[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2024 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          
          
          Title 12

Banks and Banking


________________________

Parts 1 to 199

                         Revised as of January 1, 2024

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2024
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

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[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter I--Comptroller of the Currency, Department 
          of the Treasury                                            3
  Finding Aids:
      Table of CFR Titles and Chapters........................    1143
      Alphabetical List of Agencies Appearing in the CFR......    1163
      List of CFR Sections Affected...........................    1173

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 1.1 refers to 
                       title 12, part 1, section 
                       1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
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    To determine whether a Code volume has been amended since its 
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Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
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PAST PROVISIONS OF THE CODE

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``[RESERVED]'' TERMINOLOGY

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Federal Regulations. An agency may add regulatory information at a 
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INCORPORATION BY REFERENCE

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This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
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    An index to the text of ``Title 3--The President'' is carried within 
that volume.

[[Page vii]]

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the revision dates of the 50 CFR titles.

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    Oliver A. Potts,
    Director,
    Office of the Federal Register
    January 1, 2024







[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of ten volumes. The parts in 
these volumes are arranged in the following order: Parts 1-199, 200-219, 
220-229, 230-299, 300-346, 347-599, 600-899, 900-1025, 1026-1099, and 
1100-end. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of January 1, 2024.

    For this volume, Christine Colaninno was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of John 
Hyrum Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                   (This book contains parts 1 to 199)

  --------------------------------------------------------------------
                                                                    Part

chapter i--Comptroller of the Currency, Department of the 
  Treasury..................................................           1

[[Page 3]]



   CHAPTER I--COMPTROLLER OF THE CURRENCY, DEPARTMENT OF THE TREASURY




  --------------------------------------------------------------------
Part                                                                Page
1               Investment securities.......................           7
2               Sales of credit life insurance..............          14
3               Capital adequacy standards..................          15
4               Organization and functions, availability and 
                    release of information, contracting 
                    outreach program, post-employment 
                    restrictions for senior examiners.......         248
5               Rules, policies, and procedures for 
                    corporate activities....................         274
6               Prompt corrective action....................         392
7               Activities and operations...................         402
8               Assessment of fees..........................         437
9               Fiduciary activities of national banks......         443
10              Municipal securities dealers................         457
11              Securities Exchange Act disclosure rules....         457
12              Recordkeeping and confirmation requirements 
                    for securities transactions.............         459
13              Government securities sales practices.......         467
14              Consumer protection in sales of insurance...         470
15

[Reserved]

16              Securities offering disclosure rules........         474
19              Rules of practice and procedure (Eff. until 
                    04-01-2024).............................         481
19              Rules of practice and procedure (Eff. 04-01-
                    2024)...................................         522
21              Minimum security devices and procedures, 
                    reports of suspicious activities, and 
                    Bank Secrecy Act Compliance Program.....         623
22              Loans in areas having special flood hazards.         628
23              Leasing.....................................         637
24              Community and economic development entities, 
                    community development projects, and 
                    other public welfare investments........         640
25              Community Reinvestment Act and interstate 
                    deposit production regulations..........         651
26              Management official interlocks..............         677

[[Page 4]]

27              Fair housing home loan data system..........         681
28              International banking activities............         692
29

[Reserved]

30              Safety and soundness standards..............         706
31              Extensions of credit to insiders and 
                    transactions with affiliates............         731
32              Lending limits..............................         735
33

[Reserved]

34              Real estate lending and appraisals..........         758
35              Disclosure and reporting of CRA-related 
                    agreements..............................         789
36

[Reserved]

37              Debt cancellation contracts and debt 
                    suspension agreements...................         802
38-40

[Reserved]

41              Fair credit reporting.......................         806
42

[Reserved]

43              Credit risk retention.......................         812
44              Proprietary trading and certain interests in 
                    and relationships with covered funds....         854
45              Margin and capital requirements for covered 
                    swap entities...........................         901
46              Stress testing..............................         924
47              Mandatory contractual stay requirements for 
                    qualified financial contracts...........         928
48              Retail foreign exchange transactions........         939
49

[Reserved]

50              Liquidity risk measurement standards........         953
51              Receiverships for uninsured national banks..         997
52              Regulatory reporting........................        1000
53              Computer-security incident notification.....        1001
54-99

[Reserved]

100             Rules applicable to savings associations....        1002
101             Covered savings associations................        1003
102-107

[Reserved]

108             Removals, suspensions, and prohibitions 
                    where a crime is charged or proven......        1005
109             Rules of practice and procedure in 
                    adjudicatory proceedings................        1009
110-111

[Reserved]

112             Rules for investigative proceedings and 
                    formal examination proceedings..........        1031
113-127

[Reserved]

128             Nondiscrimination requirements..............        1033
129-140

[Reserved]

141             Definitions for regulations affecting 
                    Federal savings associations............        1038
142

[Reserved]

[[Page 5]]

143             Federal savings associations--grandfathered 
                    authority...............................        1039
144             Federal mutual savings associations--
                    communication between members...........        1040
145             Federal savings associations--operations....        1041
146-149

[Reserved]

150             Fiduciary powers of Federal savings 
                    associations............................        1043
151             Recordkeeping and confirmation requirements 
                    for securities transactions.............        1052
152-154

[Reserved]

155             Electronic operations of Federal savings 
                    associations............................        1060
156

[Reserved]

157             Deposits....................................        1060
158-159

[Reserved]

160             Lending and investment......................        1061
161             Definitions for regulations affecting all 
                    savings associations....................        1076
162             Accounting and disclosure standards.........        1081
163             Savings associations--operations............        1081
165             Prompt corrective action....................        1094
166

[Reserved]

168             Security procedures.........................        1097
169             Proxies.....................................        1098
170-189

[Reserved]

190             Preemption of State usury laws..............        1099
191             Preemption of State due-on-sale laws........        1104
192             Conversions from mutual to stock form.......        1109
193-199

[Reserved]

[[Page 7]]



PART 1_INVESTMENT SECURITIES--Table of Contents



Sec.
1.1 Authority, purpose, scope, and reservation of authority.
1.2 Definitions.
1.3 Limitations on dealing in, underwriting, and purchase and sale of 
          securities.
1.4 Calculation of limits.
1.5 Safe and sound banking practices; credit information required.
1.6 Convertible securities.
1.7 Securities held in satisfaction of debts previously contracted; 
          holding period; disposal; accounting treatment; non-
          speculative purpose.
1.8 Nonconforming investments.

                             Interpretations

1.100 Indirect general obligations.
1.110 Taxing powers of a State or political subdivision.
1.120 Prerefunded or escrowed bonds and obligations secured by Type I 
          securities.
1.130 Type II securities; guidelines for obligations issued for 
          university and housing purposes.

    Authority: 12 U.S.C. 1 et seq., 24 (Seventh), and 93a.

    Source: 61 FR 63982, Dec. 2, 1996, unless otherwise noted.



Sec.  1.1  Authority, purpose, scope, and reservation of authority.

    (a) Authority. This part is issued pursuant to 12 U.S.C. 1 et seq., 
12 U.S.C. 24 (Seventh), and 12 U.S.C. 93a.
    (b) Purpose This part prescribes standards under which national 
banks may purchase, sell, deal in, underwrite, and hold securities, 
consistent with the authority contained in 12 U.S.C. 24 (Seventh) and 
safe and sound banking practices.
    (c) Scope. The standards set forth in this part apply to national 
banks and Federal branches of foreign banks. Further, pursuant to 12 
U.S.C. 335, State banks that are members of the Federal Reserve System 
are subject to the same limitations and conditions that apply to 
national banks in connection with purchasing, selling, dealing in, and 
underwriting securities and stock. In addition to activities authorized 
under this part, foreign branches of national banks are authorized to 
conduct international activities and invest in securities pursuant to 12 
CFR part 211.
    (d) Reservation of authority. The OCC may determine, on a case-by-
case basis, that a national bank may acquire an investment security 
other than an investment security of a type set forth in this part, 
provided the OCC determines that the bank's investment is consistent 
with 12 U.S.C. section 24 (Seventh) and with safe and sound banking 
practices. The OCC will consider all relevant factors, including the 
risk characteristics of the particular investment in comparison with the 
risk characteristics of investments that the OCC has previously 
authorized, and the bank's ability effectively to manage such risks. The 
OCC may impose limits or conditions in connection with approval of an 
investment security under this subsection. Investment securities that 
the OCC determines are permissible in accordance with this paragraph 
constitute eligible investments for purposes of 12 U.S.C. 24.

[61 FR 63982, Dec. 2, 1996, as amended at 73 FR 22235, Apr. 24, 2008]



Sec.  1.2  Definitions.

    (a) Capital and surplus means:
    (1) For qualifying community banking organizations that have elected 
to use the community bank leverage ratio framework, as set forth under 
the OCC's Capital Adequacy Standards at part 3 of this chapter:
    (i) A qualifying community banking organization's tier 1 capital, as 
used under Sec.  3.12 of this chapter; plus
    (ii) A qualifying community banking organization's allowance for 
loan and lease losses or adjusted allowances for credit losses, as 
applicable, as reported in the bank's Consolidated Report of Condition 
and Income (Call Report); or
    (2) For all other banks:
    (i) A bank's tier 1 and tier 2 capital calculated under the OCC's 
risk-based capital standards set forth in part 3 of this chapter, as 
applicable (or comparable capital guidelines of the appropriate Federal 
banking agency), as reported in the bank's Call Report; plus
    (ii) The balance of a bank's allowance for loan and lease losses or 
adjusted allowances for credit losses, as applicable, not included in 
the bank's tier 2 capital, for purposes of the calculation of risk-based 
capital described in paragraph (a)(2)(i) of this section, as reported in 
the bank's Call Report.

[[Page 8]]

    (b) General obligation of a State or political subdivision means:
    (1) An obligation supported by the full faith and credit of an 
obligor possessing general powers of taxation, including property 
taxation; or
    (2) An obligation payable from a special fund or by an obligor not 
possessing general powers of taxation, when an obligor possessing 
general powers of taxation, including property taxation, has 
unconditionally promised to make payments into the fund or otherwise 
provide funds to cover all required payments on the obligation.
    (c) Investment company means an investment company, including a 
mutual fund, registered under section 8 of the Investment Company Act of 
1940, 15 U.S.C. 80a-8.
    (d) Investment grade means the issuer of a security has an adequate 
capacity to meet financial commitments under the security for the 
projected life of the asset or exposure. An issuer has an adequate 
capacity to meet financial commitments if the risk of default by the 
obligor is low and the full and timely repayment of principal and 
interest is expected.
    (e) Investment security means a marketable debt obligation that is 
investment grade and not predominately speculative in nature.
    (f) Marketable means that the security:
    (1) Is registered under the Securities Act of 1933, 15 U.S.C. 77a et 
seq.;
    (2) Is a municipal revenue bond exempt from registration under the 
Securities Act of 1933, 15 U.S.C. 77c(a)(2);
    (3) Is offered and sold pursuant to Securities and Exchange 
Commission Rule 144A, 17 CFR 230.144A, and investment grade; or
    (4) Can be sold with reasonable promptness at a price that 
corresponds reasonably to its fair value.
    (g) Municipal bonds means obligations of a State or political 
subdivision other than general obligations, and includes limited 
obligation bonds, revenue bonds, and obligations that satisfy the 
requirements of section 142(b)(1) of the Internal Revenue Code of 1986 
issued by or on behalf of any State or political subdivision of a State, 
including any municipal corporate instrumentality of 1 or more States, 
or any public agency or authority of any State or political subdivision 
of a State.
    (h) [Reserved]
    (i) Political subdivision means a county, city, town, or other 
municipal corporation, a public authority, and generally any publicly-
owned entity that is an instrumentality of a State or of a municipal 
corporation.
    (j) Type I security means:
    (1) Obligations of the United States;
    (2) Obligations issued, insured, or guaranteed by a department or an 
agency of the United States Government, if the obligation, insurance, or 
guarantee commits the full faith and credit of the United States for the 
repayment of the obligation;
    (3) Obligations issued by a department or agency of the United 
States, or an agency or political subdivision of a State of the United 
States, that represent an interest in a loan or a pool of loans made to 
third parties, if the full faith and credit of the United States has 
been validly pledged for the full and timely payment of interest on, and 
principal of, the loans in the event of non-payment by the third party 
obligor(s);
    (4) General obligations of a State of the United States or any 
political subdivision thereof; and municipal bonds if the national bank 
is well capitalized as defined in 12 CFR 6.4;
    (5) Obligations authorized under 12 U.S.C. 24 (Seventh) as 
permissible for a national bank to deal in, underwrite, purchase, and 
sell for the bank's own account, including qualified Canadian government 
obligations; and
    (6) Other securities the OCC determines to be eligible as Type I 
securities under 12 U.S.C. 24 (Seventh).
    (k) Type II security means an investment security that represents:
    (1) Obligations issued by a State, or a political subdivision or 
agency of a State, for housing, university, or dormitory purposes that 
would not satisfy the definition of Type I securities pursuant to 
paragraph (j) of Sec.  1.2;
    (2) Obligations of international and multilateral development banks 
and organizations listed in 12 U.S.C. 24 (Seventh);
    (3) Other obligations listed in 12 U.S.C. 24 (Seventh) as 
permissible for a bank to deal in, underwrite, purchase,

[[Page 9]]

and sell for the bank's own account, subject to a limitation per obligor 
of 10 percent of the bank's capital and surplus; and
    (4) Other securities the OCC determines to be eligible as Type II 
securities under 12 U.S.C. 24 (Seventh).
    (l) Type III security means an investment security that does not 
qualify as a Type I, II, IV, or V security. Examples of Type III 
securities include corporate bonds and municipal bonds that do not 
satisfy the definition of Type I securities pursuant to paragraph (j) of 
Sec.  1.2 or the definition of Type II securities pursuant to paragraph 
(k) of Sec.  1.2.
    (m) Type IV security means:
    (1) A small business-related security as defined in section 
3(a)(53)(A) of the Securities Exchange Act of 1934, 15 U.S.C. 
78c(a)(53)(A), that is fully secured by interests in a pool of loans to 
numerous obligors.
    (2) A commercial mortgage-related security that is offered or sold 
pursuant to section 4(5) of the Securities Act of 1933, 15 U.S.C. 
77d(5), that is investment grade, or a commercial mortgage-related 
security as described in section 3(a)(41) of the Securities Exchange Act 
of 1934, 15 U.S.C. 78c(a)(41), that represents ownership of a promissory 
note or certificate of interest or participation that is directly 
secured by a first lien on one or more parcels of real estate upon which 
one or more commercial structures are located and that is fully secured 
by interests in a pool of loans to numerous obligors.
    (3) A residential mortgage-related security that is offered and sold 
pursuant to section 4(5) of the Securities Act of 1933, 15 U.S.C. 
77d(5), that is investment grade, or a residential mortgage-related 
security as described in section 3(a)(41) of the Securities Exchange Act 
of 1934, 15 U.S.C. 78c(a)(41)) that does not otherwise qualify as a Type 
I security.
    (n) Type V security means a security that is:
    (1) Investment grade;
    (2) Marketable;
    (3) Not a Type IV security; and
    (4) Fully secured by interests in a pool of loans to numerous 
obligors and in which a national bank could invest directly.

[61 FR 63982, Dec. 2, 1996, as amended at 66 FR 34791, July 2, 2001; 77 
FR 35257, June 13, 2012; 79 FR 11309, Feb. 28, 2014; 84 FR 4237, Feb. 
14, 2019; 84 FR 61792, Nov. 13, 2019; 84 FR 69297, Dec. 18, 2019]



Sec.  1.3  Limitations on dealing in, underwriting, and purchase 
and sale of securities.

    (a) Type I securities. A national bank may deal in, underwrite, 
purchase, and sell Type I securities for its own account. The amount of 
Type I securities that the bank may deal in, underwrite, purchase, and 
sell is not limited to a specified percentage of the bank's capital and 
surplus.
    (b) Type II securities. A national bank may deal in, underwrite, 
purchase, and sell Type II securities for its own account, provided the 
aggregate par value of Type II securities issued by any one obligor held 
by the bank does not exceed 10 percent of the bank's capital and 
surplus. In applying this limitation, a national bank shall take account 
of Type II securities that the bank is legally committed to purchase or 
to sell in addition to the bank's existing holdings.
    (c) Type III securities. A national bank may purchase and sell Type 
III securities for its own account, provided the aggregate par value of 
Type III securities issued by any one obligor held by the bank does not 
exceed 10 percent of the bank's capital and surplus. In applying this 
limitation, a national bank shall take account of Type III securities 
that the bank is legally committed to purchase or to sell in addition to 
the bank's existing holdings.
    (d) Type II and III securities; other investment securities 
limitations. A national bank may not hold Type II and III securities 
issued by any one obligor with an aggregate par value exceeding 10 
percent of the bank's capital and surplus. However, if the proceeds of 
each issue are to be used to acquire and lease real estate and related 
facilities to economically and legally separate industrial tenants, and 
if each issue is payable solely from and secured by a first lien on the 
revenues to be derived from rentals paid by the lessee under net 
noncancellable leases, the bank

[[Page 10]]

may apply the 10 percent investment limitation separately to each issue 
of a single obligor.
    (e) Type IV securities. A national bank may purchase and sell Type 
IV securities for its own account. The amount of the Type IV securities 
that a bank may purchase and sell is not limited to a specified 
percentage of the bank's capital and surplus.
    (f) Type V securities. A national bank may purchase and sell Type V 
securities for its own account provided that the aggregate par value of 
Type V securities issued by any one issuer held by the bank does not 
exceed 25 percent of the bank's capital and surplus. In applying this 
limitation, a national bank shall take account of Type V securities that 
the bank is legally committed to purchase or to sell in addition to the 
bank's existing holdings.
    (g) Securitization. A national bank may securitize and sell assets 
that it holds, as a part of its banking business. The amount of 
securitized loans and obligations that a bank may sell is not limited to 
a specified percentage of the bank's capital and surplus.
    (h) Pooled investments--(1) General. A national bank may purchase 
and sell for its own account investment company shares provided that:
    (i) The portfolio of the investment company consists exclusively of 
assets that the national bank may purchase and sell for its own account; 
and
    (ii) The bank's holdings of investment company shares do not exceed 
the limitations in Sec.  1.4(e).
    (2) Other issuers. The OCC may determine that a national bank may 
invest in an entity that is exempt from registration as an investment 
company under section 3(c)(1) of the Investment Company Act of 1940, 
provided that the portfolio of the entity consists exclusively of assets 
that a national bank may purchase and sell for its own account.
    (3) Investments made under this paragraph (h) must comply with Sec.  
1.5 of this part, conform with applicable published OCC precedent, and 
must be:
    (i) Marketable and investment grade, or
    (ii) Satisfy the requirements of Sec.  1.3(i).
    (i) Securities held based on estimates of obligor's performance. (1) 
Notwithstanding Sec.  1.2(d) and (e), a national bank may treat a debt 
security as an investment security for purposes of this part if the 
security is marketable and the bank concludes, on the basis of estimates 
that the bank reasonably believes are reliable, that the obligor will be 
able to satisfy its obligations under that security.
    (2) The aggregate par value of securities treated as investment 
securities under paragraph (i)(1) of this section may not exceed 5 
percent of the bank's capital and surplus.

[61 FR 63982, Dec. 2, 1996, as amended at 64 FR 60098, Nov. 4, 1999; 73 
FR 22235, Apr. 24, 2008; 77 FR 35257, June 13, 2012]



Sec.  1.4  Calculation of limits.

    (a) Calculation date. For purposes of determining compliance with 12 
U.S.C. 24 (Seventh) and this part, a bank shall determine its investment 
limitations as of the most recent of the following dates:
    (1) The last day of the preceding calendar quarter; or
    (2) The date on which there is a change in the bank's capital 
category for purposes of 12 U.S.C. 1831o and 12 CFR 6.3.
    (b) Effective date. (1) A bank's investment limit calculated in 
accordance with paragraph (a)(1) of this section will be effective on 
the earlier of the following dates:
    (i) The date on which the bank's Consolidated Report of Condition 
and Income (Call Report) is submitted; or
    (ii) The date on which the bank's Consolidated Report of Condition 
and Income is required to be submitted.
    (2) A bank's investment limit calculated in accordance with 
paragraph (a)(2) of this section will be effective on the date that the 
limit is to be calculated.
    (c) Authority of OCC to require more frequent calculations. If the 
OCC determines for safety and soundness reasons that a bank should 
calculate its investment limits more frequently than required by 
paragraph (a) of this section, the OCC may provide written notice to the 
bank directing the bank to calculate its investment limitations at a 
more frequent interval. The bank shall

[[Page 11]]

thereafter calculate its investment limits at that interval until 
further notice.
    (d) Calculation of Type III and Type V securities holdings--(1) 
General. In calculating the amount of its investment in Type III or Type 
V securities issued by any one obligor, a bank shall aggregate:
    (i) Obligations issued by obligors that are related directly or 
indirectly through common control; and
    (ii) Securities that are credit enhanced by the same entity.
    (2) Aggregation by type. The aggregation requirement in paragraph 
(d)(1) of this section applies separately to the Type III and Type V 
securities held by a bank.
    (e) Limit on investment company holdings--(1) General. In 
calculating the amount of its investment in investment company shares 
under this part, a bank shall use reasonable efforts to calculate and 
combine its pro rata share of a particular security in the portfolio of 
each investment company with the bank's direct holdings of that 
security. The bank's direct holdings of the particular security and the 
bank's pro rata interest in the same security in the investment 
company's portfolio may not, in the aggregate, exceed the investment 
limitation that would apply to that security.
    (2) Alternate limit for diversified investment companies. A national 
bank may elect not to combine its pro rata interest in a particular 
security in an investment company with the bank's direct holdings of 
that security if:
    (i) The investment company's holdings of the securities of any one 
issuer do not exceed 5 percent of its total portfolio; and
    (ii) The bank's total holdings of the investment company's shares do 
not exceed the most stringent investment limitation that would apply to 
any of the securities in the company's portfolio if those securities 
were purchased directly by the bank.



Sec.  1.5  Safe and sound banking practices; credit information required.

    (a) A national bank shall adhere to safe and sound banking practices 
and the specific requirements of this part in conducting the activities 
described in Sec.  1.3. The bank shall consider, as appropriate, the 
interest rate, credit, liquidity, price, foreign exchange, transaction, 
compliance, strategic, and reputation risks presented by a proposed 
activity, and the particular activities undertaken by the bank must be 
appropriate for that bank.
    (b) In conducting these activities, the bank shall determine that 
there is adequate evidence that an obligor possesses resources 
sufficient to provide for all required payments on its obligations, or, 
in the case of securities deemed to be investment securities on the 
basis of reliable estimates of an obligor's performance, that the bank 
reasonably believes that the obligor will be able to satisfy the 
obligation.
    (c) Each bank shall maintain records available for examination 
purposes adequate to demonstrate that it meets the requirements of this 
part. The bank may store the information in any manner that can be 
readily retrieved and reproduced in a readable form.



Sec.  1.6  Convertible securities.

    A national bank may not purchase securities convertible into stock 
at the option of the issuer.



Sec.  1.7  Securities held in satisfaction of debts previously contracted; 
holding period; disposal; accounting treatment; non-speculative purpose.

    (a) Securities held in satisfaction of debts previously contracted. 
The restrictions and limitations of this part, other than those set 
forth in paragraphs (b),(c), and (d) of this section, do not apply to 
securities acquired:
    (1) Through foreclosure on collateral;
    (2) In good faith by way of compromise of a doubtful claim; or
    (3) To avoid loss in connection with a debt previously contracted.
    (b) Holding period. A national bank holding securities pursuant to 
paragraph (a) of this section may do so for a period not to exceed five 
years from the date that ownership of the securities was originally 
transferred to the bank. The OCC may extend the holding period for up to 
an additional five years if a bank provides a clearly convincing 
demonstration as to why an additional holding period is needed.

[[Page 12]]

    (c) Accounting treatment. A bank shall account for securities held 
pursuant to paragraph (a) of this section in accordance with Generally 
Accepted Accounting Principles.
    (d) Non-speculative purpose. A bank may not hold securities pursuant 
to paragraph (a) of this section for speculative purposes.



Sec.  1.8  Nonconforming investments.

    (a) A national bank's investment in securities that no longer 
conform to this part but conformed when made will not be deemed in 
violation but instead will be treated as nonconforming if the reason why 
the investment no longer conforms to this part is because:
    (1) The bank's capital declines;
    (2) Issuers, obligors, or credit-enhancers merge;
    (3) Issuers become related directly or indirectly through common 
control;
    (4) The investment securities rules change;
    (5) The security no longer qualifies as an investment security; or
    (6) Other events identified by the OCC occur.
    (b) A bank shall exercise reasonable efforts to bring an investment 
that is nonconforming as a result of events described in paragraph (a) 
of this section into conformity with this part unless to do so would be 
inconsistent with safe and sound banking practices.

                             Interpretations



Sec.  1.100  Indirect general obligations.

    (a) Obligation issued by an obligor not possessing general powers of 
taxation. Pursuant to Sec.  1.2(b), an obligation issued by an obligor 
not possessing general powers of taxation qualifies as a general 
obligation of a State or political subdivision for the purposes of 12 
U.S.C. 24 (Seventh), if a party possessing general powers of taxation 
unconditionally promises to make sufficient funds available for all 
required payments in connection with the obligation.
    (b) Indirect commitment of full faith and credit. The indirect 
commitment of the full faith and credit of a State or political 
subdivision (that possesses general powers of taxation) in support of an 
obligation may be demonstrated by any of the following methods, alone or 
in combination, when the State or political subdivision pledges its full 
faith and credit in support of the obligation.
    (1) Lease/rental agreement. The lease agreement must be valid and 
binding on the State or the political subdivision, and the State or 
political subdivision must unconditionally promise to pay rentals that, 
together with any other available funds, are sufficient for the timely 
payment of interest on, and principal of, the obligation. These lease/
rental agreement may, for instance, provide support for obligations 
financing the acquisition or operation of public projects in the areas 
of education, medical care, transportation, recreation, public 
buildings, and facilities.
    (2) Service/purchase agreement. The agreement must be valid and 
binding on the State or the political subdivision, and the State or 
political subdivision must unconditionally promise in the agreement to 
make payments for services or resources provided through or by the 
issuer of the obligation. These payments, together with any other 
available funds, must be sufficient for the timely payment of interest 
on, and principal of, the obligation. An agreement to purchase municipal 
sewer, water, waste disposal, or electric services may, for instance, 
provide support for obligations financing the construction or 
acquisition of facilities supplying those services.
    (3) Refillable debt service reserve fund. The reserve fund must at 
least equal the amount necessary to meet the annual payment of interest 
on, and principal of, the obligation as required by applicable law. The 
maintenance of a refillable reserve fund may be provided, for instance, 
by statutory direction for an appropriation, or by statutory automatic 
apportionment and payment from the State funds of amounts necessary to 
restore the fund to the required level.
    (4) Other grants or support. A statutory provision or agreement must 
unconditionally commit the State or the political subdivision to provide 
funds which, together with other available funds, are sufficient for the 
timely payment of interest on, and principal of,

[[Page 13]]

the obligation. Those funds may, for instance, be supplied in the form 
of annual grants or may be advanced whenever the other available 
revenues are not sufficient for the payment of principal and interest.



Sec.  1.110  Taxing powers of a State or political subdivision.

    (a) An obligation is considered supported by the full faith and 
credit of a State or political subdivision possessing general powers of 
taxation when the promise or other commitment of the State or the 
political subdivision will produce funds, which (together with any other 
funds available for the purpose) will be sufficient to provide for all 
required payments on the obligation. In order to evaluate whether a 
commitment of a State or political subdivision is likely to generate 
sufficient funds, a bank shall consider the impact of any possible 
limitations regarding the State's or political subdivision's taxing 
powers, as well as the availability of funds in view of the projected 
revenues and expenditures. Quantitative restrictions on the general 
powers of taxation of the State or political subdivision do not 
necessarily mean that an obligation is not supported by the full faith 
and credit of the State or political subdivision. In such case, the bank 
shall determine the eligibility of obligations by reviewing, on a case-
by-case basis, whether tax revenues available under the limited taxing 
powers are sufficient for the full and timely payment of interest on, 
and principal of, the obligation. The bank shall use current and 
reasonable financial projections in calculating the availability of the 
revenues. An obligation expressly or implicitly dependent upon voter or 
legislative authorization of appropriations may be considered supported 
by the full faith and credit of a State or political subdivision if the 
bank determines, on the basis of past actions by the voters or 
legislative body in similar situations involving similar types of 
projects, that it is reasonably probable that the obligor will obtain 
all necessary appropriations.
    (b) An obligation supported exclusively by excise taxes or license 
fees is not a general obligation for the purposes of 12 U.S.C. 24 
(Seventh). Nevertheless, an obligation that is primarily payable from a 
fund consisting of excise taxes or other pledged revenues qualifies as a 
``general obligation,'' if, in the event of a deficiency of those 
revenues, the obligation is also supported by the general revenues of a 
State or a political subdivision possessing general powers of taxation.



Sec.  1.120  Prerefunded or escrowed bonds and obligations secured 
by Type I securities.

    (a) An obligation qualifies as a Type I security if it is secured by 
an escrow fund consisting of obligations of the United States or general 
obligations of a State or a political subdivision, and the escrowed 
obligations produce interest earnings sufficient for the full and timely 
payment of interest on, and principal of, the obligation.
    (b) If the interest earnings from the escrowed Type I securities 
alone are not sufficient to guarantee the full repayment of an 
obligation, a promise of a State or a political subdivision possessing 
general powers of taxation to maintain a reserve fund for the timely 
payment of interest on, and principal of, the obligation may further 
support a guarantee of the full repayment of an obligation.
    (c) An obligation issued to refund an indirect general obligation 
may be supported in a number of ways that, in combination, are 
sufficient at all times to support the obligation with the full faith 
and credit of the United States or a State or a political subdivision 
possessing general powers of taxation. During the period following its 
issuance, the proceeds of the refunding obligation may be invested in 
U.S. obligations or municipal general obligations that will produce 
sufficient interest income for payment of principal and interest. Upon 
the retirement of the outstanding indirect general obligation bonds, the 
same indirect commitment, such as a lease agreement or a reserve fund, 
that supported the prior issue, may support the refunding obligation.

[[Page 14]]



Sec.  1.130  Type II securities; guidelines for obligations issued 
for university and housing purposes.

    (a) Investment quality. An obligation issued for housing, 
university, or dormitory purposes is a Type II security only if it:
    (1) Qualifies as an investment security, as defined in Sec.  1.2(e); 
and
    (2) Is issued for the appropriate purpose and by a qualifying 
issuer.
    (b) Obligation issued for university purposes. (1) An obligation 
issued by a State or political subdivision or agency of a State or 
political subdivision for the purpose of financing the construction or 
improvement of facilities at or used by a university or a degree-
granting college-level institution, or financing loans for studies at 
such institutions, qualifies as a Type II security. Facilities financed 
in this manner may include student buildings, classrooms, university 
utility buildings, cafeterias, stadiums, and university parking lots.
    (2) An obligation that finances the construction or improvement of 
facilities used by a hospital may be eligible as a Type II security, if 
the hospital is a department or a division of a university, or otherwise 
provides a nexus with university purposes, such as an affiliation 
agreement between the university and the hospital, faculty positions of 
the hospital staff, and training of medical students, interns, 
residents, and nurses (e.g., a ``teaching hospital'').
    (c) Obligation issued for housing purposes. An obligation issued for 
housing purposes may qualify as a Type II security if the security 
otherwise meets the criteria for a Type II security.



PART 2_SALES OF CREDIT LIFE INSURANCE--Table of Contents



Sec.
2.1 Authority, purpose, and scope.
2.2 Definitions.
2.3 Distribution of credit life insurance income.
2.4 Bonus and incentive plans.
2.5 Bank compensation.

    Authority: 12 U.S.C. 24 (Seventh), 93a, and 1818(n).

    Source: 61 FR 51781, Oct. 4, 1996, unless otherwise noted.



Sec.  2.1  Authority, purpose, and scope.

    (a) Authority. A national bank may provide credit life insurance to 
loan customers pursuant to 12 U.S.C. 24 (Seventh).
    (b) Purpose. The purpose of this part is to set forth the principles 
and standards that apply to a national bank's provision of credit life 
insurance and the limitations that apply to the receipt of income from 
those sales by certain individuals and entities associated with the 
bank.
    (c) Scope. This part applies to the provision of credit life 
insurance by any national bank employee, officer, director, or principal 
shareholder, and certain entities in which such persons own an interest 
of more than ten percent.



Sec.  2.2  Definitions.

    (a) Bank means a national banking association.
    (b) Credit life insurance means credit life, health, and accident 
insurance, sometimes referred to as credit life and disability 
insurance, and mortgage life and disability insurance.
    (c) Owning an interest includes:
    (1) Ownership through a spouse or minor child;
    (2) Ownership through a broker, nominee, or other agent; or
    (3) Ownership through any corporation, partnership, association, 
joint venture, or proprietorship, that is controlled by the director, 
officer, employee, or principal shareholder of the bank.
    (d) Officer, director, employee, or principal shareholder includes 
the spouse and minor children of an officer, director, employee, or 
principal shareholder.
    (e) Principal shareholder means any shareholder who directly or 
indirectly owns or controls an interest of more than ten percent of the 
bank's outstanding voting securities.

[61 FR 51781, Oct. 4, 1996, as amended at 73 FR 22235, Apr. 24, 2008]



Sec.  2.3  Distribution of credit life insurance income.

    (a) Distribution of credit life insurance income by a national bank 
must

[[Page 15]]

be consistent with the requirements and principles of this section.
    (b) It is an unsafe and unsound practice for any director, officer, 
employee, or principal shareholder of a national bank (including any 
entity in which this person owns an interest of more than ten percent), 
who is involved in the sale of credit life insurance to loan customers 
of the national bank, to take advantage of that business opportunity for 
personal profit. Recommendations to customers to buy insurance should be 
based on the benefits of the policy, not the commissions received from 
the sale.
    (c) Except as provided in Sec. Sec.  2.4 and 2.5(b), and paragraph 
(d) of this section, a director, officer, employee, or principal 
shareholder of a national bank, or an entity in which such person owns 
an interest of more than ten percent, may not retain commissions or 
other income from the sale of credit life insurance in connection with 
any loan made by that bank, and income from credit life insurance sales 
to loan customers must be credited to the income accounts of the bank.
    (d) The requirements of paragraph (c) of this section do not apply 
to a director, officer, employee, or principal shareholder if:
    (1) The person is employed by a third party that has contracted with 
the bank on an arm's-length basis to sell financial products on bank 
premises; and
    (2) The person is not involved in the bank's credit decision 
process.



Sec.  2.4  Bonus and incentive plans.

    A bank employee or officer may participate in a bonus or incentive 
plan based on the sale of credit life insurance if payments to the 
employee or officer in any one year do not exceed the greater of:
    (a) Five percent of the recipient's annual salary; or
    (b) Five percent of the average salary of all loan officers 
participating in the plan.



Sec.  2.5  Bank compensation.

    (a) Nothing contained in this part prohibits a bank employee, 
officer, director, or principal shareholder who holds an insurance 
agent's license from agreeing to compensate the bank for the use of its 
premises, employees, or good will. However, the employee, officer, 
director, or principal shareholder shall turn over to the bank as 
compensation all income received from the sale of the credit life 
insurance to the bank's loan customers.
    (b) Income derived from credit life insurance sales to loan 
customers may be credited to an affiliate operating under the Bank 
Holding Company Act of 1956, 12 U.S.C. 1841 et seq., or to a trust for 
the benefit of all shareholders, provided that the bank receives 
reasonable compensation in recognition of the role played by its 
personnel, premises, and good will in credit life insurance sales. 
Reasonable compensation generally means an amount equivalent to at least 
20 percent of the affiliate's net income attributable to the bank's 
credit life insurance sales.



PART 3_CAPITAL ADEQUACY STANDARDS--Table of Contents



                      Subpart A_General Provisions

Sec.
3.1 Purpose, applicability, reservations of authority, and timing.
3.2 Definitions.
3.3 Operational requirements for certain exposures.
3.4-3.9 [Reserved]

            Subpart B_Capital Ratio Requirements and Buffers

3.10 Minimum capital requirements.
3.11 Capital conservation buffer and countercyclical capital buffer 
          amount.
3.12 Community bank leverage ratio framework.
3.13-3.19 [Reserved]

                     Subpart C_Definition of Capital

3.20 Capital components and eligibility criteria for regulatory capital 
          instruments.
3.21 Minority interest.
3.22 Regulatory capital adjustments and deductions.
3.23-3.29 [Reserved]

          Subpart D_Risk-Weighted Assets_Standardized Approach

3.30 Applicability.

[[Page 16]]

              Risk-Weighted Assets for General Credit Risk

3.31 Mechanics for calculating risk-weighted assets for general credit 
          risk.
3.32 General risk weights.
3.33 Off-balance sheet exposures.
3.34 Derivative contracts.
3.35 Cleared transactions.
3.36 Guarantees and credit derivatives: Substitution treatment.
3.37 Collateralized transactions.

             Risk-Weighted Assets for Unsettled Transactions

3.38 Unsettled transactions.
3.39-3.40 [Reserved]

            Risk-Weighted Assets for Securitization Exposures

3.41 Operational requirements for securitization exposures.
3.42 Risk-weighted assets for securitization exposures.
3.43 Simplified supervisory formula approach (SSFA) and the gross-up 
          approach.
3.44 Securitization exposures to which the SSFA and gross-up approach do 
          not apply.
3.45 Recognition of credit risk mitigants for securitization exposures.
3.46-3.50 [Reserved]

                Risk-Weighted Assets for Equity Exposures

3.51 Introduction and exposure measurement.
3.52 Simple risk-weight approach (SRWA).
3.53 Equity exposures to investment funds.
3.54-3.60 [Reserved]

                               Disclosures

3.61 Purpose and scope.
3.62 Disclosure requirements.
3.63 Disclosures by national banks or Federal savings associations 
          described in Sec.  3.61.
3.64-3.99 [Reserved]

   Subpart E_Risk-Weighted Assets_Internal Ratings-Based and Advanced 
                         Measurement Approaches

3.100 Purpose, applicability, and principle of conservatism.
3.101 Definitions.
3.102-3.120 [Reserved]

                              Qualification

3.121 Qualification process.
3.122 Qualification requirements.
3.123 Ongoing qualification.
3.124 Merger and acquisition transitional arrangements.
3.125-3.130 [Reserved]

              Risk-Weighted Assets For General Credit Risk

3.131 Mechanics for calculating total wholesale and retail risk-weighted 
          assets.
3.132 Counterparty credit risk of repo-style transactions, eligible 
          margin loans, and OTC derivative contracts.
3.133 Cleared transactions.
3.134 Guarantees and credit derivatives: PD substitution and LGD 
          adjustment approaches.
3.135 Guarantees and credit derivatives: Double default treatment.
3.136 Unsettled transactions.
3.137-3.140 [Reserved]

            Risk-Weighted Assets for Securitization Exposures

3.141 Operational criteria for recognizing the transfer of risk.
3.142 Risk-weighted assets for securitization exposures.
3.143 Supervisory formula approach (SFA).
3.144 Simplified supervisory formula approach (SSFA).
3.145 Recognition of credit risk mitigants for securitization exposures.
3.146-3.150 [Reserved]

                Risk-Weighted Assets For Equity Exposures

3.151 Introduction and exposure measurement.
3.152 Simple risk weight approach (SRWA).
3.153 Internal models approach (IMA).
3.154 Equity exposures to investment funds.
3.155 Equity derivative contracts.
3.156-3.160 [Reserved]

                Risk-Weighted Assets For Operational Risk

3.161 Qualification requirements for incorporation of operational risk 
          mitigants.
3.162 Mechanics of risk-weighted asset calculation.
3.163-3.170 [Reserved]

                               Disclosures

3.171 Purpose and scope.
3.172 Disclosure requirements.
3.173 Disclosures by certain advanced approaches national banks or 
          Federal savings associations and Category III national banks 
          or Federal savings associations.
3.174-3.200 [Reserved]

               Subpart F_Risk-Weighted Assets_Market Risk

3.201 Purpose, applicability, and reservation of authority.
3.202 Definitions.
3.203 Requirements for application of this subpart F.

[[Page 17]]

3.204 Measure for market risk.
3.205 VaR-based measure.
3.206 Stressed VaR-based measure.
3.207 Specific risk.
3.208 Incremental risk.
3.209 Comprehensive risk.
3.210 Standardized measurement method for specific risk.
3.211 Simplified supervisory formula approach (SSFA).
3.212 Market risk disclosures.
3.213-3.299 [Reserved]

                     Subpart G_Transition Provisions

3.300 Transitions.
3.301 Current Expected Credit Losses (CECL) transition.
3.302 Exposures related the Money Market Mutual Fund Liquidity Facility.
3.303 Temporary changes to the community bank leverage ratio framework.
3.304 Temporary exclusions from total leverage exposure.
3.305 Exposures related to the Paycheck Protection Program Lending 
          Facility.

Subpart H_Establishment of Minimum Capital Ratios for an Individual Bank 
                or Individual Federal Savings Association

3.401 Purpose and scope.
3.402 Applicability.
3.403 Standards for determination of appropriate individual minimum 
          capital ratios.
3.404 Procedures.
3.405 Relation to other actions.

                          Subpart I_Enforcement

3.501 Remedies.

                    Subpart J_Issuance of a Directive

3.601 Purpose and scope.
3.602 Notice of intent to issue a directive.
3.603 Response to notice.
3.604 Decision.
3.605 Issuance of a directive.
3.606 Change in circumstances.
3.607 Relation to other administrative actions.

                        Subpart K_Interpretations

3.701 Capital and surplus.

    Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, 5412(b)(2)(B), and 
Pub. L. 116-136, 134 Stat. 281.

    Source: 50 FR 10216, Mar. 14, 1985, unless otherwise noted.



                      Subpart A_General Provisions

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.1  Purpose, applicability, reservations of authority, and timing.

    (a) Purpose. This part establishes minimum capital requirements and 
overall capital adequacy standards for national banks and Federal 
savings associations. This part does not apply to Federal branches and 
agencies of foreign banks. This part includes methodologies for 
calculating minimum capital requirements, public disclosure requirements 
related to the capital requirements, and transition provisions for the 
application of this part.
    (b) Limitation of authority. Nothing in this part shall be read to 
limit the authority of the OCC to take action under other provisions of 
law, including action to address unsafe or unsound practices or 
conditions, deficient capital levels, or violations of law or 
regulation, under section 8 of the Federal Deposit Insurance Act.
    (c) Applicability. Subject to the requirements in paragraphs (d) and 
(f) of this section:
    (1) Minimum capital requirements and overall capital adequacy 
standards. Each national bank or Federal savings association must 
calculate its minimum capital requirements and meet the overall capital 
adequacy standards in subpart B of this part.
    (2) Regulatory capital. Each national bank or Federal savings 
association must calculate its regulatory capital in accordance with 
subpart C of this part.
    (3) Risk-weighted assets. (i) Each national bank or Federal savings 
association must use the methodologies in subpart D of this part (and 
subpart F of this part for a market risk national bank or Federal 
savings association) to calculate standardized total risk-weighted 
assets.
    (ii) Each advanced approaches national bank or Federal savings 
association must use the methodologies in subpart E (and subpart F of 
this part for a market risk national bank or Federal savings 
association) to calculate advanced approaches total risk-weighted 
assets.

[[Page 18]]

    (4) Disclosures. (i) Except for an advanced approaches national bank 
or Federal savings association that is making public disclosures 
pursuant to the requirements in subpart E of this part, each national 
bank or Federal savings association with total consolidated assets of 
$50 billion or more must make the public disclosures described in 
subpart D of this part.
    (ii) Each market risk national bank or Federal savings association 
must make the public disclosures described in subpart F of this part.
    (iii) Each advanced approaches national bank or Federal savings 
association must make the public disclosures described in subpart E of 
this part.
    (d) Reservation of authority--(1) Additional capital in the 
aggregate. The OCC may require a national bank or Federal savings 
association to hold an amount of regulatory capital greater than 
otherwise required under this part if the OCC determines that the 
national bank's or Federal savings association's capital requirements 
under this part are not commensurate with the national bank's or Federal 
savings association's credit, market, operational, or other risks.
    (2) Regulatory capital elements. (i) If the OCC determines that a 
particular common equity tier 1, additional tier 1, or tier 2 capital 
element has characteristics or terms that diminish its ability to absorb 
losses, or otherwise present safety and soundness concerns, the OCC may 
require the national bank or Federal savings association to exclude all 
or a portion of such element from common equity tier 1 capital, 
additional tier 1 capital, or tier 2 capital, as appropriate.
    (ii) Notwithstanding the criteria for regulatory capital instruments 
set forth in subpart C of this part, the OCC may find that a capital 
element may be included in a national bank's or Federal savings 
association's common equity tier 1 capital, additional tier 1 capital, 
or tier 2 capital on a permanent or temporary basis consistent with the 
loss absorption capacity of the element and in accordance with Sec.  
3.20(e).
    (3) Risk-weighted asset amounts. If the OCC determines that the 
risk-weighted asset amount calculated under this part by the national 
bank or Federal savings association for one or more exposures is not 
commensurate with the risks associated with those exposures, the OCC may 
require the national bank or Federal savings association to assign a 
different risk-weighted asset amount to the exposure(s) or to deduct the 
amount of the exposure(s) from its regulatory capital.
    (4) Total leverage. If the OCC determines that the total leverage 
exposure, or the amount reflected in the national bank's or Federal 
savings association's reported average total consolidated assets, for an 
on- or off-balance sheet exposure calculated by a national bank or 
Federal savings association under Sec.  3.10 is inappropriate for the 
exposure(s) or the circumstances of the national bank or Federal savings 
association, the OCC may require the national bank or Federal savings 
association to adjust this exposure amount in the numerator and the 
denominator for purposes of the leverage ratio calculations.
    (5) Consolidation of certain exposures. The OCC may determine that 
the risk-based capital treatment for an exposure or the treatment 
provided to an entity that is not consolidated on the national bank's or 
Federal savings association's balance sheet is not commensurate with the 
risk of the exposure and the relationship of the national bank or 
Federal savings association to the entity. Upon making this 
determination, the OCC may require the national bank or Federal savings 
association to treat the exposure or entity as if it were consolidated 
on the balance sheet of the national bank or Federal savings association 
for purposes of determining the national bank's or Federal savings 
association's risk-based capital requirements and calculating the 
national bank's or Federal savings association's risk-based capital 
ratios accordingly. The OCC will look to the substance of, and risk 
associated with, the transaction, as well as other relevant factors the 
OCC deems appropriate in determining whether to require such treatment.
    (6) Other reservation of authority. With respect to any deduction or 
limitation required under this part, the OCC may

[[Page 19]]

require a different deduction or limitation, provided that such 
alternative deduction or limitation is commensurate with the national 
bank's or Federal savings association's risk and consistent with safety 
and soundness.
    (e) Notice and response procedures. In making a determination under 
this section, the OCC will apply notice and response procedures in the 
same manner as the notice and response procedures in Sec.  3.404.
    (f) Timing. (1) Subject to the transition provisions in subpart G of 
this part, an advanced approaches national bank or Federal savings 
association that is not a savings and loan holding company must:
    (i) Except as described in paragraph (f)(1)(ii) of this section, 
beginning on January 1, 2014, calculate advanced approaches total risk-
weighted assets in accordance with subpart E and, if applicable, subpart 
F of this part and, beginning on January 1, 2015, calculate standardized 
total risk-weighted assets in accordance with subpart D and, if 
applicable, subpart F of this part;
    (ii) [Reserved]
    (iii) Beginning on January 1, 2014, calculate and maintain minimum 
capital ratios in accordance with subparts A, B, and C of this part, 
provided, however, that such national bank or Federal savings 
association must:
    (A) From January 1, 2014 to December 31, 2014, maintain a minimum 
common equity tier 1 capital ratio of 4 percent, a minimum tier 1 
capital ratio of 5.5 percent, a minimum total capital ratio of 8 
percent, and a minimum leverage ratio of 4 percent; and
    (B) From January 1, 2015 to December 31, 2017, an advanced 
approaches national bank or Federal savings association:
    (1) Is not required to maintain a supplementary leverage ratio; and
    (2) Must calculate a supplementary leverage ratio in accordance with 
Sec.  3.10(c), and must report the calculated supplementary leverage 
ratio on any applicable regulatory reports.
    (2) Subject to the transition provisions in subpart G of this part, 
a national bank or Federal savings association that is not an advanced 
approaches national bank or Federal savings association or a savings and 
loan holding company that is an advanced approaches national bank or 
Federal savings association must:
    (i) Beginning on January 1, 2015, calculate standardized total risk-
weighted assets in accordance with subpart D, and if applicable, subpart 
F of this part; and
    (ii) Beginning on January 1, 2015, calculate and maintain minimum 
capital ratios in accordance with subparts A, B and C of this part, 
provided, however, that from January 1, 2015 to December 31, 2017, a 
savings and loan holding company that is an advanced approaches national 
bank or Federal savings association:
    (A) Is not required to maintain a supplementary leverage ratio; and
    (B) Must calculate a supplementary leverage ratio in accordance with 
Sec.  3.10(c), and must report the calculated supplementary leverage 
ratio on any applicable regulatory reports.
    (3) Beginning on January 1, 2016, and subject to the transition 
provisions in subpart G of this part, a national bank or Federal savings 
association is subject to limitations on distributions and discretionary 
bonus payments with respect to its capital conservation buffer and any 
applicable countercyclical capital buffer amount, in accordance with 
subpart B of this part.
    (4) No national bank or Federal savings association that is not an 
advanced approaches bank or advanced approaches savings association is 
subject to this part 3 until January 1, 2015.
    (5) A national bank or Federal savings association that changes from 
one category of national bank or Federal savings association to another 
of such categories must comply with the requirements of its category in 
this part, including applicable transition provisions of the 
requirements in this part, no later than on the first day of the second 
quarter following the change in the national bank's or Federal savings 
association's category.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 79 FR 57740, Sept. 26, 
2014; 84 FR 35248, July 22, 2019; 84 FR 56374, Oct. 22, 2019; 84 FR 
59263, Nov. 1, 2019]



Sec.  3.2  Definitions.

    As used in this part:

[[Page 20]]

    Additional tier 1 capital is defined in Sec.  3.20(c).
    Adjusted allowances for credit losses (AACL) means, with respect to 
a national bank or Federal savings association that has adopted CECL, 
valuation allowances that have been established through a charge against 
earnings or retained earnings for expected credit losses on financial 
assets measured at amortized cost and a lessor's net investment in 
leases that have been established to reduce the amortized cost basis of 
the assets to amounts expected to be collected as determined in 
accordance with GAAP. For purposes of this part, adjusted allowances for 
credit losses include allowances for expected credit losses on off-
balance sheet credit exposures not accounted for as insurance as 
determined in accordance with GAAP. Adjusted allowances for credit 
losses exclude ``allocated transfer risk reserves'' and allowances 
created that reflect credit losses on purchased credit deteriorated 
assets and available-for-sale debt securities.
    Advanced approaches national bank or Federal savings association 
means a national bank or Federal savings association that is described 
in Sec.  3.100(b)(1).
    Advanced approaches total risk-weighted assets means:
    (1) The sum of:
    (i) Credit-risk-weighted assets;
    (ii) Credit valuation adjustment (CVA) risk-weighted assets;
    (iii) Risk-weighted assets for operational risk; and
    (iv) For a market risk national bank or Federal savings association 
only, advanced market risk-weighted assets; minus
    (2) Excess eligible credit reserves not included in the national 
bank's or Federal savings association's tier 2 capital.
    Advanced market risk-weighted assets means the advanced measure for 
market risk calculated under Sec.  3.204 multiplied by 12.5.
    Affiliate with respect to a company, means any company that 
controls, is controlled by, or is under common control with, the 
company.
    Allocated transfer risk reserves means reserves that have been 
established in accordance with section 905(a) of the International 
Lending Supervision Act, against certain assets whose value U.S. 
supervisory authorities have found to be significantly impaired by 
protracted transfer risk problems.
    Allowances for loan and lease losses (ALLL) means valuation 
allowances that have been established through a charge against earnings 
to cover estimated credit losses on loans, lease financing receivables 
or other extensions of credit as determined in accordance with GAAP. 
ALLL excludes ``allocated transfer risk reserves.'' For purposes of this 
part, ALLL includes allowances that have been established through a 
charge against earnings to cover estimated credit losses associated with 
off-balance sheet credit exposures as determined in accordance with 
GAAP.
    Asset-backed commercial paper (ABCP) program means a program 
established primarily for the purpose of issuing commercial paper that 
is investment grade and backed by underlying exposures held in a 
bankruptcy-remote special purpose entity (SPE).
    Asset-backed commercial paper (ABCP) program sponsor means a 
national bank or Federal savings association that:
    (1) Establishes an ABCP program;
    (2) Approves the sellers permitted to participate in an ABCP 
program;
    (3) Approves the exposures to be purchased by an ABCP program; or
    (4) Administers the ABCP program by monitoring the underlying 
exposures, underwriting or otherwise arranging for the placement of debt 
or other obligations issued by the program, compiling monthly reports, 
or ensuring compliance with the program documents and with the program's 
credit and investment policy.
    Bank holding company means a bank holding company as defined in 
section 2 of the Bank Holding Company Act.
    Bank Holding Company Act means the Bank Holding Company Act of 1956, 
as amended (12 U.S.C. 1841 et seq.).
    Bankruptcy remote means, with respect to an entity or asset, that 
the entity or asset would be excluded from an insolvent entity's estate 
in receivership, insolvency, liquidation, or similar proceeding.
    Basis derivative contract means a non-foreign-exchange derivative 
contract (i.e., the contract is denominated in a single currency) in 
which the cash flows of the derivative contract depend

[[Page 21]]

on the difference between two risk factors that are attributable solely 
to one of the following derivative asset classes: Interest rate, credit, 
equity, or commodity.
    Call Report means Consolidated Reports of Condition and Income.
    Carrying value means, with respect to an asset, the value of the 
asset on the balance sheet of the national bank or Federal savings 
association as determined in accordance with GAAP. For all assets other 
than available-for-sale debt securities or purchased credit deteriorated 
assets, the carrying value is not reduced by any associated credit loss 
allowance that is determined in accordance with GAAP.
    Category II national bank or Federal savings association means:
    (1) A national bank or Federal savings association that is a 
subsidiary of a Category II banking organization, as defined pursuant to 
12 CFR 252.5 or 12 CFR 238.10, as applicable; or
    (2) A national bank or Federal savings association that:
    (i) Is not a subsidiary of a depository institution holding company; 
and
    (ii)(A) Has total consolidated assets, calculated based on the 
average of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Call Report, equal to $700 billion or more. If the 
national bank or Federal savings association has not filed the Call 
Report for each of the four most recent calendar quarters, total 
consolidated assets is calculated based on its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
the average of the most recent quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, of $100 billion or more but less than $700 billion. If the 
national bank or Federal savings association has not filed the Call 
Report for each of the four most recent quarters, total consolidated 
assets is based on its total consolidated assets, as reported on the 
Call Report, for the most recent quarter or average of the most recent 
quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross-jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional liabilities, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form.
    (iii) After meeting the criteria in paragraph (2)(ii) of this 
definition, a national bank or Federal savings association continues to 
be a Category II national bank or Federal savings association until the 
national bank or Federal savings association has:
    (A)(1) Less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Less than $75 billion in cross-jurisdictional activity for each 
of the four most recent calendar quarters. Cross-jurisdictional activity 
is the sum of cross-jurisdictional claims and cross-jurisdictional 
liabilities, calculated in accordance with the instructions to the FR Y-
15 or equivalent reporting form; or
    (B) Less than $100 billion in total consolidated assets, as reported 
on the Call Report, for each of the four most recent calendar quarters.
    Category III national bank or Federal savings association means:
    (1) A national bank or Federal savings association that is a 
subsidiary of a Category III banking organization, as defined pursuant 
to 12 CFR 252.5 or 12 CFR 238.10, as applicable;
    (2) A national bank or Federal savings association that is a 
subsidiary of a depository institution that meets the criteria in 
paragraph (3)(ii)(A) or (B) of this definition; or
    (3) A national bank or Federal savings association that:
    (i) Is not a subsidiary of a depository institution holding company; 
and
    (ii)(A) Has total consolidated assets, calculated based on the 
average of the depository institution's total consolidated assets for 
the four most recent calendar quarters as reported on the Call Report, 
equal to $250 billion or

[[Page 22]]

more. If the depository institution has not filed the Call Report for 
each of the four most recent calendar quarters, total consolidated 
assets is calculated based on its total consolidated assets, as reported 
on the Call Report, for the most recent quarter or average of the most 
recent quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the depository institution's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, of $100 billion 
or more but less than $250 billion. If the depository institution has 
not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets is calculated based on its total 
consolidated assets, as reported on the Call Report, for the most recent 
quarter or average of the most recent quarters, as applicable; and
    (2) At least one of the following in paragraphs (3)(ii)(B)(2)(i) 
through (iii) of this definition, each calculated as the average of the 
four most recent calendar quarters, or if the depository institution has 
not filed each applicable reporting form for each of the four most 
recent calendar quarters, for the most recent quarter or quarters, as 
applicable:
    (i) Total nonbank assets, calculated in accordance with the 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure equal to $75 billion or more. Off-
balance sheet exposure is a depository institution's total exposure, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, minus the total consolidated assets of the 
depository institution, as reported on the Call Report; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (iii) After meeting the criteria in paragraph (3)(ii) of this 
definition, a national bank or Federal savings association continues to 
be a Category III national bank or Federal savings association until the 
national bank or Federal savings association:
    (A) Has:
    (1) Less than $250 billion in total consolidated assets, as reported 
on the Call Report, for each of the four most recent calendar quarters;
    (2) Less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent reporting 
form, for each of the four most recent calendar quarters;
    (3) Less than $75 billion in weighted short-term wholesale funding, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Less than $75 billion in off-balance sheet exposure for each of 
the four most recent calendar quarters. Off-balance sheet exposure is a 
national bank's or Federal savings association's total exposure, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, minus the total consolidated assets of the 
national bank or Federal savings association, as reported on the Call 
Report; or
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a Category II national bank or Federal savings association.
    Central counterparty (CCP) means a counterparty (for example, a 
clearing house) that facilitates trades between counterparties in one or 
more financial markets by either guaranteeing trades or novating 
contracts.
    CFTC means the U.S. Commodity Futures Trading Commission.
    Clean-up call means a contractual provision that permits an 
originating national bank or Federal savings association or servicer to 
call securitization exposures before their stated maturity or call date.
    Cleared transaction means an exposure associated with an outstanding 
derivative contract or repo-style transaction that a national bank or 
Federal savings association or clearing member has entered into with a 
central counterparty (that is, a transaction that a central counterparty 
has accepted).

[[Page 23]]

    (1) The following transactions are cleared transactions:
    (i) A transaction between a CCP and a national bank or Federal 
savings association that is a clearing member of the CCP where the 
national bank or Federal savings association enters into the transaction 
with the CCP for the national bank's or Federal savings association's 
own account;
    (ii) A transaction between a CCP and a national bank or Federal 
savings association that is a clearing member of the CCP where the 
national bank or Federal savings association is acting as a financial 
intermediary on behalf of a clearing member client and the transaction 
offsets another transaction that satisfies the requirements set forth in 
Sec.  3.3(a);
    (iii) A transaction between a clearing member client national bank 
or Federal savings association and a clearing member where the clearing 
member acts as a financial intermediary on behalf of the clearing member 
client and enters into an offsetting transaction with a CCP, provided 
that the requirements set forth in Sec.  3.3(a) are met; or
    (iv) A transaction between a clearing member client national bank or 
Federal savings association and a CCP where a clearing member guarantees 
the performance of the clearing member client national bank or Federal 
savings association to the CCP and the transaction meets the 
requirements of Sec.  3.3(a)(2) and (3).
    (2) The exposure of a national bank or Federal savings association 
that is a clearing member to its clearing member client is not a cleared 
transaction where the national bank or Federal savings association is 
either acting as a financial intermediary and enters into an offsetting 
transaction with a CCP or where the national bank or Federal savings 
association provides a guarantee to the CCP on the performance of the 
client.\3\
---------------------------------------------------------------------------

    \3\ For the standardized approach treatment of these exposures, see 
Sec.  3.34(e) (OTC derivative contracts) or Sec.  3.37(c) (repo-style 
transactions). For the advanced approaches treatment of these exposures, 
see Sec. Sec.  3.132(c)(8) and (d) (OTC derivative contracts) or 
Sec. Sec.  3.132(b) and 3.132(d) (repo-style transactions) and for 
calculation of the margin period of risk, see Sec. Sec.  
3.132(d)(5)(iii)(C) (OTC derivative contracts) and 3.132(d)(5)(iii)(A) 
(repo-style transactions).
---------------------------------------------------------------------------

    Clearing member means a member of, or direct participant in, a CCP 
that is entitled to enter into transactions with the CCP.
    Clearing member client means a party to a cleared transaction 
associated with a CCP in which a clearing member acts either as a 
financial intermediary with respect to the party or guarantees the 
performance of the party to the CCP.
    Client-facing derivative transaction means a derivative contract 
that is not a cleared transaction where the national bank or Federal 
savings association is either acting as a financial intermediary and 
enters into an offsetting transaction with a qualifying central 
counterparty (QCCP) or where the national bank or Federal savings 
association provides a guarantee on the performance of a client on a 
transaction between the client and a QCCP.
    Collateral agreement means a legal contract that specifies the time 
when, and circumstances under which, a counterparty is required to 
pledge collateral to a national bank or Federal savings association for 
a single financial contract or for all financial contracts in a netting 
set and confers upon the national bank or Federal savings association a 
perfected, first-priority security interest (notwithstanding the prior 
security interest of any custodial agent), or the legal equivalent 
thereof, in the collateral posted by the counterparty under the 
agreement. This security interest must provide the national bank or 
Federal savings association with a right to close-out the financial 
positions and liquidate the collateral upon an event of default of, or 
failure to perform by, the counterparty under the collateral agreement. 
A contract would not satisfy this requirement if the national bank's or 
Federal savings association's exercise of rights under the agreement may 
be stayed or avoided:
    (1) Under applicable law in the relevant jurisdictions, other than:
    (i) In receivership, conservatorship, or resolution under the 
Federal Deposit Insurance Act, Title II of the Dodd-

[[Page 24]]

Frank Act, or under any similar insolvency law applicable to GSEs, or 
laws of foreign jurisdictions that are substantially similar \4\ to the 
U.S. laws referenced in this paragraph (1)(i) in order to facilitate the 
orderly resolution of the defaulting counterparty;
---------------------------------------------------------------------------

    \4\ The OCC expects to evaluate jointly with the Board and FDIC 
whether foreign special resolution regimes meet the requirements of this 
paragraph.
---------------------------------------------------------------------------

    (ii) Where the agreement is subject by its terms to any of the laws 
referenced in paragraph (1)(i) of this definition; or
    (2) Other than to the extent necessary for the counterparty to 
comply with the requirements of part 47, subpart I of part 252, and part 
382 of this title 12, as applicable.
    Commercial end-user means an entity that:
    (1)(i) Is using derivative contracts to hedge or mitigate commercial 
risk; and
    (ii)(A) Is not an entity described in section 2(h)(7)(C)(i)(I) 
through (VIII) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(C)(i)(I) 
through (VIII)); or
    (B) Is not a ``financial entity'' for purposes of section 2(h)(7) of 
the Commodity Exchange Act (7 U.S.C. 2(h)) by virtue of section 
2(h)(7)(C)(iii) of the Act (7 U.S.C. 2(h)(7)(C)(iii)); or
    (2)(i) Is using derivative contracts to hedge or mitigate commercial 
risk; and
    (ii) Is not an entity described in section 3C(g)(3)(A)(i) through 
(viii) of the Securities Exchange Act of 1934 (15 U.S.C. 78c-
3(g)(3)(A)(i) through (viii)); or
    (3) Qualifies for the exemption in section 2(h)(7)(A) of the 
Commodity Exchange Act (7 U.S.C. 2(h)(7)(A)) by virtue of section 
2(h)(7)(D) of the Act (7 U.S.C. 2(h)(7)(D)); or
    (4) Qualifies for an exemption in section 3C(g)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c-3(g)(1)) by virtue of section 
3C(g)(4) of the Act (15 U.S.C. 78c-3(g)(4)).
    Commitment means any legally binding arrangement that obligates a 
national bank or Federal savings association to extend credit or to 
purchase assets.
    Commodity derivative contract means a commodity-linked swap, 
purchased commodity-linked option, forward commodity-linked contract, or 
any other instrument linked to commodities that gives rise to similar 
counterparty credit risks.
    Commodity Exchange Act means the Commodity Exchange Act of 1936 (7 
U.S.C. 1 et seq.)
    Common equity tier 1 capital is defined in Sec.  3.20(b).
    Common equity tier 1 minority interest means the common equity tier 
1 capital of a depository institution or foreign bank that is:
    (1) A consolidated subsidiary of a national bank or Federal savings 
association; and
    (2) Not owned by the national bank or Federal savings association.
    Company means a corporation, partnership, limited liability company, 
depository institution, business trust, special purpose entity, 
association, or similar organization.
    Control. A person or company controls a company if it:
    (1) Owns, controls, or holds with power to vote 25 percent or more 
of a class of voting securities of the company; or
    (2) Consolidates the company for financial reporting purposes.
    Core capital means tier 1 capital, as calculated in accordance with 
subpart B of this part.
    Corporate exposure means an exposure to a company that is not:
    (1) An exposure to a sovereign, the Bank for International 
Settlements, the European Central Bank, the European Commission, the 
International Monetary Fund, the European Stability Mechanism, the 
European Financial Stability Facility, a multi-lateral development bank 
(MDB), a depository institution, a foreign bank, a credit union, or a 
public sector entity (PSE);
    (2) An exposure to a GSE;
    (3) A residential mortgage exposure;
    (4) A pre-sold construction loan;
    (5) A statutory multifamily mortgage;
    (6) A high volatility commercial real estate (HVCRE) exposure;
    (7) A cleared transaction;
    (8) A default fund contribution;
    (9) A securitization exposure;
    (10) An equity exposure; or
    (11) An unsettled transaction.
    (12) A policy loan;
    (13) A separate account; or

[[Page 25]]

    (14) A Paycheck Protection Program covered loan as defined in 
section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)).
    Country risk classification (CRC) with respect to a sovereign, means 
the most recent consensus CRC published by the Organization for Economic 
Cooperation and Development (OECD) as of December 31st of the prior 
calendar year that provides a view of the likelihood that the sovereign 
will service its external debt.
    Covered debt instrument means an unsecured debt instrument that is:
    (1) Issued by a global systemically important BHC, as defined in 12 
CFR 217.2, and that is an eligible debt security, as defined in 12 CFR 
252.61, or that is pari passu or subordinated to any eligible debt 
security issued by the global systemically important BHC; or
    (2) Issued by a Covered IHC, as defined in 12 CFR 252.161, and that 
is an eligible Covered IHC debt security, as defined in 12 CFR 252.161, 
or that is pari passu or subordinated to any eligible Covered IHC debt 
security issued by the Covered IHC; or
    (3) Issued by a global systemically important banking organization, 
as defined in 12 CFR 252.2 other than a global systemically important 
BHC, as defined in 12 CFR 217.2; or issued by a subsidiary of a global 
systemically important banking organization that is not a global 
systemically important BHC, other than a Covered IHC, as defined in 12 
CFR 252.161; and where
    (i) The instrument is eligible for use to comply with an applicable 
law or regulation requiring the issuance of a minimum amount of 
instruments to absorb losses or recapitalize the issuer or any of its 
subsidiaries in connection with a resolution, receivership, insolvency, 
or similar proceeding of the issuer or any of its subsidiaries; or
    (ii) The instrument is pari passu or subordinated to any instrument 
described in paragraph (3)(i) of this definition; for purposes of this 
paragraph (3)(ii) of this definition, if the issuer may be subject to a 
special resolution regime, in its jurisdiction of incorporation or 
organization, that addresses the failure or potential failure of a 
financial company and any instrument described in paragraph (3)(i) of 
this definition is eligible under that special resolution regime to be 
written down or converted into equity or any other capital instrument, 
then an instrument is pari passu or subordinated to any instrument 
described in paragraph (3)(i) of this definition if that instrument is 
eligible under that special resolution regime to be written down or 
converted into equity or any other capital instrument ahead of or 
proportionally with any instrument described in paragraph (3)(i) of this 
definition; and
    (4) Provided that, for purposes of this definition, covered debt 
instrument does not include a debt instrument that qualifies as tier 2 
capital pursuant to 12 CFR 3.20(d) or that is otherwise treated as 
regulatory capital by the primary supervisor of the issuer.
    Covered savings and loan holding company means a top-tier savings 
and loan holding company other than:
    (1) A top-tier savings and loan holding company that is:
    (i) A grandfathered unitary savings and loan holding company as 
defined in section 10(c)(9)(A) of HOLA; and
    (ii) As of June 30 of the previous calendar year, derived 50 percent 
or more of its total consolidated assets or 50 percent of its total 
revenues on an enterprise-wide basis (as calculated under GAAP) from 
activities that are not financial in nature under section 4(k) of the 
Bank Holding Company Act (12 U.S.C. 1842(k));
    (2) A top-tier savings and loan holding company that is an insurance 
underwriting company; or
    (3)(i) A top-tier savings and loan holding company that, as of June 
30 of the previous calendar year, held 25 percent or more of its total 
consolidated assets in subsidiaries that are insurance underwriting 
companies (other than assets associated with insurance for credit risk); 
and
    (ii) For purposes of paragraph (3)(i) of this definition, the 
company must calculate its total consolidated assets in accordance with 
GAAP, or if the company does not calculate its total consolidated assets 
under GAAP for any regulatory purpose (including compliance with 
applicable securities laws), the company may estimate its total 
consolidated assets, subject to review and adjustment by the Board.

[[Page 26]]

    Credit derivative means a financial contract executed under standard 
industry credit derivative documentation that allows one party (the 
protection purchaser) to transfer the credit risk of one or more 
exposures (reference exposure(s)) to another party (the protection 
provider) for a certain period of time.
    Credit-enhancing interest-only strip (CEIO) means an on-balance 
sheet asset that, in form or in substance:
    (1) Represents a contractual right to receive some or all of the 
interest and no more than a minimal amount of principal due on the 
underlying exposures of a securitization; and
    (2) Exposes the holder of the CEIO to credit risk directly or 
indirectly associated with the underlying exposures that exceeds a pro 
rata share of the holder's claim on the underlying exposures, whether 
through subordination provisions or other credit-enhancement techniques.
    Credit-enhancing representations and warranties means 
representations and warranties that are made or assumed in connection 
with a transfer of underlying exposures (including loan servicing 
assets) and that obligate a national bank or Federal savings association 
to protect another party from losses arising from the credit risk of the 
underlying exposures. Credit-enhancing representations and warranties 
include provisions to protect a party from losses resulting from the 
default or nonperformance of the counterparties of the underlying 
exposures or from an insufficiency in the value of the collateral 
backing the underlying exposures. Credit-enhancing representations and 
warranties do not include:
    (1) Early default clauses and similar warranties that permit the 
return of, or premium refund clauses covering, 1-4 family residential 
first mortgage loans that qualify for a 50 percent risk weight for a 
period not to exceed 120 days from the date of transfer. These 
warranties may cover only those loans that were originated within 1 year 
of the date of transfer;
    (2) Premium refund clauses that cover assets guaranteed, in whole or 
in part, by the U.S. Government, a U.S. Government agency or a GSE, 
provided the premium refund clauses are for a period not to exceed 120 
days from the date of transfer; or
    (3) Warranties that permit the return of underlying exposures in 
instances of misrepresentation, fraud, or incomplete documentation.
    Credit risk mitigant means collateral, a credit derivative, or a 
guarantee.
    Credit-risk-weighted assets means 1.06 multiplied by the sum of:
    (1) Total wholesale and retail risk-weighted assets as calculated 
under Sec.  3.131;
    (2) Risk-weighted assets for securitization exposures as calculated 
under Sec.  3.142; and
    (3) Risk-weighted assets for equity exposures as calculated under 
Sec.  3.151.
    Credit union means an insured credit union as defined under the 
Federal Credit Union Act (12 U.S.C. 1752 et seq.).
    Current Expected Credit Losses (CECL) means the current expected 
credit losses methodology under GAAP.
    Current exposure means, with respect to a netting set, the larger of 
zero or the fair value of a transaction or portfolio of transactions 
within the netting set that would be lost upon default of the 
counterparty, assuming no recovery on the value of the transactions.
    Current exposure methodology means the method of calculating the 
exposure amount for over-the-counter derivative contracts in Sec.  
3.34(b).
    Custodian means a financial institution that has legal custody of 
collateral provided to a CCP.
    Custody bank means a national bank or Federal savings association 
that is a subsidiary of a depository institution holding company that is 
a custodial banking organization under 12 CFR 217.2.
    Default fund contribution means the funds contributed or commitments 
made by a clearing member to a CCP's mutualized loss sharing 
arrangement.
    Depository institution means a depository institution as defined in 
section 3 of the Federal Deposit Insurance Act.
    Depository institution holding company means a bank holding company 
or savings and loan holding company.
    Derivative contract means a financial contract whose value is 
derived from the values of one or more underlying assets, reference 
rates, or indices of

[[Page 27]]

asset values or reference rates. Derivative contracts include interest 
rate derivative contracts, exchange rate derivative contracts, equity 
derivative contracts, commodity derivative contracts, credit derivative 
contracts, and any other instrument that poses similar counterparty 
credit risks. Derivative contracts also include unsettled securities, 
commodities, and foreign exchange transactions with a contractual 
settlement or delivery lag that is longer than the lesser of the market 
standard for the particular instrument or five business days.
    Discretionary bonus payment means a payment made to an executive 
officer of a national bank or Federal savings association, where:
    (1) The national bank or Federal savings association retains 
discretion as to whether to make, and the amount of, the payment until 
the payment is awarded to the executive officer;
    (2) The amount paid is determined by the national bank or Federal 
savings association without prior promise to, or agreement with, the 
executive officer; and
    (3) The executive officer has no contractual right, whether express 
or implied, to the bonus payment.
    Distribution means:
    (1) A reduction of tier 1 capital through the repurchase of a tier 1 
capital instrument or by other means, except when a national bank or 
Federal savings association, within the same quarter when the repurchase 
is announced, fully replaces a tier 1 capital instrument it has 
repurchased by issuing another capital instrument that meets the 
eligibility criteria for:
    (i) A common equity tier 1 capital instrument if the instrument 
being repurchased was part of the national bank's or Federal savings 
association's common equity tier 1 capital, or
    (ii) A common equity tier 1 or additional tier 1 capital instrument 
if the instrument being repurchased was part of the national bank's or 
Federal savings association's tier 1 capital;
    (2) A reduction of tier 2 capital through the repurchase, or 
redemption prior to maturity, of a tier 2 capital instrument or by other 
means, except when a national bank or Federal savings association, 
within the same quarter when the repurchase or redemption is announced, 
fully replaces a tier 2 capital instrument it has repurchased by issuing 
another capital instrument that meets the eligibility criteria for a 
tier 1 or tier 2 capital instrument;
    (3) A dividend declaration or payment on any tier 1 capital 
instrument;
    (4) A dividend declaration or interest payment on any tier 2 capital 
instrument if the national bank or Federal savings association has full 
discretion to permanently or temporarily suspend such payments without 
triggering an event of default; or
    (5) Any similar transaction that the OCC determines to be in 
substance a distribution of capital.
    Dodd-Frank Act means the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 (Pub. L. 111-203, 124 Stat. 1376).
    Early amortization provision means a provision in the documentation 
governing a securitization that, when triggered, causes investors in the 
securitization exposures to be repaid before the original stated 
maturity of the securitization exposures, unless the provision:
    (1) Is triggered solely by events not directly related to the 
performance of the underlying exposures or the originating national bank 
or Federal savings association (such as material changes in tax laws or 
regulations); or
    (2) Leaves investors fully exposed to future draws by borrowers on 
the underlying exposures even after the provision is triggered.
    Effective notional amount means for an eligible guarantee or 
eligible credit derivative, the lesser of the contractual notional 
amount of the credit risk mitigant and the exposure amount (or EAD for 
purposes of subpart E of this part) of the hedged exposure, multiplied 
by the percentage coverage of the credit risk mitigant.
    Eligible ABCP liquidity facility means a liquidity facility 
supporting ABCP, in form or in substance, that is subject to an asset 
quality test at the time of draw that precludes funding against assets 
that are 90 days or more past due or in default. Notwithstanding the 
preceding sentence, a liquidity facility is an eligible ABCP liquidity 
facility if the assets or exposures funded under

[[Page 28]]

the liquidity facility that do not meet the eligibility requirements are 
guaranteed by a sovereign that qualifies for a 20 percent risk weight or 
lower.
    Eligible clean-up call means a clean-up call that:
    (1) Is exercisable solely at the discretion of the originating 
national bank or Federal savings association or servicer;
    (2) Is not structured to avoid allocating losses to securitization 
exposures held by investors or otherwise structured to provide credit 
enhancement to the securitization; and
    (3)(i) For a traditional securitization, is only exercisable when 10 
percent or less of the principal amount of the underlying exposures or 
securitization exposures (determined as of the inception of the 
securitization) is outstanding; or
    (ii) For a synthetic securitization, is only exercisable when 10 
percent or less of the principal amount of the reference portfolio of 
underlying exposures (determined as of the inception of the 
securitization) is outstanding.
    Eligible credit derivative means a credit derivative in the form of 
a credit default swap, n\th\-to-default swap, total return swap, or any 
other form of credit derivative approved by the OCC, provided that:
    (1) The contract meets the requirements of an eligible guarantee and 
has been confirmed by the protection purchaser and the protection 
provider;
    (2) Any assignment of the contract has been confirmed by all 
relevant parties;
    (3) If the credit derivative is a credit default swap or n\th\-to-
default swap, the contract includes the following credit events:
    (i) Failure to pay any amount due under the terms of the reference 
exposure, subject to any applicable minimal payment threshold that is 
consistent with standard market practice and with a grace period that is 
closely in line with the grace period of the reference exposure; and
    (ii) Receivership, insolvency, liquidation, conservatorship or 
inability of the reference exposure issuer to pay its debts, or its 
failure or admission in writing of its inability generally to pay its 
debts as they become due, and similar events;
    (4) The terms and conditions dictating the manner in which the 
contract is to be settled are incorporated into the contract;
    (5) If the contract allows for cash settlement, the contract 
incorporates a robust valuation process to estimate loss reliably and 
specifies a reasonable period for obtaining post-credit event valuations 
of the reference exposure;
    (6) If the contract requires the protection purchaser to transfer an 
exposure to the protection provider at settlement, the terms of at least 
one of the exposures that is permitted to be transferred under the 
contract provide that any required consent to transfer may not be 
unreasonably withheld;
    (7) If the credit derivative is a credit default swap or n\th\-to-
default swap, the contract clearly identifies the parties responsible 
for determining whether a credit event has occurred, specifies that this 
determination is not the sole responsibility of the protection provider, 
and gives the protection purchaser the right to notify the protection 
provider of the occurrence of a credit event; and
    (8) If the credit derivative is a total return swap and the national 
bank or Federal savings association records net payments received on the 
swap as net income, the national bank or Federal savings association 
records offsetting deterioration in the value of the hedged exposure 
(either through reductions in fair value or by an addition to reserves).
    Eligible credit reserves means:
    (1) For a national bank or Federal savings association that has not 
adopted CECL, all general allowances that have been established through 
a charge against earnings to cover estimated credit losses associated 
with on- or off-balance sheet wholesale and retail exposures, including 
the ALLL associated with such exposures, but excluding allocated 
transfer risk reserves established pursuant to 12 U.S.C. 3904 and other 
specific reserves created against recognized losses; and
    (2) For a national bank or Federal savings association that has 
adopted CECL, all general allowances that have been established through 
a charge against earnings or retained earnings

[[Page 29]]

to cover expected credit losses associated with on- or off-balance sheet 
wholesale and retail exposures, including AACL associated with such 
exposures. Eligible credit reserves exclude allocated transfer risk 
reserves established pursuant to 12 U.S.C. 3904, allowances that reflect 
credit losses on purchased credit deteriorated assets and available-for-
sale debt securities, and other specific reserves created against 
recognized losses.
    Eligible guarantee means a guarantee that:
    (1) Is written;
    (2) Is either:
    (i) Unconditional; or
    (ii) A contingent obligation of the U.S. government or its agencies, 
the enforceability of which is dependent upon some affirmative action on 
the part of the beneficiary of the guarantee or a third party (for 
example, meeting servicing requirements);
    (3) Covers all or a pro rata portion of all contractual payments of 
the obligated party on the reference exposure;
    (4) Gives the beneficiary a direct claim against the protection 
provider;
    (5) Is not unilaterally cancelable by the protection provider for 
reasons other than the breach of the contract by the beneficiary;
    (6) Except for a guarantee by a sovereign, is legally enforceable 
against the protection provider in a jurisdiction where the protection 
provider has sufficient assets against which a judgment may be attached 
and enforced;
    (7) Requires the protection provider to make payment to the 
beneficiary on the occurrence of a default (as defined in the guarantee) 
of the obligated party on the reference exposure in a timely manner 
without the beneficiary first having to take legal actions to pursue the 
obligor for payment;
    (8) Does not increase the beneficiary's cost of credit protection on 
the guarantee in response to deterioration in the credit quality of the 
reference exposure;
    (9) Is not provided by an affiliate of the national bank or Federal 
savings association, unless the affiliate is an insured depository 
institution, foreign bank, securities broker or dealer, or insurance 
company that:
    (i) Does not control the national bank or Federal savings 
association; and
    (ii) Is subject to consolidated supervision and regulation 
comparable to that imposed on depository institutions, U.S. securities 
broker-dealers, or U.S. insurance companies (as the case may be); and
    (10) For purposes of Sec. Sec.  3.141 through 3.145 and subpart D of 
this part, is provided by an eligible guarantor.
    Eligible guarantor means:
    (1) A sovereign, the Bank for International Settlements, the 
International Monetary Fund, the European Central Bank, the European 
Commission, a Federal Home Loan Bank, Federal Agricultural Mortgage 
Corporation (Farmer Mac), the European Stability Mechanism, the European 
Financial Stability Facility, a multilateral development bank (MDB), a 
depository institution, a bank holding company, a savings and loan 
holding company, a credit union, a foreign bank, or a qualifying central 
counterparty; or
    (2) An entity (other than a special purpose entity):
    (i) That at the time the guarantee is issued or anytime thereafter, 
has issued and outstanding an unsecured debt security without credit 
enhancement that is investment grade;
    (ii) Whose creditworthiness is not positively correlated with the 
credit risk of the exposures for which it has provided guarantees; and
    (iii) That is not an insurance company engaged predominately in the 
business of providing credit protection (such as a monoline bond insurer 
or re-insurer).
    Eligible margin loan means:
    (1) An extension of credit where:
    (i) The extension of credit is collateralized exclusively by liquid 
and readily marketable debt or equity securities, or gold;
    (ii) The collateral is marked-to-fair value daily, and the 
transaction is subject to daily margin maintenance requirements; and
    (iii) The extension of credit is conducted under an agreement that 
provides the national bank or Federal savings association the right to 
accelerate and terminate the extension of credit and to liquidate or 
set-off collateral

[[Page 30]]

promptly upon an event of default, including upon an event of 
receivership, insolvency, liquidation, conservatorship, or similar 
proceeding, of the counterparty, provided that, in any such case:
    (A) Any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions, other than 
in receivership, conservatorship, or resolution under the Federal 
Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any 
similar insolvency law applicable to GSEs,\5\ or laws of foreign 
jurisdictions that are substantially similar \6\ to the U.S. laws 
referenced in this paragraph (1)(iii)(A) in order to facilitate the 
orderly resolution of the defaulting counterparty; and
---------------------------------------------------------------------------

    \5\ This requirement is met where all transactions under the 
agreement are (i) executed under U.S. law and (ii) constitute 
``securities contracts'' under section 555 of the Bankruptcy Code (11 
U.S.C. 555), qualified financial contracts under section 11(e)(8) of the 
Federal Deposit Insurance Act, or netting contracts between or among 
financial institutions under sections 401-407 of the Federal Deposit 
Insurance Corporation Improvement Act or the Federal Reserve Board's 
Regulation EE (12 CFR part 231).
    \6\ The OCC expects to evaluate jointly with the Board and FDIC 
whether foreign special resolution regimes meet the requirements of this 
paragraph.
---------------------------------------------------------------------------

    (B) The agreement may limit the right to accelerate, terminate, and 
close-out on a net basis all transactions under the agreement and to 
liquidate or set-off collateral promptly upon an event of default of the 
counterparty to the extent necessary for the counterparty to comply with 
the requirements of part 47, subpart I of part 252, and part 382, of 
this title 12, as applicable.
    (2) In order to recognize an exposure as an eligible margin loan for 
purposes of this subpart, a national bank or Federal savings association 
must comply with the requirements of Sec.  3.3(b) with respect to that 
exposure.
    Eligible servicer cash advance facility means a servicer cash 
advance facility in which:
    (1) The servicer is entitled to full reimbursement of advances, 
except that a servicer may be obligated to make non-reimbursable 
advances for a particular underlying exposure if any such advance is 
contractually limited to an insignificant amount of the outstanding 
principal balance of that exposure;
    (2) The servicer's right to reimbursement is senior in right of 
payment to all other claims on the cash flows from the underlying 
exposures of the securitization; and
    (3) The servicer has no legal obligation to, and does not make 
advances to the securitization if the servicer concludes the advances 
are unlikely to be repaid.
    Employee stock ownership plan has the same meaning as in 29 CFR 
2550.407d-6.
    Equity derivative contract means an equity-linked swap, purchased 
equity-linked option, forward equity-linked contract, or any other 
instrument linked to equities that gives rise to similar counterparty 
credit risks.
    Equity exposure means:
    (1) A security or instrument (whether voting or non-voting) that 
represents a direct or an indirect ownership interest in, and is a 
residual claim on, the assets and income of a company, unless:
    (i) The issuing company is consolidated with the national bank or 
Federal savings association under GAAP;
    (ii) The national bank or Federal savings association is required to 
deduct the ownership interest from tier 1 or tier 2 capital under this 
part;
    (iii) The ownership interest incorporates a payment or other similar 
obligation on the part of the issuing company (such as an obligation to 
make periodic payments); or
    (iv) The ownership interest is a securitization exposure;
    (2) A security or instrument that is mandatorily convertible into a 
security or instrument described in paragraph (1) of this definition;
    (3) An option or warrant that is exercisable for a security or 
instrument described in paragraph (1) of this definition; or
    (4) Any other security or instrument (other than a securitization 
exposure) to the extent the return on the security or instrument is 
based on the performance of a security or instrument described in 
paragraph (1) of this definition.

[[Page 31]]

    ERISA means the Employee Retirement Income and Security Act of 1974 
(29 U.S.C. 1001 et seq.).
    Exchange rate derivative contract means a cross-currency interest 
rate swap, forward foreign-exchange contract, currency option purchased, 
or any other instrument linked to exchange rates that gives rise to 
similar counterparty credit risks.
    Excluded covered debt instrument means an investment in a covered 
debt instrument held by a national bank or Federal savings association 
that is a subsidiary of a global systemically important BHC, as defined 
in 12 CFR 252.2, that:
    (1) Is held in connection with market making-related activities 
permitted under 12 CFR 44.4, provided that a direct exposure or an 
indirect exposure to a covered debt instrument is held for 30 business 
days or less; and
    (2) Has been designated as an excluded covered debt instrument by 
the national bank or Federal savings association that is a subsidiary of 
a global systemically important BHC, as defined in 12 CFR 252.2, 
pursuant to 12 CFR 3.22(c)(5)(iv)(A).
    Executive officer means a person who holds the title or, without 
regard to title, salary, or compensation, performs the function of one 
or more of the following positions: President, chief executive officer, 
executive chairman, chief operating officer, chief financial officer, 
chief investment officer, chief legal officer, chief lending officer, 
chief risk officer, or head of a major business line, and other staff 
that the board of directors of the national bank or Federal savings 
association deems to have equivalent responsibility.
    Expected credit loss (ECL) means:
    (1) For a wholesale exposure to a non-defaulted obligor or segment 
of non-defaulted retail exposures that is carried at fair value with 
gains and losses flowing through earnings or that is classified as held-
for-sale and is carried at the lower of cost or fair value with losses 
flowing through earnings, zero.
    (2) For all other wholesale exposures to non-defaulted obligors or 
segments of non-defaulted retail exposures, the product of the 
probability of default (PD) times the loss given default (LGD) times the 
exposure at default (EAD) for the exposure or segment.
    (3) For a wholesale exposure to a defaulted obligor or segment of 
defaulted retail exposures, the national bank's or Federal savings 
association's impairment estimate for allowance purposes for the 
exposure or segment.
    (4) Total ECL is the sum of expected credit losses for all wholesale 
and retail exposures other than exposures for which the national bank or 
Federal savings association has applied the double default treatment in 
Sec.  3.135.
    Exposure amount means:
    (1) For the on-balance sheet component of an exposure (other than an 
available-for-sale or held-to-maturity security, if the national bank or 
Federal savings association has made an AOCI opt-out election (as 
defined in Sec.  3.22(b)(2)); an OTC derivative contract; a repo-style 
transaction or an eligible margin loan for which the national bank or 
Federal savings association determines the exposure amount under Sec.  
3.37; a cleared transaction; a default fund contribution; or a 
securitization exposure), the national bank's or Federal savings 
association's carrying value of the exposure.
    (2) For a security (that is not a securitization exposure, equity 
exposure, or preferred stock classified as an equity security under 
GAAP) classified as available-for-sale or held-to-maturity if the 
national bank or Federal savings association has made an AOCI opt-out 
election (as defined in Sec.  3.22(b)(2)), the national bank's or 
Federal savings association's carrying value (including net accrued but 
unpaid interest and fees) for the exposure less any net unrealized gains 
on the exposure and plus any net unrealized losses on the exposure.
    (3) For available-for-sale preferred stock classified as an equity 
security under GAAP if the national bank or Federal savings association 
has made an AOCI opt-out election (as defined in Sec.  3.22(b)(2)), the 
national bank's or Federal savings association's carrying value of the 
exposure less any net unrealized gains on the exposure that are 
reflected in such carrying value but excluded from the national bank's 
or Federal savings association's regulatory capital components.

[[Page 32]]

    (4) For the off-balance sheet component of an exposure (other than 
an OTC derivative contract; a repo-style transaction or an eligible 
margin loan for which the national bank or Federal savings association 
calculates the exposure amount under Sec.  3.37; a cleared transaction; 
a default fund contribution; or a securitization exposure), the notional 
amount of the off-balance sheet component multiplied by the appropriate 
credit conversion factor (CCF) in Sec.  3.33.
    (5) For an exposure that is an OTC derivative contract, the exposure 
amount determined under Sec.  3.34.
    (6) For an exposure that is a cleared transaction, the exposure 
amount determined under Sec.  3.35.
    (7) For an exposure that is an eligible margin loan or repo-style 
transaction for which the bank calculates the exposure amount as 
provided in Sec.  3.37, the exposure amount determined under Sec.  3.37.
    (8) For an exposure that is a securitization exposure, the exposure 
amount determined under Sec.  3.42.
    Federal Deposit Insurance Act means the Federal Deposit Insurance 
Act (12 U.S.C. 1813).
    Federal Deposit Insurance Corporation Improvement Act means the 
Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 
4401).
    Federal savings association means an insured Federal savings 
association or an insured Federal savings bank chartered under section 5 
of the Home Owners' Loan Act of 1933.
    Fiduciary or custodial and safekeeping account means, for purposes 
of Sec.  3.10(c)(2)(x), an account administered by a custody bank for 
which the custody bank provides fiduciary or custodial and safekeeping 
services, as authorized by applicable Federal or state law.
    Financial collateral means collateral:
    (1) In the form of:
    (i) Cash on deposit with the national bank or Federal savings 
association (including cash held for the national bank or Federal 
savings association by a third-party custodian or trustee);
    (ii) Gold bullion;
    (iii) Long-term debt securities that are not resecuritization 
exposures and that are investment grade;
    (iv) Short-term debt instruments that are not resecuritization 
exposures and that are investment grade;
    (v) Equity securities that are publicly traded;
    (vi) Convertible bonds that are publicly traded; or
    (vii) Money market fund shares and other mutual fund shares if a 
price for the shares is publicly quoted daily; and
    (2) In which the national bank and Federal savings association has a 
perfected, first-priority security interest or, outside of the United 
States, the legal equivalent thereof (with the exception of cash on 
deposit; and notwithstanding the prior security interest of any 
custodial agent or any priority security interest granted to a CCP in 
connection with collateral posted to that CCP).
    Financial institution means:
    (1) A bank holding company; savings and loan holding company; 
nonbank financial institution supervised by the Board under Title I of 
the Dodd-Frank Act; depository institution; foreign bank; credit union; 
industrial loan company, industrial bank, or other similar institution 
described in section 2 of the Bank Holding Company Act; national 
association, state member bank, or state non-member bank that is not a 
depository institution; insurance company; securities holding company as 
defined in section 618 of the Dodd-Frank Act; broker or dealer 
registered with the SEC under section 15 of the Securities Exchange Act; 
futures commission merchant as defined in section 1a of the Commodity 
Exchange Act; swap dealer as defined in section 1a of the Commodity 
Exchange Act; or security-based swap dealer as defined in section 3 of 
the Securities Exchange Act;
    (2) Any designated financial market utility, as defined in section 
803 of the Dodd-Frank Act;
    (3) Any entity not domiciled in the United States (or a political 
subdivision thereof) that is supervised and regulated in a manner 
similar to entities described in paragraphs (1) or (2) of this 
definition; or
    (4) Any other company:
    (i) Of which the national bank or Federal savings association owns:

[[Page 33]]

    (A) An investment in GAAP equity instruments of the company with an 
adjusted carrying value or exposure amount equal to or greater than $10 
million; or
    (B) More than 10 percent of the company's issued and outstanding 
common shares (or similar equity interest), and
    (ii) Which is predominantly engaged in the following activities:
    (A) Lending money, securities or other financial instruments, 
including servicing loans;
    (B) Insuring, guaranteeing, indemnifying against loss, harm, damage, 
illness, disability, or death, or issuing annuities;
    (C) Underwriting, dealing in, making a market in, or investing as 
principal in securities or other financial instruments; or
    (D) Asset management activities (not including investment or 
financial advisory activities).
    (5) For the purposes of this definition, a company is 
``predominantly engaged'' in an activity or activities if:
    (i) 85 percent or more of the total consolidated annual gross 
revenues (as determined in accordance with applicable accounting 
standards) of the company is either of the two most recent calendar 
years were derived, directly or indirectly, by the company on a 
consolidated basis from the activities; or
    (ii) 85 percent or more of the company's consolidated total assets 
(as determined in accordance with applicable accounting standards) as of 
the end of either of the two most recent calendar years were related to 
the activities.
    (6) Any other company that the OCC may determine is a financial 
institution based on activities similar in scope, nature, or operation 
to those of the entities included in paragraphs (1) through (4) of this 
definition.
    (7) For purposes of this part, ``financial institution'' does not 
include the following entities:
    (i) GSEs;
    (ii) Small business investment companies, as defined in section 102 
of the Small Business Investment Act of 1958 (15 U.S.C. 662);
    (iii) Entities designated as Community Development Financial 
Institutions (CDFIs) under 12 U.S.C. 4701 et seq. and 12 CFR part 1805;
    (iv) Entities registered with the SEC under the Investment Company 
Act of 1940 (15 U.S.C. 80a-1) or foreign equivalents thereof;
    (v) Entities to the extent that the national bank's or Federal 
savings association's investment in such entities would qualify as a 
community development investment under section 24 (Eleventh) of the 
National Bank Act; and
    (vi) An employee benefit plan as defined in paragraphs (3) and (32) 
of section 3 of ERISA, a ``governmental plan'' (as defined in 29 U.S.C. 
1002(32)) that complies with the tax deferral qualification requirements 
provided in the Internal Revenue Code, or any similar employee benefit 
plan established under the laws of a foreign jurisdiction.
    First-lien residential mortgage exposure means a residential 
mortgage exposure secured by a first lien.
    Foreign bank means a foreign bank as defined in Sec.  211.2 of the 
Federal Reserve Board's Regulation K (12 CFR 211.2) (other than a 
depository institution).
    Forward agreement means a legally binding contractual obligation to 
purchase assets with certain drawdown at a specified future date, not 
including commitments to make residential mortgage loans or forward 
foreign exchange contracts.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
    FR Y-15 means the Systemic Risk Report.
    GAAP means generally accepted accounting principles as used in the 
United States.
    Gain-on-sale means an increase in the equity capital of a national 
bank or Federal savings association (as reported on [Schedule RC of the 
Call Report or Schedule HC of the FR Y-9C]) resulting from a traditional 
securitization (other than an increase in equity capital resulting from 
the national bank's or Federal savings association's receipt of cash in 
connection with the securitization or reporting of a mortgage servicing 
asset on [Schedule RC of the Call Report or Schedule HC of the FRY-9C]).
    General obligation means a bond or similar obligation that is backed 
by

[[Page 34]]

the full faith and credit of a public sector entity (PSE).
    Government-sponsored enterprise (GSE) means an entity established or 
chartered by the U.S. government to serve public purposes specified by 
the U.S. Congress but whose debt obligations are not explicitly 
guaranteed by the full faith and credit of the U.S. government.
    Guarantee means a financial guarantee, letter of credit, insurance, 
or other similar financial instrument (other than a credit derivative) 
that allows one party (beneficiary) to transfer the credit risk of one 
or more specific exposures (reference exposure) to another party 
(protection provider).
    High volatility commercial real estate (HVCRE) exposure means:
    (1) A credit facility secured by land or improved real property 
that, prior to being reclassified by the depository institution as a 
non-HVCRE exposure pursuant to paragraph (6) of this definition--
    (i) Primarily finances, has financed, or refinances the acquisition, 
development, or construction of real property;
    (ii) Has the purpose of providing financing to acquire, develop, or 
improve such real property into income-producing real property; and
    (iii) Is dependent upon future income or sales proceeds from, or 
refinancing of, such real property for the repayment of such credit 
facility;
    (2) An HVCRE exposure does not include a credit facility financing--
    (i) The acquisition, development, or construction of properties that 
are--
    (A) One- to four-family residential properties. Credit facilities 
that do not finance the construction of one- to four-family residential 
structures, but instead solely finance improvements such as the laying 
of sewers, water pipes, and similar improvements to land, do not qualify 
for the one- to four-family residential properties exclusion;
    (B) Real property that would qualify as an investment in community 
development; or
    (C) Agricultural land;
    (ii) The acquisition or refinance of existing income-producing real 
property secured by a mortgage on such property, if the cash flow being 
generated by the real property is sufficient to support the debt service 
and expenses of the real property, in accordance with the national 
bank's or Federal savings association's applicable loan underwriting 
criteria for permanent financings;
    (iii) Improvements to existing income-producing improved real 
property secured by a mortgage on such property, if the cash flow being 
generated by the real property is sufficient to support the debt service 
and expenses of the real property, in accordance with the national 
bank's or Federal savings association's applicable loan underwriting 
criteria for permanent financings; or
    (iv) Commercial real property projects in which--
    (A) The loan-to-value ratio is less than or equal to the applicable 
maximum supervisory loan-to-value ratio as determined by the OCC;
    (B) The borrower has contributed capital of at least 15 percent of 
the real property's appraised, `as completed' value to the project in 
the form of--
    (1) Cash;
    (2) Unencumbered readily marketable assets;
    (3) Paid development expenses out-of-pocket; or
    (4) Contributed real property or improvements; and
    (C) The borrower contributed the minimum amount of capital described 
under paragraph (2)(iv)(B) of this definition before the national bank 
or Federal savings association advances funds (other than the advance of 
a nominal sum made in order to secure the national bank's or Federal 
savings association's lien against the real property) under the credit 
facility, and such minimum amount of capital contributed by the borrower 
is contractually required to remain in the project until the HVCRE 
exposure has been reclassified by the national bank or Federal savings 
association as a non-HVCRE exposure under paragraph (6) of this 
definition;
    (3) An HVCRE exposure does not include any loan made prior to 
January 1, 2015; and
    (4) An HVCRE exposure does not include a credit facility 
reclassified as a

[[Page 35]]

non-HVCRE exposure under paragraph (6) of this definition.
    (5) Value of contributed real property: For the purposes of this 
HVCRE exposure definition, the value of any real property contributed by 
a borrower as a capital contribution shall be the appraised value of the 
property as determined under standards prescribed pursuant to section 
1110 of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989 (12 U.S.C. 3339), in connection with the extension of the credit 
facility or loan to such borrower.
    (6) Reclassification as a non-HVCRE exposure: For purposes of this 
HVCRE exposure definition and with respect to a credit facility and a 
national bank or Federal savings association, a national bank or Federal 
savings association may reclassify an HVCRE exposure as a non-HVCRE 
exposure upon--
    (i) The substantial completion of the development or construction of 
the real property being financed by the credit facility; and
    (ii) Cash flow being generated by the real property being sufficient 
to support the debt service and expenses of the real property, in 
accordance with the national bank's or Federal savings association's 
applicable loan underwriting criteria for permanent financings.
    (7) For purposes of this definition, a national bank or Federal 
savings association is not required to reclassify a credit facility that 
was originated on or after January 1, 2015 and prior to April 1, 2020.
    Home country means the country where an entity is incorporated, 
chartered, or similarly established.
    Independent collateral means financial collateral, other than 
variation margin, that is subject to a collateral agreement, or in which 
a national bank and Federal savings association has a perfected, first-
priority security interest or, outside of the United States, the legal 
equivalent thereof (with the exception of cash on deposit; 
notwithstanding the prior security interest of any custodial agent or 
any prior security interest granted to a CCP in connection with 
collateral posted to that CCP), and the amount of which does not change 
directly in response to the value of the derivative contract or 
contracts that the financial collateral secures.
    Indirect exposure means an exposure that arises from the national 
bank's or Federal savings association's investment in an investment fund 
which holds an investment in the national bank's or Federal savings 
association's own capital instrument, or an investment in the capital of 
an unconsolidated financial institution. For an advanced approaches 
national bank or Federal savings association, indirect exposure also 
includes an investment in an investment fund that holds a covered debt 
instrument.
    Insurance company means an insurance company as defined in section 
201 of the Dodd-Frank Act (12 U.S.C. 5381).
    Insurance underwriting company means an insurance company as defined 
in section 201 of the Dodd-Frank Act (12 U.S.C. 5381) that engages in 
insurance underwriting activities.
    Insured depository institution means an insured depository 
institution as defined in section 3 of the Federal Deposit Insurance 
Act.
    Interest rate derivative contract means a single-currency interest 
rate swap, basis swap, forward rate agreement, purchased interest rate 
option, when-issued securities, or any other instrument linked to 
interest rates that gives rise to similar counterparty credit risks.
    International Lending Supervision Act means the International 
Lending Supervision Act of 1983 (12 U.S.C. 3901 et seq.).
    Investing bank means, with respect to a securitization, a national 
bank or Federal savings association that assumes the credit risk of a 
securitization exposure (other than an originating national bank or 
Federal savings association of the securitization). In the typical 
synthetic securitization, the investing national bank or Federal savings 
association sells credit protection on a pool of underlying exposures to 
the originating national bank or Federal savings association.
    Investment fund means a company:
    (1) Where all or substantially all of the assets of the company are 
financial assets; and

[[Page 36]]

    (2) That has no material liabilities.
    Investment grade means that the entity to which the national bank or 
Federal savings association is exposed through a loan or security, or 
the reference entity with respect to a credit derivative, has adequate 
capacity to meet financial commitments for the projected life of the 
asset or exposure. Such an entity or reference entity has adequate 
capacity to meet financial commitments if the risk of its default is low 
and the full and timely repayment of principal and interest is expected.
    Investment in a covered debt instrument means a national bank's or 
Federal savings association's net long position calculated in accordance 
with Sec.  3.22(h) in a covered debt instrument, including direct, 
indirect, and synthetic exposures to the debt instrument, excluding any 
underwriting positions held by the national bank or Federal savings 
association for five or fewer business days.
    Investment in the capital of an unconsolidated financial institution 
means a net long position calculated in accordance with Sec.  3.22(h) in 
an instrument that is recognized as capital for regulatory purposes by 
the primary supervisor of an unconsolidated regulated financial 
institution or is an instrument that is part of the GAAP equity of an 
unconsolidated unregulated financial institution, including direct, 
indirect, and synthetic exposures to capital instruments, excluding 
underwriting positions held by the national bank or Federal savings 
association for five or fewer business days.
    Investment in the national bank's or Federal savings association's 
own capital instrument means a net long position calculated in 
accordance with Sec.  3.22(h) in the national bank's or Federal savings 
association's own common stock instrument, own additional tier 1 capital 
instrument or own tier 2 capital instrument, including direct, indirect, 
or synthetic exposures to such capital instruments. An investment in the 
national bank's or Federal savings association's own capital instrument 
includes any contractual obligation to purchase such capital instrument.
    Junior-lien residential mortgage exposure means a residential 
mortgage exposure that is not a first-lien residential mortgage 
exposure.
    Main index means the Standard & Poor's 500 Index, the FTSE All-World 
Index, and any other index for which the national bank or Federal 
savings association can demonstrate to the satisfaction of the OCC that 
the equities represented in the index have comparable liquidity, depth 
of market, and size of bid-ask spreads as equities in the Standard & 
Poor's 500 Index and FTSE All-World Index.
    Market risk national bank or Federal savings association means a 
national bank or Federal savings association that is described in Sec.  
3.201(b).
    Minimum transfer amount means the smallest amount of variation 
margin that may be transferred between counterparties to a netting set 
pursuant to the variation margin agreement.
    Money market fund means an investment fund that is subject to 17 CFR 
270.2a-7 or any foreign equivalent thereof.
    Mortgage servicing assets (MSAs) means the contractual rights owned 
by a national bank or Federal savings association to service for a fee 
mortgage loans that are owned by others.
    Multilateral development bank (MDB) means the International Bank for 
Reconstruction and Development, the Multilateral Investment Guarantee 
Agency, the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African Development 
Bank, the European Bank for Reconstruction and Development, the European 
Investment Bank, the European Investment Fund, the Nordic Investment 
Bank, the Caribbean Development Bank, the Islamic Development Bank, the 
Council of Europe Development Bank, and any other multilateral lending 
institution or regional development bank in which the U.S. government is 
a shareholder or contributing member or which the OCC determines poses 
comparable credit risk.
    National Bank Act means the National Bank Act (12 U.S.C. 24).
    Net independent collateral amount means the fair value amount of the 
independent collateral, as adjusted by the standard supervisory haircuts 
under Sec.  3.132(b)(2)(ii), as applicable,

[[Page 37]]

that a counterparty to a netting set has posted to a national bank or 
Federal savings association less the fair value amount of the 
independent collateral, as adjusted by the standard supervisory haircuts 
under Sec.  3.132(b)(2)(ii), as applicable, posted by the national bank 
or Federal savings association to the counterparty, excluding such 
amounts held in a bankruptcy remote manner or posted to a QCCP and held 
in conformance with the operational requirements in Sec.  3.3.
    Netting set means a group of transactions with a single counterparty 
that are subject to a qualifying master netting agreement. For 
derivative contracts, netting set also includes a single derivative 
contract between a national bank or Federal savings association and a 
single counterparty. For purposes of the internal model methodology 
under Sec.  3.132(d), netting set also includes a group of transactions 
with a single counterparty that are subject to a qualifying cross-
product master netting agreement and does not include a transaction:
    (1) That is not subject to such a master netting agreement; or
    (2) Where the national bank or Federal savings association has 
identified specific wrong-way risk.
    Non-significant investment in the capital of an unconsolidated 
financial institution means an investment by an advanced approaches 
national bank or Federal savings association in the capital of an 
unconsolidated financial institution where the advanced approaches 
national bank or Federal savings association owns 10 percent or less of 
the issued and outstanding common stock of the unconsolidated financial 
institution.
    Nth-to-default credit derivative means a credit 
derivative that provides credit protection only for the nth-
defaulting reference exposure in a group of reference exposures.
    Operating entity means a company established to conduct business 
with clients with the intention of earning a profit in its own right.
    Original maturity with respect to an off-balance sheet commitment 
means the length of time between the date a commitment is issued and:
    (1) For a commitment that is not subject to extension or renewal, 
the stated expiration date of the commitment; or
    (2) For a commitment that is subject to extension or renewal, the 
earliest date on which the national bank or Federal savings association 
can, at its option, unconditionally cancel the commitment.
    Originating national bank or Federal savings association, with 
respect to a securitization, means a national bank or Federal savings 
association that:
    (1) Directly or indirectly originated or securitized the underlying 
exposures included in the securitization; or
    (2) Serves as an ABCP program sponsor to the securitization.
    Over-the-counter (OTC) derivative contract means a derivative 
contract that is not a cleared transaction. An OTC derivative includes a 
transaction:
    (1) Between a national bank or Federal savings association that is a 
clearing member and a counterparty where the national bank or Federal 
savings association is acting as a financial intermediary and enters 
into a cleared transaction with a CCP that offsets the transaction with 
the counterparty; or
    (2) In which a national bank or Federal savings association that is 
a clearing member provides a CCP a guarantee on the performance of the 
counterparty to the transaction.
    Performance standby letter of credit (or performance bond) means an 
irrevocable obligation of a national bank or Federal savings association 
to pay a third-party beneficiary when a customer (account party) fails 
to perform on any contractual nonfinancial or commercial obligation. To 
the extent permitted by law or regulation, performance standby letters 
of credit include arrangements backing, among other things, 
subcontractors' and suppliers' performance, labor and materials 
contracts, and construction bids.
    Pre-sold construction loan means any one-to-four family residential 
construction loan to a builder that meets the requirements of section 
618(a)(1) or (2) of the Resolution Trust Corporation Refinancing, 
Restructuring, and Improvement Act of 1991 (12 U.S.C. 1831n note) and 
the following criteria:

[[Page 38]]

    (1) The loan is made in accordance with prudent underwriting 
standards, meaning that the national bank or Federal savings association 
has obtained sufficient documentation that the buyer of the home has a 
legally binding written sales contract and has a firm written commitment 
for permanent financing of the home upon completion;
    (2) The purchaser is an individual(s) that intends to occupy the 
residence and is not a partnership, joint venture, trust, corporation, 
or any other entity (including an entity acting as a sole 
proprietorship) that is purchasing one or more of the residences for 
speculative purposes;
    (3) The purchaser has entered into a legally binding written sales 
contract for the residence;
    (4) The purchaser has not terminated the contract;
    (5) The purchaser has made a substantial earnest money deposit of no 
less than 3 percent of the sales price, which is subject to forfeiture 
if the purchaser terminates the sales contract; provided that, the 
earnest money deposit shall not be subject to forfeiture by reason of 
breach or termination of the sales contract on the part of the builder;
    (6) The earnest money deposit must be held in escrow by the national 
bank or Federal savings association or an independent party in a 
fiduciary capacity, and the escrow agreement must provide that in an 
event of default arising from the cancellation of the sales contract by 
the purchaser of the residence, the escrow funds shall be used to defray 
any cost incurred by the national bank or Federal savings association;
    (7) The builder must incur at least the first 10 percent of the 
direct costs of construction of the residence (that is, actual costs of 
the land, labor, and material) before any drawdown is made under the 
loan;
    (8) The loan may not exceed 80 percent of the sales price of the 
presold residence; and
    (9) The loan is not more than 90 days past due, or on nonaccrual.
    Protection amount (P) means, with respect to an exposure hedged by 
an eligible guarantee or eligible credit derivative, the effective 
notional amount of the guarantee or credit derivative, reduced to 
reflect any currency mismatch, maturity mismatch, or lack of 
restructuring coverage (as provided in Sec.  3.36 or Sec.  3.134, as 
appropriate).
    Publicly-traded means traded on:
    (1) Any exchange registered with the SEC as a national securities 
exchange under section 6 of the Securities Exchange Act; or
    (2) Any non-U.S.-based securities exchange that:
    (i) Is registered with, or approved by, a national securities 
regulatory authority; and
    (ii) Provides a liquid, two-way market for the instrument in 
question.
    Public sector entity (PSE) means a state, local authority, or other 
governmental subdivision below the sovereign level.
    Qualifying central bank means:
    (1) A Federal Reserve Bank;
    (2) The European Central Bank; and
    (3) The central bank of any member country of the OECD, if:
    (i) Sovereign exposures to the member country would receive a zero 
percent risk-weight under Sec.  3.32; and
    (ii) The sovereign debt of the member country is not in default or 
has not been in default during the previous 5 years.
    Qualifying central counterparty (QCCP) means a central counterparty 
that:
    (1)(i) Is a designated financial market utility (FMU) under Title 
VIII of the Dodd-Frank Act;
    (ii) If not located in the United States, is regulated and 
supervised in a manner equivalent to a designated FMU; or
    (iii) Meets the following standards:
    (A) The central counterparty requires all parties to contracts 
cleared by the counterparty to be fully collateralized on a daily basis;
    (B) The national bank or Federal savings association demonstrates to 
the satisfaction of the OCC that the central counterparty:
    (1) Is in sound financial condition;
    (2) Is subject to supervision by the Board, the CFTC, or the 
Securities Exchange Commission (SEC), or, if the central counterparty is 
not located in

[[Page 39]]

the United States, is subject to effective oversight by a national 
supervisory authority in its home country; and
    (3) Meets or exceeds the risk-management standards for central 
counterparties set forth in regulations established by the Board, the 
CFTC, or the SEC under Title VII or Title VIII of the Dodd-Frank Act; or 
if the central counterparty is not located in the United States, meets 
or exceeds similar risk-management standards established under the law 
of its home country that are consistent with international standards for 
central counterparty risk management as established by the relevant 
standard setting body of the Bank of International Settlements; and
    (2)(i) Provides the national bank or Federal savings association 
with the central counterparty's hypothetical capital requirement or the 
information necessary to calculate such hypothetical capital 
requirement, and other information the national bank or Federal savings 
association is required to obtain under Sec. Sec.  3.35(d)(3) and 
3.133(d)(3);
    (ii) Makes available to the OCC and the CCP's regulator the 
information described in paragraph (2)(i) of this definition; and
    (iii) Has not otherwise been determined by the OCC to not be a QCCP 
due to its financial condition, risk profile, failure to meet 
supervisory risk management standards, or other weaknesses or 
supervisory concerns that are inconsistent with the risk weight assigned 
to qualifying central counterparties under Sec. Sec.  3.35 and 3.133.
    (3) Exception. A QCCP that fails to meet the requirements of a QCCP 
in the future may still be treated as a QCCP under the conditions 
specified in Sec.  3.3(f).
    Qualifying master netting agreement means a written, legally 
enforceable agreement provided that:
    (1) The agreement creates a single legal obligation for all 
individual transactions covered by the agreement upon an event of 
default following any stay permitted by paragraph (2) of this 
definition, including upon an event of receivership, conservatorship, 
insolvency, liquidation, or similar proceeding, of the counterparty; and
    (2) The agreement provides the national bank or Federal savings 
association the right to accelerate, terminate, and close-out on a net 
basis all transactions under the agreement and to liquidate or set-off 
collateral promptly upon an event of default, including upon an event of 
receivership, conservatorship, insolvency, liquidation, or similar 
proceeding, of the counterparty, provided that, in any such case:
    (i) Any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions, other than:
    (A) In receivership, conservatorship, or resolution under the 
Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under 
any similar insolvency law applicable to GSEs, or laws of foreign 
jurisdictions that are substantially similar \7\ to the U.S. laws 
referenced in this paragraph (2)(i)(A) in order to facilitate the 
orderly resolution of the defaulting counterparty; or
---------------------------------------------------------------------------

    \7\ The OCC expects to evaluate jointly with the Board and FDIC 
whether foreign special resolution regimes meet the requirements of this 
paragraph.
---------------------------------------------------------------------------

    (B) Where the agreement is subject by its terms to, or incorporates, 
any of the laws referenced in paragraph (2)(i)(A) of this definition; 
and
    (ii) The agreement may limit the right to accelerate, terminate, and 
close-out on a net basis all transactions under the agreement and to 
liquidate or set-off collateral promptly upon an event of default of the 
counterparty to the extent necessary for the counterparty to comply with 
the requirements of part 47, subpart I of part 252, and part 382, of 
this title 12, as applicable.
    Regulated financial institution means a financial institution 
subject to consolidated supervision and regulation comparable to that 
imposed on the following U.S. financial institutions: Depository 
institutions, depository institution holding companies, nonbank 
financial companies supervised by the Board, designated financial market 
utilities, securities broker-dealers, credit unions, or insurance 
companies.

[[Page 40]]

    Repo-style transaction means a repurchase or reverse repurchase 
transaction, or a securities borrowing or securities lending 
transaction, including a transaction in which the national bank or 
Federal savings association acts as agent for a customer and indemnifies 
the customer against loss, provided that:
    (1) The transaction is based solely on liquid and readily marketable 
securities, cash, or gold;
    (2) The transaction is marked-to-fair value daily and subject to 
daily margin maintenance requirements;
    (3)(i) The transaction is a ``securities contract'' or ``repurchase 
agreement'' under section 555 or 559, respectively, of the Bankruptcy 
Code (11 U.S.C. 555 or 559), a qualified financial contract under 
section 11(e)(8) of the Federal Deposit Insurance Act, or a netting 
contract between or among financial institutions under sections 401-407 
of the Federal Deposit Insurance Corporation Improvement Act or the 
Federal Reserve Board's Regulation EE (12 CFR part 231); or
    (ii) If the transaction does not meet the criteria set forth in 
paragraph (3)(i) of this definition, then either:
    (A) The transaction is executed under an agreement that provides the 
national bank or Federal savings association the right to accelerate, 
terminate, and close-out the transaction on a net basis and to liquidate 
or set-off collateral promptly upon an event of default, including upon 
an event of receivership, insolvency, liquidation, or similar 
proceeding, of the counterparty, provided that, in any such case:
    (1) Any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions, other than 
in receivership, conservatorship, or resolution under the Federal 
Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any 
similar insolvency law applicable to GSEs, or laws of foreign 
jurisdictions that are substantially similar \8\ to the U.S. laws 
referenced in this paragraph (3)(ii)(A)(1) in order to facilitate the 
orderly resolution of the defaulting counterparty; and
---------------------------------------------------------------------------

    \8\ The OCC expects to evaluate jointly with the Board and FDIC 
whether foreign special resolution regimes meet the requirements of this 
paragraph.
---------------------------------------------------------------------------

    (2) The agreement may limit the right to accelerate, terminate, and 
close-out on a net basis all transactions under the agreement and to 
liquidate or set-off collateral promptly upon an event of default of the 
counterparty to the extent necessary for the counterparty to comply with 
the requirements of part 47, subpart I of part 252, and part 382, of 
this title 12, as applicable; or
    (B) The transaction is:
    (1) Either overnight or unconditionally cancelable at any time by 
the national bank or Federal savings association; and
    (2) Executed under an agreement that provides the national bank or 
Federal savings association the right to accelerate, terminate, and 
close-out the transaction on a net basis and to liquidate or set-off 
collateral promptly upon an event of counterparty default; and
    (4) In order to recognize an exposure as a repo-style transaction 
for purposes of this subpart, a national bank or Federal savings 
association must comply with the requirements of Sec.  3.3(e) of this 
part with respect to that exposure.
    Resecuritization means a securitization which has more than one 
underlying exposure and in which one or more of the underlying exposures 
is a securitization exposure.
    Resecuritization exposure means:
    (1) An on- or off-balance sheet exposure to a resecuritization;
    (2) An exposure that directly or indirectly references a 
resecuritization exposure.
    (3) An exposure to an asset-backed commercial paper program is not a 
resecuritization exposure if either:
    (i) The program-wide credit enhancement does not meet the definition 
of a resecuritization exposure; or
    (ii) The entity sponsoring the program fully supports the commercial 
paper through the provision of liquidity so that the commercial paper 
holders effectively are exposed to the default risk of the sponsor 
instead of the underlying exposures.
    Residential mortgage exposure means an exposure (other than a

[[Page 41]]

securitization exposure, equity exposure, statutory multifamily 
mortgage, or presold construction loan):
    (1)(i) That is primarily secured by a first or subsequent lien on 
one-to-four family residential property; or
    (ii) With an original and outstanding amount of $1 million or less 
that is primarily secured by a first or subsequent lien on residential 
property that is not one-to-four family; and
    (2) For purposes of calculating capital requirements under subpart E 
of this part, managed as part of a segment of exposures with homogeneous 
risk characteristics and not on an individual-exposure basis.
    Revenue obligation means a bond or similar obligation that is an 
obligation of a PSE, but which the PSE is committed to repay with 
revenues from the specific project financed rather than general tax 
funds.
    Savings and loan holding company means a savings and loan holding 
company as defined in section 10 of the Home Owners' Loan Act (12 U.S.C. 
1467a).
    Securities and Exchange Commission (SEC) means the U.S. Securities 
and Exchange Commission.
    Securities Exchange Act means the Securities Exchange Act of 1934 
(15 U.S.C. 78).
    Securitization exposure means:
    (1) An on-balance sheet or off-balance sheet credit exposure 
(including credit-enhancing representations and warranties) that arises 
from a traditional securitization or synthetic securitization (including 
a resecuritization), or
    (2) An exposure that directly or indirectly references a 
securitization exposure described in paragraph (1) of this definition.
    Securitization special purpose entity (securitization SPE) means a 
corporation, trust, or other entity organized for the specific purpose 
of holding underlying exposures of a securitization, the activities of 
which are limited to those appropriate to accomplish this purpose, and 
the structure of which is intended to isolate the underlying exposures 
held by the entity from the credit risk of the seller of the underlying 
exposures to the entity.
    Separate account means a legally segregated pool of assets owned and 
held by an insurance company and maintained separately from the 
insurance company's general account assets for the benefit of an 
individual contract holder. To be a separate account:
    (1) The account must be legally recognized as a separate account 
under applicable law;
    (2) The assets in the account must be insulated from general 
liabilities of the insurance company under applicable law in the event 
of the insurance company's insolvency;
    (3) The insurance company must invest the funds within the account 
as directed by the contract holder in designated investment alternatives 
or in accordance with specific investment objectives or policies; and
    (4) All investment gains and losses, net of contract fees and 
assessments, must be passed through to the contract holder, provided 
that the contract may specify conditions under which there may be a 
minimum guarantee but must not include contract terms that limit the 
maximum investment return available to the policyholder.
    Servicer cash advance facility means a facility under which the 
servicer of the underlying exposures of a securitization may advance 
cash to ensure an uninterrupted flow of payments to investors in the 
securitization, including advances made to cover foreclosure costs or 
other expenses to facilitate the timely collection of the underlying 
exposures.
    Significant investment in the capital of an unconsolidated financial 
institution means an investment by an advanced approaches national bank 
or Federal savings association in the capital of an unconsolidated 
financial institution where the advanced approaches national bank or 
Federal savings association owns more than 10 percent of the issued and 
outstanding common stock of the unconsolidated financial institution.
    Small Business Act means the Small Business Act (15 U.S.C. 632).
    Small Business Investment Act means the Small Business Investment 
Act of 1958 (15 U.S.C. 682).
    Sovereign means a central government (including the U.S. government)

[[Page 42]]

or an agency, department, ministry, or central bank of a central 
government.
    Sovereign default means noncompliance by a sovereign with its 
external debt service obligations or the inability or unwillingness of a 
sovereign government to service an existing loan according to its 
original terms, as evidenced by failure to pay principal and interest 
timely and fully, arrearages, or restructuring.
    Sovereign exposure means:
    (1) A direct exposure to a sovereign; or
    (2) An exposure directly and unconditionally backed by the full 
faith and credit of a sovereign.
    Specific wrong-way risk means wrong-way risk that arises when 
either:
    (1) The counterparty and issuer of the collateral supporting the 
transaction; or
    (2) The counterparty and the reference asset of the transaction, are 
affiliates or are the same entity.
    Speculative grade means the reference entity has adequate capacity 
to meet financial commitments in the near term, but is vulnerable to 
adverse economic conditions, such that should economic conditions 
deteriorate, the reference entity would present an elevated default 
risk.
    Standardized market risk-weighted assets means the standardized 
measure for market risk calculated under Sec.  3.204 multiplied by 12.5.
    Standardized total risk-weighted assets means:
    (1) The sum of:
    (i) Total risk-weighted assets for general credit risk as calculated 
under Sec.  3.31;
    (ii) Total risk-weighted assets for cleared transactions and default 
fund contributions as calculated under Sec.  3.35;
    (iii) Total risk-weighted assets for unsettled transactions as 
calculated under Sec.  3.38;
    (iv) Total risk-weighted assets for securitization exposures as 
calculated under Sec.  3.42;
    (v) Total risk-weighted assets for equity exposures as calculated 
under Sec. Sec.  3.52 and 3.53; and
    (vi) For a market risk national bank or Federal savings association 
only, standardized market risk-weighted assets; minus
    (2) Any amount of a national bank's or Federal savings association's 
allowance for loan and lease losses or adjusted allowance for credit 
losses, as applicable, that is not included in tier 2 capital and any 
amount of ``allocated transfer risk reserves.
    Statutory multifamily mortgage means a loan secured by a multifamily 
residential property that meets the requirements under section 618(b)(1) 
of the Resolution Trust Corporation Refinancing, Restructuring, and 
Improvement Act of 1991, and that meets the following criteria: \9\
---------------------------------------------------------------------------

    \9\ The types of loans that qualify as loans secured by multifamily 
residential properties are listed in the instructions for preparation of 
the Call Report.
---------------------------------------------------------------------------

    (1) The loan is made in accordance with prudent underwriting 
standards;
    (2) The principal amount of the loan at origination does not exceed 
80 percent of the value of the property (or 75 percent of the value of 
the property if the loan is based on an interest rate that changes over 
the term of the loan) where the value of the property is the lower of 
the acquisition cost of the property or the appraised (or, if 
appropriate, evaluated) value of the property;
    (3) All principal and interest payments on the loan must have been 
made on a timely basis in accordance with the terms of the loan for at 
least one year prior to applying a 50 percent risk weight to the loan, 
or in the case where an existing owner is refinancing a loan on the 
property, all principal and interest payments on the loan being 
refinanced must have been made on a timely basis in accordance with the 
terms of the loan for at least one year prior to applying a 50 percent 
risk weight to the loan;
    (4) Amortization of principal and interest on the loan must occur 
over a period of not more than 30 years and the minimum original 
maturity for repayment of principal must not be less than 7 years;
    (5) Annual net operating income (before making any payment on the 
loan) generated by the property securing the loan during its most recent 
fiscal year must not be less than 120 percent of the loan's current 
annual debt service (or

[[Page 43]]

115 percent of current annual debt service if the loan is based on an 
interest rate that changes over the term of the loan) or, in the case of 
a cooperative or other not-for-profit housing project, the property must 
generate sufficient cash flow to provide comparable protection to the 
national bank or Federal savings association; and
    (6) The loan is not more than 90 days past due, or on nonaccrual.
    Sub-speculative grade means the reference entity depends on 
favorable economic conditions to meet its financial commitments, such 
that should such economic conditions deteriorate the reference entity 
likely would default on its financial commitments.
    Subsidiary means, with respect to a company, a company controlled by 
that company.
    Synthetic exposure means an exposure whose value is linked to the 
value of an investment in the national bank or Federal savings 
association's own capital instrument or to the value of an investment in 
the capital of an unconsolidated financial institution. For an advanced 
approaches national bank or Federal savings association, synthetic 
exposure includes an exposure whose value is linked to the value of an 
investment in a covered debt instrument.
    Synthetic securitization means a transaction in which:
    (1) All or a portion of the credit risk of one or more underlying 
exposures is retained or transferred to one or more third parties 
through the use of one or more credit derivatives or guarantees (other 
than a guarantee that transfers only the credit risk of an individual 
retail exposure);
    (2) The credit risk associated with the underlying exposures has 
been separated into at least two tranches reflecting different levels of 
seniority;
    (3) Performance of the securitization exposures depends upon the 
performance of the underlying exposures; and
    (4) All or substantially all of the underlying exposures are 
financial exposures (such as loans, commitments, credit derivatives, 
guarantees, receivables, asset-backed securities, mortgage-backed 
securities, other debt securities, or equity securities).
    Tangible capital means the amount of core capital (tier 1 capital), 
as calculated in accordance with subpart B of this part, plus the amount 
of outstanding perpetual preferred stock (including related surplus) not 
included in tier 1 capital.
    Tier 1 capital means the sum of common equity tier 1 capital and 
additional tier 1 capital.
    Tier 1 minority interest means the tier 1 capital of a consolidated 
subsidiary of a national bank or Federal savings association that is not 
owned by the national bank or Federal savings association.
    Tier 2 capital is defined in Sec.  3.20(d).
    Total capital means the sum of tier 1 capital and tier 2 capital.
    Total capital minority interest means the total capital of a 
consolidated subsidiary of a national bank or Federal savings 
association that is not owned by the national bank or Federal savings 
association.
    Total leverage exposure is defined in Sec.  3.10(c)(2) of this part.
    Traditional securitization means a transaction in which:
    (1) All or a portion of the credit risk of one or more underlying 
exposures is transferred to one or more third parties other than through 
the use of credit derivatives or guarantees;
    (2) The credit risk associated with the underlying exposures has 
been separated into at least two tranches reflecting different levels of 
seniority;
    (3) Performance of the securitization exposures depends upon the 
performance of the underlying exposures;
    (4) All or substantially all of the underlying exposures are 
financial exposures (such as loans, commitments, credit derivatives, 
guarantees, receivables, asset-backed securities, mortgage-backed 
securities, other debt securities, or equity securities);
    (5) The underlying exposures are not owned by an operating company;
    (6) The underlying exposures are not owned by a small business 
investment company defined in section 302 of the Small Business 
Investment Act;
    (7) The underlying exposures are not owned by a firm an investment 
in which qualifies as a community development investment under section 
24(Eleventh) of the National Bank Act;
    (8) The OCC may determine that a transaction in which the underlying

[[Page 44]]

exposures are owned by an investment firm that exercises substantially 
unfettered control over the size and composition of its assets, 
liabilities, and off-balance sheet exposures is not a traditional 
securitization based on the transaction's leverage, risk profile, or 
economic substance;
    (9) The OCC may deem a transaction that meets the definition of a 
traditional securitization, notwithstanding paragraph (5), (6), or (7) 
of this definition, to be a traditional securitization based on the 
transaction's leverage, risk profile, or economic substance; and
    (10) The transaction is not:
    (i) An investment fund;
    (ii) A collective investment fund (as defined in 12 CFR 9.18 
(national banks), 12 CFR 151.40 (Federal saving associations);
    (iii) An employee benefit plan (as defined in paragraphs (3) and 
(32) of section 3 of ERISA), a ``governmental plan'' (as defined in 29 
U.S.C. 1002(32)) that complies with the tax deferral qualification 
requirements provided in the Internal Revenue Code, or any similar 
employee benefit plan established under the laws of a foreign 
jurisdiction;
    (iv) A synthetic exposure to the capital of a financial institution 
to the extent deducted from capital under Sec.  3.22; or
    (v) Registered with the SEC under the Investment Company Act of 1940 
(15 U.S.C. 80a-1) or foreign equivalents thereof.
    Tranche means all securitization exposures associated with a 
securitization that have the same seniority level.
    Two-way market means a market where there are independent bona fide 
offers to buy and sell so that a price reasonably related to the last 
sales price or current bona fide competitive bid and offer quotations 
can be determined within one day and settled at that price within a 
relatively short time frame conforming to trade custom.
    Unconditionally cancelable means with respect to a commitment, that 
a national bank or Federal savings association may, at any time, with or 
without cause, refuse to extend credit under the commitment (to the 
extent permitted under applicable law).
    Underlying exposures means one or more exposures that have been 
securitized in a securitization transaction.
    Unregulated financial institution means, for purposes of Sec.  
3.131, a financial institution that is not a regulated financial 
institution, including any financial institution that would meet the 
definition of ``financial institution'' under this section but for the 
ownership interest thresholds set forth in paragraph (4)(i) of that 
definition.
    U.S. Government agency means an instrumentality of the U.S. 
Government whose obligations are fully and explicitly guaranteed as to 
the timely payment of principal and interest by the full faith and 
credit of the U.S. Government.
    Value-at-Risk (VaR) means the estimate of the maximum amount that 
the value of one or more exposures could decline due to market price or 
rate movements during a fixed holding period within a stated confidence 
interval.
    Variation margin means financial collateral that is subject to a 
collateral agreement provided by one party to its counterparty to meet 
the performance of the first party's obligations under one or more 
transactions between the parties as a result of a change in value of 
such obligations since the last time such financial collateral was 
provided.
    Variation margin agreement means an agreement to collect or post 
variation margin.
    Variation margin amount means the fair value amount of the variation 
margin, as adjusted by the standard supervisory haircuts under Sec.  
3.132(b)(2)(ii), as applicable, that a counterparty to a netting set has 
posted to a national bank or Federal savings association less the fair 
value amount of the variation margin, as adjusted by the standard 
supervisory haircuts under Sec.  3.132(b)(2)(ii), as applicable, posted 
by the national bank or Federal savings association to the counterparty.
    Variation margin threshold means the amount of credit exposure of a 
national bank or Federal savings association to its counterparty that, 
if exceeded, would require the counterparty to post

[[Page 45]]

variation margin to the national bank or Federal savings association 
pursuant to the variation margin agreement.
    Volatility derivative contract means a derivative contract in which 
the payoff of the derivative contract explicitly depends on a measure of 
the volatility of an underlying risk factor to the derivative contract.
    Wrong-way risk means the risk that arises when an exposure to a 
particular counterparty is positively correlated with the probability of 
default of such counterparty itself.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 79 FR 44123, July 30, 
2014; 79 FR 57740, Sept. 26, 2014; 79 FR 78293, Dec. 30, 2014; 80 FR 
41415, July 15, 2015; 82 FR 56661, Nov. 29, 2017; 84 FR 4237, Feb. 14, 
2019; 84 FR 35248, July 22, 2019; 84 FR 59263, Nov. 1, 2019; 84 FR 
61792, Nov. 13, 2019; 84 FR 68031, Dec. 13, 2019; 85 FR 4400, Jan. 24, 
2020; 85 FR 4577, Jan. 27, 2020; 85 FR 20393, Apr. 13, 2020; 85 FR 
42640, July 14, 2020; 86 FR 724, Jan. 6, 2021]



Sec.  3.3  Operational requirements for counterparty credit risk.

    For purposes of calculating risk-weighted assets under subparts D 
and E of this part:
    (a) Cleared transaction. In order to recognize certain exposures as 
cleared transactions pursuant to paragraphs (1)(ii), (iii) or (iv) of 
the definition of ``cleared transaction'' in Sec.  3.2, the exposures 
must meet the applicable requirements set forth in this paragraph (a).
    (1) The offsetting transaction must be identified by the CCP as a 
transaction for the clearing member client.
    (2) The collateral supporting the transaction must be held in a 
manner that prevents the national bank or Federal savings association 
from facing any loss due to an event of default, including from a 
liquidation, receivership, insolvency, or similar proceeding of either 
the clearing member or the clearing member's other clients. Omnibus 
accounts established under 17 CFR parts 190 and 300 satisfy the 
requirements of this paragraph (a).
    (3) The national bank or Federal savings association must conduct 
sufficient legal review to conclude with a well-founded basis (and 
maintain sufficient written documentation of that legal review) that in 
the event of a legal challenge (including one resulting from a default 
or receivership, insolvency, liquidation, or similar proceeding) the 
relevant court and administrative authorities would find the 
arrangements of paragraph (a)(2) of this section to be legal, valid, 
binding and enforceable under the law of the relevant jurisdictions.
    (4) The offsetting transaction with a clearing member must be 
transferable under the transaction documents and applicable laws in the 
relevant jurisdiction(s) to another clearing member should the clearing 
member default, become insolvent, or enter receivership, insolvency, 
liquidation, or similar proceedings.
    (b) Eligible margin loan. In order to recognize an exposure as an 
eligible margin loan as defined in Sec.  3.2, a national bank or Federal 
savings association must conduct sufficient legal review to conclude 
with a well-founded basis (and maintain sufficient written documentation 
of that legal review) that the agreement underlying the exposure:
    (1) Meets the requirements of paragraph (1)(iii) of the definition 
of eligible margin loan in Sec.  3.2, and
    (2) Is legal, valid, binding, and enforceable under applicable law 
in the relevant jurisdictions.
    (c) Qualifying cross-product master netting agreement. In order to 
recognize an agreement as a qualifying cross-product master netting 
agreement as defined in Sec.  3.101, a national bank or Federal savings 
association must obtain a written legal opinion verifying the validity 
and enforceability of the agreement under applicable law of the relevant 
jurisdictions if the counterparty fails to perform upon an event of 
default, including upon receivership, insolvency, liquidation, or 
similar proceeding.
    (d) Qualifying master netting agreement. In order to recognize an 
agreement as a qualifying master netting agreement as defined in Sec.  
3.2, a national bank or Federal savings association must:
    (1) Conduct sufficient legal review to conclude with a well-founded 
basis (and maintain sufficient written documentation of that legal 
review) that:
    (i) The agreement meets the requirements of paragraph (2) of the 
definition

[[Page 46]]

of qualifying master netting agreement in Sec.  3.2; and
    (ii) In the event of a legal challenge (including one resulting from 
default or from receivership, insolvency, liquidation, or similar 
proceeding) the relevant court and administrative authorities would find 
the agreement to be legal, valid, binding, and enforceable under the law 
of the relevant jurisdictions; and
    (2) Establish and maintain written procedures to monitor possible 
changes in relevant law and to ensure that the agreement continues to 
satisfy the requirements of the definition of qualifying master netting 
agreement in Sec.  3.2.
    (e) Repo-style transaction. In order to recognize an exposure as a 
repo-style transaction as defined in Sec.  3.2, a national bank or 
Federal savings association must conduct sufficient legal review to 
conclude with a well-founded basis (and maintain sufficient written 
documentation of that legal review) that the agreement underlying the 
exposure:
    (1) Meets the requirements of paragraph (3) of the definition of 
repo-style transaction in Sec.  3.2, and
    (2) Is legal, valid, binding, and enforceable under applicable law 
in the relevant jurisdictions.
    (f) Failure of a QCCP to satisfy the rule's requirements. If a 
national bank or Federal savings association determines that a CCP 
ceases to be a QCCP due to the failure of the CCP to satisfy one or more 
of the requirements set forth in paragraphs (2)(i) through (2)(iii) of 
the definition of a QCCP in Sec.  3.2, the national bank or Federal 
savings association may continue to treat the CCP as a QCCP for up to 
three months following the determination. If the CCP fails to remedy the 
relevant deficiency within three months after the initial determination, 
or the CCP fails to satisfy the requirements set forth in paragraphs 
(2)(i) through (2)(iii) of the definition of a QCCP continuously for a 
three-month period after remedying the relevant deficiency, a national 
bank or Federal savings association may not treat the CCP as a QCCP for 
the purposes of this part until after the national bank or Federal 
savings association has determined that the CCP has satisfied the 
requirements in paragraphs (2)(i) through (2)(iii) of the definition of 
a QCCP for three continuous months.



Sec. Sec.  3.4-3.9  [Reserved]



            Subpart B_Capital Ratio Requirements and Buffers

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.10  Minimum capital requirements.

    (a) Minimum capital requirements. (1) A national bank or Federal 
savings association must maintain the following minimum capital ratios:
    (i) A common equity tier 1 capital ratio of 4.5 percent.
    (ii) A tier 1 capital ratio of 6 percent.
    (iii) A total capital ratio of 8 percent.
    (iv) A leverage ratio of 4 percent.
    (v) For advanced approaches national banks or Federal savings 
associations or, for Category III OCC-regulated institutions, a 
supplementary leverage ratio of 3 percent.
    (vi) For Federal savings associations, a tangible capital ratio of 
1.5 percent.
    (2) A qualifying community banking organization (as defined in Sec.  
3.12), that is subject to the community bank leverage ratio framework 
(as defined in Sec.  3.12), is considered to have met the minimum 
capital requirements in this paragraph (a).
    (b) Standardized capital ratio calculations. Other than as provided 
in paragraph (c) of this section:
    (1) Common equity tier 1 capital ratio. A national bank's or Federal 
savings association's common equity tier 1 capital ratio is the ratio of 
the national bank's or Federal savings association's common equity tier 
1 capital to standardized total risk-weighted assets;
    (2) Tier 1 capital ratio. A national bank's or Federal savings 
association's tier 1 capital ratio is the ratio of the national bank's 
or Federal savings association's tier 1 capital to standardized total 
risk-weighted assets;
    (3) Total capital ratio. A national bank's or Federal savings 
association's total capital ratio is the ratio of the national bank's or 
Federal savings association's total capital to standardized total risk-
weighted assets; and

[[Page 47]]

    (4) Leverage ratio. A national bank's or Federal savings 
association's leverage ratio is the ratio of the national bank's or 
Federal savings association's tier 1 capital to the national bank's or 
Federal savings association's average total consolidated assets as 
reported on the national bank's or Federal savings association's Call 
Report minus amounts deducted from tier 1 capital under Sec.  3.22(a), 
(c) and (d).
    (5) Federal savings association tangible capital ratio. A Federal 
savings association's tangible capital ratio is the ratio of the Federal 
savings association's core capital (tier 1 capital) to average total 
assets as calculated under this subpart B. For purposes of this 
paragraph (b)(5), the term ``total assets'' means ``total assets'' as 
defined in part 6, subpart A of this chapter, subject to subpart G of 
this part.
    (c) Supplementary leverage ratio. (1) A Category III national bank 
or Federal savings association or advanced approaches national bank or 
Federal savings association must determine its supplementary leverage 
ratio in accordance with this paragraph, beginning with the calendar 
quarter immediately following the quarter in which the national bank or 
Federal savings association is identified as a Category III national 
bank or Federal savings association. An advanced approaches national 
bank's or Federal savings association's or a Category III national 
bank's or Federal savings association's supplementary leverage ratio is 
the ratio of its tier 1 capital to total leverage exposure, the latter 
of which is calculated as the sum of:
    (i) The mean of the on-balance sheet assets calculated as of each 
day of the reporting quarter; and
    (ii) The mean of the off-balance sheet exposures calculated as of 
the last day of each of the most recent three months, minus the 
applicable deductions under Sec.  3.22(a), (c), and (d).
    (2) For purposes of this part, total leverage exposure means the sum 
of the items described in paragraphs (c)(2)(i) through (viii) of this 
section, as adjusted pursuant to paragraph (c)(2)(ix) of this section 
for a clearing member national bank and Federal savings association and 
paragraph (c)(2)(x) of this section for a custody bank:
    (i) The balance sheet carrying value of all of the national bank or 
Federal savings association's on-balance sheet assets, plus the value of 
securities sold under a repurchase transaction or a securities lending 
transaction that qualifies for sales treatment under GAAP, less amounts 
deducted from tier 1 capital under Sec.  3.22(a), (c), and (d), and less 
the value of securities received in security-for-security repo-style 
transactions, where the national bank or Federal savings association 
acts as a securities lender and includes the securities received in its 
on-balance sheet assets but has not sold or re-hypothecated the 
securities received, and, for a national bank or Federal savings 
association that uses the standardized approach for counterparty credit 
risk under Sec.  3.132(c) for its standardized risk-weighted assets, 
less the fair value of any derivative contracts;
    (ii)(A) For a national bank or Federal savings association that uses 
the current exposure methodology under Sec.  3.34(b) for its 
standardized risk-weighted assets, the potential future credit exposure 
(PFE) for each derivative contract or each single-product netting set of 
derivative contracts (including a cleared transaction except as provided 
in paragraph (c)(2)(ix) of this section and, at the discretion of the 
national bank or Federal savings association, excluding a forward 
agreement treated as a derivative contract that is part of a repurchase 
or reverse repurchase or a securities borrowing or lending transaction 
that qualifies for sales treatment under GAAP), to which the national 
bank or Federal savings association is a counterparty as determined 
under Sec.  3.34, but without regard to Sec.  3.34(c), provided that:
    (1) A national bank or Federal savings association may choose to 
exclude the PFE of all credit derivatives or other similar instruments 
through which it provides credit protection when calculating the PFE 
under Sec.  3.34, but without regard to Sec.  3.34(c), provided that it 
does not adjust the net-to-gross ratio (NGR); and
    (2) A national bank or Federal savings association that chooses to 
exclude the PFE of credit derivatives or other similar instruments 
through

[[Page 48]]

which it provides credit protection pursuant to this paragraph 
(c)(2)(ii)(A) must do so consistently over time for the calculation of 
the PFE for all such instruments; or
    (B)(1) For a national bank or Federal savings association that uses 
the standardized approach for counterparty credit risk under section 
Sec.  3.132(c) for its standardized risk-weighted assets, the PFE for 
each netting set to which the national bank or Federal savings 
association is a counterparty (including cleared transactions except as 
provided in paragraph (c)(2)(ix) of this section and, at the discretion 
of the national bank or Federal savings association, excluding a forward 
agreement treated as a derivative contract that is part of a repurchase 
or reverse repurchase or a securities borrowing or lending transaction 
that qualifies for sales treatment under GAAP), as determined under 
Sec.  3.132(c)(7), in which the term C in Sec.  3.132(c)(7)(i) equals 
zero, and, for any counterparty that is not a commercial end-user, 
multiplied by 1.4. For purposes of this paragraph (c)(2)(ii)(B)(1), a 
national bank or Federal savings association may set the value of the 
term C in Sec.  3.132(c)(7)(i) equal to the amount of collateral posted 
by a clearing member client of the national bank or Federal savings 
association in connection with the client-facing derivative transactions 
within the netting set; and
    (2) A national bank or Federal savings association may choose to 
exclude the PFE of all credit derivatives or other similar instruments 
through which it provides credit protection when calculating the PFE 
under Sec.  3.132(c), provided that it does so consistently over time 
for the calculation of the PFE for all such instruments;
    (iii)(A)(1) For a national bank or Federal savings association that 
uses the current exposure methodology under Sec.  3.34(b) for its 
standardized risk-weighted assets, the amount of cash collateral that is 
received from a counterparty to a derivative contract and that has 
offset the mark-to-fair value of the derivative asset, or cash 
collateral that is posted to a counterparty to a derivative contract and 
that has reduced the national bank or Federal savings association's on-
balance sheet assets, unless such cash collateral is all or part of 
variation margin that satisfies the conditions in paragraphs 
(c)(2)(iii)(C) through (G) of this section; and
    (2) The variation margin is used to reduce the current credit 
exposure of the derivative contract, calculated as described in Sec.  
3.34(b), and not the PFE; and
    (3) For the purpose of the calculation of the NGR described in Sec.  
3.34(b)(2)(ii)(B), variation margin described in paragraph 
(c)(2)(iii)(A)(2) of this section may not reduce the net current credit 
exposure or the gross current credit exposure; or
    (B)(1) For a national bank or Federal savings association that uses 
the standardized approach for counterparty credit risk under Sec.  
3.132(c) for its standardized risk-weighted assets, the replacement cost 
of each derivative contract or single product netting set of derivative 
contracts to which the national bank or Federal savings association is a 
counterparty, calculated according to the following formula, and, for 
any counterparty that is not a commercial end-user, multiplied by 1.4:


Replacement Cost = max{V-CVMr + CVMp;0{time} 

Where:

    V equals the fair value for each derivative contract or each single-
product netting set of derivative contracts (including a cleared 
transaction except as provided in paragraph (c)(2)(ix) of this section 
and, at the discretion of the national bank or Federal savings 
association, excluding a forward agreement treated as a derivative 
contract that is part of a repurchase or reverse repurchase or a 
securities borrowing or lending transaction that qualifies for sales 
treatment under GAAP);
    CVMr equals the amount of cash collateral received from a 
counterparty to a derivative contract and that satisfies the conditions 
in paragraphs (c)(2)(iii)(C) through (G) of this section, or, in the 
case of a client-facing derivative transaction, the amount of collateral 
received from the clearing member client; and
    CVMp equals the amount of cash collateral that is posted to a 
counterparty to a derivative contract and that has not offset the fair 
value of the derivative contract and that satisfies the conditions in 
paragraphs (c)(2)(iii)(C) through (G) of this section, or, in the case 
of a client-facing derivative

[[Page 49]]

transaction, the amount of collateral posted to the clearing member 
client;

    (2) Notwithstanding paragraph (c)(2)(iii)(B)(1) of this section, 
where multiple netting sets are subject to a single variation margin 
agreement, a national bank or Federal savings association must apply the 
formula for replacement cost provided in Sec.  3.132(c)(10)(i), in which 
the term CMA may only include cash collateral that satisfies 
the conditions in paragraphs (c)(2)(iii)(C) through (G) of this section; 
and
    (3) For purposes of paragraph (c)(2)(iii)(B)(1), a national bank or 
Federal savings association must treat a derivative contract that 
references an index as if it were multiple derivative contracts each 
referencing one component of the index if the national bank or Federal 
savings association elected to treat the derivative contract as multiple 
derivative contracts under Sec.  3.132(c)(5)(vi);
    (C) For derivative contracts that are not cleared through a QCCP, 
the cash collateral received by the recipient counterparty is not 
segregated (by law, regulation, or an agreement with the counterparty);
    (D) Variation margin is calculated and transferred on a daily basis 
based on the mark-to-fair value of the derivative contract;
    (E) The variation margin transferred under the derivative contract 
or the governing rules of the CCP or QCCP for a cleared transaction is 
the full amount that is necessary to fully extinguish the net current 
credit exposure to the counterparty of the derivative contracts, subject 
to the threshold and minimum transfer amounts applicable to the 
counterparty under the terms of the derivative contract or the governing 
rules for a cleared transaction;
    (F) The variation margin is in the form of cash in the same currency 
as the currency of settlement set forth in the derivative contract, 
provided that for the purposes of this paragraph (c)(2)(iii)(F), 
currency of settlement means any currency for settlement specified in 
the governing qualifying master netting agreement and the credit support 
annex to the qualifying master netting agreement, or in the governing 
rules for a cleared transaction; and
    (G) The derivative contract and the variation margin are governed by 
a qualifying master netting agreement between the legal entities that 
are the counterparties to the derivative contract or by the governing 
rules for a cleared transaction, and the qualifying master netting 
agreement or the governing rules for a cleared transaction must 
explicitly stipulate that the counterparties agree to settle any payment 
obligations on a net basis, taking into account any variation margin 
received or provided under the contract if a credit event involving 
either counterparty occurs;
    (iv) The effective notional principal amount (that is, the apparent 
or stated notional principal amount multiplied by any multiplier in the 
derivative contract) of a credit derivative, or other similar 
instrument, through which the national bank or Federal savings 
association provides credit protection, provided that:
    (A) The national bank or Federal savings association may reduce the 
effective notional principal amount of the credit derivative by the 
amount of any reduction in the mark-to-fair value of the credit 
derivative if the reduction is recognized in common equity tier 1 
capital;
    (B) The national bank or Federal savings association may reduce the 
effective notional principal amount of the credit derivative by the 
effective notional principal amount of a purchased credit derivative or 
other similar instrument, provided that the remaining maturity of the 
purchased credit derivative is equal to or greater than the remaining 
maturity of the credit derivative through which the national bank or 
Federal savings association provides credit protection and that:
    (1) With respect to a credit derivative that references a single 
exposure, the reference exposure of the purchased credit derivative is 
to the same legal entity and ranks pari passu with, or is junior to, the 
reference exposure of the credit derivative through which the national 
bank or Federal savings association provides credit protection; or
    (2) With respect to a credit derivative that references multiple 
exposures, the

[[Page 50]]

reference exposures of the purchased credit derivative are to the same 
legal entities and rank pari passu with the reference exposures of the 
credit derivative through which the national bank or Federal savings 
association provides credit protection, and the level of seniority of 
the purchased credit derivative ranks pari passu to the level of 
seniority of the credit derivative through which the national bank or 
Federal savings association provides credit protection;
    (3) Where a national bank or Federal savings association has reduced 
the effective notional amount of a credit derivative through which the 
national bank or Federal savings association provides credit protection 
in accordance with paragraph (c)(2)(iv)(A) of this section, the national 
bank or Federal savings association must also reduce the effective 
notional principal amount of a purchased credit derivative used to 
offset the credit derivative through which the national bank or Federal 
savings association provides credit protection, by the amount of any 
increase in the mark-to-fair value of the purchased credit derivative 
that is recognized in common equity tier 1 capital; and
    (4) Where the national bank or Federal savings association purchases 
credit protection through a total return swap and records the net 
payments received on a credit derivative through which the national bank 
or Federal savings association provides credit protection in net income, 
but does not record offsetting deterioration in the mark-to-fair value 
of the credit derivative through which the national bank or Federal 
savings association provides credit protection in net income (either 
through reductions in fair value or by additions to reserves), the 
national bank or Federal savings association may not use the purchased 
credit protection to offset the effective notional principal amount of 
the related credit derivative through which the national bank or Federal 
savings association provides credit protection;
    (v) Where a national bank or Federal savings association acting as a 
principal has more than one repo-style transaction with the same 
counterparty and has offset the gross value of receivables due from a 
counterparty under reverse repurchase transactions by the gross value of 
payables under repurchase transactions due to the same counterparty, the 
gross value of receivables associated with the repo-style transactions 
less any on-balance sheet receivables amount associated with these repo-
style transactions included under paragraph (c)(2)(i) of this section, 
unless the following criteria are met:
    (A) The offsetting transactions have the same explicit final 
settlement date under their governing agreements;
    (B) The right to offset the amount owed to the counterparty with the 
amount owed by the counterparty is legally enforceable in the normal 
course of business and in the event of receivership, insolvency, 
liquidation, or similar proceeding; and
    (C) Under the governing agreements, the counterparties intend to 
settle net, settle simultaneously, or settle according to a process that 
is the functional equivalent of net settlement, (that is, the cash flows 
of the transactions are equivalent, in effect, to a single net amount on 
the settlement date), where both transactions are settled through the 
same settlement system, the settlement arrangements are supported by 
cash or intraday credit facilities intended to ensure that settlement of 
both transactions will occur by the end of the business day, and the 
settlement of the underlying securities does not interfere with the net 
cash settlement;
    (vi) The counterparty credit risk of a repo-style transaction, 
including where the national bank or Federal savings association acts as 
an agent for a repo-style transaction and indemnifies the customer with 
respect to the performance of the customer's counterparty in an amount 
limited to the difference between the fair value of the security or cash 
its customer has lent and the fair value of the collateral the borrower 
has provided, calculated as follows:
    (A) If the transaction is not subject to a qualifying master netting 
agreement, the counterparty credit risk (E*) for transactions with a 
counterparty must be calculated on a transaction by transaction basis, 
such that each

[[Page 51]]

transaction i is treated as its own netting set, in accordance with the 
following formula, where Ei is the fair value of the 
instruments, gold, or cash that the national bank or Federal savings 
association has lent, sold subject to repurchase, or provided as 
collateral to the counterparty, and Ci is the fair value of 
the instruments, gold, or cash that the national bank or Federal savings 
association has borrowed, purchased subject to resale, or received as 
collateral from the counterparty:

Ei* = max {0, [Ei - Ci]{time} ; and

    (B) If the transaction is subject to a qualifying master netting 
agreement, the counterparty credit risk (E*) must be calculated as the 
greater of zero and the total fair value of the instruments, gold, or 
cash that the national bank or Federal savings association has lent, 
sold subject to repurchase or provided as collateral to a counterparty 
for all transactions included in the qualifying master netting agreement 
([Sigma]Ei), less the total fair value of the instruments, 
gold, or cash that the national bank or Federal savings association 
borrowed, purchased subject to resale or received as collateral from the 
counterparty for those transactions ([Sigma]Ci), in 
accordance with the following formula:

E* = max {0, [[Sigma]Ei - [Sigma]Ci]{time} 

    (vii) If a national bank or Federal savings association acting as an 
agent for a repo-style transaction provides a guarantee to a customer of 
the security or cash its customer has lent or borrowed with respect to 
the performance of the customer's counterparty and the guarantee is not 
limited to the difference between the fair value of the security or cash 
its customer has lent and the fair value of the collateral the borrower 
has provided, the amount of the guarantee that is greater than the 
difference between the fair value of the security or cash its customer 
has lent and the value of the collateral the borrower has provided;
    (viii) The credit equivalent amount of all off-balance sheet 
exposures of the national bank or Federal savings association, excluding 
repo-style transactions, repurchase or reverse repurchase or securities 
borrowing or lending transactions that qualify for sales treatment under 
GAAP, and derivative transactions, determined using the applicable 
credit conversion factor under Sec.  3.33(b), provided, however, that 
the minimum credit conversion factor that may be assigned to an off-
balance sheet exposure under this paragraph is 10 percent; and
    (ix) For a national bank or Federal savings association that is a 
clearing member:
    (A) A clearing member national bank or Federal savings association 
that guarantees the performance of a clearing member client with respect 
to a cleared transaction must treat its exposure to the clearing member 
client as a derivative contract for purposes of determining its total 
leverage exposure;
    (B) A clearing member national bank or Federal savings association 
that guarantees the performance of a CCP with respect to a transaction 
cleared on behalf of a clearing member client must treat its exposure to 
the CCP as a derivative contract for purposes of determining its total 
leverage exposure;
    (C) A clearing member national bank or Federal savings association 
that does not guarantee the performance of a CCP with respect to a 
transaction cleared on behalf of a clearing member client may exclude 
its exposure to the CCP for purposes of determining its total leverage 
exposure;
    (D) A national bank or Federal savings association that is a 
clearing member may exclude from its total leverage exposure the 
effective notional principal amount of credit protection sold through a 
credit derivative contract, or other similar instrument, that it clears 
on behalf of a clearing member client through a CCP as calculated in 
accordance with paragraph (c)(2)(iv) of this section; and
    (E) Notwithstanding paragraphs (c)(2)(ix)(A) through (C) of this 
section, a national bank or Federal savings association may exclude from 
its total leverage exposure a clearing member's exposure to a clearing 
member client for a derivative contract, if the clearing member client 
and the clearing member are affiliates and consolidated for financial 
reporting purposes on the national bank's or Federal savings 
association's balance sheet.

[[Page 52]]

    (x) A custodial bank shall exclude from its total leverage exposure 
the lesser of:
    (A) The amount of funds that the custody bank has on deposit at a 
qualifying central bank; and
    (B) The amount of funds that the custody bank's clients have on 
deposit at the custody bank that are linked to fiduciary or custodial 
and safekeeping accounts. For purposes of this paragraph (c)(2)(x), a 
deposit account is linked to a fiduciary or custodial and safekeeping 
account if the deposit account is provided to a client that maintains a 
fiduciary or custodial and safekeeping account with the custody bank, 
and the deposit account is used to facilitate the administration of the 
fiduciary or custody and safekeeping account.
    (d) Advanced approaches capital ratio calculations. An advanced 
approaches national bank or Federal savings association that has 
completed the parallel run process and received notification from the 
OCC pursuant to Sec.  3.121(d) must determine its regulatory capital 
ratios as described in paragraphs (d)(1) through (3) of this section.
    (1) Common equity tier 1 capital ratio. The national bank's or 
Federal savings association's common equity tier 1 capital ratio is the 
lower of:
    (i) The ratio of the national bank's or Federal savings 
association's common equity tier 1 capital to standardized total risk-
weighted assets; and
    (ii) The ratio of the national bank's or Federal savings 
association's common equity tier 1 capital to advanced approaches total 
risk-weighted assets.
    (2) Tier 1 capital ratio. The national bank's or Federal savings 
association's tier 1 capital ratio is the lower of:
    (i) The ratio of the national bank's or Federal savings 
association's tier 1 capital to standardized total risk-weighted assets; 
and
    (ii) The ratio of the national bank's or Federal savings 
association's tier 1 capital to advanced approaches total risk-weighted 
assets.
    (3) Total capital ratio. The national bank's or Federal savings 
association's total capital ratio is the lower of:
    (i) The ratio of the national bank's or Federal savings 
association's total capital to standardized total risk-weighted assets; 
and
    (ii) The ratio of the national bank's or Federal savings 
association's advanced-approaches-adjusted total capital to advanced 
approaches total risk-weighted assets. A national bank's or Federal 
savings association's advanced-approaches-adjusted total capital is the 
national bank's or Federal savings association's total capital after 
being adjusted as follows:
    (A) An advanced approaches national bank or Federal savings 
association must deduct from its total capital any allowance for loan 
and lease losses or adjusted allowance for credit losses, as applicable, 
included in its tier 2 capital in accordance with Sec.  3.20(d)(3); and
    (B) An advanced approaches national bank or Federal savings 
association must add to its total capital any eligible credit reserves 
that exceed the national bank's or Federal savings association's total 
expected credit losses to the extent that the excess reserve amount does 
not exceed 0.6 percent of the national bank's or Federal savings 
association's credit risk-weighted assets.
    (4) Federal savings association tangible capital ratio. A Federal 
savings association's tangible capital ratio is the ratio of the Federal 
savings association's core capital (tier 1 capital) to average total 
assets as calculated under this subpart B. For purposes of this 
paragraph (d)(4), the term ``total assets'' means ``total assets'' as 
defined in part 6, subpart A of this chapter, subject to subpart G of 
this part.
    (e) Capital adequacy. (1) Notwithstanding the minimum requirements 
in this part, a national bank or Federal savings association must 
maintain capital commensurate with the level and nature of all risks to 
which the national bank or Federal savings association is exposed. The 
supervisory evaluation of a national bank's or Federal savings 
association's capital adequacy is based on an individual assessment of 
numerous factors, including those listed at this section (national 
banks), 12 CFR 167.3(c) (Federal savings associations).
    (2) A national bank or Federal savings association must have a 
process

[[Page 53]]

for assessing its overall capital adequacy in relation to its risk 
profile and a comprehensive strategy for maintaining an appropriate 
level of capital.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 79 FR 57740, Sept. 26, 
2014; 80 FR 41415, July 15, 2015; 84 FR 4238, Feb. 14, 2019; 84 FR 
35248, July 22, 2019; 84 FR 59264, Nov. 1, 2019; 84 FR 61792, Nov. 13, 
2019; 85 FR 4401, Jan. 24, 2020; 85 FR 4577, Jan. 27, 2020; 85 FR 57959, 
Sept. 17, 2020; 86 FR 725, Jan. 6, 2021]



Sec.  3.11  Capital conservation buffer and countercyclical 
capital buffer amount.

    (a) Capital conservation buffer--(1) Composition of the capital 
conservation buffer. The capital conservation buffer is composed solely 
of common equity tier 1 capital.
    (2) Definitions. For purposes of this section, the following 
definitions apply:
    (i) Eligible retained income. The eligible retained income of a 
national bank or Federal savings association is the greater of:
    (A) The national bank's or Federal savings association's net income, 
calculated in accordance with the instructions to the Call Report, for 
the four calendar quarters preceding the current calendar quarter, net 
of any distributions and associated tax effects not already reflected in 
net income; and
    (B) The average of the national bank's or Federal savings 
association's net income, calculated in accordance with the instructions 
to the Call Report, for the four calendar quarters preceding the current 
calendar quarter.
    (ii) Maximum payout ratio. The maximum payout ratio is the 
percentage of eligible retained income that a national bank or Federal 
savings association can pay out in the form of distributions and 
discretionary bonus payments during the current calendar quarter. The 
maximum payout ratio is based on the national bank's or Federal savings 
association's capital conservation buffer, calculated as of the last day 
of the previous calendar quarter, as set forth in Table 1 to Sec.  3.11.
    (iii) Maximum payout amount. A national bank's or Federal savings 
association's maximum payout amount for the current calendar quarter is 
equal to the national bank's or Federal savings association's eligible 
retained income, multiplied by the applicable maximum payout ratio, as 
set forth in Table 1 to Sec.  3.11.
    (iv) Private sector credit exposure. Private sector credit exposure 
means an exposure to a company or an individual that is not an exposure 
to a sovereign, the Bank for International Settlements, the European 
Central Bank, the European Commission, the European Stability Mechanism, 
the European Financial Stability Facility, the International Monetary 
Fund, a MDB, a PSE, or a GSE.
    (3) Calculation of capital conservation buffer. (i) A national 
bank's or Federal savings association's capital conservation buffer is 
equal to the lowest of the following ratios, calculated as of the last 
day of the previous calendar quarter:
    (A) The national bank or Federal savings association's common equity 
tier 1 capital ratio minus the national bank or Federal savings 
association 's minimum common equity tier 1 capital ratio requirement 
under Sec.  3.10;
    (B) The national bank or Federal savings association's tier 1 
capital ratio minus the national bank or Federal savings association's 
minimum tier 1 capital ratio requirement under Sec.  3.10; and
    (C) The national bank or Federal savings association's total capital 
ratio minus the national bank or Federal savings association's minimum 
total capital ratio requirement under Sec.  3.10; or
    (ii) Notwithstanding paragraphs (a)(3)(i)(A)-(C) of this section, if 
the national bank's or Federal savings association's common equity tier 
1, tier 1 or total capital ratio is less than or equal to the national 
bank's or Federal savings association's minimum common equity tier 1, 
tier 1 or total capital ratio requirement under Sec.  3.10, 
respectively, the national bank's or Federal savings association's 
capital conservation buffer is zero.
    (4) Limits on distributions and discretionary bonus payments. (i) A 
national bank or Federal savings association shall not make 
distributions or discretionary bonus payments or create an obligation to 
make such distributions

[[Page 54]]

or payments during the current calendar quarter that, in the aggregate, 
exceed the maximum payout amount.
    (ii) A national bank or Federal savings association with a capital 
conservation buffer that is greater than 2.5 percent plus 100 percent of 
its applicable countercyclical capital buffer, in accordance with 
paragraph (b) of this section, is not subject to a maximum payout amount 
under this section.
    (iii) Negative eligible retained income. Except as provided in 
paragraph (a)(4)(iv) of this section, a national bank or Federal savings 
association may not make distributions or discretionary bonus payments 
during the current calendar quarter if the national bank's or Federal 
savings association's:
    (A) Eligible retained income is negative; and
    (B) Capital conservation buffer was less than 2.5 percent as of the 
end of the previous calendar quarter.
    (iv) Prior approval. Notwithstanding the limitations in paragraphs 
(a)(4)(i) through (iii) of this section, the OCC may permit a national 
bank or Federal savings association to make a distribution or 
discretionary bonus payment upon a request of the national bank or 
Federal savings association, if the OCC determines that the distribution 
or discretionary bonus payment would not be contrary to the purposes of 
this section, or to the safety and soundness of the national bank or 
Federal savings association. In making such a determination, the OCC 
will consider the nature and extent of the request and the particular 
circumstances giving rise to the request.

      Table 1 to Sec.   3.11--Calculation of Maximum Payout Amount
------------------------------------------------------------------------
   Capital conservation buffer              Maximum payout ratio
------------------------------------------------------------------------
Greater than 2.5 percent plus 100  No payout ratio limitation applies.
 percent of the national bank's
 or Federal savings association's
 applicable countercyclical
 capital buffer amount.
Less than or equal to 2.5 percent  60 percent.
 plus 100 percent of the national
 bank's or Federal savings
 association's applicable
 countercyclical capital buffer
 amount, and greater than 1.875
 percent plus 75 percent of the
 national bank's or Federal
 savings association's applicable
 countercyclical capital buffer
 amount.
Less than or equal to 1.875        40 percent.
 percent plus 75 percent of the
 national bank's or Federal
 savings association's applicable
 countercyclical capital buffer
 amount, and greater than 1.25
 percent plus 50 percent of the
 national bank's or Federal
 savings association's applicable
 countercyclical capital buffer
 amount.
Less than or equal to 1.25         20 percent.
 percent plus 50 percent of the
 national bank's or Federal
 savings association's applicable
 countercyclical capital buffer
 amount, and greater than 0.625
 percent plus 25 percent of the
 national bank's or Federal
 savings association's applicable
 countercyclical capital buffer
 amount.
Less than or equal to 0.625        0 percent.
 percent plus 25 percent of the
 national bank's or Federal
 savings association's applicable
 countercyclical capital buffer
 amount.
------------------------------------------------------------------------

    (v) Other limitations on distributions. Additional limitations on 
distributions may apply to a national bank or Federal savings 
association under subparts H and I of this part; 12 CFR 5.46, 12 CFR 
part 5, subpart E; 12 CFR part 6.
    (b) Countercyclical capital buffer amount--(1) General. An advanced 
approaches national bank or Federal savings association, and a Category 
III national bank or Federal savings association, must calculate a 
countercyclical capital buffer amount in accordance with paragraphs 
(b)(1)(i) through (iv) of this section for purposes of determining its 
maximum payout ratio under Table 1 to this section.
    (i) Extension of capital conservation buffer. The countercyclical 
capital buffer amount is an extension of the capital conservation buffer 
as described in paragraph (a) of this section.
    (ii) Amount. An advanced approaches national bank or Federal savings 
association, and a Category III national bank or Federal savings 
association, has a countercyclical capital buffer amount determined by 
calculating the weighted average of the countercyclical capital buffer 
amounts established for the national jurisdictions where the national 
bank's or Federal savings association's private sector

[[Page 55]]

credit exposures are located, as specified in paragraphs (b)(2) and (3) 
of this section.
    (iii) Weighting. The weight assigned to a jurisdiction's 
countercyclical capital buffer amount is calculated by dividing the 
total risk-weighted assets for the national bank's or Federal savings 
association's private sector credit exposures located in the 
jurisdiction by the total risk-weighted assets for all of the national 
bank's or Federal savings association's private sector credit exposures. 
The methodology a national bank or Federal savings association uses for 
determining risk-weighted assets for purposes of this paragraph (b) must 
be the methodology that determines its risk-based capital ratios under 
Sec.  3.10. Notwithstanding the previous sentence, the risk-weighted 
asset amount for a private sector credit exposure that is a covered 
position under subpart F of this part is its specific risk add-on as 
determined under Sec.  3.210 multiplied by 12.5.
    (iv) Location. (A) Except as provided in paragraphs (b)(1)(iv)(B) 
and (b)(1)(iv)(C) of this section, the location of a private sector 
credit exposure is the national jurisdiction where the borrower is 
located (that is, where it is incorporated, chartered, or similarly 
established or, if the borrower is an individual, where the borrower 
resides).
    (B) If, in accordance with subparts D or E of this part, the 
national bank or Federal savings association has assigned to a private 
sector credit exposure a risk weight associated with a protection 
provider on a guarantee or credit derivative, the location of the 
exposure is the national jurisdiction where the protection provider is 
located.
    (C) The location of a securitization exposure is the location of the 
underlying exposures, or, if the underlying exposures are located in 
more than one national jurisdiction, the national jurisdiction where the 
underlying exposures with the largest aggregate unpaid principal balance 
are located. For purposes of this paragraph (b), the location of an 
underlying exposure shall be the location of the borrower, determined 
consistent with paragraph (b)(1)(iv)(A) of this section.
    (2) Countercyclical capital buffer amount for credit exposures in 
the United States--(i) Initial countercyclical capital buffer amount 
with respect to credit exposures in the United States. The initial 
countercyclical capital buffer amount in the United States is zero.
    (ii) Adjustment of the countercyclical capital buffer amount. The 
OCC will adjust the countercyclical capital buffer amount for credit 
exposures in the United States in accordance with applicable law.\10\
---------------------------------------------------------------------------

    \10\ The OCC expects that any adjustment will be based on a 
determination made jointly by the Board, OCC, and FDIC.
---------------------------------------------------------------------------

    (iii) Range of countercyclical capital buffer amount. The OCC will 
adjust the countercyclical capital buffer amount for credit exposures in 
the United States between zero percent and 2.5 percent of risk-weighted 
assets.
    (iv) Adjustment determination. The OCC will base its decision to 
adjust the countercyclical capital buffer amount under this section on a 
range of macroeconomic, financial, and supervisory information 
indicating an increase in systemic risk including, but not limited to, 
the ratio of credit to gross domestic product, a variety of asset 
prices, other factors indicative of relative credit and liquidity 
expansion or contraction, funding spreads, credit condition surveys, 
indices based on credit default swap spreads, options implied 
volatility, and measures of systemic risk.
    (v) Effective date of adjusted countercyclical capital buffer 
amount--(A) Increase adjustment. A determination by the OCC under 
paragraph (b)(2)(ii) of this section to increase the countercyclical 
capital buffer amount will be effective 12 months from the date of 
announcement, unless the OCC establishes an earlier effective date and 
includes a statement articulating the reasons for the earlier effective 
date.
    (B) Decrease adjustment. A determination by the OCC to decrease the 
established countercyclical capital buffer amount under paragraph 
(b)(2)(ii) of this section will be effective on the day following 
announcement of the final determination or the earliest date permissible 
under applicable law or regulation, whichever is later.

[[Page 56]]

    (vi) Twelve month sunset. The countercyclical capital buffer amount 
will return to zero percent 12 months after the effective date that the 
adjusted countercyclical capital buffer amount is announced, unless the 
OCC announces a decision to maintain the adjusted countercyclical 
capital buffer amount or adjust it again before the expiration of the 
12-month period.
    (3) Countercyclical capital buffer amount for foreign jurisdictions. 
The OCC will adjust the countercyclical capital buffer amount for 
private sector credit exposures to reflect decisions made by foreign 
jurisdictions consistent with due process requirements described in 
paragraph (b)(2) of this section.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35249, July 22, 
2019; 84 FR 59265, Nov. 1, 2019; 85 FR 15915, Mar. 20, 2020]



Sec.  3.12  Community bank leverage ratio framework.

    (a) Community bank leverage ratio framework. (1) Notwithstanding any 
other provision in this part, a qualifying community banking 
organization that has made an election to use the community bank 
leverage ratio framework under paragraph (a)(3) of this section shall be 
considered to have met the minimum capital requirements under Sec.  
3.10, the capital ratio requirements for the well capitalized capital 
category under Sec.  6.4(b)(1) of this chapter, and any other capital or 
leverage requirements to which the qualifying community banking 
organization is subject, if it has a leverage ratio greater than 9 
percent.
    (2) For purposes of this section, a qualifying community banking 
organization means a national bank or Federal savings association that 
is not an advanced approaches national bank or Federal savings 
association and that satisfies all of the following criteria:
    (i) Has a leverage ratio of greater than 9 percent;
    (ii) Has total consolidated assets of less than $10 billion, 
calculated in accordance with the reporting instructions to the Call 
Report as of the end of the most recent calendar quarter;
    (iii) Has off-balance sheet exposures of 25 percent or less of its 
total consolidated assets as of the end of the most recent calendar 
quarter, calculated as the sum of the notional amounts of the exposures 
listed in paragraphs (a)(2)(iii)(A) through (I) of this section, divided 
by total consolidated assets, each as of the end of the most recent 
calendar quarter:
    (A) The unused portion of commitments (except for unconditionally 
cancellable commitments);
    (B) Self-liquidating, trade-related contingent items that arise from 
the movement of goods;
    (C) Transaction-related contingent items, including performance 
bonds, bid bonds, warranties, and performance standby letters of credit;
    (D) Sold credit protection through
    (1) Guarantees; and
    (2) Credit derivatives;
    (E) Credit-enhancing representations and warranties;
    (F) Securities lent and borrowed, calculated in accordance with the 
reporting instructions to the Call Report;
    (G) Financial standby letters of credit;
    (H) Forward agreements that are not derivative contracts; and
    (I) Off-balance sheet securitization exposures; and
    (iv) Has total trading assets plus trading liabilities, calculated 
in accordance with the reporting instructions to the Call Report of 5 
percent or less of the national bank's or Federal savings association's 
total consolidated assets, each as of the end of the most recent 
calendar quarter.
    (3)(i) A qualifying community banking organization may elect to use 
the community bank leverage ratio framework if it makes an opt-in 
election under this paragraph (a)(3).
    (ii) For purposes of this paragraph (a)(3), a qualifying community 
banking organization makes an election to use the community bank 
leverage ratio framework by completing the applicable reporting 
requirements of its Call Report.
    (iii)(A) A qualifying community banking organization that has 
elected to use the community bank leverage ratio framework may opt out 
of the community bank leverage ratio framework by completing the 
applicable risk-based and leverage ratio reporting requirements 
necessary to demonstrate compliance with Sec.  3.10(a)(1) in its Call

[[Page 57]]

Report or by otherwise providing this information to the OCC.
    (B) A qualifying community banking organization that opts out of the 
community bank leverage ratio framework pursuant to paragraph 
(a)(3)(iii)(A) of this section must comply with Sec.  3.10(a)(1) 
immediately.
    (4)(i) Temporary relief. From December 2, 2020 through December 31, 
2021, except as provided in paragraph (a)(4)(ii) of this section, the 
total consolidated assets of a national bank or Federal savings 
association for purposes of paragraph (a)(2)(ii) of this section shall 
be the lesser of:
    (A) The total consolidated assets reported by the national bank or 
Federal savings association in its Call Report as of December 31, 2019; 
and
    (B) The total consolidated assets of the national bank or Federal 
savings association calculated in accordance with the reporting 
instructions to the Call Report as of the end of the most recent 
calendar quarter.
    (ii) Reservation of authority. The temporary relief provided under 
paragraph (a)(4)(i) of this section does not apply to a national bank or 
Federal savings association if the OCC determines that permitting the 
institution to determine its assets in accordance with that paragraph 
would not be commensurate with the risk posed by the institution. When 
making this determination, the OCC will consider all relevant factors, 
including the extent of asset growth of the national bank or Federal 
savings association since December 31, 2019; the causes of this growth, 
including whether this growth occurred as a result of a merger or 
acquisition; whether such growth is likely to be temporary or permanent; 
whether the national bank or Federal savings association has become 
involved in any additional activities since December 31, 2019; and the 
type of assets held by the national bank or Federal savings association. 
The OCC will notify a national bank or Federal savings association of a 
determination under this paragraph. A national bank or Federal savings 
association may, not later than 30 days after the date of a 
determination by the OCC, inform the OCC, in writing, of why the 
national bank or Federal savings association should be eligible for the 
temporary relief. The OCC will make a final determination after 
reviewing any response.
    (b) Calculation of the leverage ratio. A qualifying community 
banking organization's leverage ratio is calculated in accordance with 
Sec.  3.10(b)(4), except that a qualifying community banking 
organization is not required to:
    (1) Make adjustments and deductions from tier 2 capital for purposes 
of Sec.  3.22(c); or
    (2) Calculate and deduct from tier 1 capital an amount resulting 
from insufficient tier 2 capital under Sec.  3.22(f).
    (c) Treatment when ceasing to meet the qualifying community banking 
organization requirements. (1) Except as provided in paragraphs (c)(5) 
and (6) of this section, if a national bank or Federal savings 
association ceases to meet the definition of a qualifying community 
banking organization, the national bank or Federal savings association 
has two reporting periods under its Call Report (grace period) to either 
satisfy the requirements to be a qualifying community banking 
organization or to comply with Sec.  3.10(a)(1) and report the required 
capital measures under Sec.  3.10(a)(1) on its Call Report.
    (2) The grace period begins as of the end of the calendar quarter in 
which the national bank or Federal savings association ceases to satisfy 
the criteria to be a qualifying community banking organization provided 
in paragraph (a)(2) of this section. The grace period ends on the last 
day of the second consecutive calendar quarter following the beginning 
of the grace period.
    (3) During the grace period, the national bank or Federal savings 
association continues to be treated as a qualifying community banking 
organization for the purpose of this part and must continue calculating 
and reporting its leverage ratio under this section unless the national 
bank or Federal savings association has opted out of using the community 
bank leverage ratio framework under paragraph (a)(3) of this section.
    (4) During the grace period, the qualifying community banking 
organization continues to be considered to have met the minimum capital 
requirements

[[Page 58]]

under Sec.  3.10(a)(1), the capital ratio requirements for the well 
capitalized capital category under Sec.  6.4(b)(1)(i)(A) through (D) of 
this chapter, and any other capital or leverage requirements to which 
the qualifying community banking organization is subject, and must 
continue calculating and reporting its leverage ratio under this 
section.
    (5) Notwithstanding paragraphs (c)(1) through (4) of this section, a 
national bank or Federal savings association that no longer meets the 
definition of a qualifying community banking organization as a result of 
a merger or acquisition has no grace period and immediately ceases to be 
a qualifying community banking organization. Such a national bank or 
Federal savings association must comply with the minimum capital 
requirements under Sec.  3.10(a)(1) and must report the required capital 
measures under Sec.  3.10(a)(1) for the quarter in which it ceases to be 
a qualifying community banking organization.
    (6) Notwithstanding paragraphs (c)(1) through (4) of this section, a 
national bank or Federal savings association that has a leverage ratio 
of 8 percent or less does not have a grace period and must comply with 
the minimum capital requirements under Sec.  3.10(a)(1) and must report 
the required capital measures under Sec.  3.10(a)(1) for the quarter in 
which it reports a leverage ratio of 8 percent or less.

[84 FR 61792, Nov. 13, 2019, as amended at 85 FR 77359, Dec. 2, 2020]



Sec. Sec.  3.13-3.19  [Reserved]



                     Subpart C_Definition of Capital

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.20  Capital components and eligibility criteria for regulatory 
capital instruments.

    (a) Regulatory capital components. A national bank's or Federal 
savings association's regulatory capital components are:
    (1) Common equity tier 1 capital;
    (2) Additional tier 1 capital; and
    (3) Tier 2 capital.
    (b) Common equity tier 1 capital. Common equity tier 1 capital is 
the sum of the common equity tier 1 capital elements in this paragraph 
(b), minus regulatory adjustments and deductions in Sec.  3.22. The 
common equity tier 1 capital elements are:
    (1) Any common stock instruments (plus any related surplus) issued 
by the national bank or Federal savings association, net of treasury 
stock, and any capital instruments issued by mutual banking 
organizations, that meet all the following criteria:
    (i) The instrument is paid-in, issued directly by the national bank 
or Federal savings association, and represents the most subordinated 
claim in a receivership, insolvency, liquidation, or similar proceeding 
of the national bank or Federal savings association;
    (ii) The holder of the instrument is entitled to a claim on the 
residual assets of the national bank or Federal savings association that 
is proportional with the holder's share of the national bank's or 
Federal savings association's issued capital after all senior claims 
have been satisfied in a receivership, insolvency, liquidation, or 
similar proceeding;
    (iii) The instrument has no maturity date, can only be redeemed via 
discretionary repurchases with the prior approval of the OCC, and does 
not contain any term or feature that creates an incentive to redeem;
    (iv) The national bank or Federal savings association did not create 
at issuance of the instrument through any action or communication an 
expectation that it will buy back, cancel, or redeem the instrument, and 
the instrument does not include any term or feature that might give rise 
to such an expectation;
    (v) Any cash dividend payments on the instrument are paid out of the 
national bank's or Federal savings association's net income or retained 
earnings and are not subject to a limit imposed by the contractual terms 
governing the instrument.
    (vi) The national bank or Federal savings association has full 
discretion at all times to refrain from paying any dividends and making 
any other distributions on the instrument without

[[Page 59]]

triggering an event of default, a requirement to make a payment-in-kind, 
or an imposition of any other restrictions on the national bank or 
Federal savings association;
    (vii) Dividend payments and any other distributions on the 
instrument may be paid only after all legal and contractual obligations 
of the national bank or Federal savings association have been satisfied, 
including payments due on more senior claims;
    (viii) The holders of the instrument bear losses as they occur 
equally, proportionately, and simultaneously with the holders of all 
other common stock instruments before any losses are borne by holders of 
claims on the national bank or Federal savings association with greater 
priority in a receivership, insolvency, liquidation, or similar 
proceeding;
    (ix) The paid-in amount is classified as equity under GAAP;
    (x) The national bank or Federal savings association, or an entity 
that the national bank or Federal savings association controls, did not 
purchase or directly or indirectly fund the purchase of the instrument;
    (xi) The instrument is not secured, not covered by a guarantee of 
the national bank or Federal savings association or of an affiliate of 
the national bank or Federal savings association, and is not subject to 
any other arrangement that legally or economically enhances the 
seniority of the instrument;
    (xii) The instrument has been issued in accordance with applicable 
laws and regulations; and
    (xiii) The instrument is reported on the national bank's or Federal 
savings association's regulatory financial statements separately from 
other capital instruments.
    (2) Retained earnings.
    (3) Accumulated other comprehensive income (AOCI) as reported under 
GAAP.\1\
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    \1\ See Sec.  3.22 for specific adjustments related to AOCI.
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    (4) Any common equity tier 1 minority interest, subject to the 
limitations in Sec.  3.21.
    (5) Notwithstanding the criteria for common stock instruments 
referenced above, a national bank's or Federal savings association's 
common stock issued and held in trust for the benefit of its employees 
as part of an employee stock ownership plan does not violate any of the 
criteria in paragraph (b)(1)(iii), paragraph (b)(1)(iv) or paragraph 
(b)(1)(xi) of this section, provided that any repurchase of the stock is 
required solely by virtue of ERISA for an instrument of a national bank 
or Federal savings association that is not publicly-traded. In addition, 
an instrument issued by a national bank or Federal savings association 
to its employee stock ownership plan does not violate the criterion in 
paragraph (b)(1)(x) of this section.
    (c) Additional tier 1 capital. Additional tier 1 capital is the sum 
of additional tier 1 capital elements and any related surplus, minus the 
regulatory adjustments and deductions in Sec.  3.22. Additional tier 1 
capital elements are:
    (1) Instruments (plus any related surplus) that meet the following 
criteria:
    (i) The instrument is issued and paid-in;
    (ii) The instrument is subordinated to depositors, general 
creditors, and subordinated debt holders of the national bank or Federal 
savings association in a receivership, insolvency, liquidation, or 
similar proceeding;
    (iii) The instrument is not secured, not covered by a guarantee of 
the national bank or Federal savings association or of an affiliate of 
the national bank or Federal savings association, and not subject to any 
other arrangement that legally or economically enhances the seniority of 
the instrument;
    (iv) The instrument has no maturity date and does not contain a 
dividend step-up or any other term or feature that creates an incentive 
to redeem; and
    (v) If callable by its terms, the instrument may be called by the 
national bank or Federal savings association only after a minimum of 
five years following issuance, except that the terms of the instrument 
may allow it to be called earlier than five years upon the occurrence of 
a regulatory event that precludes the instrument from being included in 
additional tier 1 capital, a tax event, or if the issuing entity is 
required to register as an investment

[[Page 60]]

company pursuant to the Investment Company Act of 1940 (15 U.S.C. 80a-1 
et seq.). In addition:
    (A) The national bank or Federal savings association must receive 
prior approval from the OCC to exercise a call option on the instrument.
    (B) The national bank or Federal savings association does not create 
at issuance of the instrument, through any action or communication, an 
expectation that the call option will be exercised.
    (C) Prior to exercising the call option, or immediately thereafter, 
the national bank or Federal savings association must either: Replace 
the instrument to be called with an equal amount of instruments that 
meet the criteria under paragraph (b) of this section or this paragraph 
(c); \2\ or demonstrate to the satisfaction of the OCC that following 
redemption, the national bank or Federal savings association will 
continue to hold capital commensurate with its risk.
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    \2\ Replacement can be concurrent with redemption of existing 
additional tier 1 capital instruments.
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    (vi) Redemption or repurchase of the instrument requires prior 
approval from the OCC.
    (vii) The national bank or Federal savings association has full 
discretion at all times to cancel dividends or other distributions on 
the instrument without triggering an event of default, a requirement to 
make a payment-in-kind, or an imposition of other restrictions on the 
national bank or Federal savings association except in relation to any 
distributions to holders of common stock or instruments that are pari 
passu with the instrument.
    (viii) Any cash dividend payments on the instrument are paid out of 
the national bank's or Federal savings association's net income or 
retained earnings.
    (ix) The instrument does not have a credit-sensitive feature, such 
as a dividend rate that is reset periodically based in whole or in part 
on the national bank's or Federal savings association's credit quality, 
but may have a dividend rate that is adjusted periodically independent 
of the national bank's or Federal savings association's credit quality, 
in relation to general market interest rates or similar adjustments.
    (x) The paid-in amount is classified as equity under GAAP.
    (xi) The national bank or Federal savings association, or an entity 
that the national bank or Federal savings association controls, did not 
purchase or directly or indirectly fund the purchase of the instrument.
    (xii) The instrument does not have any features that would limit or 
discourage additional issuance of capital by the national bank or 
Federal savings association, such as provisions that require the 
national bank or Federal savings association to compensate holders of 
the instrument if a new instrument is issued at a lower price during a 
specified time frame.
    (xiii) If the instrument is not issued directly by the national bank 
or Federal savings association or by a subsidiary of the national bank 
or Federal savings association that is an operating entity, the only 
asset of the issuing entity is its investment in the capital of the 
national bank or Federal savings association, and proceeds must be 
immediately available without limitation to the national bank or Federal 
savings association or to the national bank's or Federal savings 
association's top-tier holding company in a form which meets or exceeds 
all of the other criteria for additional tier 1 capital instruments.\3\
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    \3\ De minimis assets related to the operation of the issuing entity 
can be disregarded for purposes of this criterion.
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    (xiv) For an advanced approaches national bank or Federal savings 
association, the governing agreement, offering circular, or prospectus 
of an instrument issued after the date upon which the national bank or 
Federal savings association becomes subject to this part as set forth in 
Sec.  3.1(f) must disclose that the holders of the instrument may be 
fully subordinated to interests held by the U.S. government in the event 
that the national bank or Federal savings association enters into a 
receivership, insolvency, liquidation, or similar proceeding.
    (2) Tier 1 minority interest, subject to the limitations in Sec.  
3.21, that is not

[[Page 61]]

included in the national bank's or Federal savings association's common 
equity tier 1 capital.
    (3)(i) Any and all instruments that qualified as tier 1 capital 
under the OCC's general risk-based capital rules under appendix A to 
this part (national banks), 12 CFR part 167 (Federal savings 
associations) as then in effect, that were issued under the Small 
Business Jobs Act of 2010 \4\ or prior to October 4, 2010, under the 
Emergency Economic Stabilization Act of 2008.\5\
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    \4\ Public Law 111-240; 124 Stat. 2504 (2010).
    \5\ Public Law 110-343, 122 Stat. 3765 (2008).
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    (ii) Any preferred stock instruments issued under the U.S. 
Department of the Treasury's Emergency Capital Investment Program 
pursuant to section 104A of the Community Development Banking and 
Financial Institutions Act of 1994, added by the Consolidated 
Appropriations Act, 2021.\6\
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    \6\ Public Law 116-260.
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    (4) Notwithstanding the criteria for additional tier 1 capital 
instruments referenced above:
    (i) An instrument issued by a national bank or Federal savings 
association and held in trust for the benefit of its employees as part 
of an employee stock ownership plan does not violate any of the criteria 
in paragraph (c)(1)(iii) of this section, provided that any repurchase 
is required solely by virtue of ERISA for an instrument of a national 
bank or Federal savings association that is not publicly-traded. In 
addition, an instrument issued by a national bank or Federal savings 
association to its employee stock ownership plan does not violate the 
criteria in paragraph (c)(1)(v) or paragraph (c)(1)(xi) of this section; 
and
    (ii) An instrument with terms that provide that the instrument may 
be called earlier than five years upon the occurrence of a rating agency 
event does not violate the criterion in paragraph (c)(1)(v) of this 
section provided that the instrument was issued and included in a 
national bank's or Federal savings association's tier 1 capital prior to 
January 1, 2014, and that such instrument satisfies all other criteria 
under this Sec.  3.20(c).
    (d) Tier 2 Capital. Tier 2 capital is the sum of tier 2 capital 
elements and any related surplus, minus regulatory adjustments and 
deductions in Sec.  3.22. Tier 2 capital elements are:
    (1) Instruments (plus related surplus) that meet the following 
criteria:
    (i) The instrument is issued and paid-in;
    (ii) The instrument is subordinated to depositors and general 
creditors of the national bank or Federal savings association;
    (iii) The instrument is not secured, not covered by a guarantee of 
the national bank or Federal savings association or of an affiliate of 
the national bank or Federal savings association, and not subject to any 
other arrangement that legally or economically enhances the seniority of 
the instrument in relation to more senior claims;
    (iv) The instrument has a minimum original maturity of at least five 
years. At the beginning of each of the last five years of the life of 
the instrument, the amount that is eligible to be included in tier 2 
capital is reduced by 20 percent of the original amount of the 
instrument (net of redemptions) and is excluded from regulatory capital 
when the remaining maturity is less than one year. In addition, the 
instrument must not have any terms or features that require, or create 
significant incentives for, the national bank or Federal savings 
association to redeem the instrument prior to maturity; \7\ and
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    \7\ An instrument that by its terms automatically converts into a 
tier 1 capital instrument prior to five years after issuance complies 
with the five-year maturity requirement of this criterion.
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    (v) The instrument, by its terms, may be called by the national bank 
or Federal savings association only after a minimum of five years 
following issuance, except that the terms of the instrument may allow it 
to be called sooner upon the occurrence of an event that would preclude 
the instrument from being included in tier 2 capital, a tax event, or if 
the issuing entity is required to register as an investment company 
pursuant to the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
seq.). In addition:
    (A) The national bank or Federal savings association must receive 
the prior approval of the OCC to exercise a call option on the 
instrument.

[[Page 62]]

    (B) The national bank or Federal savings association does not create 
at issuance, through action or communication, an expectation the call 
option will be exercised.
    (C) Prior to exercising the call option, or immediately thereafter, 
the national bank or Federal savings association must either: Replace 
any amount called with an equivalent amount of an instrument that meets 
the criteria for regulatory capital under this section; \8\ or 
demonstrate to the satisfaction of the OCC that following redemption, 
the national bank or Federal savings association would continue to hold 
an amount of capital that is commensurate with its risk.
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    \8\ A national bank or Federal savings association may replace tier 
2 capital instruments concurrent with the redemption of existing tier 2 
capital instruments.
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    (vi) The holder of the instrument must have no contractual right to 
accelerate payment of principal or interest on the instrument, except in 
the event of a receivership, insolvency, liquidation, or similar 
proceeding of the national bank or Federal savings association.
    (vii) The instrument has no credit-sensitive feature, such as a 
dividend or interest rate that is reset periodically based in whole or 
in part on the national bank's or Federal savings association's credit 
standing, but may have a dividend rate that is adjusted periodically 
independent of the national bank's or Federal savings association's 
credit standing, in relation to general market interest rates or similar 
adjustments.
    (viii) The national bank or Federal savings association, or an 
entity that the national bank or Federal savings association controls, 
has not purchased and has not directly or indirectly funded the purchase 
of the instrument.
    (ix) If the instrument is not issued directly by the national bank 
or Federal savings association or by a subsidiary of the national bank 
or Federal savings association that is an operating entity, the only 
asset of the issuing entity is its investment in the capital of the 
national bank or Federal savings association, and proceeds must be 
immediately available without limitation to the national bank or Federal 
savings association or the national bank's or Federal savings 
association's top-tier holding company in a form that meets or exceeds 
all the other criteria for tier 2 capital instruments under this 
section.\9\
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    \9\ A national bank or Federal savings association may disregard de 
minimis assets related to the operation of the issuing entity for 
purposes of this criterion.
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    (x) Redemption of the instrument prior to maturity or repurchase 
requires the prior approval of the OCC.
    (xi) For an advanced approaches national bank or Federal savings 
association, the governing agreement, offering circular, or prospectus 
of an instrument issued after the date on which the advanced approaches 
national bank or Federal savings association becomes subject to this 
part under Sec.  3.1(f) must disclose that the holders of the instrument 
may be fully subordinated to interests held by the U.S. government in 
the event that the national bank or Federal savings association enters 
into a receivership, insolvency, liquidation, or similar proceeding.
    (2) Total capital minority interest, subject to the limitations set 
forth in Sec.  3.21, that is not included in the national bank's or 
Federal savings association's tier 1 capital.
    (3) ALLL or AACL, as applicable, up to 1.25 percent of the national 
bank's or Federal savings association's standardized total risk-weighted 
assets not including any amount of the ALLL or AACL, as applicable (and 
excluding in the case of a market risk national bank or Federal savings 
association, its standardized market risk-weighted assets).
    (4)(i) Any instrument that qualified as tier 2 capital under the 
OCC's general risk-based capital rules under appendix A to this part, 12 
CFR part 167 as then in effect, that were issued under the Small 
Business Jobs Act of 2010,\10\ or prior to October 4, 2010, under the 
Emergency Economic Stabilization Act of 2008.\11\
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    \10\ Public Law 111-240; 124 Stat. 2504 (2010).
    \11\ Public Law 110-343, 122 Stat. 3765 (2008).
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    (ii) Any debt instruments issued under the U.S. Department of the 
Treasury's Emergency Capital Investment Program pursuant to section

[[Page 63]]

104A of the Community Development Banking and Financial Institutions Act 
of 1994, added by the Consolidated Appropriations Act, 2021.\12\
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    \12\ Public Law 116-260.
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    (5) For a national bank or Federal savings association that makes an 
AOCI opt-out election (as defined in paragraph (b)(2) of Sec.  3.22), 45 
percent of pretax net unrealized gains on available-for-sale preferred 
stock classified as an equity security under GAAP and available-for-sale 
equity exposures.
    (6) Notwithstanding the criteria for tier 2 capital instruments 
referenced above, an instrument with terms that provide that the 
instrument may be called earlier than five years upon the occurrence of 
a rating agency event does not violate the criterion in paragraph 
(d)(1)(v) of this section provided that the instrument was issued and 
included in a national bank's or Federal savings association's tier 1 or 
tier 2 capital prior to January 1, 2014, and that such instrument 
satisfies all other criteria under this paragraph (d).
    (e) OCC approval of a capital element. (1) A national bank or 
Federal savings association must receive OCC prior approval to include a 
capital element (as listed in this section) in its common equity tier 1 
capital, additional tier 1 capital, or tier 2 capital unless the 
element:
    (i) Was included in a national bank's or Federal savings 
association's tier 1 capital or tier 2 capital prior to May 19, 2010 in 
accordance with the OCC's risk-based capital rules that were effective 
as of that date and the underlying instrument may continue to be 
included under the criteria set forth in this section; or
    (ii) Is equivalent, in terms of capital quality and ability to 
absorb losses with respect to all material terms, to a regulatory 
capital element the OCC determined may be included in regulatory capital 
pursuant to paragraph (e)(3) of this section.
    (2) When considering whether a national bank or Federal savings 
association may include a regulatory capital element in its common 
equity tier 1 capital, additional tier 1 capital, or tier 2 capital, the 
OCC will consult with the Federal Deposit Insurance Corporation and 
Federal Reserve Board.
    (3) After determining that a regulatory capital element may be 
included in a national bank's or Federal savings association's common 
equity tier 1 capital, additional tier 1 capital, or tier 2 capital, the 
OCC will make its decision publicly available, including a brief 
description of the material terms of the regulatory capital element and 
the rationale for the determination.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 4238, Feb. 14, 
2019; 84 FR 35249, July 22, 2019; 86 FR 15080, Mar. 22, 2021]



Sec.  3.21  Minority interest.

    (a)(1) Applicability. For purposes of Sec.  3.20, a national bank or 
Federal savings association that is not an advanced approaches national 
bank or Federal savings association is subject to the minority interest 
limitations in this paragraph (a) if a consolidated subsidiary of the 
national bank or Federal savings association has issued regulatory 
capital that is not owned by the national bank or Federal savings 
association.
    (2) Common equity tier 1 minority interest includable in the common 
equity tier 1 capital of the national bank or Federal savings 
association. The amount of common equity tier 1 minority interest that a 
national bank or Federal savings association may include in common 
equity tier 1 capital must be no greater than 10 percent of the sum of 
all common equity tier 1 capital elements of the national bank or 
Federal savings association (not including the common equity tier 1 
minority interest itself), less any common equity tier 1 capital 
regulatory adjustments and deductions in accordance with Sec.  3.22(a) 
and (b).
    (3) Tier 1 minority interest includable in the tier 1 capital of the 
national bank or Federal savings association. The amount of tier 1 
minority interest that a national bank or Federal savings association 
may include in tier 1 capital must be no greater than 10 percent of the 
sum of all tier 1 capital elements of the

[[Page 64]]

national bank or Federal savings association (not including the tier 1 
minority interest itself), less any tier 1 capital regulatory 
adjustments and deductions in accordance with Sec.  3.22(a) and (b).
    (4) Total capital minority interest includable in the total capital 
of the national bank or Federal savings association. The amount of total 
capital minority interest that a national bank or Federal savings 
association may include in total capital must be no greater than 10 
percent of the sum of all total capital elements of the national bank or 
Federal savings association (not including the total capital minority 
interest itself), less any total capital regulatory adjustments and 
deductions in accordance with Sec.  3.22(a) and (b).
    (b)(1) Applicability. For purposes of Sec.  3.20, an advanced 
approaches national bank or Federal savings association is subject to 
the minority interest limitations in this paragraph (b) if:
    (i) A consolidated subsidiary of the advanced approaches national 
bank or Federal savings association has issued regulatory capital that 
is not owned by the national bank or Federal savings association; and
    (ii) For each relevant regulatory capital ratio of the consolidated 
subsidiary, the ratio exceeds the sum of the subsidiary's minimum 
regulatory capital requirements plus its capital conservation buffer.
    (2) Difference in capital adequacy standards at the subsidiary 
level. For purposes of the minority interest calculations in this 
section, if the consolidated subsidiary issuing the capital is not 
subject to capital adequacy standards similar to those of the advanced 
approaches national bank or Federal savings association, the advanced 
approaches national bank or Federal savings association must assume that 
the capital adequacy standards of the advanced approaches national bank 
or Federal savings association apply to the subsidiary.
    (3) Common equity tier 1 minority interest includable in the common 
equity tier 1 capital of the national bank or Federal savings 
association. For each consolidated subsidiary of an advanced approaches 
national bank or Federal savings association, the amount of common 
equity tier 1 minority interest the advanced approaches national bank or 
Federal savings association may include in common equity tier 1 capital 
is equal to:
    (i) The common equity tier 1 minority interest of the subsidiary; 
minus
    (ii) The percentage of the subsidiary's common equity tier 1 capital 
that is not owned by the advanced approaches national bank or Federal 
savings association, multiplied by the difference between the common 
equity tier 1 capital of the subsidiary and the lower of:
    (A) The amount of common equity tier 1 capital the subsidiary must 
hold, or would be required to hold pursuant to this paragraph (b), to 
avoid restrictions on distributions and discretionary bonus payments 
under Sec.  3.11 or equivalent standards established by the subsidiary's 
home country supervisor; or
    (B)(1) The standardized total risk-weighted assets of the advanced 
approaches national bank or Federal savings association that relate to 
the subsidiary multiplied by
    (2) The common equity tier 1 capital ratio the subsidiary must 
maintain to avoid restrictions on distributions and discretionary bonus 
payments under Sec.  3.11 or equivalent standards established by the 
subsidiary's home country supervisor.
    (4) Tier 1 minority interest includable in the tier 1 capital of the 
advanced approaches national bank or Federal savings association. For 
each consolidated subsidiary of the advanced approaches national bank or 
Federal savings association, the amount of tier 1 minority interest the 
advanced approaches national bank or Federal savings association may 
include in tier 1 capital is equal to:
    (i) The tier 1 minority interest of the subsidiary; minus
    (ii) The percentage of the subsidiary's tier 1 capital that is not 
owned by the advanced approaches national bank or Federal savings 
association multiplied by the difference between the tier 1 capital of 
the subsidiary and the lower of:

[[Page 65]]

    (A) The amount of tier 1 capital the subsidiary must hold, or would 
be required to hold pursuant to this paragraph (b), to avoid 
restrictions on distributions and discretionary bonus payments under 
Sec.  3.11 or equivalent standards established by the subsidiary's home 
country supervisor, or
    (B)(1) The standardized total risk-weighted assets of the advanced 
approaches national bank or Federal savings association that relate to 
the subsidiary multiplied by
    (2) The tier 1 capital ratio the subsidiary must maintain to avoid 
restrictions on distributions and discretionary bonus payments under 
Sec.  3.11 or equivalent standards established by the subsidiary's home 
country supervisor.
    (5) Total capital minority interest includable in the total capital 
of the national bank or Federal savings association. For each 
consolidated subsidiary of the advanced approaches national bank or 
Federal savings association, the amount of total capital minority 
interest the advanced approaches national bank or Federal savings 
association may include in total capital is equal to:
    (i) The total capital minority interest of the subsidiary; minus
    (ii) The percentage of the subsidiary's total capital that is not 
owned by the advanced approaches national bank or Federal savings 
association multiplied by the difference between the total capital of 
the subsidiary and the lower of:
    (A) The amount of total capital the subsidiary must hold, or would 
be required to hold pursuant to this paragraph (b), to avoid 
restrictions on distributions and discretionary bonus payments under 
Sec.  3.11 or equivalent standards established by the subsidiary's home 
country supervisor, or
    (B)(1) The standardized total risk-weighted assets of the advanced 
approaches national bank or Federal savings association that relate to 
the subsidiary multiplied by
    (2) The total capital ratio the subsidiary must maintain to avoid 
restrictions on distributions and discretionary bonus payments under 
Sec.  3.11 or equivalent standards established by the subsidiary's home 
country supervisor.

[84 FR 35249, July 22, 2019]



Sec.  3.22  Regulatory capital adjustments and deductions.

    (a) Regulatory capital deductions from common equity tier 1 capital. 
A national bank or Federal savings association must deduct from the sum 
of its common equity tier 1 capital elements the items set forth in this 
paragraph (a):
    (1)(i) Goodwill, net of associated deferred tax liabilities (DTLs) 
in accordance with paragraph (e) of this section; and
    (ii) For an advanced approaches national bank or Federal savings 
association, goodwill that is embedded in the valuation of a significant 
investment in the capital of an unconsolidated financial institution in 
the form of common stock (and that is reflected in the consolidated 
financial statements of the advanced approaches national bank or Federal 
savings association), in accordance with paragraph (d) of this section;
    (2) Intangible assets, other than MSAs, net of associated DTLs in 
accordance with paragraph (e) of this section;
    (3) Deferred tax assets (DTAs) that arise from net operating loss 
and tax credit carryforwards net of any related valuation allowances and 
net of DTLs in accordance with paragraph (e) of this section;
    (4) Any gain-on-sale in connection with a securitization exposure;
    (5)(i) Any defined benefit pension fund net asset, net of any 
associated DTL in accordance with paragraph (e) of this section, held by 
a depository institution holding company. With the prior approval of the 
OCC, this deduction is not required for any defined benefit pension fund 
net asset to the extent the depository institution holding company has 
unrestricted and unfettered access to the assets in that fund.
    (ii) For an insured depository institution, no deduction is 
required.
    (iii) A national bank or Federal savings association must risk 
weight any portion of the defined benefit pension fund asset that is not 
deducted under paragraphs (a)(5)(i) or (a)(5)(ii) of this section as if 
the national bank or Federal savings association directly holds a 
proportional ownership share of each

[[Page 66]]

exposure in the defined benefit pension fund.
    (6) For an advanced approaches national bank or Federal savings 
association that has completed the parallel run process and that has 
received notification from the OCC pursuant to Sec.  3.121(d), the 
amount of expected credit loss that exceeds its eligible credit 
reserves; and
    (7) With respect to a financial subsidiary, the aggregate amount of 
the national bank's or Federal savings association's outstanding equity 
investment, including retained earnings, in its financial subsidiaries 
(as defined in [12 CFR 5.39 (OCC); 12 CFR 208.77 (Board))]. A national 
bank or Federal savings association must not consolidate the assets and 
liabilities of a financial subsidiary with those of the parent bank, and 
no other deduction is required under paragraph (c) of this section for 
investments in the capital instruments of financial subsidiaries.
    (8)(i) A Federal savings association must deduct the aggregate 
amount of its outstanding investments (both equity and debt) in, and 
extensions of credit to, subsidiaries that are not includable 
subsidiaries as defined in paragraph (a)(8)(iv) of this section and may 
not consolidate the assets and liabilities of the subsidiary with those 
of the Federal savings association. Any such deductions shall be 
deducted from assets and common equity tier 1 except as provided in 
paragraphs (a)(8)(ii) and (iii) of this section.
    (ii) If a Federal savings association has any investments (both debt 
and equity) in, or extensions or credit to, one or more subsidiaries 
engaged in any activity that would not fall within the scope of 
activities in which includable subsidiaries as defined in paragraph 
(a)(8)(iv) of this section may engage, it must deduct such investments 
and extensions of credit from assets and, thus, common equity tier 1 in 
accordance with paragraph (a)(8)(i) of this section.
    (iii) If a Federal savings association holds a subsidiary (either 
directly or through a subsidiary) that is itself a domestic depository 
institution, the OCC may, in its sole discretion upon determining that 
the amount of common equity tier 1 that would be required would be 
higher if the assets and liabilities of such subsidiary were 
consolidated with those of the parent Federal savings association than 
the amount that would be required if the parent Federal savings 
association's investment were deducted pursuant to paragraphs (a)(8)(i) 
and (ii) of this section, consolidate the assets and liabilities of that 
subsidiary with those of the parent Federal savings association in 
calculating the capital adequacy of the parent Federal savings 
association, regardless of whether the subsidiary would otherwise be an 
includable subsidiary as defined in paragraph (a)(8)(iv) of this 
section.
    (iv) For purposes of this section, the term includable subsidiary 
means a subsidiary of a Federal savings association that:
    (A) Is engaged solely in activities not impermissible for a national 
bank;
    (B) Is engaged in activities not permissible for a national bank, 
but only if acting solely as agent for its customers and such agency 
position is clearly documented in the Federal savings association's 
files;
    (C) Is engaged solely in mortgage-banking activities;
    (D)(1) Is itself an insured depository institution or a company the 
sole investment of which is an insured depository institution; and
    (2) Was acquired by the parent Federal savings association prior to 
May 1, 1989; or
    (E) Was a subsidiary of any Federal savings association existing as 
a Federal savings association on August 9, 1989:
    (1) That was chartered prior to October 15, 1982, as a savings bank 
or a cooperative bank under state law; or
    (2) That acquired its principal assets from an association that was 
chartered prior to October 15, 1982, as a savings bank or a cooperative 
bank under state law.
    (b) Regulatory adjustments to common equity tier 1 capital. (1) A 
national bank or Federal savings association must adjust the sum of 
common equity tier 1 capital elements pursuant to the requirements set 
forth in this paragraph (b). Such adjustments to common equity tier 1 
capital must be made net of the associated deferred tax effects.

[[Page 67]]

    (i) A national bank or Federal savings association that makes an 
AOCI opt-out election (as defined in paragraph (b)(2) of this section), 
must make the adjustments required under Sec.  3.22(b)(2)(i).
    (ii) A national bank or Federal savings association that is an 
advanced approaches national bank or Federal savings association, and a 
national bank or Federal savings association that has not made an AOCI 
opt-out election (as defined in paragraph (b)(2) of this section), must 
deduct any accumulated net gains and add any accumulated net losses on 
cash flow hedges included in AOCI that relate to the hedging of items 
that are not recognized at fair value on the balance sheet.
    (iii) A national bank or Federal savings association must deduct any 
net gain and add any net loss related to changes in the fair value of 
liabilities that are due to changes in the national bank's or Federal 
savings association's own credit risk. An advanced approaches national 
bank or Federal savings association must deduct the difference between 
its credit spread premium and the risk-free rate for derivatives that 
are liabilities as part of this adjustment.
    (2) AOCI opt-out election. (i) A national bank or Federal savings 
association that is not an advanced approaches national bank or Federal 
savings association may make a one-time election to opt out of the 
requirement to include all components of AOCI (with the exception of 
accumulated net gains and losses on cash flow hedges related to items 
that are not fair-valued on the balance sheet) in common equity tier 1 
capital (AOCI opt-out election). A national bank or Federal savings 
association that makes an AOCI opt-out election in accordance with this 
paragraph (b)(2) must adjust common equity tier 1 capital as follows:
    (A) Subtract any net unrealized gains and add any net unrealized 
losses on available-for-sale securities;
    (B) Subtract any net unrealized losses on available-for-sale 
preferred stock classified as an equity security under GAAP and 
available-for-sale equity exposures;
    (C) Subtract any accumulated net gains and add any accumulated net 
losses on cash flow hedges;
    (D) Subtract any amounts recorded in AOCI attributed to defined 
benefit postretirement plans resulting from the initial and subsequent 
application of the relevant GAAP standards that pertain to such plans 
(excluding, at the national bank's or Federal savings association's 
option, the portion relating to pension assets deducted under paragraph 
(a)(5) of this section); and
    (E) Subtract any net unrealized gains and add any net unrealized 
losses on held-to-maturity securities that are included in AOCI.
    (ii) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association must 
make its AOCI opt-out election in the Call Report:
    (A) If the national bank or Federal savings association is a 
Category III national bank or Federal savings association, during the 
first reporting period after the national bank or Federal savings 
association meets the definition of a Category III national bank or 
Federal savings association in Sec.  3.2; or
    (B) If the national bank or Federal savings association is not a 
Category III national bank or Federal savings association, during the 
first reporting period after the national bank or Federal savings 
association is required to comply with subpart A of this part as set 
forth in Sec.  3.1(f).
    (iii) With respect to a national bank or Federal savings association 
that is not an advanced approaches national bank or Federal savings 
association, each of its subsidiary banking organizations that is 
subject to regulatory capital requirements issued by the Board of 
Governors of the Federal Reserve, the Federal Deposit Insurance 
Corporation, or the Office of the Comptroller of the Currency \21\ must 
elect the same option as the national bank or Federal savings 
association pursuant to this paragraph (b)(2).
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    \21\ These rules include the regulatory capital requirements set 
forth at 12 CFR part 3 (OCC); 12 CFR part 225 (Board); 12 CFR part 325, 
and 12 CFR part 390 (FDIC).

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[[Page 68]]

    (iv) With prior notice to the OCC, a national bank or Federal 
savings association resulting from a merger, acquisition, or purchase 
transaction and that is not an advanced approaches national bank or 
Federal savings association may change its AOCI opt-out election in its 
Call Report filed for the first reporting period after the date required 
for such national bank or Federal savings association to comply with 
subpart A of this part as set forth in Sec.  3.1(f) if:
    (A) Other than as set forth in paragraph (b)(2)(iv)(C) of this 
section, the merger, acquisition, or purchase transaction involved the 
acquisition or purchase of all or substantially all of either the assets 
or voting stock of another banking organization that is subject to 
regulatory capital requirements issued by the Board of Governors of the 
Federal Reserve, the Federal Deposit Insurance Corporation, or the 
Office of the Comptroller of the Currency; \22\
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    \22\ These rules include the regulatory capital requirements set 
forth at 12 CFR part 3 (OCC); 12 CFR part 225 (Board); 12 CFR part 325, 
and 12 CFR part 390 (FDIC).
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    (B) Prior to the merger, acquisition, or purchase transaction, only 
one of the banking organizations involved in the transaction made an 
AOCI opt-out election under this section; and
    (C) A national bank or Federal savings association may, with the 
prior approval of the OCC, change its AOCI opt-out election under this 
paragraph (b) in the case of a merger, acquisition, or purchase 
transaction that meets the requirements set forth at paragraph 
(b)(2)(iv)(B) of this section, but does not meet the requirements of 
paragraph (b)(2)(iv)(A). In making such a determination, the OCC may 
consider the terms of the merger, acquisition, or purchase transaction, 
as well as the extent of any changes to the risk profile, complexity, 
and scope of operations of the national bank or Federal savings 
association resulting from the merger, acquisition, or purchase 
transaction.
    (c) Deductions from regulatory capital related to investments in 
capital instruments or covered debt instruments \23\--(1) Investment in 
the national bank's or Federal savings association's own capital 
instruments. A national bank or Federal savings association must deduct 
an investment in the national bank's or Federal savings association's 
own capital instruments, as follows:
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    \23\ The national bank or Federal savings association must calculate 
amounts deducted under paragraphs (c) through (f) of this section after 
it calculates the amount of ALLL or AACL, as applicable, includable in 
tier 2 capital under Sec.  3.20(d)(3).
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    (i) A national bank or Federal savings association must deduct an 
investment in the national bank's or Federal savings association's own 
common stock instruments from its common equity tier 1 capital elements 
to the extent such instruments are not excluded from regulatory capital 
under Sec.  3.20(b)(1);
    (ii) A national bank or Federal savings association must deduct an 
investment in the national bank's or Federal savings association's own 
additional tier 1 capital instruments from its additional tier 1 capital 
elements; and
    (iii) A national bank or Federal savings association must deduct an 
investment in the national bank's or Federal savings association's own 
tier 2 capital instruments from its tier 2 capital elements.
    (2) Corresponding deduction approach. For purposes of subpart C of 
this part, the corresponding deduction approach is the methodology used 
for the deductions from regulatory capital related to reciprocal cross 
holdings (as described in paragraph (c)(3) of this section), investments 
in the capital of unconsolidated financial institutions for a national 
bank or Federal savings association that is not an advanced approaches 
national bank or Federal savings association (as described in paragraph 
(c)(4) of this section), non-significant investments in the capital of 
unconsolidated financial institutions for an advanced approaches 
national bank or Federal savings association (as described in paragraph 
(c)(5) of this section), and non-common stock significant investments in 
the capital of unconsolidated financial institutions for an advanced 
approaches national bank or Federal savings association (as described in 
paragraph (c)(6) of this section). Under the corresponding deduction 
approach, a national bank or Federal savings association must make

[[Page 69]]

deductions from the component of capital for which the underlying 
instrument would qualify if it were issued by the national bank or 
Federal savings association itself, as described in paragraphs (c)(2)(i) 
through (iii) of this section. If the national bank or Federal savings 
association does not have a sufficient amount of a specific component of 
capital to effect the required deduction, the shortfall must be deducted 
according to paragraph (f) of this section.
    (i) If an investment is in the form of an instrument issued by a 
financial institution that is not a regulated financial institution, the 
national bank or Federal savings association must treat the instrument 
as:
    (A) A common equity tier 1 capital instrument if it is common stock 
or represents the most subordinated claim in a liquidation of the 
financial institution; and
    (B) An additional tier 1 capital instrument if it is subordinated to 
all creditors of the financial institution and is senior in liquidation 
only to common shareholders.
    (ii) If an investment is in the form of an instrument issued by a 
regulated financial institution and the instrument does not meet the 
criteria for common equity tier 1, additional tier 1 or tier 2 capital 
instruments under Sec.  3.20, the national bank or Federal savings 
association must treat the instrument as:
    (A) A common equity tier 1 capital instrument if it is common stock 
included in GAAP equity or represents the most subordinated claim in 
liquidation of the financial institution;
    (B) An additional tier 1 capital instrument if it is included in 
GAAP equity, subordinated to all creditors of the financial institution, 
and senior in a receivership, insolvency, liquidation, or similar 
proceeding only to common shareholders;
    (C) A tier 2 capital instrument if it is not included in GAAP equity 
but considered regulatory capital by the primary supervisor of the 
financial institution; and
    (D) For an advanced approaches national bank or Federal savings 
association, a tier 2 capital instrument if it is a covered debt 
instrument.
    (iii) If an investment is in the form of a non-qualifying capital 
instrument (as defined in Sec.  3.300(c)), the national bank or Federal 
savings association must treat the instrument as:
    (A) An additional tier 1 capital instrument if such instrument was 
included in the issuer's tier 1 capital prior to May 19, 2010; or
    (B) A tier 2 capital instrument if such instrument was included in 
the issuer's tier 2 capital (but not includable in tier 1 capital) prior 
to May 19, 2010.
    (3) Reciprocal cross holdings in the capital of financial 
institutions. (i) A national bank or Federal savings association must 
deduct an investment in the capital of other financial institutions that 
it holds reciprocally with another financial institution, where such 
reciprocal cross holdings result from a formal or informal arrangement 
to swap, exchange, or otherwise intend to hold each other's capital 
instruments, by applying the corresponding deduction approach in 
paragraph (c)(2) of this section.
    (ii) An advanced approaches national bank or Federal savings 
association must deduct an investment in any covered debt instrument 
that the institution holds reciprocally with another financial 
institution, where such reciprocal cross holdings result from a formal 
or informal arrangement to swap, exchange, or otherwise intend to hold 
each other's capital or covered debt instruments, by applying the 
corresponding deduction approach in paragraph (c)(2) of this section.
    (4) Investments in the capital of unconsolidated financial 
institutions. A national bank or Federal savings association that is not 
an advanced approaches national bank or Federal savings association must 
deduct its investments in the capital of unconsolidated financial 
institutions (as defined in Sec.  3.2) that exceed 25 percent of the sum 
of the national bank or Federal savings association's common equity tier 
1 capital elements minus all deductions from and adjustments to common 
equity tier 1 capital elements required under paragraphs (a) through 
(c)(3) of

[[Page 70]]

this section by applying the corresponding deduction approach in 
paragraph (c)(2) of this section.\24\ The deductions described in this 
section are net of associated DTLs in accordance with paragraph (e) of 
this section. In addition, with the prior written approval of the OCC, a 
national bank or Federal savings association that underwrites a failed 
underwriting, for the period of time stipulated by the OCC, is not 
required to deduct an investment in the capital of an unconsolidated 
financial institution pursuant to this paragraph (c) to the extent the 
investment is related to the failed underwriting.\25\
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    \24\ With the prior written approval of the OCC, for the period of 
time stipulated by the OCC, a national bank or Federal savings 
association is not required to deduct a non-significant investment in 
the capital instrument of an unconsolidated financial institution or an 
investment in a covered debt instrument pursuant to this paragraph if 
the financial institution is in distress and if such investment is made 
for the purpose of providing financial support to the financial 
institution, as determined by the OCC.
    \25\ Any non-significant investments in the capital of an 
unconsolidated financial institution that is not required to be deducted 
under this paragraph (c)(4) or otherwise under this section must be 
assigned the appropriate risk weight under subparts D, E, or F of this 
part, as applicable.
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    (5) Non-significant investments in the capital of unconsolidated 
financial institutions. (i) An advanced approaches national bank or 
Federal savings association must deduct its non-significant investments 
in the capital of unconsolidated financial institutions (as defined in 
Sec.  3.2) that, in the aggregate and together with any investment in a 
covered debt instrument (as defined in Sec.  3.2) issued by a financial 
institution in which the national bank or Federal savings association 
does not have a significant investment in the capital of the 
unconsolidated financial institution (as defined in Sec.  3.2), exceeds 
10 percent of the sum of the advanced approaches national bank's or 
Federal savings association's common equity tier 1 capital elements 
minus all deductions from and adjustments to common equity tier 1 
capital elements required under paragraphs (a) through (c)(3) of this 
section (the 10 percent threshold for non-significant investments) by 
applying the corresponding deduction approach in paragraph (c)(2) of 
this section.\26\ The deductions described in this paragraph are net of 
associated DTLs in accordance with paragraph (e) of this section. In 
addition, with the prior written approval of the OCC, an advanced 
approaches national bank or Federal savings association that underwrites 
a failed underwriting, for the period of time stipulated by the OCC, is 
not required to deduct from capital a non-significant investment in the 
capital of an unconsolidated financial institution or an investment in a 
covered debt instrument pursuant to this paragraph (c)(5) to the extent 
the investment is related to the failed underwriting.\27\ For any 
calculation under this paragraph (c)(5)(i), an advanced approaches 
national bank or Federal savings association may exclude the amount of 
an investment in a covered debt instrument under paragraph (c)(5)(iii) 
or (iv) of this section, as applicable.
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    \26\ With the prior written approval of the OCC, for the period of 
time stipulated by the OCC, an advanced approaches a national bank or 
Federal savings association is not required to deduct a non-significant 
investment in the capital instrument of an unconsolidated financial 
institution or an investment in a covered debt instrument pursuant to 
this paragraph if the financial institution is in distress and if such 
investment is made for the purpose of providing financial support to the 
financial institution, as determined by the OCC.
    \27\ Any non-significant investment in the capital of an 
unconsolidated financial institution or any investment in a covered debt 
instrument that is not required to be deducted under this paragraph 
(c)(4) or otherwise under this section must be assigned the appropriate 
risk weight under subpart D, E, or F of this part, as applicable.
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    (ii) For an advanced approaches national bank or Federal savings 
association, the amount to be deducted under this paragraph (c)(5) from 
a specific capital component is equal to:
    (A) The advanced approaches national bank's or Federal savings 
association's aggregate non-significant investments in the capital of an 
unconsolidated financial institution and, if

[[Page 71]]

applicable, any investments in a covered debt instrument subject to 
deduction under this paragraph (c)(5), exceeding the 10 percent 
threshold for non-significant investments, multiplied by
    (B) The ratio of the advanced approaches national bank's or Federal 
savings association's aggregate non-significant investments in the 
capital of an unconsolidated financial institution (in the form of such 
capital component) to the national bank's or Federal savings 
association's total non-significant investments in unconsolidated 
financial institutions, with an investment in a covered debt instrument 
being treated as tier 2 capital for this purpose.
    (iii) For purposes of applying the deduction under paragraph 
(c)(5)(i) of this section, an advanced approaches national bank or 
Federal savings association that is not a subsidiary of a global 
systemically important banking organization, as defined in 12 CFR 252.2, 
may exclude from the deduction the amount of the national bank's or 
Federal savings association's gross long position, in accordance with 
Sec.  3.22(h)(2), in investments in covered debt instruments issued by 
financial institutions in which the national bank or Federal savings 
association does not have a significant investment in the capital of the 
unconsolidated financial institutions up to an amount equal to 5 percent 
of the sum of the national bank's or Federal savings association's 
common equity tier 1 capital elements minus all deductions from and 
adjustments to common equity tier 1 capital elements required under 
paragraphs (a) through (c)(3) of this section, net of associated DTLs in 
accordance with paragraph (e) of this section.
    (iv) Prior to applying the deduction under paragraph (c)(5)(i) of 
this section:
    (A) A national bank or Federal savings association that is a 
subsidiary of a global systemically important BHC, as defined in 12 CFR 
252.2, may designate any investment in a covered debt instrument as an 
excluded covered debt instrument, as defined in Sec.  3.2.
    (B) A national bank or Federal savings association that is a 
subsidiary of a global systemically important BHC, as defined in 12 CFR 
252.2, must deduct according to the corresponding deduction approach in 
paragraph (c)(2) of this section, its gross long position, calculated in 
accordance with paragraph (h)(2) of this section, in a covered debt 
instrument that was originally designated as an excluded covered debt 
instrument, in accordance with paragraph (c)(5)(iv)(A) of this section, 
but no longer qualifies as an excluded covered debt instrument.
    (C) A national bank or Federal savings association that is a 
subsidiary of a global systemically important BHC, as defined in 12 CFR 
252.2, must deduct according to the corresponding deduction approach in 
paragraph (c)(2) of this section the amount of its gross long position, 
calculated in accordance with paragraph (h)(2) of this section, in a 
direct or indirect investment in a covered debt instrument that was 
originally designated as an excluded covered debt instrument, in 
accordance with paragraph (c)(5)(iv)(A) of this section, and has been 
held for more than thirty business days.
    (D) A national bank or Federal savings association that is a 
subsidiary of a global systemically important BHC, as defined in 12 CFR 
252.2, must deduct according to the corresponding deduction approach in 
paragraph (c)(2) of this section its gross long position, calculated in 
accordance with paragraph (h)(2) of this section, of its aggregate 
investment in excluded covered debt instruments that exceeds 5 percent 
of the sum of the national bank's or Federal savings association's 
common equity tier 1 capital elements minus all deductions from and 
adjustments to common equity tier 1 capital elements required under 
paragraphs (a) through (c)(3) of this section, net of associated DTLs in 
accordance with paragraph (e) of this section.
    (6) Significant investments in the capital of unconsolidated 
financial institutions that are not in the form of common stock. If an 
advanced approaches national bank or Federal savings association has a 
significant investment in the capital of an unconsolidated financial 
institution, the advanced approaches national bank or Federal savings 
association must deduct from capital any such investment issued by the

[[Page 72]]

unconsolidated financial institution that is held by the national bank 
or Federal savings association other than an investment in the form of 
common stock, as well as any investment in a covered debt instrument 
issued by the unconsolidated financial institution, by applying the 
corresponding deduction approach in paragraph (c)(2) of this 
section.\28\ The deductions described in this section are net of 
associated DTLs in accordance with paragraph (e) of this section. In 
addition, with the prior written approval of the OCC, for the period of 
time stipulated by the OCC, an advanced approaches national bank or 
Federal savings association that underwrites a failed underwriting is 
not required to deduct the significant investment in the capital of an 
unconsolidated financial institution or an investment in a covered debt 
instrument pursuant to this paragraph (c)(6) if such investment is 
related to such failed underwriting.
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    \28\ With prior written approval of the OCC, for the period of time 
stipulated by the OCC, an advanced approaches national bank or Federal 
savings association is not required to deduct an investment in a covered 
debt instrument under this paragraph (c)(5) or otherwise under this 
section if such investment is made for the purpose of providing 
financial support to the financial institution as determined by the OCC.
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    (d) MSAs and certain DTAs subject to common equity tier 1 capital 
deduction thresholds. (1) A national bank or Federal savings association 
that is not an advanced approaches national bank or Federal savings 
association must make deductions from regulatory capital as described in 
this paragraph (d)(1).
    (i) The national bank or Federal savings association must deduct 
from common equity tier 1 capital elements the amount of each of the 
items set forth in this paragraph (d)(1) that, individually, exceeds 25 
percent of the sum of the national bank's or Federal savings 
association's common equity tier 1 capital elements, less adjustments to 
and deductions from common equity tier 1 capital required under 
paragraphs (a) through (c)(3) of this section (the 25 percent common 
equity tier 1 capital deduction threshold).\29\
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    \29\ The amount of the items in paragraph (d)(1) of this section 
that is not deducted from common equity tier 1 capital must be included 
in the risk-weighted assets of the national bank or Federal savings 
association and assigned a 250 percent risk weight.
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    (ii) The national bank or Federal savings association must deduct 
from common equity tier 1 capital elements the amount of DTAs arising 
from temporary differences that the national bank or Federal savings 
association could not realize through net operating loss carrybacks, net 
of any related valuation allowances and net of DTLs, in accordance with 
paragraph (e) of this section. A national bank or Federal savings 
association is not required to deduct from the sum of its common equity 
tier 1 capital elements DTAs (net of any related valuation allowances 
and net of DTLs, in accordance with Sec.  3.22(e)) arising from timing 
differences that the national bank or Federal savings association could 
realize through net operating loss carrybacks. The national bank or 
Federal savings association must risk weight these assets at 100 
percent. For a national bank or Federal savings association that is a 
member of a consolidated group for tax purposes, the amount of DTAs that 
could be realized through net operating loss carrybacks may not exceed 
the amount that the national bank or Federal savings association could 
reasonably expect to have refunded by its parent holding company.
    (iii) The national bank or Federal savings association must deduct 
from common equity tier 1 capital elements the amount of MSAs net of 
associated DTLs, in accordance with paragraph (e) of this section.
    (iv) For purposes of calculating the amount of DTAs subject to 
deduction pursuant to paragraph (d)(1) of this section, a national bank 
or Federal savings association may exclude DTAs and DTLs relating to 
adjustments made to common equity tier 1 capital under paragraph (b) of 
this section. A national bank or Federal savings association that elects 
to exclude DTAs relating to adjustments under paragraph (b) of this 
section also must exclude DTLs and must do so consistently in all future 
calculations. A national bank or Federal savings association may change 
its exclusion preference only

[[Page 73]]

after obtaining the prior approval of the OCC.
    (2) An advanced approaches national bank or Federal savings 
association must make deductions from regulatory capital as described in 
this paragraph (d)(2).
    (i) An advanced approaches national bank or Federal savings 
association must deduct from common equity tier 1 capital elements the 
amount of each of the items set forth in this paragraph (d)(2) that, 
individually, exceeds 10 percent of the sum of the advanced approaches 
national bank's or Federal savings association's common equity tier 1 
capital elements, less adjustments to and deductions from common equity 
tier 1 capital required under paragraphs (a) through (c) of this section 
(the 10 percent common equity tier 1 capital deduction threshold).
    (A) DTAs arising from temporary differences that the advanced 
approaches national bank or Federal savings association could not 
realize through net operating loss carrybacks, net of any related 
valuation allowances and net of DTLs, in accordance with paragraph (e) 
of this section. An advanced approaches national bank or Federal savings 
association is not required to deduct from the sum of its common equity 
tier 1 capital elements DTAs (net of any related valuation allowances 
and net of DTLs, in accordance with Sec.  3.22(e)) arising from timing 
differences that the advanced approaches national bank or Federal 
savings association could realize through net operating loss carrybacks. 
The advanced approaches national bank or Federal savings association 
must risk weight these assets at 100 percent. For a national bank or 
Federal savings association that is a member of a consolidated group for 
tax purposes, the amount of DTAs that could be realized through net 
operating loss carrybacks may not exceed the amount that the national 
bank or Federal savings association could reasonably expect to have 
refunded by its parent holding company.
    (B) MSAs net of associated DTLs, in accordance with paragraph (e) of 
this section.
    (C) Significant investments in the capital of unconsolidated 
financial institutions in the form of common stock, net of associated 
DTLs in accordance with paragraph (e) of this section.\30\ Significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock subject to the 10 percent common equity tier 1 
capital deduction threshold may be reduced by any goodwill embedded in 
the valuation of such investments deducted by the advanced approaches 
national bank or Federal savings association pursuant to paragraph 
(a)(1) of this section. In addition, with the prior written approval of 
the OCC, for the period of time stipulated by the OCC, an advanced 
approaches national bank or Federal savings association that underwrites 
a failed underwriting is not required to deduct a significant investment 
in the capital of an unconsolidated financial institution in the form of 
common stock pursuant to this paragraph (d)(2) if such investment is 
related to such failed underwriting.
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    \30\ With the prior written approval of the OCC, for the period of 
time stipulated by the OCC, an advanced approaches national bank or 
Federal savings association is not required to deduct a significant 
investment in the capital instrument of an unconsolidated financial 
institution in distress in the form of common stock pursuant to this 
section if such investment is made for the purpose of providing 
financial support to the financial institution as determined by the OCC.
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    (ii) An advanced approaches national bank or Federal savings 
association must deduct from common equity tier 1 capital elements the 
items listed in paragraph (d)(2)(i) of this section that are not 
deducted as a result of the application of the 10 percent common equity 
tier 1 capital deduction threshold, and that, in aggregate, exceed 17.65 
percent of the sum of the advanced approaches national bank's or Federal 
savings association's common equity tier 1 capital elements, minus 
adjustments to and deductions from common equity tier 1 capital required 
under paragraphs (a) through (c) of this section, minus the items listed 
in paragraph (d)(2)(i) of this section (the 15 percent common equity 
tier 1 capital deduction threshold). Any goodwill that has been deducted 
under paragraph (a)(1) of this section can be excluded from the 
significant investments in the capital of unconsolidated

[[Page 74]]

financial institutions in the form of common stock.\31\
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    \31\ The amount of the items in paragraph (d)(2) of this section 
that is not deducted from common equity tier 1 capital pursuant to this 
section must be included in the risk-weighted assets of the advanced 
approaches national bank or Federal savings association and assigned a 
250 percent risk weight.
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    (iii) For purposes of calculating the amount of DTAs subject to the 
10 and 15 percent common equity tier 1 capital deduction thresholds, an 
advanced approaches national bank or Federal savings association may 
exclude DTAs and DTLs relating to adjustments made to common equity tier 
1 capital under paragraph (b) of this section. An advanced approaches 
national bank or Federal savings association that elects to exclude DTAs 
relating to adjustments under paragraph (b) of this section also must 
exclude DTLs and must do so consistently in all future calculations. An 
advanced approaches national bank or Federal savings association may 
change its exclusion preference only after obtaining the prior approval 
of the OCC.
    (e) Netting of DTLs against assets subject to deduction. (1) Except 
as described in paragraph (e)(3) of this section, netting of DTLs 
against assets that are subject to deduction under this section is 
permitted, but not required, if the following conditions are met:
    (i) The DTL is associated with the asset; and
    (ii) The DTL would be extinguished if the associated asset becomes 
impaired or is derecognized under GAAP.
    (2) A DTL may only be netted against a single asset.
    (3) For purposes of calculating the amount of DTAs subject to the 
threshold deduction in paragraph (d) of this section, the amount of DTAs 
that arise from net operating loss and tax credit carryforwards, net of 
any related valuation allowances, and of DTAs arising from temporary 
differences that the national bank or Federal savings association could 
not realize through net operating loss carrybacks, net of any related 
valuation allowances, may be offset by DTLs (that have not been netted 
against assets subject to deduction pursuant to paragraph (e)(1) of this 
section) subject to the conditions set forth in this paragraph (e).
    (i) Only the DTAs and DTLs that relate to taxes levied by the same 
taxation authority and that are eligible for offsetting by that 
authority may be offset for purposes of this deduction.
    (ii) The amount of DTLs that the national bank or Federal savings 
association nets against DTAs that arise from net operating loss and tax 
credit carryforwards, net of any related valuation allowances, and 
against DTAs arising from temporary differences that the national bank 
or Federal savings association could not realize through net operating 
loss carrybacks, net of any related valuation allowances, must be 
allocated in proportion to the amount of DTAs that arise from net 
operating loss and tax credit carryforwards (net of any related 
valuation allowances, but before any offsetting of DTLs) and of DTAs 
arising from temporary differences that the national bank or Federal 
savings association could not realize through net operating loss 
carrybacks (net of any related valuation allowances, but before any 
offsetting of DTLs), respectively.
    (4) A national bank or Federal savings association may offset DTLs 
embedded in the carrying value of a leveraged lease portfolio acquired 
in a business combination that are not recognized under GAAP against 
DTAs that are subject to paragraph (d) of this section in accordance 
with this paragraph (e).
    (5) A national bank or Federal savings association must net DTLs 
against assets subject to deduction under this section in a consistent 
manner from reporting period to reporting period. A national bank or 
Federal savings association may change its preference regarding the 
manner in which it nets DTLs against specific assets subject to 
deduction under this section only after obtaining the prior approval of 
the OCC.
    (f) Insufficient amounts of a specific regulatory capital component 
to effect deductions. Under the corresponding deduction approach, if a 
national bank or Federal savings association does not have a sufficient 
amount of a specific component of capital to effect the full amount of 
any deduction from capital

[[Page 75]]

required under paragraph (d) of this section, the national bank or 
Federal savings association must deduct the shortfall amount from the 
next higher (that is, more subordinated) component of regulatory 
capital. Any investment by an advanced approaches national bank or 
Federal savings association in a covered debt instrument must be treated 
as an investment in the tier 2 capital for purposes of this paragraph. 
Notwithstanding any other provision of this section, a qualifying 
community banking organization (as defined in Sec.  3.12) that has 
elected to use the community bank leverage ratio framework pursuant to 
Sec.  3.12 is not required to deduct any shortfall of tier 2 capital 
from its additional tier 1 capital or common equity tier 1 capital.
    (g) Treatment of assets that are deducted. A national bank or 
Federal savings association must exclude from standardized total risk-
weighted assets and, as applicable, advanced approaches total risk-
weighted assets any item that is required to be deducted from regulatory 
capital.
    (h) Net long position--(1) In general. For purposes of calculating 
the amount of a national bank's or Federal savings association's 
investment in the national bank's or Federal savings association's own 
capital instrument, investment in the capital of an unconsolidated 
financial institution, and investment in a covered debt instrument under 
this section, the institution's net long position is the gross long 
position in the underlying instrument determined in accordance with 
paragraph (h)(2) of this section, as adjusted to recognize any short 
position by the national bank or Federal savings association in the same 
instrument subject to paragraph (h)(3) of this section.
    (2) Gross long position. A gross long position is determined as 
follows:
    (i) For an equity exposure that is held directly by the national 
bank or Federal savings association, the adjusted carrying value of the 
exposure as that term is defined in Sec.  3.51(b);
    (ii) For an exposure that is held directly and that is not an equity 
exposure or a securitization exposure, the exposure amount as that term 
is defined in Sec.  3.2;
    (iii) For each indirect exposure, the national bank's or Federal 
savings association's carrying value of its investment in an investment 
fund or, alternatively:
    (A) A national bank or Federal savings association may, with the 
prior approval of the OCC, use a conservative estimate of the amount of 
its indirect investment in the national bank's or Federal savings 
association's own capital instruments, its indirect investment in the 
capital of an unconsolidated financial institution, or its indirect 
investment in a covered debt instrument held through a position in an 
index, as applicable; or
    (B) A national bank or Federal savings association may calculate the 
gross long position for an indirect exposure to the national bank's or 
Federal savings association's own capital the capital in an 
unconsolidated financial institution, or a covered debt instrument by 
multiplying the national bank's or Federal savings association's 
carrying value of its investment in the investment fund by either:
    (1) The highest stated investment limit (in percent) for an 
investment in the national bank's or Federal savings association's own 
capital instruments, an investment in the capital of an unconsolidated 
financial institution, or an investment in a covered debt instrument, as 
applicable, as stated in the prospectus, partnership agreement, or 
similar contract defining permissible investments of the investment 
fund; or
    (2) The investment fund's actual holdings (in percent) of the 
investment in the national bank's or Federal savings association's own 
capital instruments, investment in the capital of an unconsolidated 
financial institution, or investment in a covered debt instrument, as 
applicable; and
    (iv) For a synthetic exposure, the amount of the national bank's or 
Federal savings association's loss on the exposure if the reference 
capital instrument or covered debt instrument were to have a value of 
zero.
    (3) Adjustments to reflect a short position. In order to adjust the 
gross long position to recognize a short position in the same instrument 
under paragraph (h)(1) of this section, the following criteria must be 
met:

[[Page 76]]

    (i) The maturity of the short position must match the maturity of 
the long position, or the short position must have a residual maturity 
of at least one year (maturity requirement); or
    (ii) For a position that is a trading asset or trading liability 
(whether on- or off-balance sheet) as reported on the national bank's or 
Federal savings association's Call Report, if the national bank or 
Federal savings association has a contractual right or obligation to 
sell the long position at a specific point in time and the counterparty 
to the contract has an obligation to purchase the long position if the 
national bank or Federal savings association exercises its right to 
sell, this point in time may be treated as the maturity of the long 
position such that the maturity of the long position and short position 
are deemed to match for purposes of the maturity requirement, even if 
the maturity of the short position is less than one year; and
    (iii) For an investment in a national bank's or Federal savings 
association's own capital instrument under paragraph (c)(1) of this 
section, an investment in the capital of an unconsolidated financial 
institution under paragraphs (c)(4) through (6) and (d) of this section 
(as applicable), and an investment in a covered debt instrument under 
paragraphs (c)(1), (5), and (6) of this section:
    (A) The national bank or Federal savings association may only net a 
short position against a long position in an investment in the national 
bank's or Federal savings association's own capital instrument under 
paragraph (c)(1) of this section if the short position involves no 
counterparty credit risk;
    (B) A gross long position in an investment in the national bank's or 
Federal savings association's own capital instrument, an investment in 
the capital of an unconsolidated financial institution, or an investment 
in a covered debt instrument due to a position in an index may be netted 
against a short position in the same index;
    (C) Long and short positions in the same index without maturity 
dates are considered to have matching maturities; and
    (D) A short position in an index that is hedging a long cash or 
synthetic position in an investment in the national bank's or Federal 
savings association's own capital instrument, an investment in the 
capital instrument of an unconsolidated financial institution, or an 
investment in a covered debt instrument can be decomposed to provide 
recognition of the hedge. More specifically, the portion of the index 
that is composed of the same underlying instrument that is being hedged 
may be used to offset the long position if both the long position being 
hedged and the short position in the index are reported as a trading 
asset or trading liability (whether on- or off-balance sheet) on the 
national bank's or Federal savings association's Call Report, and the 
hedge is deemed effective by the national bank's or Federal savings 
association's internal control processes, which have not been found to 
be inadequate by the OCC.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41415, July 15, 
2015; 84 FR 4238, Feb. 14, 2019; 84 FR 35250, July 22, 2019; 84 FR 
59265, Nov. 1, 2019; 84 FR 61793, Nov. 13, 2019; 86 FR 728, Jan. 6, 
2021]



Sec. Sec.  3.23-3.29  [Reserved]



          Subpart D_Risk-Weighted Assets_Standardized Approach

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.30  Applicability.

    (a) This subpart sets forth methodologies for determining risk-
weighted assets for purposes of the generally applicable risk-based 
capital requirements for all national banks or Federal savings 
associations.
    (b) Notwithstanding paragraph (a) of this section, a market risk 
national bank or Federal savings association must exclude from its 
calculation of risk-weighted assets under this subpart the risk-weighted 
asset amounts of all covered positions, as defined in subpart F of this 
part (except foreign exchange positions that are not trading positions, 
OTC derivative positions, cleared transactions, and unsettled 
transactions).

[[Page 77]]

              Risk-Weighted Assets For General Credit Risk



Sec.  3.31  Mechanics for calculating risk-weighted assets for general 
credit risk.

    (a) General risk-weighting requirements. A national bank or Federal 
savings association must apply risk weights to its exposures as follows:
    (1) A national bank or Federal savings association must determine 
the exposure amount of each on-balance sheet exposure, each OTC 
derivative contract, and each off-balance sheet commitment, trade and 
transaction-related contingency, guarantee, repo-style transaction, 
financial standby letter of credit, forward agreement, or other similar 
transaction that is not:
    (i) An unsettled transaction subject to Sec.  3.38;
    (ii) A cleared transaction subject to Sec.  3.35;
    (iii) A default fund contribution subject to Sec.  3.35;
    (iv) A securitization exposure subject to Sec. Sec.  3.41 through 
3.45; or
    (v) An equity exposure (other than an equity OTC derivative 
contract) subject to Sec. Sec.  3.51 through 3.53.
    (2) The national bank or Federal savings association must multiply 
each exposure amount by the risk weight appropriate to the exposure 
based on the exposure type or counterparty, eligible guarantor, or 
financial collateral to determine the risk-weighted asset amount for 
each exposure.
    (b) Total risk-weighted assets for general credit risk equals the 
sum of the risk-weighted asset amounts calculated under this section.



Sec.  3.32  General risk weights.

    (a) Sovereign exposures--(1) Exposures to the U.S. government. (i) 
Notwithstanding any other requirement in this subpart, a national bank 
or Federal savings association must assign a zero percent risk weight 
to:
    (A) An exposure to the U.S. government, its central bank, or a U.S. 
government agency; and
    (B) The portion of an exposure that is directly and unconditionally 
guaranteed by the U.S. government, its central bank, or a U.S. 
government agency. This includes a deposit or other exposure, or the 
portion of a deposit or other exposure, that is insured or otherwise 
unconditionally guaranteed by the FDIC or National Credit Union 
Administration.
    (ii) A national bank or Federal savings association must assign a 20 
percent risk weight to the portion of an exposure that is conditionally 
guaranteed by the U.S. government, its central bank, or a U.S. 
government agency. This includes an exposure, or the portion of an 
exposure, that is conditionally guaranteed by the FDIC or National 
Credit Union Administration.
    (iii) A national bank or Federal savings association must assign a 
zero percent risk weight to a Paycheck Protection Program covered loan 
as defined in section 7(a)(36) of the Small Business Act (15 U.S.C. 
636(a)(36)).
    (2) Other sovereign exposures. In accordance with Table 1 to Sec.  
3.32, a national bank or Federal savings association must assign a risk 
weight to a sovereign exposure based on the CRC applicable to the 
sovereign or the sovereign's OECD membership status if there is no CRC 
applicable to the sovereign.

      Table 1 to Sec.   3.32--Risk Weights for Sovereign Exposures
------------------------------------------------------------------------
                                                            Risk weight
                                                           (in percent)
------------------------------------------------------------------------
CRC:
  0-1...................................................               0
  2.....................................................              20
  3.....................................................              50
  4-6...................................................             100
  7.....................................................             150
OECD Member with No CRC.................................               0
Non-OECD Member with No CRC.............................             100
Sovereign Default.......................................             150
------------------------------------------------------------------------

    (3) Certain sovereign exposures. Notwithstanding paragraph (a)(2) of 
this section, a national bank or Federal savings association may assign 
to a sovereign exposure a risk weight that is lower than the applicable 
risk weight in Table 1 to Sec.  3.32 if:
    (i) The exposure is denominated in the sovereign's currency;
    (ii) The national bank or Federal savings association has at least 
an equivalent amount of liabilities in that currency; and
    (iii) The risk weight is not lower than the risk weight that the 
home country supervisor allows national

[[Page 78]]

banks or Federal savings associations under its jurisdiction to assign 
to the same exposures to the sovereign.
    (4) Exposures to a non-OECD member sovereign with no CRC. Except as 
provided in paragraphs (a)(3), (a)(5) and (a)(6) of this section, a 
national bank or Federal savings association must assign a 100 percent 
risk weight to an exposure to a sovereign if the sovereign does not have 
a CRC.
    (5) Exposures to an OECD member sovereign with no CRC. Except as 
provided in paragraph (a)(6) of this section, a national bank or Federal 
savings association must assign a 0 percent risk weight to an exposure 
to a sovereign that is a member of the OECD if the sovereign does not 
have a CRC.
    (6) Sovereign default. A national bank or Federal savings 
association must assign a 150 percent risk weight to a sovereign 
exposure immediately upon determining that an event of sovereign default 
has occurred, or if an event of sovereign default has occurred during 
the previous five years.
    (b) Certain supranational entities and multilateral development 
banks (MDBs). A national bank or Federal savings association must assign 
a zero percent risk weight to an exposure to the Bank for International 
Settlements, the European Central Bank, the European Commission, the 
International Monetary Fund, the European Stability Mechanism, the 
European Financial Stability Facility, or an MDB.
    (c) Exposures to GSEs. (1) A national bank or Federal savings 
association must assign a 20 percent risk weight to an exposure to a GSE 
other than an equity exposure or preferred stock.
    (2) A national bank or Federal savings association must assign a 100 
percent risk weight to preferred stock issued by a GSE.
    (d) Exposures to depository institutions, foreign banks, and credit 
unions--(1) Exposures to U.S. depository institutions and credit unions. 
A national bank or Federal savings association must assign a 20 percent 
risk weight to an exposure to a depository institution or credit union 
that is organized under the laws of the United States or any state 
thereof, except as otherwise provided under paragraph (d)(3) of this 
section.
    (2) Exposures to foreign banks. (i) Except as otherwise provided 
under paragraphs (d)(2)(iii), (d)(2)(v), and (d)(3) of this section, a 
national bank or Federal savings association must assign a risk weight 
to an exposure to a foreign bank, in accordance with Table 2 to Sec.  
3.32, based on the CRC that corresponds to the foreign bank's home 
country or the OECD membership status of the foreign bank's home country 
if there is no CRC applicable to the foreign bank's home country.

   Table 2 to Sec.   3.32--Risk Weights for Exposures to Foreign Banks
------------------------------------------------------------------------
                                                            Risk weight
                                                           (in percent)
------------------------------------------------------------------------
CRC:
  0-1...................................................              20
  2.....................................................              50
  3.....................................................             100
  4-7...................................................             150
OECD Member with No CRC.................................              20
Non-OECD Member with No CRC.............................             100
Sovereign Default.......................................             150
------------------------------------------------------------------------

    (ii) A national bank or Federal savings association must assign a 20 
percent risk weight to an exposure to a foreign bank whose home country 
is a member of the OECD and does not have a CRC.
    (iii) A national bank or Federal savings association must assign a 
20 percent risk-weight to an exposure that is a self-liquidating, trade-
related contingent item that arises from the movement of goods and that 
has a maturity of three months or less to a foreign bank whose home 
country has a CRC of 0, 1, 2, or 3, or is an OECD member with no CRC.
    (iv) A national bank or Federal savings association must assign a 
100 percent risk weight to an exposure to a foreign bank whose home 
country is not a member of the OECD and does not have a CRC, with the 
exception of self-liquidating, trade-related contingent items that arise 
from the movement of goods, and that have a maturity of three months or 
less, which may be assigned a 20 percent risk weight.
    (v) A national bank or Federal savings association must assign a 150 
percent risk weight to an exposure to a foreign bank immediately upon 
determining that an event of sovereign default has occurred in the 
bank's home

[[Page 79]]

country, or if an event of sovereign default has occurred in the foreign 
bank's home country during the previous five years.
    (3) A national bank or Federal savings association must assign a 100 
percent risk weight to an exposure to a financial institution if the 
exposure may be included in that financial institution's capital unless 
the exposure is:
    (i) An equity exposure;
    (ii) A significant investment in the capital of an unconsolidated 
financial institution in the form of common stock pursuant to Sec.  
3.22(d)(2)(i)(c);
    (iii) Deducted from regulatory capital under Sec.  3.22; or
    (iv) Subject to a 150 percent risk weight under paragraph (d)(2)(iv) 
or Table 2 of paragraph (d)(2) of this section.
    (e) Exposures to public sector entities (PSEs)--(1) Exposures to 
U.S. PSEs. (i) A national bank or Federal savings association must 
assign a 20 percent risk weight to a general obligation exposure to a 
PSE that is organized under the laws of the United States or any state 
or political subdivision thereof.
    (ii) A national bank or Federal savings association must assign a 50 
percent risk weight to a revenue obligation exposure to a PSE that is 
organized under the laws of the United States or any state or political 
subdivision thereof.
    (2) Exposures to foreign PSEs. (i) Except as provided in paragraphs 
(e)(1) and (e)(3) of this section, a national bank or Federal savings 
association must assign a risk weight to a general obligation exposure 
to a PSE, in accordance with Table 3 to Sec.  3.32, based on the CRC 
that corresponds to the PSE's home country or the OECD membership status 
of the PSE's home country if there is no CRC applicable to the PSE's 
home country.
    (ii) Except as provided in paragraphs (e)(1) and (e)(3) of this 
section, a national bank or Federal savings association must assign a 
risk weight to a revenue obligation exposure to a PSE, in accordance 
with Table 4 to Sec.  3.32, based on the CRC that corresponds to the 
PSE's home country; or the OECD membership status of the PSE's home 
country if there is no CRC applicable to the PSE's home country.
    (3) A national bank or Federal savings association may assign a 
lower risk weight than would otherwise apply under Tables 3 or 4 to 
Sec.  3.32 to an exposure to a foreign PSE if:
    (i) The PSE's home country supervisor allows banks under its 
jurisdiction to assign a lower risk weight to such exposures; and
    (ii) The risk weight is not lower than the risk weight that 
corresponds to the PSE's home country in accordance with Table 1 to 
Sec.  3.32.

      Table 3 to Sec.   3.32--Risk Weights for Non-U.S. PSE General
                               Obligations
------------------------------------------------------------------------
                                                            Risk weight
                                                           (in percent)
------------------------------------------------------------------------
CRC:
  0-1...................................................              20
  2.....................................................              50
  3.....................................................             100
  4-7...................................................             150
OECD Member with No CRC.................................              20
Non-OECD Member with No CRC.............................             100
Sovereign Default.......................................             150
------------------------------------------------------------------------


      Table 4 to Sec.   3.32--Risk Weights for Non-U.S. PSE Revenue
                               Obligations
------------------------------------------------------------------------
                                                            Risk weight
                                                           (in percent)
------------------------------------------------------------------------
CRC:
  0-1...................................................              50
  2-3...................................................             100
  4-7...................................................             150
OECD Member with No CRC.................................              50
Non-OECD Member with No CRC.............................             100
Sovereign Default.......................................             150
------------------------------------------------------------------------

    (4) Exposures to PSEs from an OECD member sovereign with no CRC. (i) 
A national bank or Federal savings association must assign a 20 percent 
risk weight to a general obligation exposure to a PSE whose home country 
is an OECD member sovereign with no CRC.
    (ii) A national bank or Federal savings association must assign a 50 
percent risk weight to a revenue obligation exposure to a PSE whose home 
country is an OECD member sovereign with no CRC.
    (5) Exposures to PSEs whose home country is not an OECD member 
sovereign with no CRC. A national bank or Federal savings association 
must assign a 100 percent risk weight to an exposure to a PSE whose home 
country is not a member of the OECD and does not have a CRC.

[[Page 80]]

    (6) A national bank or Federal savings association must assign a 150 
percent risk weight to a PSE exposure immediately upon determining that 
an event of sovereign default has occurred in a PSE's home country or if 
an event of sovereign default has occurred in the PSE's home country 
during the previous five years.
    (f) Corporate exposures. (1) A national bank or Federal savings 
association must assign a 100 percent risk weight to all its corporate 
exposures, except as provided in paragraphs (f)(2) and (f)(3) of this 
section.
    (2) A national bank or Federal savings association must assign a 2 
percent risk weight to an exposure to a QCCP arising from the national 
bank or Federal savings association posting cash collateral to the QCCP 
in connection with a cleared transaction that meets the requirements of 
Sec.  3.35(b)(3)(i)(A) and a 4 percent risk weight to an exposure to a 
QCCP arising from the national bank or Federal savings association 
posting cash collateral to the QCCP in connection with a cleared 
transaction that meets the requirements of Sec.  3.35(b)(3)(i)(B).
    (3) A national bank or Federal savings association must assign a 2 
percent risk weight to an exposure to a QCCP arising from the national 
bank or Federal savings association posting cash collateral to the QCCP 
in connection with a cleared transaction that meets the requirements of 
Sec.  3.35(c)(3)(i).
    (g) Residential mortgage exposures. (1) A national bank or Federal 
savings association must assign a 50 percent risk weight to a first-lien 
residential mortgage exposure that:
    (i) Is secured by a property that is either owner-occupied or 
rented;
    (ii) Is made in accordance with prudent underwriting standards, 
including standards relating to the loan amount as a percent of the 
appraised value of the property;
    (iii) Is not 90 days or more past due or carried in nonaccrual 
status; and
    (iv) Is not restructured or modified.
    (2) A national bank or Federal savings association must assign a 100 
percent risk weight to a first-lien residential mortgage exposure that 
does not meet the criteria in paragraph (g)(1) of this section, and to 
junior-lien residential mortgage exposures.
    (3) For the purpose of this paragraph (g), if a national bank or 
Federal savings association holds the first-lien and junior-lien(s) 
residential mortgage exposures, and no other party holds an intervening 
lien, the national bank or Federal savings association must combine the 
exposures and treat them as a single first-lien residential mortgage 
exposure.
    (4) A loan modified or restructured solely pursuant to the U.S. 
Treasury's Home Affordable Mortgage Program is not modified or 
restructured for purposes of this section.
    (h) Pre-sold construction loans. A national bank or Federal savings 
association must assign a 50 percent risk weight to a pre-sold 
construction loan unless the purchase contract is cancelled, in which 
case a national bank or Federal savings association must assign a 100 
percent risk weight.
    (i) Statutory multifamily mortgages. A national bank or Federal 
savings association must assign a 50 percent risk weight to a statutory 
multifamily mortgage.
    (j) High-volatility commercial real estate (HVCRE) exposures. A 
national bank or Federal savings association must assign a 150 percent 
risk weight to an HVCRE exposure.
    (k) Past due exposures. Except for an exposure to a sovereign entity 
or a residential mortgage exposure or a policy loan, if an exposure is 
90 days or more past due or on nonaccrual:
    (1) A national bank or Federal savings association must assign a 150 
percent risk weight to the portion of the exposure that is not 
guaranteed or that is unsecured;
    (2) A national bank or Federal savings association may assign a risk 
weight to the guaranteed portion of a past due exposure based on the 
risk weight that applies under Sec.  3.36 if the guarantee or credit 
derivative meets the requirements of that section; and
    (3) A national bank or Federal savings association may assign a risk 
weight to the collateralized portion of a past due exposure based on the 
risk weight that applies under Sec.  3.37 if the collateral meets the 
requirements of that section.

[[Page 81]]

    (l) Other assets. (1) A national bank or Federal savings association 
must assign a zero percent risk weight to cash owned and held in all 
offices of the national bank or Federal savings association or in 
transit; to gold bullion held in the national bank's or Federal savings 
association's own vaults or held in another depository institution's 
vaults on an allocated basis, to the extent the gold bullion assets are 
offset by gold bullion liabilities; and to exposures that arise from the 
settlement of cash transactions (such as equities, fixed income, spot 
foreign exchange and spot commodities) with a central counterparty where 
there is no assumption of ongoing counterparty credit risk by the 
central counterparty after settlement of the trade and associated 
default fund contributions.
    (2) A national bank or Federal savings association must assign a 20 
percent risk weight to cash items in the process of collection.
    (3) A national bank or Federal savings association must assign a 100 
percent risk weight to DTAs arising from temporary differences that the 
national bank or Federal savings association could realize through net 
operating loss carrybacks.
    (4) A national bank or Federal savings association must assign a 250 
percent risk weight to the portion of each of the following items to the 
extent it is not deducted from common equity tier 1 capital pursuant to 
Sec.  3.22(d):
    (i) MSAs; and
    (ii) DTAs arising from temporary differences that the national bank 
or Federal savings association could not realize through net operating 
loss carrybacks.
    (5) A national bank or Federal savings association must assign a 100 
percent risk weight to all assets not specifically assigned a different 
risk weight under this subpart and that are not deducted from tier 1 or 
tier 2 capital pursuant to Sec.  3.22.
    (6) Notwithstanding the requirements of this section, a national 
bank or Federal savings association may assign an asset that is not 
included in one of the categories provided in this section to the risk 
weight category applicable under the capital rules applicable to bank 
holding companies and savings and loan holding companies at 12 CFR part 
217, provided that all of the following conditions apply:
    (i) The national bank or Federal savings association is not 
authorized to hold the asset under applicable law other than debt 
previously contracted or similar authority; and
    (ii) The risks associated with the asset are substantially similar 
to the risks of assets that are otherwise assigned to a risk weight 
category of less than 100 percent under this subpart.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35254, July 22, 
2019; 85 FR 4402, Jan. 24, 2020; 85 FR 20393, Apr. 13, 2020; 85 FR 
57959, Sept. 17, 2020]



Sec.  3.33  Off-balance sheet exposures.

    (a) General. (1) A national bank or Federal savings association must 
calculate the exposure amount of an off-balance sheet exposure using the 
credit conversion factors (CCFs) in paragraph (b) of this section.
    (2) Where a national bank or Federal savings association commits to 
provide a commitment, the national bank or Federal savings association 
may apply the lower of the two applicable CCFs.
    (3) Where a national bank or Federal savings association provides a 
commitment structured as a syndication or participation, the national 
bank or Federal savings association is only required to calculate the 
exposure amount for its pro rata share of the commitment.
    (4) Where a national bank or Federal savings association provides a 
commitment, enters into a repurchase agreement, or provides a credit-
enhancing representation and warranty, and such commitment, repurchase 
agreement, or credit-enhancing representation and warranty is not a 
securitization exposure, the exposure amount shall be no greater than 
the maximum contractual amount of the commitment, repurchase agreement, 
or credit-enhancing representation and warranty, as applicable.
    (b) Credit conversion factors--(1) Zero percent CCF. A national bank 
or Federal savings association must apply a zero percent CCF to the 
unused portion of a commitment that is unconditionally cancelable by the 
national bank or Federal savings association.

[[Page 82]]

    (2) 20 percent CCF. A national bank or Federal savings association 
must apply a 20 percent CCF to the amount of:
    (i) Commitments with an original maturity of one year or less that 
are not unconditionally cancelable by the national bank or Federal 
savings association; and
    (ii) Self-liquidating, trade-related contingent items that arise 
from the movement of goods, with an original maturity of one year or 
less.
    (3) 50 percent CCF. A national bank or Federal savings association 
must apply a 50 percent CCF to the amount of:
    (i) Commitments with an original maturity of more than one year that 
are not unconditionally cancelable by the national bank or Federal 
savings association; and
    (ii) Transaction-related contingent items, including performance 
bonds, bid bonds, warranties, and performance standby letters of credit.
    (4) 100 percent CCF. A national bank or Federal savings association 
must apply a 100 percent CCF to the amount of the following off-balance-
sheet items and other similar transactions:
    (i) Guarantees;
    (ii) Repurchase agreements (the off-balance sheet component of which 
equals the sum of the current fair values of all positions the national 
bank or Federal savings association has sold subject to repurchase);
    (iii) Credit-enhancing representations and warranties that are not 
securitization exposures;
    (iv) Off-balance sheet securities lending transactions (the off-
balance sheet component of which equals the sum of the current fair 
values of all positions the national bank or Federal savings association 
has lent under the transaction);
    (v) Off-balance sheet securities borrowing transactions (the off-
balance sheet component of which equals the sum of the current fair 
values of all non-cash positions the national bank or Federal savings 
association has posted as collateral under the transaction);
    (vi) Financial standby letters of credit; and
    (vii) Forward agreements.



Sec.  3.34  Derivative contracts.

    (a) Exposure amount for derivative contracts--(1) National bank or 
Federal savings association that is not an advanced approaches national 
bank or Federal savings association. (i) A national bank or Federal 
savings association that is not an advanced approaches national bank or 
Federal savings association must use the current exposure methodology 
(CEM) described in paragraph (b) of this section to calculate the 
exposure amount for all its OTC derivative contracts, unless the 
national bank or Federal savings association makes the election provided 
in paragraph (a)(1)(ii) of this section.
    (ii) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association may 
elect to calculate the exposure amount for all its OTC derivative 
contracts under the standardized approach for counterparty credit risk 
(SA-CCR) in Sec.  3.132(c) by notifying the OCC, rather than calculating 
the exposure amount for all its derivative contracts using CEM. A 
national bank or Federal savings association that elects under this 
paragraph (a)(1)(ii) to calculate the exposure amount for its OTC 
derivative contracts under SA-CCR must apply the treatment of cleared 
transactions under Sec.  3.133 to its derivative contracts that are 
cleared transactions and to all default fund contributions associated 
with such derivative contracts, rather than applying Sec.  3.35. A 
national bank or Federal savings association that is not an advanced 
approaches national bank or Federal savings association must use the 
same methodology to calculate the exposure amount for all its derivative 
contracts and, if a national bank or Federal savings association has 
elected to use SA-CCR under this paragraph (a)(1)(ii), the national bank 
or Federal savings association may change its election only with prior 
approval of the OCC.
    (2) Advanced approaches national bank or Federal savings 
association. An advanced approaches national bank or Federal savings 
association must calculate the exposure amount for all its derivative 
contracts using SA-CCR in Sec.  3.132(c) for purposes of standardized

[[Page 83]]

total risk-weighted assets. An advanced approaches national bank or 
Federal savings association must apply the treatment of cleared 
transactions under Sec.  3.133 to its derivative contracts that are 
cleared transactions and to all default fund contributions associated 
with such derivative contracts for purposes of standardized total risk-
weighted assets.
    (b) Current exposure methodology exposure amount--(1) Single OTC 
derivative contract. Except as modified by paragraph (c) of this 
section, the exposure amount for a single OTC derivative contract that 
is not subject to a qualifying master netting agreement is equal to the 
sum of the national bank's or Federal savings association's current 
credit exposure and potential future credit exposure (PFE) on the OTC 
derivative contract.
    (i) Current credit exposure. The current credit exposure for a 
single OTC derivative contract is the greater of the fair value of the 
OTC derivative contract or zero.
    (ii) PFE. (A) The PFE for a single OTC derivative contract, 
including an OTC derivative contract with a negative fair value, is 
calculated by multiplying the notional principal amount of the OTC 
derivative contract by the appropriate conversion factor in Table 1 to 
this section.
    (B) For purposes of calculating either the PFE under this paragraph 
(b)(1)(ii) or the gross PFE under paragraph (b)(2)(ii)(A) of this 
section for exchange rate contracts and other similar contracts in which 
the notional principal amount is equivalent to the cash flows, notional 
principal amount is the net receipts to each party falling due on each 
value date in each currency.
    (C) For an OTC derivative contract that does not fall within one of 
the specified categories in Table 1 to this section, the PFE must be 
calculated using the appropriate ``other'' conversion factor.
    (D) A national bank or Federal savings association must use an OTC 
derivative contract's effective notional principal amount (that is, the 
apparent or stated notional principal amount multiplied by any 
multiplier in the OTC derivative contract) rather than the apparent or 
stated notional principal amount in calculating PFE.
    (E) The PFE of the protection provider of a credit derivative is 
capped at the net present value of the amount of unpaid premiums.

[[Page 84]]



                                      Table 1 to Sec.   3.34--Conversion Factor Matrix for Derivative Contracts \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Credit       Credit (non-
                                                              Foreign       (investment     investment-                      Precious
         Remaining maturity \2\            Interest rate   exchange rate       grade           grade          Equity      metals (except       Other
                                                             and gold        reference       reference                         gold)
                                                                            asset) \3\        asset)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One year or less........................            0.00            0.01            0.05            0.10            0.06            0.07            0.10
Greater than one year and less than or             0.005            0.05            0.05            0.10            0.08            0.07            0.12
 equal to five years....................
Greater than five years.................           0.015           0.075            0.05            0.10            0.10            0.08            0.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For a derivative contract with multiple exchanges of principal, the conversion factor is multiplied by the number of remaining payments in the
  derivative contract.
\2\ For an OTC derivative contract that is structured such that on specified dates any outstanding exposure is settled and the terms are reset so that
  the fair value of the contract is zero, the remaining maturity equals the time until the next reset date. For an interest rate derivative contract
  with a remaining maturity of greater than one year that meets these criteria, the minimum conversion factor is 0.005.
\3\ A national bank or Federal savings association must use the column labeled ``Credit (investment-grade reference asset)'' for a credit derivative
  whose reference asset is an outstanding unsecured long-term debt security without credit enhancement that is investment grade. A national bank or
  Federal savings association must use the column labeled ``Credit (non-investment-grade reference asset)'' for all other credit derivatives.


[[Page 85]]

    (2) Multiple OTC derivative contracts subject to a qualifying master 
netting agreement. Except as modified by paragraph (c) of this section, 
the exposure amount for multiple OTC derivative contracts subject to a 
qualifying master netting agreement is equal to the sum of the net 
current credit exposure and the adjusted sum of the PFE amounts for all 
OTC derivative contracts subject to the qualifying master netting 
agreement.
    (i) Net current credit exposure. The net current credit exposure is 
the greater of the net sum of all positive and negative fair values of 
the individual OTC derivative contracts subject to the qualifying master 
netting agreement or zero.
    (ii) Adjusted sum of the PFE amounts. The adjusted sum of the PFE 
amounts, Anet, is calculated as Anet = (0.4 x Agross) + (0.6 x NGR x 
Agross), where:
    (A) Agross = the gross PFE (that is, the sum of the PFE amounts as 
determined under paragraph (b)(1)(ii) of this section for each 
individual derivative contract subject to the qualifying master netting 
agreement); and
    (B) Net-to-gross Ratio (NGR) = the ratio of the net current credit 
exposure to the gross current credit exposure. In calculating the NGR, 
the gross current credit exposure equals the sum of the positive current 
credit exposures (as determined under paragraph (b)(1)(i) of this 
section) of all individual derivative contracts subject to the 
qualifying master netting agreement.
    (c) Recognition of credit risk mitigation of collateralized OTC 
derivative contracts. (1) A national bank or Federal savings association 
using CEM under paragraph (b) of this section may recognize the credit 
risk mitigation benefits of financial collateral that secures an OTC 
derivative contract or multiple OTC derivative contracts subject to a 
qualifying master netting agreement (netting set) by using the simple 
approach in Sec.  3.37(b).
    (2) As an alternative to the simple approach, a national bank or 
Federal savings association using CEM under paragraph (b) of this 
section may recognize the credit risk mitigation benefits of financial 
collateral that secures such a contract or netting set if the financial 
collateral is marked-to-fair value on a daily basis and subject to a 
daily margin maintenance requirement by applying a risk weight to the 
uncollateralized portion of the exposure, after adjusting the exposure 
amount calculated under paragraph (b)(1) or (2) of this section using 
the collateral haircut approach in Sec.  3.37(c). The national bank or 
Federal savings association must substitute the exposure amount 
calculated under paragraph (b)(1) or (2) of this section for [Sigma]E in 
the equation in Sec.  3.37(c)(2).
    (d) Counterparty credit risk for credit derivatives--(1) Protection 
purchasers. A national bank or Federal savings association that 
purchases a credit derivative that is recognized under Sec.  3.36 as a 
credit risk mitigant for an exposure that is not a covered position 
under subpart F of this part is not required to compute a separate 
counterparty credit risk capital requirement under this subpart provided 
that the national bank or Federal savings association does so 
consistently for all such credit derivatives. The national bank or 
Federal savings association must either include all or exclude all such 
credit derivatives that are subject to a qualifying master netting 
agreement from any measure used to determine counterparty credit risk 
exposure to all relevant counterparties for risk-based capital purposes.
    (2) Protection providers. (i) A national bank or Federal savings 
association that is the protection provider under a credit derivative 
must treat the credit derivative as an exposure to the underlying 
reference asset. The national bank or Federal savings association is not 
required to compute a counterparty credit risk capital requirement for 
the credit derivative under this subpart, provided that this treatment 
is applied consistently for all such credit derivatives. The national 
bank or Federal savings association must either include all or exclude 
all such credit derivatives that are subject to a qualifying master 
netting agreement from any measure used to determine counterparty credit 
risk exposure.

[[Page 86]]

    (ii) The provisions of this paragraph (d)(2) apply to all relevant 
counterparties for risk-based capital purposes unless the national bank 
or Federal savings association is treating the credit derivative as a 
covered position under subpart F of this part, in which case the 
national bank or Federal savings association must compute a supplemental 
counterparty credit risk capital requirement under this section.
    (e) Counterparty credit risk for equity derivatives. (1) A national 
bank or Federal savings association must treat an equity derivative 
contract as an equity exposure and compute a risk-weighted asset amount 
for the equity derivative contract under Sec. Sec.  3.51 through 3.53 
(unless the national bank or Federal savings association is treating the 
contract as a covered position under subpart F of this part).
    (2) In addition, the national bank or Federal savings association 
must also calculate a risk-based capital requirement for the 
counterparty credit risk of an equity derivative contract under this 
section if the national bank or Federal savings association is treating 
the contract as a covered position under subpart F of this part.
    (3) If the national bank or Federal savings association risk weights 
the contract under the Simple Risk-Weight Approach (SRWA) in Sec.  3.52, 
the national bank or Federal savings association may choose not to hold 
risk-based capital against the counterparty credit risk of the equity 
derivative contract, as long as it does so for all such contracts. Where 
the equity derivative contracts are subject to a qualified master 
netting agreement, a national bank or Federal savings association using 
the SRWA must either include all or exclude all of the contracts from 
any measure used to determine counterparty credit risk exposure.
    (f) Clearing member national bank's or Federal savings association's 
exposure amount. The exposure amount of a clearing member national bank 
or Federal savings association using CEM under paragraph (b) of this 
section for a client-facing derivative transaction or netting set of 
client-facing derivative transactions equals the exposure amount 
calculated according to paragraph (b)(1) or (2) of this section 
multiplied by the scaling factor of the square root of \1/2\ (which 
equals 0.707107). If the national bank or Federal savings association 
determines that a longer period is appropriate, the national bank or 
Federal savings association must use a larger scaling factor to adjust 
for a longer holding period as follows:
[GRAPHIC] [TIFF OMITTED] TR24JA20.012


Where H = the holding period greater than or equal to five days.


Additionally, the OCC may require the national bank or Federal savings 
association to set a longer holding period if the OCC determines that a 
longer period is appropriate due to the nature, structure, or 
characteristics of the transaction or is commensurate with the risks 
associated with the transaction.

[85 FR 4402, Jan. 24, 2020]



Sec.  3.35  Cleared transactions.

    (a) General requirements--(1) Clearing member clients. A national 
bank or Federal savings association that is a clearing member client 
must use the methodologies described in paragraph (b) of this section to 
calculate risk-weighted assets for a cleared transaction.
    (2) Clearing members. A national bank or Federal savings association 
that is a clearing member must use the methodologies described in 
paragraph (c) of this section to calculate its risk-weighted assets for 
a cleared transaction and paragraph (d) of this section

[[Page 87]]

to calculate its risk-weighted assets for its default fund contribution 
to a CCP.
    (3) Alternate requirements. Notwithstanding any other provision of 
this section, an advanced approaches national bank or Federal savings 
association or a national bank or Federal savings association that is 
not an advanced approaches national bank or Federal savings association 
and that has elected to use SA-CCR under Sec.  3.34(a)(1) must apply 
Sec.  3.133 to its derivative contracts that are cleared transactions 
rather than this section.
    (b) Clearing member client national banks or Federal savings 
associations--(1) Risk-weighted assets for cleared transactions. (i) To 
determine the risk-weighted asset amount for a cleared transaction, a 
national bank or Federal savings association that is a clearing member 
client must multiply the trade exposure amount for the cleared 
transaction, calculated in accordance with paragraph (b)(2) of this 
section, by the risk weight appropriate for the cleared transaction, 
determined in accordance with paragraph (b)(3) of this section.
    (ii) A clearing member client national bank's or Federal savings 
association's total risk-weighted assets for cleared transactions is the 
sum of the risk-weighted asset amounts for all its cleared transactions.
    (2) Trade exposure amount. (i) For a cleared transaction that is 
either a derivative contract or a netting set of derivative contracts, 
the trade exposure amount equals:
    (A) The exposure amount for the derivative contract or netting set 
of derivative contracts, calculated using the methodology used to 
calculate exposure amount for OTC derivative contracts under Sec.  3.34; 
plus
    (B) The fair value of the collateral posted by the clearing member 
client national bank or Federal savings association and held by the CCP, 
clearing member, or custodian in a manner that is not bankruptcy remote.
    (ii) For a cleared transaction that is a repo-style transaction or 
netting set of repo-style transactions, the trade exposure amount 
equals:
    (A) The exposure amount for the repo-style transaction calculated 
using the methodologies under Sec.  3.37(c); plus
    (B) The fair value of the collateral posted by the clearing member 
client national bank or Federal savings association and held by the CCP, 
clearing member, or custodian in a manner that is not bankruptcy remote.
    (3) Cleared transaction risk weights. (i) For a cleared transaction 
with a QCCP, a clearing member client national bank or Federal savings 
association must apply a risk weight of:
    (A) 2 percent if the collateral posted by the national bank or 
Federal savings association to the QCCP or clearing member is subject to 
an arrangement that prevents any losses to the clearing member client 
national bank or Federal savings association due to the joint default or 
a concurrent insolvency, liquidation, or receivership proceeding of the 
clearing member and any other clearing member clients of the clearing 
member; and the clearing member client national bank or Federal savings 
association has conducted sufficient legal review to conclude with a 
well-founded basis (and maintains sufficient written documentation of 
that legal review) that in the event of a legal challenge (including one 
resulting from an event of default or from liquidation, insolvency, or 
receivership proceedings) the relevant court and administrative 
authorities would find the arrangements to be legal, valid, binding and 
enforceable under the law of the relevant jurisdictions; or
    (B) 4 percent if the requirements of Sec.  3.35(b)(3)(A) are not 
met.
    (ii) For a cleared transaction with a CCP that is not a QCCP, a 
clearing member client national bank or Federal savings association must 
apply the risk weight appropriate for the CCP according to this subpart 
D.
    (4) Collateral. (i) Notwithstanding any other requirements in this 
section, collateral posted by a clearing member client national bank or 
Federal savings association that is held by a custodian (in its capacity 
as custodian) in a manner that is bankruptcy remote from the CCP, 
clearing member, and other clearing member clients of the clearing 
member, is not subject to a capital requirement under this section.
    (ii) A clearing member client national bank or Federal savings 
association must calculate a risk-weighted

[[Page 88]]

asset amount for any collateral provided to a CCP, clearing member, or 
custodian in connection with a cleared transaction in accordance with 
the requirements under this subpart D.
    (c) Clearing member national banks or Federal savings associations--
(1) Risk-weighted assets for cleared transactions. (i) To determine the 
risk-weighted asset amount for a cleared transaction, a clearing member 
national bank or Federal savings association must multiply the trade 
exposure amount for the cleared transaction, calculated in accordance 
with paragraph (c)(2) of this section, by the risk weight appropriate 
for the cleared transaction, determined in accordance with paragraph 
(c)(3) of this section.
    (ii) A clearing member national bank's or Federal savings 
association's total risk-weighted assets for cleared transactions is the 
sum of the risk-weighted asset amounts for all of its cleared 
transactions.
    (2) Trade exposure amount. A clearing member national bank or 
Federal savings association must calculate its trade exposure amount for 
a cleared transaction as follows:
    (i) For a cleared transaction that is either a derivative contract 
or a netting set of derivative contracts, the trade exposure amount 
equals:
    (A) The exposure amount for the derivative contract, calculated 
using the methodology to calculate exposure amount for OTC derivative 
contracts under Sec.  3.34; plus
    (B) The fair value of the collateral posted by the clearing member 
national bank or Federal savings association and held by the CCP in a 
manner that is not bankruptcy remote.
    (ii) For a cleared transaction that is a repo-style transaction or 
netting set of repo-style transactions, trade exposure amount equals:
    (A) The exposure amount for repo-style transactions calculated using 
methodologies under Sec.  3.37(c); plus
    (B) The fair value of the collateral posted by the clearing member 
national bank or Federal savings association and held by the CCP in a 
manner that is not bankruptcy remote.
    (3) Cleared transaction risk weight. (i) A clearing member national 
bank or Federal savings association must apply a risk weight of 2 
percent to the trade exposure amount for a cleared transaction with a 
QCCP.
    (ii) For a cleared transaction with a CCP that is not a QCCP, a 
clearing member national bank or Federal savings association must apply 
the risk weight appropriate for the CCP according to this subpart D.
    (iii) Notwithstanding paragraphs (c)(3)(i) and (ii) of this section, 
a clearing member national bank or Federal savings association may apply 
a risk weight of zero percent to the trade exposure amount for a cleared 
transaction with a CCP where the clearing member national bank or 
Federal savings association is acting as a financial intermediary on 
behalf of a clearing member client, the transaction offsets another 
transaction that satisfies the requirements set forth in Sec.  3.3(a), 
and the clearing member national bank or Federal savings association is 
not obligated to reimburse the clearing member client in the event of 
the CCP default.
    (4) Collateral. (i) Notwithstanding any other requirement in this 
section, collateral posted by a clearing member national bank or Federal 
savings association that is held by a custodian in a manner that is 
bankruptcy remote from the CCP is not subject to a capital requirement 
under this section.
    (ii) A clearing member national bank or Federal savings association 
must calculate a risk-weighted asset amount for any collateral provided 
to a CCP, clearing member, or a custodian in connection with a cleared 
transaction in accordance with requirements under this subpart D.
    (d) Default fund contributions--(1) General requirement. A clearing 
member national bank or Federal savings association must determine the 
risk-weighted asset amount for a default fund contribution to a CCP at 
least quarterly, or more frequently if, in the opinion of the national 
bank or Federal savings association or the OCC, there is a material 
change in the financial condition of the CCP.
    (2) Risk-weighted asset amount for default fund contributions to 
non-qualifying CCPs. A clearing member national bank's or Federal 
savings association's risk-weighted asset amount for default

[[Page 89]]

fund contributions to CCPs that are not QCCPs equals the sum of such 
default fund contributions multiplied by 1,250 percent, or an amount 
determined by the OCC, based on factors such as size, structure and 
membership characteristics of the CCP and riskiness of its transactions, 
in cases where such default fund contributions may be unlimited.
    (3) Risk-weighted asset amount for default fund contributions to 
QCCPs. A clearing member national bank's or Federal savings 
association's risk-weighted asset amount for default fund contributions 
to QCCPs equals the sum of its capital requirement, KCM for 
each QCCP, as calculated under the methodology set forth in paragraphs 
(d)(3)(i) through (iii) of this section (Method 1), multiplied by 1,250 
percent or in paragraphs (d)(3)(iv) of this section (Method 2).
    (i) Method 1. The hypothetical capital requirement of a QCCP 
(KCCP) equals:
[GRAPHIC] [TIFF OMITTED] TR11OC13.058

    (A) EBRMi = the exposure amount for each transaction 
cleared through the QCCP by clearing member i, calculated in accordance 
with Sec.  3.34 for OTC derivative contracts and Sec.  3.37(c)(2) for 
repo-style transactions, provided that:
    (1) For purposes of this section, in calculating the exposure amount 
the national bank or Federal savings association may replace the formula 
provided in Sec.  3.34(a)(2)(ii) with the following: Anet = (0.15 x 
Agross) + (0.85 x NGR x Agross); and
    (2) For option derivative contracts that are cleared transactions, 
the PFE described in Sec.  3.34(a)(1)(ii) must be adjusted by 
multiplying the notional principal amount of the derivative contract by 
the appropriate conversion factor in Table 1 to Sec.  3.34 and the 
absolute value of the option's delta, that is, the ratio of the change 
in the value of the derivative contract to the corresponding change in 
the price of the underlying asset.
    (3) For repo-style transactions, when applying Sec.  3.37(c)(2), the 
national bank or Federal savings association must use the methodology in 
Sec.  3.37(c)(3);
    (B) VMi = any collateral posted by clearing member i to 
the QCCP that it is entitled to receive from the QCCP, but has not yet 
received, and any collateral that the QCCP has actually received from 
clearing member i;
    (C) IMi = the collateral posted as initial margin by 
clearing member i to the QCCP;
    (D) DFi = the funded portion of clearing member i's 
default fund contribution that will be applied to reduce the QCCP's loss 
upon a default by clearing member i;
    (E) RW = 20 percent, except when the OCC has determined that a 
higher risk weight is more appropriate based on the specific 
characteristics of the QCCP and its clearing members; and
    (F) Where a QCCP has provided its KCCP, a national bank 
or Federal savings association must rely on such disclosed figure 
instead of calculating KCCP under this paragraph (d), unless 
the national bank or Federal savings association determines that a more 
conservative figure is appropriate based on the nature, structure, or 
characteristics of the QCCP.
    (ii) For a national bank or Federal savings association that is a 
clearing member of a QCCP with a default fund supported by funded 
commitments, KCM equals:

[[Page 90]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.016

    Subscripts 1 and 2 denote the clearing members with the two largest 
ANet values. For purposes of this paragraph (d), for 
derivatives ANet is defined in Sec.  3.34(a)(2)(ii) and for 
repo-style transactions, ANet means the exposure amount as 
defined in Sec.  3.37(c)(2) using the methodology in Sec.  3.37(c)(3);
    (B) N = the number of clearing members in the QCCP;
    (C) DFCCP = the QCCP's own funds and other financial 
resources that would be used to cover its losses before clearing 
members' default fund contributions are used to cover losses;
    (D) DFCM = funded default fund contributions from all 
clearing members and any other clearing member contributed financial 
resources that are available to absorb mutualized QCCP losses;
    (E) DF = DFCCP + DFCM (that is, the total 
funded default fund contribution);

[[Page 91]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.017


Where:

    (1) DFi = the national bank's or Federal savings 
association's unfunded commitment to the default fund;
    (2) DFCM = the total of all clearing members' unfunded 
commitment to the default fund; and
    (3) K*CM as defined in paragraph (d)(3)(ii) of this section.
    (B) For a national bank or Federal savings association that is a 
clearing member of a QCCP with a default fund supported by unfunded 
commitments and is unable to calculate KCM using the 
methodology described in paragraph (d)(3)(iii) of this section, 
KCM equals:

[[Page 92]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.018


Where:

    (1) IMi = the national bank's or Federal savings 
association's initial margin posted to the QCCP;
    (2) IMCM = the total of initial margin posted to the 
QCCP; and
    (3)K*CM as defined in paragraph (d)(3)(ii) of this section.
    (iv) Method 2. A clearing member national bank's or Federal savings 
association's risk-weighted asset amount for its default fund 
contribution to a QCCP, RWADF, equals:

RWADF = Min {12.5 * DF; 0.18 * TE{time} 


Where:

    (A) TE = the national bank's or Federal savings association's trade 
exposure amount to the QCCP, calculated according to section 35(c)(2);
    (B) DF = the funded portion of the national bank's or Federal 
savings association's default fund contribution to the QCCP.
    (4) Total risk-weighted assets for default fund contributions. Total 
risk-weighted assets for default fund contributions is the sum of a 
clearing member national bank's or Federal savings association's risk-
weighted assets for all of its default fund contributions to all CCPs of 
which the national bank or Federal savings association is a clearing 
member.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35255, July 22, 
2019; 85 FR 4404, Jan. 24, 2020]



Sec.  3.36  Guarantees and credit derivatives: substitution treatment.

    (a) Scope--(1) General. A national bank or Federal savings 
association may recognize the credit risk mitigation benefits of an 
eligible guarantee or eligible credit derivative by substituting the 
risk weight associated with the protection provider for the risk weight 
assigned to an exposure, as provided under this section.
    (2) This section applies to exposures for which:
    (i) Credit risk is fully covered by an eligible guarantee or 
eligible credit derivative; or
    (ii) Credit risk is covered on a pro rata basis (that is, on a basis 
in which the national bank or Federal savings association and the 
protection provider share losses proportionately) by an eligible 
guarantee or eligible credit derivative.
    (3) Exposures on which there is a tranching of credit risk 
(reflecting at least two different levels of seniority) generally are 
securitization exposures subject to Sec. Sec.  3.41 through 3.45.
    (4) If multiple eligible guarantees or eligible credit derivatives 
cover a single exposure described in this section, a national bank or 
Federal savings association may treat the hedged exposure as multiple 
separate exposures each covered by a single eligible guarantee or 
eligible credit derivative and may calculate a separate risk-weighted 
asset amount for each separate exposure as described in paragraph (c) of 
this section.
    (5) If a single eligible guarantee or eligible credit derivative 
covers multiple hedged exposures described in paragraph (a)(2) of this 
section, a national bank or Federal savings association must treat each 
hedged exposure as covered by a separate eligible guarantee or eligible 
credit derivative and must calculate a separate risk-weighted asset 
amount for each exposure as described in paragraph (c) of this section.
    (b) Rules of recognition. (1) A national bank or Federal savings 
association may only recognize the credit risk mitigation benefits of 
eligible guarantees and eligible credit derivatives.
    (2) A national bank or Federal savings association may only 
recognize the credit risk mitigation benefits of an eligible credit 
derivative to hedge an exposure that is different from the credit 
derivative's reference exposure used for determining the derivative's

[[Page 93]]

cash settlement value, deliverable obligation, or occurrence of a credit 
event if:
    (i) The reference exposure ranks pari passu with, or is subordinated 
to, the hedged exposure; and
    (ii) The reference exposure and the hedged exposure are to the same 
legal entity, and legally enforceable cross-default or cross-
acceleration clauses are in place to ensure payments under the credit 
derivative are triggered when the obligated party of the hedged exposure 
fails to pay under the terms of the hedged exposure.
    (c) Substitution approach--(1) Full coverage. If an eligible 
guarantee or eligible credit derivative meets the conditions in 
paragraphs (a) and (b) of this section and the protection amount (P) of 
the guarantee or credit derivative is greater than or equal to the 
exposure amount of the hedged exposure, a national bank or Federal 
savings association may recognize the guarantee or credit derivative in 
determining the risk-weighted asset amount for the hedged exposure by 
substituting the risk weight applicable to the guarantor or credit 
derivative protection provider under this subpart D for the risk weight 
assigned to the exposure.
    (2) Partial coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and the protection amount (P) of the guarantee or credit 
derivative is less than the exposure amount of the hedged exposure, the 
national bank or Federal savings association must treat the hedged 
exposure as two separate exposures (protected and unprotected) in order 
to recognize the credit risk mitigation benefit of the guarantee or 
credit derivative.
    (i) The national bank or Federal savings association may calculate 
the risk-weighted asset amount for the protected exposure under this 
subpart D, where the applicable risk weight is the risk weight 
applicable to the guarantor or credit derivative protection provider.
    (ii) The national bank or Federal savings association must calculate 
the risk-weighted asset amount for the unprotected exposure under this 
subpart D, where the applicable risk weight is that of the unprotected 
portion of the hedged exposure.
    (iii) The treatment provided in this section is applicable when the 
credit risk of an exposure is covered on a partial pro rata basis and 
may be applicable when an adjustment is made to the effective notional 
amount of the guarantee or credit derivative under paragraphs (d), (e), 
or (f) of this section.
    (d) Maturity mismatch adjustment. (1) A national bank or Federal 
savings association that recognizes an eligible guarantee or eligible 
credit derivative in determining the risk-weighted asset amount for a 
hedged exposure must adjust the effective notional amount of the credit 
risk mitigant to reflect any maturity mismatch between the hedged 
exposure and the credit risk mitigant.
    (2) A maturity mismatch occurs when the residual maturity of a 
credit risk mitigant is less than that of the hedged exposure(s).
    (3) The residual maturity of a hedged exposure is the longest 
possible remaining time before the obligated party of the hedged 
exposure is scheduled to fulfil its obligation on the hedged exposure. 
If a credit risk mitigant has embedded options that may reduce its term, 
the national bank or Federal savings association (protection purchaser) 
must use the shortest possible residual maturity for the credit risk 
mitigant. If a call is at the discretion of the protection provider, the 
residual maturity of the credit risk mitigant is at the first call date. 
If the call is at the discretion of the national bank or Federal savings 
association (protection purchaser), but the terms of the arrangement at 
origination of the credit risk mitigant contain a positive incentive for 
the national bank or Federal savings association to call the transaction 
before contractual maturity, the remaining time to the first call date 
is the residual maturity of the credit risk mitigant.
    (4) A credit risk mitigant with a maturity mismatch may be 
recognized only if its original maturity is greater than or equal to one 
year and its residual maturity is greater than three months.
    (5) When a maturity mismatch exists, the national bank or Federal 
savings

[[Page 94]]

association must apply the following adjustment to reduce the effective 
notional amount of the credit risk mitigant: Pm = E x (t - 0.25) / (T - 
0.25), where:
    (i) Pm = effective notional amount of the credit risk mitigant, 
adjusted for maturity mismatch;
    (ii) E = effective notional amount of the credit risk mitigant;
    (iii) t = the lesser of T or the residual maturity of the credit 
risk mitigant, expressed in years; and
    (iv) T = the lesser of five or the residual maturity of the hedged 
exposure, expressed in years.
    (e) Adjustment for credit derivatives without restructuring as a 
credit event. If a national bank or Federal savings association 
recognizes an eligible credit derivative that does not include as a 
credit event a restructuring of the hedged exposure involving 
forgiveness or postponement of principal, interest, or fees that results 
in a credit loss event (that is, a charge-off, specific provision, or 
other similar debit to the profit and loss account), the national bank 
or Federal savings association must apply the following adjustment to 
reduce the effective notional amount of the credit derivative: Pr = Pm x 
0.60, where:
    (1) Pr = effective notional amount of the credit risk mitigant, 
adjusted for lack of restructuring event (and maturity mismatch, if 
applicable); and
    (2) Pm = effective notional amount of the credit risk mitigant 
(adjusted for maturity mismatch, if applicable).
    (f) Currency mismatch adjustment. (1) If a national bank or Federal 
savings association recognizes an eligible guarantee or eligible credit 
derivative that is denominated in a currency different from that in 
which the hedged exposure is denominated, the national bank or Federal 
savings association must apply the following formula to the effective 
notional amount of the guarantee or credit derivative: Pc = Pr x (1-
HFX), where:
    (i) Pc = effective notional amount of the credit risk mitigant, 
adjusted for currency mismatch (and maturity mismatch and lack of 
restructuring event, if applicable);
    (ii) Pr = effective notional amount of the credit risk mitigant 
(adjusted for maturity mismatch and lack of restructuring event, if 
applicable); and
    (iii) HFX = haircut appropriate for the currency mismatch 
between the credit risk mitigant and the hedged exposure.
    (2) A national bank or Federal savings association must set 
HFX equal to eight percent unless it qualifies for the use of 
and uses its own internal estimates of foreign exchange volatility based 
on a ten-business-day holding period. A national bank or Federal savings 
association qualifies for the use of its own internal estimates of 
foreign exchange volatility if it qualifies for the use of its own-
estimates haircuts in Sec.  3.37(c)(4).
    (3) A national bank or Federal savings association must adjust 
HFX calculated in paragraph (f)(2) of this section upward if 
the national bank or Federal savings association revalues the guarantee 
or credit derivative less frequently than once every 10 business days 
using the following square root of time formula:
[GRAPHIC] [TIFF OMITTED] TR11OC13.021


[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35255, July 22, 
2019]



Sec.  3.37  Collateralized transactions.

    (a) General. (1) To recognize the risk-mitigating effects of 
financial collateral, a national bank or Federal savings association may 
use:
    (i) The simple approach in paragraph (b) of this section for any 
exposure; or
    (ii) The collateral haircut approach in paragraph (c) of this 
section for

[[Page 95]]

repo-style transactions, eligible margin loans, collateralized 
derivative contracts, and single-product netting sets of such 
transactions.
    (2) A national bank or Federal savings association may use any 
approach described in this section that is valid for a particular type 
of exposure or transaction; however, it must use the same approach for 
similar exposures or transactions.
    (b) The simple approach--(1) General requirements. (i) A national 
bank or Federal savings association may recognize the credit risk 
mitigation benefits of financial collateral that secures any exposure.
    (ii) To qualify for the simple approach, the financial collateral 
must meet the following requirements:
    (A) The collateral must be subject to a collateral agreement for at 
least the life of the exposure;
    (B) The collateral must be revalued at least every six months; and
    (C) The collateral (other than gold) and the exposure must be 
denominated in the same currency.
    (2) Risk weight substitution. (i) A national bank or Federal savings 
association may apply a risk weight to the portion of an exposure that 
is secured by the fair value of financial collateral (that meets the 
requirements of paragraph (b)(1) of this section) based on the risk 
weight assigned to the collateral under this subpart D. For repurchase 
agreements, reverse repurchase agreements, and securities lending and 
borrowing transactions, the collateral is the instruments, gold, and 
cash the national bank or Federal savings association has borrowed, 
purchased subject to resale, or taken as collateral from the 
counterparty under the transaction. Except as provided in paragraph 
(b)(3) of this section, the risk weight assigned to the collateralized 
portion of the exposure may not be less than 20 percent.
    (ii) A national bank or Federal savings association must apply a 
risk weight to the unsecured portion of the exposure based on the risk 
weight applicable to the exposure under this subpart.
    (3) Exceptions to the 20 percent risk-weight floor and other 
requirements. Notwithstanding paragraph (b)(2)(i) of this section:
    (i) A national bank or Federal savings association may assign a zero 
percent risk weight to an exposure to an OTC derivative contract that is 
marked-to-market on a daily basis and subject to a daily margin 
maintenance requirement, to the extent the contract is collateralized by 
cash on deposit.
    (ii) A national bank or Federal savings association may assign a 10 
percent risk weight to an exposure to an OTC derivative contract that is 
marked-to-market daily and subject to a daily margin maintenance 
requirement, to the extent that the contract is collateralized by an 
exposure to a sovereign that qualifies for a zero percent risk weight 
under Sec.  3.32.
    (iii) A national bank or Federal savings association may assign a 
zero percent risk weight to the collateralized portion of an exposure 
where:
    (A) The financial collateral is cash on deposit; or
    (B) The financial collateral is an exposure to a sovereign that 
qualifies for a zero percent risk weight under Sec.  3.32, and the 
national bank or Federal savings association has discounted the fair 
value of the collateral by 20 percent.
    (c) Collateral haircut approach--(1) General. A national bank or 
Federal savings association may recognize the credit risk mitigation 
benefits of financial collateral that secures an eligible margin loan, 
repo-style transaction, collateralized derivative contract, or single-
product netting set of such transactions, and of any collateral that 
secures a repo-style transaction that is included in the national bank's 
or Federal savings association's VaR-based measure under subpart F of 
this part by using the collateral haircut approach in this section. A 
national bank or Federal savings association may use the standard 
supervisory haircuts in paragraph (c)(3) of this section or, with prior 
written approval of the OCC, its own estimates of haircuts according to 
paragraph (c)(4) of this section.
    (2) Exposure amount equation. A national bank or Federal savings 
association must determine the exposure amount for an eligible margin 
loan, repo-style transaction, collateralized

[[Page 96]]

derivative contract, or a single-product netting set of such 
transactions by setting the exposure amount equal to max {0, [([Sigma]E 
- [Sigma]C) + [Sigma](Es x Hs) + [Sigma](Efx x Hfx)]{time} , where:
    (i)(A) For eligible margin loans and repo-style transactions and 
netting sets thereof, [Sigma]E equals the value of the exposure (the sum 
of the current fair values of all instruments, gold, and cash the 
national bank or Federal savings association has lent, sold subject to 
repurchase, or posted as collateral to the counterparty under the 
transaction (or netting set)); and
    (B) For collateralized derivative contracts and netting sets 
thereof, [Sigma]E equals the exposure amount of the OTC derivative 
contract (or netting set) calculated under Sec.  3.34(b)(1) or (2).
    (ii) [Sigma]C equals the value of the collateral (the sum of the 
current fair values of all instruments, gold and cash the national bank 
or Federal savings association has borrowed, purchased subject to 
resale, or taken as collateral from the counterparty under the 
transaction (or netting set));
    (iii) Es equals the absolute value of the net position in a given 
instrument or in gold (where the net position in the instrument or gold 
equals the sum of the current fair values of the instrument or gold the 
national bank or Federal savings association has lent, sold subject to 
repurchase, or posted as collateral to the counterparty minus the sum of 
the current fair values of that same instrument or gold the national 
bank or Federal savings association has borrowed, purchased subject to 
resale, or taken as collateral from the counterparty);
    (iv) Hs equals the market price volatility haircut appropriate to 
the instrument or gold referenced in Es;
    (v) Efx equals the absolute value of the net position of instruments 
and cash in a currency that is different from the settlement currency 
(where the net position in a given currency equals the sum of the 
current fair values of any instruments or cash in the currency the 
national bank or Federal savings association has lent, sold subject to 
repurchase, or posted as collateral to the counterparty minus the sum of 
the current fair values of any instruments or cash in the currency the 
national bank or Federal savings association has borrowed, purchased 
subject to resale, or taken as collateral from the counterparty); and
    (vi) Hfx equals the haircut appropriate to the mismatch between the 
currency referenced in Efx and the settlement currency.
    (3) Standard supervisory haircuts. (i) A national bank or Federal 
savings association must use the haircuts for market price volatility 
(Hs) provided in Table 1 to Sec.  3.37, as adjusted in certain 
circumstances in accordance with the requirements of paragraphs 
(c)(3)(iii) and (iv) of this section.

                Table 1 to Sec.   3.37--Standard Supervisory Market Price Volatility Haircuts \1\
----------------------------------------------------------------------------------------------------------------
                                             Haircut (in percent) assigned based on:
                               ------------------------------------------------------------------   Investment
                                 Sovereign issuers risk weight      Non-sovereign issuers risk         grade
       Residual maturity         under Sec.   3.32 (in percent)    weight under Sec.   3.32 (in   securitization
                                              \2\                            percent)              exposures (in
                               ------------------------------------------------------------------    percent)
                                   Zero     20 or 50     100         20         50        100
----------------------------------------------------------------------------------------------------------------
Less than or equal to 1 year..        0.5        1.0       15.0        1.0        2.0        4.0             4.0
Greater than 1 year and less          2.0        3.0       15.0        4.0        6.0        8.0            12.0
 than or equal to 5 years.....
Greater than 5 years..........        4.0        6.0       15.0        8.0       12.0       16.0            24.0
----------------------------------------------------------------------------------------------------------------
Main index equities (including convertible bonds) a15.0old.....
----------------------------------------------------------------------------------------------------------------
Other publicly traded equities (including convertib25.0onds)...
----------------------------------------------------------------------------------------------------------------
Mutual funds....................Highest haircut applicable to any security
                                       in which the fund can invest.
----------------------------------------------------------------------------------------------------------------
Cash collateral held...............................Zero........
----------------------------------------------------------------------------------------------------------------
Other exposure types...............................25.0........
----------------------------------------------------------------------------------------------------------------
\1\ The market price volatility haircuts in Table 1 to Sec.   3.37 are based on a 10 business-day holding
  period.
\2\ Includes a foreign PSE that receives a zero percent risk weight.


[[Page 97]]

    (ii) For currency mismatches, a national bank or Federal savings 
association must use a haircut for foreign exchange rate volatility 
(Hfx) of 8.0 percent, as adjusted in certain circumstances under 
paragraphs (c)(3)(iii) and (iv) of this section.
    (iii) For repo-style transactions and client-facing derivative 
transactions, a national bank or Federal savings association may 
multiply the standard supervisory haircuts provided in paragraphs 
(c)(3)(i) and (ii) of this section by the square root of \1/2\ (which 
equals 0.707107). For client-facing derivative transactions, if a larger 
scaling factor is applied under Sec.  3.34(f), the same factor must be 
used to adjust the supervisory haircuts.
    (iv) If the number of trades in a netting set exceeds 5,000 at any 
time during a quarter, a national bank or Federal savings association 
must adjust the supervisory haircuts provided in paragraphs (c)(3)(i) 
and (ii) of this section upward on the basis of a holding period of 
twenty business days for the following quarter except in the calculation 
of the exposure amount for purposes of Sec.  3.35. If a netting set 
contains one or more trades involving illiquid collateral or an OTC 
derivative that cannot be easily replaced, a national bank or Federal 
savings association must adjust the supervisory haircuts upward on the 
basis of a holding period of twenty business days. If over the two 
previous quarters more than two margin disputes on a netting set have 
occurred that lasted more than the holding period, then the national 
bank or Federal savings association must adjust the supervisory haircuts 
upward for that netting set on the basis of a holding period that is at 
least two times the minimum holding period for that netting set. A 
national bank or Federal savings association must adjust the standard 
supervisory haircuts upward using the following formula:
[GRAPHIC] [TIFF OMITTED] TR11OC13.022

    (A) TM equals a holding period of longer than 10 business 
days for eligible margin loans and derivative contracts other than 
client-facing derivative transactions or longer than 5 business days for 
repo-style transactions and client-facing derivative transactions;
    (B) HS equals the standard supervisory haircut; and
    (C) TS equals 10 business days for eligible margin loans 
and derivative contracts other than client-facing derivative 
transactions or 5 business days for repo-style transactions and client-
facing derivative transactions.
    (v) If the instrument a national bank or Federal savings association 
has lent, sold subject to repurchase, or posted as collateral does not 
meet the definition of financial collateral, the national bank or 
Federal savings association must use a 25.0 percent haircut for market 
price volatility (Hs).
    (4) Own internal estimates for haircuts. With the prior written 
approval of the OCC, a national bank or Federal savings association may 
calculate haircuts (Hs and Hfx) using its own internal estimates of the 
volatilities of market prices and foreign exchange rates:
    (i) To receive OCC approval to use its own internal estimates, a 
national bank or Federal savings association must satisfy the following 
minimum standards:
    (A) A national bank or Federal savings association must use a 99th 
percentile one-tailed confidence interval.
    (B) The minimum holding period for a repo-style transaction and 
client-facing derivative transaction is five business days and for an 
eligible margin loan and a derivative contract other than a client-
facing derivative transaction is ten business days except for 
transactions or netting sets for which paragraph (c)(4)(i)(C) of this 
section applies. When a national bank or Federal savings association 
calculates an own-estimates haircut on a TN-day holding

[[Page 98]]

period, which is different from the minimum holding period for the 
transaction type, the applicable haircut (HM) is calculated 
using the following square root of time formula:
[GRAPHIC] [TIFF OMITTED] TR11OC13.023

    (1) TM equals 5 for repo-style transactions and client-
facing derivative transactions and 10 for eligible margin loans and 
derivative contracts other than client-facing derivative transactions;
    (2) TN equals the holding period used by the national 
bank or Federal savings association to derive HN; and
    (3) HN equals the haircut based on the holding period 
TN.
    (C) If the number of trades in a netting set exceeds 5,000 at any 
time during a quarter, a national bank or Federal savings association 
must calculate the haircut using a minimum holding period of twenty 
business days for the following quarter except in the calculation of the 
exposure amount for purposes of Sec.  3.35. If a netting set contains 
one or more trades involving illiquid collateral or an OTC derivative 
that cannot be easily replaced, a national bank or Federal savings 
association must calculate the haircut using a minimum holding period of 
twenty business days. If over the two previous quarters more than two 
margin disputes on a netting set have occurred that lasted more than the 
holding period, then the national bank or Federal savings association 
must calculate the haircut for transactions in that netting set on the 
basis of a holding period that is at least two times the minimum holding 
period for that netting set.
    (D) A national bank or Federal savings association is required to 
calculate its own internal estimates with inputs calibrated to 
historical data from a continuous 12-month period that reflects a period 
of significant financial stress appropriate to the security or category 
of securities.
    (E) A national bank or Federal savings association must have 
policies and procedures that describe how it determines the period of 
significant financial stress used to calculate the national bank's or 
Federal savings association's own internal estimates for haircuts under 
this section and must be able to provide empirical support for the 
period used. The national bank or Federal savings association must 
obtain the prior approval of the OCC for, and notify the OCC if the 
national bank or Federal savings association makes any material changes 
to, these policies and procedures.
    (F) Nothing in this section prevents the OCC from requiring a 
national bank or Federal savings association to use a different period 
of significant financial stress in the calculation of own internal 
estimates for haircuts.
    (G) A national bank or Federal savings association must update its 
data sets and calculate haircuts no less frequently than quarterly and 
must also reassess data sets and haircuts whenever market prices change 
materially.
    (ii) With respect to debt securities that are investment grade, a 
national bank or Federal savings association may calculate haircuts for 
categories of securities. For a category of securities, the national 
bank or Federal savings association must calculate the haircut on the 
basis of internal volatility estimates for securities in that category 
that are representative of the securities in that category that the 
national bank or Federal savings association has lent, sold subject to 
repurchase, posted as collateral, borrowed, purchased subject to resale, 
or taken as collateral. In determining relevant categories, the national 
bank or Federal savings association must at a minimum take into account:
    (A) The type of issuer of the security;
    (B) The credit quality of the security;
    (C) The maturity of the security; and
    (D) The interest rate sensitivity of the security.

[[Page 99]]

    (iii) With respect to debt securities that are not investment grade 
and equity securities, a national bank or Federal savings association 
must calculate a separate haircut for each individual security.
    (iv) Where an exposure or collateral (whether in the form of cash or 
securities) is denominated in a currency that differs from the 
settlement currency, the national bank or Federal savings association 
must calculate a separate currency mismatch haircut for its net position 
in each mismatched currency based on estimated volatilities of foreign 
exchange rates between the mismatched currency and the settlement 
currency.
    (v) A national bank's or Federal savings association's own estimates 
of market price and foreign exchange rate volatilities may not take into 
account the correlations among securities and foreign exchange rates on 
either the exposure or collateral side of a transaction (or netting set) 
or the correlations among securities and foreign exchange rates between 
the exposure and collateral sides of the transaction (or netting set).

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35256, July 22, 
2019; 85 FR 4404, Jan. 24, 2020; 85 FR 57959, Sept. 17, 2020]

             Risk-Weighted Assets for Unsettled Transactions



Sec.  3.38  Unsettled transactions.

    (a) Definitions. For purposes of this section:
    (1) Delivery-versus-payment (DvP) transaction means a securities or 
commodities transaction in which the buyer is obligated to make payment 
only if the seller has made delivery of the securities or commodities 
and the seller is obligated to deliver the securities or commodities 
only if the buyer has made payment.
    (2) Payment-versus-payment (PvP) transaction means a foreign 
exchange transaction in which each counterparty is obligated to make a 
final transfer of one or more currencies only if the other counterparty 
has made a final transfer of one or more currencies.
    (3) A transaction has a normal settlement period if the contractual 
settlement period for the transaction is equal to or less than the 
market standard for the instrument underlying the transaction and equal 
to or less than five business days.
    (4) Positive current exposure of a national bank or Federal savings 
association for a transaction is the difference between the transaction 
value at the agreed settlement price and the current market price of the 
transaction, if the difference results in a credit exposure of the 
national bank or Federal savings association to the counterparty.
    (b) Scope. This section applies to all transactions involving 
securities, foreign exchange instruments, and commodities that have a 
risk of delayed settlement or delivery. This section does not apply to:
    (1) Cleared transactions that are marked-to-market daily and subject 
to daily receipt and payment of variation margin;
    (2) Repo-style transactions, including unsettled repo-style 
transactions;
    (3) One-way cash payments on OTC derivative contracts; or
    (4) Transactions with a contractual settlement period that is longer 
than the normal settlement period (which are treated as OTC derivative 
contracts as provided in Sec.  3.34).
    (c) System-wide failures. In the case of a system-wide failure of a 
settlement, clearing system or central counterparty, the OCC may waive 
risk-based capital requirements for unsettled and failed transactions 
until the situation is rectified.
    (d) Delivery-versus-payment (DvP) and payment-versus-payment (PvP) 
transactions. A national bank or Federal savings association must hold 
risk-based capital against any DvP or PvP transaction with a normal 
settlement period if the national bank's or Federal savings 
association's counterparty has not made delivery or payment within five 
business days after the settlement date. The national bank or Federal 
savings association must determine its risk-weighted asset amount for 
such a transaction by multiplying the positive current exposure of the 
transaction for the national bank or Federal savings association by the 
appropriate risk weight in Table 1 to Sec.  3.38.

[[Page 100]]



     Table 1 to Sec.   3.38--Risk Weights for Unsettled DvP and PvP
                              Transactions
------------------------------------------------------------------------
                                                         Risk weight to
                                                          be applied to
 Number of business days after contractual settlement   positive current
                         date                             exposure (in
                                                            percent)
------------------------------------------------------------------------
From 5 to 15..........................................             100.0
From 16 to 30.........................................             625.0
From 31 to 45.........................................             937.5
46 or more............................................           1,250.0
------------------------------------------------------------------------

    (e) Non-DvP/non-PvP (non-delivery-versus-payment/non-payment-versus-
payment) transactions. (1) A national bank or Federal savings 
association must hold risk-based capital against any non-DvP/non-PvP 
transaction with a normal settlement period if the national bank or 
Federal savings association has delivered cash, securities, commodities, 
or currencies to its counterparty but has not received its corresponding 
deliverables by the end of the same business day. The national bank or 
Federal savings association must continue to hold risk-based capital 
against the transaction until the national bank or Federal savings 
association has received its corresponding deliverables.
    (2) From the business day after the national bank or Federal savings 
association has made its delivery until five business days after the 
counterparty delivery is due, the national bank or Federal savings 
association must calculate the risk-weighted asset amount for the 
transaction by treating the current fair value of the deliverables owed 
to the national bank or Federal savings association as an exposure to 
the counterparty and using the applicable counterparty risk weight under 
this subpart D.
    (3) If the national bank or Federal savings association has not 
received its deliverables by the fifth business day after counterparty 
delivery was due, the national bank or Federal savings association must 
assign a 1,250 percent risk weight to the current fair value of the 
deliverables owed to the national bank or Federal savings association.
    (f) Total risk-weighted assets for unsettled transactions. Total 
risk-weighted assets for unsettled transactions is the sum of the risk-
weighted asset amounts of all DvP, PvP, and non-DvP/non-PvP 
transactions.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35256, July 22, 
2019]



Sec. Sec.  3.39-3.40  [Reserved]

            Risk-Weighted Assets for Securitization Exposures



Sec.  3.41  Operational requirements for securitization exposures.

    (a) Operational criteria for traditional securitizations. A national 
bank or Federal savings association that transfers exposures it has 
originated or purchased to a securitization SPE or other third party in 
connection with a traditional securitization may exclude the exposures 
from the calculation of its risk-weighted assets only if each condition 
in this section is satisfied. A national bank or Federal savings 
association that meets these conditions must hold risk-based capital 
against any credit risk it retains in connection with the 
securitization. A national bank or Federal savings association that 
fails to meet these conditions must hold risk-based capital against the 
transferred exposures as if they had not been securitized and must 
deduct from common equity tier 1 capital any after-tax gain-on-sale 
resulting from the transaction. The conditions are:
    (1) The exposures are not reported on the national bank's or Federal 
savings association's consolidated balance sheet under GAAP;
    (2) The national bank or Federal savings association has transferred 
to one or more third parties credit risk associated with the underlying 
exposures;
    (3) Any clean-up calls relating to the securitization are eligible 
clean-up calls; and
    (4) The securitization does not:
    (i) Include one or more underlying exposures in which the borrower 
is permitted to vary the drawn amount within an agreed limit under a 
line of credit; and
    (ii) Contain an early amortization provision.
    (b) Operational criteria for synthetic securitizations. For 
synthetic securitizations, a national bank or Federal savings 
association may recognize for risk-based capital purposes the

[[Page 101]]

use of a credit risk mitigant to hedge underlying exposures only if each 
condition in this paragraph (b) is satisfied. A national bank or Federal 
savings association that meets these conditions must hold risk-based 
capital against any credit risk of the exposures it retains in 
connection with the synthetic securitization. A national bank or Federal 
savings association that fails to meet these conditions or chooses not 
to recognize the credit risk mitigant for purposes of this section must 
instead hold risk-based capital against the underlying exposures as if 
they had not been synthetically securitized. The conditions are:
    (1) The credit risk mitigant is:
    (i) Financial collateral;
    (ii) A guarantee that meets all criteria as set forth in the 
definition of ``eligible guarantee'' in Sec.  3.2, except for the 
criteria in paragraph (3) of that definition; or
    (iii) A credit derivative that meets all criteria as set forth in 
the definition of ``eligible credit derivative'' in Sec.  3.2, except 
for the criteria in paragraph (3) of the definition of ``eligible 
guarantee'' in Sec.  3.2.
    (2) The national bank or Federal savings association transfers 
credit risk associated with the underlying exposures to one or more 
third parties, and the terms and conditions in the credit risk mitigants 
employed do not include provisions that:
    (i) Allow for the termination of the credit protection due to 
deterioration in the credit quality of the underlying exposures;
    (ii) Require the national bank or Federal savings association to 
alter or replace the underlying exposures to improve the credit quality 
of the underlying exposures;
    (iii) Increase the national bank's or Federal savings association's 
cost of credit protection in response to deterioration in the credit 
quality of the underlying exposures;
    (iv) Increase the yield payable to parties other than the national 
bank or Federal savings association in response to a deterioration in 
the credit quality of the underlying exposures; or
    (v) Provide for increases in a retained first loss position or 
credit enhancement provided by the national bank or Federal savings 
association after the inception of the securitization;
    (3) The national bank or Federal savings association obtains a well-
reasoned opinion from legal counsel that confirms the enforceability of 
the credit risk mitigant in all relevant jurisdictions; and
    (4) Any clean-up calls relating to the securitization are eligible 
clean-up calls.
    (c) Due diligence requirements for securitization exposures. (1) 
Except for exposures that are deducted from common equity tier 1 capital 
and exposures subject to Sec.  3.42(h), if a national bank or Federal 
savings association is unable to demonstrate to the satisfaction of the 
OCC a comprehensive understanding of the features of a securitization 
exposure that would materially affect the performance of the exposure, 
the national bank or Federal savings association must assign the 
securitization exposure a risk weight of 1,250 percent. The national 
bank's or Federal savings association's analysis must be commensurate 
with the complexity of the securitization exposure and the materiality 
of the exposure in relation to its capital.
    (2) A national bank or Federal savings association must demonstrate 
its comprehensive understanding of a securitization exposure under 
paragraph (c)(1) of this section, for each securitization exposure by:
    (i) Conducting an analysis of the risk characteristics of a 
securitization exposure prior to acquiring the exposure, and documenting 
such analysis within three business days after acquiring the exposure, 
considering:
    (A) Structural features of the securitization that would materially 
impact the performance of the exposure, for example, the contractual 
cash flow waterfall, waterfall-related triggers, credit enhancements, 
liquidity enhancements, fair value triggers, the performance of 
organizations that service the exposure, and deal-specific definitions 
of default;
    (B) Relevant information regarding the performance of the underlying 
credit exposure(s), for example, the percentage of loans 30, 60, and 90 
days past due; default rates; prepayment rates; loans in foreclosure; 
property

[[Page 102]]

types; occupancy; average credit score or other measures of 
creditworthiness; average LTV ratio; and industry and geographic 
diversification data on the underlying exposure(s);
    (C) Relevant market data of the securitization, for example, bid-ask 
spread, most recent sales price and historic price volatility, trading 
volume, implied market rating, and size, depth and concentration level 
of the market for the securitization; and
    (D) For resecuritization exposures, performance information on the 
underlying securitization exposures, for example, the issuer name and 
credit quality, and the characteristics and performance of the exposures 
underlying the securitization exposures; and
    (ii) On an on-going basis (no less frequently than quarterly), 
evaluating, reviewing, and updating as appropriate the analysis required 
under paragraph (c)(1) of this section for each securitization exposure.



Sec.  3.42  Risk-weighted assets for securitization exposures.

    (a) Securitization risk weight approaches. Except as provided 
elsewhere in this section or in Sec.  3.41:
    (1) A national bank or Federal savings association must deduct from 
common equity tier 1 capital any after-tax gain-on-sale resulting from a 
securitization and apply a 1,250 percent risk weight to the portion of a 
CEIO that does not constitute after-tax gain-on-sale.
    (2) If a securitization exposure does not require deduction under 
paragraph (a)(1) of this section, a national bank or Federal savings 
association may assign a risk weight to the securitization exposure 
using the simplified supervisory formula approach (SSFA) in accordance 
with Sec. Sec.  3.43(a) through 3.43(d) and subject to the limitation 
under paragraph (e) of this section. Alternatively, a national bank or 
Federal savings association that is not subject to subpart F of this 
part may assign a risk weight to the securitization exposure using the 
gross-up approach in accordance with Sec.  3.43(e), provided, however, 
that such national bank or Federal savings association must apply either 
the SSFA or the gross-up approach consistently across all of its 
securitization exposures, except as provided in paragraphs (a)(1), 
(a)(3), and (a)(4) of this section.
    (3) If a securitization exposure does not require deduction under 
paragraph (a)(1) of this section and the national bank or Federal 
savings association cannot, or chooses not to apply the SSFA or the 
gross-up approach to the exposure, the national bank or Federal savings 
association must assign a risk weight to the exposure as described in 
Sec.  3.44.
    (4) If a securitization exposure is a derivative contract (other 
than protection provided by a national bank or Federal savings 
association in the form of a credit derivative) that has a first 
priority claim on the cash flows from the underlying exposures 
(notwithstanding amounts due under interest rate or currency derivative 
contracts, fees due, or other similar payments), a national bank or 
Federal savings association may choose to set the risk-weighted asset 
amount of the exposure equal to the amount of the exposure as determined 
in paragraph (c) of this section.
    (b) Total risk-weighted assets for securitization exposures. A 
national bank's or Federal savings association's total risk-weighted 
assets for securitization exposures equals the sum of the risk-weighted 
asset amount for securitization exposures that the national bank or 
Federal savings association risk weights under Sec. Sec.  3.41(c), 
3.42(a)(1), and 3.43, 3.44, or Sec.  3.45, and paragraphs (e) through 
(j) of this section, as applicable.
    (c) Exposure amount of a securitization exposure--(1) On-balance 
sheet securitization exposures. The exposure amount of an on-balance 
sheet securitization exposure (excluding an available-for-sale or held-
to-maturity security where the national bank or Federal savings 
association has made an AOCI opt-out election under Sec.  3.22(b)(2), a 
repo-style transaction, eligible margin loan, OTC derivative contract, 
or cleared transaction) is equal to the carrying value of the exposure.
    (2) On-balance sheet securitization exposures held by a national 
bank or Federal savings association that has made an AOCI opt-out 
election. The exposure amount of an on-balance sheet

[[Page 103]]

securitization exposure that is an available-for-sale or held-to-
maturity security held by a national bank or Federal savings association 
that has made an AOCI opt-out election under Sec.  3.22(b)(2) is the 
national bank's or Federal savings association's carrying value 
(including net accrued but unpaid interest and fees), less any net 
unrealized gains on the exposure and plus any net unrealized losses on 
the exposure.
    (3) Off-balance sheet securitization exposures. (i) Except as 
provided in paragraph (j) of this section, the exposure amount of an 
off-balance sheet securitization exposure that is not a repo-style 
transaction, eligible margin loan, cleared transaction (other than a 
credit derivative), or an OTC derivative contract (other than a credit 
derivative) is the notional amount of the exposure. For an off-balance 
sheet securitization exposure to an ABCP program, such as an eligible 
ABCP liquidity facility, the notional amount may be reduced to the 
maximum potential amount that the national bank or Federal savings 
association could be required to fund given the ABCP program's current 
underlying assets (calculated without regard to the current credit 
quality of those assets).
    (ii) A national bank or Federal savings association must determine 
the exposure amount of an eligible ABCP liquidity facility for which the 
SSFA does not apply by multiplying the notional amount of the exposure 
by a CCF of 50 percent.
    (iii) A national bank or Federal savings association must determine 
the exposure amount of an eligible ABCP liquidity facility for which the 
SSFA applies by multiplying the notional amount of the exposure by a CCF 
of 100 percent.
    (4) Repo-style transactions, eligible margin loans, and derivative 
contracts. The exposure amount of a securitization exposure that is a 
repo-style transaction, eligible margin loan, or derivative contract 
(other than a credit derivative) is the exposure amount of the 
transaction as calculated under Sec.  3.34 or Sec.  3.37, as applicable.
    (d) Overlapping exposures. If a national bank or Federal savings 
association has multiple securitization exposures that provide 
duplicative coverage to the underlying exposures of a securitization 
(such as when a national bank or Federal savings association provides a 
program-wide credit enhancement and multiple pool-specific liquidity 
facilities to an ABCP program), the national bank or Federal savings 
association is not required to hold duplicative risk-based capital 
against the overlapping position. Instead, the national bank or Federal 
savings association may apply to the overlapping position the applicable 
risk-based capital treatment that results in the highest risk-based 
capital requirement.
    (e) Implicit support. If a national bank or Federal savings 
association provides support to a securitization in excess of the 
national bank's or Federal savings association's contractual obligation 
to provide credit support to the securitization (implicit support):
    (1) The national bank or Federal savings association must include in 
risk-weighted assets all of the underlying exposures associated with the 
securitization as if the exposures had not been securitized and must 
deduct from common equity tier 1 capital any after-tax gain-on-sale 
resulting from the securitization; and
    (2) The national bank or Federal savings association must disclose 
publicly:
    (i) That it has provided implicit support to the securitization; and
    (ii) The risk-based capital impact to the national bank or Federal 
savings association of providing such implicit support.
    (f) Undrawn portion of a servicer cash advance facility. (1) 
Notwithstanding any other provision of this subpart, a national bank or 
Federal savings association that is a servicer under an eligible 
servicer cash advance facility is not required to hold risk-based 
capital against potential future cash advance payments that it may be 
required to provide under the contract governing the facility.
    (2) For a national bank or Federal savings association that acts as 
a servicer, the exposure amount for a servicer cash advance facility 
that is not an eligible servicer cash advance facility is equal to the 
amount of all

[[Page 104]]

potential future cash advance payments that the national bank or Federal 
savings association may be contractually required to provide during the 
subsequent 12 month period under the contract governing the facility.
    (g) Interest-only mortgage-backed securities. Regardless of any 
other provisions in this subpart, the risk weight for a non-credit-
enhancing interest-only mortgage-backed security may not be less than 
100 percent.
    (h) Small-business loans and leases on personal property transferred 
with retained contractual exposure. (1) Regardless of any other 
provision of this subpart, a national bank or Federal savings 
association that has transferred small-business loans and leases on 
personal property (small-business obligations) with recourse must 
include in risk-weighted assets only its contractual exposure to the 
small-business obligations if all the following conditions are met:
    (i) The transaction must be treated as a sale under GAAP.
    (ii) The national bank or Federal savings association establishes 
and maintains, pursuant to GAAP, a non-capital reserve sufficient to 
meet the national bank's or Federal savings association's reasonably 
estimated liability under the contractual obligation.
    (iii) The small-business obligations are to businesses that meet the 
criteria for a small-business concern established by the Small Business 
Administration under section 3(a) of the Small Business Act (15 U.S.C. 
632 et seq.).
    (iv) The national bank or Federal savings association is well 
capitalized, as defined in 12 CFR 6.4. For purposes of determining 
whether a national bank or Federal savings association is well 
capitalized for purposes of this paragraph (h), the national bank's or 
Federal savings association's capital ratios must be calculated without 
regard to the capital treatment for transfers of small-business 
obligations under this paragraph (h).
    (2) The total outstanding amount of contractual exposure retained by 
a national bank or Federal savings association on transfers of small-
business obligations receiving the capital treatment specified in 
paragraph (h)(1) of this section cannot exceed 15 percent of the 
national bank's or Federal savings association's total capital.
    (3) If a national bank or Federal savings association ceases to be 
well capitalized under 12 CFR 6.4 or exceeds the 15 percent capital 
limitation provided in paragraph (h)(2) of this section, the capital 
treatment under paragraph (h)(1) of this section will continue to apply 
to any transfers of small-business obligations with retained contractual 
exposure that occurred during the time that the national bank or Federal 
savings association was well capitalized and did not exceed the capital 
limit.
    (4) The risk-based capital ratios of the national bank or Federal 
savings association must be calculated without regard to the capital 
treatment for transfers of small-business obligations specified in 
paragraph (h)(1) of this section for purposes of:
    (i) Determining whether a national bank or Federal savings 
association is adequately capitalized, undercapitalized, significantly 
undercapitalized, or critically undercapitalized under the OCC's prompt 
corrective action regulations; and
    (ii) Reclassifying a well-capitalized national bank or Federal 
savings association to adequately capitalized and requiring an 
adequately capitalized national bank or Federal savings association to 
comply with certain mandatory or discretionary supervisory actions as if 
the national bank or Federal savings association were in the next lower 
prompt-corrective-action category.
    (i) Nth-to-default credit derivatives--(1) Protection provider. A 
national bank or Federal savings association may assign a risk weight 
using the SSFA in Sec.  3.43 to an nth-to-default credit 
derivative in accordance with this paragraph (i). A national bank or 
Federal savings association must determine its exposure in the 
nth-to-default credit derivative as the largest notional 
amount of all the underlying exposures.
    (2) For purposes of determining the risk weight for an 
nth-to-default credit derivative using the SSFA, the national 
bank or Federal savings association must calculate the attachment point 
and detachment point of its exposure as follows:

[[Page 105]]

    (i) The attachment point (parameter A) is the ratio of the sum of 
the notional amounts of all underlying exposures that are subordinated 
to the national bank's or Federal savings association's exposure to the 
total notional amount of all underlying exposures. The ratio is 
expressed as a decimal value between zero and one. In the case of a 
first-to-default credit derivative, there are no underlying exposures 
that are subordinated to the national bank's or Federal savings 
association's exposure. In the case of a second-or-subsequent-to-default 
credit derivative, the smallest (n-1) notional amounts of the underlying 
exposure(s) are subordinated to the national bank's or Federal savings 
association's exposure.
    (ii) The detachment point (parameter D) equals the sum of parameter 
A plus the ratio of the notional amount of the national bank's or 
Federal savings association's exposure in the nth-to-default 
credit derivative to the total notional amount of all underlying 
exposures. The ratio is expressed as a decimal value between zero and 
one.
    (3) A national bank or Federal savings association that does not use 
the SSFA to determine a risk weight for its nth-to-default 
credit derivative must assign a risk weight of 1,250 percent to the 
exposure.
    (4) Protection purchaser--(i) First-to-default credit derivatives. A 
national bank or Federal savings association that obtains credit 
protection on a group of underlying exposures through a first-to-default 
credit derivative that meets the rules of recognition of Sec.  3.36(b) 
must determine its risk-based capital requirement for the underlying 
exposures as if the national bank or Federal savings association 
synthetically securitized the underlying exposure with the smallest 
risk-weighted asset amount and had obtained no credit risk mitigant on 
the other underlying exposures. A national bank or Federal savings 
association must calculate a risk-based capital requirement for 
counterparty credit risk according to Sec.  3.34 for a first-to-default 
credit derivative that does not meet the rules of recognition of Sec.  
3.36(b).
    (ii) Second-or-subsequent-to-default credit derivatives. (A) A 
national bank or Federal savings association that obtains credit 
protection on a group of underlying exposures through a nth-
to-default credit derivative that meets the rules of recognition of 
Sec.  3.36(b) (other than a first-to-default credit derivative) may 
recognize the credit risk mitigation benefits of the derivative only if:
    (1) The national bank or Federal savings association also has 
obtained credit protection on the same underlying exposures in the form 
of first-through-(n-1)-to-default credit derivatives; or
    (2) If n-1 of the underlying exposures have already defaulted.
    (B) If a national bank or Federal savings association satisfies the 
requirements of paragraph (i)(4)(ii)(A) of this section, the national 
bank or Federal savings association must determine its risk-based 
capital requirement for the underlying exposures as if the national bank 
or Federal savings association had only synthetically securitized the 
underlying exposure with the nth smallest risk-weighted asset 
amount and had obtained no credit risk mitigant on the other underlying 
exposures.
    (C) A national bank or Federal savings association must calculate a 
risk-based capital requirement for counterparty credit risk according to 
Sec.  3.34 for a nth-to-default credit derivative that does 
not meet the rules of recognition of Sec.  3.36(b).
    (j) Guarantees and credit derivatives other than nth-to-default 
credit derivatives--(1) Protection provider. For a guarantee or credit 
derivative (other than an nth-to-default credit derivative) 
provided by a national bank or Federal savings association that covers 
the full amount or a pro rata share of a securitization exposure's 
principal and interest, the national bank or Federal savings association 
must risk weight the guarantee or credit derivative as if it holds the 
portion of the reference exposure covered by the guarantee or credit 
derivative.
    (2) Protection purchaser. (i) A national bank or Federal savings 
association that purchases a guarantee or OTC credit derivative (other 
than an nth-to-default credit derivative) that is recognized 
under Sec.  3.45 as a credit risk mitigant (including via collateral 
recognized under Sec.  3.37) is not required to

[[Page 106]]

compute a separate counterparty credit risk capital requirement under 
Sec.  3.31, in accordance with 34(c).
    (ii) If a national bank or Federal savings association cannot, or 
chooses not to, recognize a purchased credit derivative as a credit risk 
mitigant under Sec.  3.45, the national bank or Federal savings 
association must determine the exposure amount of the credit derivative 
under Sec.  3.34.
    (A) If the national bank or Federal savings association purchases 
credit protection from a counterparty that is not a securitization SPE, 
the national bank or Federal savings association must determine the risk 
weight for the exposure according to this subpart D.
    (B) If the national bank or Federal savings association purchases 
the credit protection from a counterparty that is a securitization SPE, 
the national bank or Federal savings association must determine the risk 
weight for the exposure according to section Sec.  3.42, including Sec.  
3.42(a)(4) for a credit derivative that has a first priority claim on 
the cash flows from the underlying exposures of the securitization SPE 
(notwithstanding amounts due under interest rate or currency derivative 
contracts, fees due, or other similar payments).

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35256, July 22, 
2019]



Sec.  3.43  Simplified supervisory formula approach (SSFA) 
and the gross-up approach.

    (a) General requirements for the SSFA. To use the SSFA to determine 
the risk weight for a securitization exposure, a national bank or 
Federal savings association must have data that enables it to assign 
accurately the parameters described in paragraph (b) of this section. 
Data used to assign the parameters described in paragraph (b) of this 
section must be the most currently available data; if the contracts 
governing the underlying exposures of the securitization require 
payments on a monthly or quarterly basis, the data used to assign the 
parameters described in paragraph (b) of this section must be no more 
than 91 calendar days old. A national bank or Federal savings 
association that does not have the appropriate data to assign the 
parameters described in paragraph (b) of this section must assign a risk 
weight of 1,250 percent to the exposure.
    (b) SSFA parameters. To calculate the risk weight for a 
securitization exposure using the SSFA, a national bank or Federal 
savings association must have accurate information on the following five 
inputs to the SSFA calculation:
    (1) KG is the weighted-average (with unpaid principal 
used as the weight for each exposure) total capital requirement of the 
underlying exposures calculated using this subpart. KG is 
expressed as a decimal value between zero and one (that is, an average 
risk weight of 100 percent represents a value of KG equal to 
0.08).
    (2) Parameter W is expressed as a decimal value between zero and 
one. Parameter W is the ratio of the sum of the dollar amounts of any 
underlying exposures of the securitization that meet any of the criteria 
as set forth in paragraphs (b)(2)(i) through (vi) of this section to the 
balance, measured in dollars, of underlying exposures:
    (i) Ninety days or more past due;
    (ii) Subject to a bankruptcy or insolvency proceeding;
    (iii) In the process of foreclosure;
    (iv) Held as real estate owned;
    (v) Has contractually deferred payments for 90 days or more, other 
than principal or interest payments deferred on:
    (A) Federally-guaranteed student loans, in accordance with the terms 
of those guarantee programs; or
    (B) Consumer loans, including non-federally-guaranteed student 
loans, provided that such payments are deferred pursuant to provisions 
included in the contract at the time funds are disbursed that provide 
for period(s) of deferral that are not initiated based on changes in the 
creditworthiness of the borrower; or
    (vi) Is in default.
    (3) Parameter A is the attachment point for the exposure, which 
represents the threshold at which credit losses will first be allocated 
to the exposure. Except as provided in Sec.  3.42(i)

[[Page 107]]

for nth-to-default credit derivatives, parameter A equals the 
ratio of the current dollar amount of underlying exposures that are 
subordinated to the exposure of the national bank or Federal savings 
association to the current dollar amount of underlying exposures. Any 
reserve account funded by the accumulated cash flows from the underlying 
exposures that is subordinated to the national bank's or Federal savings 
association's securitization exposure may be included in the calculation 
of parameter A to the extent that cash is present in the account. 
Parameter A is expressed as a decimal value between zero and one.
    (4) Parameter D is the detachment point for the exposure, which 
represents the threshold at which credit losses of principal allocated 
to the exposure would result in a total loss of principal. Except as 
provided in section 42(i) for nth-to-default credit 
derivatives, parameter D equals parameter A plus the ratio of the 
current dollar amount of the securitization exposures that are pari 
passu with the exposure (that is, have equal seniority with respect to 
credit risk) to the current dollar amount of the underlying exposures. 
Parameter D is expressed as a decimal value between zero and one.
    (5) A supervisory calibration parameter, p, is equal to 0.5 for 
securitization exposures that are not resecuritization exposures and 
equal to 1.5 for resecuritization exposures.
    (c) Mechanics of the SSFA. KG and W are used to calculate 
KA, the augmented value of KG, which reflects the 
observed credit quality of the underlying exposures. KA is 
defined in paragraph (d) of this section. The values of parameters A and 
D, relative to KA determine the risk weight assigned to a 
securitization exposure as described in paragraph (d) of this section. 
The risk weight assigned to a securitization exposure, or portion of a 
securitization exposure, as appropriate, is the larger of the risk 
weight determined in accordance with this paragraph (c) or paragraph (d) 
of this section and a risk weight of 20 percent.
    (1) When the detachment point, parameter D, for a securitization 
exposure is less than or equal to KA, the exposure must be 
assigned a risk weight of 1,250 percent.
    (2) When the attachment point, parameter A, for a securitization 
exposure is greater than or equal to KA, the national bank or 
Federal savings association must calculate the risk weight in accordance 
with paragraph (d) of this section.
    (3) When A is less than KA and D is greater than 
KA, the risk weight is a weighted-average of 1,250 percent 
and 1,250 percent times KSSFA calculated in accordance with 
paragraph (d) of this section. For the purpose of this weighted-average 
calculation:

[[Page 108]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.024

    (e) Gross-up approach--(1) Applicability. A national bank or Federal 
savings association that is not subject to subpart F of this part may 
apply the gross-up approach set forth in this section instead of the 
SSFA to determine the risk weight of its securitization exposures, 
provided that it applies the gross-up approach to all of its 
securitization exposures, except as otherwise provided for certain 
securitization exposures in Sec. Sec.  3.44 and 3.45.
    (2) To use the gross-up approach, a national bank or Federal savings 
association must calculate the following four inputs:
    (i) Pro rata share, which is the par value of the national bank's or 
Federal

[[Page 109]]

savings association's securitization exposure as a percent of the par 
value of the tranche in which the securitization exposure resides;
    (ii) Enhanced amount, which is the par value of tranches that are 
more senior to the tranche in which the national bank's or Federal 
savings association's securitization resides;
    (iii) Exposure amount of the national bank's or Federal savings 
association's securitization exposure calculated under Sec.  3.42(c); 
and
    (iv) Risk weight, which is the weighted-average risk weight of 
underlying exposures of the securitization as calculated under this 
subpart.
    (3) Credit equivalent amount. The credit equivalent amount of a 
securitization exposure under this section equals the sum of:
    (i) The exposure amount of the national bank's or Federal savings 
association's securitization exposure; and
    (ii) The pro rata share multiplied by the enhanced amount, each 
calculated in accordance with paragraph (e)(2) of this section.
    (4) Risk-weighted assets. To calculate risk-weighted assets for a 
securitization exposure under the gross-up approach, a national bank or 
Federal savings association must apply the risk weight required under 
paragraph (e)(2) of this section to the credit equivalent amount 
calculated in paragraph (e)(3) of this section.
    (f) Limitations. Notwithstanding any other provision of this 
section, a national bank or Federal savings association must assign a 
risk weight of not less than 20 percent to a securitization exposure.



Sec.  3.44  Securitization exposures to which the SSFA and gross-up approach 
do not apply.

    (a) General requirement. A national bank or Federal savings 
association must assign a 1,250 percent risk weight to all 
securitization exposures to which the national bank or Federal savings 
association does not apply the SSFA or the gross-up approach under Sec.  
3.43, except as set forth in this section.
    (b) Eligible ABCP liquidity facilities. A national bank or Federal 
savings association may determine the risk-weighted asset amount of an 
eligible ABCP liquidity facility by multiplying the exposure amount by 
the highest risk weight applicable to any of the individual underlying 
exposures covered by the facility.
    (c) A securitization exposure in a second loss position or better to 
an ABCP program--(1) Risk weighting. A national bank or Federal savings 
association may determine the risk-weighted asset amount of a 
securitization exposure that is in a second loss position or better to 
an ABCP program that meets the requirements of paragraph (c)(2) of this 
section by multiplying the exposure amount by the higher of the 
following risk weights:
    (i) 100 percent; and
    (ii) The highest risk weight applicable to any of the individual 
underlying exposures of the ABCP program.
    (2) Requirements. (i) The exposure is not an eligible ABCP liquidity 
facility;
    (ii) The exposure must be economically in a second loss position or 
better, and the first loss position must provide significant credit 
protection to the second loss position;
    (iii) The exposure qualifies as investment grade; and
    (iv) The national bank or Federal savings association holding the 
exposure must not retain or provide protection to the first loss 
position.



Sec.  3.45  Recognition of credit risk mitigants for securitization exposures.

    (a) General. (1) An originating national bank or Federal savings 
association that has obtained a credit risk mitigant to hedge its 
exposure to a synthetic or traditional securitization that satisfies the 
operational criteria provided in Sec.  3.41 may recognize the credit 
risk mitigant under Sec.  3.36 or Sec.  3.37, but only as provided in 
this section.
    (2) An investing national bank or Federal savings association that 
has obtained a credit risk mitigant to hedge a securitization exposure 
may recognize the credit risk mitigant under Sec.  3.36 or Sec.  3.37, 
but only as provided in this section.
    (b) Mismatches. A national bank or Federal savings association must 
make

[[Page 110]]

any applicable adjustment to the protection amount of an eligible 
guarantee or credit derivative as required in Sec.  3.36(d), (e), and 
(f) for any hedged securitization exposure. In the context of a 
synthetic securitization, when an eligible guarantee or eligible credit 
derivative covers multiple hedged exposures that have different residual 
maturities, the national bank or Federal savings association must use 
the longest residual maturity of any of the hedged exposures as the 
residual maturity of all hedged exposures.



Sec. Sec.  3.46-3.50  [Reserved]

                Risk-Weighted Assets for Equity Exposures



Sec.  3.51  Introduction and exposure measurement.

    (a) General. (1) To calculate its risk-weighted asset amounts for 
equity exposures that are not equity exposures to an investment fund, a 
national bank or Federal savings association must use the Simple Risk-
Weight Approach (SRWA) provided in 3.52. A national bank or Federal 
savings association must use the look-through approaches provided in 
Sec.  3.53 to calculate its risk-weighted asset amounts for equity 
exposures to investment funds.
    (2) A national bank or Federal savings association must treat an 
investment in a separate account (as defined in Sec.  3.2) as if it were 
an equity exposure to an investment fund as provided in Sec.  3.53.
    (3) Stable value protection. (i) Stable value protection means a 
contract where the provider of the contract is obligated to pay:
    (A) The policy owner of a separate account an amount equal to the 
shortfall between the fair value and cost basis of the separate account 
when the policy owner of the separate account surrenders the policy; or
    (B) The beneficiary of the contract an amount equal to the shortfall 
between the fair value and book value of a specified portfolio of 
assets.
    (ii) A national bank or Federal savings association that purchases 
stable value protection on its investment in a separate account must 
treat the portion of the carrying value of its investment in the 
separate account attributable to the stable value protection as an 
exposure to the provider of the protection and the remaining portion of 
the carrying value of its separate account as an equity exposure to an 
investment fund.
    (iii) A national bank or Federal savings association that provides 
stable value protection must treat the exposure as an equity derivative 
with an adjusted carrying value determined as the sum of paragraphs 
(b)(1) and (3) of this section.
    (b) Adjusted carrying value. For purposes of Sec. Sec.  3.51 through 
3.53, the adjusted carrying value of an equity exposure is:
    (1) For the on-balance sheet component of an equity exposure (other 
than an equity exposure that is classified as available-for-sale where 
the national bank or Federal savings association has made an AOCI opt-
out election under Sec.  3.22(b)(2)), the national bank's or Federal 
savings association's carrying value of the exposure;
    (2) For the on-balance sheet component of an equity exposure that is 
classified as available-for-sale where the national bank or Federal 
savings association has made an AOCI opt-out election under Sec.  
3.22(b)(2), the national bank's or Federal savings association's 
carrying value of the exposure less any net unrealized gains on the 
exposure that are reflected in such carrying value but excluded from the 
national bank's or Federal savings association's regulatory capital 
components;
    (3) For the off-balance sheet component of an equity exposure that 
is not an equity commitment, the effective notional principal amount of 
the exposure, the size of which is equivalent to a hypothetical on-
balance sheet position in the underlying equity instrument that would 
evidence the same change in fair value (measured in dollars) given a 
small change in the price of the underlying equity instrument, minus the 
adjusted carrying value of the on-balance sheet component of the 
exposure as calculated in paragraph (b)(1) of this section; and
    (4) For a commitment to acquire an equity exposure (an equity 
commitment), the effective notional principal amount of the exposure is 
multiplied

[[Page 111]]

by the following conversion factors (CFs):
    (i) Conditional equity commitments with an original maturity of one 
year or less receive a CF of 20 percent.
    (ii) Conditional equity commitments with an original maturity of 
over one year receive a CF of 50 percent.
    (iii) Unconditional equity commitments receive a CF of 100 percent.



Sec.  3.52  Simple risk-weight approach (SRWA).

    (a) General. Under the SRWA, a national bank's or Federal savings 
association's total risk-weighted assets for equity exposures equals the 
sum of the risk-weighted asset amounts for each of the national bank's 
or Federal savings association's individual equity exposures (other than 
equity exposures to an investment fund) as determined under this section 
and the risk-weighted asset amounts for each of the national bank's or 
Federal savings association's individual equity exposures to an 
investment fund as determined under Sec.  3.53.
    (b) SRWA computation for individual equity exposures. A national 
bank or Federal savings association must determine the risk-weighted 
asset amount for an individual equity exposure (other than an equity 
exposure to an investment fund) by multiplying the adjusted carrying 
value of the equity exposure or the effective portion and ineffective 
portion of a hedge pair (as defined in paragraph (c) of this section) by 
the lowest applicable risk weight in this paragraph (b).
    (1) Zero percent risk weight equity exposures. An equity exposure to 
a sovereign, the Bank for International Settlements, the European 
Central Bank, the European Commission, the International Monetary Fund, 
the European Stability Mechanism, the European Financial Stability 
Facility, an MDB, and any other entity whose credit exposures receive a 
zero percent risk weight under Sec.  3.32 may be assigned a zero percent 
risk weight.
    (2) 20 percent risk weight equity exposures. An equity exposure to a 
PSE, Federal Home Loan Bank or the Federal Agricultural Mortgage 
Corporation (Farmer Mac) must be assigned a 20 percent risk weight.
    (3) 100 percent risk weight equity exposures. The equity exposures 
set forth in this paragraph (b)(3) must be assigned a 100 percent risk 
weight.
    (i) Community development equity exposures. An equity exposure that 
qualifies as a community development investment under section 24 
(Eleventh) of the National Bank Act, excluding equity exposures to an 
unconsolidated small business investment company and equity exposures 
held through a consolidated small business investment company described 
in section 302 of the Small Business Investment Act.
    (ii) Effective portion of hedge pairs. The effective portion of a 
hedge pair.
    (iii) Non-significant equity exposures. Equity exposures, excluding 
significant investments in the capital of an unconsolidated financial 
institution in the form of common stock and exposures to an investment 
firm that would meet the definition of a traditional securitization were 
it not for the application of paragraph (8) of that definition in Sec.  
3.2 and has greater than immaterial leverage, to the extent that the 
aggregate adjusted carrying value of the exposures does not exceed 10 
percent of the national bank's or Federal savings association's total 
capital.
    (A) To compute the aggregate adjusted carrying value of a national 
bank's or Federal savings association's equity exposures for purposes of 
this section, the national bank or Federal savings association may 
exclude equity exposures described in paragraphs (b)(1), (b)(2), 
(b)(3)(i), and (b)(3)(ii) of this section, the equity exposure in a 
hedge pair with the smaller adjusted carrying value, and a proportion of 
each equity exposure to an investment fund equal to the proportion of 
the assets of the investment fund that are not equity exposures or that 
meet the criterion of paragraph (b)(3)(i) of this section. If a national 
bank or Federal savings association does not know the actual holdings of 
the investment fund, the national bank or Federal savings association 
may calculate the proportion of the assets of the fund that are not 
equity exposures based on the terms of the prospectus, partnership 
agreement, or similar contract that defines the fund's permissible 
investments. If the sum of the investment

[[Page 112]]

limits for all exposure classes within the fund exceeds 100 percent, the 
national bank or Federal savings association must assume for purposes of 
this section that the investment fund invests to the maximum extent 
possible in equity exposures.
    (B) When determining which of a national bank's or Federal savings 
association's equity exposures qualify for a 100 percent risk weight 
under this paragraph (b), a national bank or Federal savings association 
first must include equity exposures to unconsolidated small business 
investment companies or held through consolidated small business 
investment companies described in section 302 of the Small Business 
Investment Act, then must include publicly traded equity exposures 
(including those held indirectly through investment funds), and then 
must include non-publicly traded equity exposures (including those held 
indirectly through investment funds).
    (4) 250 percent risk weight equity exposures. Significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock that are not deducted from capital pursuant to 
Sec.  3.22(d)(2) are assigned a 250 percent risk weight.
    (5) 300 percent risk weight equity exposures. A publicly traded 
equity exposure (other than an equity exposure described in paragraph 
(b)(7) of this section and including the ineffective portion of a hedge 
pair) must be assigned a 300 percent risk weight.
    (6) 400 percent risk weight equity exposures. An equity exposure 
(other than an equity exposure described in paragraph (b)(7)) of this 
section that is not publicly traded must be assigned a 400 percent risk 
weight.
    (7) 600 percent risk weight equity exposures. An equity exposure to 
an investment firm must be assigned a 600 percent risk weight, provided 
that the investment firm:
    (i) Would meet the definition of a traditional securitization were 
it not for the application of paragraph (8) of that definition; and
    (ii) Has greater than immaterial leverage.
    (c) Hedge transactions--(1) Hedge pair. A hedge pair is two equity 
exposures that form an effective hedge so long as each equity exposure 
is publicly traded or has a return that is primarily based on a publicly 
traded equity exposure.
    (2) Effective hedge. Two equity exposures form an effective hedge if 
the exposures either have the same remaining maturity or each has a 
remaining maturity of at least three months; the hedge relationship is 
formally documented in a prospective manner (that is, before the 
national bank or Federal savings association acquires at least one of 
the equity exposures); the documentation specifies the measure of 
effectiveness (E) the national bank or Federal savings association will 
use for the hedge relationship throughout the life of the transaction; 
and the hedge relationship has an E greater than or equal to 0.8. A 
national bank or Federal savings association must measure E at least 
quarterly and must use one of three alternative measures of E as set 
forth in this paragraph (c).
    (i) Under the dollar-offset method of measuring effectiveness, the 
national bank or Federal savings association must determine the ratio of 
value change (RVC). The RVC is the ratio of the cumulative sum of the 
changes in value of one equity exposure to the cumulative sum of the 
changes in the value of the other equity exposure. If RVC is positive, 
the hedge is not effective and E equals 0. If RVC is negative and 
greater than or equal to -1 (that is, between zero and -1), then E 
equals the absolute value of RVC. If RVC is negative and less than -1, 
then E equals 2 plus RVC.
    (ii) Under the variability-reduction method of measuring 
effectiveness:

[[Page 113]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.027

    (iii) Under the regression method of measuring effectiveness, E 
equals the coefficient of determination of a regression in which the 
change in value of one exposure in a hedge pair is the dependent 
variable and the change in value of the other exposure in a hedge pair 
is the independent variable. However, if the estimated regression 
coefficient is positive, then E equals zero.
    (3) The effective portion of a hedge pair is E multiplied by the 
greater of the adjusted carrying values of the equity exposures forming 
a hedge pair.
    (4) The ineffective portion of a hedge pair is (1-E) multiplied by 
the greater of the adjusted carrying values of the equity exposures 
forming a hedge pair.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35256, July 22, 
2019]



Sec.  3.53  Equity exposures to investment funds.

    (a) Available approaches. (1) Unless the exposure meets the 
requirements for a community development equity exposure under Sec.  
3.52(b)(3)(i), a national bank or Federal savings association must 
determine the risk-weighted asset amount of an equity exposure to an 
investment fund under the full look-through approach described in 
paragraph (b) of this section, the simple modified look-through approach 
described in paragraph (c) of this section, or the alterative modified 
look-through approach described paragraph (d) of this section, provided, 
however, that the minimum risk weight that may be assigned to an equity 
exposure under this section is 20 percent.
    (2) The risk-weighted asset amount of an equity exposure to an 
investment fund that meets the requirements for a community development 
equity exposure in Sec.  3.52(b)(3)(i) is its adjusted carrying value.
    (3) If an equity exposure to an investment fund is part of a hedge 
pair and the national bank or Federal savings association does not use 
the full look-through approach, the national bank or Federal savings 
association must use the ineffective portion of the hedge pair as 
determined under Sec.  3.52(c) as the adjusted carrying value for the 
equity exposure to the investment fund. The risk-weighted asset amount 
of the effective portion of the hedge pair is equal to its adjusted 
carrying value.
    (b) Full look-through approach. A national bank or Federal savings 
association that is able to calculate a risk-weighted asset amount for 
its proportional ownership share of each exposure held by the investment 
fund (as calculated under this subpart as if the proportional ownership 
share of the adjusted carrying value of each exposure were held directly 
by the national bank or Federal savings association) may set the risk-
weighted asset amount of the national bank's or Federal savings 
association's exposure to the fund equal to the product of:
    (1) The aggregate risk-weighted asset amounts of the exposures held 
by the fund as if they were held directly by

[[Page 114]]

the national bank or Federal savings association; and
    (2) The national bank's or Federal savings association's 
proportional ownership share of the fund.
    (c) Simple modified look-through approach. Under the simple modified 
look-through approach, the risk-weighted asset amount for a national 
bank's or Federal savings association's equity exposure to an investment 
fund equals the adjusted carrying value of the equity exposure 
multiplied by the highest risk weight that applies to any exposure the 
fund is permitted to hold under the prospectus, partnership agreement, 
or similar agreement that defines the fund's permissible investments 
(excluding derivative contracts that are used for hedging rather than 
speculative purposes and that do not constitute a material portion of 
the fund's exposures).
    (d) Alternative modified look-through approach. Under the 
alternative modified look-through approach, a national bank or Federal 
savings association may assign the adjusted carrying value of an equity 
exposure to an investment fund on a pro rata basis to different risk 
weight categories under this subpart based on the investment limits in 
the fund's prospectus, partnership agreement, or similar contract that 
defines the fund's permissible investments. The risk-weighted asset 
amount for the national bank's or Federal savings association's equity 
exposure to the investment fund equals the sum of each portion of the 
adjusted carrying value assigned to an exposure type multiplied by the 
applicable risk weight under this subpart. If the sum of the investment 
limits for all exposure types within the fund exceeds 100 percent, the 
national bank or Federal savings association must assume that the fund 
invests to the maximum extent permitted under its investment limits in 
the exposure type with the highest applicable risk weight under this 
subpart and continues to make investments in order of the exposure type 
with the next highest applicable risk weight under this subpart until 
the maximum total investment level is reached. If more than one exposure 
type applies to an exposure, the national bank or Federal savings 
association must use the highest applicable risk weight. A national bank 
or Federal savings association may exclude derivative contracts held by 
the fund that are used for hedging rather than for speculative purposes 
and do not constitute a material portion of the fund's exposures.



Sec. Sec.  3.54-3.60  [Reserved]

                               Disclosures



Sec.  3.61  Purpose and scope.

    Sections 3.61 through 3.63 of this subpart establish public 
disclosure requirements related to the capital requirements described in 
subpart B of this part for a national bank or Federal savings 
association with total consolidated assets of $50 billion or more as 
reported on the national bank's or Federal savings association's most 
recent year-end Call Report that is not an advanced approaches national 
bank or Federal savings association making public disclosures pursuant 
to Sec.  3.172. An advanced approaches national bank or Federal savings 
association that has not received approval from the OCC to exit parallel 
run pursuant to Sec.  3.121(d) is subject to the disclosure requirements 
described in Sec. Sec.  3.62 and 3.63. A national bank or Federal 
savings association with total consolidated assets of $50 billion or 
more as reported on the national bank's or Federal savings association's 
most recent year-end Call Report that is not an advanced approaches 
national bank or Federal savings association making public disclosures 
subject to Sec.  3.172 must comply with Sec.  3.62 unless it is a 
consolidated subsidiary of a bank holding company, savings and loan 
holding company, or depository institution that is subject to the 
disclosure requirements of Sec.  3.62 or a subsidiary of a non-U.S. 
banking organization that is subject to comparable public disclosure 
requirements in its home jurisdiction. For purposes of this section, 
total consolidated assets are determined based on the average of the 
national bank's or Federal savings association's total consolidated 
assets in the four most recent quarters as reported on the Call Report 
or the

[[Page 115]]

average of the national bank or Federal savings association's total 
consolidated assets in the most recent consecutive quarters as reported 
quarterly on the national bank's or Federal savings association's Call 
Report if the national bank or Federal savings association has not filed 
such a report for each of the most recent four quarters.

[84 FR 35256, July 22, 2019]



Sec.  3.62  Disclosure requirements.

    (a) A national bank or Federal savings association described in 
Sec.  3.61 must provide timely public disclosures each calendar quarter 
of the information in the applicable tables in Sec.  3.63. If a 
significant change occurs, such that the most recent reported amounts 
are no longer reflective of the national bank's or Federal savings 
association's capital adequacy and risk profile, then a brief discussion 
of this change and its likely impact must be disclosed as soon as 
practicable thereafter. Qualitative disclosures that typically do not 
change each quarter (for example, a general summary of the national 
bank's or Federal savings association's risk management objectives and 
policies, reporting system, and definitions) may be disclosed annually 
after the end of the fourth calendar quarter, provided that any 
significant changes are disclosed in the interim. The national bank's or 
Federal savings association's management may provide all of the 
disclosures required by Sec. Sec.  3.61 through 3.63 in one place on the 
national bank's or Federal savings association's public Web site or may 
provide the disclosures in more than one public financial report or 
other regulatory reports, provided that the national bank or Federal 
savings association publicly provides a summary table specifically 
indicating the location(s) of all such disclosures.
    (b) A national bank or Federal savings association described in 
Sec.  3.61 must have a formal disclosure policy approved by the board of 
directors that addresses its approach for determining the disclosures it 
makes. The policy must address the associated internal controls and 
disclosure controls and procedures. The board of directors and senior 
management are responsible for establishing and maintaining an effective 
internal control structure over financial reporting, including the 
disclosures required by this subpart, and must ensure that appropriate 
review of the disclosures takes place. One or more senior officers of 
the national bank or Federal savings association must attest that the 
disclosures meet the requirements of this subpart.
    (c) If a national bank or Federal savings association described in 
Sec.  3.61 concludes that specific commercial or financial information 
that it would otherwise be required to disclose under this section would 
be exempt from disclosure by the OCC under the Freedom of Information 
Act (5 U.S.C. 552), then the national bank or Federal savings 
association is not required to disclose that specific information 
pursuant to this section, but must disclose more general information 
about the subject matter of the requirement, together with the fact 
that, and the reason why, the specific items of information have not 
been disclosed.



Sec.  3.63  Disclosures by national banks or Federal savings associations 
described in Sec.  3.61.

    (a) Except as provided in Sec.  3.62, a national bank or Federal 
savings association described in Sec.  3.61 must make the disclosures 
described in Tables 1 through 10 of this section. The national bank or 
Federal savings association must make these disclosures publicly 
available for each of the last three years (that is, twelve quarters) or 
such shorter period beginning on January 1, 2015.
    (b) A national bank or Federal savings association must publicly 
disclose each quarter the following:
    (1) Common equity tier 1 capital, additional tier 1 capital, tier 2 
capital, tier 1 and total capital ratios, including the regulatory 
capital elements and all the regulatory adjustments and deductions 
needed to calculate the numerator of such ratios;
    (2) Total risk-weighted assets, including the different regulatory 
adjustments and deductions needed to calculate total risk-weighted 
assets;
    (3) Regulatory capital ratios during any transition periods, 
including a description of all the regulatory capital

[[Page 116]]

elements and all regulatory adjustments and deductions needed to 
calculate the numerator and denominator of each capital ratio during any 
transition period; and
    (4) A reconciliation of regulatory capital elements as they relate 
to its balance sheet in any audited consolidated financial statements.

              Table 1 to Sec.   3.63--Scope of Application
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  The name of the top
                                                    corporate entity in
                                                    the group to which
                                                    subpart D of this
                                                    part applies.
                                (b)..............  A brief description
                                                    of the differences
                                                    in the basis for
                                                    consolidating
                                                    entities \1\ for
                                                    accounting and
                                                    regulatory purposes,
                                                    with a description
                                                    of those entities:
                                                   (1) That are fully
                                                    consolidated;
                                                   (2) That are
                                                    deconsolidated and
                                                    deducted from total
                                                    capital;
                                                   (3) For which the
                                                    total capital
                                                    requirement is
                                                    deducted; and
                                                   (4) That are neither
                                                    consolidated nor
                                                    deducted (for
                                                    example, where the
                                                    investment in the
                                                    entity is assigned a
                                                    risk weight in
                                                    accordance with this
                                                    subpart).
                                (c)..............  Any restrictions, or
                                                    other major
                                                    impediments, on
                                                    transfer of funds or
                                                    total capital within
                                                    the group.
                                (d)..............  The aggregate amount
                                                    of surplus capital
                                                    of insurance
                                                    subsidiaries
                                                    included in the
                                                    total capital of the
                                                    consolidated group.
                                (e)..............  The aggregate amount
                                                    by which actual
                                                    total capital is
                                                    less than the
                                                    minimum total
                                                    capital requirement
                                                    in all subsidiaries,
                                                    with total capital
                                                    requirements and the
                                                    name(s) of the
                                                    subsidiaries with
                                                    such deficiencies.
------------------------------------------------------------------------
\1\ Entities include securities, insurance and other financial
  subsidiaries, commercial subsidiaries (where permitted), and
  significant minority equity investments in insurance, financial and
  commercial entities.


                Table 2 to Sec.   3.63--Capital Structure
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  Summary information
                                                    on the terms and
                                                    conditions of the
                                                    main features of all
                                                    regulatory capital
                                                    instruments.
Quantitative Disclosures......  (b)..............  The amount of common
                                                    equity tier 1
                                                    capital, with
                                                    separate disclosure
                                                    of:
                                                   (1) Common stock and
                                                    related surplus;
                                                   (2) Retained
                                                    earnings;
                                                   (3) Common equity
                                                    minority interest;
                                                   (4) AOCI; and
                                                   (5) Regulatory
                                                    adjustments and
                                                    deductions made to
                                                    common equity tier 1
                                                    capital.
                                (c)..............  The amount of tier 1
                                                    capital, with
                                                    separate disclosure
                                                    of:
                                                   (1) Additional tier 1
                                                    capital elements,
                                                    including additional
                                                    tier 1 capital
                                                    instruments and tier
                                                    1 minority interest
                                                    not included in
                                                    common equity tier 1
                                                    capital; and
                                                   (2) Regulatory
                                                    adjustments and
                                                    deductions made to
                                                    tier 1 capital.
                                (d)..............  The amount of total
                                                    capital, with
                                                    separate disclosure
                                                    of:
                                                   (1) Tier 2 capital
                                                    elements, including
                                                    tier 2 capital
                                                    instruments and
                                                    total capital
                                                    minority interest
                                                    not included in tier
                                                    1 capital; and
                                                   (2) Regulatory
                                                    adjustments and
                                                    deductions made to
                                                    total capital.
------------------------------------------------------------------------


                Table 3 to Sec.   3.63--Capital Adequacy
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.....  (a) A summary discussion of the national
                               bank's or Federal savings association's
                               approach to assessing the adequacy of its
                               capital to support current and future
                               activities.
Quantitative disclosures....  (b) Risk-weighted assets for:
                                 (1) Exposures to sovereign entities;
                                 (2) Exposures to certain supranational
                                  entities and MDBs;
                                 (3) Exposures to depository
                                  institutions, foreign banks, and
                                  credit unions;
                                 (4) Exposures to PSEs;
                                 (5) Corporate exposures;
                                 (6) Residential mortgage exposures;
                                 (7) Statutory multifamily mortgages and
                                  pre-sold construction loans;
                                 (8) HVCRE exposures;
                                 (9) Past due loans;

[[Page 117]]

 
                                 (10) Other assets;
                                 (11) Cleared transactions;
                                 (12) Default fund contributions;
                                 (13) Unsettled transactions;
                                 (14) Securitization exposures; and
                                 (15) Equity exposures.
                              (c) Standardized market risk-weighted
                               assets as calculated under subpart F of
                               this part.
                              (d) Common equity tier 1, tier 1 and total
                               risk-based capital ratios:
                                 (1) For the top consolidated group; and
                                 (2) For each depository institution
                                  subsidiary.
                              (e) Total standardized risk-weighted
                               assets.
------------------------------------------------------------------------


           Table 4 to Sec.   3.63--Capital Conservation Buffer
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Quantitative Disclosures......  (a)..............  At least quarterly,
                                                    the national bank or
                                                    Federal savings
                                                    association must
                                                    calculate and
                                                    publicly disclose
                                                    the capital
                                                    conservation buffer
                                                    as described under
                                                    Sec.   3.11.
                                (b)..............  At least quarterly,
                                                    the national bank or
                                                    Federal savings
                                                    association must
                                                    calculate and
                                                    publicly disclose
                                                    the eligible
                                                    retained income of
                                                    the national bank or
                                                    Federal savings
                                                    association, as
                                                    described under Sec.
                                                      3.11.
                                (c)..............  At least quarterly,
                                                    the national bank or
                                                    Federal savings
                                                    association must
                                                    calculate and
                                                    publicly disclose
                                                    any limitations it
                                                    has on distributions
                                                    and discretionary
                                                    bonus payments
                                                    resulting from the
                                                    capital conservation
                                                    buffer framework
                                                    described under Sec.
                                                      3.11, including
                                                    the maximum payout
                                                    amount for the
                                                    quarter.
------------------------------------------------------------------------

    (c) General qualitative disclosure requirement. For each separate 
risk area described in Tables 5 through 10, the national bank or Federal 
savings association must describe its risk management objectives and 
policies, including: Strategies and processes; the structure and 
organization of the relevant risk management function; the scope and 
nature of risk reporting and/or measurement systems; policies for 
hedging and/or mitigating risk and strategies and processes for 
monitoring the continuing effectiveness of hedges/mitigants.

      Table 5 to Sec.   3.63 \1\--Credit Risk: General Disclosures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to credit
                                                    risk (excluding
                                                    counterparty credit
                                                    risk disclosed in
                                                    accordance with
                                                    Table 6), including
                                                    the:
                                                   (1) Policy for
                                                    determining past due
                                                    or delinquency
                                                    status;
                                                   (2) Policy for
                                                    placing loans on
                                                    nonaccrual;
                                                   (3) Policy for
                                                    returning loans to
                                                    accrual status;
                                                   (4) Definition of and
                                                    policy for
                                                    identifying impaired
                                                    loans (for financial
                                                    accounting
                                                    purposes);
                                                   (5) Description of
                                                    the methodology that
                                                    the national bank or
                                                    Federal savings
                                                    association uses to
                                                    estimate its
                                                    allowance for loan
                                                    and lease losses or
                                                    adjusted allowance
                                                    for credit losses,
                                                    as applicable,
                                                    including
                                                    statistical methods
                                                    used where
                                                    applicable;
                                                   (6) Policy for
                                                    charging-off
                                                    uncollectible
                                                    amounts; and
                                                   (7) Discussion of the
                                                    national bank's or
                                                    Federal savings
                                                    association's credit
                                                    risk management
                                                    policy.
Quantitative Disclosures......  (b)..............  Total credit risk
                                                    exposures and
                                                    average credit risk
                                                    exposures, after
                                                    accounting offsets
                                                    in accordance with
                                                    GAAP, without taking
                                                    into account the
                                                    effects of credit
                                                    risk mitigation
                                                    techniques (for
                                                    example, collateral
                                                    and netting not
                                                    permitted under
                                                    GAAP), over the
                                                    period categorized
                                                    by major types of
                                                    credit exposure. For
                                                    example, national
                                                    banks or Federal
                                                    savings associations
                                                    could use categories
                                                    similar to that used
                                                    for financial
                                                    statement purposes.
                                                    Such categories
                                                    might include, for
                                                    instance
                                                   (1) Loans, off-
                                                    balance sheet
                                                    commitments, and
                                                    other non-derivative
                                                    off-balance sheet
                                                    exposures;

[[Page 118]]

 
                                                   (2) Debt securities;
                                                    and
                                                   (3) OTC
                                                    derivatives.\2\
                                (c)..............  Geographic
                                                    distribution of
                                                    exposures,
                                                    categorized in
                                                    significant areas by
                                                    major types of
                                                    credit exposure.\3\
                                (d)..............  Industry or
                                                    counterparty type
                                                    distribution of
                                                    exposures,
                                                    categorized by major
                                                    types of credit
                                                    exposure.
                                (e)..............  By major industry or
                                                    counterparty type:
                                                   (1) Amount of
                                                    impaired loans for
                                                    which there was a
                                                    related allowance
                                                    under GAAP;
                                                   (2) Amount of
                                                    impaired loans for
                                                    which there was no
                                                    related allowance
                                                    under GAAP;
                                                   (3) Amount of loans
                                                    past due 90 days and
                                                    on nonaccrual;
                                                   (4) Amount of loans
                                                    past due 90 days and
                                                    still accruing; \4\
                                                   (5) The balance in
                                                    the allowance for
                                                    loan and lease
                                                    losses or adjusted
                                                    allowance for credit
                                                    losses, as
                                                    applicable, at the
                                                    end of each period,
                                                    disaggregated on the
                                                    basis of the
                                                    national bank's or
                                                    Federal savings
                                                    association's
                                                    impairment method.
                                                    To disaggregate the
                                                    information required
                                                    on the basis of
                                                    impairment
                                                    methodology, an
                                                    entity shall
                                                    separately disclose
                                                    the amounts based on
                                                    the requirements in
                                                    GAAP; and
                                                   (6) Charge-offs
                                                    during the period.
                                (f)..............  Amount of impaired
                                                    loans and, if
                                                    available, the
                                                    amount of past due
                                                    loans categorized by
                                                    significant
                                                    geographic areas
                                                    including, if
                                                    practical, the
                                                    amounts of
                                                    allowances related
                                                    to each geographical
                                                    area,\5\ further
                                                    categorized as
                                                    required by GAAP.
                                (g)..............  Reconciliation of
                                                    changes in ALLL or
                                                    AACL, as
                                                    applicable.\6\
                                (h)..............  Remaining contractual
                                                    maturity delineation
                                                    (for example, one
                                                    year or less) of the
                                                    whole portfolio,
                                                    categorized by
                                                    credit exposure.
------------------------------------------------------------------------
\1\ Table 5 does not cover equity exposures, which should be reported in
  Table 9.
\2\ See, for example, ASC Topic 815-10 and 210, as they may be amended
  from time to time.
\3\ Geographical areas may consist of individual countries, groups of
  countries, or regions within countries. A national bank or Federal
  savings association might choose to define the geographical areas
  based on the way the national bank's or Federal savings association's
  portfolio is geographically managed. The criteria used to allocate the
  loans to geographical areas must be specified.
\4\ A national bank or Federal savings association is encouraged also to
  provide an analysis of the aging of past-due loans.
\5\ The portion of the general allowance that is not allocated to a
  geographical area should be disclosed separately.
\6\ The reconciliation should include the following: A description of
  the allowance; the opening balance of the allowance; charge-offs taken
  against the allowance during the period; amounts provided (or
  reversed) for estimated probable loan losses during the period; any
  other adjustments (for example, exchange rate differences, business
  combinations, acquisitions and disposals of subsidiaries), including
  transfers between allowances; and the closing balance of the
  allowance. Charge-offs and recoveries that have been recorded directly
  to the income statement should be disclosed separately.


Table 6 to Sec.   3.63--General Disclosure for Counterparty Credit Risk-
                            Related Exposures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to OTC
                                                    derivatives,
                                                    eligible margin
                                                    loans, and repo-
                                                    style transactions,
                                                    including a
                                                    discussion of:
                                                   (1) The methodology
                                                    used to assign
                                                    credit limits for
                                                    counterparty credit
                                                    exposures;
                                                   (2) Policies for
                                                    securing collateral,
                                                    valuing and managing
                                                    collateral, and
                                                    establishing credit
                                                    reserves;
                                                   (3) The primary types
                                                    of collateral taken;
                                                    and
                                                   (4) The impact of the
                                                    amount of collateral
                                                    the national bank or
                                                    Federal savings
                                                    association would
                                                    have to provide
                                                    given a
                                                    deterioration in the
                                                    national bank's or
                                                    Federal savings
                                                    association's own
                                                    creditworthiness.
Quantitative Disclosures......  (b)..............  Gross positive fair
                                                    value of contracts,
                                                    collateral held
                                                    (including type, for
                                                    example, cash,
                                                    government
                                                    securities), and net
                                                    unsecured credit
                                                    exposure.\1\ A
                                                    national bank or
                                                    Federal savings
                                                    association also
                                                    must disclose the
                                                    notional value of
                                                    credit derivative
                                                    hedges purchased for
                                                    counterparty credit
                                                    risk protection and
                                                    the distribution of
                                                    current credit
                                                    exposure by exposure
                                                    type.\2\
                                (c)..............  Notional amount of
                                                    purchased and sold
                                                    credit derivatives,
                                                    segregated between
                                                    use for the national
                                                    bank's or Federal
                                                    savings
                                                    association's own
                                                    credit portfolio and
                                                    in its
                                                    intermediation
                                                    activities,
                                                    including the
                                                    distribution of the
                                                    credit derivative
                                                    products used,
                                                    categorized further
                                                    by protection bought
                                                    and sold within each
                                                    product group.
------------------------------------------------------------------------
\1\ Net unsecured credit exposure is the credit exposure after
  considering both the benefits from legally enforceable netting
  agreements and collateral arrangements without taking into account
  haircuts for price volatility, liquidity, etc.
\2\ This may include interest rate derivative contracts, foreign
  exchange derivative contracts, equity derivative contracts, credit
  derivatives, commodity or other derivative contracts, repo-style
  transactions, and eligible margin loans.


[[Page 119]]


          Table 7 to Sec.   3.63--Credit Risk Mitigation \1 2\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to credit
                                                    risk mitigation,
                                                    including:
                                                   (1) Policies and
                                                    processes for
                                                    collateral valuation
                                                    and management;
                                                   (2) A description of
                                                    the main types of
                                                    collateral taken by
                                                    the national bank or
                                                    Federal savings
                                                    association;
                                                   (3) The main types of
                                                    guarantors/credit
                                                    derivative
                                                    counterparties and
                                                    their
                                                    creditworthiness;
                                                    and
                                                   (4) Information about
                                                    (market or credit)
                                                    risk concentrations
                                                    with respect to
                                                    credit risk
                                                    mitigation.
Quantitative Disclosures......  (b)..............  For each separately
                                                    disclosed credit
                                                    risk portfolio, the
                                                    total exposure that
                                                    is covered by
                                                    eligible financial
                                                    collateral, and
                                                    after the
                                                    application of
                                                    haircuts.
                                (c)..............  For each separately
                                                    disclosed portfolio,
                                                    the total exposure
                                                    that is covered by
                                                    guarantees/credit
                                                    derivatives and the
                                                    risk-weighted asset
                                                    amount associated
                                                    with that exposure.
------------------------------------------------------------------------
\1\ At a minimum, a national bank or Federal savings association must
  provide the disclosures in Table 7 in relation to credit risk
  mitigation that has been recognized for the purposes of reducing
  capital requirements under this subpart. Where relevant, national
  banks or Federal savings associations are encouraged to give further
  information about mitigants that have not been recognized for that
  purpose.
\2\ Credit derivatives that are treated, for the purposes of this
  subpart, as synthetic securitization exposures should be excluded from
  the credit risk mitigation disclosures and included within those
  relating to securitization (Table 8).


                 Table 8 to Sec.   3.63--Securitization
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.  (a) The general qualitative disclosure
                           requirement with respect to a securitization
                           (including synthetic securitizations),
                           including a discussion of:
                             (1) The national bank's or Federal savings
                              association 's objectives for securitizing
                              assets, including the extent to which
                              these activities transfer credit risk of
                              the underlying exposures away from the
                              national bank or Federal savings
                              association to other entities and
                              including the type of risks assumed and
                              retained with resecuritization activity;
                              \1\
                             (2) The nature of the risks (e.g.,
                              liquidity risk) inherent in the
                              securitized assets;
                             (3) The roles played by the national bank
                              or Federal savings association in the
                              securitization process \2\ and an
                              indication of the extent of the national
                              bank's or Federal savings association 's
                              involvement in each of them;
                             (4) The processes in place to monitor
                              changes in the credit and market risk of
                              securitization exposures including how
                              those processes differ for
                              resecuritization exposures;
                             (5) The national bank's or Federal savings
                              association's policy for mitigating the
                              credit risk retained through
                              securitization and resecuritization
                              exposures; and
                             (6) The risk-based capital approaches that
                              the national bank or Federal savings
                              association follows for its securitization
                              exposures including the type of
                              securitization exposure to which each
                              approach applies.
                          (b) A list of:
                             (1) The type of securitization SPEs that
                              the national bank or Federal savings
                              association, as sponsor, uses to
                              securitize third-party exposures. The
                              national bank or Federal savings
                              association must indicate whether it has
                              exposure to these SPEs, either on- or off-
                              balance sheet; and
                             (2) Affiliated entities:
                               (i) That the national bank or Federal
                                savings association manages or advises;
                                and
                               (ii) That invest either in the
                                securitization exposures that the
                                national bank or Federal savings
                                association has securitized or in
                                securitization SPEs that the national
                                bank or Federal savings association
                                sponsors.\3\
                          (c) Summary of the national bank's or Federal
                           savings association's accounting policies for
                           securitization activities, including:
                             (1) Whether the transactions are treated as
                              sales or financings;
                             (2) Recognition of gain-on-sale;

[[Page 120]]

 
                             (3) Methods and key assumptions applied in
                              valuing retained or purchased interests;
                             (4) Changes in methods and key assumptions
                              from the previous period for valuing
                              retained interests and impact of the
                              changes;
                             (5) Treatment of synthetic securitizations;
                             (6) How exposures intended to be
                              securitized are valued and whether they
                              are recorded under subpart D of this part;
                              and
                             (7) Policies for recognizing liabilities on
                              the balance sheet for arrangements that
                              could require the national bank or Federal
                              savings association to provide financial
                              support for securitized assets.
                          (d) An explanation of significant changes to
                           any quantitative information since the last
                           reporting period.
Quantitative Disclosures  (e) The total outstanding exposures
                           securitized by the national bank or Federal
                           savings association in securitizations that
                           meet the operational criteria provided in
                           Sec.   3.41 (categorized into traditional and
                           synthetic securitizations), by exposure type,
                           separately for securitizations of third-party
                           exposures for which the bank acts only as
                           sponsor.\4\
                          (f) For exposures securitized by the national
                           bank or Federal savings association in
                           securitizations that meet the operational
                           criteria in Sec.   3.41:
                             (1) Amount of securitized assets that are
                              impaired/past due categorized by exposure
                              type; \5\ and
                             (2) Losses recognized by the national bank
                              or Federal savings association during the
                              current period categorized by exposure
                              type.\6\
                          (g) The total amount of outstanding exposures
                           intended to be securitized categorized by
                           exposure type.
                          (h) Aggregate amount of:
                             (1) On-balance sheet securitization
                              exposures retained or purchased
                              categorized by exposure type; and
                             (2) Off-balance sheet securitization
                              exposures categorized by exposure type.
                          (i)(1) Aggregate amount of securitization
                           exposures retained or purchased and the
                           associated capital requirements for these
                           exposures, categorized between securitization
                           and resecuritization exposures, further
                           categorized into a meaningful number of risk
                           weight bands and by risk-based capital
                           approach (e.g., SSFA); and
                             (2) Aggregate amount disclosed separately
                              by type of underlying exposure in the pool
                              of any:
                               (i) After-tax gain-on-sale on a
                                securitization that has been deducted
                                from common equity tier 1 capital; and
                               (ii) Credit-enhancing interest-only strip
                                that is assigned a 1,250 percent risk
                                weight.
                          (j) Summary of current year's securitization
                           activity, including the amount of exposures
                           securitized (by exposure type), and
                           recognized gain or loss on sale by exposure
                           type.
                          (k) Aggregate amount of resecuritization
                           exposures retained or purchased categorized
                           according to:
                             (1) Exposures to which credit risk
                              mitigation is applied and those not
                              applied; and
                             (2) Exposures to guarantors categorized
                              according to guarantor creditworthiness
                              categories or guarantor name.
------------------------------------------------------------------------
\1\ The national bank or Federal savings association should describe the
  structure of resecuritizations in which it participates; this
  description should be provided for the main categories of
  resecuritization products in which the national bank or Federal
  savings association is active.
\2\ For example, these roles may include originator, investor, servicer,
  provider of credit enhancement, sponsor, liquidity provider, or swap
  provider.
\3\ Such affiliated entities may include, for example, money market
  funds, to be listed individually, and personal and private trusts, to
  be noted collectively.

[[Page 121]]

 
\4\ ``Exposures securitized'' include underlying exposures originated by
  the national bank or Federal savings association, whether generated by
  them or purchased, and recognized in the balance sheet, from third
  parties, and third-party exposures included in sponsored transactions.
  Securitization transactions (including underlying exposures originally
  on the national bank's or Federal savings association's balance sheet
  and underlying exposures acquired by the national bank or Federal
  savings association from third-party entities) in which the
  originating bank does not retain any securitization exposure should be
  shown separately but need only be reported for the year of inception.
  National banks and Federal savings associations are required to
  disclose exposures regardless of whether there is a capital charge
  under this part.
\5\ Include credit-related other than temporary impairment (OTTI).
\6\ For example, charge-offs/allowances (if the assets remain on the
  national bank's or Federal savings association's balance sheet) or
  credit-related OTTI of interest-only strips and other retained
  residual interests, as well as recognition of liabilities for probable
  future financial support required of the national bank or Federal
  savings association with respect to securitized assets.


 Table 9 to Sec.   3.63--Equities Not Subject to Subpart F of This Part
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to equity
                                                    risk for equities
                                                    not subject to
                                                    subpart F of this
                                                    part, including:
                                                   (1) Differentiation
                                                    between holdings on
                                                    which capital gains
                                                    are expected and
                                                    those taken under
                                                    other objectives
                                                    including for
                                                    relationship and
                                                    strategic reasons;
                                                    and
                                                   (2) Discussion of
                                                    important policies
                                                    covering the
                                                    valuation of and
                                                    accounting for
                                                    equity holdings not
                                                    subject to subpart F
                                                    of this part. This
                                                    includes the
                                                    accounting
                                                    techniques and
                                                    valuation
                                                    methodologies used,
                                                    including key
                                                    assumptions and
                                                    practices affecting
                                                    valuation as well as
                                                    significant changes
                                                    in these practices.
Quantitative Disclosures......  (b)..............  Value disclosed on
                                                    the balance sheet of
                                                    investments, as well
                                                    as the fair value of
                                                    those investments;
                                                    for securities that
                                                    are publicly traded,
                                                    a comparison to
                                                    publicly-quoted
                                                    share values where
                                                    the share price is
                                                    materially different
                                                    from fair value.
                                (c)..............  The types and nature
                                                    of investments,
                                                    including the amount
                                                    that is: (1)
                                                    Publicly traded; and
                                                   (2) Non publicly
                                                    traded.
                                (d)..............  The cumulative
                                                    realized gains
                                                    (losses) arising
                                                    from sales and
                                                    liquidations in the
                                                    reporting period.
                                (e)..............  (1) Total unrealized
                                                    gains (losses).\1\
                                                   (2) Total latent
                                                    revaluation gains
                                                    (losses).\2\
                                                   (3) Any amounts of
                                                    the above included
                                                    in tier 1 or tier 2
                                                    capital.
                                (f)..............  Capital requirements
                                                    categorized by
                                                    appropriate equity
                                                    groupings,
                                                    consistent with the
                                                    national bank's or
                                                    Federal savings
                                                    association's
                                                    methodology, as well
                                                    as the aggregate
                                                    amounts and the type
                                                    of equity
                                                    investments subject
                                                    to any supervisory
                                                    transition regarding
                                                    regulatory capital
                                                    requirements.
------------------------------------------------------------------------
\1\ Unrealized gains (losses) recognized on the balance sheet but not
  through earnings.
\2\ Unrealized gains (losses) not recognized either on the balance sheet
  or through earnings.


 Table 10 to Sec.   3.63--Interest Rate Risk for Non-Trading Activities
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement,
                                                    including the nature
                                                    of interest rate
                                                    risk for non-trading
                                                    activities and key
                                                    assumptions,
                                                    including
                                                    assumptions
                                                    regarding loan
                                                    prepayments and
                                                    behavior of non-
                                                    maturity deposits,
                                                    and frequency of
                                                    measurement of
                                                    interest rate risk
                                                    for non-trading
                                                    activities.
Quantitative disclosures......  (b)..............  The increase
                                                    (decline) in
                                                    earnings or economic
                                                    value (or relevant
                                                    measure used by
                                                    management) for
                                                    upward and downward
                                                    rate shocks
                                                    according to
                                                    management's method
                                                    for measuring
                                                    interest rate risk
                                                    for non-trading
                                                    activities,
                                                    categorized by
                                                    currency (as
                                                    appropriate).
------------------------------------------------------------------------

    (d) A Category III national bank or Federal savings association that 
is required to publicly disclose its supplementary leverage ratio 
pursuant to Sec.  3.172(d) is subject to the supplementary leverage 
ratio disclosure requirement at Sec.  3.173(a)(2).
    (e) A Category III national bank or Federal savings association that 
is required to calculate a countercyclical capital buffer pursuant to 
Sec.  3.11 is subject to the disclosure requirement at Table 4 to Sec.  
3.173, ``Capital Conservation and Countercyclical Capital Buffers,'' and 
not to the disclosure requirement at Table 4 to this section, ``Capital 
Conservation Buffer.''

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 4238, Feb. 14, 
2019; 84 FR 35256, July 22, 2019; 84 FR 59265, Nov. 1, 2019]

[[Page 122]]



Sec. Sec.  3.64-3.99  [Reserved]



   Subpart E_Risk-Weighted Assets_Internal Ratings-Based and Advanced 
                         Measurement Approaches

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.100  Purpose, applicability, and principle of conservatism.

    (a) Purpose. This subpart E establishes:
    (1) Minimum qualifying criteria for national banks or Federal 
savings associations using institution-specific internal risk 
measurement and management processes for calculating risk-based capital 
requirements; and
    (2) Methodologies for such national banks or Federal savings 
associations to calculate their total risk-weighted assets.
    (b) Applicability. (1) This subpart applies to a national bank or 
Federal savings association that:
    (i) Is a subsidiary of a global systemically important BHC, as 
identified pursuant to 12 CFR 217.402;
    (ii) Is a Category II national bank or Federal savings association;
    (iii) Is a subsidiary of a depository institution that uses the 
advanced approaches pursuant to this subpart (OCC), 12 CFR part 217, 
subpart E (Board), or 12 CFR part 324 (FDIC), to calculate its risk-
based capital requirements;
    (iv) Is a subsidiary of a bank holding company or savings and loan 
holding company that uses the advanced approaches pursuant to subpart E 
of 12 CFR part 217 to calculate its risk-based capital requirements; or
    (v) Elects to use this subpart to calculate its risk-based capital 
requirements.
    (2) A market risk national bank or Federal savings association must 
exclude from its calculation of risk-weighted assets under this subpart 
the risk-weighted asset amounts of all covered positions, as defined in 
subpart F of this part (except foreign exchange positions that are not 
trading positions, over-the-counter derivative positions, cleared 
transactions, and unsettled transactions).
    (c) Principle of conservatism. Notwithstanding the requirements of 
this subpart, a national bank or Federal savings association may choose 
not to apply a provision of this subpart to one or more exposures 
provided that:
    (1) The national bank or Federal savings association can demonstrate 
on an ongoing basis to the satisfaction of the OCC that not applying the 
provision would, in all circumstances, unambiguously generate a risk-
based capital requirement for each such exposure greater than that which 
would otherwise be required under this subpart;
    (2) The national bank or Federal savings association appropriately 
manages the risk of each such exposure;
    (3) The national bank or Federal savings association notifies the 
OCC in writing prior to applying this principle to each such exposure; 
and
    (4) The exposures to which the national bank or Federal savings 
association applies this principle are not, in the aggregate, material 
to the national bank or Federal savings association.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41415, July 15, 
2015; 84 FR 59265, Nov. 1, 2019]



Sec.  3.101  Definitions.

    (a) Terms that are set forth in Sec.  3.2 and used in this subpart 
have the definitions assigned thereto in Sec.  3.2.
    (b) For the purposes of this subpart, the following terms are 
defined as follows:
    Advanced internal ratings-based (IRB) systems means an advanced 
approaches national bank's or Federal savings association's internal 
risk rating and segmentation system; risk parameter quantification 
system; data management and maintenance system; and control, oversight, 
and validation system for credit risk of wholesale and retail exposures.
    Advanced systems means an advanced approaches national bank's or 
Federal savings association's advanced IRB systems, operational risk 
management processes, operational risk data and assessment systems, 
operational risk quantification systems, and, to the extent used by the 
national bank or Federal savings association, the internal

[[Page 123]]

models methodology, advanced CVA approach, double default excessive 
correlation detection process, and internal models approach (IMA) for 
equity exposures.
    Backtesting means the comparison of a national bank's or Federal 
savings association's internal estimates with actual outcomes during a 
sample period not used in model development. In this context, 
backtesting is one form of out-of-sample testing.
    Benchmarking means the comparison of a national bank's or Federal 
savings association's internal estimates with relevant internal and 
external data or with estimates based on other estimation techniques.
    Bond option contract means a bond option, bond future, or any other 
instrument linked to a bond that gives rise to similar counterparty 
credit risk.
    Business environment and internal control factors means the 
indicators of a national bank's or Federal savings association's 
operational risk profile that reflect a current and forward-looking 
assessment of the national bank's or Federal savings association's 
underlying business risk factors and internal control environment.
    Credit default swap (CDS) means a financial contract executed under 
standard industry documentation that allows one party (the protection 
purchaser) to transfer the credit risk of one or more exposures 
(reference exposure(s)) to another party (the protection provider) for a 
certain period of time.
    Credit valuation adjustment (CVA) means the fair value adjustment to 
reflect counterparty credit risk in valuation of OTC derivative 
contracts.
    Default--For the purposes of calculating capital requirements under 
this subpart:
    (1) Retail. (i) A retail exposure of a national bank or Federal 
savings association is in default if:
    (A) The exposure is 180 days past due, in the case of a residential 
mortgage exposure or revolving exposure;
    (B) The exposure is 120 days past due, in the case of retail 
exposures that are not residential mortgage exposures or revolving 
exposures; or
    (C) The national bank or Federal savings association has taken a 
full or partial charge-off, write-down of principal, or material 
negative fair value adjustment of principal on the exposure for credit-
related reasons.
    (ii) Notwithstanding paragraph (1)(i) of this definition, for a 
retail exposure held by a non-U.S. subsidiary of the national bank or 
Federal savings association that is subject to an internal ratings-based 
approach to capital adequacy consistent with the Basel Committee on 
Banking Supervision's ``International Convergence of Capital Measurement 
and Capital Standards: A Revised Framework'' in a non-U.S. jurisdiction, 
the national bank or Federal savings association may elect to use the 
definition of default that is used in that jurisdiction, provided that 
the national bank or Federal savings association has obtained prior 
approval from the OCC to use the definition of default in that 
jurisdiction.
    (iii) A retail exposure in default remains in default until the 
national bank or Federal savings association has reasonable assurance of 
repayment and performance for all contractual principal and interest 
payments on the exposure.
    (2) Wholesale. (i) A national bank's or Federal savings 
association's wholesale obligor is in default if:
    (A) The national bank or Federal savings association determines that 
the obligor is unlikely to pay its credit obligations to the national 
bank or Federal savings association in full, without recourse by the 
national bank or Federal savings association to actions such as 
realizing collateral (if held); or
    (B) The obligor is past due more than 90 days on any material credit 
obligation(s) to the national bank or Federal savings association.\29\
---------------------------------------------------------------------------

    \29\ Overdrafts are past due once the obligor has breached an 
advised limit or been advised of a limit smaller than the current 
outstanding balance.
---------------------------------------------------------------------------

    (ii) An obligor in default remains in default until the national 
bank or Federal savings association has reasonable assurance of 
repayment and performance for all contractual principal and interest 
payments on all exposures of the national bank or Federal savings 
association to the obligor (other than

[[Page 124]]

exposures that have been fully written-down or charged-off).
    Dependence means a measure of the association among operational 
losses across and within units of measure.
    Economic downturn conditions means, with respect to an exposure held 
by the national bank or Federal savings association, those conditions in 
which the aggregate default rates for that exposure's wholesale or 
retail exposure subcategory (or subdivision of such subcategory selected 
by the national bank or Federal savings association) in the exposure's 
national jurisdiction (or subdivision of such jurisdiction selected by 
the national bank or Federal savings association) are significantly 
higher than average.
    Effective maturity (M) of a wholesale exposure means:
    (1) For wholesale exposures other than repo-style transactions, 
eligible margin loans, and OTC derivative contracts described in 
paragraph (2) or (3) of this definition:
    (i) The weighted-average remaining maturity (measured in years, 
whole or fractional) of the expected contractual cash flows from the 
exposure, using the undiscounted amounts of the cash flows as weights; 
or
    (ii) The nominal remaining maturity (measured in years, whole or 
fractional) of the exposure.
    (2) For repo-style transactions, eligible margin loans, and OTC 
derivative contracts subject to a qualifying master netting agreement 
for which the national bank or Federal savings association does not 
apply the internal models approach in section 132(d), the weighted-
average remaining maturity (measured in years, whole or fractional) of 
the individual transactions subject to the qualifying master netting 
agreement, with the weight of each individual transaction set equal to 
the notional amount of the transaction.
    (3) For repo-style transactions, eligible margin loans, and OTC 
derivative contracts for which the national bank or Federal savings 
association applies the internal models approach in Sec.  3.132(d), the 
value determined in Sec.  3.132(d)(4).
    Eligible double default guarantor, with respect to a guarantee or 
credit derivative obtained by a national bank or Federal savings 
association, means:
    (1) U.S.-based entities. A depository institution, a bank holding 
company, a savings and loan holding company, or a securities broker or 
dealer registered with the SEC under the Securities Exchange Act, if at 
the time the guarantee is issued or anytime thereafter, has issued and 
outstanding an unsecured debt security without credit enhancement that 
is investment grade.
    (2) Non-U.S.-based entities. A foreign bank, or a non-U.S.-based 
securities firm if the national bank or Federal savings association 
demonstrates that the guarantor is subject to consolidated supervision 
and regulation comparable to that imposed on U.S. depository 
institutions, or securities broker-dealers) if at the time the guarantee 
is issued or anytime thereafter, has issued and outstanding an unsecured 
debt security without credit enhancement that is investment grade.
    Eligible operational risk offsets means amounts, not to exceed 
expected operational loss, that:
    (1) Are generated by internal business practices to absorb highly 
predictable and reasonably stable operational losses, including reserves 
calculated consistent with GAAP; and
    (2) Are available to cover expected operational losses with a high 
degree of certainty over a one-year horizon.
    Eligible purchased wholesale exposure means a purchased wholesale 
exposure that:
    (1) The national bank or Federal savings association or 
securitization SPE purchased from an unaffiliated seller and did not 
directly or indirectly originate;
    (2) Was generated on an arm's-length basis between the seller and 
the obligor (intercompany accounts receivable and receivables subject to 
contra-accounts between firms that buy and sell to each other do not 
satisfy this criterion);
    (3) Provides the national bank or Federal savings association or 
securitization SPE with a claim on all proceeds from the exposure or a 
pro rata interest in the proceeds from the exposure;
    (4) Has an M of less than one year; and

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    (5) When consolidated by obligor, does not represent a concentrated 
exposure relative to the portfolio of purchased wholesale exposures.
    Expected exposure (EE) means the expected value of the probability 
distribution of non-negative credit risk exposures to a counterparty at 
any specified future date before the maturity date of the longest term 
transaction in the netting set. Any negative fair values in the 
probability distribution of fair values to a counterparty at a specified 
future date are set to zero to convert the probability distribution of 
fair values to the probability distribution of credit risk exposures.
    Expected operational loss (EOL) means the expected value of the 
distribution of potential aggregate operational losses, as generated by 
the national bank's or Federal savings association's operational risk 
quantification system using a one-year horizon.
    Expected positive exposure (EPE) means the weighted average over 
time of expected (non-negative) exposures to a counterparty where the 
weights are the proportion of the time interval that an individual 
expected exposure represents. When calculating risk-based capital 
requirements, the average is taken over a one-year horizon.
    Exposure at default (EAD) means:
    (1) For the on-balance sheet component of a wholesale exposure or 
segment of retail exposures (other than an OTC derivative contract, a 
repo-style transaction or eligible margin loan for which the national 
bank or Federal savings association determines EAD under Sec.  3.132, a 
cleared transaction, or default fund contribution), EAD means the 
national bank's or Federal savings association's carrying value 
(including net accrued but unpaid interest and fees) for the exposure or 
segment less any allocated transfer risk reserve for the exposure or 
segment.
    (2) For the off-balance sheet component of a wholesale exposure or 
segment of retail exposures (other than an OTC derivative contract, a 
repo-style transaction or eligible margin loan for which the national 
bank or Federal savings association determines EAD under Sec.  3.132, 
cleared transaction, or default fund contribution) in the form of a loan 
commitment, line of credit, trade-related letter of credit, or 
transaction-related contingency, EAD means the national bank's or 
Federal savings association's best estimate of net additions to the 
outstanding amount owed the national bank or Federal savings 
association, including estimated future additional draws of principal 
and accrued but unpaid interest and fees, that are likely to occur over 
a one-year horizon assuming the wholesale exposure or the retail 
exposures in the segment were to go into default. This estimate of net 
additions must reflect what would be expected during economic downturn 
conditions. For the purposes of this definition:
    (i) Trade-related letters of credit are short-term, self-liquidating 
instruments that are used to finance the movement of goods and are 
collateralized by the underlying goods.
    (ii) Transaction-related contingencies relate to a particular 
transaction and include, among other things, performance bonds and 
performance-based letters of credit.
    (3) For the off-balance sheet component of a wholesale exposure or 
segment of retail exposures (other than an OTC derivative contract, a 
repo-style transaction, or eligible margin loan for which the national 
bank or Federal savings association determines EAD under Sec.  3.132, 
cleared transaction, or default fund contribution) in the form of 
anything other than a loan commitment, line of credit, trade-related 
letter of credit, or transaction-related contingency, EAD means the 
notional amount of the exposure or segment.
    (4) EAD for OTC derivative contracts is calculated as described in 
Sec.  3.132. A national bank or Federal savings association also may 
determine EAD for repo-style transactions and eligible margin loans as 
described in Sec.  3.132.
    Exposure category means any of the wholesale, retail, 
securitization, or equity exposure categories.
    External operational loss event data means, with respect to a 
national bank or Federal savings association, gross operational loss 
amounts, dates, recoveries, and relevant causal information for 
operational loss events occurring at organizations other than the 
national bank or Federal savings association.

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    IMM exposure means a repo-style transaction, eligible margin loan, 
or OTC derivative for which a national bank or Federal savings 
association calculates its EAD using the internal models methodology of 
Sec.  3.132(d).
    Internal operational loss event data means, with respect to a 
national bank or Federal savings association, gross operational loss 
amounts, dates, recoveries, and relevant causal information for 
operational loss events occurring at the national bank or Federal 
savings association.
    Loss given default (LGD) means:
    (1) For a wholesale exposure, the greatest of:
    (i) Zero;
    (ii) The national bank's or Federal savings association's 
empirically based best estimate of the long-run default-weighted average 
economic loss, per dollar of EAD, the national bank or Federal savings 
association would expect to incur if the obligor (or a typical obligor 
in the loss severity grade assigned by the national bank or Federal 
savings association to the exposure) were to default within a one-year 
horizon over a mix of economic conditions, including economic downturn 
conditions; or
    (iii) The national bank's or Federal savings association's 
empirically based best estimate of the economic loss, per dollar of EAD, 
the national bank or Federal savings association would expect to incur 
if the obligor (or a typical obligor in the loss severity grade assigned 
by the national bank or Federal savings association to the exposure) 
were to default within a one-year horizon during economic downturn 
conditions.
    (2) For a segment of retail exposures, the greatest of:
    (i) Zero;
    (ii) The national bank's or Federal savings association's 
empirically based best estimate of the long-run default-weighted average 
economic loss, per dollar of EAD, the national bank or Federal savings 
association would expect to incur if the exposures in the segment were 
to default within a one-year horizon over a mix of economic conditions, 
including economic downturn conditions; or
    (iii) The national bank's or Federal savings association's 
empirically based best estimate of the economic loss, per dollar of EAD, 
the national bank or Federal savings association would expect to incur 
if the exposures in the segment were to default within a one-year 
horizon during economic downturn conditions.
    (3) The economic loss on an exposure in the event of default is all 
material credit-related losses on the exposure (including accrued but 
unpaid interest or fees, losses on the sale of collateral, direct 
workout costs, and an appropriate allocation of indirect workout costs). 
Where positive or negative cash flows on a wholesale exposure to a 
defaulted obligor or a defaulted retail exposure (including proceeds 
from the sale of collateral, workout costs, additional extensions of 
credit to facilitate repayment of the exposure, and draw-downs of unused 
credit lines) occur after the date of default, the economic loss must 
reflect the net present value of cash flows as of the default date using 
a discount rate appropriate to the risk of the defaulted exposure.
    Obligor means the legal entity or natural person contractually 
obligated on a wholesale exposure, except that a national bank or 
Federal savings association may treat the following exposures as having 
separate obligors:
    (1) Exposures to the same legal entity or natural person denominated 
in different currencies;
    (2)(i) An income-producing real estate exposure for which all or 
substantially all of the repayment of the exposure is reliant on the 
cash flows of the real estate serving as collateral for the exposure; 
the national bank or Federal savings association, in economic substance, 
does not have recourse to the borrower beyond the real estate 
collateral; and no cross-default or cross-acceleration clauses are in 
place other than clauses obtained solely out of an abundance of caution; 
and
    (ii) Other credit exposures to the same legal entity or natural 
person; and
    (3)(i) A wholesale exposure authorized under section 364 of the U.S. 
Bankruptcy Code (11 U.S.C. 364) to a legal

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entity or natural person who is a debtor-in-possession for purposes of 
Chapter 11 of the Bankruptcy Code; and
    (ii) Other credit exposures to the same legal entity or natural 
person.
    Operational loss means a loss (excluding insurance or tax effects) 
resulting from an operational loss event. Operational loss includes all 
expenses associated with an operational loss event except for 
opportunity costs, forgone revenue, and costs related to risk management 
and control enhancements implemented to prevent future operational 
losses.
    Operational loss event means an event that results in loss and is 
associated with any of the following seven operational loss event type 
categories:
    (1) Internal fraud, which means the operational loss event type 
category that comprises operational losses resulting from an act 
involving at least one internal party of a type intended to defraud, 
misappropriate property, or circumvent regulations, the law, or company 
policy excluding diversity- and discrimination-type events.
    (2) External fraud, which means the operational loss event type 
category that comprises operational losses resulting from an act by a 
third party of a type intended to defraud, misappropriate property, or 
circumvent the law. Retail credit card losses arising from non-
contractual, third-party-initiated fraud (for example, identity theft) 
are external fraud operational losses. All other third-party-initiated 
credit losses are to be treated as credit risk losses.
    (3) Employment practices and workplace safety, which means the 
operational loss event type category that comprises operational losses 
resulting from an act inconsistent with employment, health, or safety 
laws or agreements, payment of personal injury claims, or payment 
arising from diversity- and discrimination-type events.
    (4) Clients, products, and business practices, which means the 
operational loss event type category that comprises operational losses 
resulting from the nature or design of a product or from an 
unintentional or negligent failure to meet a professional obligation to 
specific clients (including fiduciary and suitability requirements).
    (5) Damage to physical assets, which means the operational loss 
event type category that comprises operational losses resulting from the 
loss of or damage to physical assets from natural disaster or other 
events.
    (6) Business disruption and system failures, which means the 
operational loss event type category that comprises operational losses 
resulting from disruption of business or system failures.
    (7) Execution, delivery, and process management, which means the 
operational loss event type category that comprises operational losses 
resulting from failed transaction processing or process management or 
losses arising from relations with trade counterparties and vendors.
    Operational risk means the risk of loss resulting from inadequate or 
failed internal processes, people, and systems or from external events 
(including legal risk but excluding strategic and reputational risk).
    Operational risk exposure means the 99.9th percentile of the 
distribution of potential aggregate operational losses, as generated by 
the national bank's or Federal savings association's operational risk 
quantification system over a one-year horizon (and not incorporating 
eligible operational risk offsets or qualifying operational risk 
mitigants).
    Other retail exposure means an exposure (other than a securitization 
exposure, an equity exposure, a residential mortgage exposure, a pre-
sold construction loan, a qualifying revolving exposure, or the residual 
value portion of a lease exposure) that is managed as part of a segment 
of exposures with homogeneous risk characteristics, not on an 
individual-exposure basis, and is either:
    (1) An exposure to an individual for non-business purposes; or
    (2) An exposure to an individual or company for business purposes if 
the national bank's or Federal savings association's consolidated 
business credit exposure to the individual or company is $1 million or 
less.
    Probability of default (PD) means:

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    (1) For a wholesale exposure to a non-defaulted obligor, the 
national bank's or Federal savings association's empirically based best 
estimate of the long-run average one-year default rate for the rating 
grade assigned by the national bank or Federal savings association to 
the obligor, capturing the average default experience for obligors in 
the rating grade over a mix of economic conditions (including economic 
downturn conditions) sufficient to provide a reasonable estimate of the 
average one-year default rate over the economic cycle for the rating 
grade.
    (2) For a segment of non-defaulted retail exposures, the national 
bank's or Federal savings association's empirically based best estimate 
of the long-run average one-year default rate for the exposures in the 
segment, capturing the average default experience for exposures in the 
segment over a mix of economic conditions (including economic downturn 
conditions) sufficient to provide a reasonable estimate of the average 
one-year default rate over the economic cycle for the segment.
    (3) For a wholesale exposure to a defaulted obligor or segment of 
defaulted retail exposures, 100 percent.
    Qualifying cross-product master netting agreement means a qualifying 
master netting agreement that provides for termination and close-out 
netting across multiple types of financial transactions or qualifying 
master netting agreements in the event of a counterparty's default, 
provided that the underlying financial transactions are OTC derivative 
contracts, eligible margin loans, or repo-style transactions. In order 
to treat an agreement as a qualifying cross-product master netting 
agreement for purposes of this subpart, a national bank or Federal 
savings association must comply with the requirements of Sec.  3.3(c) of 
this part with respect to that agreement.
    Qualifying revolving exposure (QRE) means an exposure (other than a 
securitization exposure or equity exposure) to an individual that is 
managed as part of a segment of exposures with homogeneous risk 
characteristics, not on an individual-exposure basis, and:
    (1) Is revolving (that is, the amount outstanding fluctuates, 
determined largely by a borrower's decision to borrow and repay up to a 
pre-established maximum amount, except for an outstanding amount that 
the borrower is required to pay in full every month);
    (2) Is unsecured and unconditionally cancelable by the national bank 
or Federal savings association to the fullest extent permitted by 
Federal law; and
    (3)(i) Has a maximum contractual exposure amount (drawn plus 
undrawn) of up to $100,000; or
    (ii) With respect to a product with an outstanding amount that the 
borrower is required to pay in full every month, the total outstanding 
amount does not in practice exceed $100,000.
    (4) A segment of exposures that contains one or more exposures that 
fails to meet paragraph (3)(ii) of this definition must be treated as a 
segment of other retail exposures for the 24 month period following the 
month in which the total outstanding amount of one or more exposures 
individually exceeds $100,000.
    Retail exposure means a residential mortgage exposure, a qualifying 
revolving exposure, or an other retail exposure.
    Retail exposure subcategory means the residential mortgage exposure, 
qualifying revolving exposure, or other retail exposure subcategory.
    Risk parameter means a variable used in determining risk-based 
capital requirements for wholesale and retail exposures, specifically 
probability of default (PD), loss given default (LGD), exposure at 
default (EAD), or effective maturity (M).
    Scenario analysis means a systematic process of obtaining expert 
opinions from business managers and risk management experts to derive 
reasoned assessments of the likelihood and loss impact of plausible 
high-severity operational losses. Scenario analysis may include the 
well-reasoned evaluation and use of external operational loss event 
data, adjusted as appropriate to ensure relevance to a national bank's 
or Federal savings association's operational risk profile and control 
structure.
    Total wholesale and retail risk-weighted assets means the sum of:

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    (1) Risk-weighted assets for wholesale exposures that are not IMM 
exposures, cleared transactions, or default fund contributions to non-
defaulted obligors and segments of non-defaulted retail exposures;
    (2) Risk-weighted assets for wholesale exposures to defaulted 
obligors and segments of defaulted retail exposures;
    (3) Risk-weighted assets for assets not defined by an exposure 
category;
    (4) Risk-weighted assets for non-material portfolios of exposures;
    (5) Risk-weighted assets for IMM exposures (as determined in Sec.  
3.132(d));
    (6) Risk-weighted assets for cleared transactions and risk-weighted 
assets for default fund contributions (as determined in Sec.  3.133); 
and
    (7) Risk-weighted assets for unsettled transactions (as determined 
in Sec.  3.136).
    Unexpected operational loss (UOL) means the difference between the 
national bank's or Federal savings association's operational risk 
exposure and the national bank's or Federal savings association's 
expected operational loss.
    Unit of measure means the level (for example, organizational unit or 
operational loss event type) at which the national bank's or Federal 
savings association's operational risk quantification system generates a 
separate distribution of potential operational losses.
    Wholesale exposure means a credit exposure to a company, natural 
person, sovereign, or governmental entity (other than a securitization 
exposure, retail exposure, pre-sold construction loan, or equity 
exposure).
    Wholesale exposure subcategory means the HVCRE or non-HVCRE 
wholesale exposure subcategory.

                              Qualification



Sec.  3.121  Qualification process.

    (a) Timing. (1) A national bank or Federal savings association that 
is described in Sec.  3.100(b)(1)(i) through (iv) must adopt a written 
implementation plan no later than six months after the date the national 
bank or Federal savings association meets a criterion in that section. 
The implementation plan must incorporate an explicit start date no later 
than 36 months after the date the national bank or Federal savings 
association meets at least one criterion under Sec.  3.100(b)(1)(i) 
through (iv). The OCC may extend the start date.
    (2) A national bank or Federal savings association that elects to be 
subject to this appendix under Sec.  3.100(b)(1)(v) must adopt a written 
implementation plan.
    (b) Implementation plan. (1) The national bank's or Federal savings 
association's implementation plan must address in detail how the 
national bank or Federal savings association complies, or plans to 
comply, with the qualification requirements in Sec.  3.122. The national 
bank or Federal savings association also must maintain a comprehensive 
and sound planning and governance process to oversee the implementation 
efforts described in the plan. At a minimum, the plan must:
    (i) Comprehensively address the qualification requirements in Sec.  
3.122 for the national bank or Federal savings association and each 
consolidated subsidiary (U.S. and foreign-based) of the national bank or 
Federal savings association with respect to all portfolios and exposures 
of the national bank or Federal savings association and each of its 
consolidated subsidiaries;
    (ii) Justify and support any proposed temporary or permanent 
exclusion of business lines, portfolios, or exposures from the 
application of the advanced approaches in this subpart (which business 
lines, portfolios, and exposures must be, in the aggregate, immaterial 
to the national bank or Federal savings association);
    (iii) Include the national bank's or Federal savings association's 
self-assessment of:
    (A) The national bank's or Federal savings association's current 
status in meeting the qualification requirements in Sec.  3.122; and
    (B) The consistency of the national bank's or Federal savings 
association's current practices with the OCC's supervisory guidance on 
the qualification requirements;
    (iv) Based on the national bank's or Federal savings association's 
self-assessment, identify and describe the areas in which the national 
bank or Federal savings association proposes to undertake additional 
work to comply

[[Page 130]]

with the qualification requirements in Sec.  3.122 or to improve the 
consistency of the national bank's or Federal savings association's 
current practices with the OCC's supervisory guidance on the 
qualification requirements (gap analysis);
    (v) Describe what specific actions the national bank or Federal 
savings association will take to address the areas identified in the gap 
analysis required by paragraph (b)(1)(iv) of this section;
    (vi) Identify objective, measurable milestones, including delivery 
dates and a date when the national bank's or Federal savings 
association's implementation of the methodologies described in this 
subpart will be fully operational;
    (vii) Describe resources that have been budgeted and are available 
to implement the plan; and
    (viii) Receive approval of the national bank's or Federal savings 
association's board of directors.
    (2) The national bank or Federal savings association must submit the 
implementation plan, together with a copy of the minutes of the board of 
directors' approval, to the OCC at least 60 days before the national 
bank or Federal savings association proposes to begin its parallel run, 
unless the OCC waives prior notice.
    (c) Parallel run. Before determining its risk-weighted assets under 
this subpart and following adoption of the implementation plan, the 
national bank or Federal savings association must conduct a satisfactory 
parallel run. A satisfactory parallel run is a period of no less than 
four consecutive calendar quarters during which the national bank or 
Federal savings association complies with the qualification requirements 
in Sec.  3.122 to the satisfaction of the OCC. During the parallel run, 
the national bank or Federal savings association must report to the OCC 
on a calendar quarterly basis its risk-based capital ratios determined 
in accordance with Sec.  3.10(b)(1) through (3) and Sec.  3.10(d)(1) 
through (3). During this period, the national bank's or Federal savings 
association's minimum risk-based capital ratios are determined as set 
forth in subpart D of this part.
    (d) Approval to calculate risk-based capital requirements under this 
subpart. The OCC will notify the national bank or Federal savings 
association of the date that the national bank or Federal savings 
association must begin to use this subpart for purposes of Sec.  3.10 if 
the OCC determines that:
    (1) The national bank or Federal savings association fully complies 
with all the qualification requirements in Sec.  3.122;
    (2) The national bank or Federal savings association has conducted a 
satisfactory parallel run under paragraph (c) of this section; and
    (3) The national bank or Federal savings association has an adequate 
process to ensure ongoing compliance with the qualification requirements 
in Sec.  3.122.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 86 FR 731, Jan. 6, 
2021]



Sec.  3.122  Qualification requirements.

    (a) Process and systems requirements. (1) A national bank or Federal 
savings association must have a rigorous process for assessing its 
overall capital adequacy in relation to its risk profile and a 
comprehensive strategy for maintaining an appropriate level of capital.
    (2) The systems and processes used by a national bank or Federal 
savings association for risk-based capital purposes under this subpart 
must be consistent with the national bank's or Federal savings 
association's internal risk management processes and management 
information reporting systems.
    (3) Each national bank or Federal savings association must have an 
appropriate infrastructure with risk measurement and management 
processes that meet the qualification requirements of this section and 
are appropriate given the national bank's or Federal savings 
association's size and level of complexity. Regardless of whether the 
systems and models that generate the risk parameters necessary for 
calculating a national bank's or Federal savings association's risk-
based capital requirements are located at any affiliate of the national 
bank or Federal savings association, the national bank or Federal 
savings association itself must ensure that the risk parameters and 
reference data used to

[[Page 131]]

determine its risk-based capital requirements are representative of long 
run experience with respect to its own credit risk and operational risk 
exposures.
    (b) Risk rating and segmentation systems for wholesale and retail 
exposures. (1)(i) A national bank or Federal savings association must 
have an internal risk rating and segmentation system that accurately, 
reliably, and meaningfully differentiates among degrees of credit risk 
for the national bank's or Federal savings association's wholesale and 
retail exposures. When assigning an internal risk rating, a national 
bank or Federal savings association may consider a third-party 
assessment of credit risk, provided that the national bank's or Federal 
savings association's internal risk rating assignment does not rely 
solely on the external assessment.
    (ii) If a national bank or Federal savings association uses multiple 
rating or segmentation systems, the national bank's or Federal savings 
association's rationale for assigning an obligor or exposure to a 
particular system must be documented and applied in a manner that best 
reflects the obligor's or exposure's level of risk. A national bank or 
Federal savings association must not inappropriately allocate obligors 
or exposures across systems to minimize regulatory capital requirements.
    (iii) In assigning ratings to wholesale obligors and exposures, 
including loss severity ratings grades to wholesale exposures, and 
assigning retail exposures to retail segments, a national bank or 
Federal savings association must use all relevant and material 
information and ensure that the information is current.
    (iv) When assigning an obligor to a PD rating or retail exposure to 
a PD segment, a national bank or Federal savings association must assess 
the obligor or retail borrower's ability and willingness to 
contractually perform, taking a conservative view of projected 
information.
    (2) For wholesale exposures:
    (i) A national bank or Federal savings association must have an 
internal risk rating system that accurately and reliably assigns each 
obligor to a single rating grade (reflecting the obligor's likelihood of 
default). A national bank or Federal savings association may elect, 
however, not to assign to a rating grade an obligor to whom the national 
bank or Federal savings association extends credit based solely on the 
financial strength of a guarantor, provided that all of the national 
bank's or Federal savings association's exposures to the obligor are 
fully covered by eligible guarantees, the national bank or Federal 
savings association applies the PD substitution approach in Sec.  
3.134(c)(1) to all exposures to that obligor, and the national bank or 
Federal savings association immediately assigns the obligor to a rating 
grade if a guarantee can no longer be recognized under this part. The 
national bank's or Federal savings association's wholesale obligor 
rating system must have at least seven discrete rating grades for non-
defaulted obligors and at least one rating grade for defaulted obligors.
    (ii) Unless the national bank or Federal savings association has 
chosen to directly assign LGD estimates to each wholesale exposure, the 
national bank or Federal savings association must have an internal risk 
rating system that accurately and reliably assigns each wholesale 
exposure to a loss severity rating grade (reflecting the national bank's 
or Federal savings association's estimate of the LGD of the exposure). A 
national bank or Federal savings association employing loss severity 
rating grades must have a sufficiently granular loss severity grading 
system to avoid grouping together exposures with widely ranging LGDs.
    (iii) A national bank or Federal savings association must have an 
effective process to obtain and update in a timely manner relevant and 
material information on obligor and exposure characteristics that affect 
PD, LGD and EAD.
    (3) For retail exposures:
    (i) A national bank or Federal savings association must have an 
internal system that groups retail exposures into the appropriate retail 
exposure subcategory and groups the retail exposures in each retail 
exposure subcategory into separate segments with homogeneous risk 
characteristics that provide a meaningful differentiation of risk. The 
national bank's or Federal savings association's system must

[[Page 132]]

identify and group in separate segments by subcategories exposures 
identified in Sec.  3.131(c)(2)(ii) and (iii).
    (ii) A national bank or Federal savings association must have an 
internal system that captures all relevant exposure risk 
characteristics, including borrower credit score, product and collateral 
types, as well as exposure delinquencies, and must consider cross-
collateral provisions, where present.
    (iii) The national bank or Federal savings association must review 
and, if appropriate, update assignments of individual retail exposures 
to segments and the loss characteristics and delinquency status of each 
identified risk segment. These reviews must occur whenever the national 
bank or Federal savings association receives new material information, 
but generally no less frequently than quarterly, and, in all cases, at 
least annually.
    (4) The national bank's or Federal savings association's internal 
risk rating policy for wholesale exposures must describe the national 
bank's or Federal savings association's rating philosophy (that is, must 
describe how wholesale obligor rating assignments are affected by the 
national bank's or Federal savings association's choice of the range of 
economic, business, and industry conditions that are considered in the 
obligor rating process).
    (5) The national bank's or Federal savings association's internal 
risk rating system for wholesale exposures must provide for the review 
and update (as appropriate) of each obligor rating and (if applicable) 
each loss severity rating whenever the national bank or Federal savings 
association obtains relevant and material information on the obligor or 
exposure that affects PD, LGD and EAD, but no less frequently than 
annually.
    (c) Quantification of risk parameters for wholesale and retail 
exposures. (1) The national bank or Federal savings association must 
have a comprehensive risk parameter quantification process that produces 
accurate, timely, and reliable estimates of the risk parameters on a 
consistent basis for the national bank's or Federal savings 
association's wholesale and retail exposures.
    (2) A national bank's or Federal savings association's estimates of 
PD, LGD, and EAD must incorporate all relevant, material, and available 
data that is reflective of the national bank's or Federal savings 
association's actual wholesale and retail exposures and of sufficient 
quality to support the determination of risk-based capital requirements 
for the exposures. In particular, the population of exposures in the 
data used for estimation purposes, the lending standards in use when the 
data were generated, and other relevant characteristics, should closely 
match or be comparable to the national bank's or Federal savings 
association's exposures and standards. In addition, a national bank or 
Federal savings association must:
    (i) Demonstrate that its estimates are representative of long run 
experience, including periods of economic downturn conditions, whether 
internal or external data are used;
    (ii) Take into account any changes in lending practice or the 
process for pursuing recoveries over the observation period;
    (iii) Promptly reflect technical advances, new data, and other 
information as they become available;
    (iv) Demonstrate that the data used to estimate risk parameters 
support the accuracy and robustness of those estimates; and
    (v) Demonstrate that its estimation technique performs well in out-
of-sample tests whenever possible.
    (3) The national bank's or Federal savings association's risk 
parameter quantification process must produce appropriately conservative 
risk parameter estimates where the national bank or Federal savings 
association has limited relevant data, and any adjustments that are part 
of the quantification process must not result in a pattern of bias 
toward lower risk parameter estimates.
    (4) The national bank's or Federal savings association's risk 
parameter estimation process should not rely on the possibility of U.S. 
government financial assistance, except for the financial assistance 
that the U.S. government has a legally binding commitment to provide.
    (5) The national bank or Federal savings association must be able to 
demonstrate which variables have been

[[Page 133]]

found to be statistically significant with regard to EAD. The national 
bank's or Federal savings association's EAD estimates must reflect its 
specific policies and strategies with regard to account management, 
including account monitoring and payment processing, and its ability and 
willingness to prevent further drawdowns in circumstances short of 
payment default. The national bank or Federal savings association must 
have adequate systems and procedures in place to monitor current 
outstanding amounts against committed lines, and changes in outstanding 
amounts per obligor and obligor rating grade and per retail segment. The 
national bank or Federal savings association must be able to monitor 
outstanding amounts on a daily basis.
    (6) At a minimum, PD estimates for wholesale obligors and retail 
segments must be based on at least five years of default data. LGD 
estimates for wholesale exposures must be based on at least seven years 
of loss severity data, and LGD estimates for retail segments must be 
based on at least five years of loss severity data. EAD estimates for 
wholesale exposures must be based on at least seven years of exposure 
amount data, and EAD estimates for retail segments must be based on at 
least five years of exposure amount data. If the national bank or 
Federal savings association has relevant and material reference data 
that span a longer period of time than the minimum time periods 
specified above, the national bank or Federal savings association must 
incorporate such data in its estimates, provided that it does not place 
undue weight on periods of favorable or benign economic conditions 
relative to periods of economic downturn conditions.
    (7) Default, loss severity, and exposure amount data must include 
periods of economic downturn conditions, or the national bank or Federal 
savings association must adjust its estimates of risk parameters to 
compensate for the lack of data from periods of economic downturn 
conditions.
    (8) The national bank's or Federal savings association's PD, LGD, 
and EAD estimates must be based on the definition of default in Sec.  
3.101.
    (9) If a national bank or Federal savings association uses internal 
data obtained prior to becoming subject to this subpart E or external 
data to arrive at PD, LGD, or EAD estimates, the national bank or 
Federal savings association must demonstrate to the OCC that the 
national bank or Federal savings association has made appropriate 
adjustments if necessary to be consistent with the definition of default 
in Sec.  3.101. Internal data obtained after the national bank or 
Federal savings association becomes subject to this subpart E must be 
consistent with the definition of default in Sec.  3.101.
    (10) The national bank or Federal savings association must review 
and update (as appropriate) its risk parameters and its risk parameter 
quantification process at least annually.
    (11) The national bank or Federal savings association must, at least 
annually, conduct a comprehensive review and analysis of reference data 
to determine relevance of the reference data to the national bank's or 
Federal savings association's exposures, quality of reference data to 
support PD, LGD, and EAD estimates, and consistency of reference data to 
the definition of default in Sec.  3.101.
    (d) Counterparty credit risk model. A national bank or Federal 
savings association must obtain the prior written approval of the OCC 
under Sec.  3.132 to use the internal models methodology for 
counterparty credit risk and the advanced CVA approach for the CVA 
capital requirement.
    (e) Double default treatment. A national bank or Federal savings 
association must obtain the prior written approval of the OCC under 
Sec.  3.135 to use the double default treatment.
    (f) Equity exposures model. A national bank or Federal savings 
association must obtain the prior written approval of the OCC under 
Sec.  3.153 to use the internal models approach for equity exposures.
    (g) Operational risk. (1) Operational risk management processes. A 
national bank or Federal savings association must:
    (i) Have an operational risk management function that:
    (A) Is independent of business line management; and

[[Page 134]]

    (B) Is responsible for designing, implementing, and overseeing the 
national bank's or Federal savings association's operational risk data 
and assessment systems, operational risk quantification systems, and 
related processes;
    (ii) Have and document a process (which must capture business 
environment and internal control factors affecting the national bank's 
or Federal savings association's operational risk profile) to identify, 
measure, monitor, and control operational risk in the national bank's or 
Federal savings association's products, activities, processes, and 
systems; and
    (iii) Report operational risk exposures, operational loss events, 
and other relevant operational risk information to business unit 
management, senior management, and the board of directors (or a 
designated committee of the board).
    (2) Operational risk data and assessment systems. A national bank or 
Federal savings association must have operational risk data and 
assessment systems that capture operational risks to which the national 
bank or Federal savings association is exposed. The national bank's or 
Federal savings association's operational risk data and assessment 
systems must:
    (i) Be structured in a manner consistent with the national bank's or 
Federal savings association's current business activities, risk profile, 
technological processes, and risk management processes; and
    (ii) Include credible, transparent, systematic, and verifiable 
processes that incorporate the following elements on an ongoing basis:
    (A) Internal operational loss event data. The national bank or 
Federal savings association must have a systematic process for capturing 
and using internal operational loss event data in its operational risk 
data and assessment systems.
    (1) The national bank's or Federal savings association's operational 
risk data and assessment systems must include a historical observation 
period of at least five years for internal operational loss event data 
(or such shorter period approved by the OCC to address transitional 
situations, such as integrating a new business line).
    (2) The national bank or Federal savings association must be able to 
map its internal operational loss event data into the seven operational 
loss event type categories.
    (3) The national bank or Federal savings association may refrain 
from collecting internal operational loss event data for individual 
operational losses below established dollar threshold amounts if the 
national bank or Federal savings association can demonstrate to the 
satisfaction of the OCC that the thresholds are reasonable, do not 
exclude important internal operational loss event data, and permit the 
national bank or Federal savings association to capture substantially 
all the dollar value of the national bank's or Federal savings 
association's operational losses.
    (B) External operational loss event data. The national bank or 
Federal savings association must have a systematic process for 
determining its methodologies for incorporating external operational 
loss event data into its operational risk data and assessment systems.
    (C) Scenario analysis. The national bank or Federal savings 
association must have a systematic process for determining its 
methodologies for incorporating scenario analysis into its operational 
risk data and assessment systems.
    (D) Business environment and internal control factors. The national 
bank or Federal savings association must incorporate business 
environment and internal control factors into its operational risk data 
and assessment systems. The national bank or Federal savings association 
must also periodically compare the results of its prior business 
environment and internal control factor assessments against its actual 
operational losses incurred in the intervening period.
    (3) Operational risk quantification systems. (i) The national bank's 
or Federal savings association's operational risk quantification 
systems:
    (A) Must generate estimates of the national bank's or Federal 
savings association's operational risk exposure

[[Page 135]]

using its operational risk data and assessment systems;
    (B) Must employ a unit of measure that is appropriate for the 
national bank's or Federal savings association's range of business 
activities and the variety of operational loss events to which it is 
exposed, and that does not combine business activities or operational 
loss events with demonstrably different risk profiles within the same 
loss distribution;
    (C) Must include a credible, transparent, systematic, and verifiable 
approach for weighting each of the four elements, described in paragraph 
(g)(2)(ii) of this section, that a national bank or Federal savings 
association is required to incorporate into its operational risk data 
and assessment systems;
    (D) May use internal estimates of dependence among operational 
losses across and within units of measure if the national bank or 
Federal savings association can demonstrate to the satisfaction of the 
OCC that its process for estimating dependence is sound, robust to a 
variety of scenarios, and implemented with integrity, and allows for 
uncertainty surrounding the estimates. If the national bank or Federal 
savings association has not made such a demonstration, it must sum 
operational risk exposure estimates across units of measure to calculate 
its total operational risk exposure; and
    (E) Must be reviewed and updated (as appropriate) whenever the 
national bank or Federal savings association becomes aware of 
information that may have a material effect on the national bank's or 
Federal savings association's estimate of operational risk exposure, but 
the review and update must occur no less frequently than annually.
    (ii) With the prior written approval of the OCC, a national bank or 
Federal savings association may generate an estimate of its operational 
risk exposure using an alternative approach to that specified in 
paragraph (g)(3)(i) of this section. A national bank or Federal savings 
association proposing to use such an alternative operational risk 
quantification system must submit a proposal to the OCC. In determining 
whether to approve a national bank's or Federal savings association's 
proposal to use an alternative operational risk quantification system, 
the OCC will consider the following principles:
    (A) Use of the alternative operational risk quantification system 
will be allowed only on an exception basis, considering the size, 
complexity, and risk profile of the national bank or Federal savings 
association;
    (B) The national bank or Federal savings association must 
demonstrate that its estimate of its operational risk exposure generated 
under the alternative operational risk quantification system is 
appropriate and can be supported empirically; and
    (C) A national bank or Federal savings association must not use an 
allocation of operational risk capital requirements that includes 
entities other than depository institutions or the benefits of 
diversification across entities.
    (h) Data management and maintenance. (1) A national bank or Federal 
savings association must have data management and maintenance systems 
that adequately support all aspects of its advanced systems and the 
timely and accurate reporting of risk-based capital requirements.
    (2) A national bank or Federal savings association must retain data 
using an electronic format that allows timely retrieval of data for 
analysis, validation, reporting, and disclosure purposes.
    (3) A national bank or Federal savings association must retain 
sufficient data elements related to key risk drivers to permit adequate 
monitoring, validation, and refinement of its advanced systems.
    (i) Control, oversight, and validation mechanisms. (1) The national 
bank's or Federal savings association's senior management must ensure 
that all components of the national bank's or Federal savings 
association's advanced systems function effectively and comply with the 
qualification requirements in this section.
    (2) The national bank's or Federal savings association's board of 
directors (or a designated committee of the board) must at least 
annually review the effectiveness of, and approve, the

[[Page 136]]

national bank's or Federal savings association's advanced systems.
    (3) A national bank or Federal savings association must have an 
effective system of controls and oversight that:
    (i) Ensures ongoing compliance with the qualification requirements 
in this section;
    (ii) Maintains the integrity, reliability, and accuracy of the 
national bank's or Federal savings association's advanced systems; and
    (iii) Includes adequate governance and project management processes.
    (4) The national bank or Federal savings association must validate, 
on an ongoing basis, its advanced systems. The national bank's or 
Federal savings association's validation process must be independent of 
the advanced systems' development, implementation, and operation, or the 
validation process must be subjected to an independent review of its 
adequacy and effectiveness. Validation must include:
    (i) An evaluation of the conceptual soundness of (including 
developmental evidence supporting) the advanced systems;
    (ii) An ongoing monitoring process that includes verification of 
processes and benchmarking; and
    (iii) An outcomes analysis process that includes backtesting.
    (5) The national bank or Federal savings association must have an 
internal audit function or equivalent function that is independent of 
business-line management that at least annually:
    (i) Reviews the national bank's or Federal savings association's 
advanced systems and associated operations, including the operations of 
its credit function and estimations of PD, LGD, and EAD;
    (ii) Assesses the effectiveness of the controls supporting the 
national bank's or Federal savings association's advanced systems; and
    (iii) Documents and reports its findings to the national bank's or 
Federal savings association's board of directors (or a committee 
thereof).
    (6) The national bank or Federal savings association must 
periodically stress test its advanced systems. The stress testing must 
include a consideration of how economic cycles, especially downturns, 
affect risk-based capital requirements (including migration across 
rating grades and segments and the credit risk mitigation benefits of 
double default treatment).
    (j) Documentation. The national bank or Federal savings association 
must adequately document all material aspects of its advanced systems.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41415, July 15, 
2015]



Sec.  3.123  Ongoing qualification.

    (a) Changes to advanced systems. A national bank or Federal savings 
association must meet all the qualification requirements in Sec.  3.122 
on an ongoing basis. A national bank or Federal savings association must 
notify the OCC when the national bank or Federal savings association 
makes any change to an advanced system that would result in a material 
change in the national bank's or Federal savings association's advanced 
approaches total risk-weighted asset amount for an exposure type or when 
the national bank or Federal savings association makes any significant 
change to its modeling assumptions.
    (b) Failure to comply with qualification requirements. (1) If the 
OCC determines that a national bank or Federal savings association that 
uses this subpart and that has conducted a satisfactory parallel run 
fails to comply with the qualification requirements in Sec.  3.122, the 
OCC will notify the national bank or Federal savings association in 
writing of the national bank's or Federal savings association's failure 
to comply.
    (2) The national bank or Federal savings association must establish 
and submit a plan satisfactory to the OCC to return to compliance with 
the qualification requirements.
    (3) In addition, if the OCC determines that the national bank's or 
Federal savings association's advanced approaches total risk-weighted 
assets are not commensurate with the national bank's or Federal savings 
association's credit, market, operational, or other risks, the OCC may 
require such a national bank or Federal savings association to calculate 
its advanced approaches total risk-weighted assets with any 
modifications provided by the OCC.

[[Page 137]]



Sec.  3.124  Merger and acquisition transitional arrangements.

    (a) Mergers and acquisitions of companies without advanced systems. 
If a national bank or Federal savings association merges with or 
acquires a company that does not calculate its risk-based capital 
requirements using advanced systems, the national bank or Federal 
savings association may use subpart D of this part to determine the 
risk-weighted asset amounts for the merged or acquired company's 
exposures for up to 24 months after the calendar quarter during which 
the merger or acquisition consummates. The OCC may extend this 
transition period for up to an additional 12 months. Within 90 days of 
consummating the merger or acquisition, the national bank or Federal 
savings association must submit to the OCC an implementation plan for 
using its advanced systems for the acquired company. During the period 
in which subpart D of this part applies to the merged or acquired 
company, any ALLL or AACL, as applicable, net of allocated transfer risk 
reserves established pursuant to 12 U.S.C. 3904, associated with the 
merged or acquired company's exposures may be included in the acquiring 
national bank's or Federal savings association's tier 2 capital up to 
1.25 percent of the acquired company's risk-weighted assets. All general 
allowances of the merged or acquired company must be excluded from the 
national bank's or Federal savings association's eligible credit 
reserves. In addition, the risk-weighted assets of the merged or 
acquired company are not included in the national bank's or Federal 
savings association's credit-risk-weighted assets but are included in 
total risk-weighted assets. If a national bank or Federal savings 
association relies on this paragraph (a), the national bank or Federal 
savings association must disclose publicly the amounts of risk-weighted 
assets and qualifying capital calculated under this subpart for the 
acquiring national bank or Federal savings association and under subpart 
D of this part for the acquired company.
    (b) Mergers and acquisitions of companies with advanced systems. (1) 
If a national bank or Federal savings association merges with or 
acquires a company that calculates its risk-based capital requirements 
using advanced systems, the national bank or Federal savings association 
may use the acquired company's advanced systems to determine total risk-
weighted assets for the merged or acquired company's exposures for up to 
24 months after the calendar quarter during which the acquisition or 
merger consummates. The OCC may extend this transition period for up to 
an additional 12 months. Within 90 days of consummating the merger or 
acquisition, the national bank or Federal savings association must 
submit to the OCC an implementation plan for using its advanced systems 
for the merged or acquired company.
    (2) If the acquiring national bank or Federal savings association is 
not subject to the advanced approaches in this subpart at the time of 
acquisition or merger, during the period when subpart D of this part 
applies to the acquiring national bank or Federal savings association, 
the ALLL or AACL, as applicable associated with the exposures of the 
merged or acquired company may not be directly included in tier 2 
capital. Rather, any excess eligible credit reserves associated with the 
merged or acquired company's exposures may be included in the national 
bank's or Federal savings association's tier 2 capital up to 0.6 percent 
of the credit-risk-weighted assets associated with those exposures.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 4238, Feb. 14, 
2019]



Sec. Sec.  3.125-3.130  [Reserved]

              Risk-Weighted Assets for General Credit Risk



Sec.  3.131  Mechanics for calculating total wholesale and retail 
risk-weighted assets.

    (a) Overview. A national bank or Federal savings association must 
calculate its total wholesale and retail risk-weighted asset amount in 
four distinct phases:
    (1) Phase 1--categorization of exposures;
    (2) Phase 2--assignment of wholesale obligors and exposures to 
rating grades and segmentation of retail exposures;

[[Page 138]]

    (3) Phase 3--assignment of risk parameters to wholesale exposures 
and segments of retail exposures; and
    (4) Phase 4--calculation of risk-weighted asset amounts.
    (b) Phase 1--Categorization. The national bank or Federal savings 
association must determine which of its exposures are wholesale 
exposures, retail exposures, securitization exposures, or equity 
exposures. The national bank or Federal savings association must 
categorize each retail exposure as a residential mortgage exposure, a 
QRE, or an other retail exposure. The national bank or Federal savings 
association must identify which wholesale exposures are HVCRE exposures, 
sovereign exposures, OTC derivative contracts, repo-style transactions, 
eligible margin loans, eligible purchased wholesale exposures, cleared 
transactions, default fund contributions, unsettled transactions to 
which Sec.  3.136 applies, and eligible guarantees or eligible credit 
derivatives that are used as credit risk mitigants. The national bank or 
Federal savings association must identify any on-balance sheet asset 
that does not meet the definition of a wholesale, retail, equity, or 
securitization exposure, as well as any non-material portfolio of 
exposures described in paragraph (e)(4) of this section.
    (c) Phase 2--Assignment of wholesale obligors and exposures to 
rating grades and retail exposures to segments--(1) Assignment of 
wholesale obligors and exposures to rating grades. (i) The national bank 
or Federal savings association must assign each obligor of a wholesale 
exposure to a single obligor rating grade and must assign each wholesale 
exposure to which it does not directly assign an LGD estimate to a loss 
severity rating grade.
    (ii) The national bank or Federal savings association must identify 
which of its wholesale obligors are in default.
    (2) Segmentation of retail exposures. (i) The national bank or 
Federal savings association must group the retail exposures in each 
retail subcategory into segments that have homogeneous risk 
characteristics.
    (ii) The national bank or Federal savings association must identify 
which of its retail exposures are in default. The national bank or 
Federal savings association must segment defaulted retail exposures 
separately from non-defaulted retail exposures.
    (iii) If the national bank or Federal savings association determines 
the EAD for eligible margin loans using the approach in Sec.  3.132(b), 
the national bank or Federal savings association must identify which of 
its retail exposures are eligible margin loans for which the national 
bank or Federal savings association uses this EAD approach and must 
segment such eligible margin loans separately from other retail 
exposures.
    (3) Eligible purchased wholesale exposures. A national bank or 
Federal savings association may group its eligible purchased wholesale 
exposures into segments that have homogeneous risk characteristics. A 
national bank or Federal savings association must use the wholesale 
exposure formula in Table 1 of this section to determine the risk-based 
capital requirement for each segment of eligible purchased wholesale 
exposures.
    (d) Phase 3--Assignment of risk parameters to wholesale exposures 
and segments of retail exposures--(1) Quantification process. Subject to 
the limitations in this paragraph (d), the national bank or Federal 
savings association must:
    (i) Associate a PD with each wholesale obligor rating grade;
    (ii) Associate an LGD with each wholesale loss severity rating grade 
or assign an LGD to each wholesale exposure;
    (iii) Assign an EAD and M to each wholesale exposure; and
    (iv) Assign a PD, LGD, and EAD to each segment of retail exposures.
    (2) Floor on PD assignment. The PD for each wholesale obligor or 
retail segment may not be less than 0.03 percent, except for exposures 
to or directly and unconditionally guaranteed by a sovereign entity, the 
Bank for International Settlements, the International Monetary Fund, the 
European Commission, the European Central Bank, the European Stability 
Mechanism, the European Financial Stability Facility, or a multilateral 
development bank, to which the national bank or Federal savings 
association assigns a rating grade associated with a PD of less than 
0.03 percent.

[[Page 139]]

    (3) Floor on LGD estimation. The LGD for each segment of residential 
mortgage exposures may not be less than 10 percent, except for segments 
of residential mortgage exposures for which all or substantially all of 
the principal of each exposure is either:
    (i) Directly and unconditionally guaranteed by the full faith and 
credit of a sovereign entity; or
    (ii) Guaranteed by a contingent obligation of the U.S. government or 
its agencies, the enforceability of which is dependent upon some 
affirmative action on the part of the beneficiary of the guarantee or a 
third party (for example, meeting servicing requirements).
    (4) Eligible purchased wholesale exposures. A national bank or 
Federal savings association must assign a PD, LGD, EAD, and M to each 
segment of eligible purchased wholesale exposures. If the national bank 
or Federal savings association can estimate ECL (but not PD or LGD) for 
a segment of eligible purchased wholesale exposures, the national bank 
or Federal savings association must assume that the LGD of the segment 
equals 100 percent and that the PD of the segment equals ECL divided by 
EAD. The estimated ECL must be calculated for the exposures without 
regard to any assumption of recourse or guarantees from the seller or 
other parties.
    (5) Credit risk mitigation: credit derivatives, guarantees, and 
collateral. (i) A national bank or Federal savings association may take 
into account the risk reducing effects of eligible guarantees and 
eligible credit derivatives in support of a wholesale exposure by 
applying the PD substitution or LGD adjustment treatment to the exposure 
as provided in Sec.  3.134 or, if applicable, applying double default 
treatment to the exposure as provided in Sec.  3.135. A national bank or 
Federal savings association may decide separately for each wholesale 
exposure that qualifies for the double default treatment under Sec.  
3.135 whether to apply the double default treatment or to use the PD 
substitution or LGD adjustment treatment without recognizing double 
default effects.
    (ii) A national bank or Federal savings association may take into 
account the risk reducing effects of guarantees and credit derivatives 
in support of retail exposures in a segment when quantifying the PD and 
LGD of the segment. In doing so, a national bank or Federal savings 
association must consider all relevant available information.
    (iii) Except as provided in paragraph (d)(6) of this section, a 
national bank or Federal savings association may take into account the 
risk reducing effects of collateral in support of a wholesale exposure 
when quantifying the LGD of the exposure, and may take into account the 
risk reducing effects of collateral in support of retail exposures when 
quantifying the PD and LGD of the segment. In order to do so, a national 
bank or Federal savings association must have established internal 
requirements for collateral management, legal certainty, and risk 
management processes.
    (6) EAD for OTC derivative contracts, repo-style transactions, and 
eligible margin loans. A national bank or Federal savings association 
must calculate its EAD for an OTC derivative contract as provided in 
Sec.  3.132 (c) and (d). A national bank or Federal savings association 
may take into account the risk-reducing effects of financial collateral 
in support of a repo-style transaction or eligible margin loan and of 
any collateral in support of a repo-style transaction that is included 
in the national bank's or Federal savings association's VaR-based 
measure under subpart F of this part through an adjustment to EAD as 
provided in Sec.  3.132(b) and (d). A national bank or Federal savings 
association that takes collateral into account through such an 
adjustment to EAD under Sec.  3.132 may not reflect such collateral in 
LGD.
    (7) Effective maturity. An exposure's M must be no greater than five 
years and no less than one year, except that an exposure's M must be no 
less than one day if the exposure is a trade related letter of credit, 
or if the exposure has an original maturity of less than one year and is 
not part of a national bank's or Federal savings association's ongoing 
financing of the obligor. An exposure is not part of a national bank's 
or Federal savings association's ongoing financing of the obligor if the

[[Page 140]]

national bank or Federal savings association:
    (i) Has a legal and practical ability not to renew or roll over the 
exposure in the event of credit deterioration of the obligor;
    (ii) Makes an independent credit decision at the inception of the 
exposure and at every renewal or roll over; and
    (iii) Has no substantial commercial incentive to continue its credit 
relationship with the obligor in the event of credit deterioration of 
the obligor.
    (8) EAD for exposures to certain central counterparties. A national 
bank or Federal savings association may attribute an EAD of zero to 
exposures that arise from the settlement of cash transactions (such as 
equities, fixed income, spot foreign exchange, and spot commodities) 
with a central counterparty where there is no assumption of ongoing 
counterparty credit risk by the central counterparty after settlement of 
the trade and associated default fund contributions.
    (e) Phase 4--Calculation of risk-weighted assets--(1) Non-defaulted 
exposures. (i) A national bank or Federal savings association must 
calculate the dollar risk-based capital requirement for each of its 
wholesale exposures to a non-defaulted obligor (except for eligible 
guarantees and eligible credit derivatives that hedge another wholesale 
exposure, IMM exposures, cleared transactions, default fund 
contributions, unsettled transactions, and exposures to which the 
national bank or Federal savings association applies the double default 
treatment in Sec.  3.135) and segments of non-defaulted retail exposures 
by inserting the assigned risk parameters for the wholesale obligor and 
exposure or retail segment into the appropriate risk-based capital 
formula specified in Table 1 and multiplying the output of the formula 
(K) by the EAD of the exposure or segment. Alternatively, a national 
bank or Federal savings association may apply a 300 percent risk weight 
to the EAD of an eligible margin loan if the national bank or Federal 
savings association is not able to meet the OCC's requirements for 
estimation of PD and LGD for the margin loan.

[[Page 141]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.028


[[Page 142]]


[GRAPHIC] [TIFF OMITTED] TR11OC13.029

    (ii) The sum of all the dollar risk-based capital requirements for 
each wholesale exposure to a non-defaulted obligor and segment of non-
defaulted retail exposures calculated in paragraph (e)(1)(i) of this 
section and in Sec.  3.135(e) equals the total dollar risk-based capital 
requirement for those exposures and segments.
    (iii) The aggregate risk-weighted asset amount for wholesale 
exposures to non-defaulted obligors and segments of non-defaulted retail 
exposures equals the total dollar risk-based capital requirement in 
paragraph (e)(1)(ii) of this section multiplied by 12.5.
    (2) Wholesale exposures to defaulted obligors and segments of 
defaulted retail exposures--(i) Not covered by an eligible U.S. 
government guarantee: The dollar risk-based capital requirement for each 
wholesale exposure not covered by an eligible guarantee from the U.S. 
government to a defaulted obligor and each segment of defaulted retail 
exposures not covered by an eligible guarantee from the U.S. government 
equals 0.08 multiplied by the EAD of the exposure or segment.
    (ii) Covered by an eligible U.S. government guarantee: The dollar 
risk-based capital requirement for each wholesale exposure to a 
defaulted obligor covered by an eligible guarantee from the U.S. 
government and each segment of defaulted retail exposures covered by an 
eligible guarantee from the U.S. government equals the sum of:

[[Page 143]]

    (A) The sum of the EAD of the portion of each wholesale exposure to 
a defaulted obligor covered by an eligible guarantee from the U.S. 
government plus the EAD of the portion of each segment of defaulted 
retail exposures that is covered by an eligible guarantee from the U.S. 
government and the resulting sum is multiplied by 0.016, and
    (B) The sum of the EAD of the portion of each wholesale exposure to 
a defaulted obligor not covered by an eligible guarantee from the U.S. 
government plus the EAD of the portion of each segment of defaulted 
retail exposures that is not covered by an eligible guarantee from the 
U.S. government and the resulting sum is multiplied by 0.08.
    (iii) The sum of all the dollar risk-based capital requirements for 
each wholesale exposure to a defaulted obligor and each segment of 
defaulted retail exposures calculated in paragraph (e)(2)(i) of this 
section plus the dollar risk-based capital requirements each wholesale 
exposure to a defaulted obligor and for each segment of defaulted retail 
exposures calculated in paragraph (e)(2)(ii) of this section equals the 
total dollar risk-based capital requirement for those exposures and 
segments.
    (iv) The aggregate risk-weighted asset amount for wholesale 
exposures to defaulted obligors and segments of defaulted retail 
exposures equals the total dollar risk-based capital requirement 
calculated in paragraph (e)(2)(iii) of this section multiplied by 12.5.
    (3) Assets not included in a defined exposure category. (i) A 
national bank or Federal savings association may assign a risk-weighted 
asset amount of zero to cash owned and held in all offices of the 
national bank or Federal savings association or in transit and for gold 
bullion held in the national bank's or Federal savings association's own 
vaults, or held in another national bank's or Federal savings 
association's vaults on an allocated basis, to the extent the gold 
bullion assets are offset by gold bullion liabilities.
    (ii) A national bank or Federal savings association must assign a 
risk-weighted asset amount equal to 20 percent of the carrying value of 
cash items in the process of collection.
    (iii) A national bank or Federal savings association must assign a 
risk-weighted asset amount equal to 50 percent of the carrying value to 
a pre-sold construction loan unless the purchase contract is cancelled, 
in which case a national bank or Federal savings association must assign 
a risk-weighted asset amount equal to a 100 percent of the carrying 
value of the pre-sold construction loan.
    (iv) The risk-weighted asset amount for the residual value of a 
retail lease exposure equals such residual value.
    (v) The risk-weighted asset amount for DTAs arising from temporary 
differences that the national bank or Federal savings association could 
realize through net operating loss carrybacks equals the carrying value, 
netted in accordance with Sec.  3.22.
    (vi) The risk-weighted asset amount for MSAs, DTAs arising from 
temporary timing differences that the national bank or Federal savings 
association could not realize through net operating loss carrybacks, and 
significant investments in the capital of unconsolidated financial 
institutions in the form of common stock that are not deducted pursuant 
to Sec.  3.22(d) equals the amount not subject to deduction multiplied 
by 250 percent.
    (vii) The risk-weighted asset amount for any other on-balance-sheet 
asset that does not meet the definition of a wholesale, retail, 
securitization, IMM, or equity exposure, cleared transaction, or default 
fund contribution and is not subject to deduction under Sec.  3.22(a), 
(c), or (d) equals the carrying value of the asset.
    (viii) The risk-weighted asset amount for a Paycheck Protection 
Program covered loan as defined in section 7(a)(36) of the Small 
Business Act (15 U.S.C. 636(a)(36)) equals zero.
    (4) Non-material portfolios of exposures. The risk-weighted asset 
amount of a portfolio of exposures for which the national bank or 
Federal savings association has demonstrated to the OCC's satisfaction 
that the portfolio (when combined with all other portfolios of exposures 
that the national bank or Federal savings association seeks to treat 
under this paragraph (e)) is not material to the national bank or 
Federal savings association is the sum of

[[Page 144]]

the carrying values of on-balance sheet exposures plus the notional 
amounts of off-balance sheet exposures in the portfolio. For purposes of 
this paragraph (e)(4), the notional amount of an OTC derivative contract 
that is not a credit derivative is the EAD of the derivative as 
calculated in Sec.  3.132.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41416, July 15, 
2015; 84 FR 35258, July 22, 2019; 85 FR 20393, Apr. 13, 2020]



Sec.  3.132  Counterparty credit risk of repo-style transactions, 
eligible margin loans, and OTC derivative contracts.

    (a) Methodologies for collateral recognition. (1) Instead of an LGD 
estimation methodology, a national bank or Federal savings association 
may use the following methodologies to recognize the benefits of 
financial collateral in mitigating the counterparty credit risk of repo-
style transactions, eligible margin loans, collateralized OTC derivative 
contracts and single product netting sets of such transactions, and to 
recognize the benefits of any collateral in mitigating the counterparty 
credit risk of repo-style transactions that are included in a national 
bank's or Federal savings association's VaR-based measure under subpart 
F of this part:
    (i) The collateral haircut approach set forth in paragraph (b)(2) of 
this section;
    (ii) The internal models methodology set forth in paragraph (d) of 
this section; and
    (iii) For single product netting sets of repo-style transactions and 
eligible margin loans, the simple VaR methodology set forth in paragraph 
(b)(3) of this section.
    (2) A national bank or Federal savings association may use any 
combination of the three methodologies for collateral recognition; 
however, it must use the same methodology for transactions in the same 
category.
    (3) A national bank or Federal savings association must use the 
methodology in paragraph (c) of this section, or with prior written 
approval of the OCC, the internal model methodology in paragraph (d) of 
this section, to calculate EAD for an OTC derivative contract or a set 
of OTC derivative contracts subject to a qualifying master netting 
agreement. To estimate EAD for qualifying cross-product master netting 
agreements, a national bank or Federal savings association may only use 
the internal models methodology in paragraph (d) of this section.
    (4) A national bank or Federal savings association must also use the 
methodology in paragraph (e) of this section to calculate the risk-
weighted asset amounts for CVA for OTC derivatives.
    (b) EAD for eligible margin loans and repo-style transactions--(1) 
General. A national bank or Federal savings association may recognize 
the credit risk mitigation benefits of financial collateral that secures 
an eligible margin loan, repo-style transaction, or single-product 
netting set of such transactions by factoring the collateral into its 
LGD estimates for the exposure. Alternatively, a national bank or 
Federal savings association may estimate an unsecured LGD for the 
exposure, as well as for any repo-style transaction that is included in 
the national bank's or Federal savings association's VaR-based measure 
under subpart F of this part, and determine the EAD of the exposure 
using:
    (i) The collateral haircut approach described in paragraph (b)(2) of 
this section;
    (ii) For netting sets only, the simple VaR methodology described in 
paragraph (b)(3) of this section; or
    (iii) The internal models methodology described in paragraph (d) of 
this section.
    (2) Collateral haircut approach--(i) EAD equation. A national bank 
or Federal savings association may determine EAD for an eligible margin 
loan, repo-style transaction, or netting set by setting EAD equal to max

{0, [([Sigma]E - [Sigma]C) + [Sigma](Es x Hs) + 
[Sigma](Efx x Hfx)]{time} ,


where:
    (A) [Sigma]E equals the value of the exposure (the sum of the 
current fair values of all instruments, gold, and cash the national bank 
or Federal savings association has lent, sold subject to repurchase, or 
posted as collateral to the counterparty under the transaction (or 
netting set));

[[Page 145]]

    (B) [Sigma]C equals the value of the collateral (the sum of the 
current fair values of all instruments, gold, and cash the national bank 
or Federal savings association has borrowed, purchased subject to 
resale, or taken as collateral from the counterparty under the 
transaction (or netting set));
    (C) Es equals the absolute value of the net position in a 
given instrument or in gold (where the net position in a given 
instrument or in gold equals the sum of the current fair values of the 
instrument or gold the national bank or Federal savings association has 
lent, sold subject to repurchase, or posted as collateral to the 
counterparty minus the sum of the current fair values of that same 
instrument or gold the national bank or Federal savings association has 
borrowed, purchased subject to resale, or taken as collateral from the 
counterparty);
    (D) Hs equals the market price volatility haircut 
appropriate to the instrument or gold referenced in Es;
    (E) Efx equals the absolute value of the net position of 
instruments and cash in a currency that is different from the settlement 
currency (where the net position in a given currency equals the sum of 
the current fair values of any instruments or cash in the currency the 
national bank or Federal savings association has lent, sold subject to 
repurchase, or posted as collateral to the counterparty minus the sum of 
the current fair values of any instruments or cash in the currency the 
national bank or Federal savings association has borrowed, purchased 
subject to resale, or taken as collateral from the counterparty); and
    (F) Hfx equals the haircut appropriate to the mismatch 
between the currency referenced in Efx and the settlement 
currency.
    (ii) Standard supervisory haircuts. (A) Under the standard 
supervisory haircuts approach:
    (1) A national bank or Federal savings association must use the 
haircuts for market price volatility (Hs) in Table 1 to Sec.  
3.132, as adjusted in certain circumstances as provided in paragraphs 
(b)(2)(ii)(A)(3) and (4) of this section;

                                   Table 1 to Sec.   3.132--Standard Supervisory Market Price Volatility Haircuts \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Haircut (in percent) assigned based on:
                                                           ------------------------------------------------------------------------------   Investment
                                                             Sovereign issuers risk weight under     Non-sovereign issuers risk weight         grade
                     Residual maturity                           Sec.   3.32 \2\ (in percent)          under Sec.   3.32 (in percent)     securitization
                                                           ------------------------------------------------------------------------------  exposures (in
                                                                Zero       20 or 50       100           20           50          100         percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than or equal to 1 year..............................          0.5          1.0         15.0          1.0          2.0          4.0            4.0
Greater than 1 year and less than or equal to 5 years.....          2.0          3.0         15.0          4.0          6.0          8.0           12.0
Greater than 5 years......................................          4.0          6.0         15.0          8.0         12.0         16.0           24.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Main index equities (including convertible bonds) and gold.........................15.0..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
Other publicly traded equities (including convertible bonds).......................25.0..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mutual funds...................................................Highest haircut applicable to any security in
                                                                        which the fund can invest.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cash collateral held...............................................................Zero..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
Other exposure types...............................................................25.0 .........
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The market price volatility haircuts in Table 1 to Sec.   3.132 are based on a 10 business-day holding period.
\2\ Includes a foreign PSE that receives a zero percent risk weight.

    (2) For currency mismatches, a national bank or Federal savings 
association must use a haircut for foreign exchange rate volatility 
(Hfx) of 8 percent, as adjusted in certain circumstances as 
provided in paragraphs (b)(2)(ii)(A)(3) and (4) of this section.
    (3) For repo-style transactions and client-facing derivative 
transactions, a

[[Page 146]]

national bank or Federal savings association may multiply the 
supervisory haircuts provided in paragraphs (b)(2)(ii)(A)(1) and (2) of 
this section by the square root of \1/2\ (which equals 0.707107). If the 
national bank or Federal savings association determines that a longer 
holding period is appropriate for client-facing derivative transactions, 
then it must use a larger scaling factor to adjust for the longer 
holding period pursuant to paragraph (b)(2)(ii)(A)(6) of this section.
    (4) A national bank or Federal savings association must adjust the 
supervisory haircuts upward on the basis of a holding period longer than 
ten business days (for eligible margin loans) or five business days (for 
repo-style transactions), using the formula provided in paragraph 
(b)(2)(ii)(A)(6) of this section where the conditions in this paragraph 
(b)(2)(ii)(A)(4) apply. If the number of trades in a netting set exceeds 
5,000 at any time during a quarter, a national bank or Federal savings 
association must adjust the supervisory haircuts upward on the basis of 
a minimum holding period of twenty business days for the following 
quarter (except when a national bank or Federal savings association is 
calculating EAD for a cleared transaction under Sec.  3.133). If a 
netting set contains one or more trades involving illiquid collateral, a 
national bank or Federal savings association must adjust the supervisory 
haircuts upward on the basis of a minimum holding period of twenty 
business days. If over the two previous quarters more than two margin 
disputes on a netting set have occurred that lasted longer than the 
holding period, then the national bank or Federal savings association 
must adjust the supervisory haircuts upward for that netting set on the 
basis of a minimum holding period that is at least two times the minimum 
holding period for that netting set.
    (5)(i) A national bank or Federal savings association must adjust 
the supervisory haircuts upward on the basis of a holding period longer 
than ten business days for collateral associated with derivative 
contracts (five business days for client-facing derivative contracts) 
using the formula provided in paragraph (b)(2)(ii)(A)(6) of this section 
where the conditions in this paragraph (b)(2)(ii)(A)(5)(i) apply. For 
collateral associated with a derivative contract that is within a 
netting set that is composed of more than 5,000 derivative contracts 
that are not cleared transactions, a national bank or Federal savings 
association must use a minimum holding period of twenty business days. 
If a netting set contains one or more trades involving illiquid 
collateral or a derivative contract that cannot be easily replaced, a 
national bank or Federal savings association must use a minimum holding 
period of twenty business days.
    (ii) Notwithstanding paragraph (b)(2)(ii)(A)(1) or (3) or 
(b)(2)(ii)(A)(5)(i) of this section, for collateral associated with a 
derivative contract in a netting set under which more than two margin 
disputes that lasted longer than the holding period occurred during the 
previous two quarters, the minimum holding period is twice the amount 
provided under paragraph (b)(2)(ii)(A)(1) or (3) or (b)(2)(ii)(A)(5)(i) 
of this section.
    (6) A national bank or Federal savings association must adjust the 
standard supervisory haircuts upward, pursuant to the adjustments 
provided in paragraphs (b)(2)(ii)(A)(3) through (5) of this section, 
using the following formula:
[GRAPHIC] [TIFF OMITTED] TR24JA20.013



[[Page 147]]


Where:

TM equals a holding period of longer than 10 business days 
          for eligible margin loans and derivative contracts other than 
          client-facing derivative transactions or longer than 5 
          business days for repo-style transactions and client-facing 
          derivative transactions;
HS equals the standard supervisory haircut; and
TS equals 10 business days for eligible margin loans and 
          derivative contracts other than client-facing derivative 
          transactions or 5 business days for repo-style transactions 
          and client-facing derivative transactions.

    (7) If the instrument a national bank or Federal savings association 
has lent, sold subject to repurchase, or posted as collateral does not 
meet the definition of financial collateral, the national bank or 
Federal savings association must use a 25.0 percent haircut for market 
price volatility (HS).
    (iii) Own internal estimates for haircuts. With the prior written 
approval of the OCC, a national bank or Federal savings association may 
calculate haircuts (Hs and Hfx) using its own 
internal estimates of the volatilities of market prices and foreign 
exchange rates.
    (A) To receive OCC approval to use its own internal estimates, a 
national bank or Federal savings association must satisfy the following 
minimum quantitative standards:
    (1) A national bank or Federal savings association must use a 99th 
percentile one-tailed confidence interval.
    (2) The minimum holding period for a repo-style transaction is five 
business days and for an eligible margin loan is ten business days 
except for transactions or netting sets for which paragraph 
(b)(2)(iii)(A)(3) of this section applies. When a national bank or 
Federal savings association calculates an own-estimates haircut on a 
TN-day holding period, which is different from the minimum 
holding period for the transaction type, the applicable haircut 
(HM) is calculated using the following square root of time 
formula:
[GRAPHIC] [TIFF OMITTED] TR11OC13.031

    (i) TM equals 5 for repo-style transactions and 10 for 
eligible margin loans;
    (ii) TN equals the holding period used by the national 
bank or Federal savings association to derive HN; and
    (iii) HN equals the haircut based on the holding period 
TN
    (3) If the number of trades in a netting set exceeds 5,000 at any 
time during a quarter, a national bank or Federal savings association 
must calculate the haircut using a minimum holding period of twenty 
business days for the following quarter (except when a national bank or 
Federal savings association is calculating EAD for a cleared transaction 
under Sec.  3.133). If a netting set contains one or more trades 
involving illiquid collateral or an OTC derivative that cannot be easily 
replaced, a national bank or Federal savings association must calculate 
the haircut using a minimum holding period of twenty business days. If 
over the two previous quarters more than two margin disputes on a 
netting set have occurred that lasted more than the holding period, then 
the national bank or Federal savings association must calculate the 
haircut for transactions in that netting set on the basis of a holding 
period that is at least two times the minimum holding period for that 
netting set.
    (4) A national bank or Federal savings association is required to 
calculate its own internal estimates with inputs calibrated to 
historical data from a continuous 12-month period that reflects a period 
of significant financial stress appropriate to the security or category 
of securities.
    (5) A national bank or Federal savings association must have 
policies and procedures that describe how it determines the period of 
significant financial stress used to calculate the national bank's or 
Federal savings association's own internal estimates for

[[Page 148]]

haircuts under this section and must be able to provide empirical 
support for the period used. The national bank or Federal savings 
association must obtain the prior approval of the OCC for, and notify 
the OCC if the national bank or Federal savings association makes any 
material changes to, these policies and procedures.
    (6) Nothing in this section prevents the OCC from requiring a 
national bank or Federal savings association to use a different period 
of significant financial stress in the calculation of own internal 
estimates for haircuts.
    (7) A national bank or Federal savings association must update its 
data sets and calculate haircuts no less frequently than quarterly and 
must also reassess data sets and haircuts whenever market prices change 
materially.
    (B) With respect to debt securities that are investment grade, a 
national bank or Federal savings association may calculate haircuts for 
categories of securities. For a category of securities, the national 
bank or Federal savings association must calculate the haircut on the 
basis of internal volatility estimates for securities in that category 
that are representative of the securities in that category that the 
national bank or Federal savings association has lent, sold subject to 
repurchase, posted as collateral, borrowed, purchased subject to resale, 
or taken as collateral. In determining relevant categories, the national 
bank or Federal savings association must at a minimum take into account:
    (1) The type of issuer of the security;
    (2) The credit quality of the security;
    (3) The maturity of the security; and
    (4) The interest rate sensitivity of the security.
    (C) With respect to debt securities that are not investment grade 
and equity securities, a national bank or Federal savings association 
must calculate a separate haircut for each individual security.
    (D) Where an exposure or collateral (whether in the form of cash or 
securities) is denominated in a currency that differs from the 
settlement currency, the national bank or Federal savings association 
must calculate a separate currency mismatch haircut for its net position 
in each mismatched currency based on estimated volatilities of foreign 
exchange rates between the mismatched currency and the settlement 
currency.
    (E) A national bank's or Federal savings association's own estimates 
of market price and foreign exchange rate volatilities may not take into 
account the correlations among securities and foreign exchange rates on 
either the exposure or collateral side of a transaction (or netting set) 
or the correlations among securities and foreign exchange rates between 
the exposure and collateral sides of the transaction (or netting set).
    (3) Simple VaR methodology. With the prior written approval of the 
OCC, a national bank or Federal savings association may estimate EAD for 
a netting set using a VaR model that meets the requirements in paragraph 
(b)(3)(iii) of this section. In such event, the national bank or Federal 
savings association must set EAD equal to max {0, [([Sigma]E - [Sigma]C) 
+ PFE]{time} , where:
    (i) [Sigma]E equals the value of the exposure (the sum of the 
current fair values of all instruments, gold, and cash the national bank 
or Federal savings association has lent, sold subject to repurchase, or 
posted as collateral to the counterparty under the netting set);
    (ii) [Sigma]C equals the value of the collateral (the sum of the 
current fair values of all instruments, gold, and cash the national bank 
or Federal savings association has borrowed, purchased subject to 
resale, or taken as collateral from the counterparty under the netting 
set); and
    (iii) PFE (potential future exposure) equals the national bank's or 
Federal savings association's empirically based best estimate of the 
99th percentile, one-tailed confidence interval for an increase in the 
value of ([Sigma]E - [Sigma]C) over a five-business-day holding period 
for repo-style transactions, or over a ten-business-day holding period 
for eligible margin loans except for netting sets for which paragraph 
(b)(3)(iv) of this section applies using a minimum one-year historical 
observation period of price data representing the instruments that the 
national bank or Federal savings association has lent, sold subject to 
repurchase, posted as collateral, borrowed, purchased subject to resale, 
or

[[Page 149]]

taken as collateral. The national bank or Federal savings association 
must validate its VaR model by establishing and maintaining a rigorous 
and regular backtesting regime.
    (iv) If the number of trades in a netting set exceeds 5,000 at any 
time during a quarter, a national bank or Federal savings association 
must use a twenty-business-day holding period for the following quarter 
(except when a national bank or Federal savings association is 
calculating EAD for a cleared transaction under Sec.  3.133). If a 
netting set contains one or more trades involving illiquid collateral, a 
national bank or Federal savings association must use a twenty-business-
day holding period. If over the two previous quarters more than two 
margin disputes on a netting set have occurred that lasted more than the 
holding period, then the national bank or Federal savings association 
must set its PFE for that netting set equal to an estimate over a 
holding period that is at least two times the minimum holding period for 
that netting set.
    (c) EAD for derivative contracts--(1) Options for determining EAD. A 
national bank or Federal savings association must determine the EAD for 
a derivative contract using the standardized approach for counterparty 
credit risk (SA-CCR) under paragraph (c)(5) of this section or using the 
internal models methodology described in paragraph (d) of this section. 
If a national bank or Federal savings association elects to use SA-CCR 
for one or more derivative contracts, the exposure amount determined 
under SA-CCR is the EAD for the derivative contract or derivative 
contracts. A national bank or Federal savings association must use the 
same methodology to calculate the exposure amount for all its derivative 
contracts and may change its election only with prior approval of the 
OCC. A national bank or Federal savings association may reduce the EAD 
calculated according to paragraph (c)(5) of this section by the credit 
valuation adjustment that the national bank or Federal savings 
association has recognized in its balance sheet valuation of any 
derivative contracts in the netting set. For purposes of this paragraph 
(c)(1), the credit valuation adjustment does not include any adjustments 
to common equity tier 1 capital attributable to changes in the fair 
value of the national bank's or Federal savings association's 
liabilities that are due to changes in its own credit risk since the 
inception of the transaction with the counterparty.
    (2) Definitions. For purposes of this paragraph (c) of this section, 
the following definitions apply:
    (i) End date means the last date of the period referenced by an 
interest rate or credit derivative contract or, if the derivative 
contract references another instrument, by the underlying instrument, 
except as otherwise provided in paragraph (c) of this section.
    (ii) Start date means the first date of the period referenced by an 
interest rate or credit derivative contract or, if the derivative 
contract references the value of another instrument, by underlying 
instrument, except as otherwise provided in paragraph (c) of this 
section.
    (iii) Hedging set means:
    (A) With respect to interest rate derivative contracts, all such 
contracts within a netting set that reference the same reference 
currency;
    (B) With respect to exchange rate derivative contracts, all such 
contracts within a netting set that reference the same currency pair;
    (C) With respect to credit derivative contract, all such contracts 
within a netting set;
    (D) With respect to equity derivative contracts, all such contracts 
within a netting set;
    (E) With respect to a commodity derivative contract, all such 
contracts within a netting set that reference one of the following 
commodity categories: Energy, metal, agricultural, or other commodities;
    (F) With respect to basis derivative contracts, all such contracts 
within a netting set that reference the same pair of risk factors and 
are denominated in the same currency; or
    (G) With respect to volatility derivative contracts, all such 
contracts within a netting set that reference one of interest rate, 
exchange rate, credit, equity, or commodity risk factors, separated 
according to the requirements

[[Page 150]]

under paragraphs (c)(2)(iii)(A) through (E) of this section.
    (H) If the risk of a derivative contract materially depends on more 
than one of interest rate, exchange rate, credit, equity, or commodity 
risk factors, the OCC may require a national bank or Federal savings 
association to include the derivative contract in each appropriate 
hedging set under paragraphs (c)(2)(iii)(A) through (E) of this section.
    (3) Credit derivatives. Notwithstanding paragraphs (c)(1) and (c)(2) 
of this section:
    (i) A national bank or Federal savings association that purchases a 
credit derivative that is recognized under Sec.  3.134 or Sec.  3.135 as 
a credit risk mitigant for an exposure that is not a covered position 
under subpart F of this part is not required to calculate a separate 
counterparty credit risk capital requirement under this section so long 
as the national bank or Federal savings association does so consistently 
for all such credit derivatives and either includes or excludes all such 
credit derivatives that are subject to a master netting agreement from 
any measure used to determine counterparty credit risk exposure to all 
relevant counterparties for risk-based capital purposes.
    (ii) A national bank or Federal savings association that is the 
protection provider in a credit derivative must treat the credit 
derivative as a wholesale exposure to the reference obligor and is not 
required to calculate a counterparty credit risk capital requirement for 
the credit derivative under this section, so long as it does so 
consistently for all such credit derivatives and either includes all or 
excludes all such credit derivatives that are subject to a master 
netting agreement from any measure used to determine counterparty credit 
risk exposure to all relevant counterparties for risk-based capital 
purposes (unless the national bank or Federal savings association is 
treating the credit derivative as a covered position under subpart F of 
this part, in which case the national bank or Federal savings 
association must calculate a supplemental counterparty credit risk 
capital requirement under this section).
    (4) Equity derivatives. A national bank or Federal savings 
association must treat an equity derivative contract as an equity 
exposure and compute a risk-weighted asset amount for the equity 
derivative contract under Sec. Sec.  3.151-3.155 (unless the national 
bank or Federal savings association is treating the contract as a 
covered position under subpart F of this part). In addition, if the 
national bank or Federal savings association is treating the contract as 
a covered position under subpart F of this part, and under certain other 
circumstances described in Sec.  3.155, the national bank or Federal 
savings association must also calculate a risk-based capital requirement 
for the counterparty credit risk of an equity derivative contract under 
this section.
    (5) Exposure amount. (i) The exposure amount of a netting set, as 
calculated under paragraph (c) of this section, is equal to 1.4 
multiplied by the sum of the replacement cost of the netting set, as 
calculated under paragraph (c)(6) of this section, and the potential 
future exposure of the netting set, as calculated under paragraph (c)(7) 
of this section.
    (ii) Notwithstanding the requirements of paragraph (c)(5)(i) of this 
section, the exposure amount of a netting set subject to a variation 
margin agreement, excluding a netting set that is subject to a variation 
margin agreement under which the counterparty to the variation margin 
agreement is not required to post variation margin, is equal to the 
lesser of the exposure amount of the netting set calculated under 
paragraph (c)(5)(i) of this section and the exposure amount of the 
netting set calculated as if the netting set were not subject to a 
variation margin agreement.
    (iii) Notwithstanding the requirements of paragraph (c)(5)(i) of 
this section, the exposure amount of a netting set that consists of only 
sold options in which the premiums have been fully paid by the 
counterparty to the options and where the options are not subject to a 
variation margin agreement is zero.
    (iv) Notwithstanding the requirements of paragraph (c)(5)(i) of this 
section, the exposure amount of a netting

[[Page 151]]

set in which the counterparty is a commercial end-user is equal to the 
sum of replacement cost, as calculated under paragraph (c)(6) of this 
section, and the potential future exposure of the netting set, as 
calculated under paragraph (c)(7) of this section.
    (v) For purposes of the exposure amount calculated under paragraph 
(c)(5)(i) of this section and all calculations that are part of that 
exposure amount, a national bank or Federal savings association may 
elect, at the netting set level, to treat a derivative contract that is 
a cleared transaction that is not subject to a variation margin 
agreement as one that is subject to a variation margin agreement, if the 
derivative contract is subject to a requirement that the counterparties 
make daily cash payments to each other to account for changes in the 
fair value of the derivative contract and to reduce the net position of 
the contract to zero. If a national bank or Federal savings association 
makes an election under this paragraph (c)(5)(v) for one derivative 
contract, it must treat all other derivative contracts within the same 
netting set that are eligible for an election under this paragraph 
(c)(5)(v) as derivative contracts that are subject to a variation margin 
agreement.
    (vi) For purposes of the exposure amount calculated under paragraph 
(c)(5)(i) of this section and all calculations that are part of that 
exposure amount, a national bank or Federal savings association may 
elect to treat a credit derivative contract, equity derivative contract, 
or commodity derivative contract that references an index as if it were 
multiple derivative contracts each referencing one component of the 
index.
    (6) Replacement cost of a netting set--(i) Netting set subject to a 
variation margin agreement under which the counterparty must post 
variation margin. The replacement cost of a netting set subject to a 
variation margin agreement, excluding a netting set that is subject to a 
variation margin agreement under which the counterparty is not required 
to post variation margin, is the greater of:
    (A) The sum of the fair values (after excluding any valuation 
adjustments) of the derivative contracts within the netting set less the 
sum of the net independent collateral amount and the variation margin 
amount applicable to such derivative contracts;
    (B) The sum of the variation margin threshold and the minimum 
transfer amount applicable to the derivative contracts within the 
netting set less the net independent collateral amount applicable to 
such derivative contracts; or
    (C) Zero.
    (ii) Netting sets not subject to a variation margin agreement under 
which the counterparty must post variation margin. The replacement cost 
of a netting set that is not subject to a variation margin agreement 
under which the counterparty must post variation margin to the national 
bank or Federal savings association is the greater of:
    (A) The sum of the fair values (after excluding any valuation 
adjustments) of the derivative contracts within the netting set less the 
sum of the net independent collateral amount and variation margin amount 
applicable to such derivative contracts; or
    (B) Zero.
    (iii) Multiple netting sets subject to a single variation margin 
agreement. Notwithstanding paragraphs (c)(6)(i) and (ii) of this 
section, the replacement cost for multiple netting sets subject to a 
single variation margin agreement must be calculated according to 
paragraph (c)(10)(i) of this section.
    (iv) Netting set subject to multiple variation margin agreements or 
a hybrid netting set. Notwithstanding paragraphs (c)(6)(i) and (ii) of 
this section, the replacement cost for a netting set subject to multiple 
variation margin agreements or a hybrid netting set must be calculated 
according to paragraph (c)(11)(i) of this section.
    (7) Potential future exposure of a netting set. The potential future 
exposure of a netting set is the product of the PFE multiplier and the 
aggregated amount.
    (i) PFE multiplier. The PFE multiplier is calculated according to 
the following formula:

[[Page 152]]

[GRAPHIC] [TIFF OMITTED] TR24JA20.014


Where:

V is the sum of the fair values (after excluding any valuation 
          adjustments) of the derivative contracts within the netting 
          set;
C is the sum of the net independent collateral amount and the variation 
          margin amount applicable to the derivative contracts within 
          the netting set; and
A is the aggregated amount of the netting set.

    (ii) Aggregated amount. The aggregated amount is the sum of all 
hedging set amounts, as calculated under paragraph (c)(8) of this 
section, within a netting set.
    (iii) Multiple netting sets subject to a single variation margin 
agreement. Notwithstanding paragraphs (c)(7)(i) and (ii) of this section 
and when calculating the potential future exposure for purposes of total 
leverage exposure under Sec.  3.10(c)(2)(ii)(B), the potential future 
exposure for multiple netting sets subject to a single variation margin 
agreement must be calculated according to paragraph (c)(10)(ii) of this 
section.
    (iv) Netting set subject to multiple variation margin agreements or 
a hybrid netting set. Notwithstanding paragraphs (c)(7)(i) and (ii) of 
this section and when calculating the potential future exposure for 
purposes of total leverage exposure under Sec.  3.10(c)(2)(ii)(B), the 
potential future exposure for a netting set subject to multiple 
variation margin agreements or a hybrid netting set must be calculated 
according to paragraph (c)(11)(ii) of this section.
    (8) Hedging set amount--(i) Interest rate derivative contracts. To 
calculate the hedging set amount of an interest rate derivative contract 
hedging set, a national bank or Federal savings association may use 
either of the formulas provided in paragraphs (c)(8)(i)(A) and (B) of 
this section:
    (A) Formula 1 is as follows:
    [GRAPHIC] [TIFF OMITTED] TR24JA20.015
    
    (B) Formula 2 is as follows:

Hedging set amount = [bond]AddOnTB1IR[bond]+ 
[bond]AddOnTB2IR[bond] + [bond]AddOnTB3IR[bond].

Where in paragraphs (c)(8)(i)(A) and (B) of this section:

AddOnTB1IR is the sum of the adjusted derivative contract 
          amounts, as calculated under paragraph (c)(9) of this section, 
          within the hedging set with an end date of less than one year 
          from the present date;
AddOnTB2IR is the sum of the adjusted derivative contract 
          amounts, as calculated under paragraph (c)(9) of this section, 
          within the hedging set with an end date of one to five years 
          from the present date; and
AddOnTB3IR is the sum of the adjusted derivative contract 
          amounts, as calculated under paragraph (c)(9) of this section, 
          within the hedging set with an end date of more than five 
          years from the present date.

    (ii) Exchange rate derivative contracts. For an exchange rate 
derivative contract hedging set, the hedging set amount equals the 
absolute value of the sum of the adjusted derivative contract amounts, 
as calculated under paragraph (c)(9) of this section, within the hedging 
set.
    (iii) Credit derivative contracts and equity derivative contracts. 
The hedging

[[Page 153]]

set amount of a credit derivative contract hedging set or equity 
derivative contract hedging set within a netting set is calculated 
according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR24JA20.016

Where:

k is each reference entity within the hedging set.
K is the number of reference entities within the hedging set.
AddOn(Refk) equals the sum of the adjusted derivative contract amounts, 
          as determined under paragraph (c)(9) of this section, for all 
          derivative contracts within the hedging set that reference 
          reference entity k.
[rho]k equals the applicable supervisory correlation factor, as provided 
          in Table 3 to this section.

    (iv) Commodity derivative contracts. The hedging set amount of a 
commodity derivative contract hedging set within a netting set is 
calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR24JA20.017

Where:

k is each commodity type within the hedging set.
K is the number of commodity types within the hedging set.
AddOn(Typek) equals the sum of the adjusted derivative contract amounts, 
          as determined under paragraph (c)(9) of this section, for all 
          derivative contracts within the hedging set that reference 
          reference commodity type k.
[rho] equals the applicable supervisory correlation factor, as provided 
          in Table 3 to this section.

    (v) Basis derivative contracts and volatility derivative contracts. 
Notwithstanding paragraphs (c)(8)(i) through (iv) of this section, a 
national bank or Federal savings association must calculate a separate 
hedging set amount for each basis derivative contract hedging set and 
each volatility derivative contract hedging set. A national bank or 
Federal savings association must calculate such hedging set amounts 
using one of the formulas under paragraphs (c)(8)(i) through (iv) of 
this section that corresponds to the primary risk factor of the hedging 
set being calculated.
    (9) Adjusted derivative contract amount--(i) Summary. To calculate 
the adjusted derivative contract amount of a derivative contract, a 
national bank or Federal savings association must determine the adjusted 
notional amount of derivative contract, pursuant to paragraph (c)(9)(ii) 
of this section, and multiply the adjusted notional amount by each of 
the supervisory delta adjustment, pursuant to paragraph (c)(9)(iii) of 
this section, the maturity factor, pursuant to paragraph (c)(9)(iv) of 
this section, and the applicable supervisory

[[Page 154]]

factor, as provided in Table 3 to this section.
    (ii) Adjusted notional amount. (A)(1) For an interest rate 
derivative contract or a credit derivative contract, the adjusted 
notional amount equals the product of the notional amount of the 
derivative contract, as measured in U.S. dollars using the exchange rate 
on the date of the calculation, and the supervisory duration, as 
calculated by the following formula:
[GRAPHIC] [TIFF OMITTED] TR17SE20.011

Where:

S is the number of business days from the present day until the start 
          date of the derivative contract, or zero if the start date has 
          already passed; and
E is the number of business days from the present day until the end date 
          of the derivative contract.

    (2) For purposes of paragraph (c)(9)(ii)(A)(1) of this section:
    (i) For an interest rate derivative contract or credit derivative 
contract that is a variable notional swap, the notional amount is equal 
to the time-weighted average of the contractual notional amounts of such 
a swap over the remaining life of the swap; and
    (ii) For an interest rate derivative contract or a credit derivative 
contract that is a leveraged swap, in which the notional amount of all 
legs of the derivative contract are divided by a factor and all rates of 
the derivative contract are multiplied by the same factor, the notional 
amount is equal to the notional amount of an equivalent unleveraged 
swap.
    (B)(1) For an exchange rate derivative contract, the adjusted 
notional amount is the notional amount of the non-U.S. denominated 
currency leg of the derivative contract, as measured in U.S. dollars 
using the exchange rate on the date of the calculation. If both legs of 
the exchange rate derivative contract are denominated in currencies 
other than U.S. dollars, the adjusted notional amount of the derivative 
contract is the largest leg of the derivative contract, as measured in 
U.S. dollars using the exchange rate on the date of the calculation.
    (2) Notwithstanding paragraph (c)(9)(ii)(B)(1) of this section, for 
an exchange rate derivative contract with multiple exchanges of 
principal, the national bank or Federal savings association must set the 
adjusted notional amount of the derivative contract equal to the 
notional amount of the derivative contract multiplied by the number of 
exchanges of principal under the derivative contract.
    (C)(1) For an equity derivative contract or a commodity derivative 
contract, the adjusted notional amount is the product of the fair value 
of one unit of the reference instrument underlying the derivative 
contract and the number of such units referenced by the derivative 
contract.
    (2) Notwithstanding paragraph (c)(9)(ii)(C)(1) of this section, when 
calculating the adjusted notional amount for an equity derivative 
contract or a commodity derivative contract that is a volatility 
derivative contract, the national bank or Federal savings association 
must replace the unit price with the underlying volatility referenced by 
the volatility derivative contract and replace the number of units with 
the notional amount of the volatility derivative contract.
    (iii) Supervisory delta adjustments. (A) For a derivative contract 
that is not an option contract or collateralized debt obligation 
tranche, the supervisory delta adjustment is 1 if the fair value of the 
derivative contract increases when the value of the primary risk factor 
increases and -1 if the fair value of the derivative contract decreases 
when the value of the primary risk factor increases.
    (B)(1) For a derivative contract that is an option contract, the 
supervisory delta adjustment is determined by the following formulas, as 
applicable:

[[Page 155]]

[GRAPHIC] [TIFF OMITTED] TR24JA20.019

    (2) As used in the formulas in Table 2 to this section:
    (i) [Phi] is the standard normal cumulative distribution function;
    (ii) P equals the current fair value of the instrument or risk 
factor, as applicable, underlying the option;
    (iii) K equals the strike price of the option;
    (iv) T equals the number of business days until the latest 
contractual exercise date of the option;
    (v) [lgr] equals zero for all derivative contracts except interest 
rate options for the currencies where interest rates have negative 
values. The same value of [lgr] must be used for all interest rate 
options that are denominated in the same currency. To determine the 
value of [lgr] for a given currency, a national bank or Federal savings 
association must find the lowest value L of P and K of all interest rate 
options in a given currency that the national bank or Federal savings 
association has with all counterparties. Then, [lgr] is set according to 
this formula: [lgr] = max{-L + 0.1%, 0{time} ; and
    (vi) [sigma] equals the supervisory option volatility, as provided 
in Table 3 to of this section.
    (C)(1) For a derivative contract that is a collateralized debt 
obligation tranche, the supervisory delta adjustment is determined by 
the following formula:
[GRAPHIC] [TIFF OMITTED] TR24JA20.020

    (2) As used in the formula in paragraph (c)(9)(iii)(C)(1) of this 
section:
    (i) A is the attachment point, which equals the ratio of the 
notional amounts of all underlying exposures that are subordinated to 
the national bank's or Federal savings association's exposure to the 
total notional amount of all underlying exposures, expressed as a 
decimal value between zero and one; \30\
---------------------------------------------------------------------------

    \30\ In the case of a first-to-default credit derivative, there are 
no underlying exposures that are subordinated to the national bank's or 
Federal savings association's exposure. In the case of a second-or-
subsequent-to-default credit derivative, the smallest (n-1) notional 
amounts of the underlying exposures are subordinated to the national 
bank's or Federal savings association's exposure.
---------------------------------------------------------------------------

    (ii) D is the detachment point, which equals one minus the ratio of 
the notional amounts of all underlying exposures that are senior to the 
national bank's or Federal savings association's exposure to the total 
notional amount of all underlying exposures, expressed

[[Page 156]]

as a decimal value between zero and one; and
    (iii) The resulting amount is designated with a positive sign if the 
collateralized debt obligation tranche was purchased by the national 
bank or Federal savings association and is designated with a negative 
sign if the collateralized debt obligation tranche was sold by the 
national bank or Federal savings association.
    (iv) Maturity factor. (A)(1) The maturity factor of a derivative 
contract that is subject to a variation margin agreement, excluding 
derivative contracts that are subject to a variation margin agreement 
under which the counterparty is not required to post variation margin, 
is determined by the following formula:
[GRAPHIC] [TIFF OMITTED] TR24JA20.021

    Where MPOR refers to the period from the most recent exchange of 
collateral covering a netting set of derivative contracts with a 
defaulting counterparty until the derivative contracts are closed out 
and the resulting market risk is re-hedged.

    (2) Notwithstanding paragraph (c)(9)(iv)(A)(1) of this section:
    (i) For a derivative contract that is not a client-facing derivative 
transaction, MPOR cannot be less than ten business days plus the 
periodicity of re-margining expressed in business days minus one 
business day;
    (ii) For a derivative contract that is a client-facing derivative 
transaction, MPOR cannot be less than five business days plus the 
periodicity of re-margining expressed in business days minus one 
business day; and
    (iii) For a derivative contract that is within a netting set that is 
composed of more than 5,000 derivative contracts that are not cleared 
transactions, or a netting set that contains one or more trades 
involving illiquid collateral or a derivative contract that cannot be 
easily replaced, MPOR cannot be less than twenty business days.
    (3) Notwithstanding paragraphs (c)(9)(iv)(A)(1) and (2) of this 
section, for a netting set subject to more than two outstanding disputes 
over margin that lasted longer than the MPOR over the previous two 
quarters, the applicable floor is twice the amount provided in 
paragraphs (c)(9)(iv)(A)(1) and (2) of this section.
    (B) The maturity factor of a derivative contract that is not subject 
to a variation margin agreement, or derivative contracts under which the 
counterparty is not required to post variation margin, is determined by 
the following formula:
[GRAPHIC] [TIFF OMITTED] TR24JA20.022

    Where M equals the greater of 10 business days and the remaining 
maturity of the contract, as measured in business days.

    (C) For purposes of paragraph (c)(9)(iv) of this section, if a 
national bank or Federal savings association has elected pursuant to 
paragraph (c)(5)(v) of this section to treat a derivative contract that 
is a cleared transaction that is not subject to a variation margin 
agreement as one that is subject to a variation margin agreement, the 
national bank or Federal savings association must treat the derivative 
contract as subject to a variation margin agreement with maturity factor 
as determined according to (c)(9)(iv)(A) of this section, and daily 
settlement does not change the end

[[Page 157]]

date of the period referenced by the derivative contract.
    (v) Derivative contract as multiple effective derivative contracts. 
A national bank or Federal savings association must separate a 
derivative contract into separate derivative contracts, according to the 
following rules:
    (A) For an option where the counterparty pays a predetermined amount 
if the value of the underlying asset is above or below the strike price 
and nothing otherwise (binary option), the option must be treated as two 
separate options. For purposes of paragraph (c)(9)(iii)(B) of this 
section, a binary option with strike K must be represented as the 
combination of one bought European option and one sold European option 
of the same type as the original option (put or call) with the strikes 
set equal to 0.95 * K and 1.05 * K so that the payoff of the binary 
option is reproduced exactly outside the region between the two strikes. 
The absolute value of the sum of the adjusted derivative contract 
amounts of the bought and sold options is capped at the payoff amount of 
the binary option.
    (B) For a derivative contract that can be represented as a 
combination of standard option payoffs (such as collar, butterfly 
spread, calendar spread, straddle, and strangle), a national bank or 
Federal savings association must treat each standard option component as 
a separate derivative contract.
    (C) For a derivative contract that includes multiple-payment 
options, (such as interest rate caps and floors), a national bank or 
Federal savings association may represent each payment option as a 
combination of effective single-payment options (such as interest rate 
caplets and floorlets).
    (D) A national bank or Federal savings association may not decompose 
linear derivative contracts (such as swaps) into components.
    (10) Multiple netting sets subject to a single variation margin 
agreement--(i) Calculating replacement cost. Notwithstanding paragraph 
(c)(6) of this section, a national bank or Federal savings association 
shall assign a single replacement cost to multiple netting sets that are 
subject to a single variation margin agreement under which the 
counterparty must post variation margin, calculated according to the 
following formula:

Replacement Cost = max{[Sigma]NS max{VNS; 0{time}  - max{CMA; 0{time} ; 
0{time}  + max{[Sigma]NS min{VNS; 0{time}  - min{CMA; 0{time} ; 0{time} 

Where:

NS is each netting set subject to the variation margin agreement MA.
VNS is the sum of the fair values (after excluding any valuation 
          adjustments) of the derivative contracts within the netting 
          set NS.
CMA is the sum of the net independent collateral amount and the 
          variation margin amount applicable to the derivative contracts 
          within the netting sets subject to the single variation margin 
          agreement.

    (ii) Calculating potential future exposure. Notwithstanding 
paragraph (c)(5) of this section, a national bank or Federal savings 
association shall assign a single potential future exposure to multiple 
netting sets that are subject to a single variation margin agreement 
under which the counterparty must post variation margin equal to the sum 
of the potential future exposure of each such netting set, each 
calculated according to paragraph (c)(7) of this section as if such 
nettings sets were not subject to a variation margin agreement.
    (11) Netting set subject to multiple variation margin agreements or 
a hybrid netting set--(i) Calculating replacement cost. To calculate 
replacement cost for either a netting set subject to multiple variation 
margin agreements under which the counterparty to each variation margin 
agreement must post variation margin, or a netting set composed of at 
least one derivative contract subject to variation margin agreement 
under which the counterparty must post variation margin and at least one 
derivative contract that is not subject to such a variation margin 
agreement, the calculation for replacement cost is provided under 
paragraph (c)(6)(i) of this section, except that the variation margin 
threshold equals the sum of the variation margin thresholds of all 
variation margin agreements within the netting set and the minimum 
transfer amount equals the sum of the minimum transfer amounts of all 
the variation margin agreements within the netting set.

[[Page 158]]

    (ii) Calculating potential future exposure. (A) To calculate 
potential future exposure for a netting set subject to multiple 
variation margin agreements under which the counterparty to each 
variation margin agreement must post variation margin, or a netting set 
composed of at least one derivative contract subject to variation margin 
agreement under which the counterparty to the derivative contract must 
post variation margin and at least one derivative contract that is not 
subject to such a variation margin agreement, a national bank or Federal 
savings association must divide the netting set into sub-netting sets 
(as described in paragraph (c)(11)(ii)(B) of this section) and calculate 
the aggregated amount for each sub-netting set. The aggregated amount 
for the netting set is calculated as the sum of the aggregated amounts 
for the sub-netting sets. The multiplier is calculated for the entire 
netting set.
    (B) For purposes of paragraph (c)(11)(ii)(A) of this section, the 
netting set must be divided into sub-netting sets as follows:
    (1) All derivative contracts within the netting set that are not 
subject to a variation margin agreement or that are subject to a 
variation margin agreement under which the counterparty is not required 
to post variation margin form a single sub-netting set. The aggregated 
amount for this sub-netting set is calculated as if the netting set is 
not subject to a variation margin agreement.
    (2) All derivative contracts within the netting set that are subject 
to variation margin agreements in which the counterparty must post 
variation margin and that share the same value of the MPOR form a single 
sub-netting set. The aggregated amount for this sub-netting set is 
calculated as if the netting set is subject to a variation margin 
agreement, using the MPOR value shared by the derivative contracts 
within the netting set.

   Table 3 to Sec.   3.132--Supervisory Option Volatility, Supervisory Correlation Parameters, and Supervisory
                                        Factors for Derivative Contracts
----------------------------------------------------------------------------------------------------------------
                                                                    Supervisory     Supervisory
                                                                      option        correlation     Supervisory
         Asset class               Category            Type         volatility        factor         factor 1
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Interest rate................  N/A.............  N/A............              50             N/A            0.50
Exchange rate................  N/A.............  N/A............              15             N/A             4.0
Credit, single name..........  Investment grade  N/A............             100              50            0.46
                               Speculative       N/A............             100              50             1.3
                                grade.
                               Sub-speculative   N/A............             100              50             6.0
                                grade.
Credit, index................  Investment Grade  N/A............              80              80            0.38
                               Speculative       N/A............              80              80            1.06
                                Grade.
Equity, single name..........  N/A.............  N/A............             120              50              32
Equity, index................  N/A.............  N/A............              75              80              20
Commodity....................  Energy..........  Electricity....             150              40              40
                                                 Other..........              70              40              18
                               Metals..........  N/A............              70              40              18
                               Agricultural....  N/A............              70              40              18
                               Other...........  N/A............              70              40              18
----------------------------------------------------------------------------------------------------------------
\1\ The applicable supervisory factor for basis derivative contract hedging sets is equal to one-half of the
  supervisory factor provided in this Table 3, and the applicable supervisory factor for volatility derivative
  contract hedging sets is equal to 5 times the supervisory factor provided in this Table 3.

    (d) Internal models methodology. (1)(i) With prior written approval 
from the OCC, a national bank or Federal savings association may use the 
internal models methodology in this paragraph (d) to determine EAD for 
counterparty credit risk for derivative contracts (collateralized or 
uncollateralized) and single-product netting sets thereof, for eligible 
margin loans and single-product netting sets thereof, and for repo-style 
transactions and single-product netting sets thereof.
    (ii) A national bank or Federal savings association that uses the 
internal models methodology for a particular transaction type 
(derivative contracts, eligible margin loans, or repo-style 
transactions) must use the internal

[[Page 159]]

models methodology for all transactions of that transaction type. A 
national bank or Federal savings association may choose to use the 
internal models methodology for one or two of these three types of 
exposures and not the other types.
    (iii) A national bank or Federal savings association may also use 
the internal models methodology for derivative contracts, eligible 
margin loans, and repo-style transactions subject to a qualifying cross-
product netting agreement if:
    (A) The national bank or Federal savings association effectively 
integrates the risk mitigating effects of cross-product netting into its 
risk management and other information technology systems; and
    (B) The national bank or Federal savings association obtains the 
prior written approval of the OCC.
    (iv) A national bank or Federal savings association that uses the 
internal models methodology for a transaction type must receive approval 
from the OCC to cease using the methodology for that transaction type or 
to make a material change to its internal model.
    (2) Risk-weighted assets using IMM. Under the IMM, a national bank 
or Federal savings association uses an internal model to estimate the 
expected exposure (EE) for a netting set and then calculates EAD based 
on that EE. A national bank or Federal savings association must 
calculate two EEs and two EADs (one stressed and one unstressed) for 
each netting set as follows:
    (i) EADunstressed is calculated using an EE estimate 
based on the most recent data meeting the requirements of paragraph 
(d)(3)(vii) of this section;
    (ii) EADstressed is calculated using an EE estimate based 
on a historical period that includes a period of stress to the credit 
default spreads of the national bank's or Federal savings association's 
counterparties according to paragraph (d)(3)(viii) of this section;
    (iii) The national bank or Federal savings association must use its 
internal model's probability distribution for changes in the fair value 
of a netting set that are attributable to changes in market variables to 
determine EE; and
    (iv) Under the internal models methodology, EAD = Max (0, [alpha] x 
effective EPE - CVA), or, subject to the prior written approval of OCC 
as provided in paragraph (d)(10) of this section, a more conservative 
measure of EAD.
    (A) CVA equals the credit valuation adjustment that the national 
bank or Federal savings association has recognized in its balance sheet 
valuation of any OTC derivative contracts in the netting set. For 
purposes of this paragraph (d), CVA does not include any adjustments to 
common equity tier 1 capital attributable to changes in the fair value 
of the national bank's or Federal savings association's liabilities that 
are due to changes in its own credit risk since the inception of the 
transaction with the counterparty.

[[Page 160]]

[GRAPHIC] [TIFF OMITTED] TR11OC13.033

    (C) [alpha] = 1.4 except as provided in paragraph (d)(6) of this 
section, or when the OCC has determined that the national bank or 
Federal savings association must set [alpha] higher based on the 
national bank's or Federal savings association's specific 
characteristics of counterparty credit risk or model performance.
    (v) A national bank or Federal savings association may include 
financial collateral currently posted by the counterparty as collateral 
(but may not include other forms of collateral) when calculating EE.
    (vi) If a national bank or Federal savings association hedges some 
or all of the counterparty credit risk associated with a netting set 
using an eligible credit derivative, the national bank or Federal 
savings association may take the reduction in exposure to the 
counterparty into account when estimating EE. If the national bank or 
Federal savings association recognizes this reduction in exposure to the 
counterparty in its estimate of EE, it must also use its internal model 
to estimate a separate EAD for the national bank's or Federal savings 
association's exposure to the protection provider of the credit 
derivative.
    (3) Prior approval relating to EAD calculation. To obtain OCC 
approval to calculate the distributions of exposures upon which the EAD 
calculation is based, the national bank or Federal savings association 
must demonstrate to the satisfaction of the OCC that it has been using 
for at least one year an internal model that broadly meets the following 
minimum standards, with which the national bank or Federal savings 
association must maintain compliance:
    (i) The model must have the systems capability to estimate the 
expected exposure to the counterparty on a daily basis (but is not 
expected to estimate or report expected exposure on a daily basis);
    (ii) The model must estimate expected exposure at enough future 
dates to reflect accurately all the future cash flows of contracts in 
the netting set;
    (iii) The model must account for the possible non-normality of the 
exposure distribution, where appropriate;
    (iv) The national bank or Federal savings association must measure, 
monitor, and control current counterparty exposure and the exposure to 
the counterparty over the whole life of all contracts in the netting 
set;
    (v) The national bank or Federal savings association must be able to 
measure and manage current exposures gross and net of collateral held, 
where appropriate. The national bank or Federal savings association must 
estimate expected exposures for OTC derivative contracts both with and 
without the effect of collateral agreements;

[[Page 161]]

    (vi) The national bank or Federal savings association must have 
procedures to identify, monitor, and control wrong-way risk throughout 
the life of an exposure. The procedures must include stress testing and 
scenario analysis;
    (vii) The model must use current market data to compute current 
exposures. The national bank or Federal savings association must 
estimate model parameters using historical data from the most recent 
three-year period and update the data quarterly or more frequently if 
market conditions warrant. The national bank or Federal savings 
association should consider using model parameters based on forward-
looking measures, where appropriate;
    (viii) When estimating model parameters based on a stress period, 
the national bank or Federal savings association must use at least three 
years of historical data that include a period of stress to the credit 
default spreads of the national bank's or Federal savings association's 
counterparties. The national bank or Federal savings association must 
review the data set and update the data as necessary, particularly for 
any material changes in its counterparties. The national bank or Federal 
savings association must demonstrate, at least quarterly, and maintain 
documentation of such demonstration, that the stress period coincides 
with increased CDS or other credit spreads of the national bank's or 
Federal savings association's counterparties. The national bank or 
Federal savings association must have procedures to evaluate the 
effectiveness of its stress calibration that include a process for using 
benchmark portfolios that are vulnerable to the same risk factors as the 
national bank's or Federal savings association's portfolio. The OCC may 
require the national bank or Federal savings association to modify its 
stress calibration to better reflect actual historic losses of the 
portfolio;
    (ix) A national bank or Federal savings association must subject its 
internal model to an initial validation and annual model review process. 
The model review should consider whether the inputs and risk factors, as 
well as the model outputs, are appropriate. As part of the model review 
process, the national bank or Federal savings association must have a 
backtesting program for its model that includes a process by which 
unacceptable model performance will be determined and remedied;
    (x) A national bank or Federal savings association must have 
policies for the measurement, management and control of collateral and 
margin amounts; and
    (xi) A national bank or Federal savings association must have a 
comprehensive stress testing program that captures all credit exposures 
to counterparties, and incorporates stress testing of principal market 
risk factors and creditworthiness of counterparties.
    (4) Calculating the maturity of exposures. (i) If the remaining 
maturity of the exposure or the longest-dated contract in the netting 
set is greater than one year, the national bank or Federal savings 
association must set M for the exposure or netting set equal to the 
lower of five years or M(EPE), where:
[GRAPHIC] [TIFF OMITTED] TR11OC13.034


[[Page 162]]


    (ii) If the remaining maturity of the exposure or the longest-dated 
contract in the netting set is one year or less, the national bank or 
Federal savings association must set M for the exposure or netting set 
equal to one year, except as provided in Sec.  3.131(d)(7).
    (iii) Alternatively, a national bank or Federal savings association 
that uses an internal model to calculate a one-sided credit valuation 
adjustment may use the effective credit duration estimated by the model 
as M(EPE) in place of the formula in paragraph (d)(4)(i) of this 
section.
    (5) Effects of collateral agreements on EAD. A national bank or 
Federal savings association may capture the effect on EAD of a 
collateral agreement that requires receipt of collateral when exposure 
to the counterparty increases, but may not capture the effect on EAD of 
a collateral agreement that requires receipt of collateral when 
counterparty credit quality deteriorates. Two methods are available to 
capture the effect of a collateral agreement, as set forth in paragraphs 
(d)(5)(i) and (ii) of this section:
    (i) With prior written approval from the OCC, a national bank or 
Federal savings association may include the effect of a collateral 
agreement within its internal model used to calculate EAD. The national 
bank or Federal savings association may set EAD equal to the expected 
exposure at the end of the margin period of risk. The margin period of 
risk means, with respect to a netting set subject to a collateral 
agreement, the time period from the most recent exchange of collateral 
with a counterparty until the next required exchange of collateral, plus 
the period of time required to sell and realize the proceeds of the 
least liquid collateral that can be delivered under the terms of the 
collateral agreement and, where applicable, the period of time required 
to re-hedge the resulting market risk upon the default of the 
counterparty. The minimum margin period of risk is set according to 
paragraph (d)(5)(iii) of this section; or
    (ii) As an alternative to paragraph (d)(5)(i) of this section, a 
national bank or Federal savings association that can model EPE without 
collateral agreements but cannot achieve the higher level of modeling 
sophistication to model EPE with collateral agreements can set effective 
EPE for a collateralized netting set equal to the lesser of:
    (A) An add-on that reflects the potential increase in exposure of 
the netting set over the margin period of risk, plus the larger of:
    (1) The current exposure of the netting set reflecting all 
collateral held or posted by the national bank or Federal savings 
association excluding any collateral called or in dispute; or
    (2) The largest net exposure including all collateral held or posted 
under the margin agreement that would not trigger a collateral call. For 
purposes of this section, the add-on is computed as the expected 
increase in the netting set's exposure over the margin period of risk 
(set in accordance with paragraph (d)(5)(iii) of this section); or
    (B) Effective EPE without a collateral agreement plus any collateral 
the national bank or Federal savings association posts to the 
counterparty that exceeds the required margin amount.
    (iii) For purposes of this part, including paragraphs (d)(5)(i) and 
(ii) of this section, the margin period of risk for a netting set 
subject to a collateral agreement is:
    (A) Five business days for repo-style transactions subject to daily 
remargining and daily marking-to-market, and ten business days for other 
transactions when liquid financial collateral is posted under a daily 
margin maintenance requirement, or
    (B) Twenty business days if the number of trades in a netting set 
exceeds 5,000 at any time during the previous quarter (except if the 
national bank or Federal savings association is calculating EAD for a 
cleared transaction under Sec.  3.133) or contains one or more trades 
involving illiquid collateral or any derivative contract that cannot be 
easily replaced. If over the two previous quarters more than two margin 
disputes on a netting set have occurred that lasted more than the margin 
period of risk, then the national bank or Federal savings association 
must use a margin period of risk for that netting set that is at least 
two times the minimum margin period of risk for that

[[Page 163]]

netting set. If the periodicity of the receipt of collateral is N-days, 
the minimum margin period of risk is the minimum margin period of risk 
under this paragraph (d) plus N minus 1. This period should be extended 
to cover any impediments to prompt re-hedging of any market risk.
    (C) Five business days for an OTC derivative contract or netting set 
of OTC derivative contracts where the national bank or Federal savings 
association is either acting as a financial intermediary and enters into 
an offsetting transaction with a CCP or where the national bank or 
Federal savings association provides a guarantee to the CCP on the 
performance of the client. A national bank or Federal savings 
association must use a longer holding period if the national bank or 
Federal savings association determines that a longer period is 
appropriate. Additionally, the OCC may require the national bank or 
Federal savings association to set a longer holding period if the OCC 
determines that a longer period is appropriate due to the nature, 
structure, or characteristics of the transaction or is commensurate with 
the risks associated with the transaction.
    (6) Own estimate of alpha. With prior written approval of the OCC, a 
national bank or Federal savings association may calculate alpha as the 
ratio of economic capital from a full simulation of counterparty 
exposure across counterparties that incorporates a joint simulation of 
market and credit risk factors (numerator) and economic capital based on 
EPE (denominator), subject to a floor of 1.2. For purposes of this 
calculation, economic capital is the unexpected losses for all 
counterparty credit risks measured at a 99.9 percent confidence level 
over a one-year horizon. To receive approval, the national bank or 
Federal savings association must meet the following minimum standards to 
the satisfaction of the OCC:
    (i) The national bank's or Federal savings association's own 
estimate of alpha must capture in the numerator the effects of:
    (A) The material sources of stochastic dependency of distributions 
of fair values of transactions or portfolios of transactions across 
counterparties;
    (B) Volatilities and correlations of market risk factors used in the 
joint simulation, which must be related to the credit risk factor used 
in the simulation to reflect potential increases in volatility or 
correlation in an economic downturn, where appropriate; and
    (C) The granularity of exposures (that is, the effect of a 
concentration in the proportion of each counterparty's exposure that is 
driven by a particular risk factor).
    (ii) The national bank or Federal savings association must assess 
the potential model uncertainty in its estimates of alpha.
    (iii) The national bank or Federal savings association must 
calculate the numerator and denominator of alpha in a consistent fashion 
with respect to modeling methodology, parameter specifications, and 
portfolio composition.
    (iv) The national bank or Federal savings association must review 
and adjust as appropriate its estimates of the numerator and denominator 
of alpha on at least a quarterly basis and more frequently when the 
composition of the portfolio varies over time.
    (7) Risk-based capital requirements for transactions with specific 
wrong-way risk. A national bank or Federal savings association must 
determine if a repo-style transaction, eligible margin loan, bond 
option, or equity derivative contract or purchased credit derivative to 
which the national bank or Federal savings association applies the 
internal models methodology under this paragraph (d) has specific wrong-
way risk. If a transaction has specific wrong-way risk, the national 
bank or Federal savings association must treat the transaction as its 
own netting set and exclude it from the model described in Sec.  
3.132(d)(2) and instead calculate the risk-based capital requirement for 
the transaction as follows:
    (i) For an equity derivative contract, by multiplying:
    (A) K, calculated using the appropriate risk-based capital formula 
specified in Table 1 of Sec.  3.131 using the PD of the counterparty and 
LGD equal to 100 percent, by

[[Page 164]]

    (B) The maximum amount the national bank or Federal savings 
association could lose on the equity derivative.
    (ii) For a purchased credit derivative by multiplying:
    (A) K, calculated using the appropriate risk-based capital formula 
specified in Table 1 of Sec.  3.131 using the PD of the counterparty and 
LGD equal to 100 percent, by
    (B) The fair value of the reference asset of the credit derivative.
    (iii) For a bond option, by multiplying:
    (A) K, calculated using the appropriate risk-based capital formula 
specified in Table 1 of Sec.  3.131 using the PD of the counterparty and 
LGD equal to 100 percent, by
    (B) The smaller of the notional amount of the underlying reference 
asset and the maximum potential loss under the bond option contract.
    (iv) For a repo-style transaction or eligible margin loan by 
multiplying:
    (A) K, calculated using the appropriate risk-based capital formula 
specified in Table 1 of Sec.  3.131 using the PD of the counterparty and 
LGD equal to 100 percent, by
    (B) The EAD of the transaction determined according to the EAD 
equation in Sec.  3.132(b)(2), substituting the estimated value of the 
collateral assuming a default of the counterparty for the value of the 
collateral in [Sigma]c of the equation.
    (8) Risk-weighted asset amount for IMM exposures with specific 
wrong-way risk. The aggregate risk-weighted asset amount for IMM 
exposures with specific wrong-way risk is the sum of a national bank's 
or Federal savings association's risk-based capital requirement for 
purchased credit derivatives that are not bond options with specific 
wrong-way risk as calculated under paragraph (d)(7)(ii) of this section, 
a national bank's or Federal savings association's risk-based capital 
requirement for equity derivatives with specific wrong-way risk as 
calculated under paragraph (d)(7)(i) of this section, a national bank's 
or Federal savings association's risk-based capital requirement for bond 
options with specific wrong-way risk as calculated under paragraph 
(d)(7)(iii) of this section, and a national bank's or Federal savings 
association's risk-based capital requirement for repo-style transactions 
and eligible margin loans with specific wrong-way risk as calculated 
under paragraph (d)(7)(iv) of this section, multiplied by 12.5.
    (9) Risk-weighted assets for IMM exposures. (i) The national bank or 
Federal savings association must insert the assigned risk parameters for 
each counterparty and netting set into the appropriate formula specified 
in Table 1 of Sec.  3.131 and multiply the output of the formula by the 
EADunstressed of the netting set to obtain the unstressed 
capital requirement for each netting set. A national bank or Federal 
savings association that uses an advanced CVA approach that captures 
migrations in credit spreads under paragraph (e)(3) of this section must 
set the maturity adjustment (b) in the formula equal to zero. The sum of 
the unstressed capital requirement calculated for each netting set 
equals Kunstressed.
    (ii) The national bank or Federal savings association must insert 
the assigned risk parameters for each wholesale obligor and netting set 
into the appropriate formula specified in Table 1 of Sec.  3.131 and 
multiply the output of the formula by the EADstressed of the 
netting set to obtain the stressed capital requirement for each netting 
set. A national bank or Federal savings association that uses an 
advanced CVA approach that captures migrations in credit spreads under 
paragraph (e)(6) of this section must set the maturity adjustment (b) in 
the formula equal to zero. The sum of the stressed capital requirement 
calculated for each netting set equals Kstressed.
    (iii) The national bank's or Federal savings association's dollar 
risk-based capital requirement under the internal models methodology 
equals the larger of Kunstressed and Kstressed. A 
national bank's or Federal savings association's risk-weighted assets 
amount for IMM exposures is equal to the capital requirement multiplied 
by 12.5, plus risk-weighted assets for IMM exposures with specific 
wrong-way risk in paragraph (d)(8) of this section and those in 
paragraph (d)(10) of this section.
    (10) Other measures of counterparty exposure. (i) With prior written 
approval

[[Page 165]]

of the OCC, a national bank or Federal savings association may set EAD 
equal to a measure of counterparty credit risk exposure, such as peak 
EAD, that is more conservative than an alpha of 1.4 times the larger of 
EPEunstressed and EPEstressed for every 
counterparty whose EAD will be measured under the alternative measure of 
counterparty exposure. The national bank or Federal savings association 
must demonstrate the conservatism of the measure of counterparty credit 
risk exposure used for EAD. With respect to paragraph (d)(10)(i) of this 
section:
    (A) For material portfolios of new OTC derivative products, the 
national bank or Federal savings association may assume that the 
standardized approach for counterparty credit risk pursuant to paragraph 
(c) of this section meets the conservatism requirement of this section 
for a period not to exceed 180 days.
    (B) For immaterial portfolios of OTC derivative contracts, the 
national bank or Federal savings association generally may assume that 
the standardized approach for counterparty credit risk pursuant to 
paragraph (c) of this section meets the conservatism requirement of this 
section.
    (ii) To calculate risk-weighted assets for purposes of the approach 
in paragraph (d)(10)(i) of this section, the national bank or Federal 
savings association must insert the assigned risk parameters for each 
counterparty and netting set into the appropriate formula specified in 
Table 1 of Sec.  3.131, multiply the output of the formula by the EAD 
for the exposure as specified above, and multiply by 12.5.
    (e) Credit valuation adjustment (CVA) risk-weighted assets--(1) In 
general. With respect to its OTC derivative contracts, a national bank 
or Federal savings association must calculate a CVA risk-weighted asset 
amount for its portfolio of OTC derivative transactions that are subject 
to the CVA capital requirement using the simple CVA approach described 
in paragraph (e)(5) of this section or, with prior written approval of 
the OCC, the advanced CVA approach described in paragraph (e)(6) of this 
section. A national bank or Federal savings association that receives 
prior OCC approval to calculate its CVA risk-weighted asset amounts for 
a class of counterparties using the advanced CVA approach must continue 
to use that approach for that class of counterparties until it notifies 
the OCC in writing that the national bank or Federal savings association 
expects to begin calculating its CVA risk-weighted asset amount using 
the simple CVA approach. Such notice must include an explanation of the 
national bank's or Federal savings association's rationale and the date 
upon which the national bank or Federal savings association will begin 
to calculate its CVA risk-weighted asset amount using the simple CVA 
approach.
    (2) Market risk national banks or Federal savings associations. 
Notwithstanding the prior approval requirement in paragraph (e)(1) of 
this section, a market risk national bank or Federal savings association 
may calculate its CVA risk-weighted asset amount using the advanced CVA 
approach if the national bank or Federal savings association has OCC 
approval to:
    (i) Determine EAD for OTC derivative contracts using the internal 
models methodology described in paragraph (d) of this section; and
    (ii) Determine its specific risk add-on for debt positions issued by 
the counterparty using a specific risk model described in Sec.  
3.207(b).
    (3) Recognition of hedges. (i) A national bank or Federal savings 
association may recognize a single name CDS, single name contingent CDS, 
any other equivalent hedging instrument that references the counterparty 
directly, and index credit default swaps (CDSind) as a CVA 
hedge under paragraph (e)(5)(ii) of this section or paragraph (e)(6) of 
this section, provided that the position is managed as a CVA hedge in 
accordance with the national bank's or Federal savings association's 
hedging policies.
    (ii) A national bank or Federal savings association shall not 
recognize as a CVA hedge any tranched or nth-to-default 
credit derivative.
    (4) Total CVA risk-weighted assets. Total CVA risk-weighted assets 
is the CVA capital requirement, KCVA, calculated for a 
national bank's or Federal savings association's entire portfolio of OTC 
derivative counterparties

[[Page 166]]

that are subject to the CVA capital requirement, multiplied by 12.5.
    (5) Simple CVA approach. (i) Under the simple CVA approach, the CVA 
capital requirement, KCVA, is calculated according to the 
following formula:
[GRAPHIC] [TIFF OMITTED] TR11OC13.035

    (A) wi = the weight applicable to counterparty i under Table 4 to 
this section;
    (B) Mi = the EAD-weighted average of the effective maturity of each 
netting set with counterparty i (where each netting set's effective 
maturity can be no less than one year.)
    (C) EADitotal = the sum of the EAD for all netting sets of OTC 
derivative contracts with counterparty i calculated using the 
standardized approach for counterparty credit risk methodology described 
in paragraph (c) of this section or the internal models methodology 
described in paragraph (d) of this section. When the national bank or 
Federal savings association calculates EAD under paragraph (c) of this 
section, such EAD may be adjusted for purposes of calculating EADitotal 
by multiplying EAD by (1-exp(-0.05 x Mi))/(0.05 x Mi), where ``exp'' is 
the exponential function. When the national bank or Federal savings 
association calculates EAD under paragraph (d) of this section, 
EADitotal equals EADunstressed.
    (D) Mihedge = the notional weighted average maturity of the hedge 
instrument.
    (E) Bi = the sum of the notional amounts of any purchased single 
name CDS referencing counterparty i that is used to hedge CVA risk to 
counterparty i multiplied by (1-exp(-0.05 x Mihedge))/(0.05 x Mihedge).
    (F) Mind = the maturity of the CDSind or the 
notional weighted average maturity of any CDSind purchased to 
hedge CVA risk of counterparty i.
    (G) Bind = the notional amount of one or more CDSind 
purchased to hedge CVA risk for counterparty i multiplied by (1-exp(-
0.05 x Mind))/(0.05 x Mind)
    (H) wind = the weight applicable to the CDSind based on 
the average weight of the underlying reference names that comprise the 
index under Table 4 to this section.
    (ii) The national bank or Federal savings association may treat the 
notional amount of the index attributable to a counterparty as a single 
name hedge of counterparty i (Bi,) when calculating KCVA, and 
subtract the notional amount of Bi from the notional amount of the 
CDSind. A national bank or Federal savings association must 
treat the CDSind hedge with the notional amount reduced by Bi 
as a CVA hedge.

       Table 4 to Sec.   3.132--Assignment of Counterparty Weight
------------------------------------------------------------------------
                                                           Weight wi (in
                Internal PD (in percent)                     percent)
------------------------------------------------------------------------
0.00-0.07...............................................            0.70
0.070-0.15...................................            0.80
0.15-0.40....................................            1.00
0.40-2.00....................................            2.00
2.00-6.00....................................            3.00
6.00.........................................           10.00
------------------------------------------------------------------------

    (6) Advanced CVA approach. (i) A national bank or Federal savings 
association may use the VaR model that it uses to determine specific 
risk under Sec.  3.207(b) or another VaR model that meets the 
quantitative requirements of Sec. Sec.  3.205(b) and 3.207(b)(1) to 
calculate its CVA capital requirement for a counterparty by modeling the 
impact of changes in the counterparties' credit spreads, together with 
any recognized CVA hedges, on the CVA for the

[[Page 167]]

counterparties, subject to the following requirements:
    (A) The VaR model must incorporate only changes in the 
counterparties' credit spreads, not changes in other risk factors. The 
VaR model does not need to capture jump-to-default risk;
    (B) A national bank or Federal savings association that qualifies to 
use the advanced CVA approach must include in that approach any 
immaterial OTC derivative portfolios for which it uses the standardized 
approach for counterparty credit risk methodology in paragraph (c) of 
this section according to paragraph (e)(6)(viii) of this section; and
    (C) A national bank or Federal savings association must have the 
systems capability to calculate the CVA capital requirement for a 
counterparty on a daily basis (but is not required to calculate the CVA 
capital requirement on a daily basis).
    (ii) Under the advanced CVA approach, the CVA capital requirement, 
KCVA, is calculated according to the following formulas:
[GRAPHIC] [TIFF OMITTED] TR11OC13.037


Where

    (A) ti = the time of the i-th revaluation time bucket starting from 
t0 = 0.
    (B) tT = the longest contractual maturity across the OTC derivative 
contracts with the counterparty.
    (C) si = the CDS spread for the counterparty at tenor ti used to 
calculate the CVA for the counterparty. If a CDS spread is not 
available, the national bank or Federal savings association must use a 
proxy spread based on the credit quality, industry and region of the 
counterparty.
    (D) LGDMKT = the loss given default of the counterparty based on the 
spread of a publicly traded debt instrument of the counterparty, or, 
where a publicly traded debt instrument spread is not available, a proxy 
spread based on the credit quality, industry, and region of the 
counterparty. Where no market information and no reliable proxy based on 
the credit quality, industry, and region of the counterparty are 
available to determine LGDMKT, a national bank or Federal 
savings association may use a conservative estimate when determining 
LGDMKT, subject to approval by the OCC.
    (E) EEi = the sum of the expected exposures for all netting sets 
with the counterparty at revaluation time ti, calculated according to 
paragraphs (e)(6)(iv)(A) and (e)(6)(v)(A) of this section.
    (F) Di = the risk-free discount factor at time ti, where D0 = 1.
    (G) Exp is the exponential function.
    (H) The subscript j refers either to a stressed or an unstressed 
calibration as described in paragraphs (e)(6)(iv) and (v) of this 
section.
    (iii) Notwithstanding paragraphs (e)(6)(i) and (e)(6)(ii) of this 
section, a national bank or Federal savings association must use the 
formulas in paragraphs (e)(6)(iii)(A) or (e)(6)(iii)(B) of

[[Page 168]]

this section to calculate credit spread sensitivities if its VaR model 
is not based on full repricing.
    (A) If the VaR model is based on credit spread sensitivities for 
specific tenors, the national bank or Federal savings association must 
calculate each credit spread sensitivity according to the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR11OC13.039

    (iv) To calculate the CVAUnstressed measure for purposes 
of paragraph (e)(6)(ii) of this section, the national bank or Federal 
savings association must:
    (A) Use the EEi calculated using the calibration of 
paragraph (d)(3)(vii) of this section, except as provided in Sec.  
3.132(e)(6)(vi), and
    (B) Use the historical observation period required under Sec.  
3.205(b)(2).
    (v) To calculate the CVAStressed measure for purposes of 
paragraph (e)(6)(ii) of this section, the national bank or Federal 
savings association must:
    (A) Use the EEi calculated using the stress calibration 
in paragraph (d)(3)(viii) of this section except as provided in 
paragraph (e)(6)(vi) of this section.
    (B) Calibrate VaR model inputs to historical data from the most 
severe twelve-month stress period contained within the three-year stress 
period used to calculate EEi. The OCC may require a national 
bank or Federal savings association to use a different period of 
significant financial stress in the calculation of the 
CVAStressed measure.
    (vi) If a national bank or Federal savings association captures the 
effect of a collateral agreement on EAD using the method described in 
paragraph (d)(5)(ii) of this section, for purposes of paragraph 
(e)(6)(ii) of this section, the national bank or Federal savings 
association must calculate EEi using the method in paragraph 
(d)(5)(ii) of this section and keep that EE constant with the maturity 
equal to the maximum of:
    (A) Half of the longest maturity of a transaction in the netting 
set, and
    (B) The notional weighted average maturity of all transactions in 
the netting set.
    (vii) For purposes of paragraph (e)(6) of this section, the national 
bank's or Federal savings association's VaR model must capture the basis 
between the spreads of any CDSind that is used as the hedging 
instrument and the hedged counterparty exposure over various time 
periods, including benign and stressed environments. If the VaR

[[Page 169]]

model does not capture that basis, the national bank or Federal savings 
association must reflect only 50 percent of the notional amount of the 
CDSind hedge in the VaR model.
    (viii) If a national bank or Federal savings association uses the 
standardized approach for counterparty credit risk pursuant to paragraph 
(c) of this section to calculate the EAD for any immaterial portfolios 
of OTC derivative contracts, the national bank or Federal savings 
association must use that EAD as a constant EE in the formula for the 
calculation of CVA with the maturity equal to the maximum of:
    (A) Half of the longest maturity of a transaction in the netting 
set; and
    (B) The notional weighted average maturity of all transactions in 
the netting set.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41417, July 15, 
2015; 85 FR 4405, Jan. 24, 2020; 85 FR 57959, Sept. 17, 2020; 86 FR 731, 
Jan. 6, 2021]



Sec.  3.133  Cleared transactions.

    (a) General requirements--(1) Clearing member clients. A national 
bank or Federal savings association that is a clearing member client 
must use the methodologies described in paragraph (b) of this section to 
calculate risk-weighted assets for a cleared transaction.
    (2) Clearing members. A national bank or Federal savings association 
that is a clearing member must use the methodologies described in 
paragraph (c) of this section to calculate its risk-weighted assets for 
a cleared transaction and paragraph (d) of this section to calculate its 
risk-weighted assets for its default fund contribution to a CCP.
    (b) Clearing member client national banks or Federal savings 
associations--(1) Risk-weighted assets for cleared transactions. (i) To 
determine the risk-weighted asset amount for a cleared transaction, a 
national bank or Federal savings association that is a clearing member 
client must multiply the trade exposure amount for the cleared 
transaction, calculated in accordance with paragraph (b)(2) of this 
section, by the risk weight appropriate for the cleared transaction, 
determined in accordance with paragraph (b)(3) of this section.
    (ii) A clearing member client national bank's or Federal savings 
association's total risk-weighted assets for cleared transactions is the 
sum of the risk-weighted asset amounts for all of its cleared 
transactions.
    (2) Trade exposure amount. (i) For a cleared transaction that is a 
derivative contract or a netting set of derivative contracts, trade 
exposure amount equals the EAD for the derivative contract or netting 
set of derivative contracts calculated using the methodology used to 
calculate EAD for derivative contracts set forth in Sec.  3.132(c) or 
(d), plus the fair value of the collateral posted by the clearing member 
client national bank or Federal savings association and held by the CCP 
or a clearing member in a manner that is not bankruptcy remote. When the 
national bank or Federal savings association calculates EAD for the 
cleared transaction using the methodology in Sec.  3.132(d), EAD equals 
EADunstressed.
    (ii) For a cleared transaction that is a repo-style transaction or 
netting set of repo-style transactions, trade exposure amount equals the 
EAD for the repo-style transaction calculated using the methodology set 
forth in Sec.  3.132(b)(2) or (3) or (d), plus the fair value of the 
collateral posted by the clearing member client national bank or Federal 
savings association and held by the CCP or a clearing member in a manner 
that is not bankruptcy remote. When the national bank or Federal savings 
association calculates EAD for the cleared transaction under Sec.  
3.132(d), EAD equals EADunstressed.
    (3) Cleared transaction risk weights. (i) For a cleared transaction 
with a QCCP, a clearing member client national bank or Federal savings 
association must apply a risk weight of:
    (A) 2 percent if the collateral posted by the national bank or 
Federal savings association to the QCCP or clearing member is subject to 
an arrangement that prevents any loss to the clearing member client 
national bank or Federal savings association due to the joint default or 
a concurrent insolvency, liquidation, or receivership proceeding of the 
clearing member and any other clearing member clients of the clearing 
member; and the clearing member client national bank or Federal savings 
association has conducted sufficient legal review to conclude with

[[Page 170]]

a well-founded basis (and maintains sufficient written documentation of 
that legal review) that in the event of a legal challenge (including one 
resulting from an event of default or from liquidation, insolvency, or 
receivership proceedings) the relevant court and administrative 
authorities would find the arrangements to be legal, valid, binding, and 
enforceable under the law of the relevant jurisdictions.
    (B) 4 percent, if the requirements of paragraph (b)(3)(i)(A) of this 
section are not met.
    (ii) For a cleared transaction with a CCP that is not a QCCP, a 
clearing member client national bank or Federal savings association must 
apply the risk weight applicable to the CCP under subpart D of this 
part.
    (4) Collateral. (i) Notwithstanding any other requirement of this 
section, collateral posted by a clearing member client national bank or 
Federal savings association that is held by a custodian (in its capacity 
as a custodian) in a manner that is bankruptcy remote from the CCP, 
clearing member, and other clearing member clients of the clearing 
member, is not subject to a capital requirement under this section.
    (ii) A clearing member client national bank or Federal savings 
association must calculate a risk-weighted asset amount for any 
collateral provided to a CCP, clearing member or a custodian in 
connection with a cleared transaction in accordance with requirements 
under subparts E or F of this part, as applicable.
    (c) Clearing member national bank or Federal savings association--
(1) Risk-weighted assets for cleared transactions. (i) To determine the 
risk-weighted asset amount for a cleared transaction, a clearing member 
national bank or Federal savings association must multiply the trade 
exposure amount for the cleared transaction, calculated in accordance 
with paragraph (c)(2) of this section by the risk weight appropriate for 
the cleared transaction, determined in accordance with paragraph (c)(3) 
of this section.
    (ii) A clearing member national bank's or Federal savings 
association's total risk-weighted assets for cleared transactions is the 
sum of the risk-weighted asset amounts for all of its cleared 
transactions.
    (2) Trade exposure amount. A clearing member national bank or 
Federal savings association must calculate its trade exposure amount for 
a cleared transaction as follows:
    (i) For a cleared transaction that is a derivative contract or a 
netting set of derivative contracts, trade exposure amount equals the 
EAD calculated using the methodology used to calculate EAD for 
derivative contracts set forth in Sec.  3.132(c) or (d), plus the fair 
value of the collateral posted by the clearing member national bank or 
Federal savings association and held by the CCP in a manner that is not 
bankruptcy remote. When the clearing member national bank or Federal 
savings association calculates EAD for the cleared transaction using the 
methodology in Sec.  3.132(d), EAD equals EADunstressed.
    (ii) For a cleared transaction that is a repo-style transaction or 
netting set of repo-style transactions, trade exposure amount equals the 
EAD calculated under Sec.  3.132(b)(2) or (3) or (d), plus the fair 
value of the collateral posted by the clearing member national bank or 
Federal savings association and held by the CCP in a manner that is not 
bankruptcy remote. When the clearing member national bank or Federal 
savings association calculates EAD for the cleared transaction under 
Sec.  3.132(d), EAD equals EADunstressed.
    (3) Cleared transaction risk weights. (i) A clearing member national 
bank or Federal savings association must apply a risk weight of 2 
percent to the trade exposure amount for a cleared transaction with a 
QCCP.
    (ii) For a cleared transaction with a CCP that is not a QCCP, a 
clearing member national bank or Federal savings association must apply 
the risk weight applicable to the CCP according to subpart D of this 
part.
    (iii) Notwithstanding paragraphs (c)(3)(i) and (ii) of this section, 
a clearing member national bank or Federal savings association may apply 
a risk weight of zero percent to the trade exposure amount for a cleared 
transaction with a QCCP where the clearing member national bank or 
Federal savings association is acting as a financial

[[Page 171]]

intermediary on behalf of a clearing member client, the transaction 
offsets another transaction that satisfies the requirements set forth in 
Sec.  3.3(a), and the clearing member national bank or Federal savings 
association is not obligated to reimburse the clearing member client in 
the event of the QCCP default.
    (4) Collateral. (i) Notwithstanding any other requirement of this 
section, collateral posted by a clearing member national bank or Federal 
savings association that is held by a custodian (in its capacity as a 
custodian) in a manner that is bankruptcy remote from the CCP, clearing 
member, and other clearing member clients of the clearing member, is not 
subject to a capital requirement under this section.
    (ii) A clearing member national bank or Federal savings association 
must calculate a risk-weighted asset amount for any collateral provided 
to a CCP, clearing member or a custodian in connection with a cleared 
transaction in accordance with requirements under subparts E or F of 
this part, as applicable
    (d) Default fund contributions--(1) General requirement. A clearing 
member national bank or Federal savings association must determine the 
risk-weighted asset amount for a default fund contribution to a CCP at 
least quarterly, or more frequently if, in the opinion of the national 
bank or Federal savings association or the OCC, there is a material 
change in the financial condition of the CCP.
    (2) Risk-weighted asset amount for default fund contributions to 
nonqualifying CCPs. A clearing member national bank's or Federal savings 
association's risk-weighted asset amount for default fund contributions 
to CCPs that are not QCCPs equals the sum of such default fund 
contributions multiplied by 1,250 percent, or an amount determined by 
the OCC, based on factors such as size, structure, and membership 
characteristics of the CCP and riskiness of its transactions, in cases 
where such default fund contributions may be unlimited.
    (3) Risk-weighted asset amount for default fund contributions to 
QCCPs. A clearing member national bank's or Federal savings 
association's risk-weighted asset amount for default fund contributions 
to QCCPs equals the sum of its capital requirement, KCM for 
each QCCP, as calculated under the methodology set forth in paragraph 
(d)(4) of this section, multiplied by 12.5.
    (4) Capital requirement for default fund contributions to a QCCP. A 
clearing member national bank's or Federal savings association's capital 
requirement for its default fund contribution to a QCCP (KCM) is equal 
to:

[[Page 172]]

[GRAPHIC] [TIFF OMITTED] TR17SE20.012

    (5) Hypothetical capital requirement of a QCCP. Where a QCCP has 
provided its KCCP, a national bank or Federal savings 
association must rely on such disclosed figure instead of calculating 
KCCP under this paragraph (d)(5), unless the national bank or 
Federal savings association determines that a more conservative figure 
is appropriate based on the nature, structure, or characteristics of the 
QCCP. The hypothetical capital requirement of a QCCP (KCCP), as 
determined by the national bank or Federal savings association, is equal 
to:

KCCP = [Sigma]CMiEADi * 1.6 percent

Where:

CMi is each clearing member of the QCCP; and
EADi is the exposure amount of the QCCP to each clearing member of the 
          QCCP, as determined under paragraph (d)(6) of this section.

    (6) EAD of a QCCP to a clearing member. (i) The EAD of a QCCP to a 
clearing member is equal to the sum of the EAD for derivative contracts 
determined under paragraph (d)(6)(ii) of this section and the EAD for 
repo-style transactions determined under paragraph (d)(6)(iii) of this 
section.
    (ii) With respect to any derivative contracts between the QCCP and 
the clearing member that are cleared transactions and any guarantees 
that the clearing member has provided to the QCCP with respect to 
performance of a clearing member client on a derivative contract, the 
EAD is equal to the exposure amount of the QCCP to the clearing member 
for all such derivative contracts and guarantees of derivative contracts 
calculated under SA-CCR in Sec.  3.132(c) (or, with respect to a QCCP 
located outside the United States, under a substantially identical 
methodology in effect in the jurisdiction) using a value of 10 business 
days for purposes of Sec.  3.132(c)(9)(iv); less the value of all 
collateral held by the QCCP posted by the clearing member or a client of 
the clearing member in connection with a derivative contract for which 
the clearing member has provided a guarantee to the QCCP and the amount 
of the prefunded default fund contribution of the clearing member to the 
QCCP.

[[Page 173]]

    (iii) With respect to any repo-style transactions between the QCCP 
and a clearing member that are cleared transactions, EAD is equal to:

EADi = max{EBRMi-IMi-DFi; 0{time} 

Where:

EBRMi is the exposure amount of the QCCP to each clearing member for all 
          repo-style transactions between the QCCP and the clearing 
          member, as determined under Sec.  3.132(b)(2) and without 
          recognition of the initial margin collateral posted by the 
          clearing member to the QCCP with respect to the repo-style 
          transactions or the prefunded default fund contribution of the 
          clearing member institution to the QCCP;
    IMi is the initial margin collateral posted by each clearing member 
to the QCCP with respect to the repo-style transactions; and
    DFi is the prefunded default fund contribution of each clearing 
member to the QCCP that is not already deducted in paragraph (d)(6)(ii) 
of this section.
    (iv) EAD must be calculated separately for each clearing member's 
sub-client accounts and sub-house account (i.e., for the clearing 
member's proprietary activities). If the clearing member's collateral 
and its client's collateral are held in the same default fund 
contribution account, then the EAD of that account is the sum of the EAD 
for the client-related transactions within the account and the EAD of 
the house-related transactions within the account. For purposes of 
determining such EADs, the independent collateral of the clearing member 
and its client must be allocated in proportion to the respective total 
amount of independent collateral posted by the clearing member to the 
QCCP.
    (v) If any account or sub-account contains both derivative contracts 
and repo-style transactions, the EAD of that account is the sum of the 
EAD for the derivative contracts within the account and the EAD of the 
repo-style transactions within the account. If independent collateral is 
held for an account containing both derivative contracts and repo-style 
transactions, then such collateral must be allocated to the derivative 
contracts and repo-style transactions in proportion to the respective 
product specific exposure amounts, calculated, excluding the effects of 
collateral, according to Sec.  3.132(b) for repo-style transactions and 
to Sec.  3.132(c)(5) for derivative contracts.
    (vi) Notwithstanding any other provision of paragraph (d) of this 
section, with the prior approval of the OCC, a national bank or Federal 
savings association may determine the risk-weighted asset amount for a 
default fund contribution to a QCCP according to Sec.  3.35(d)(3)(ii).

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41417, July 15, 
2015; 84 FR 35258, July 22, 2019; 85 FR 4411, Jan. 24, 2020; 85 FR 
57960, Sept. 17, 2020]



Sec.  3.134  Guarantees and credit derivatives: PD substitution 
and LGD adjustment approaches.

    (a) Scope. (1) This section applies to wholesale exposures for 
which:
    (i) Credit risk is fully covered by an eligible guarantee or 
eligible credit derivative; or
    (ii) Credit risk is covered on a pro rata basis (that is, on a basis 
in which the national bank or Federal savings association and the 
protection provider share losses proportionately) by an eligible 
guarantee or eligible credit derivative.
    (2) Wholesale exposures on which there is a tranching of credit risk 
(reflecting at least two different levels of seniority) are 
securitization exposures subject to Sec. Sec.  3.141 through 3.145.
    (3) A national bank or Federal savings association may elect to 
recognize the credit risk mitigation benefits of an eligible guarantee 
or eligible credit derivative covering an exposure described in 
paragraph (a)(1) of this section by using the PD substitution approach 
or the LGD adjustment approach in paragraph (c) of this section or, if 
the transaction qualifies, using the double default treatment in Sec.  
3.135. A national bank's or Federal savings association's PD and LGD for 
the hedged exposure may not be lower than the PD and LGD floors 
described in Sec.  3.131(d)(2) and (d)(3).
    (4) If multiple eligible guarantees or eligible credit derivatives 
cover a single exposure described in paragraph (a)(1) of this section, a 
national bank or Federal savings association may treat the hedged 
exposure as multiple separate exposures each covered by a single 
eligible guarantee or eligible

[[Page 174]]

credit derivative and may calculate a separate risk-based capital 
requirement for each separate exposure as described in paragraph (a)(3) 
of this section.
    (5) If a single eligible guarantee or eligible credit derivative 
covers multiple hedged wholesale exposures described in paragraph (a)(1) 
of this section, a national bank or Federal savings association must 
treat each hedged exposure as covered by a separate eligible guarantee 
or eligible credit derivative and must calculate a separate risk-based 
capital requirement for each exposure as described in paragraph (a)(3) 
of this section.
    (6) A national bank or Federal savings association must use the same 
risk parameters for calculating ECL as it uses for calculating the risk-
based capital requirement for the exposure.
    (b) Rules of recognition. (1) A national bank or Federal savings 
association may only recognize the credit risk mitigation benefits of 
eligible guarantees and eligible credit derivatives.
    (2) A national bank or Federal savings association may only 
recognize the credit risk mitigation benefits of an eligible credit 
derivative to hedge an exposure that is different from the credit 
derivative's reference exposure used for determining the derivative's 
cash settlement value, deliverable obligation, or occurrence of a credit 
event if:
    (i) The reference exposure ranks pari passu (that is, equally) with 
or is junior to the hedged exposure; and
    (ii) The reference exposure and the hedged exposure are exposures to 
the same legal entity, and legally enforceable cross-default or cross-
acceleration clauses are in place to assure payments under the credit 
derivative are triggered when the obligor fails to pay under the terms 
of the hedged exposure.
    (c) Risk parameters for hedged exposures--(1) PD substitution 
approach--(i) Full coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and the protection amount (P) of the guarantee or credit 
derivative is greater than or equal to the EAD of the hedged exposure, a 
national bank or Federal savings association may recognize the guarantee 
or credit derivative in determining the national bank's or Federal 
savings association's risk-based capital requirement for the hedged 
exposure by substituting the PD associated with the rating grade of the 
protection provider for the PD associated with the rating grade of the 
obligor in the risk-based capital formula applicable to the guarantee or 
credit derivative in Table 1 of Sec.  3.131 and using the appropriate 
LGD as described in paragraph (c)(1)(iii) of this section. If the 
national bank or Federal savings association determines that full 
substitution of the protection provider's PD leads to an inappropriate 
degree of risk mitigation, the national bank or Federal savings 
association may substitute a higher PD than that of the protection 
provider.
    (ii) Partial coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and P of the guarantee or credit derivative is less than the EAD 
of the hedged exposure, the national bank or Federal savings association 
must treat the hedged exposure as two separate exposures (protected and 
unprotected) in order to recognize the credit risk mitigation benefit of 
the guarantee or credit derivative.
    (A) The national bank or Federal savings association must calculate 
its risk-based capital requirement for the protected exposure under 
Sec.  3.131, where PD is the protection provider's PD, LGD is determined 
under paragraph (c)(1)(iii) of this section, and EAD is P. If the 
national bank or Federal savings association determines that full 
substitution leads to an inappropriate degree of risk mitigation, the 
national bank or Federal savings association may use a higher PD than 
that of the protection provider.
    (B) The national bank or Federal savings association must calculate 
its risk-based capital requirement for the unprotected exposure under 
Sec.  3.131, where PD is the obligor's PD, LGD is the hedged exposure's 
LGD (not adjusted to reflect the guarantee or credit derivative), and 
EAD is the EAD of the original hedged exposure minus P.
    (C) The treatment in paragraph (c)(1)(ii) of this section is 
applicable

[[Page 175]]

when the credit risk of a wholesale exposure is covered on a partial pro 
rata basis or when an adjustment is made to the effective notional 
amount of the guarantee or credit derivative under paragraphs (d), (e), 
or (f) of this section.
    (iii) LGD of hedged exposures. The LGD of a hedged exposure under 
the PD substitution approach is equal to:
    (A) The lower of the LGD of the hedged exposure (not adjusted to 
reflect the guarantee or credit derivative) and the LGD of the guarantee 
or credit derivative, if the guarantee or credit derivative provides the 
national bank or Federal savings association with the option to receive 
immediate payout upon triggering the protection; or
    (B) The LGD of the guarantee or credit derivative, if the guarantee 
or credit derivative does not provide the national bank or Federal 
savings association with the option to receive immediate payout upon 
triggering the protection.
    (2) LGD adjustment approach--(i) Full coverage. If an eligible 
guarantee or eligible credit derivative meets the conditions in 
paragraphs (a) and (b) of this section and the protection amount (P) of 
the guarantee or credit derivative is greater than or equal to the EAD 
of the hedged exposure, the national bank's or Federal savings 
association's risk-based capital requirement for the hedged exposure is 
the greater of:
    (A) The risk-based capital requirement for the exposure as 
calculated under Sec.  3.131, with the LGD of the exposure adjusted to 
reflect the guarantee or credit derivative; or
    (B) The risk-based capital requirement for a direct exposure to the 
protection provider as calculated under Sec.  3.131, using the PD for 
the protection provider, the LGD for the guarantee or credit derivative, 
and an EAD equal to the EAD of the hedged exposure.
    (ii) Partial coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and the protection amount (P) of the guarantee or credit 
derivative is less than the EAD of the hedged exposure, the national 
bank or Federal savings association must treat the hedged exposure as 
two separate exposures (protected and unprotected) in order to recognize 
the credit risk mitigation benefit of the guarantee or credit 
derivative.
    (A) The national bank's or Federal savings association's risk-based 
capital requirement for the protected exposure would be the greater of:
    (1) The risk-based capital requirement for the protected exposure as 
calculated under Sec.  3.131, with the LGD of the exposure adjusted to 
reflect the guarantee or credit derivative and EAD set equal to P; or
    (2) The risk-based capital requirement for a direct exposure to the 
guarantor as calculated under Sec.  3.131, using the PD for the 
protection provider, the LGD for the guarantee or credit derivative, and 
an EAD set equal to P.
    (B) The national bank or Federal savings association must calculate 
its risk-based capital requirement for the unprotected exposure under 
Sec.  3.131, where PD is the obligor's PD, LGD is the hedged exposure's 
LGD (not adjusted to reflect the guarantee or credit derivative), and 
EAD is the EAD of the original hedged exposure minus P.
    (3) M of hedged exposures. For purposes of this paragraph (c), the M 
of the hedged exposure is the same as the M of the exposure if it were 
unhedged.
    (d) Maturity mismatch. (1) A national bank or Federal savings 
association that recognizes an eligible guarantee or eligible credit 
derivative in determining its risk-based capital requirement for a 
hedged exposure must adjust the effective notional amount of the credit 
risk mitigant to reflect any maturity mismatch between the hedged 
exposure and the credit risk mitigant.
    (2) A maturity mismatch occurs when the residual maturity of a 
credit risk mitigant is less than that of the hedged exposure(s).
    (3) The residual maturity of a hedged exposure is the longest 
possible remaining time before the obligor is scheduled to fulfil its 
obligation on the exposure. If a credit risk mitigant has embedded 
options that may reduce its term, the national bank or Federal savings 
association (protection purchaser) must use the shortest possible 
residual maturity for the credit risk mitigant.

[[Page 176]]

If a call is at the discretion of the protection provider, the residual 
maturity of the credit risk mitigant is at the first call date. If the 
call is at the discretion of the national bank or Federal savings 
association (protection purchaser), but the terms of the arrangement at 
origination of the credit risk mitigant contain a positive incentive for 
the national bank or Federal savings association to call the transaction 
before contractual maturity, the remaining time to the first call date 
is the residual maturity of the credit risk mitigant.\31\
---------------------------------------------------------------------------

    \31\ For example, where there is a step-up in cost in conjunction 
with a call feature or where the effective cost of protection increases 
over time even if credit quality remains the same or improves, the 
residual maturity of the credit risk mitigant will be the remaining time 
to the first call.
---------------------------------------------------------------------------

    (4) A credit risk mitigant with a maturity mismatch may be 
recognized only if its original maturity is greater than or equal to one 
year and its residual maturity is greater than three months.
    (5) When a maturity mismatch exists, the national bank or Federal 
savings association must apply the following adjustment to the effective 
notional amount of the credit risk mitigant:

Pm = E x (t - 0.25)/(T - 0.25),


where:

    (i) Pm = effective notional amount of the credit risk 
mitigant, adjusted for maturity mismatch;
    (ii) E = effective notional amount of the credit risk mitigant;
    (iii) t = the lesser of T or the residual maturity of the credit 
risk mitigant, expressed in years; and
    (iv) T = the lesser of five or the residual maturity of the hedged 
exposure, expressed in years.
    (e) Credit derivatives without restructuring as a credit event. If a 
national bank or Federal savings association recognizes an eligible 
credit derivative that does not include as a credit event a 
restructuring of the hedged exposure involving forgiveness or 
postponement of principal, interest, or fees that results in a credit 
loss event (that is, a charge-off, specific provision, or other similar 
debit to the profit and loss account), the national bank or Federal 
savings association must apply the following adjustment to the effective 
notional amount of the credit derivative:

Pr = Pm x 0.60,


where:

    (1) Pr = effective notional amount of the credit risk 
mitigant, adjusted for lack of restructuring event (and maturity 
mismatch, if applicable); and
    (2) Pm = effective notional amount of the credit risk 
mitigant adjusted for maturity mismatch (if applicable).
    (f) Currency mismatch. (1) If a national bank or Federal savings 
association recognizes an eligible guarantee or eligible credit 
derivative that is denominated in a currency different from that in 
which the hedged exposure is denominated, the national bank or Federal 
savings association must apply the following formula to the effective 
notional amount of the guarantee or credit derivative:

Pc = Pr x (1 - HFX),


where:

    (i) Pc = effective notional amount of the credit risk 
mitigant, adjusted for currency mismatch (and maturity mismatch and lack 
of restructuring event, if applicable);
    (ii) Pr = effective notional amount of the credit risk 
mitigant (adjusted for maturity mismatch and lack of restructuring 
event, if applicable); and
    (iii) HFX = haircut appropriate for the currency mismatch 
between the credit risk mitigant and the hedged exposure.
    (2) A national bank or Federal savings association must set 
HFX equal to 8 percent unless it qualifies for the use of and 
uses its own internal estimates of foreign exchange volatility based on 
a ten-business-day holding period and daily marking-to-market and 
remargining. A national bank or Federal savings association qualifies 
for the use of its own internal estimates of foreign exchange volatility 
if it qualifies for:
    (i) The own-estimates haircuts in Sec.  3.132(b)(2)(iii);
    (ii) The simple VaR methodology in Sec.  3.132(b)(3); or
    (iii) The internal models methodology in Sec.  3.132(d).

[[Page 177]]

    (3) A national bank or Federal savings association must adjust 
HFX calculated in paragraph (f)(2) of this section upward if 
the national bank or Federal savings association revalues the guarantee 
or credit derivative less frequently than once every ten business days 
using the square root of time formula provided in Sec.  
3.132(b)(2)(iii)(A)(2).

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 85 FR 4405, Jan. 24, 
2020]



Sec.  3.135  Guarantees and credit derivatives: double default treatment.

    (a) Eligibility and operational criteria for double default 
treatment. A national bank or Federal savings association may recognize 
the credit risk mitigation benefits of a guarantee or credit derivative 
covering an exposure described in Sec.  3.134(a)(1) by applying the 
double default treatment in this section if all the following criteria 
are satisfied:
    (1) The hedged exposure is fully covered or covered on a pro rata 
basis by:
    (i) An eligible guarantee issued by an eligible double default 
guarantor; or
    (ii) An eligible credit derivative that meets the requirements of 
Sec.  3.134(b)(2) and that is issued by an eligible double default 
guarantor.
    (2) The guarantee or credit derivative is:
    (i) An uncollateralized guarantee or uncollateralized credit 
derivative (for example, a credit default swap) that provides protection 
with respect to a single reference obligor; or
    (ii) An nth-to-default credit derivative (subject to the 
requirements of Sec.  3.142(m).
    (3) The hedged exposure is a wholesale exposure (other than a 
sovereign exposure).
    (4) The obligor of the hedged exposure is not:
    (i) An eligible double default guarantor or an affiliate of an 
eligible double default guarantor; or
    (ii) An affiliate of the guarantor.
    (5) The national bank or Federal savings association does not 
recognize any credit risk mitigation benefits of the guarantee or credit 
derivative for the hedged exposure other than through application of the 
double default treatment as provided in this section.
    (6) The national bank or Federal savings association has implemented 
a process (which has received the prior, written approval of the OCC) to 
detect excessive correlation between the creditworthiness of the obligor 
of the hedged exposure and the protection provider. If excessive 
correlation is present, the national bank or Federal savings association 
may not use the double default treatment for the hedged exposure.
    (b) Full coverage. If a transaction meets the criteria in paragraph 
(a) of this section and the protection amount (P) of the guarantee or 
credit derivative is at least equal to the EAD of the hedged exposure, 
the national bank or Federal savings association may determine its risk-
weighted asset amount for the hedged exposure under paragraph (e) of 
this section.
    (c) Partial coverage. If a transaction meets the criteria in 
paragraph (a) of this section and the protection amount (P) of the 
guarantee or credit derivative is less than the EAD of the hedged 
exposure, the national bank or Federal savings association must treat 
the hedged exposure as two separate exposures (protected and 
unprotected) in order to recognize double default treatment on the 
protected portion of the exposure:
    (1) For the protected exposure, the national bank or Federal savings 
association must set EAD equal to P and calculate its risk-weighted 
asset amount as provided in paragraph (e) of this section; and
    (2) For the unprotected exposure, the national bank or Federal 
savings association must set EAD equal to the EAD of the original 
exposure minus P and then calculate its risk-weighted asset amount as 
provided in Sec.  3.131.
    (d) Mismatches. For any hedged exposure to which a national bank or 
Federal savings association applies double default treatment under this 
part, the national bank or Federal savings association must make 
applicable adjustments to the protection amount as required in Sec.  
3.134(d), (e), and (f).
    (e) The double default dollar risk-based capital requirement. The 
dollar risk-based capital requirement for a hedged exposure to which a 
national bank or Federal savings association has applied

[[Page 178]]

double default treatment is KDD multiplied by the EAD of the 
exposure. KDD is calculated according to the following 
formula:

KDD = Ko x (0.15 + 160 x PDg),


Where:
    (1)
    [GRAPHIC] [TIFF OMITTED] TR11OC13.048
    
    (2) PDg = PD of the protection provider.
    (3) PDo = PD of the obligor of the hedged exposure.
    (4) LGDg =
    (i) The lower of the LGD of the hedged exposure (not adjusted to 
reflect the guarantee or credit derivative) and the LGD of the guarantee 
or credit derivative, if the guarantee or credit derivative provides the 
national bank or Federal savings association with the option to receive 
immediate payout on triggering the protection; or
    (ii) The LGD of the guarantee or credit derivative, if the guarantee 
or credit derivative does not provide the national bank or Federal 
savings association with the option to receive immediate payout on 
triggering the protection; and
    (5) [rho]os (asset value correlation of the obligor) is 
calculated according to the appropriate formula for (R) provided in 
Table 1 in Sec.  3.131, with PD equal to PDo.
    (6) b (maturity adjustment coefficient) is calculated according to 
the formula for b provided in Table 1 in Sec.  3.131, with PD equal to 
the lesser of PDo and PDg; and
    (7) M (maturity) is the effective maturity of the guarantee or 
credit derivative, which may not be less than one year or greater than 
five years.



Sec.  3.136  Unsettled transactions.

    (a) Definitions. For purposes of this section:
    (1) Delivery-versus-payment (DvP) transaction means a securities or 
commodities transaction in which the buyer is obligated to make payment 
only if the seller has made delivery of the securities or commodities 
and the seller is obligated to deliver the securities or commodities 
only if the buyer has made payment.
    (2) Payment-versus-payment (PvP) transaction means a foreign 
exchange transaction in which each counterparty is obligated to make a 
final transfer of one or more currencies only if the other counterparty 
has made a final transfer of one or more currencies.
    (3) A transaction has a normal settlement period if the contractual 
settlement period for the transaction is equal to or less than the 
market standard for the instrument underlying the transaction and equal 
to or less than five business days.
    (4) The positive current exposure of a national bank or Federal 
savings association for a transaction is the difference between the 
transaction value at the agreed settlement price and the current market 
price of the transaction, if the difference results in a credit exposure 
of the national bank or Federal savings association to the counterparty.
    (b) Scope. This section applies to all transactions involving 
securities, foreign exchange instruments, and commodities that have a 
risk of delayed settlement or delivery. This section does not apply to:
    (1) Cleared transactions that are subject to daily marking-to-market 
and daily receipt and payment of variation margin;
    (2) Repo-style transactions, including unsettled repo-style 
transactions (which are addressed in Sec. Sec.  3.131 and 132);
    (3) One-way cash payments on OTC derivative contracts (which are 
addressed in Sec. Sec.  3. 131 and 132); or
    (4) Transactions with a contractual settlement period that is longer 
than the normal settlement period (which are treated as OTC derivative 
contracts and addressed in Sec. Sec.  3.131 and 132).

[[Page 179]]

    (c) System-wide failures. In the case of a system-wide failure of a 
settlement or clearing system, or a central counterparty, the OCC may 
waive risk-based capital requirements for unsettled and failed 
transactions until the situation is rectified.
    (d) Delivery-versus-payment (DvP) and payment-versus-payment (PvP) 
transactions. A national bank or Federal savings association must hold 
risk-based capital against any DvP or PvP transaction with a normal 
settlement period if the national bank's or Federal savings 
association's counterparty has not made delivery or payment within five 
business days after the settlement date. The national bank or Federal 
savings association must determine its risk-weighted asset amount for 
such a transaction by multiplying the positive current exposure of the 
transaction for the national bank or Federal savings association by the 
appropriate risk weight in Table 1 to Sec.  3.136.

     Table 1 to Sec.   3.136--Risk Weights for Unsettled DvP and PvP
                              Transactions
------------------------------------------------------------------------
                                                          Risk weight to
                                                           be applied to
  Number of business days after contractual settlement       positive
                          date                                current
                                                           exposure (in
                                                             percent)
------------------------------------------------------------------------
From 5 to 15............................................             100
From 16 to 30...........................................             625
From 31 to 45...........................................           937.5
46 or more..............................................           1,250
------------------------------------------------------------------------

    (e) Non-DvP/non-PvP (non-delivery-versus-payment/non-payment-versus-
payment) transactions. (1) A national bank or Federal savings 
association must hold risk-based capital against any non-DvP/non-PvP 
transaction with a normal settlement period if the national bank or 
Federal savings association has delivered cash, securities, commodities, 
or currencies to its counterparty but has not received its corresponding 
deliverables by the end of the same business day. The national bank or 
Federal savings association must continue to hold risk-based capital 
against the transaction until the national bank or Federal savings 
association has received its corresponding deliverables.
    (2) From the business day after the national bank or Federal savings 
association has made its delivery until five business days after the 
counterparty delivery is due, the national bank or Federal savings 
association must calculate its risk-based capital requirement for the 
transaction by treating the current fair value of the deliverables owed 
to the national bank or Federal savings association as a wholesale 
exposure.
    (i) A national bank or Federal savings association may use a 45 
percent LGD for the transaction rather than estimating LGD for the 
transaction provided the national bank or Federal savings association 
uses the 45 percent LGD for all transactions described in paragraphs 
(e)(1) and (2) of this section.
    (ii) A national bank or Federal savings association may use a 100 
percent risk weight for the transaction provided the national bank or 
Federal savings association uses this risk weight for all transactions 
described in paragraphs (e)(1) and (2) of this section.
    (3) If the national bank or Federal savings association has not 
received its deliverables by the fifth business day after the 
counterparty delivery was due, the national bank or Federal savings 
association must apply a 1,250 percent risk weight to the current fair 
value of the deliverables owed to the national bank or Federal savings 
association.
    (f) Total risk-weighted assets for unsettled transactions. Total 
risk-weighted assets for unsettled transactions is the sum of the risk-
weighted asset amounts of all DvP, PvP, and non-DvP/non-PvP 
transactions.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41417, July 15, 
2015]



Sec. Sec.  3.137-3.140  [Reserved]

            Risk-Weighted Assets for Securitization Exposures



Sec.  3.141  Operational criteria for recognizing the transfer of risk.

    (a) Operational criteria for traditional securitizations. A national 
bank or Federal savings association that transfers exposures it has 
originated or purchased to a securitization SPE or other third party in 
connection with a traditional securitization may exclude the exposures 
from the calculation of its risk-weighted assets only if each of the

[[Page 180]]

conditions in this paragraph (a) is satisfied. A national bank or 
Federal savings association that meets these conditions must hold risk-
based capital against any securitization exposures it retains in 
connection with the securitization. A national bank or Federal savings 
association that fails to meet these conditions must hold risk-based 
capital against the transferred exposures as if they had not been 
securitized and must deduct from common equity tier 1 capital any after-
tax gain-on-sale resulting from the transaction. The conditions are:
    (1) The exposures are not reported on the national bank's or Federal 
savings association's consolidated balance sheet under GAAP;
    (2) The national bank or Federal savings association has transferred 
to one or more third parties credit risk associated with the underlying 
exposures;
    (3) Any clean-up calls relating to the securitization are eligible 
clean-up calls; and
    (4) The securitization does not:
    (i) Include one or more underlying exposures in which the borrower 
is permitted to vary the drawn amount within an agreed limit under a 
line of credit; and
    (ii) Contain an early amortization provision.
    (b) Operational criteria for synthetic securitizations. For 
synthetic securitizations, a national bank or Federal savings 
association may recognize for risk-based capital purposes under this 
subpart the use of a credit risk mitigant to hedge underlying exposures 
only if each of the conditions in this paragraph (b) is satisfied. A 
national bank or Federal savings association that meets these conditions 
must hold risk-based capital against any credit risk of the exposures it 
retains in connection with the synthetic securitization. A national bank 
or Federal savings association that fails to meet these conditions or 
chooses not to recognize the credit risk mitigant for purposes of this 
section must hold risk-based capital under this subpart against the 
underlying exposures as if they had not been synthetically securitized. 
The conditions are:
    (1) The credit risk mitigant is:
    (i) Financial collateral; or
    (ii) A guarantee that meets all of the requirements of an eligible 
guarantee in Sec.  3.2 except for paragraph (3) of the definition; or
    (iii) A credit derivative that meets all of the requirements of an 
eligible credit derivative except for paragraph (3) of the definition of 
eligible guarantee in Sec.  3.2.
    (2) The national bank or Federal savings association transfers 
credit risk associated with the underlying exposures to third parties, 
and the terms and conditions in the credit risk mitigants employed do 
not include provisions that:
    (i) Allow for the termination of the credit protection due to 
deterioration in the credit quality of the underlying exposures;
    (ii) Require the national bank or Federal savings association to 
alter or replace the underlying exposures to improve the credit quality 
of the underlying exposures;
    (iii) Increase the national bank's or Federal savings association's 
cost of credit protection in response to deterioration in the credit 
quality of the underlying exposures;
    (iv) Increase the yield payable to parties other than the national 
bank or Federal savings association in response to a deterioration in 
the credit quality of the underlying exposures; or
    (v) Provide for increases in a retained first loss position or 
credit enhancement provided by the national bank or Federal savings 
association after the inception of the securitization;
    (3) The national bank or Federal savings association obtains a well-
reasoned opinion from legal counsel that confirms the enforceability of 
the credit risk mitigant in all relevant jurisdictions; and
    (4) Any clean-up calls relating to the securitization are eligible 
clean-up calls.
    (c) Due diligence requirements for securitization exposures. (1) 
Except for exposures that are deducted from common equity tier 1 capital 
and exposures subject to Sec.  3.142(k), if a national bank or Federal 
savings association is unable to demonstrate to the satisfaction of the 
OCC a comprehensive understanding of the features of a

[[Page 181]]

securitization exposure that would materially affect the performance of 
the exposure, the national bank or Federal savings association must 
assign a 1,250 percent risk weight to the securitization exposure. The 
national bank's or Federal savings association's analysis must be 
commensurate with the complexity of the securitization exposure and the 
materiality of the position in relation to regulatory capital according 
to this part.
    (2) A national bank or Federal savings association must demonstrate 
its comprehensive understanding of a securitization exposure under 
paragraph (c)(1) of this section, for each securitization exposure by:
    (i) Conducting an analysis of the risk characteristics of a 
securitization exposure prior to acquiring the exposure and document 
such analysis within three business days after acquiring the exposure, 
considering:
    (A) Structural features of the securitization that would materially 
impact the performance of the exposure, for example, the contractual 
cash flow waterfall, waterfall-related triggers, credit enhancements, 
liquidity enhancements, fair value triggers, the performance of 
organizations that service the position, and deal-specific definitions 
of default;
    (B) Relevant information regarding the performance of the underlying 
credit exposure(s), for example, the percentage of loans 30, 60, and 90 
days past due; default rates; prepayment rates; loans in foreclosure; 
property types; occupancy; average credit score or other measures of 
creditworthiness; average loan-to-value ratio; and industry and 
geographic diversification data on the underlying exposure(s);
    (C) Relevant market data of the securitization, for example, bid-ask 
spreads, most recent sales price and historical price volatility, 
trading volume, implied market rating, and size, depth and concentration 
level of the market for the securitization; and
    (D) For resecuritization exposures, performance information on the 
underlying securitization exposures, for example, the issuer name and 
credit quality, and the characteristics and performance of the exposures 
underlying the securitization exposures; and
    (ii) On an on-going basis (no less frequently than quarterly), 
evaluating, reviewing, and updating as appropriate the analysis required 
under this section for each securitization exposure.



Sec.  3.142  Risk-weighted assets for securitization exposures.

    (a) Hierarchy of approaches. Except as provided elsewhere in this 
section and in Sec.  3.141:
    (1) A national bank or Federal savings association must deduct from 
common equity tier 1 capital any after-tax gain-on-sale resulting from a 
securitization and must apply a 1,250 percent risk weight to the portion 
of any CEIO that does not constitute after tax gain-on-sale;
    (2) If a securitization exposure does not require deduction or a 
1,250 percent risk weight under paragraph (a)(1) of this section, the 
national bank or Federal savings association must apply the supervisory 
formula approach in Sec.  3.143 to the exposure if the national bank or 
Federal savings association and the exposure qualify for the supervisory 
formula approach according to Sec.  3.143(a);
    (3) If a securitization exposure does not require deduction or a 
1,250 percent risk weight under paragraph (a)(1) of this section and 
does not qualify for the supervisory formula approach, the national bank 
or Federal savings association may apply the simplified supervisory 
formula approach under Sec.  3.144;
    (4) If a securitization exposure does not require deduction or a 
1,250 percent risk weight under paragraph (a)(1) of this section, does 
not qualify for the supervisory formula approach in Sec.  3.143, and the 
national bank or Federal savings association does not apply the 
simplified supervisory formula approach in Sec.  3.144, the national 
bank or Federal savings association must apply a 1,250 percent risk 
weight to the exposure; and
    (5) If a securitization exposure is a derivative contract (other 
than protection provided by a national bank or Federal savings 
association in the form of a credit derivative) that has a first 
priority claim on the cash flows from the underlying exposures 
(notwithstanding amounts due under interest rate or currency derivative 
contracts, fees due, or other similar payments), a

[[Page 182]]

national bank or Federal savings association may choose to set the risk-
weighted asset amount of the exposure equal to the amount of the 
exposure as determined in paragraph (e) of this section rather than 
apply the hierarchy of approaches described in paragraphs (a)(1) through 
(4) of this section.
    (b) Total risk-weighted assets for securitization exposures. A 
national bank's or Federal savings association's total risk-weighted 
assets for securitization exposures is equal to the sum of its risk-
weighted assets calculated using Sec. Sec.  3.141 through 146.
    (c) Deductions. A national bank or Federal savings association may 
calculate any deduction from common equity tier 1 capital for a 
securitization exposure net of any DTLs associated with the 
securitization exposure.
    (d) Maximum risk-based capital requirement. Except as provided in 
Sec.  3.141(c), unless one or more underlying exposures does not meet 
the definition of a wholesale, retail, securitization, or equity 
exposure, the total risk-based capital requirement for all 
securitization exposures held by a single national bank or Federal 
savings association associated with a single securitization (excluding 
any risk-based capital requirements that relate to the national bank's 
or Federal savings association's gain-on-sale or CEIOs associated with 
the securitization) may not exceed the sum of:
    (1) The national bank's or Federal savings association's total risk-
based capital requirement for the underlying exposures calculated under 
this subpart as if the national bank or Federal savings association 
directly held the underlying exposures; and
    (2) The total ECL of the underlying exposures calculated under this 
subpart.
    (e) Exposure amount of a securitization exposure. (1) The exposure 
amount of an on-balance sheet securitization exposure that is not a 
repo-style transaction, eligible margin loan, OTC derivative contract, 
or cleared transaction is the national bank's or Federal savings 
association's carrying value.
    (2) Except as provided in paragraph (m) of this section, the 
exposure amount of an off-balance sheet securitization exposure that is 
not an OTC derivative contract (other than a credit derivative), repo-
style transaction, eligible margin loan, or cleared transaction (other 
than a credit derivative) is the notional amount of the exposure. For an 
off-balance-sheet securitization exposure to an ABCP program, such as an 
eligible ABCP liquidity facility, the notional amount may be reduced to 
the maximum potential amount that the national bank or Federal savings 
association could be required to fund given the ABCP program's current 
underlying assets (calculated without regard to the current credit 
quality of those assets).
    (3) The exposure amount of a securitization exposure that is a repo-
style transaction, eligible margin loan, or OTC derivative contract 
(other than a credit derivative) or cleared transaction (other than a 
credit derivative) is the EAD of the exposure as calculated in Sec.  
3.132 or Sec.  3.133.
    (f) Overlapping exposures. If a national bank or Federal savings 
association has multiple securitization exposures that provide 
duplicative coverage of the underlying exposures of a securitization 
(such as when a national bank or Federal savings association provides a 
program-wide credit enhancement and multiple pool-specific liquidity 
facilities to an ABCP program), the national bank or Federal savings 
association is not required to hold duplicative risk-based capital 
against the overlapping position. Instead, the national bank or Federal 
savings association may assign to the overlapping securitization 
exposure the applicable risk-based capital treatment under this subpart 
that results in the highest risk-based capital requirement.
    (g) Securitizations of non-IRB exposures. Except as provided in 
Sec.  3.141(c), if a national bank or Federal savings association has a 
securitization exposure where any underlying exposure is not a wholesale 
exposure, retail exposure, securitization exposure, or equity exposure, 
the national bank or Federal savings association:
    (1) Must deduct from common equity tier 1 capital any after-tax 
gain-on-sale resulting from the securitization and apply a 1,250 percent 
risk weight to the

[[Page 183]]

portion of any CEIO that does not constitute gain-on-sale, if the 
national bank or Federal savings association is an originating national 
bank or Federal savings association;
    (2) May apply the simplified supervisory formula approach in Sec.  
3.144 to the exposure, if the securitization exposure does not require 
deduction or a 1,250 percent risk weight under paragraph (g)(1) of this 
section;
    (3) Must assign a 1,250 percent risk weight to the exposure if the 
securitization exposure does not require deduction or a 1,250 percent 
risk weight under paragraph (g)(1) of this section, does not qualify for 
the supervisory formula approach in Sec.  3.143, and the national bank 
or Federal savings association does not apply the simplified supervisory 
formula approach in Sec.  3.144 to the exposure.
    (h) Implicit support. If a national bank or Federal savings 
association provides support to a securitization in excess of the 
national bank's or Federal savings association's contractual obligation 
to provide credit support to the securitization (implicit support):
    (1) The national bank or Federal savings association must calculate 
a risk-weighted asset amount for underlying exposures associated with 
the securitization as if the exposures had not been securitized and must 
deduct from common equity tier 1 capital any after-tax gain-on-sale 
resulting from the securitization; and
    (2) The national bank or Federal savings association must disclose 
publicly:
    (i) That it has provided implicit support to the securitization; and
    (ii) The regulatory capital impact to the national bank or Federal 
savings association of providing such implicit support.
    (i) Undrawn portion of a servicer cash advance facility. (1) 
Notwithstanding any other provision of this subpart, a national bank or 
Federal savings association that is a servicer under an eligible 
servicer cash advance facility is not required to hold risk-based 
capital against potential future cash advance payments that it may be 
required to provide under the contract governing the facility.
    (2) For a national bank or Federal savings association that acts as 
a servicer, the exposure amount for a servicer cash advance facility 
that is not an eligible servicer cash advance facility is equal to the 
amount of all potential future cash advance payments that the national 
bank or Federal savings association may be contractually required to 
provide during the subsequent 12 month period under the contract 
governing the facility.
    (j) Interest-only mortgage-backed securities. Regardless of any 
other provisions in this part, the risk weight for a non-credit-
enhancing interest-only mortgage-backed security may not be less than 
100 percent.
    (k) Small-business loans and leases on personal property transferred 
with recourse. (1) Notwithstanding any other provisions of this subpart 
E, a national bank or Federal savings association that has transferred 
small-business loans and leases on personal property (small-business 
obligations) with recourse must include in risk-weighted assets only the 
contractual amount of retained recourse if all the following conditions 
are met:
    (i) The transaction is a sale under GAAP.
    (ii) The national bank or Federal savings association establishes 
and maintains, pursuant to GAAP, a non-capital reserve sufficient to 
meet the national bank's or Federal savings association's reasonably 
estimated liability under the recourse arrangement.
    (iii) The loans and leases are to businesses that meet the criteria 
for a small-business concern established by the Small Business 
Administration under section 3(a) of the Small Business Act (15 U.S.C. 
632 et seq.); and
    (iv) The national bank or Federal savings association is well-
capitalized, as defined in 12 CFR 6.4. For purposes of determining 
whether a national bank or Federal savings association is well 
capitalized for purposes of this paragraph (k), the national bank's or 
Federal savings association's capital ratios must be calculated without 
regard to the capital treatment for transfers of small-business 
obligations with recourse specified in paragraph (k)(1) of this section.
    (2) The total outstanding amount of recourse retained by a national 
bank or

[[Page 184]]

Federal savings association on transfers of small-business obligations 
subject to paragraph (k)(1) of this section cannot exceed 15 percent of 
the national bank's or Federal savings association's total capital.
    (3) If a national bank or Federal savings association ceases to be 
well capitalized or exceeds the 15 percent capital limitation in 
paragraph (k)(2) of this section, the preferential capital treatment 
specified in paragraph (k)(1) of this section will continue to apply to 
any transfers of small-business obligations with recourse that occurred 
during the time that the national bank or Federal savings association 
was well capitalized and did not exceed the capital limit.
    (4) The risk-based capital ratios of a national bank or Federal 
savings association must be calculated without regard to the capital 
treatment for transfers of small-business obligations with recourse 
specified in paragraph (k)(1) of this section.
    (l) Nth-to-default credit derivatives--(1) Protection provider. A 
national bank or Federal savings association must determine a risk 
weight using the supervisory formula approach (SFA) pursuant to Sec.  
3.143 or the simplified supervisory formula approach (SSFA) pursuant to 
Sec.  3.144 for an nth-to-default credit derivative in accordance with 
this paragraph (l). In the case of credit protection sold, a national 
bank or Federal savings association must determine its exposure in the 
nth-to-default credit derivative as the largest notional 
amount of all the underlying exposures.
    (2) For purposes of determining the risk weight for an 
nth-to-default credit derivative using the SFA or the SSFA, 
the national bank or Federal savings association must calculate the 
attachment point and detachment point of its exposure as follows:
    (i) The attachment point (parameter A) is the ratio of the sum of 
the notional amounts of all underlying exposures that are subordinated 
to the national bank's or Federal savings association's exposure to the 
total notional amount of all underlying exposures. For purposes of the 
SSFA, parameter A is expressed as a decimal value between zero and one. 
For purposes of using the SFA to calculate the risk weight for its 
exposure in an nth-to-default credit derivative, parameter A 
must be set equal to the credit enhancement level (L) input to the SFA 
formula. In the case of a first-to-default credit derivative, there are 
no underlying exposures that are subordinated to the national bank's or 
Federal savings association's exposure. In the case of a second-or-
subsequent-to-default credit derivative, the smallest (n-1) risk-
weighted asset amounts of the underlying exposure(s) are subordinated to 
the national bank's or Federal savings association's exposure.
    (ii) The detachment point (parameter D) equals the sum of parameter 
A plus the ratio of the notional amount of the national bank's or 
Federal savings association's exposure in the nth-to-default 
credit derivative to the total notional amount of all underlying 
exposures. For purposes of the SSFA, parameter W is expressed as a 
decimal value between zero and one. For purposes of the SFA, parameter D 
must be set to equal L plus the thickness of tranche T input to the SFA 
formula.
    (3) A national bank or Federal savings association that does not use 
the SFA or the SSFA to determine a risk weight for its exposure in an 
nth-to-default credit derivative must assign a risk weight of 
1,250 percent to the exposure.
    (4) Protection purchaser--(i) First-to-default credit derivatives. A 
national bank or Federal savings association that obtains credit 
protection on a group of underlying exposures through a first-to-default 
credit derivative that meets the rules of recognition of Sec.  3.134(b) 
must determine its risk-based capital requirement under this subpart for 
the underlying exposures as if the national bank or Federal savings 
association synthetically securitized the underlying exposure with the 
lowest risk-based capital requirement and had obtained no credit risk 
mitigant on the other underlying exposures. A national bank or Federal 
savings association must calculate a risk-based capital requirement for 
counterparty credit risk according to Sec.  3.132 for a first-to-default 
credit derivative that does not meet the rules of recognition of Sec.  
3.134(b).

[[Page 185]]

    (ii) Second-or-subsequent-to-default credit derivatives. (A) A 
national bank or Federal savings association that obtains credit 
protection on a group of underlying exposures through a nth-
to-default credit derivative that meets the rules of recognition of 
Sec.  3.134(b) (other than a first-to-default credit derivative) may 
recognize the credit risk mitigation benefits of the derivative only if:
    (1) The national bank or Federal savings association also has 
obtained credit protection on the same underlying exposures in the form 
of first-through-(n-1)-to-default credit derivatives; or
    (2) If n-1 of the underlying exposures have already defaulted.
    (B) If a national bank or Federal savings association satisfies the 
requirements of paragraph (l)(3)(ii)(A) of this section, the national 
bank or Federal savings association must determine its risk-based 
capital requirement for the underlying exposures as if the bank had only 
synthetically securitized the underlying exposure with the 
nth smallest risk-based capital requirement and had obtained 
no credit risk mitigant on the other underlying exposures.
    (C) A national bank or Federal savings association must calculate a 
risk-based capital requirement for counterparty credit risk according to 
Sec.  3.132 for a nth-to-default credit derivative that does 
not meet the rules of recognition of Sec.  3.134(b).
    (m) Guarantees and credit derivatives other than nth-to-default 
credit derivatives--(1) Protection provider. For a guarantee or credit 
derivative (other than an nth-to-default credit derivative) 
provided by a national bank or Federal savings association that covers 
the full amount or a pro rata share of a securitization exposure's 
principal and interest, the national bank or Federal savings association 
must risk weight the guarantee or credit derivative as if it holds the 
portion of the reference exposure covered by the guarantee or credit 
derivative.
    (2) Protection purchaser. (i) A national bank or Federal savings 
association that purchases an OTC credit derivative (other than an 
nth-to-default credit derivative) that is recognized under 
Sec.  3.145 as a credit risk mitigant (including via recognized 
collateral) is not required to compute a separate counterparty credit 
risk capital requirement under Sec.  3.131 in accordance with Sec.  
3.132(c)(3).
    (ii) If a national bank or Federal savings association cannot, or 
chooses not to, recognize a purchased credit derivative as a credit risk 
mitigant under Sec.  3.145, the national bank or Federal savings 
association must determine the exposure amount of the credit derivative 
under Sec.  3.132(c).
    (A) If the national bank or Federal savings association purchases 
credit protection from a counterparty that is not a securitization SPE, 
the national bank or Federal savings association must determine the risk 
weight for the exposure according Sec.  3.131.
    (B) If the national bank or Federal savings association purchases 
the credit protection from a counterparty that is a securitization SPE, 
the national bank or Federal savings association must determine the risk 
weight for the exposure according to this section, including paragraph 
(a)(5) of this section for a credit derivative that has a first priority 
claim on the cash flows from the underlying exposures of the 
securitization SPE (notwithstanding amounts due under interest rate or 
currency derivative contracts, fees due, or other similar payments.



Sec.  3.143  Supervisory formula approach (SFA).

    (a) Eligibility requirements. A national bank or Federal savings 
association must use the SFA to determine its risk-weighted asset amount 
for a securitization exposure if the national bank or Federal savings 
association can calculate on an ongoing basis each of the SFA parameters 
in paragraph (e) of this section.
    (b) Mechanics. The risk-weighted asset amount for a securitization 
exposure equals its SFA risk-based capital requirement as calculated 
under paragraph (c) and (d) of this section, multiplied by 12.5.
    (c) The SFA risk-based capital requirement. (1) If KIRB 
is greater than or equal to L + T, an exposure's SFA risk-based capital 
requirement equals the exposure amount.
    (2) If KIRB is less than or equal to L, an exposure's SFA 
risk-based capital

[[Page 186]]

requirement is UE multiplied by TP multiplied by the greater of:
    (i) F [middot] T (where F is 0.016 for all securitization 
exposures); or
    (ii) S[L + T]-S[L].
    (3) If KIRB is greater than L and less than L + T, the 
national bank or Federal savings association must apply a 1,250 percent 
risk weight to an amount equal to UE [middot] TP (KIRB-L), 
and the exposure's SFA risk-based capital requirement is UE multiplied 
by TP multiplied by the greater of:
    (i) F [middot] (T-(KIRB-L)) (where F is 0.016 for all 
other securitization exposures); or
    (ii) S[L + T]-S[KIRB].
    (d) The supervisory formula:
    [GRAPHIC] [TIFF OMITTED] TR11OC13.049
    
    (e) SFA parameters. For purposes of the calculations in paragraphs 
(c) and (d) of this section:
    (1) Amount of the underlying exposures (UE). UE is the EAD of any 
underlying exposures that are wholesale and retail

[[Page 187]]

exposures (including the amount of any funded spread accounts, cash 
collateral accounts, and other similar funded credit enhancements) plus 
the amount of any underlying exposures that are securitization exposures 
(as defined in Sec.  3.142(e)) plus the adjusted carrying value of any 
underlying exposures that are equity exposures (as defined in Sec.  
3.151(b)).
    (2) Tranche percentage (TP). TP is the ratio of the amount of the 
national bank's or Federal savings association's securitization exposure 
to the amount of the tranche that contains the securitization exposure.
    (3) Capital requirement on underlying exposures (KIRB). (i) 
KIRB is the ratio of:
    (A) The sum of the risk-based capital requirements for the 
underlying exposures plus the expected credit losses of the underlying 
exposures (as determined under this subpart E as if the underlying 
exposures were directly held by the national bank or Federal savings 
association); to
    (B) UE.
    (ii) The calculation of KIRB must reflect the effects of 
any credit risk mitigant applied to the underlying exposures (either to 
an individual underlying exposure, to a group of underlying exposures, 
or to all of the underlying exposures).
    (iii) All assets related to the securitization are treated as 
underlying exposures, including assets in a reserve account (such as a 
cash collateral account).
    (4) Credit enhancement level (L). (i) L is the ratio of:
    (A) The amount of all securitization exposures subordinated to the 
tranche that contains the national bank's or Federal savings 
association's securitization exposure; to
    (B) UE.
    (ii) A national bank or Federal savings association must determine L 
before considering the effects of any tranche-specific credit 
enhancements.
    (iii) Any gain-on-sale or CEIO associated with the securitization 
may not be included in L.
    (iv) Any reserve account funded by accumulated cash flows from the 
underlying exposures that is subordinated to the tranche that contains 
the national bank's or Federal savings association's securitization 
exposure may be included in the numerator and denominator of L to the 
extent cash has accumulated in the account. Unfunded reserve accounts 
(that is, reserve accounts that are to be funded from future cash flows 
from the underlying exposures) may not be included in the calculation of 
L.
    (v) In some cases, the purchase price of receivables will reflect a 
discount that provides credit enhancement (for example, first loss 
protection) for all or certain tranches of the securitization. When this 
arises, L should be calculated inclusive of this discount if the 
discount provides credit enhancement for the securitization exposure.
    (5) Thickness of tranche (T). T is the ratio of:
    (i) The amount of the tranche that contains the national bank's or 
Federal savings association's securitization exposure; to
    (ii) UE.
    (6) Effective number of exposures (N). (i) Unless the national bank 
or Federal savings association elects to use the formula provided in 
paragraph (f) of this section,
[GRAPHIC] [TIFF OMITTED] TR11OC13.050


where EADi represents the EAD associated with the ith 
instrument in the underlying exposures.
    (ii) Multiple exposures to one obligor must be treated as a single 
underlying exposure.

[[Page 188]]

    (iii) In the case of a resecuritization, the national bank or 
Federal savings association must treat each underlying exposure as a 
single underlying exposure and must not look through to the originally 
securitized underlying exposures.
    (7) Exposure-weighted average loss given default (EWALGD). EWALGD is 
calculated as:
[GRAPHIC] [TIFF OMITTED] TR11OC13.051

where LGDi represents the average LGD associated with all 
exposures to the ith obligor. In the case of a resecuritization, an LGD 
of 100 percent must be assumed for the underlying exposures that are 
themselves securitization exposures.

    (f) Simplified method for computing N and EWALGD. (1) If all 
underlying exposures of a securitization are retail exposures, a 
national bank or Federal savings association may apply the SFA using the 
following simplifications:
    (i) h = 0; and
    (ii) v = 0.
    (2) Under the conditions in Sec. Sec.  3.143(f)(3) and (f)(4), a 
national bank or Federal savings association may employ a simplified 
method for calculating N and EWALGD.
    (3) If C1 is no more than 0.03, a national bank or 
Federal savings association may set EWALGD = 0.50 if none of the 
underlying exposures is a securitization exposure, or may set EWALGD = 1 
if one or more of the underlying exposures is a securitization exposure, 
and may set N equal to the following amount:
[GRAPHIC] [TIFF OMITTED] TR11OC13.052


where:

    (i) Cm is the ratio of the sum of the amounts of the `m' 
largest underlying exposures to UE; and
    (ii) The level of m is to be selected by the national bank or 
Federal savings association.
    (4) Alternatively, if only C1 is available and 
C1 is no more than 0.03, the national bank or Federal savings 
association may set EWALGD = 0.50 if none of the underlying exposures is 
a securitization exposure, or may set EWALGD = 1 if one or more of the 
underlying exposures is a securitization exposure and may set N = 1/
C1.



Sec.  3.144  Simplified supervisory formula approach (SSFA).

    (a) General requirements for the SSFA. To use the SSFA to determine 
the risk weight for a securitization exposure, a national bank or 
Federal savings association must have data that enables it to assign 
accurately the parameters described in paragraph (b) of this section. 
Data used to assign the parameters described in paragraph (b) of this 
section must be the most currently available data; if the contracts 
governing the underlying exposures of the securitization require 
payments on a monthly or quarterly basis, the data used to assign the 
parameters described in paragraph (b) of this section must be no more 
than 91 calendar days old. A national bank or Federal savings 
association

[[Page 189]]

that does not have the appropriate data to assign the parameters 
described in paragraph (b) of this section must assign a risk weight of 
1,250 percent to the exposure.
    (b) SSFA parameters. To calculate the risk weight for a 
securitization exposure using the SSFA, a national bank or Federal 
savings association must have accurate information on the following five 
inputs to the SSFA calculation:
    (1) KG is the weighted-average (with unpaid principal 
used as the weight for each exposure) total capital requirement of the 
underlying exposures calculated using subpart D of this part. 
KG is expressed as a decimal value between zero and one (that 
is, an average risk weight of 100 percent represents a value of 
KG equal to 0.08).
    (2) Parameter W is expressed as a decimal value between zero and 
one. Parameter W is the ratio of the sum of the dollar amounts of any 
underlying exposures of the securitization that meet any of the criteria 
as set forth in paragraphs (b)(2)(i) through (vi) of this section to the 
balance, measured in dollars, of underlying exposures:
    (i) Ninety days or more past due;
    (ii) Subject to a bankruptcy or insolvency proceeding;
    (iii) In the process of foreclosure;
    (iv) Held as real estate owned;
    (v) Has contractually deferred payments for 90 days or more, other 
than principal or interest payments deferred on:
    (A) Federally-guaranteed student loans, in accordance with the terms 
of those guarantee programs; or
    (B) Consumer loans, including non-federally-guaranteed student 
loans, provided that such payments are deferred pursuant to provisions 
included in the contract at the time funds are disbursed that provide 
for period(s) of deferral that are not initiated based on changes in the 
creditworthiness of the borrower; or
    (vi) Is in default.
    (3) Parameter A is the attachment point for the exposure, which 
represents the threshold at which credit losses will first be allocated 
to the exposure. Except as provided in section 142(l) for 
nth-to-default credit derivatives, parameter A equals the 
ratio of the current dollar amount of underlying exposures that are 
subordinated to the exposure of the national bank or Federal savings 
association to the current dollar amount of underlying exposures. Any 
reserve account funded by the accumulated cash flows from the underlying 
exposures that is subordinated to the national bank's or Federal savings 
association's securitization exposure may be included in the calculation 
of parameter A to the extent that cash is present in the account. 
Parameter A is expressed as a decimal value between zero and one.
    (4) Parameter D is the detachment point for the exposure, which 
represents the threshold at which credit losses of principal allocated 
to the exposure would result in a total loss of principal. Except as 
provided in section 142(l) for nth-to-default credit 
derivatives, parameter D equals parameter A plus the ratio of the 
current dollar amount of the securitization exposures that are pari 
passu with the exposure (that is, have equal seniority with respect to 
credit risk) to the current dollar amount of the underlying exposures. 
Parameter D is expressed as a decimal value between zero and one.
    (5) A supervisory calibration parameter, p, is equal to 0.5 for 
securitization exposures that are not resecuritization exposures and 
equal to 1.5 for resecuritization exposures.
    (c) Mechanics of the SSFA. KG and W are used to calculate 
KA, the augmented value of KG, which reflects the 
observed credit quality of the underlying exposures. KA is 
defined in paragraph (d) of this section. The values of parameters A and 
D, relative to KA determine the risk weight assigned to a 
securitization exposure as described in paragraph (d) of this section. 
The risk weight assigned to a securitization exposure, or portion of a 
securitization exposure, as appropriate, is the larger of the risk 
weight determined in accordance with this paragraph (c), paragraph (d) 
of this section, and a risk weight of 20 percent.
    (1) When the detachment point, parameter D, for a securitization 
exposure is less than or equal to KA, the exposure must be 
assigned a risk weight of 1,250 percent;

[[Page 190]]

    (2) When the attachment point, parameter A, for a securitization 
exposure is greater than or equal to KA, the national bank or 
Federal savings association must calculate the risk weight in accordance 
with paragraph (d) of this section;
    (3) When A is less than KA and D is greater than 
KA, the risk weight is a weighted-average of 1,250 percent 
and 1,250 percent times KSSFA calculated in accordance with 
paragraph (d) of this section. For the purpose of this weighted-average 
calculation:
[GRAPHIC] [TIFF OMITTED] TR11OC13.053



Sec.  3.145  Recognition of credit risk mitigants for securitization exposures.

    (a) General. An originating national bank or Federal savings 
association that has obtained a credit risk mitigant to hedge its 
securitization exposure to a synthetic or traditional securitization 
that satisfies the operational criteria in Sec.  3.141 may recognize the 
credit risk mitigant, but only as provided in this section. An investing

[[Page 191]]

national bank or Federal savings association that has obtained a credit 
risk mitigant to hedge a securitization exposure may recognize the 
credit risk mitigant, but only as provided in this section.
    (b) Collateral--(1) Rules of recognition. A national bank or Federal 
savings association may recognize financial collateral in determining 
the national bank's or Federal savings association's risk-weighted asset 
amount for a securitization exposure (other than a repo-style 
transaction, an eligible margin loan, or an OTC derivative contract for 
which the national bank or Federal savings association has reflected 
collateral in its determination of exposure amount under Sec.  3.132) as 
follows. The national bank's or Federal savings association's risk-
weighted asset amount for the collateralized securitization exposure is 
equal to the risk-weighted asset amount for the securitization exposure 
as calculated under the SSFA in Sec.  3.144 or under the SFA in Sec.  
3.143 multiplied by the ratio of adjusted exposure amount (SE*) to 
original exposure amount (SE),

Where:

    (i) SE* = max {0, [SE-C x (1-Hs-Hfx)]{time} ;
    (ii) SE = the amount of the securitization exposure calculated under 
Sec.  3.142(e);
    (iii) C = the current fair value of the collateral;
    (iv) Hs = the haircut appropriate to the collateral type; 
and
    (v) Hfx = the haircut appropriate for any currency 
mismatch between the collateral and the exposure.
[GRAPHIC] [TIFF OMITTED] TR11OC13.054

    (3) Standard supervisory haircuts. Unless a national bank or Federal 
savings association qualifies for use of and uses own-estimates haircuts 
in paragraph (b)(4) of this section:
    (i) A national bank or Federal savings association must use the 
collateral type haircuts (Hs) in Table 1 to Sec.  3.132 of 
this subpart;
    (ii) A national bank or Federal savings association must use a 
currency mismatch haircut (Hfx) of 8 percent if the exposure 
and the collateral are denominated in different currencies;
    (iii) A national bank or Federal savings association must multiply 
the supervisory haircuts obtained in paragraphs (b)(3)(i) and (ii) of 
this section by the square root of 6.5 (which equals 2.549510); and
    (iv) A national bank or Federal savings association must adjust the 
supervisory haircuts upward on the basis of a holding period longer than 
65 business days where and as appropriate to take into account the 
illiquidity of the collateral.
    (4) Own estimates for haircuts. With the prior written approval of 
the OCC, a national bank or Federal savings association may calculate 
haircuts using its own internal estimates of market price volatility and 
foreign exchange volatility, subject to Sec.  3.132(b)(2)(iii). The 
minimum holding period (TM) for securitization exposures is 
65 business days.
    (c) Guarantees and credit derivatives--(1) Limitations on 
recognition. A national bank or Federal savings association may only 
recognize an eligible guarantee or eligible credit derivative provided 
by an eligible guarantor in determining the national bank's or Federal 
savings association's risk-weighted asset amount for a securitization 
exposure.

[[Page 192]]

    (2) ECL for securitization exposures. When a national bank or 
Federal savings association recognizes an eligible guarantee or eligible 
credit derivative provided by an eligible guarantor in determining the 
national bank's or Federal savings association's risk-weighted asset 
amount for a securitization exposure, the national bank or Federal 
savings association must also:
    (i) Calculate ECL for the protected portion of the exposure using 
the same risk parameters that it uses for calculating the risk-weighted 
asset amount of the exposure as described in paragraph (c)(3) of this 
section; and
    (ii) Add the exposure's ECL to the national bank's or Federal 
savings association's total ECL.
    (3) Rules of recognition. A national bank or Federal savings 
association may recognize an eligible guarantee or eligible credit 
derivative provided by an eligible guarantor in determining the national 
bank's or Federal savings association's risk-weighted asset amount for 
the securitization exposure as follows:
    (i) Full coverage. If the protection amount of the eligible 
guarantee or eligible credit derivative equals or exceeds the amount of 
the securitization exposure, the national bank or Federal savings 
association may set the risk-weighted asset amount for the 
securitization exposure equal to the risk-weighted asset amount for a 
direct exposure to the eligible guarantor (as determined in the 
wholesale risk weight function described in Sec.  3.131), using the 
national bank's or Federal savings association's PD for the guarantor, 
the national bank's or Federal savings association's LGD for the 
guarantee or credit derivative, and an EAD equal to the amount of the 
securitization exposure (as determined in Sec.  3.142(e)).
    (ii) Partial coverage. If the protection amount of the eligible 
guarantee or eligible credit derivative is less than the amount of the 
securitization exposure, the national bank or Federal savings 
association may set the risk-weighted asset amount for the 
securitization exposure equal to the sum of:
    (A) Covered portion. The risk-weighted asset amount for a direct 
exposure to the eligible guarantor (as determined in the wholesale risk 
weight function described in Sec.  3.131), using the national bank's or 
Federal savings association's PD for the guarantor, the national bank's 
or Federal savings association's LGD for the guarantee or credit 
derivative, and an EAD equal to the protection amount of the credit risk 
mitigant; and
    (B) Uncovered portion. (1) 1.0 minus the ratio of the protection 
amount of the eligible guarantee or eligible credit derivative to the 
amount of the securitization exposure); multiplied by
    (2) The risk-weighted asset amount for the securitization exposure 
without the credit risk mitigant (as determined in Sec. Sec.  3.142 
through 146).
    (4) Mismatches. The national bank or Federal savings association 
must make applicable adjustments to the protection amount as required in 
Sec.  3.134(d), (e), and (f) for any hedged securitization exposure and 
any more senior securitization exposure that benefits from the hedge. In 
the context of a synthetic securitization, when an eligible guarantee or 
eligible credit derivative covers multiple hedged exposures that have 
different residual maturities, the national bank or Federal savings 
association must use the longest residual maturity of any of the hedged 
exposures as the residual maturity of all the hedged exposures.



Sec. Sec.  3.146-3.150  [Reserved]

                Risk-Weighted Assets for Equity Exposures



Sec.  3.151  Introduction and exposure measurement.

    (a) General. (1) To calculate its risk-weighted asset amounts for 
equity exposures that are not equity exposures to investment funds, a 
national bank or Federal savings association may apply either the Simple 
Risk Weight Approach (SRWA) in Sec.  3.152 or, if it qualifies to do so, 
the Internal Models Approach (IMA) in Sec.  3.153. A national bank or 
Federal savings association must use the look-through approaches 
provided in Sec.  3.154 to calculate its risk-weighted asset amounts for 
equity exposures to investment funds.
    (2) A national bank or Federal savings association must treat an 
investment in a separate account (as defined

[[Page 193]]

in Sec.  3.2), as if it were an equity exposure to an investment fund as 
provided in Sec.  3.154.
    (3) Stable value protection. (i) Stable value protection means a 
contract where the provider of the contract is obligated to pay:
    (A) The policy owner of a separate account an amount equal to the 
shortfall between the fair value and cost basis of the separate account 
when the policy owner of the separate account surrenders the policy, or
    (B) The beneficiary of the contract an amount equal to the shortfall 
between the fair value and book value of a specified portfolio of 
assets.
    (ii) A national bank or Federal savings association that purchases 
stable value protection on its investment in a separate account must 
treat the portion of the carrying value of its investment in the 
separate account attributable to the stable value protection as an 
exposure to the provider of the protection and the remaining portion of 
the carrying value of its separate account as an equity exposure to an 
investment fund.
    (iii) A national bank or Federal savings association that provides 
stable value protection must treat the exposure as an equity derivative 
with an adjusted carrying value determined as the sum of Sec.  
3.151(b)(1) and (2).
    (b) Adjusted carrying value. For purposes of this subpart, the 
adjusted carrying value of an equity exposure is:
    (1) For the on-balance sheet component of an equity exposure, the 
national bank's or Federal savings association's carrying value of the 
exposure;
    (2) For the off-balance sheet component of an equity exposure, the 
effective notional principal amount of the exposure, the size of which 
is equivalent to a hypothetical on-balance sheet position in the 
underlying equity instrument that would evidence the same change in fair 
value (measured in dollars) for a given small change in the price of the 
underlying equity instrument, minus the adjusted carrying value of the 
on-balance sheet component of the exposure as calculated in paragraph 
(b)(1) of this section.
    (3) For unfunded equity commitments that are unconditional, the 
effective notional principal amount is the notional amount of the 
commitment. For unfunded equity commitments that are conditional, the 
effective notional principal amount is the national bank's or Federal 
savings association's best estimate of the amount that would be funded 
under economic downturn conditions.



Sec.  3.152  Simple risk weight approach (SRWA).

    (a) General. Under the SRWA, a national bank's or Federal savings 
association's aggregate risk-weighted asset amount for its equity 
exposures is equal to the sum of the risk-weighted asset amounts for 
each of the national bank's or Federal savings association's individual 
equity exposures (other than equity exposures to an investment fund) as 
determined in this section and the risk-weighted asset amounts for each 
of the national bank's or Federal savings association's individual 
equity exposures to an investment fund as determined in Sec.  3.154.
    (b) SRWA computation for individual equity exposures. A national 
bank or Federal savings association must determine the risk-weighted 
asset amount for an individual equity exposure (other than an equity 
exposure to an investment fund) by multiplying the adjusted carrying 
value of the equity exposure or the effective portion and ineffective 
portion of a hedge pair (as defined in paragraph (c) of this section) by 
the lowest applicable risk weight in this section.
    (1) Zero percent risk weight equity exposures. An equity exposure to 
an entity whose credit exposures are exempt from the 0.03 percent PD 
floor in Sec.  3.131(d)(2) is assigned a zero percent risk weight.
    (2) 20 percent risk weight equity exposures. An equity exposure to a 
Federal Home Loan Bank or the Federal Agricultural Mortgage Corporation 
(Farmer Mac) is assigned a 20 percent risk weight.
    (3) 100 percent risk weight equity exposures. The following equity 
exposures are assigned a 100 percent risk weight:
    (i) Community development equity exposures. An equity exposure that 
qualifies as a community development investment under section 24 
(Eleventh) of the

[[Page 194]]

National Bank Act, excluding equity exposures to an unconsolidated small 
business investment company and equity exposures held through a 
consolidated small business investment company described in section 302 
of the Small Business Investment Act.
    (ii) Effective portion of hedge pairs. The effective portion of a 
hedge pair.
    (iii) Non-significant equity exposures. Equity exposures, excluding 
significant investments in the capital of an unconsolidated institution 
in the form of common stock and exposures to an investment firm that 
would meet the definition of a traditional securitization were it not 
for the OCC's application of paragraph (8) of that definition in Sec.  
3.2 and has greater than immaterial leverage, to the extent that the 
aggregate adjusted carrying value of the exposures does not exceed 10 
percent of the national bank's or Federal savings association's total 
capital.
    (A) To compute the aggregate adjusted carrying value of a national 
bank's or Federal savings association's equity exposures for purposes of 
this section, the national bank or Federal savings association may 
exclude equity exposures described in paragraphs (b)(1), (b)(2), 
(b)(3)(i), and (b)(3)(ii) of this section, the equity exposure in a 
hedge pair with the smaller adjusted carrying value, and a proportion of 
each equity exposure to an investment fund equal to the proportion of 
the assets of the investment fund that are not equity exposures or that 
meet the criterion of paragraph (b)(3)(i) of this section. If a national 
bank or Federal savings association does not know the actual holdings of 
the investment fund, the national bank or Federal savings association 
may calculate the proportion of the assets of the fund that are not 
equity exposures based on the terms of the prospectus, partnership 
agreement, or similar contract that defines the fund's permissible 
investments. If the sum of the investment limits for all exposure 
classes within the fund exceeds 100 percent, the national bank or 
Federal savings association must assume for purposes of this section 
that the investment fund invests to the maximum extent possible in 
equity exposures.
    (B) When determining which of a national bank's or Federal savings 
association's equity exposures qualifies for a 100 percent risk weight 
under this section, a national bank or Federal savings association first 
must include equity exposures to unconsolidated small business 
investment companies or held through consolidated small business 
investment companies described in section 302 of the Small Business 
Investment Act, then must include publicly traded equity exposures 
(including those held indirectly through investment funds), and then 
must include non-publicly traded equity exposures (including those held 
indirectly through investment funds).
    (4) 250 percent risk weight equity exposures. Significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock that are not deducted from capital pursuant to 
Sec.  3.22(b)(4) are assigned a 250 percent risk weight.
    (5) 300 percent risk weight equity exposures. A publicly traded 
equity exposure (other than an equity exposure described in paragraph 
(b)(7) of this section and including the ineffective portion of a hedge 
pair) is assigned a 300 percent risk weight.
    (6) 400 percent risk weight equity exposures. An equity exposure 
(other than an equity exposure described in paragraph (b)(7) of this 
section) that is not publicly traded is assigned a 400 percent risk 
weight.
    (7) 600 percent risk weight equity exposures. An equity exposure to 
an investment firm that:
    (i) Would meet the definition of a traditional securitization were 
it not for the OCC's application of paragraph (8) of that definition in 
Sec.  3.2; and
    (ii) Has greater than immaterial leverage is assigned a 600 percent 
risk weight.
    (c) Hedge transactions--(1) Hedge pair. A hedge pair is two equity 
exposures that form an effective hedge so long as each equity exposure 
is publicly traded or has a return that is primarily based on a publicly 
traded equity exposure.
    (2) Effective hedge. Two equity exposures form an effective hedge if 
the exposures either have the same remaining maturity or each has a 
remaining maturity of at least three months; the

[[Page 195]]

hedge relationship is formally documented in a prospective manner (that 
is, before the national bank or Federal savings association acquires at 
least one of the equity exposures); the documentation specifies the 
measure of effectiveness (E) the national bank or Federal savings 
association will use for the hedge relationship throughout the life of 
the transaction; and the hedge relationship has an E greater than or 
equal to 0.8. A national bank or Federal savings association must 
measure E at least quarterly and must use one of three alternative 
measures of E:
    (i) Under the dollar-offset method of measuring effectiveness, the 
national bank or Federal savings association must determine the ratio of 
value change (RVC). The RVC is the ratio of the cumulative sum of the 
periodic changes in value of one equity exposure to the cumulative sum 
of the periodic changes in the value of the other equity exposure. If 
RVC is positive, the hedge is not effective and E equals zero. If RVC is 
negative and greater than or equal to -1 (that is, between zero and -1), 
then E equals the absolute value of RVC. If RVC is negative and less 
than -1, then E equals 2 plus RVC.
    (ii) Under the variability-reduction method of measuring 
effectiveness:
[GRAPHIC] [TIFF OMITTED] TR11OC13.055

    (iii) Under the regression method of measuring effectiveness, E 
equals the coefficient of determination of a regression in which the 
change in value of one exposure in a hedge pair is the dependent 
variable and the change in value of the other exposure in a hedge pair 
is the independent variable. However, if the estimated regression 
coefficient is positive, then the value of E is zero.
    (3) The effective portion of a hedge pair is E multiplied by the 
greater of the adjusted carrying values of the equity exposures forming 
a hedge pair.
    (4) The ineffective portion of a hedge pair is (1-E) multiplied by 
the greater of the adjusted carrying values of the equity exposures 
forming a hedge pair.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35258, July 22, 
2019]



Sec.  3.153  Internal models approach (IMA).

    (a) General. A national bank or Federal savings association may 
calculate its risk-weighted asset amount for equity exposures using the 
IMA by modeling publicly traded and non-publicly traded equity exposures 
(in accordance with paragraph (c) of this section) or by modeling only 
publicly traded equity exposures (in accordance with paragraphs (c) and 
(d) of this section).
    (b) Qualifying criteria. To qualify to use the IMA to calculate 
risk-weighted

[[Page 196]]

assets for equity exposures, a national bank or Federal savings 
association must receive prior written approval from the OCC. To receive 
such approval, the national bank or Federal savings association must 
demonstrate to the OCC's satisfaction that the national bank or Federal 
savings association meets the following criteria:
    (1) The national bank or Federal savings association must have one 
or more models that:
    (i) Assess the potential decline in value of its modeled equity 
exposures;
    (ii) Are commensurate with the size, complexity, and composition of 
the national bank's or Federal savings association's modeled equity 
exposures; and
    (iii) Adequately capture both general market risk and idiosyncratic 
risk.
    (2) The national bank's or Federal savings association's model must 
produce an estimate of potential losses for its modeled equity exposures 
that is no less than the estimate of potential losses produced by a VaR 
methodology employing a 99th percentile one-tailed confidence interval 
of the distribution of quarterly returns for a benchmark portfolio of 
equity exposures comparable to the national bank's or Federal savings 
association's modeled equity exposures using a long-term sample period.
    (3) The number of risk factors and exposures in the sample and the 
data period used for quantification in the national bank's or Federal 
savings association's model and benchmarking exercise must be sufficient 
to provide confidence in the accuracy and robustness of the national 
bank's or Federal savings association's estimates.
    (4) The national bank's or Federal savings association's model and 
benchmarking process must incorporate data that are relevant in 
representing the risk profile of the national bank's or Federal savings 
association's modeled equity exposures, and must include data from at 
least one equity market cycle containing adverse market movements 
relevant to the risk profile of the national bank's or Federal savings 
association's modeled equity exposures. In addition, the national bank's 
or Federal savings association's benchmarking exercise must be based on 
daily market prices for the benchmark portfolio. If the national bank's 
or Federal savings association's model uses a scenario methodology, the 
national bank or Federal savings association must demonstrate that the 
model produces a conservative estimate of potential losses on the 
national bank's or Federal savings association's modeled equity 
exposures over a relevant long-term market cycle. If the national bank 
or Federal savings association employs risk factor models, the national 
bank or Federal savings association must demonstrate through empirical 
analysis the appropriateness of the risk factors used.
    (5) The national bank or Federal savings association must be able to 
demonstrate, using theoretical arguments and empirical evidence, that 
any proxies used in the modeling process are comparable to the national 
bank's or Federal savings association's modeled equity exposures and 
that the national bank or Federal savings association has made 
appropriate adjustments for differences. The national bank or Federal 
savings association must derive any proxies for its modeled equity 
exposures and benchmark portfolio using historical market data that are 
relevant to the national bank's or Federal savings association's modeled 
equity exposures and benchmark portfolio (or, where not, must use 
appropriately adjusted data), and such proxies must be robust estimates 
of the risk of the national bank's or Federal savings association's 
modeled equity exposures.
    (c) Risk-weighted assets calculation for a national bank or Federal 
savings association using the IMA for publicly traded and non-publicly 
traded equity exposures. If a national bank or Federal savings 
association models publicly traded and non-publicly traded equity 
exposures, the national bank's or Federal savings association's 
aggregate risk-weighted asset amount for its equity exposures is equal 
to the sum of:
    (1) The risk-weighted asset amount of each equity exposure that 
qualifies for a 0 percent, 20 percent, or 100 percent risk weight under 
Sec.  3.152(b)(1) through (b)(3)(i) (as determined under Sec.  3.152)

[[Page 197]]

and each equity exposure to an investment fund (as determined under 
Sec.  3.154); and
    (2) The greater of:
    (i) The estimate of potential losses on the national bank's or 
Federal savings association's equity exposures (other than equity 
exposures referenced in paragraph (c)(1) of this section) generated by 
the national bank's or Federal savings association's internal equity 
exposure model multiplied by 12.5; or
    (ii) The sum of:
    (A) 200 percent multiplied by the aggregate adjusted carrying value 
of the national bank's or Federal savings association's publicly traded 
equity exposures that do not belong to a hedge pair, do not qualify for 
a 0 percent, 20 percent, or 100 percent risk weight under Sec.  
3.152(b)(1) through (b)(3)(i), and are not equity exposures to an 
investment fund;
    (B) 200 percent multiplied by the aggregate ineffective portion of 
all hedge pairs; and
    (C) 300 percent multiplied by the aggregate adjusted carrying value 
of the national bank's or Federal savings association's equity exposures 
that are not publicly traded, do not qualify for a 0 percent, 20 
percent, or 100 percent risk weight under Sec.  3.152(b)(1) through 
(b)(3)(i), and are not equity exposures to an investment fund.
    (d) Risk-weighted assets calculation for a national bank or Federal 
savings association using the IMA only for publicly traded equity 
exposures. If a national bank or Federal savings association models only 
publicly traded equity exposures, the national bank's or Federal savings 
association's aggregate risk-weighted asset amount for its equity 
exposures is equal to the sum of:
    (1) The risk-weighted asset amount of each equity exposure that 
qualifies for a 0 percent, 20 percent, or 100 percent risk weight under 
Sec. Sec.  3.152(b)(1) through (b)(3)(i) (as determined under Sec.  
3.152), each equity exposure that qualifies for a 400 percent risk 
weight under Sec.  3.152(b)(5) or a 600 percent risk weight under Sec.  
3.152(b)(6) (as determined under Sec.  3.152), and each equity exposure 
to an investment fund (as determined under Sec.  3.154); and
    (2) The greater of:
    (i) The estimate of potential losses on the national bank's or 
Federal savings association's equity exposures (other than equity 
exposures referenced in paragraph (d)(1) of this section) generated by 
the national bank's or Federal savings association's internal equity 
exposure model multiplied by 12.5; or
    (ii) The sum of:
    (A) 200 percent multiplied by the aggregate adjusted carrying value 
of the national bank's or Federal savings association's publicly traded 
equity exposures that do not belong to a hedge pair, do not qualify for 
a 0 percent, 20 percent, or 100 percent risk weight under Sec.  
3.152(b)(1) through (b)(3)(i), and are not equity exposures to an 
investment fund; and
    (B) 200 percent multiplied by the aggregate ineffective portion of 
all hedge pairs.



Sec.  3.154  Equity exposures to investment funds.

    (a) Available approaches. (1) Unless the exposure meets the 
requirements for a community development equity exposure in Sec.  
3.152(b)(3)(i), a national bank or Federal savings association must 
determine the risk-weighted asset amount of an equity exposure to an 
investment fund under the full look-through approach in paragraph (b) of 
this section, the simple modified look-through approach in paragraph (c) 
of this section, or the alternative modified look-through approach in 
paragraph (d) of this section.
    (2) The risk-weighted asset amount of an equity exposure to an 
investment fund that meets the requirements for a community development 
equity exposure in Sec.  3.152(b)(3)(i) is its adjusted carrying value.
    (3) If an equity exposure to an investment fund is part of a hedge 
pair and the national bank or Federal savings association does not use 
the full look-through approach, the national bank or Federal savings 
association may use the ineffective portion of the hedge pair as 
determined under Sec.  3.152(c) as the adjusted carrying value for the 
equity exposure to the investment fund. The risk-weighted asset amount 
of the effective portion of the hedge pair is equal to its adjusted 
carrying value.

[[Page 198]]

    (b) Full look-through approach. A national bank or Federal savings 
association that is able to calculate a risk-weighted asset amount for 
its proportional ownership share of each exposure held by the investment 
fund (as calculated under this subpart E of this part as if the 
proportional ownership share of each exposure were held directly by the 
national bank or Federal savings association) may either:
    (1) Set the risk-weighted asset amount of the national bank's or 
Federal savings association's exposure to the fund equal to the product 
of:
    (i) The aggregate risk-weighted asset amounts of the exposures held 
by the fund as if they were held directly by the national bank or 
Federal savings association; and
    (ii) The national bank's or Federal savings association's 
proportional ownership share of the fund; or
    (2) Include the national bank's or Federal savings association's 
proportional ownership share of each exposure held by the fund in the 
national bank's or Federal savings association's IMA.
    (c) Simple modified look-through approach. Under this approach, the 
risk-weighted asset amount for a national bank's or Federal savings 
association's equity exposure to an investment fund equals the adjusted 
carrying value of the equity exposure multiplied by the highest risk 
weight assigned according to subpart D of this part that applies to any 
exposure the fund is permitted to hold under its prospectus, partnership 
agreement, or similar contract that defines the fund's permissible 
investments (excluding derivative contracts that are used for hedging 
rather than speculative purposes and that do not constitute a material 
portion of the fund's exposures).
    (d) Alternative modified look-through approach. Under this approach, 
a national bank or Federal savings association may assign the adjusted 
carrying value of an equity exposure to an investment fund on a pro rata 
basis to different risk weight categories assigned according to subpart 
D of this part based on the investment limits in the fund's prospectus, 
partnership agreement, or similar contract that defines the fund's 
permissible investments. The risk-weighted asset amount for the national 
bank's or Federal savings association's equity exposure to the 
investment fund equals the sum of each portion of the adjusted carrying 
value assigned to an exposure class multiplied by the applicable risk 
weight. If the sum of the investment limits for all exposure types 
within the fund exceeds 100 percent, the national bank or Federal 
savings association must assume that the fund invests to the maximum 
extent permitted under its investment limits in the exposure type with 
the highest risk weight under subpart D of this part, and continues to 
make investments in order of the exposure type with the next highest 
risk weight under subpart D of this part until the maximum total 
investment level is reached. If more than one exposure type applies to 
an exposure, the national bank or Federal savings association must use 
the highest applicable risk weight. A national bank or Federal savings 
association may exclude derivative contracts held by the fund that are 
used for hedging rather than for speculative purposes and do not 
constitute a material portion of the fund's exposures.



Sec.  3.155  Equity derivative contracts.

    (a) Under the IMA, in addition to holding risk-based capital against 
an equity derivative contract under this part, a national bank or 
Federal savings association must hold risk-based capital against the 
counterparty credit risk in the equity derivative contract by also 
treating the equity derivative contract as a wholesale exposure and 
computing a supplemental risk-weighted asset amount for the contract 
under Sec.  3.132.
    (b) Under the SRWA, a national bank or Federal savings association 
may choose not to hold risk-based capital against the counterparty 
credit risk of equity derivative contracts, as long as it does so for 
all such contracts. Where the equity derivative contracts are subject to 
a qualified master netting agreement, a national bank or Federal savings 
association using the SRWA must either include all or exclude all of the 
contracts from any measure used to determine counterparty credit risk 
exposure.

[[Page 199]]



Sec. Sec.  3.156-3.160  [Reserved]

                Risk-Weighted Assets for Operational Risk



Sec.  3.161  Qualification requirements for incorporation of 
operational risk mitigants.

    (a) Qualification to use operational risk mitigants. A national bank 
or Federal savings association may adjust its estimate of operational 
risk exposure to reflect qualifying operational risk mitigants if:
    (1) The national bank's or Federal savings association's operational 
risk quantification system is able to generate an estimate of the 
national bank's or Federal savings association's operational risk 
exposure (which does not incorporate qualifying operational risk 
mitigants) and an estimate of the national bank's or Federal savings 
association's operational risk exposure adjusted to incorporate 
qualifying operational risk mitigants; and
    (2) The national bank's or Federal savings association's methodology 
for incorporating the effects of insurance, if the national bank or 
Federal savings association uses insurance as an operational risk 
mitigant, captures through appropriate discounts to the amount of risk 
mitigation:
    (i) The residual term of the policy, where less than one year;
    (ii) The cancellation terms of the policy, where less than one year;
    (iii) The policy's timeliness of payment;
    (iv) The uncertainty of payment by the provider of the policy; and
    (v) Mismatches in coverage between the policy and the hedged 
operational loss event.
    (b) Qualifying operational risk mitigants. Qualifying operational 
risk mitigants are:
    (1) Insurance that:
    (i) Is provided by an unaffiliated company that the national bank or 
Federal savings association deems to have strong capacity to meet its 
claims payment obligations and the obligor rating category to which the 
national bank or Federal savings association assigns the company is 
assigned a PD equal to or less than 10 basis points;
    (ii) Has an initial term of at least one year and a residual term of 
more than 90 days;
    (iii) Has a minimum notice period for cancellation by the provider 
of 90 days;
    (iv) Has no exclusions or limitations based upon regulatory action 
or for the receiver or liquidator of a failed depository institution; 
and
    (v) Is explicitly mapped to a potential operational loss event;
    (2) Operational risk mitigants other than insurance for which the 
OCC has given prior written approval. In evaluating an operational risk 
mitigant other than insurance, the OCC will consider whether the 
operational risk mitigant covers potential operational losses in a 
manner equivalent to holding total capital.



Sec.  3.162  Mechanics of risk-weighted asset calculation.

    (a) If a national bank or Federal savings association does not 
qualify to use or does not have qualifying operational risk mitigants, 
the national bank's or Federal savings association's dollar risk-based 
capital requirement for operational risk is its operational risk 
exposure minus eligible operational risk offsets (if any).
    (b) If a national bank or Federal savings association qualifies to 
use operational risk mitigants and has qualifying operational risk 
mitigants, the national bank's or Federal savings association's dollar 
risk-based capital requirement for operational risk is the greater of:
    (1) The national bank's or Federal savings association's operational 
risk exposure adjusted for qualifying operational risk mitigants minus 
eligible operational risk offsets (if any); or
    (2) 0.8 multiplied by the difference between:
    (i) The national bank's or Federal savings association's operational 
risk exposure; and
    (ii) Eligible operational risk offsets (if any).
    (c) The national bank's or Federal savings association's risk-
weighted asset amount for operational risk equals the national bank's or 
Federal savings association's dollar risk-based capital requirement for 
operational

[[Page 200]]

risk determined under sections 162(a) or (b) multiplied by 12.5.



Sec. Sec.  3.163-3.170  [Reserved]

                               Disclosures



Sec.  3.171  Purpose and scope.

    Sec. Sec.  3.171 through 3.173 establish public disclosure 
requirements related to the capital requirements of a national bank or 
Federal savings association that is an advanced approaches national bank 
or Federal savings association.



Sec.  3.172  Disclosure requirements.

    (a) A national bank or Federal savings association that is an 
advanced approaches national bank or Federal savings association that 
has completed the parallel run process and that has received 
notification from the OCC pursuant to section 121(d) of subpart E of 
this part must publicly disclose each quarter its total and tier 1 risk-
based capital ratios and their components as calculated under this 
subpart (that is, common equity tier 1 capital, additional tier 1 
capital, tier 2 capital, total qualifying capital, and total risk-
weighted assets).
    (b) A national bank or Federal savings association that is an 
advanced approaches national bank or Federal savings association that 
has completed the parallel run process and that has received 
notification from the OCC pursuant to section 121(d) of subpart E of 
this part must comply with paragraph (c) of this section unless it is a 
consolidated subsidiary of a bank holding company, savings and loan 
holding company, or depository institution that is subject to these 
disclosure requirements or a subsidiary of a non-U.S. banking 
organization that is subject to comparable public disclosure 
requirements in its home jurisdiction.
    (c)(1) A national bank or Federal savings association described in 
paragraph (b) of this section must provide timely public disclosures 
each calendar quarter of the information in the applicable tables in 
Sec.  3.173. If a significant change occurs, such that the most recent 
reported amounts are no longer reflective of the national bank's or 
Federal savings association's capital adequacy and risk profile, then a 
brief discussion of this change and its likely impact must be disclosed 
as soon as practicable thereafter. Qualitative disclosures that 
typically do not change each quarter (for example, a general summary of 
the national bank's or Federal savings association's risk management 
objectives and policies, reporting system, and definitions) may be 
disclosed annually after the end of the fourth calendar quarter, 
provided that any significant changes to these are disclosed in the 
interim. Management may provide all of the disclosures required by this 
subpart in one place on the national bank's or Federal savings 
association's public Web site or may provide the disclosures in more 
than one public financial report or other regulatory reports, provided 
that the national bank or Federal savings association publicly provides 
a summary table specifically indicating the location(s) of all such 
disclosures.
    (2) A national bank or Federal savings association described in 
paragraph (b) of this section must have a formal disclosure policy 
approved by the board of directors that addresses its approach for 
determining the disclosures it makes. The policy must address the 
associated internal controls and disclosure controls and procedures. The 
board of directors and senior management are responsible for 
establishing and maintaining an effective internal control structure 
over financial reporting, including the disclosures required by this 
subpart, and must ensure that appropriate review of the disclosures 
takes place. One or more senior officers of the national bank or Federal 
savings association must attest that the disclosures meet the 
requirements of this subpart.
    (3) If a national bank or Federal savings association described in 
paragraph (b) of this section believes that disclosure of specific 
commercial or financial information would prejudice seriously its 
position by making public information that is either proprietary or 
confidential in nature, the national bank or Federal savings association 
is not required to disclose those specific items, but must disclose more 
general information about the subject matter of the requirement, 
together with the

[[Page 201]]

fact that, and the reason why, the specific items of information have 
not been disclosed.
    (d)(1) A national bank or Federal savings association that meets any 
of the criteria in Sec.  3.100(b)(1) before January 1, 2015, must 
publicly disclose each quarter its supplementary leverage ratio and the 
components thereof (that is, tier 1 capital and total leverage exposure) 
as calculated under subpart B of this part, beginning with the first 
quarter in 2015. This disclosure requirement applies without regard to 
whether the national bank or Federal savings association has completed 
the parallel run process and received notification from the OCC pursuant 
to Sec.  3.121(d).
    (2) A national bank or Federal savings association that meets any of 
the criteria in Sec.  3.100(b)(1) on or after January 1, 2015, or a 
Category III national bank or Federal savings association must publicly 
disclose each quarter its supplementary leverage ratio and the 
components thereof (that is, tier 1 capital and total leverage exposure) 
as calculated under subpart B of this part beginning with the calendar 
quarter immediately following the quarter in which the national bank or 
Federal savings association becomes an advanced approaches national bank 
or Federal savings association or a Category III national bank or 
Federal savings association. This disclosure requirement applies without 
regard to whether the national bank or Federal savings association has 
completed the parallel run process and has received notification from 
the OCC pursuant to Sec.  3.121(d).

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 79 FR 57743, Sept. 26, 
2014; 80 FR 41417, July 15, 2015; 84 FR 59265, Nov. 1, 2019]



Sec.  3.173  Disclosures by certain advanced approaches national banks 
or Federal savings associations and Category III national banks 
or Federal savings associations.

    (a)(1) An advanced approaches national bank or Federal savings 
association described in Sec.  3.172(b) must make the disclosures 
described in Tables 1 through 12 to Sec.  3.173.
    (2) An advanced approaches national bank or Federal savings 
association and a Category III national bank or Federal savings 
association that is required to publicly disclose its supplementary 
leverage ratio pursuant to Sec.  3.172(d) must make the disclosures 
required under Table 13 to this section unless the national bank or 
Federal savings association is a consolidated subsidiary of a bank 
holding company, savings and loan holding company, or depository 
institution that is subject to these disclosure requirements or a 
subsidiary of a non-U.S. banking organization that is subject to 
comparable public disclosure requirements in its home jurisdiction.
    (3) The disclosures described in Tables 1 through 12 to Sec.  3.173 
must be made publicly available for twelve consecutive quarters 
beginning on January 1, 2014, or a shorter period, as applicable, for 
the quarters after the national bank or Federal savings association has 
completed the parallel run process and received notification from the 
OCC pursuant to Sec.  3.121(d). The disclosures described in Table 13 to 
Sec.  3.173 must be made publicly available for twelve consecutive 
quarters beginning on January 1, 2015, or a shorter period, as 
applicable, for the quarters after the national bank or Federal savings 
association becomes subject to the disclosure of the supplementary 
leverage ratio pursuant to Sec. Sec.  3.172(d) and 3.173(a)(2).

              Table 1 to Sec.   3.173--Scope of Application
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The name of the top
                                                    corporate entity in
                                                    the group to which
                                                    subpart E of this
                                                    part applies.
                                (b)..............  A brief description
                                                    of the differences
                                                    in the basis for
                                                    consolidating
                                                    entities\1\ for
                                                    accounting and
                                                    regulatory purposes,
                                                    with a description
                                                    of those entities:
                                                   (1) That are fully
                                                    consolidated;
                                                   (2) That are
                                                    deconsolidated and
                                                    deducted from total
                                                    capital;
                                                   (3) For which the
                                                    total capital
                                                    requirement is
                                                    deducted; and
                                                   (4) That are neither
                                                    consolidated nor
                                                    deducted (for
                                                    example, where the
                                                    investment in the
                                                    entity is assigned a
                                                    risk weight in
                                                    accordance with this
                                                    subpart).

[[Page 202]]

 
                                (c)..............  Any restrictions, or
                                                    other major
                                                    impediments, on
                                                    transfer of funds or
                                                    total capital within
                                                    the group.
Quantitative disclosures......  (d)..............  The aggregate amount
                                                    of surplus capital
                                                    of insurance
                                                    subsidiaries
                                                    included in the
                                                    total capital of the
                                                    consolidated group.
                                (e)..............  The aggregate amount
                                                    by which actual
                                                    total capital is
                                                    less than the
                                                    minimum total
                                                    capital requirement
                                                    in all subsidiaries,
                                                    with total capital
                                                    requirements and the
                                                    name(s) of the
                                                    subsidiaries with
                                                    such deficiencies.
------------------------------------------------------------------------
\1\ Such entities include securities, insurance and other financial
  subsidiaries, commercial subsidiaries (where permitted), and
  significant minority equity investments in insurance, financial and
  commercial entities.


               Table 2 to Sec.   3.173--Capital Structure
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  Summary information
                                                    on the terms and
                                                    conditions of the
                                                    main features of all
                                                    regulatory capital
                                                    instruments.
Quantitative disclosures......  (b)..............  The amount of common
                                                    equity tier 1
                                                    capital, with
                                                    separate disclosure
                                                    of:
                                                   (1) Common stock and
                                                    related surplus;
                                                   (2) Retained
                                                    earnings;
                                                   (3) Common equity
                                                    minority interest;
                                                   (4) AOCI (net of tax)
                                                    and other reserves;
                                                    and
                                                   (5) Regulatory
                                                    adjustments and
                                                    deductions made to
                                                    common equity tier 1
                                                    capital.
                                (c)..............  The amount of tier 1
                                                    capital, with
                                                    separate disclosure
                                                    of:
                                                   (1) Additional tier 1
                                                    capital elements,
                                                    including additional
                                                    tier 1 capital
                                                    instruments and tier
                                                    1 minority interest
                                                    not included in
                                                    common equity tier 1
                                                    capital; and
                                                   (2) Regulatory
                                                    adjustments and
                                                    deductions made to
                                                    tier 1 capital.
                                (d)..............  The amount of total
                                                    capital, with
                                                    separate disclosure
                                                    of:
                                                   (1) Tier 2 capital
                                                    elements, including
                                                    tier 2 capital
                                                    instruments and
                                                    total capital
                                                    minority interest
                                                    not included in tier
                                                    1 capital; and
                                                   (2) Regulatory
                                                    adjustments and
                                                    deductions made to
                                                    total capital.
                                (e)..............  (1) Whether the
                                                    national bank or
                                                    Federal savings
                                                    association has
                                                    elected to phase in
                                                    recognition of the
                                                    transitional amounts
                                                    as defined in Sec.
                                                    3.301.
                                                   (2) The national
                                                    bank's or Federal
                                                    savings
                                                    association's common
                                                    equity tier 1
                                                    capital, tier 1
                                                    capital, and total
                                                    capital without
                                                    including the
                                                    transitional
                                                    amounts.
------------------------------------------------------------------------


                Table 3 to Sec.   3.173--Capital Adequacy
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  A summary discussion
                                                    of the national
                                                    bank's or Federal
                                                    savings
                                                    association's
                                                    approach to
                                                    assessing the
                                                    adequacy of its
                                                    capital to support
                                                    current and future
                                                    activities.
Quantitative disclosures......  (b)..............  Risk-weighted assets
                                                    for credit risk
                                                    from:
                                                   (1) Wholesale
                                                    exposures;
                                                   (2) Residential
                                                    mortgage exposures;
                                                   (3) Qualifying
                                                    revolving exposures;
                                                   (4) Other retail
                                                    exposures;
                                                   (5) Securitization
                                                    exposures;
                                                   (6) Equity exposures:
                                                   (7) Equity exposures
                                                    subject to the
                                                    simple risk weight
                                                    approach; and
                                                   (8) Equity exposures
                                                    subject to the
                                                    internal models
                                                    approach.
                                (c)..............  Standardized market
                                                    risk-weighted assets
                                                    and advanced market
                                                    risk-weighted assets
                                                    as calculated under
                                                    subpart F of this
                                                    part:
                                                   (1) Standardized
                                                    approach for
                                                    specific risk; and
                                                   (2) Internal models
                                                    approach for
                                                    specific risk.
                                (d)..............  Risk-weighted assets
                                                    for operational
                                                    risk.
                                (e)..............  (1) Common equity
                                                    tier 1, tier 1 and
                                                    total risk-based
                                                    capital ratios
                                                    reflecting the
                                                    transition
                                                    provisions described
                                                    in Sec.   3.301:
                                                   (A) For the top
                                                    consolidated group;
                                                    and
                                                   (2) For each
                                                    depository
                                                    institution
                                                    subsidiary.
                                (f)..............  Common equity tier 1,
                                                    tier 1 and total
                                                    risk-based capital
                                                    ratios reflecting
                                                    the full adoption of
                                                    CECL:
                                                   (1) For the top
                                                    consolidated group;
                                                    and
                                                   (2) For each
                                                    depository
                                                    institution
                                                    subsidiary.
                                (g)..............  Total risk-weighted
                                                    assets.
------------------------------------------------------------------------


[[Page 203]]


    Table 4 to Sec.   3.173--Capital Conservation and Countercyclical
                             Capital Buffers
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The national bank or
                                                    Federal savings
                                                    association must
                                                    publicly disclose
                                                    the geographic
                                                    breakdown of its
                                                    private sector
                                                    credit exposures
                                                    used in the
                                                    calculation of the
                                                    countercyclical
                                                    capital buffer.
Quantitative disclosures......  (b)..............  At least quarterly,
                                                    the national bank or
                                                    Federal savings
                                                    association must
                                                    calculate and
                                                    publicly disclose
                                                    the capital
                                                    conservation buffer
                                                    and the
                                                    countercyclical
                                                    capital buffer as
                                                    described under Sec.
                                                      3.11 of subpart B.
                                (c)..............  At least quarterly,
                                                    the national bank or
                                                    Federal savings
                                                    association must
                                                    calculate and
                                                    publicly disclose
                                                    the buffer retained
                                                    income of the
                                                    national bank or
                                                    Federal savings
                                                    association, as
                                                    described under Sec.
                                                      3.11 of subpart B.
                                (d)..............  At least quarterly,
                                                    the national bank or
                                                    Federal savings
                                                    association must
                                                    calculate and
                                                    publicly disclose
                                                    any limitations it
                                                    has on distributions
                                                    and discretionary
                                                    bonus payments
                                                    resulting from the
                                                    capital conservation
                                                    buffer and the
                                                    countercyclical
                                                    capital buffer
                                                    framework described
                                                    under Sec.   3.11 of
                                                    subpart B, including
                                                    the maximum payout
                                                    amount for the
                                                    quarter.
------------------------------------------------------------------------

    (b) General qualitative disclosure requirement. For each separate 
risk area described in Tables 5 through 12 to Sec.  3.173, the national 
bank or Federal savings association must describe its risk management 
objectives and policies, including:
    (1) Strategies and processes;
    (2) The structure and organization of the relevant risk management 
function;
    (3) The scope and nature of risk reporting and/or measurement 
systems; and
    (4) Policies for hedging and/or mitigating risk and strategies and 
processes for monitoring the continuing effectiveness of hedges/
mitigants.

      Table 5 \1\ to Sec.   3.173--Credit Risk: General Disclosures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to credit
                                                    risk (excluding
                                                    counterparty credit
                                                    risk disclosed in
                                                    accordance with
                                                    Table 7 to Sec.
                                                    3.173), including:
                                                   (1) Policy for
                                                    determining past due
                                                    or delinquency
                                                    status;
                                                   (2) Policy for
                                                    placing loans on
                                                    nonaccrual;
                                                   (3) Policy for
                                                    returning loans to
                                                    accrual status;
                                                   (4) Definition of and
                                                    policy for
                                                    identifying impaired
                                                    loans (for financial
                                                    accounting
                                                    purposes).
                                                   (5) Description of
                                                    the methodology that
                                                    the entity uses to
                                                    estimate its
                                                    allowance for loan
                                                    and lease losses or
                                                    adjusted allowance
                                                    for credit losses,
                                                    as applicable,
                                                    including
                                                    statistical methods
                                                    used where
                                                    applicable;
                                                   (6) Policy for
                                                    charging-off
                                                    uncollectible
                                                    amounts; and
                                                   (7) Discussion of the
                                                    national bank's or
                                                    Federal savings
                                                    association's credit
                                                    risk management
                                                    policy
Quantitative disclosures......  (b)..............  Total credit risk
                                                    exposures and
                                                    average credit risk
                                                    exposures, after
                                                    accounting offsets
                                                    in accordance with
                                                    GAAP,\2\ without
                                                    taking into account
                                                    the effects of
                                                    credit risk
                                                    mitigation
                                                    techniques (for
                                                    example, collateral
                                                    and netting not
                                                    permitted under
                                                    GAAP), over the
                                                    period categorized
                                                    by major types of
                                                    credit exposure. For
                                                    example, national
                                                    banks or Federal
                                                    savings associations
                                                    could use categories
                                                    similar to that used
                                                    for financial
                                                    statement purposes.
                                                    Such categories
                                                    might include, for
                                                    instance:
                                                   (1) Loans, off-
                                                    balance sheet
                                                    commitments, and
                                                    other non-derivative
                                                    off-balance sheet
                                                    exposures;
                                                   (2) Debt securities;
                                                    and
                                                   (3) OTC derivatives.
                                (c)..............  Geographic \3\
                                                    distribution of
                                                    exposures,
                                                    categorized in
                                                    significant areas by
                                                    major types of
                                                    credit exposure.
                                (d)..............  Industry or
                                                    counterparty type
                                                    distribution of
                                                    exposures,
                                                    categorized by major
                                                    types of credit
                                                    exposure.
                                (e)..............  By major industry or
                                                    counterparty type:
                                                   (1) Amount of
                                                    impaired loans for
                                                    which there was a
                                                    related allowance
                                                    under GAAP;
                                                   (2) Amount of
                                                    impaired loans for
                                                    which there was no
                                                    related allowance
                                                    under GAAP;
                                                   (3) Amount of loans
                                                    past due 90 days and
                                                    on nonaccrual;

[[Page 204]]

 
                                                   (4) Amount of loans
                                                    past due 90 days and
                                                    still accruing; \4\
                                                   (5) The balance in
                                                    the allowance for
                                                    loan and lease
                                                    losses at the end of
                                                    each period,
                                                    disaggregated on the
                                                    basis of the
                                                    entity's impairment
                                                    method. To
                                                    disaggregate the
                                                    information required
                                                    on the basis of
                                                    impairment
                                                    methodology, an
                                                    entity shall
                                                    separately disclose
                                                    the amounts based on
                                                    the requirements in
                                                    GAAP; and
                                                   (6) Charge-offs
                                                    during the period.
                                (f)..............  Amount of impaired
                                                    loans and, if
                                                    available, the
                                                    amount of past due
                                                    loans categorized by
                                                    significant
                                                    geographic areas
                                                    including, if
                                                    practical, the
                                                    amounts of
                                                    allowances related
                                                    to each geographical
                                                    area,\5\ further
                                                    categorized as
                                                    required by GAAP.
                                (g)..............  Reconciliation of
                                                    changes in ALLL or
                                                    AACL, as
                                                    applicable.\6\
                                (h)..............  Remaining contractual
                                                    maturity breakdown
                                                    (for example, one
                                                    year or less) of the
                                                    whole portfolio,
                                                    categorized by
                                                    credit exposure.
------------------------------------------------------------------------
\1\ Table 5 to Sec.   3.173 does not cover equity exposures, which
  should be reported in Table 9.
\2\ See, for example, ASC Topic 815-10 and 210-20 as they may be amended
  from time to time.
\3\ Geographical areas may comprise individual countries, groups of
  countries, or regions within countries. A national bank or Federal
  savings association might choose to define the geographical areas
  based on the way the company's portfolio is geographically managed.
  The criteria used to allocate the loans to geographical areas must be
  specified.
\4\ A national bank or Federal savings association is encouraged also to
  provide an analysis of the aging of past-due loans.
\5\ The portion of the general allowance that is not allocated to a
  geographical area should be disclosed separately.
\6\ The reconciliation should include the following: A description of
  the allowance; the opening balance of the allowance; charge-offs taken
  against the allowance during the period; amounts provided (or
  reversed) for estimated probable loan losses during the period; any
  other adjustments (for example, exchange rate differences, business
  combinations, acquisitions and disposals of subsidiaries), including
  transfers between allowances; and the closing balance of the
  allowance. Charge-offs and recoveries that have been recorded directly
  to the income statement should be disclosed separately.


Table 6 to Sec.   3.173--Credit Risk: Disclosures for Portfolios Subject
                   to IRB Risk-Based Capital Formulas
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  Explanation and
                                                    review of the:
                                                   (1) Structure of
                                                    internal rating
                                                    systems and if the
                                                    national bank or
                                                    Federal savings
                                                    association
                                                    considers external
                                                    ratings, the
                                                    relation between
                                                    internal and
                                                    external ratings;
                                                   (2) Use of risk
                                                    parameter estimates
                                                    other than for
                                                    regulatory capital
                                                    purposes;
                                                   (3) Process for
                                                    managing and
                                                    recognizing credit
                                                    risk mitigation (see
                                                    Table 8 to Sec.
                                                    3.173); and
                                                   (4) Control
                                                    mechanisms for the
                                                    rating system,
                                                    including discussion
                                                    of independence,
                                                    accountability, and
                                                    rating systems
                                                    review.
                                (b)..............  Description of the
                                                    internal ratings
                                                    process, provided
                                                    separately for the
                                                    following:
                                                   (1) Wholesale
                                                    category;
                                                   (2) Retail
                                                    subcategories;
                                                   (i) Residential
                                                    mortgage exposures;
                                                   (ii) Qualifying
                                                    revolving exposures;
                                                    and
                                                   (iii) Other retail
                                                    exposures.
                                                   For each category and
                                                    subcategory above
                                                    the description
                                                    should include:
                                                   (A) The types of
                                                    exposure included in
                                                    the category/
                                                    subcategories; and
                                                   (B) The definitions,
                                                    methods and data for
                                                    estimation and
                                                    validation of PD,
                                                    LGD, and EAD,
                                                    including
                                                    assumptions employed
                                                    in the derivation of
                                                    these variables.\1\
Quantitative disclosures: risk  (c)..............  (1) For wholesale
 assessment.                                        exposures, present
                                                    the following
                                                    information across a
                                                    sufficient number of
                                                    PD grades (including
                                                    default) to allow
                                                    for a meaningful
                                                    differentiation of
                                                    credit risk: \2\
                                                   (i) Total EAD; \3\
                                                   (ii) Exposure-
                                                    weighted average LGD
                                                    (percentage);
                                                   (iii) Exposure-
                                                    weighted average
                                                    risk weight; and
                                                   (iv) Amount of
                                                    undrawn commitments
                                                    and exposure-
                                                    weighted average EAD
                                                    including average
                                                    drawdowns prior to
                                                    default for
                                                    wholesale exposures.
                                                   (2) For each retail
                                                    subcategory, present
                                                    the disclosures
                                                    outlined above
                                                    across a sufficient
                                                    number of segments
                                                    to allow for a
                                                    meaningful
                                                    differentiation of
                                                    credit risk.
Quantitative disclosures:       (d)..............  Actual losses in the
 historical results.                                preceding period for
                                                    each category and
                                                    subcategory and how
                                                    this differs from
                                                    past experience. A
                                                    discussion of the
                                                    factors that
                                                    impacted the loss
                                                    experience in the
                                                    preceding period--
                                                    for example, has the
                                                    national bank or
                                                    Federal savings
                                                    association
                                                    experienced higher
                                                    than average default
                                                    rates, loss rates or
                                                    EADs.

[[Page 205]]

 
                                (e)..............  The national bank's
                                                    or Federal savings
                                                    association's
                                                    estimates compared
                                                    against actual
                                                    outcomes over a
                                                    longer period.\4\ At
                                                    a minimum, this
                                                    should include
                                                    information on
                                                    estimates of losses
                                                    against actual
                                                    losses in the
                                                    wholesale category
                                                    and each retail
                                                    subcategory over a
                                                    period sufficient to
                                                    allow for a
                                                    meaningful
                                                    assessment of the
                                                    performance of the
                                                    internal rating
                                                    processes for each
                                                    category/
                                                    subcategory.\5\
                                                    Where appropriate,
                                                    the national bank or
                                                    Federal savings
                                                    association should
                                                    further decompose
                                                    this to provide
                                                    analysis of PD, LGD,
                                                    and EAD outcomes
                                                    against estimates
                                                    provided in the
                                                    quantitative risk
                                                    assessment
                                                    disclosures
                                                    above.\6\
------------------------------------------------------------------------
\1\ This disclosure item does not require a detailed description of the
  model in full--it should provide the reader with a broad overview of
  the model approach, describing definitions of the variables and
  methods for estimating and validating those variables set out in the
  quantitative risk disclosures below. This should be done for each of
  the four category/subcategories. The national bank or Federal savings
  association must disclose any significant differences in approach to
  estimating these variables within each category/subcategories.
\2\ The PD, LGD and EAD disclosures in Table 6 (c) to Sec.   3.173
  should reflect the effects of collateral, qualifying master netting
  agreements, eligible guarantees and eligible credit derivatives as
  defined under this part. Disclosure of each PD grade should include
  the exposure-weighted average PD for each grade. Where a national bank
  or Federal savings association aggregates PD grades for the purposes
  of disclosure, this should be a representative breakdown of the
  distribution of PD grades used for regulatory capital purposes.
\3\ Outstanding loans and EAD on undrawn commitments can be presented on
  a combined basis for these disclosures.
\4\ These disclosures are a way of further informing the reader about
  the reliability of the information provided in the ``quantitative
  disclosures: Risk assessment'' over the long run. The disclosures are
  requirements from year-end 2010; in the meantime, early adoption is
  encouraged. The phased implementation is to allow a national bank or
  Federal savings association sufficient time to build up a longer run
  of data that will make these disclosures meaningful.
\5\ This disclosure item is not intended to be prescriptive about the
  period used for this assessment. Upon implementation, it is expected
  that a national bank or Federal savings association would provide
  these disclosures for as long a set of data as possible--for example,
  if a national bank or Federal savings association has 10 years of
  data, it might choose to disclose the average default rates for each
  PD grade over that 10-year period. Annual amounts need not be
  disclosed.
\6\ A national bank or Federal savings association must provide this
  further decomposition where it will allow users greater insight into
  the reliability of the estimates provided in the ``quantitative
  disclosures: Risk assessment.'' In particular, it must provide this
  information where there are material differences between its estimates
  of PD, LGD or EAD compared to actual outcomes over the long run. The
  national bank or Federal savings association must also provide
  explanations for such differences.


Table 7 to Sec.   3.173--General Disclosure for Counterparty Credit Risk
   of OTC Derivative Contracts, Repo-Style Transactions, and Eligible
                              Margin Loans
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative Disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to OTC
                                                    derivatives,
                                                    eligible margin
                                                    loans, and repo-
                                                    style transactions,
                                                    including:
                                                   (1) Discussion of
                                                    methodology used to
                                                    assign economic
                                                    capital and credit
                                                    limits for
                                                    counterparty credit
                                                    exposures;
                                                   (2) Discussion of
                                                    policies for
                                                    securing collateral,
                                                    valuing and managing
                                                    collateral, and
                                                    establishing credit
                                                    reserves;
                                                   (3) Discussion of the
                                                    primary types of
                                                    collateral taken;
                                                   (4) Discussion of
                                                    policies with
                                                    respect to wrong-way
                                                    risk exposures; and
                                                   (5) Discussion of the
                                                    impact of the amount
                                                    of collateral the
                                                    national bank or
                                                    Federal savings
                                                    association would
                                                    have to provide if
                                                    the national bank or
                                                    Federal savings
                                                    association were to
                                                    receive a credit
                                                    rating downgrade.
Quantitative Disclosures......  (b)..............  Gross positive fair
                                                    value of contracts,
                                                    netting benefits,
                                                    netted current
                                                    credit exposure,
                                                    collateral held
                                                    (including type, for
                                                    example, cash,
                                                    government
                                                    securities), and net
                                                    unsecured credit
                                                    exposure.\1\ Also
                                                    report measures for
                                                    EAD used for
                                                    regulatory capital
                                                    for these
                                                    transactions, the
                                                    notional value of
                                                    credit derivative
                                                    hedges purchased for
                                                    counterparty credit
                                                    risk protection,
                                                    and, for national
                                                    banks or Federal
                                                    savings associations
                                                    not using the
                                                    internal models
                                                    methodology in Sec.
                                                     3.132(d) , the
                                                    distribution of
                                                    current credit
                                                    exposure by types of
                                                    credit exposure.\2\
                                (c)..............  Notional amount of
                                                    purchased and sold
                                                    credit derivatives,
                                                    segregated between
                                                    use for the national
                                                    bank's or Federal
                                                    savings
                                                    association's own
                                                    credit portfolio and
                                                    for its
                                                    intermediation
                                                    activities,
                                                    including the
                                                    distribution of the
                                                    credit derivative
                                                    products used,
                                                    categorized further
                                                    by protection bought
                                                    and sold within each
                                                    product group.
                                (d)..............  The estimate of alpha
                                                    if the national bank
                                                    or Federal savings
                                                    association has
                                                    received supervisory
                                                    approval to estimate
                                                    alpha.
------------------------------------------------------------------------
\1\ Net unsecured credit exposure is the credit exposure after
  considering the benefits from legally enforceable netting agreements
  and collateral arrangements, without taking into account haircuts for
  price volatility, liquidity, etc.
\2\ This may include interest rate derivative contracts, foreign
  exchange derivative contracts, equity derivative contracts, credit
  derivatives, commodity or other derivative contracts, repo-style
  transactions, and eligible margin loans.


[[Page 206]]


          Table 8 To Sec.   3.173--Credit Risk Mitigation \1 2\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to credit
                                                    risk mitigation,
                                                    including:
                                                   (1) Policies and
                                                    processes for, and
                                                    an indication of the
                                                    extent to which the
                                                    national bank or
                                                    Federal savings
                                                    association uses, on-
                                                     or off-balance
                                                    sheet netting;
                                                   (2) Policies and
                                                    processes for
                                                    collateral valuation
                                                    and management;
                                                   (3) A description of
                                                    the main types of
                                                    collateral taken by
                                                    the national bank or
                                                    Federal savings
                                                    association;
                                                   (4) The main types of
                                                    guarantors/credit
                                                    derivative
                                                    counterparties and
                                                    their
                                                    creditworthiness;
                                                    and
                                                   (5) Information about
                                                    (market or credit)
                                                    risk concentrations
                                                    within the
                                                    mitigation taken.
Quantitative disclosures......  (b)..............  For each separately
                                                    disclosed portfolio,
                                                    the total exposure
                                                    (after, where
                                                    applicable, on- or
                                                    off-balance sheet
                                                    netting) that is
                                                    covered by
                                                    guarantees/credit
                                                    derivatives.
------------------------------------------------------------------------
\1\ At a minimum, a national bank or Federal savings association must
  provide the disclosures in Table 8 in relation to credit risk
  mitigation that has been recognized for the purposes of reducing
  capital requirements under this subpart. Where relevant, national
  banks or Federal savings associations are encouraged to give further
  information about mitigants that have not been recognized for that
  purpose.
\2\ Credit derivatives and other credit mitigation that are treated for
  the purposes of this subpart as synthetic securitization exposures
  should be excluded from the credit risk mitigation disclosures (in
  Table 8 to Sec.   3.173) and included within those relating to
  securitization (in Table 9 to Sec.   3.173).


                 Table 9 to Sec.   3.173--Securitization
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to
                                                    securitization
                                                    (including synthetic
                                                    securitizations),
                                                    including a
                                                    discussion of:
                                                   (1) The national
                                                    bank's or Federal
                                                    savings
                                                    association's
                                                    objectives for
                                                    securitizing assets,
                                                    including the extent
                                                    to which these
                                                    activities transfer
                                                    credit risk of the
                                                    underlying exposures
                                                    away from the
                                                    national bank or
                                                    Federal savings
                                                    association to other
                                                    entities and
                                                    including the type
                                                    of risks assumed and
                                                    retained with
                                                    resecuritization
                                                    activity; \1\
                                                   (2) The nature of the
                                                    risks (e.g.
                                                    liquidity risk)
                                                    inherent in the
                                                    securitized assets;
                                                   (3) The roles played
                                                    by the national bank
                                                    or Federal savings
                                                    association in the
                                                    securitization
                                                    process \2\ and an
                                                    indication of the
                                                    extent of the
                                                    national bank's or
                                                    Federal savings
                                                    association's
                                                    involvement in each
                                                    of them;
                                                   (4) The processes in
                                                    place to monitor
                                                    changes in the
                                                    credit and market
                                                    risk of
                                                    securitization
                                                    exposures including
                                                    how those processes
                                                    differ for
                                                    resecuritization
                                                    exposures;
                                                   (5) The national
                                                    bank's or Federal
                                                    savings
                                                    association's policy
                                                    for mitigating the
                                                    credit risk retained
                                                    through
                                                    securitization and
                                                    resecuritization
                                                    exposures; and
                                                   (6) The risk-based
                                                    capital approaches
                                                    that the national
                                                    bank or Federal
                                                    savings association
                                                    follows for its
                                                    securitization
                                                    exposures including
                                                    the type of
                                                    securitization
                                                    exposure to which
                                                    each approach
                                                    applies.
                                (b)..............  A list of:
                                                   (1) The type of
                                                    securitization SPEs
                                                    that the national
                                                    bank or Federal
                                                    savings association,
                                                    as sponsor, uses to
                                                    securitize third-
                                                    party exposures. The
                                                    national bank or
                                                    Federal savings
                                                    association must
                                                    indicate whether it
                                                    has exposure to
                                                    these SPEs, either
                                                    on- or off- balance
                                                    sheet; and
                                                   (2) Affiliated
                                                    entities:
                                                   (i) That the national
                                                    bank or Federal
                                                    savings association
                                                    manages or advises;
                                                    and
                                                   (ii) That invest
                                                    either in the
                                                    securitization
                                                    exposures that the
                                                    national bank or
                                                    Federal savings
                                                    association has
                                                    securitized or in
                                                    securitization SPEs
                                                    that the national
                                                    bank or Federal
                                                    savings association
                                                    sponsors.\3\
                                (c)..............  Summary of the
                                                    national bank's or
                                                    Federal savings
                                                    association's
                                                    accounting policies
                                                    for securitization
                                                    activities,
                                                    including:
                                                   (1) Whether the
                                                    transactions are
                                                    treated as sales or
                                                    financings;
                                                   (2) Recognition of
                                                    gain-on-sale;
                                                   (3) Methods and key
                                                    assumptions and
                                                    inputs applied in
                                                    valuing retained or
                                                    purchased interests;
                                                   (4) Changes in
                                                    methods and key
                                                    assumptions and
                                                    inputs from the
                                                    previous period for
                                                    valuing retained
                                                    interests and impact
                                                    of the changes;
                                                   (5) Treatment of
                                                    synthetic
                                                    securitizations;

[[Page 207]]

 
                                                   (6) How exposures
                                                    intended to be
                                                    securitized are
                                                    valued and whether
                                                    they are recorded
                                                    under subpart E of
                                                    this part; and
                                                   (7) Policies for
                                                    recognizing
                                                    liabilities on the
                                                    balance sheet for
                                                    arrangements that
                                                    could require the
                                                    national bank or
                                                    Federal savings
                                                    association to
                                                    provide financial
                                                    support for
                                                    securitized assets.
                                (d)..............  An explanation of
                                                    significant changes
                                                    to any of the
                                                    quantitative
                                                    information set
                                                    forth below since
                                                    the last reporting
                                                    period.
Quantitative disclosures......  (e)..............  The total outstanding
                                                    exposures
                                                    securitized \4\ by
                                                    the national bank or
                                                    Federal savings
                                                    association in
                                                    securitizations that
                                                    meet the operational
                                                    criteria in Sec.
                                                    3.141 (categorized
                                                    into traditional/
                                                    synthetic), by
                                                    underlying exposure
                                                    type \5\ separately
                                                    for securitizations
                                                    of third-party
                                                    exposures for which
                                                    the bank acts only
                                                    as sponsor.
                                (f)..............  For exposures
                                                    securitized by the
                                                    national bank or
                                                    Federal savings
                                                    association in
                                                    securitizations that
                                                    meet the operational
                                                    criteria in Sec.
                                                    3.141:
                                                   (1) Amount of
                                                    securitized assets
                                                    that are impaired
                                                    \6\/past due
                                                    categorized by
                                                    exposure type; and
                                                   (2) Losses recognized
                                                    by the national bank
                                                    or Federal savings
                                                    association during
                                                    the current period
                                                    categorized by
                                                    exposure type.\7\
                                (g)..............  The total amount of
                                                    outstanding
                                                    exposures intended
                                                    to be securitized
                                                    categorized by
                                                    exposure type.
                                (h)..............  Aggregate amount of:
                                                   (1) On-balance sheet
                                                    securitization
                                                    exposures retained
                                                    or purchased
                                                    categorized by
                                                    exposure type; and
                                                   (2) Off-balance sheet
                                                    securitization
                                                    exposures
                                                    categorized by
                                                    exposure type.
                                (i)..............  (1) Aggregate amount
                                                    of securitization
                                                    exposures retained
                                                    or purchased and the
                                                    associated capital
                                                    requirements for
                                                    these exposures,
                                                    categorized between
                                                    securitization and
                                                    resecuritization
                                                    exposures, further
                                                    categorized into a
                                                    meaningful number of
                                                    risk weight bands
                                                    and by risk-based
                                                    capital approach
                                                    (e.g. SA, SFA, or
                                                    SSFA).
                                                   (2) Aggregate amount
                                                    disclosed separately
                                                    by type of
                                                    underlying exposure
                                                    in the pool of any:
                                                   (i) After-tax gain-on-
                                                    sale on a
                                                    securitization that
                                                    has been deducted
                                                    from common equity
                                                    tier 1 capital: And
                                                   (ii) Credit-enhancing
                                                    interest-only strip
                                                    that is assigned a
                                                    1,250 percent risk
                                                    weight.
                                (j)..............  Summary of current
                                                    year's
                                                    securitization
                                                    activity, including
                                                    the amount of
                                                    exposures
                                                    securitized (by
                                                    exposure type), and
                                                    recognized gain or
                                                    loss on sale by
                                                    asset type.
                                (k)..............  Aggregate amount of
                                                    resecuritization
                                                    exposures retained
                                                    or purchased
                                                    categorized
                                                    according to:
                                                   (1) Exposures to
                                                    which credit risk
                                                    mitigation is
                                                    applied and those
                                                    not applied; and
                                                   (2) Exposures to
                                                    guarantors
                                                    categorized
                                                    according to
                                                    guarantor
                                                    creditworthiness
                                                    categories or
                                                    guarantor name.
------------------------------------------------------------------------
\1\ The national bank or Federal savings association must describe the
  structure of resecuritizations in which it participates; this
  description must be provided for the main categories of
  resecuritization products in which the national bank or Federal
  savings association is active.
\2\ For example, these roles would include originator, investor,
  servicer, provider of credit enhancement, sponsor, liquidity provider,
  or swap provider.
\3\ For example, money market mutual funds should be listed
  individually, and personal and private trusts, should be noted
  collectively.
\4\ ``Exposures securitized'' include underlying exposures originated by
  the bank, whether generated by them or purchased, and recognized in
  the balance sheet, from third parties, and third-party exposures
  included in sponsored transactions. Securitization transactions
  (including underlying exposures originally on the bank's balance sheet
  and underlying exposures acquired by the bank from third-party
  entities) in which the originating bank does not retain any
  securitization exposure should be shown separately but need only be
  reported for the year of inception.
\5\ A national bank or Federal savings association is required to
  disclose exposures regardless of whether there is a capital charge
  under this part.
\6\ A national bank or Federal savings association must include credit-
  related other than temporary impairment (OTTI).
\7\ For example, charge-offs/allowances (if the assets remain on the
  bank's balance sheet) or credit-related OTTI of I/O strips and other
  retained residual interests, as well as recognition of liabilities for
  probable future financial support required of the bank with respect to
  securitized assets.


               Table 10 to Sec.   3.173--Operational Risk
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement for
                                                    operational risk.
                                (b)..............  Description of the
                                                    AMA, including a
                                                    discussion of
                                                    relevant internal
                                                    and external factors
                                                    considered in the
                                                    national bank's or
                                                    Federal savings
                                                    association's
                                                    measurement
                                                    approach.
                                (c)..............  A description of the
                                                    use of insurance for
                                                    the purpose of
                                                    mitigating
                                                    operational risk.
------------------------------------------------------------------------


[[Page 208]]


Table 11 to Sec.   3.173--Equities Not Subject to Subpart F of This Part
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement with
                                                    respect to the
                                                    equity risk of
                                                    equity holdings not
                                                    subject to subpart F
                                                    of this part,
                                                    including:
                                                   (1) Differentiation
                                                    between holdings on
                                                    which capital gains
                                                    are expected and
                                                    those held for other
                                                    objectives,
                                                    including for
                                                    relationship and
                                                    strategic reasons;
                                                    and
                                                   (2) Discussion of
                                                    important policies
                                                    covering the
                                                    valuation of and
                                                    accounting for
                                                    equity holdings not
                                                    subject to subpart F
                                                    of this part. This
                                                    includes the
                                                    accounting
                                                    methodology and
                                                    valuation
                                                    methodologies used,
                                                    including key
                                                    assumptions and
                                                    practices affecting
                                                    valuation as well as
                                                    significant changes
                                                    in these practices.
Quantitative disclosures......  (b)..............  Carrying value on the
                                                    balance sheet of
                                                    equity investments,
                                                    as well as the fair
                                                    value of those
                                                    investments.
                                (c)..............  The types and nature
                                                    of investments,
                                                    including the amount
                                                    that is:
                                                   (1) Publicly traded;
                                                    and
                                                   (2) Non-publicly
                                                    traded.
                                (d)..............  The cumulative
                                                    realized gains
                                                    (losses) arising
                                                    from sales and
                                                    liquidations in the
                                                    reporting period.
                                (e)..............  (1) Total unrealized
                                                    gains (losses) \1\
                                                   (2) Total latent
                                                    revaluation gains
                                                    (losses) \2\
                                                   (3) Any amounts of
                                                    the above included
                                                    in tier 1 and/or
                                                    tier 2 capital.
                                (f)..............  Capital requirements
                                                    categorized by
                                                    appropriate equity
                                                    groupings,
                                                    consistent with the
                                                    national bank's or
                                                    Federal savings
                                                    association's
                                                    methodology, as well
                                                    as the aggregate
                                                    amounts and the type
                                                    of equity
                                                    investments subject
                                                    to any supervisory
                                                    transition regarding
                                                    total capital
                                                    requirements.\3\
------------------------------------------------------------------------
\1\ Unrealized gains (losses) recognized in the balance sheet but not
  through earnings.
\2\ Unrealized gains (losses) not recognized either in the balance sheet
  or through earnings.
\3\ This disclosure must include a breakdown of equities that are
  subject to the 0 percent, 20 percent, 100 percent, 300 percent, 400
  percent, and 600 percent risk weights, as applicable.


 Table 12 to Sec.   3.173--Interest Rate Risk for Non-Trading Activities
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualitative disclosures.......  (a)..............  The general
                                                    qualitative
                                                    disclosure
                                                    requirement,
                                                    including the nature
                                                    of interest rate
                                                    risk for non-trading
                                                    activities and key
                                                    assumptions,
                                                    including
                                                    assumptions
                                                    regarding loan
                                                    prepayments and
                                                    behavior of non-
                                                    maturity deposits,
                                                    and frequency of
                                                    measurement of
                                                    interest rate risk
                                                    for non-trading
                                                    activities.
Quantitative disclosures......  (b)..............  The increase
                                                    (decline) in
                                                    earnings or economic
                                                    value (or relevant
                                                    measure used by
                                                    management) for
                                                    upward and downward
                                                    rate shocks
                                                    according to
                                                    management's method
                                                    for measuring
                                                    interest rate risk
                                                    for non-trading
                                                    activities,
                                                    categorized by
                                                    currency (as
                                                    appropriate).
------------------------------------------------------------------------

    (c) Except as provided in Sec.  3.172(b), a national bank or Federal 
savings association described in Sec.  3.172(d) must make the 
disclosures described in Table 13 to Sec.  3.173; provided, however, the 
disclosures required under this paragraph are required without regard to 
whether the national bank or Federal savings association has completed 
the parallel run process and has received notification from the OCC 
pursuant to Sec.  3.121(d). The national bank or Federal savings 
association must make these disclosures publicly available beginning on 
January 1, 2015.

                             Table 13 to Sec.   3.173--Supplementary Leverage Ratio
----------------------------------------------------------------------------------------------------------------
                                                                          Dollar amounts in thousands
                                                             ---------------------------------------------------
                                                                  Tril         Bil          Mil          Thou
----------------------------------------------------------------------------------------------------------------
                   Part 1: Summary comparison of accounting assets and total leverage exposure
----------------------------------------------------------------------------------------------------------------
1 Total consolidated assets as reported in published
 financial statements.......................................
2 Adjustment for investments in banking, financial,
 insurance or commercial entities that are consolidated for
 accounting purposes but outside the scope of regulatory
 consolidation..............................................
3 Adjustment for fiduciary assets recognized on balance
 sheet but excluded from total leverage exposure............

[[Page 209]]

 
4 Adjustment for derivative exposures.......................
5 Adjustment for repo-style transactions....................
6 Adjustment for off-balance sheet exposures (that is,
 conversion to credit equivalent amounts of off-balance
 sheet exposures)...........................................
7 Other adjustments.........................................
8 Total leverage exposure...................................
----------------------------------------------------------------------------------------------------------------
                                      Part 2: Supplementary leverage ratio
----------------------------------------------------------------------------------------------------------------
                 On-balance sheet exposures
 
1 On-balance sheet assets (excluding on-balance sheet assets
 for repo-style transactions and derivative exposures, but
 including cash collateral received in derivative
 transactions)..............................................
2 LESS: Amounts deducted from tier 1 capital................
3 Total on-balance sheet exposures (excluding on-balance
 sheet assets for repo-style transactions and derivative
 exposures, but including cash collateral received in
 derivative transactions) (sum of lines 1 and 2)............
 
                    Derivative exposures
 
4 Current exposure for derivative exposures (that is, net of
 cash variation margin).....................................
5 Add-on amounts for potential future exposure (PFE) for
 derivative exposures.......................................
6 Gross-up for cash collateral posted if deducted from the
 on-balance sheet assets, except for cash variation margin..
7 LESS: Deductions of receivable assets for cash variation
 margin posted in derivative transactions, if included in on-
 balance sheet assets.......................................
8 LESS: Exempted CCP leg of client-cleared transactions.....
9 Effective notional principal amount of sold credit
 protection.................................................
10 LESS: Effective notional principal amount offsets and PFE
 adjustments for sold credit protection.....................
11 Total derivative exposures (sum of lines 4 to 10)........
 
                   Repo-style transactions
12 On-balance sheet assets for repo-style transactions,
 except include the gross value of receivables for reverse
 repurchase transactions. Exclude from this item the value
 of securities received in a security-for-security repo-
 style transaction where the securities lender has not sold
 or re-hypothecated the securities received. Include in this
 item the value of securities that qualified for sales
 treatment that must be reversed............................
13 LESS: Reduction of the gross value of receivables in
 reverse repurchase transactions by cash payables in
 repurchase transactions under netting agreements...........
14 Counterparty credit risk for all repo-style transactions.
15 Exposure for repo-style transactions where a banking
 organization acts as an agent..............................
16 Total exposures for repo-style transactions (sum of lines
 12 to 15)..................................................
 
              Other off-balance sheet exposures
 
17 Off-balance sheet exposures at gross notional amounts....
18 LESS: Adjustments for conversion to credit equivalent
 amounts....................................................
19 Off-balance sheet exposures (sum of lines 17 and 18).....
 
             Capital and total leverage exposure
 
20 Tier 1 capital...........................................
21 Total leverage exposure (sum of lines 3, 11, 16 and 19)..
 
                Supplementary leverage ratio
                                                             ---------------------------------------------------
22 Supplementary leverage ratio.............................                     (in percent)
----------------------------------------------------------------------------------------------------------------



[[Page 210]]


[78 FR 62157, 62273, Oct. 11, 2013, as amended at 79 FR 57743, Sept. 26, 
2014; 80 FR 41418, July 15, 2015; 84 FR 4238, Feb. 14, 2019; 84 FR 
59265, Nov. 1, 2019; 85 FR 4413, Jan. 24, 2020]



Sec. Sec.  3.174-3.200  [Reserved]



               Subpart F_Risk-Weighted Assets_Market Risk

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.201  Purpose, applicability, and reservation of authority.

    (a) Purpose. This subpart F establishes risk-based capital 
requirements for national banks or Federal savings associations with 
significant exposure to market risk, provides methods for these national 
banks or Federal savings associations to calculate their standardized 
measure for market risk and, if applicable, advanced measure for market 
risk, and establishes public disclosure requirements.
    (b) Applicability. (1) This subpart F applies to any national bank 
or Federal savings association with aggregate trading assets and trading 
liabilities (as reported in the national bank's or Federal savings 
association's most recent quarterly [regulatory report]), equal to:
    (i) 10 percent or more of quarter-end total assets as reported on 
the most recent quarterly [Call Report or FR Y-9C]; or
    (ii) $1 billion or more.
    (2) The OCC may apply this subpart to any national bank or Federal 
savings association if the OCC deems it necessary or appropriate because 
of the level of market risk of the national bank or Federal savings 
association or to ensure safe and sound banking practices.
    (3) The OCC may exclude a national bank or Federal savings 
association that meets the criteria of paragraph (b)(1) of this section 
from application of this subpart if the OCC determines that the 
exclusion is appropriate based on the level of market risk of the 
national bank or Federal savings association and is consistent with safe 
and sound banking practices.
    (c) Reservation of authority. (1) The OCC may require a national 
bank or Federal savings association to hold an amount of capital greater 
than otherwise required under this subpart if the OCC determines that 
the national bank's or Federal savings association's capital requirement 
for market risk as calculated under this subpart is not commensurate 
with the market risk of the national bank's or Federal savings 
association's covered positions. In making determinations under 
paragraphs (c)(1) through (c)(3) of this section, the OCC will apply 
notice and response procedures generally in the same manner as the 
notice and response procedures set forth in 12 CFR 3.404.
    (2) If the OCC determines that the risk-based capital requirement 
calculated under this subpart by the national bank or Federal savings 
association for one or more covered positions or portfolios of covered 
positions is not commensurate with the risks associated with those 
positions or portfolios, the OCC may require the national bank or 
Federal savings association to assign a different risk-based capital 
requirement to the positions or portfolios that more accurately reflects 
the risk of the positions or portfolios.
    (3) The OCC may also require a national bank or Federal savings 
association to calculate risk-based capital requirements for specific 
positions or portfolios under this subpart, or under subpart D or 
subpart E of this part, as appropriate, to more accurately reflect the 
risks of the positions.
    (4) Nothing in this subpart limits the authority of the OCC under 
any other provision of law or regulation to take supervisory or 
enforcement action, including action to address unsafe or unsound 
practices or conditions, deficient capital levels, or violations of law.



Sec.  3.202  Definitions.

    (a) Terms set forth in Sec.  3.2 and used in this subpart have the 
definitions assigned thereto in Sec.  3.2.
    (b) For the purposes of this subpart, the following terms are 
defined as follows:
    Backtesting means the comparison of a national bank's or Federal 
savings

[[Page 211]]

association's internal estimates with actual outcomes during a sample 
period not used in model development. For purposes of this subpart, 
backtesting is one form of out-of-sample testing.
    Commodity position means a position for which price risk arises from 
changes in the price of a commodity.
    Corporate debt position means a debt position that is an exposure to 
a company that is not a sovereign entity, the Bank for International 
Settlements, the European Central Bank, the European Commission, the 
International Monetary Fund, the European Stability Mechanism, the 
European Financial Stability Facility, a multilateral development bank, 
a depository institution, a foreign bank, a credit union, a public 
sector entity, a GSE, or a securitization.
    Correlation trading position means:
    (1) A securitization position for which all or substantially all of 
the value of the underlying exposures is based on the credit quality of 
a single company for which a two-way market exists, or on commonly 
traded indices based on such exposures for which a two-way market exists 
on the indices; or
    (2) A position that is not a securitization position and that hedges 
a position described in paragraph (1) of this definition; and
    (3) A correlation trading position does not include:
    (i) A resecuritization position;
    (ii) A derivative of a securitization position that does not provide 
a pro rata share in the proceeds of a securitization tranche; or
    (iii) A securitization position for which the underlying assets or 
reference exposures are retail exposures, residential mortgage 
exposures, or commercial mortgage exposures.
    Covered position means the following positions:
    (1) A trading asset or trading liability (whether on- or off-balance 
sheet),\32\ as reported on Call Report, that meets the following 
conditions:
---------------------------------------------------------------------------

    \32\ Securities subject to repurchase and lending agreements are 
included as if they are still owned by the lender.
---------------------------------------------------------------------------

    (i) The position is a trading position or hedges another covered 
position; \33\ and
---------------------------------------------------------------------------

    \33\ A position that hedges a trading position must be within the 
scope of the bank's hedging strategy as described in paragraph (a)(2) of 
section 203 of this subpart.
---------------------------------------------------------------------------

    (ii) The position is free of any restrictive covenants on its 
tradability or the national bank or Federal savings association is able 
to hedge the material risk elements of the position in a two-way market;
    (2) A foreign exchange or commodity position, regardless of whether 
the position is a trading asset or trading liability (excluding any 
structural foreign currency positions that the national bank or Federal 
savings association chooses to exclude with prior supervisory approval); 
and
    (3) Notwithstanding paragraphs (1) and (2) of this definition, a 
covered position does not include:
    (i) An intangible asset, including any servicing asset;
    (ii) Any hedge of a trading position that the OCC determines to be 
outside the scope of the national bank's or Federal savings 
association's hedging strategy required in paragraph (a)(2) of Sec.  
3.203;
    (iii) Any position that, in form or substance, acts as a liquidity 
facility that provides support to asset-backed commercial paper;
    (iv) A credit derivative the national bank or Federal savings 
association recognizes as a guarantee for risk-weighted asset amount 
calculation purposes under subpart D or subpart E of this part;
    (v) Any position that is recognized as a credit valuation adjustment 
hedge under Sec.  3.132(e)(5) or Sec.  3.132(e)(6), except as provided 
in Sec.  3.132(e)(6)(vii);
    (vi) Any equity position that is not publicly traded, other than a 
derivative that references a publicly traded equity and other than a 
position in an investment company as defined in and registered with the 
SEC under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), 
provided that all the underlying equities held by the investment company 
are publicly traded;
    (vii) Any equity position that is not publicly traded, other than a 
derivative

[[Page 212]]

that references a publicly traded equity and other than a position in an 
entity not domiciled in the United States (or a political subdivision 
thereof) that is supervised and regulated in a manner similar to 
entities described in paragraph (3)(vi) of this definition;
    (viii) Any position a national bank or Federal savings association 
holds with the intent to securitize; or
    (ix) Any direct real estate holding.
    Debt position means a covered position that is not a securitization 
position or a correlation trading position and that has a value that 
reacts primarily to changes in interest rates or credit spreads.
    Default by a sovereign entity has the same meaning as the term 
sovereign default under Sec.  3.2.
    Equity position means a covered position that is not a 
securitization position or a correlation trading position and that has a 
value that reacts primarily to changes in equity prices.
    Event risk means the risk of loss on equity or hybrid equity 
positions as a result of a financial event, such as the announcement or 
occurrence of a company merger, acquisition, spin-off, or dissolution.
    Foreign exchange position means a position for which price risk 
arises from changes in foreign exchange rates.
    General market risk means the risk of loss that could result from 
broad market movements, such as changes in the general level of interest 
rates, credit spreads, equity prices, foreign exchange rates, or 
commodity prices.
    Hedge means a position or positions that offset all, or 
substantially all, of one or more material risk factors of another 
position.
    Idiosyncratic risk means the risk of loss in the value of a position 
that arises from changes in risk factors unique to that position.
    Incremental risk means the default risk and credit migration risk of 
a position. Default risk means the risk of loss on a position that could 
result from the failure of an obligor to make timely payments of 
principal or interest on its debt obligation, and the risk of loss that 
could result from bankruptcy, insolvency, or similar proceeding. Credit 
migration risk means the price risk that arises from significant changes 
in the underlying credit quality of the position.
    Market risk means the risk of loss on a position that could result 
from movements in market prices.
    Resecuritization position means a covered position that is:
    (1) An on- or off-balance sheet exposure to a resecuritization; or
    (2) An exposure that directly or indirectly references a 
resecuritization exposure in paragraph (1) of this definition.
    Securitization means a transaction in which:
    (1) All or a portion of the credit risk of one or more underlying 
exposures is transferred to one or more third parties;
    (2) The credit risk associated with the underlying exposures has 
been separated into at least two tranches that reflect different levels 
of seniority;
    (3) Performance of the securitization exposures depends upon the 
performance of the underlying exposures;
    (4) All or substantially all of the underlying exposures are 
financial exposures (such as loans, commitments, credit derivatives, 
guarantees, receivables, asset-backed securities, mortgage-backed 
securities, other debt securities, or equity securities);
    (5) For non-synthetic securitizations, the underlying exposures are 
not owned by an operating company;
    (6) The underlying exposures are not owned by a small business 
investment company described in section 302 of the Small Business 
Investment Act;
    (7) The underlying exposures are not owned by a firm an investment 
in which qualifies as a community development investment under section 
24(Eleventh) of the National Bank Act;
    (8) The OCC may determine that a transaction in which the underlying 
exposures are owned by an investment firm that exercises substantially 
unfettered control over the size and composition of its assets, 
liabilities, and off-balance sheet exposures is not a securitization 
based on the transaction's leverage, risk profile, or economic 
substance;
    (9) The OCC may deem an exposure to a transaction that meets the 
definition of a securitization, notwithstanding

[[Page 213]]

paragraph (5), (6), or (7) of this definition, to be a securitization 
based on the transaction's leverage, risk profile, or economic 
substance; and
    (10) The transaction is not:
    (i) An investment fund;
    (ii) A collective investment fund (as defined in [12 CFR 208.34 
(Board), 12 CFR 9.18 (OCC)]);
    (iii) An employee benefit plan as defined in paragraphs (3) and (32) 
of section 3 of ERISA, a ``governmental plan'' (as defined in 29 U.S.C. 
1002(32)) that complies with the tax deferral qualification requirements 
provided in the Internal Revenue Code, or any similar employee benefit 
plan established under the laws of a foreign jurisdiction; or
    (iv) Registered with the SEC under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) or foreign equivalents thereof.
    Securitization position means a covered position that is:
    (1) An on-balance sheet or off-balance sheet credit exposure 
(including credit-enhancing representations and warranties) that arises 
from a securitization (including a resecuritization); or
    (2) An exposure that directly or indirectly references a 
securitization exposure described in paragraph (1) of this definition.
    Sovereign debt position means a direct exposure to a sovereign 
entity.
    Specific risk means the risk of loss on a position that could result 
from factors other than broad market movements and includes event risk, 
default risk, and idiosyncratic risk.
    Structural position in a foreign currency means a position that is 
not a trading position and that is:
    (1) Subordinated debt, equity, or minority interest in a 
consolidated subsidiary that is denominated in a foreign currency;
    (2) Capital assigned to foreign branches that is denominated in a 
foreign currency;
    (3) A position related to an unconsolidated subsidiary or another 
item that is denominated in a foreign currency and that is deducted from 
the national bank's or Federal savings association's tier 1 or tier 2 
capital; or
    (4) A position designed to hedge a national bank's or Federal 
savings association's capital ratios or earnings against the effect on 
paragraphs (1), (2), or (3) of this definition of adverse exchange rate 
movements.
    Term repo-style transaction means a repo-style transaction that has 
an original maturity in excess of one business day.
    Trading position means a position that is held by the national bank 
or Federal savings association for the purpose of short-term resale or 
with the intent of benefiting from actual or expected short-term price 
movements, or to lock in arbitrage profits.
    Two-way market means a market where there are independent bona fide 
offers to buy and sell so that a price reasonably related to the last 
sales price or current bona fide competitive bid and offer quotations 
can be determined within one day and settled at that price within a 
relatively short time frame conforming to trade custom.
    Value-at-Risk (VaR) means the estimate of the maximum amount that 
the value of one or more positions could decline due to market price or 
rate movements during a fixed holding period within a stated confidence 
interval.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35258, July 22, 
2019; 85 FR 4405, Jan. 24, 2020]



Sec.  3.203  Requirements for application of this subpart F.

    (a) Trading positions--(1) Identification of trading positions. A 
national bank or Federal savings association must have clearly defined 
policies and procedures for determining which of its trading assets and 
trading liabilities are trading positions and which of its trading 
positions are correlation trading positions. These policies and 
procedures must take into account:
    (i) The extent to which a position, or a hedge of its material 
risks, can be marked-to-market daily by reference to a two-way market; 
and
    (ii) Possible impairments to the liquidity of a position or its 
hedge.

[[Page 214]]

    (2) Trading and hedging strategies. A national bank or Federal 
savings association must have clearly defined trading and hedging 
strategies for its trading positions that are approved by senior 
management of the national bank or Federal savings association.
    (i) The trading strategy must articulate the expected holding period 
of, and the market risk associated with, each portfolio of trading 
positions.
    (ii) The hedging strategy must articulate for each portfolio of 
trading positions the level of market risk the national bank or Federal 
savings association is willing to accept and must detail the 
instruments, techniques, and strategies the national bank or Federal 
savings association will use to hedge the risk of the portfolio.
    (b) Management of covered positions--(1) Active management. A 
national bank or Federal savings association must have clearly defined 
policies and procedures for actively managing all covered positions. At 
a minimum, these policies and procedures must require:
    (i) Marking positions to market or to model on a daily basis;
    (ii) Daily assessment of the national bank's or Federal savings 
association's ability to hedge position and portfolio risks, and of the 
extent of market liquidity;
    (iii) Establishment and daily monitoring of limits on positions by a 
risk control unit independent of the trading business unit;
    (iv) Daily monitoring by senior management of information described 
in paragraphs (b)(1)(i) through (b)(1)(iii) of this section;
    (v) At least annual reassessment of established limits on positions 
by senior management; and
    (vi) At least annual assessments by qualified personnel of the 
quality of market inputs to the valuation process, the soundness of key 
assumptions, the reliability of parameter estimation in pricing models, 
and the stability and accuracy of model calibration under alternative 
market scenarios.
    (2) Valuation of covered positions. The national bank or Federal 
savings association must have a process for prudent valuation of its 
covered positions that includes policies and procedures on the valuation 
of positions, marking positions to market or to model, independent price 
verification, and valuation adjustments or reserves. The valuation 
process must consider, as appropriate, unearned credit spreads, close-
out costs, early termination costs, investing and funding costs, 
liquidity, and model risk.
    (c) Requirements for internal models. (1) A national bank or Federal 
savings association must obtain the prior written approval of the OCC 
before using any internal model to calculate its risk-based capital 
requirement under this subpart.
    (2) A national bank or Federal savings association must meet all of 
the requirements of this section on an ongoing basis. The national bank 
or Federal savings association must promptly notify the OCC when:
    (i) The national bank or Federal savings association plans to extend 
the use of a model that the OCC has approved under this subpart to an 
additional business line or product type;
    (ii) The national bank or Federal savings association makes any 
change to an internal model approved by the OCC under this subpart that 
would result in a material change in the national bank's or Federal 
savings association's risk-weighted asset amount for a portfolio of 
covered positions; or
    (iii) The national bank or Federal savings association makes any 
material change to its modeling assumptions.
    (3) The OCC may rescind its approval of the use of any internal 
model (in whole or in part) or of the determination of the approach 
under Sec.  3.209(a)(2)(ii) for a national bank's or Federal savings 
association's modeled correlation trading positions and determine an 
appropriate capital requirement for the covered positions to which the 
model would apply, if the OCC determines that the model no longer 
complies with this subpart or fails to reflect accurately the risks of 
the national bank's or Federal savings association's covered positions.
    (4) The national bank or Federal savings association must 
periodically, but no less frequently than annually, review its internal 
models in light of developments in financial markets and modeling 
technologies, and enhance

[[Page 215]]

those models as appropriate to ensure that they continue to meet the 
OCC's standards for model approval and employ risk measurement 
methodologies that are most appropriate for the national bank's or 
Federal savings association's covered positions.
    (5) The national bank or Federal savings association must 
incorporate its internal models into its risk management process and 
integrate the internal models used for calculating its VaR-based measure 
into its daily risk management process.
    (6) The level of sophistication of a national bank's or Federal 
savings association's internal models must be commensurate with the 
complexity and amount of its covered positions. A national bank's or 
Federal savings association's internal models may use any of the 
generally accepted approaches, including but not limited to variance-
covariance models, historical simulations, or Monte Carlo simulations, 
to measure market risk.
    (7) The national bank's or Federal savings association's internal 
models must properly measure all the material risks in the covered 
positions to which they are applied.
    (8) The national bank's or Federal savings association's internal 
models must conservatively assess the risks arising from less liquid 
positions and positions with limited price transparency under realistic 
market scenarios.
    (9) The national bank or Federal savings association must have a 
rigorous and well-defined process for re-estimating, re-evaluating, and 
updating its internal models to ensure continued applicability and 
relevance.
    (10) If a national bank or Federal savings association uses internal 
models to measure specific risk, the internal models must also satisfy 
the requirements in paragraph (b)(1) of Sec.  3.207.
    (d) Control, oversight, and validation mechanisms. (1) The national 
bank or Federal savings association must have a risk control unit that 
reports directly to senior management and is independent from the 
business trading units.
    (2) The national bank or Federal savings association must validate 
its internal models initially and on an ongoing basis. The national 
bank's or Federal savings association's validation process must be 
independent of the internal models' development, implementation, and 
operation, or the validation process must be subjected to an independent 
review of its adequacy and effectiveness. Validation must include:
    (i) An evaluation of the conceptual soundness of (including 
developmental evidence supporting) the internal models;
    (ii) An ongoing monitoring process that includes verification of 
processes and the comparison of the national bank's or Federal savings 
association's model outputs with relevant internal and external data 
sources or estimation techniques; and
    (iii) An outcomes analysis process that includes backtesting. For 
internal models used to calculate the VaR-based measure, this process 
must include a comparison of the changes in the national bank's or 
Federal savings association's portfolio value that would have occurred 
were end-of-day positions to remain unchanged (therefore, excluding 
fees, commissions, reserves, net interest income, and intraday trading) 
with VaR-based measures during a sample period not used in model 
development.
    (3) The national bank or Federal savings association must stress 
test the market risk of its covered positions at a frequency appropriate 
to each portfolio, and in no case less frequently than quarterly. The 
stress tests must take into account concentration risk (including but 
not limited to concentrations in single issuers, industries, sectors, or 
markets), illiquidity under stressed market conditions, and risks 
arising from the national bank's or Federal savings association's 
trading activities that may not be adequately captured in its internal 
models.
    (4) The national bank or Federal savings association must have an 
internal audit function independent of business-line management that at 
least annually assesses the effectiveness of the controls supporting the 
national bank's or Federal savings association's market risk measurement 
systems, including the activities of the business

[[Page 216]]

trading units and independent risk control unit, compliance with 
policies and procedures, and calculation of the national bank's or 
Federal savings association's measures for market risk under this 
subpart. At least annually, the internal audit function must report its 
findings to the national bank's or Federal savings association's board 
of directors (or a committee thereof).
    (e) Internal assessment of capital adequacy. The national bank or 
Federal savings association must have a rigorous process for assessing 
its overall capital adequacy in relation to its market risk. The 
assessment must take into account risks that may not be captured fully 
in the VaR-based measure, including concentration and liquidity risk 
under stressed market conditions.
    (f) Documentation. The national bank or Federal savings association 
must adequately document all material aspects of its internal models, 
management and valuation of covered positions, control, oversight, 
validation and review processes and results, and internal assessment of 
capital adequacy.



Sec.  3.204  Measure for market risk.

    (a) General requirement. (1) A national bank or Federal savings 
association must calculate its standardized measure for market risk by 
following the steps described in paragraph (a)(2) of this section. An 
advanced approaches national bank or Federal savings association also 
must calculate an advanced measure for market risk by following the 
steps in paragraph (a)(2) of this section.
    (2) Measure for market risk. A national bank or Federal savings 
association must calculate the standardized measure for market risk, 
which equals the sum of the VaR-based capital requirement, stressed VaR-
based capital requirement, specific risk add-ons, incremental risk 
capital requirement, comprehensive risk capital requirement, and capital 
requirement for de minimis exposures all as defined under this paragraph 
(a)(2), (except, that the national bank or Federal savings association 
may not use the SFA in section 210(b)(2)(vii)(B) of this subpart for 
purposes of this calculation)[, plus any additional capital requirement 
established by the OCC]. An advanced approaches national bank or Federal 
savings association that has completed the parallel run process and that 
has received notifications from the OCC pursuant to Sec.  3.121(d) also 
must calculate the advanced measure for market risk, which equals the 
sum of the VaR-based capital requirement, stressed VaR-based capital 
requirement, specific risk add-ons, incremental risk capital 
requirement, comprehensive risk capital requirement, and capital 
requirement for de minimis exposures as defined under this paragraph 
(a)(2) [, plus any additional capital requirement established by the 
OCC].
    (i) VaR-based capital requirement. A national bank's or Federal 
savings association's VaR-based capital requirement equals the greater 
of:
    (A) The previous day's VaR-based measure as calculated under Sec.  
3.205; or
    (B) The average of the daily VaR-based measures as calculated under 
Sec.  3.205 for each of the preceding 60 business days multiplied by 
three, except as provided in paragraph (b) of this section.
    (ii) Stressed VaR-based capital requirement. A national bank's or 
Federal savings association's stressed VaR-based capital requirement 
equals the greater of:
    (A) The most recent stressed VaR-based measure as calculated under 
Sec.  3.206; or
    (B) The average of the stressed VaR-based measures as calculated 
under Sec.  3.206 for each of the preceding 12 weeks multiplied by 
three, except as provided in paragraph (b) of this section.
    (iii) Specific risk add-ons. A national bank's or Federal savings 
association's specific risk add-ons equal any specific risk add-ons that 
are required under Sec.  3.207 and are calculated in accordance with 
Sec.  3.210.
    (iv) Incremental risk capital requirement. A national bank's or 
Federal savings association's incremental risk capital requirement 
equals any incremental risk capital requirement as calculated under 
section 208 of this subpart.

[[Page 217]]

    (v) Comprehensive risk capital requirement. A national bank's or 
Federal savings association's comprehensive risk capital requirement 
equals any comprehensive risk capital requirement as calculated under 
section 209 of this subpart.
    (vi) Capital requirement for de minimis exposures. A national bank's 
or Federal savings association's capital requirement for de minimis 
exposures equals:
    (A) The absolute value of the fair value of those de minimis 
exposures that are not captured in the national bank's or Federal 
savings association's VaR-based measure or under paragraph (a)(2)(vi)(B) 
of this section; and
    (B) With the prior written approval of the OCC, the capital 
requirement for any de minimis exposures using alternative techniques 
that appropriately measure the market risk associated with those 
exposures.
    (b) Backtesting. A national bank or Federal savings association must 
compare each of its most recent 250 business days' trading losses 
(excluding fees, commissions, reserves, net interest income, and 
intraday trading) with the corresponding daily VaR-based measures 
calibrated to a one-day holding period and at a one-tail, 99.0 percent 
confidence level. A national bank or Federal savings association must 
begin backtesting as required by this paragraph (b) no later than one 
year after the later of January 1, 2014 and the date on which the 
national bank or Federal savings association becomes subject to this 
subpart. In the interim, consistent with safety and soundness 
principles, a national bank or Federal savings association subject to 
this subpart as of January 1, 2014 should continue to follow backtesting 
procedures in accordance with the OCC's supervisory expectations.
    (1) Once each quarter, the national bank or Federal savings 
association must identify the number of exceptions (that is, the number 
of business days for which the actual daily net trading loss, if any, 
exceeds the corresponding daily VaR-based measure) that have occurred 
over the preceding 250 business days.
    (2) A national bank or Federal savings association must use the 
multiplication factor in Table 1 to Sec.  3.204 that corresponds to the 
number of exceptions identified in paragraph (b)(1) of this section to 
determine its VaR-based capital requirement for market risk under 
paragraph (a)(2)(i) of this section and to determine its stressed VaR-
based capital requirement for market risk under paragraph (a)(2)(ii) of 
this section until it obtains the next quarter's backtesting results, 
unless the OCC notifies the national bank or Federal savings association 
in writing that a different adjustment or other action is appropriate.

   Table 1 to Sec.   3.204--Multiplication Factors Based on Results of
                               Backtesting
------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor
------------------------------------------------------------------------
4 or fewer..............................................            3.00
5.......................................................            3.40
6.......................................................            3.50
7.......................................................            3.65
8.......................................................            3.75
9.......................................................            3.85
10 or more..............................................            4.00
------------------------------------------------------------------------



Sec.  3.205  VaR-based measure.

    (a) General requirement. A national bank or Federal savings 
association must use one or more internal models to calculate daily a 
VaR-based measure of the general market risk of all covered positions. 
The daily VaR-based measure also may reflect the national bank's or 
Federal savings association's specific risk for one or more portfolios 
of debt and equity positions, if the internal models meet the 
requirements of paragraph (b)(1) of Sec.  3.207. The daily VaR-based 
measure must also reflect the national bank's or Federal savings 
association's specific risk for any portfolio of correlation trading 
positions that is modeled under Sec.  3.209. A national bank or Federal 
savings association may elect to include term repo-style transactions in 
its VaR-based measure, provided that the national bank or Federal 
savings association includes all such term repo-style transactions 
consistently over time.
    (1) The national bank's or Federal savings association's internal 
models for calculating its VaR-based measure must use risk factors 
sufficient to measure the market risk inherent in all covered positions. 
The market risk

[[Page 218]]

categories must include, as appropriate, interest rate risk, credit 
spread risk, equity price risk, foreign exchange risk, and commodity 
price risk. For material positions in the major currencies and markets, 
modeling techniques must incorporate enough segments of the yield 
curve--in no case less than six--to capture differences in volatility 
and less than perfect correlation of rates along the yield curve.
    (2) The VaR-based measure may incorporate empirical correlations 
within and across risk categories, provided the national bank or Federal 
savings association validates and demonstrates the reasonableness of its 
process for measuring correlations. If the VaR-based measure does not 
incorporate empirical correlations across risk categories, the national 
bank or Federal savings association must add the separate measures from 
its internal models used to calculate the VaR-based measure for the 
appropriate market risk categories (interest rate risk, credit spread 
risk, equity price risk, foreign exchange rate risk, and/or commodity 
price risk) to determine its aggregate VaR-based measure.
    (3) The VaR-based measure must include the risks arising from the 
nonlinear price characteristics of options positions or positions with 
embedded optionality and the sensitivity of the fair value of the 
positions to changes in the volatility of the underlying rates, prices, 
or other material risk factors. A national bank or Federal savings 
association with a large or complex options portfolio must measure the 
volatility of options positions or positions with embedded optionality 
by different maturities and/or strike prices, where material.
    (4) The national bank or Federal savings association must be able to 
justify to the satisfaction of the OCC the omission of any risk factors 
from the calculation of its VaR-based measure that the national bank or 
Federal savings association uses in its pricing models.
    (5) The national bank or Federal savings association must 
demonstrate to the satisfaction of the OCC the appropriateness of any 
proxies used to capture the risks of the national bank's or Federal 
savings association's actual positions for which such proxies are used.
    (b) Quantitative requirements for VaR-based measure. (1) The VaR-
based measure must be calculated on a daily basis using a one-tail, 99.0 
percent confidence level, and a holding period equivalent to a 10-
business-day movement in underlying risk factors, such as rates, 
spreads, and prices. To calculate VaR-based measures using a 10-
business-day holding period, the national bank or Federal savings 
association may calculate 10-business-day measures directly or may 
convert VaR-based measures using holding periods other than 10 business 
days to the equivalent of a 10-business-day holding period. A national 
bank or Federal savings association that converts its VaR-based measure 
in such a manner must be able to justify the reasonableness of its 
approach to the satisfaction of the OCC.
    (2) The VaR-based measure must be based on a historical observation 
period of at least one year. Data used to determine the VaR-based 
measure must be relevant to the national bank's or Federal savings 
association's actual exposures and of sufficient quality to support the 
calculation of risk-based capital requirements. The national bank or 
Federal savings association must update data sets at least monthly or 
more frequently as changes in market conditions or portfolio composition 
warrant. For a national bank or Federal savings association that uses a 
weighting scheme or other method for the historical observation period, 
the national bank or Federal savings association must either:
    (i) Use an effective observation period of at least one year in 
which the average time lag of the observations is at least six months; 
or
    (ii) Demonstrate to the OCC that its weighting scheme is more 
effective than a weighting scheme with an average time lag of at least 
six months representing the volatility of the national bank's or Federal 
savings association's trading portfolio over a full business cycle. A 
national bank or Federal savings association using this option must 
update its data more frequently than monthly and in a manner appropriate 
for the type of weighting scheme.

[[Page 219]]

    (c) A national bank or Federal savings association must divide its 
portfolio into a number of significant subportfolios approved by the OCC 
for subportfolio backtesting purposes. These subportfolios must be 
sufficient to allow the national bank or Federal savings association and 
the OCC to assess the adequacy of the VaR model at the risk factor 
level; the OCC will evaluate the appropriateness of these subportfolios 
relative to the value and composition of the national bank's or Federal 
savings association's covered positions. The national bank or Federal 
savings association must retain and make available to the OCC the 
following information for each subportfolio for each business day over 
the previous two years (500 business days), with no more than a 60-day 
lag:
    (1) A daily VaR-based measure for the subportfolio calibrated to a 
one-tail, 99.0 percent confidence level;
    (2) The daily profit or loss for the subportfolio (that is, the net 
change in price of the positions held in the portfolio at the end of the 
previous business day); and
    (3) The p-value of the profit or loss on each day (that is, the 
probability of observing a profit that is less than, or a loss that is 
greater than, the amount reported for purposes of paragraph (c)(2) of 
this section based on the model used to calculate the VaR-based measure 
described in paragraph (c)(1) of this section).



Sec.  3.206  Stressed VaR-based measure.

    (a) General requirement. At least weekly, a national bank or Federal 
savings association must use the same internal model(s) used to 
calculate its VaR-based measure to calculate a stressed VaR-based 
measure.
    (b) Quantitative requirements for stressed VaR-based measure. (1) A 
national bank or Federal savings association must calculate a stressed 
VaR-based measure for its covered positions using the same model(s) used 
to calculate the VaR-based measure, subject to the same confidence level 
and holding period applicable to the VaR-based measure under Sec.  
3.205, but with model inputs calibrated to historical data from a 
continuous 12-month period that reflects a period of significant 
financial stress appropriate to the national bank's or Federal savings 
association's current portfolio.
    (2) The stressed VaR-based measure must be calculated at least 
weekly and be no less than the national bank's or Federal savings 
association's VaR-based measure.
    (3) A national bank or Federal savings association must have 
policies and procedures that describe how it determines the period of 
significant financial stress used to calculate the national bank's or 
Federal savings association's stressed VaR-based measure under this 
section and must be able to provide empirical support for the period 
used. The national bank or Federal savings association must obtain the 
prior approval of the OCC for, and notify the OCC if the national bank 
or Federal savings association makes any material changes to, these 
policies and procedures. The policies and procedures must address:
    (i) How the national bank or Federal savings association links the 
period of significant financial stress used to calculate the stressed 
VaR-based measure to the composition and directional bias of its current 
portfolio; and
    (ii) The national bank's or Federal savings association's process 
for selecting, reviewing, and updating the period of significant 
financial stress used to calculate the stressed VaR-based measure and 
for monitoring the appropriateness of the period to the national bank's 
or Federal savings association's current portfolio.
    (4) Nothing in this section prevents the OCC from requiring a 
national bank or Federal savings association to use a different period 
of significant financial stress in the calculation of the stressed VaR-
based measure.



Sec.  3.207  Specific risk.

    (a) General requirement. A national bank or Federal savings 
association must use one of the methods in this section to measure the 
specific risk for each of its debt, equity, and securitization positions 
with specific risk.
    (b) Modeled specific risk. A national bank or Federal savings 
association may use models to measure the specific risk of covered 
positions as provided in

[[Page 220]]

paragraph (a) of section 205 of this subpart (therefore, excluding 
securitization positions that are not modeled under section 209 of this 
subpart). A national bank or Federal savings association must use models 
to measure the specific risk of correlation trading positions that are 
modeled under Sec.  3.209.
    (1) Requirements for specific risk modeling. (i) If a national bank 
or Federal savings association uses internal models to measure the 
specific risk of a portfolio, the internal models must:
    (A) Explain the historical price variation in the portfolio;
    (B) Be responsive to changes in market conditions;
    (C) Be robust to an adverse environment, including signaling rising 
risk in an adverse environment; and
    (D) Capture all material components of specific risk for the debt 
and equity positions in the portfolio. Specifically, the internal models 
must:
    (1) Capture event risk and idiosyncratic risk; and
    (2) Capture and demonstrate sensitivity to material differences 
between positions that are similar but not identical and to changes in 
portfolio composition and concentrations.
    (ii) If a national bank or Federal savings association calculates an 
incremental risk measure for a portfolio of debt or equity positions 
under section 208 of this subpart, the national bank or Federal savings 
association is not required to capture default and credit migration 
risks in its internal models used to measure the specific risk of those 
portfolios.
    (2) Specific risk fully modeled for one or more portfolios. If the 
national bank's or Federal savings association's VaR-based measure 
captures all material aspects of specific risk for one or more of its 
portfolios of debt, equity, or correlation trading positions, the 
national bank or Federal savings association has no specific risk add-on 
for those portfolios for purposes of paragraph (a)(2)(iii) of Sec.  
3.204.
    (c) Specific risk not modeled. (1) If the national bank's or Federal 
savings association's VaR-based measure does not capture all material 
aspects of specific risk for a portfolio of debt, equity, or correlation 
trading positions, the national bank or Federal savings association must 
calculate a specific-risk add-on for the portfolio under the 
standardized measurement method as described in Sec.  3.210.
    (2) A national bank or Federal savings association must calculate a 
specific risk add-on under the standardized measurement method as 
described in Sec.  3.210 for all of its securitization positions that 
are not modeled under Sec.  3.209.



Sec.  3.208  Incremental risk.

    (a) General requirement. A national bank or Federal savings 
association that measures the specific risk of a portfolio of debt 
positions under Sec.  3.207(b) using internal models must calculate at 
least weekly an incremental risk measure for that portfolio according to 
the requirements in this section. The incremental risk measure is the 
national bank's or Federal savings association's measure of potential 
losses due to incremental risk over a one-year time horizon at a one-
tail, 99.9 percent confidence level, either under the assumption of a 
constant level of risk, or under the assumption of constant positions. 
With the prior approval of the OCC, a national bank or Federal savings 
association may choose to include portfolios of equity positions in its 
incremental risk model, provided that it consistently includes such 
equity positions in a manner that is consistent with how the national 
bank or Federal savings association internally measures and manages the 
incremental risk of such positions at the portfolio level. If equity 
positions are included in the model, for modeling purposes default is 
considered to have occurred upon the default of any debt of the issuer 
of the equity position. A national bank or Federal savings association 
may not include correlation trading positions or securitization 
positions in its incremental risk measure.
    (b) Requirements for incremental risk modeling. For purposes of 
calculating the incremental risk measure, the incremental risk model 
must:
    (1) Measure incremental risk over a one-year time horizon and at a 
one-

[[Page 221]]

tail, 99.9 percent confidence level, either under the assumption of a 
constant level of risk, or under the assumption of constant positions.
    (i) A constant level of risk assumption means that the national bank 
or Federal savings association rebalances, or rolls over, its trading 
positions at the beginning of each liquidity horizon over the one-year 
horizon in a manner that maintains the national bank's or Federal 
savings association's initial risk level. The national bank or Federal 
savings association must determine the frequency of rebalancing in a 
manner consistent with the liquidity horizons of the positions in the 
portfolio. The liquidity horizon of a position or set of positions is 
the time required for a national bank or Federal savings association to 
reduce its exposure to, or hedge all of its material risks of, the 
position(s) in a stressed market. The liquidity horizon for a position 
or set of positions may not be less than the shorter of three months or 
the contractual maturity of the position.
    (ii) A constant position assumption means that the national bank or 
Federal savings association maintains the same set of positions 
throughout the one-year horizon. If a national bank or Federal savings 
association uses this assumption, it must do so consistently across all 
portfolios.
    (iii) A national bank's or Federal savings association's selection 
of a constant position or a constant risk assumption must be consistent 
between the national bank's or Federal savings association's incremental 
risk model and its comprehensive risk model described in section 209 of 
this subpart, if applicable.
    (iv) A national bank's or Federal savings association's treatment of 
liquidity horizons must be consistent between the national bank's or 
Federal savings association's incremental risk model and its 
comprehensive risk model described in section 209, if applicable.
    (2) Recognize the impact of correlations between default and 
migration events among obligors.
    (3) Reflect the effect of issuer and market concentrations, as well 
as concentrations that can arise within and across product classes 
during stressed conditions.
    (4) Reflect netting only of long and short positions that reference 
the same financial instrument.
    (5) Reflect any material mismatch between a position and its hedge.
    (6) Recognize the effect that liquidity horizons have on dynamic 
hedging strategies. In such cases, a national bank or Federal savings 
association must:
    (i) Choose to model the rebalancing of the hedge consistently over 
the relevant set of trading positions;
    (ii) Demonstrate that the inclusion of rebalancing results in a more 
appropriate risk measurement;
    (iii) Demonstrate that the market for the hedge is sufficiently 
liquid to permit rebalancing during periods of stress; and
    (iv) Capture in the incremental risk model any residual risks 
arising from such hedging strategies.
    (7) Reflect the nonlinear impact of options and other positions with 
material nonlinear behavior with respect to default and migration 
changes.
    (8) Maintain consistency with the national bank's or Federal savings 
association's internal risk management methodologies for identifying, 
measuring, and managing risk.
    (c) Calculation of incremental risk capital requirement. The 
incremental risk capital requirement is the greater of:
    (1) The average of the incremental risk measures over the previous 
12 weeks; or
    (2) The most recent incremental risk measure.



Sec.  3.209  Comprehensive risk.

    (a) General requirement. (1) Subject to the prior approval of the 
OCC, a national bank or Federal savings association may use the method 
in this section to measure comprehensive risk, that is, all price risk, 
for one or more portfolios of correlation trading positions.
    (2) A national bank or Federal savings association that measures the 
price risk of a portfolio of correlation trading positions using 
internal models must calculate at least weekly a comprehensive risk 
measure that captures

[[Page 222]]

all price risk according to the requirements of this section. The 
comprehensive risk measure is either:
    (i) The sum of:
    (A) The national bank's or Federal savings association's modeled 
measure of all price risk determined according to the requirements in 
paragraph (b) of this section; and
    (B) A surcharge for the national bank's or Federal savings 
association's modeled correlation trading positions equal to the total 
specific risk add-on for such positions as calculated under section 210 
of this subpart multiplied by 8.0 percent; or
    (ii) With approval of the OCC and provided the national bank or 
Federal savings association has met the requirements of this section for 
a period of at least one year and can demonstrate the effectiveness of 
the model through the results of ongoing model validation efforts 
including robust benchmarking, the greater of:
    (A) The national bank's or Federal savings association's modeled 
measure of all price risk determined according to the requirements in 
paragraph (b) of this section; or
    (B) The total specific risk add-on that would apply to the bank's 
modeled correlation trading positions as calculated under section 210 of 
this subpart multiplied by 8.0 percent.
    (b) Requirements for modeling all price risk. If a national bank or 
Federal savings association uses an internal model to measure the price 
risk of a portfolio of correlation trading positions:
    (1) The internal model must measure comprehensive risk over a one-
year time horizon at a one-tail, 99.9 percent confidence level, either 
under the assumption of a constant level of risk, or under the 
assumption of constant positions.
    (2) The model must capture all material price risk, including but 
not limited to the following:
    (i) The risks associated with the contractual structure of cash 
flows of the position, its issuer, and its underlying exposures;
    (ii) Credit spread risk, including nonlinear price risks;
    (iii) The volatility of implied correlations, including nonlinear 
price risks such as the cross-effect between spreads and correlations;
    (iv) Basis risk;
    (v) Recovery rate volatility as it relates to the propensity for 
recovery rates to affect tranche prices; and
    (vi) To the extent the comprehensive risk measure incorporates the 
benefits of dynamic hedging, the static nature of the hedge over the 
liquidity horizon must be recognized. In such cases, a national bank or 
Federal savings association must:
    (A) Choose to model the rebalancing of the hedge consistently over 
the relevant set of trading positions;
    (B) Demonstrate that the inclusion of rebalancing results in a more 
appropriate risk measurement;
    (C) Demonstrate that the market for the hedge is sufficiently liquid 
to permit rebalancing during periods of stress; and
    (D) Capture in the comprehensive risk model any residual risks 
arising from such hedging strategies;
    (3) The national bank or Federal savings association must use market 
data that are relevant in representing the risk profile of the national 
bank's or Federal savings association's correlation trading positions in 
order to ensure that the national bank or Federal savings association 
fully captures the material risks of the correlation trading positions 
in its comprehensive risk measure in accordance with this section; and
    (4) The national bank or Federal savings association must be able to 
demonstrate that its model is an appropriate representation of 
comprehensive risk in light of the historical price variation of its 
correlation trading positions.
    (c) Requirements for stress testing. (1) A national bank or Federal 
savings association must at least weekly apply specific, supervisory 
stress scenarios to its portfolio of correlation trading positions that 
capture changes in:
    (i) Default rates;
    (ii) Recovery rates;
    (iii) Credit spreads;
    (iv) Correlations of underlying exposures; and
    (v) Correlations of a correlation trading position and its hedge.

[[Page 223]]

    (2) Other requirements. (i) A national bank or Federal savings 
association must retain and make available to the OCC the results of the 
supervisory stress testing, including comparisons with the capital 
requirements generated by the national bank's or Federal savings 
association's comprehensive risk model.
    (ii) A national bank or Federal savings association must report to 
the OCC promptly any instances where the stress tests indicate any 
material deficiencies in the comprehensive risk model.
    (d) Calculation of comprehensive risk capital requirement. The 
comprehensive risk capital requirement is the greater of:
    (1) The average of the comprehensive risk measures over the previous 
12 weeks; or
    (2) The most recent comprehensive risk measure.



Sec.  3.210  Standardized measurement method for specific risk.

    (a) General requirement. A national bank or Federal savings 
association must calculate a total specific risk add-on for each 
portfolio of debt and equity positions for which the national bank's or 
Federal savings association's VaR-based measure does not capture all 
material aspects of specific risk and for all securitization positions 
that are not modeled under Sec.  3.209. A national bank or Federal 
savings association must calculate each specific risk add-on in 
accordance with the requirements of this section. Notwithstanding any 
other definition or requirement in this subpart, a position that would 
have qualified as a debt position or an equity position but for the fact 
that it qualifies as a correlation trading position under paragraph (2) 
of the definition of correlation trading position in Sec.  3.202, shall 
be considered a debt position or an equity position, respectively, for 
purposes of this section 210 of this subpart.
    (1) The specific risk add-on for an individual debt or 
securitization position that represents sold credit protection is capped 
at the notional amount of the credit derivative contract. The specific 
risk add-on for an individual debt or securitization position that 
represents purchased credit protection is capped at the current fair 
value of the transaction plus the absolute value of the present value of 
all remaining payments to the protection seller under the transaction. 
This sum is equal to the value of the protection leg of the transaction.
    (2) For debt, equity, or securitization positions that are 
derivatives with linear payoffs, a national bank or Federal savings 
association must assign a specific risk-weighting factor to the fair 
value of the effective notional amount of the underlying instrument or 
index portfolio, except for a securitization position for which the 
national bank or Federal savings association directly calculates a 
specific risk add-on using the SFA in paragraph (b)(2)(vii)(B) of this 
section. A swap must be included as an effective notional position in 
the underlying instrument or portfolio, with the receiving side treated 
as a long position and the paying side treated as a short position. For 
debt, equity, or securitization positions that are derivatives with 
nonlinear payoffs, a national bank or Federal savings association must 
risk weight the fair value of the effective notional amount of the 
underlying instrument or portfolio multiplied by the derivative's delta.
    (3) For debt, equity, or securitization positions, a national bank 
or Federal savings association may net long and short positions 
(including derivatives) in identical issues or identical indices. A 
national bank or Federal savings association may also net positions in 
depositary receipts against an opposite position in an identical equity 
in different markets, provided that the national bank or Federal savings 
association includes the costs of conversion.
    (4) A set of transactions consisting of either a debt position and 
its credit derivative hedge or a securitization position and its credit 
derivative hedge has a specific risk add-on of zero if:
    (i) The debt or securitization position is fully hedged by a total 
return swap (or similar instrument where there is a matching of swap 
payments and changes in fair value of the debt or securitization 
position);
    (ii) There is an exact match between the reference obligation of the 
swap and the debt or securitization position;

[[Page 224]]

    (iii) There is an exact match between the currency of the swap and 
the debt or securitization position; and
    (iv) There is either an exact match between the maturity date of the 
swap and the maturity date of the debt or securitization position; or, 
in cases where a total return swap references a portfolio of positions 
with different maturity dates, the total return swap maturity date must 
match the maturity date of the underlying asset in that portfolio that 
has the latest maturity date.
    (5) The specific risk add-on for a set of transactions consisting of 
either a debt position and its credit derivative hedge or a 
securitization position and its credit derivative hedge that does not 
meet the criteria of paragraph (a)(4) of this section is equal to 20.0 
percent of the capital requirement for the side of the transaction with 
the higher specific risk add-on when:
    (i) The credit risk of the position is fully hedged by a credit 
default swap or similar instrument;
    (ii) There is an exact match between the reference obligation of the 
credit derivative hedge and the debt or securitization position;
    (iii) There is an exact match between the currency of the credit 
derivative hedge and the debt or securitization position; and
    (iv) There is either an exact match between the maturity date of the 
credit derivative hedge and the maturity date of the debt or 
securitization position; or, in the case where the credit derivative 
hedge has a standard maturity date:
    (A) The maturity date of the credit derivative hedge is within 30 
business days of the maturity date of the debt or securitization 
position; or
    (B) For purchased credit protection, the maturity date of the credit 
derivative hedge is later than the maturity date of the debt or 
securitization position, but is no later than the standard maturity date 
for that instrument that immediately follows the maturity date of the 
debt or securitization position. The maturity date of the credit 
derivative hedge may not exceed the maturity date of the debt or 
securitization position by more than 90 calendar days.
    (6) The specific risk add-on for a set of transactions consisting of 
either a debt position and its credit derivative hedge or a 
securitization position and its credit derivative hedge that does not 
meet the criteria of either paragraph (a)(4) or (a)(5) of this section, 
but in which all or substantially all of the price risk has been hedged, 
is equal to the specific risk add-on for the side of the transaction 
with the higher specific risk add-on.
    (b) Debt and securitization positions. (1) The total specific risk 
add-on for a portfolio of debt or securitization positions is the sum of 
the specific risk add-ons for individual debt or securitization 
positions, as computed under this section. To determine the specific 
risk add-on for individual debt or securitization positions, a national 
bank or Federal savings association must multiply the absolute value of 
the current fair value of each net long or net short debt or 
securitization position in the portfolio by the appropriate specific 
risk-weighting factor as set forth in paragraphs (b)(2)(i) through 
(b)(2)(vii) of this section.
    (2) For the purpose of this section, the appropriate specific risk-
weighting factors include:
    (i) Sovereign debt positions. (A) In accordance with Table 1 to 
Sec.  3.210, a national bank or Federal savings association must assign 
a specific risk-weighting factor to a sovereign debt position based on 
the CRC applicable to the sovereign, and, as applicable, the remaining 
contractual maturity of the position, or if there is no CRC applicable 
to the sovereign, based on whether the sovereign entity is a member of 
the OECD. Notwithstanding any other provision in this subpart, sovereign 
debt positions that are backed by the full faith and credit of the 
United States are treated as having a CRC of 0.

 Table 1 to Sec.   3.210--Specific Risk-Weighting Factors for Sovereign
                             Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                       Specific risk-weighting factor
                                                (in percent)
------------------------------------------------------------------------
CRC:

[[Page 225]]

 
    0-1..........................                   0.0
                                  --------------------------------------
    2-3..........................  Remaining                        0.25
                                    contractual
                                    maturity of 6
                                    months or less.
                                   Remaining                         1.0
                                    contractual
                                    maturity of
                                    greater than 6 and
                                    up to and
                                    including 24
                                    months.
                                   Remaining                         1.6
                                    contractual
                                    maturity exceeds
                                    24 months.
                                  --------------------------------------
    4-6..........................                   8.0
                                  --------------------------------------
    7............................                   12.0
------------------------------------------------------------------------
OECD Member with No CRC..........                   0.0
------------------------------------------------------------------------
Non-OECD Member with No CRC......                   8.0
------------------------------------------------------------------------
Sovereign Default................                   12.0
------------------------------------------------------------------------

    (B) Notwithstanding paragraph (b)(2)(i)(A) of this section, a 
national bank or Federal savings association may assign to a sovereign 
debt position a specific risk-weighting factor that is lower than the 
applicable specific risk-weighting factor in Table 1 to Sec.  3.210 if:
    (1) The position is denominated in the sovereign entity's currency;
    (2) The national bank or Federal savings association has at least an 
equivalent amount of liabilities in that currency; and
    (3) The sovereign entity allows banks under its jurisdiction to 
assign the lower specific risk-weighting factor to the same exposures to 
the sovereign entity.
    (C) A national bank or Federal savings association must assign a 
12.0 percent specific risk-weighting factor to a sovereign debt position 
immediately upon determination a default has occurred; or if a default 
has occurred within the previous five years.
    (D) A national bank or Federal savings association must assign a 0.0 
percent specific risk-weighting factor to a sovereign debt position if 
the sovereign entity is a member of the OECD and does not have a CRC 
assigned to it, except as provided in paragraph (b)(2)(i)(C) of this 
section.
    (E) A national bank or Federal savings association must assign an 
8.0 percent specific risk-weighting factor to a sovereign debt position 
if the sovereign is not a member of the OECD and does not have a CRC 
assigned to it, except as provided in paragraph (b)(2)(i)(C) of this 
section.
    (ii) Certain supranational entity and multilateral development bank 
debt positions. A national bank or Federal savings association may 
assign a 0.0 percent specific risk-weighting factor to a debt position 
that is an exposure to the Bank for International Settlements, the 
European Central Bank, the European Commission, the International 
Monetary Fund, the European Stability Mechanism, the European Financial 
Stability Facility, or an MDB.
    (iii) GSE debt positions. A national bank or Federal savings 
association must assign a 1.6 percent specific risk-weighting factor to 
a debt position that is an exposure to a GSE. Notwithstanding the 
foregoing, a national bank or Federal savings association must assign an 
8.0 percent specific risk-weighting factor to preferred stock issued by 
a GSE.
    (iv) Depository institution, foreign bank, and credit union debt 
positions. (A) Except as provided in paragraph (b)(2)(iv)(B) of this 
section, a national bank or Federal savings association must assign a 
specific risk-weighting factor to a debt position that is an exposure to 
a depository institution, a foreign bank, or a credit union, in 
accordance with Table 2 to Sec.  3.210, based on the CRC that 
corresponds to that entity's home country or the OECD membership status 
of that entity's home country if there is no CRC applicable to the 
entity's home country, and, as applicable, the remaining contractual 
maturity of the position.

[[Page 226]]



 Table 2 to Sec.   3.210--Specific Risk-Weighting Factors for Depository
       Institution, Foreign Bank, and Credit Union Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                     Specific risk-weighting factor
                                              (in percent)
------------------------------------------------------------------------
CRC 0-2 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
------------------------------------------------------------------------
CRC 3.........................                     8.0
------------------------------------------------------------------------
CRC 4-7.......................                    12.0
------------------------------------------------------------------------
Non-OECD Member with No CRC...                     8.0
------------------------------------------------------------------------
Sovereign Default.............                    12.0
------------------------------------------------------------------------

    (B) A national bank or Federal savings association must assign a 
specific risk-weighting factor of 8.0 percent to a debt position that is 
an exposure to a depository institution or a foreign bank that is 
includable in the depository institution's or foreign bank's regulatory 
capital and that is not subject to deduction as a reciprocal holding 
under Sec.  3.22.
    (C) A national bank or Federal savings association must assign a 
12.0 percent specific risk-weighting factor to a debt position that is 
an exposure to a foreign bank immediately upon determination that a 
default by the foreign bank's home country has occurred or if a default 
by the foreign bank's home country has occurred within the previous five 
years.
    (v) PSE debt positions. (A) Except as provided in paragraph 
(b)(2)(v)(B) of this section, a national bank or Federal savings 
association must assign a specific risk-weighting factor to a debt 
position that is an exposure to a PSE in accordance with Tables 3 and 4 
to Sec.  3.210 depending on the position's categorization as a general 
obligation or revenue obligation based on the CRC that corresponds to 
the PSE's home country or the OECD membership status of the PSE's home 
country if there is no CRC applicable to the PSE's home country, and, as 
applicable, the remaining contractual maturity of the position, as set 
forth in Tables 3 and 4 of this section.
    (B) A national bank or Federal savings association may assign a 
lower specific risk-weighting factor than would otherwise apply under 
Tables 3 and 4 of this section to a debt position that is an exposure to 
a foreign PSE if:
    (1) The PSE's home country allows banks under its jurisdiction to 
assign a lower specific risk-weighting factor to such position; and
    (2) The specific risk-weighting factor is not lower than the risk 
weight that corresponds to the PSE's home country in accordance with 
Tables 3 and 4 of this section.
    (C) A national bank or Federal savings association must assign a 
12.0 percent specific risk-weighting factor to a PSE debt position 
immediately upon determination that a default by the PSE's home country 
has occurred or if a default by the PSE's home country has occurred 
within the previous five years.

Table 3 to Sec.   3.210--Specific Risk-Weighting Factors for PSE General
                        Obligation Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                    General obligation specific risk-
                                             weighting factor
                                              (in percent)
------------------------------------------------------------------------
CRC 0-2 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
------------------------------------------------------------------------
CRC 3.........................                     8.0
------------------------------------------------------------------------

[[Page 227]]

 
CRC 4-7.......................                    12.0
------------------------------------------------------------------------
Non-OECD Member with No CRC...                     8.0
------------------------------------------------------------------------
Sovereign Default.............                    12.0
------------------------------------------------------------------------


Table 4 to Sec.   3.210--Specific Risk-Weighting Factors for PSE Revenue
                        Obligation Debt Positions
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                                    Revenue obligation specific risk-
                                             weighting factor
                                              (in percent)
------------------------------------------------------------------------
CRC 0-1 or OECD Member with No  Remaining contractual               0.25
 CRC.                            maturity of 6 months
                                 or less.
                                Remaining contractual                1.0
                                 maturity of greater
                                 than 6 and up to and
                                 including 24 months.
                                Remaining contractual                1.6
                                 maturity exceeds 24
                                 months.
------------------------------------------------------------------------
CRC 2-3.......................                     8.0
------------------------------------------------------------------------
CRC 4-7.......................                    12.0
------------------------------------------------------------------------
Non-OECD Member with No CRC...                     8.0
------------------------------------------------------------------------
Sovereign Default.............                    12.0
------------------------------------------------------------------------

    (vi) Corporate debt positions. Except as otherwise provided in 
paragraph (b)(2)(vi)(B) of this section, a national bank or Federal 
savings association must assign a specific risk-weighting factor to a 
corporate debt position in accordance with the investment grade 
methodology in paragraph (b)(2)(vi)(A) of this section.
    (A) Investment grade methodology. (1) For corporate debt positions 
that are exposures to entities that have issued and outstanding publicly 
traded instruments, a national bank or Federal savings association must 
assign a specific risk-weighting factor based on the category and 
remaining contractual maturity of the position, in accordance with Table 
5 to Sec.  3.210. For purposes of this paragraph (b)(2)(vi)(A)(1), the 
national bank or Federal savings association must determine whether the 
position is in the investment grade or not investment grade category.

 Table 5 to Sec.   3.210--Specific Risk-Weighting Factors for Corporate
          Debt Positions Under the Investment Grade Methodology
------------------------------------------------------------------------
                                                         Specific risk-
           Category              Remaining contractual  weighting factor
                                       maturity           (in percent)
------------------------------------------------------------------------
Investment Grade..............  6 months or less......              0.50
                                Greater than 6 and up               2.00
                                 to and including 24
                                 months.
                                Greater than 24 months              4.00
------------------------------------------------------------------------
Non-investment Grade..................................             12.00
------------------------------------------------------------------------

    (2) A national bank or Federal savings association must assign an 
8.0 percent specific risk-weighting factor for corporate debt positions 
that are exposures to entities that do not have publicly traded 
instruments outstanding.
    (B) Limitations. (1) A national bank or Federal savings association 
must assign a specific risk-weighting factor of at least 8.0 percent to 
an interest-only mortgage-backed security that is not a securitization 
position.
    (2) A national bank or Federal savings association shall not assign 
a corporate debt position a specific risk-weighting factor that is lower 
than the specific risk-weighting factor that corresponds to the CRC of 
the issuer's home country, if applicable, in table 1 of this section.

[[Page 228]]

    (vii) Securitization positions. (A) General requirements. (1) A 
national bank or Federal savings association that is not an advanced 
approaches national bank or Federal savings association must assign a 
specific risk-weighting factor to a securitization position using either 
the simplified supervisory formula approach (SSFA) in paragraph 
(b)(2)(vii)(C) of this section (and Sec.  3.211) or assign a specific 
risk-weighting factor of 100 percent to the position.
    (2) A national bank or Federal savings association that is an 
advanced approaches national bank or Federal savings association must 
calculate a specific risk add-on for a securitization position in 
accordance with paragraph (b)(2)(vii)(B) of this section if the national 
bank or Federal savings association and the securitization position each 
qualifies to use the SFA in Sec.  3.143. A national bank or Federal 
savings association that is an advanced approaches national bank or 
Federal savings association with a securitization position that does not 
qualify for the SFA under paragraph (b)(2)(vii)(B) of this section may 
assign a specific risk-weighting factor to the securitization position 
using the SSFA in accordance with paragraph (b)(2)(vii)(C) of this 
section or assign a specific risk-weighting factor of 100 percent to the 
position.
    (3) A national bank or Federal savings association must treat a 
short securitization position as if it is a long securitization position 
solely for calculation purposes when using the SFA in paragraph 
(b)(2)(vii)(B) of this section or the SSFA in paragraph (b)(2)(vii)(C) 
of this section.
    (B) SFA. To calculate the specific risk add-on for a securitization 
position using the SFA, a national bank or Federal savings association 
that is an advanced approaches national bank or Federal savings 
association must set the specific risk add-on for the position equal to 
the risk-based capital requirement as calculated under Sec.  3.143.
    (C) SSFA. To use the SSFA to determine the specific risk-weighting 
factor for a securitization position, a national bank or Federal savings 
association must calculate the specific risk-weighting factor in 
accordance with Sec.  3.211.
    (D) Nth-to-default credit derivatives. A national bank or Federal 
savings association must determine a specific risk add-on using the SFA 
in paragraph (b)(2)(vii)(B) of this section, or assign a specific risk-
weighting factor using the SSFA in paragraph (b)(2)(vii)(C) of this 
section to an nth-to-default credit derivative in accordance 
with this paragraph (b)(2)(vii)(D), regardless of whether the national 
bank or Federal savings association is a net protection buyer or net 
protection seller. A national bank or Federal savings association must 
determine its position in the nth-to-default credit 
derivative as the largest notional amount of all the underlying 
exposures.
    (1) For purposes of determining the specific risk add-on using the 
SFA in paragraph (b)(2)(vii)(B) of this section or the specific risk-
weighting factor for an nth-to-default credit derivative 
using the SSFA in paragraph (b)(2)(vii)(C) of this section the national 
bank or Federal savings association must calculate the attachment point 
and detachment point of its position as follows:
    (i) The attachment point (parameter A) is the ratio of the sum of 
the notional amounts of all underlying exposures that are subordinated 
to the national bank's or Federal savings association's position to the 
total notional amount of all underlying exposures. For purposes of the 
SSFA, parameter A is expressed as a decimal value between zero and one. 
For purposes of using the SFA in paragraph (b)(2)(vii)(B) of this 
section to calculate the specific add-on for its position in an 
nth-to-default credit derivative, parameter A must be set 
equal to the credit enhancement level (L) input to the SFA formula in 
section 143 of this subpart. In the case of a first-to-default credit 
derivative, there are no underlying exposures that are subordinated to 
the national bank's or Federal savings association's position. In the 
case of a second-or-subsequent-to-default credit derivative, the 
smallest (n-1) notional amounts of the underlying exposure(s) are 
subordinated to the national bank's or Federal savings association's 
position.
    (ii) The detachment point (parameter D) equals the sum of parameter 
A plus the ratio of the notional amount of the

[[Page 229]]

national bank's or Federal savings association's position in the 
nth-to-default credit derivative to the total notional amount 
of all underlying exposures. For purposes of the SSFA, parameter A is 
expressed as a decimal value between zero and one. For purposes of using 
the SFA in paragraph (b)(2)(vii)(B) of this section to calculate the 
specific risk add-on for its position in an nth-to-default 
credit derivative, parameter D must be set to equal the L input plus the 
thickness of tranche T input to the SFA formula in Sec.  3.143 of this 
subpart.
    (2) A national bank or Federal savings association that does not use 
the SFA in paragraph (b)(2)(vii)(B) of this section to determine a 
specific risk-add on, or the SSFA in paragraph (b)(2)(vii)(C) of this 
section to determine a specific risk-weighting factor for its position 
in an nth-to-default credit derivative must assign a specific 
risk-weighting factor of 100 percent to the position.
    (c) Modeled correlation trading positions. For purposes of 
calculating the comprehensive risk measure for modeled correlation 
trading positions under either paragraph (a)(2)(i) or (a)(2)(ii) of 
Sec.  3.209, the total specific risk add-on is the greater of:
    (1) The sum of the national bank's or Federal savings association's 
specific risk add-ons for each net long correlation trading position 
calculated under this section; or
    (2) The sum of the national bank's or Federal savings association's 
specific risk add-ons for each net short correlation trading position 
calculated under this section.
    (d) Non-modeled securitization positions. For securitization 
positions that are not correlation trading positions and for 
securitizations that are correlation trading positions not modeled under 
Sec.  3.209, the total specific risk add-on is the greater of:
    (1) The sum of the national bank's or Federal savings association's 
specific risk add-ons for each net long securitization position 
calculated under this section; or
    (2) The sum of the national bank's or Federal savings association's 
specific risk add-ons for each net short securitization position 
calculated under this section.
    (e) Equity positions. The total specific risk add-on for a portfolio 
of equity positions is the sum of the specific risk add-ons of the 
individual equity positions, as computed under this section. To 
determine the specific risk add-on of individual equity positions, a 
national bank or Federal savings association must multiply the absolute 
value of the current fair value of each net long or net short equity 
position by the appropriate specific risk-weighting factor as determined 
under this paragraph (e):
    (1) The national bank or Federal savings association must multiply 
the absolute value of the current fair value of each net long or net 
short equity position by a specific risk-weighting factor of 8.0 
percent. For equity positions that are index contracts comprising a 
well-diversified portfolio of equity instruments, the absolute value of 
the current fair value of each net long or net short position is 
multiplied by a specific risk-weighting factor of 2.0 percent.\34\
---------------------------------------------------------------------------

    \34\ A portfolio is well-diversified if it contains a large number 
of individual equity positions, with no single position representing a 
substantial portion of the portfolio's total fair value.
---------------------------------------------------------------------------

    (2) For equity positions arising from the following futures-related 
arbitrage strategies, a national bank or Federal savings association may 
apply a 2.0 percent specific risk-weighting factor to one side (long or 
short) of each position with the opposite side exempt from an additional 
capital requirement:
    (i) Long and short positions in exactly the same index at different 
dates or in different market centers; or
    (ii) Long and short positions in index contracts at the same date in 
different, but similar indices.
    (3) For futures contracts on main indices that are matched by 
offsetting positions in a basket of stocks comprising the index, a 
national bank or Federal savings association may apply a 2.0 percent 
specific risk-weighting factor to the futures and stock basket positions 
(long and short), provided that such trades are deliberately entered 
into and separately controlled,

[[Page 230]]

and that the basket of stocks is comprised of stocks representing at 
least 90.0 percent of the capitalization of the index. A main index 
refers to the Standard & Poor's 500 Index, the FTSE All-World Index, and 
any other index for which the national bank or Federal savings 
association can demonstrate to the satisfaction of the OCC that the 
equities represented in the index have liquidity, depth of market, and 
size of bid-ask spreads comparable to equities in the Standard & Poor's 
500 Index and FTSE All-World Index.
    (f) Due diligence requirements for securitization positions. (1) A 
national bank or Federal savings association must demonstrate to the 
satisfaction of the OCC a comprehensive understanding of the features of 
a securitization position that would materially affect the performance 
of the position by conducting and documenting the analysis set forth in 
paragraph (f)(2) of this section. The national bank's or Federal savings 
association's analysis must be commensurate with the complexity of the 
securitization position and the materiality of the position in relation 
to capital.
    (2) A national bank or Federal savings association must demonstrate 
its comprehensive understanding for each securitization position by:
    (i) Conducting an analysis of the risk characteristics of a 
securitization position prior to acquiring the position and document 
such analysis within three business days after acquiring position, 
considering:
    (A) Structural features of the securitization that would materially 
impact the performance of the position, for example, the contractual 
cash flow waterfall, waterfall-related triggers, credit enhancements, 
liquidity enhancements, fair value triggers, the performance of 
organizations that service the position, and deal-specific definitions 
of default;
    (B) Relevant information regarding the performance of the underlying 
credit exposure(s), for example, the percentage of loans 30, 60, and 90 
days past due; default rates; prepayment rates; loans in foreclosure; 
property types; occupancy; average credit score or other measures of 
creditworthiness; average loan-to-value ratio; and industry and 
geographic diversification data on the underlying exposure(s);
    (C) Relevant market data of the securitization, for example, bid-ask 
spreads, most recent sales price and historical price volatility, 
trading volume, implied market rating, and size, depth and concentration 
level of the market for the securitization; and
    (D) For resecuritization positions, performance information on the 
underlying securitization exposures, for example, the issuer name and 
credit quality, and the characteristics and performance of the exposures 
underlying the securitization exposures.
    (ii) On an on-going basis (no less frequently than quarterly), 
evaluating, reviewing, and updating as appropriate the analysis required 
under paragraph (f)(1) of this section for each securitization position.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 84 FR 35258, July 22, 
2019; 85 FR 4405, Jan. 24, 2020]



Sec.  3.211  Simplified supervisory formula approach (SSFA).

    (a) General requirements. To use the SSFA to determine the specific 
risk-weighting factor for a securitization position, a national bank or 
Federal savings association must have data that enables it to assign 
accurately the parameters described in paragraph (b) of this section. 
Data used to assign the parameters described in paragraph (b) of this 
section must be the most currently available data; if the contracts 
governing the underlying exposures of the securitization require 
payments on a monthly or quarterly basis, the data used to assign the 
parameters described in paragraph (b) of this section must be no more 
than 91 calendar days old. A national bank or Federal savings 
association that does not have the appropriate data to assign the 
parameters described in paragraph (b) of this section must assign a 
specific risk-weighting factor of 100 percent to the position.
    (b) SSFA parameters. To calculate the specific risk-weighting factor 
for a securitization position using the SSFA, a national bank or Federal 
savings association must have accurate information on the five inputs to 
the SSFA

[[Page 231]]

calculation described in paragraphs (b)(1) through (b)(5) of this 
section.
    (1) KG is the weighted-average (with unpaid principal 
used as the weight for each exposure) total capital requirement of the 
underlying exposures calculated using subpart D. KG is 
expressed as a decimal value between zero and one (that is, an average 
risk weight of 100 percent represents a value of KG equal to 
0.08).
    (2) Parameter W is expressed as a decimal value between zero and 
one. Parameter W is the ratio of the sum of the dollar amounts of any 
underlying exposures of the securitization that meet any of the criteria 
as set forth in paragraphs (b)(2)(i) through (vi) of this section to the 
balance, measured in dollars, of underlying exposures:
    (i) Ninety days or more past due;
    (ii) Subject to a bankruptcy or insolvency proceeding;
    (iii) In the process of foreclosure;
    (iv) Held as real estate owned;
    (v) Has contractually deferred payments for 90 days or more, other 
than principal or interest payments deferred on:
    (A) Federally-guaranteed student loans, in accordance with the terms 
of those guarantee programs; or
    (B) Consumer loans, including non-federally-guaranteed student 
loans, provided that such payments are deferred pursuant to provisions 
included in the contract at the time funds are disbursed that provide 
for period(s) of deferral that are not initiated based on changes in the 
creditworthiness of the borrower; or
    (vi) Is in default.
    (3) Parameter A is the attachment point for the position, which 
represents the threshold at which credit losses will first be allocated 
to the position. Except as provided in Sec.  3.210(b)(2)(vii)(D) for 
nth-to-default credit derivatives, parameter A equals the 
ratio of the current dollar amount of underlying exposures that are 
subordinated to the position of the national bank or Federal savings 
association to the current dollar amount of underlying exposures. Any 
reserve account funded by the accumulated cash flows from the underlying 
exposures that is subordinated to the position that contains the 
national bank's or Federal savings association's securitization exposure 
may be included in the calculation of parameter A to the extent that 
cash is present in the account. Parameter A is expressed as a decimal 
value between zero and one.
    (4) Parameter D is the detachment point for the position, which 
represents the threshold at which credit losses of principal allocated 
to the position would result in a total loss of principal. Except as 
provided in Sec.  3.210(b)(2)(vii)(D) for nth-to-default 
credit derivatives, parameter D equals parameter A plus the ratio of the 
current dollar amount of the securitization positions that are pari 
passu with the position (that is, have equal seniority with respect to 
credit risk) to the current dollar amount of the underlying exposures. 
Parameter D is expressed as a decimal value between zero and one.
    (5) A supervisory calibration parameter, p, is equal to 0.5 for 
securitization positions that are not resecuritization positions and 
equal to 1.5 for resecuritization positions.
    (c) Mechanics of the SSFA. KG and W are used to calculate 
KA, the augmented value of KG, which reflects the 
observed credit quality of the underlying exposures. KA is 
defined in paragraph (d) of this section. The values of parameters A and 
D, relative to KA determine the specific risk-weighting 
factor assigned to a position as described in this paragraph (c) and 
paragraph (d) of this section. The specific risk-weighting factor 
assigned to a securitization position, or portion of a position, as 
appropriate, is the larger of the specific risk-weighting factor 
determined in accordance with this paragraph (c), paragraph (d) of this 
section, and a specific risk-weighting factor of 1.6 percent.
    (1) When the detachment point, parameter D, for a securitization 
position is less than or equal to KA, the position must be 
assigned a specific risk-weighting factor of 100 percent.
    (2) When the attachment point, parameter A, for a securitization 
position is greater than or equal to KA, the national bank or 
Federal savings association must calculate the specific risk-weighting 
factor in accordance with paragraph (d) of this section.

[[Page 232]]

    (3) When A is less than KA and D is greater than 
KA, the specific risk-weighting factor is a weighted-average 
of 1.00 and KSSFA calculated under paragraphs (c)(3)(i) and 
(c)(3)(ii) of this section. For the purpose of this calculation:
    (i) The weight assigned to 1.00 equals
    [GRAPHIC] [TIFF OMITTED] TR11OC13.057
    


Sec.  3.212  Market risk disclosures.

    (a) Scope. A national bank or Federal savings association must 
comply with this section unless it is a consolidated subsidiary of a 
bank holding company or a depository institution that is subject to 
these requirements or of a non-U.S. banking organization that is subject 
to comparable public disclosure requirements in its home jurisdiction. A 
national bank or Federal savings association must make timely public 
disclosures each calendar quarter. If a significant change occurs, such 
that the most recent reporting amounts are no longer reflective of the 
national bank's or Federal savings association's capital adequacy and 
risk profile, then a brief discussion of this change and its likely 
impact must be provided as soon as practicable thereafter. Qualitative 
disclosures that typically do not change each quarter may be disclosed 
annually, provided any significant changes are disclosed in the interim. 
If a national bank or Federal savings association believes that 
disclosure of specific commercial or financial information

[[Page 233]]

would prejudice seriously its position by making public certain 
information that is either proprietary or confidential in nature, the 
national bank or Federal savings association is not required to disclose 
these specific items, but must disclose more general information about 
the subject matter of the requirement, together with the fact that, and 
the reason why, the specific items of information have not been 
disclosed. The national bank's or Federal savings association's 
management may provide all of the disclosures required by this section 
in one place on the national bank's or Federal savings association's 
public Web site or may provide the disclosures in more than one public 
financial report or other regulatory reports, provided that the national 
bank or Federal savings association publicly provides a summary table 
specifically indicating the location(s) of all such disclosures.
    (b) Disclosure policy. The national bank or Federal savings 
association must have a formal disclosure policy approved by the board 
of directors that addresses the national bank's or Federal savings 
association's approach for determining its market risk disclosures. The 
policy must address the associated internal controls and disclosure 
controls and procedures. The board of directors and senior management 
must ensure that appropriate verification of the disclosures takes place 
and that effective internal controls and disclosure controls and 
procedures are maintained. One or more senior officers of the national 
bank or Federal savings association must attest that the disclosures 
meet the requirements of this subpart, and the board of directors and 
senior management are responsible for establishing and maintaining an 
effective internal control structure over financial reporting, including 
the disclosures required by this section.
    (c) Quantitative disclosures. (1) For each material portfolio of 
covered positions, the national bank or Federal savings association must 
provide timely public disclosures of the following information at least 
quarterly:
    (i) The high, low, and mean VaR-based measures over the reporting 
period and the VaR-based measure at period-end;
    (ii) The high, low, and mean stressed VaR-based measures over the 
reporting period and the stressed VaR-based measure at period-end;
    (iii) The high, low, and mean incremental risk capital requirements 
over the reporting period and the incremental risk capital requirement 
at period-end;
    (iv) The high, low, and mean comprehensive risk capital requirements 
over the reporting period and the comprehensive risk capital requirement 
at period-end, with the period-end requirement broken down into 
appropriate risk classifications (for example, default risk, migration 
risk, correlation risk);
    (v) Separate measures for interest rate risk, credit spread risk, 
equity price risk, foreign exchange risk, and commodity price risk used 
to calculate the VaR-based measure; and
    (vi) A comparison of VaR-based estimates with actual gains or losses 
experienced by the national bank or Federal savings association, with an 
analysis of important outliers.
    (2) In addition, the national bank or Federal savings association 
must disclose publicly the following information at least quarterly:
    (i) The aggregate amount of on-balance sheet and off-balance sheet 
securitization positions by exposure type; and
    (ii) The aggregate amount of correlation trading positions.
    (d) Qualitative disclosures. For each material portfolio of covered 
positions, the national bank or Federal savings association must provide 
timely public disclosures of the following information at least annually 
after the end of the fourth calendar quarter, or more frequently in the 
event of material changes for each portfolio:
    (1) The composition of material portfolios of covered positions;
    (2) The national bank's or Federal savings association's valuation 
policies, procedures, and methodologies for covered positions including, 
for securitization positions, the methods and key assumptions used for 
valuing such positions, any significant changes

[[Page 234]]

since the last reporting period, and the impact of such change;
    (3) The characteristics of the internal models used for purposes of 
this subpart. For the incremental risk capital requirement and the 
comprehensive risk capital requirement, this must include:
    (i) The approach used by the national bank or Federal savings 
association to determine liquidity horizons;
    (ii) The methodologies used to achieve a capital assessment that is 
consistent with the required soundness standard; and
    (iii) The specific approaches used in the validation of these 
models;
    (4) A description of the approaches used for validating and 
evaluating the accuracy of internal models and modeling processes for 
purposes of this subpart;
    (5) For each market risk category (that is, interest rate risk, 
credit spread risk, equity price risk, foreign exchange risk, and 
commodity price risk), a description of the stress tests applied to the 
positions subject to the factor;
    (6) The results of the comparison of the national bank's or Federal 
savings association's internal estimates for purposes of this subpart 
with actual outcomes during a sample period not used in model 
development;
    (7) The soundness standard on which the national bank's or Federal 
savings association's internal capital adequacy assessment under this 
subpart is based, including a description of the methodologies used to 
achieve a capital adequacy assessment that is consistent with the 
soundness standard;
    (8) A description of the national bank's or Federal savings 
association's processes for monitoring changes in the credit and market 
risk of securitization positions, including how those processes differ 
for resecuritization positions; and
    (9) A description of the national bank's or Federal savings 
association's policy governing the use of credit risk mitigation to 
mitigate the risks of securitization and resecuritization positions.



Sec. Sec.  3.213-3.299  [Reserved]



                     Subpart G_Transition Provisions

    Source: 78 FR 62157, 62273, Oct. 11, 2013, unless otherwise noted.



Sec.  3.300  Transitions.

    (a) Capital conservation and countercyclical capital buffer. (1) 
From January 1, 2014 through December 31, 2015, a national bank or 
Federal savings association is not subject to limits on distributions 
and discretionary bonus payments under Sec.  3.11 of subpart B of this 
part notwithstanding the amount of its capital conservation buffer or 
any applicable countercyclical capital buffer amount.
    (2) Beginning January 1, 2016 through December 31, 2018 a national 
bank's or Federal savings association's maximum payout ratio shall be 
determined as set forth in Table 1 to Sec.  3.300.

                                             Table 1 to Sec.   3.300
----------------------------------------------------------------------------------------------------------------
                                                                                        Maximum payout ratio (as
           Transition period                      Capital conservation buffer           a percentage of eligible
                                                                                            retained income)
----------------------------------------------------------------------------------------------------------------
Calendar year 2016....................  Greater than 0.625 percent (plus 25 percent of  No payout ratio
                                         any applicable countercyclical capital buffer   limitation applies
                                         amount).                                        under this section.
                                        Less than or equal to 0.625 percent (plus 25    60 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         0.469 percent (plus 17.25 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 0.469 percent (plus       40 percent.
                                         17.25 percent of any applicable
                                         countercyclical capital buffer amount), and
                                         greater than 0.313 percent (plus 12.5 percent
                                         of any applicable countercyclical capital
                                         buffer amount).
                                        Less than or equal to 0.313 percent (plus 12.5  20 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         0.156 percent (plus 6.25 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 0.156 percent (plus 6.25  0 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount).
Calendar year 2017....................  Greater than 1.25 percent (plus 50 percent of   No payout ratio
                                         any applicable countercyclical capital buffer   limitation applies
                                         amount).                                        under this section.

[[Page 235]]

 
                                        Less than or equal to 1.25 percent (plus 50     60 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         0.938 percent (plus 37.5 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 0.938 percent (plus 37.5  40 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         0.625 percent (plus 25 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 0.625 percent (plus 25    20 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         0.313 percent (plus 12.5 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 0.313 percent (plus 12.5  0 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount).
Calendar year 2018....................  Greater than 1.875 percent (plus 75 percent of  No payout ratio
                                         any applicable countercyclical capital buffer   limitation applies
                                         amount).                                        under this section.
                                        Less than or equal to 1.875 percent (plus 75    60 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         1.406 percent (plus 56.25 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 1.406 percent (plus       40 percent.
                                         56.25 percent of any applicable
                                         countercyclical capital buffer amount), and
                                         greater than 0.938 percent (plus 37.5 percent
                                         of any applicable countercyclical capital
                                         buffer amount).
                                        Less than or equal to 0.938 percent (plus 37.5  20 percent.
                                         percent of any applicable countercyclical
                                         capital buffer amount), and greater than
                                         0.469 percent (plus 18.75 percent of any
                                         applicable countercyclical capital buffer
                                         amount).
                                        Less than or equal to 0.469 percent (plus       0 percent.
                                         18.75 percent of any applicable
                                         countercyclical capital buffer amount).
----------------------------------------------------------------------------------------------------------------

    (b) [Reserved]
    (c) Non-qualifying capital instruments.
    (1)-(3) [Reserved]
    (4) Depository institutions. (i) Beginning on January 1, 2014, a 
depository institution that is an advanced approaches national bank or 
Federal savings association, and beginning on January 1, 2015, all other 
depository institutions, may include in regulatory capital debt or 
equity instruments issued prior to September 12, 2010 that do not meet 
the criteria for additional tier 1 or tier 2 capital instruments in 
Sec.  3.20 but that were included in tier 1 or tier 2 capital 
respectively as of September 12, 2010 (non-qualifying capital 
instruments issued prior to September 12, 2010) up to the percentage of 
the outstanding principal amount of such non-qualifying capital 
instruments as of January 1, 2014 in accordance with Table 9 to Sec.  
3.300.
    (ii) Table 9 to Sec.  3.300 applies separately to tier 1 and tier 2 
non-qualifying capital instruments.
    (iii) The amount of non-qualifying capital instruments that cannot 
be included in additional tier 1 capital under this section may be 
included in tier 2 capital without limitation, provided that the 
instruments meet the criteria for tier 2 capital instruments under Sec.  
3.20(d).

                         Table 9 to Sec.   3.300
------------------------------------------------------------------------
                                                       Percentage of non-
                                                           qualifying
                                                            capital
          Transition period (calendar year)               instruments
                                                         includable in
                                                       additional tier 1
                                                       or tier 2 capital
------------------------------------------------------------------------
Calendar year 2014...................................                 80
Calendar year 2015...................................                 70
Calendar year 2016...................................                 60
Calendar year 2017...................................                 50
Calendar year 2018...................................                 40
Calendar year 2019...................................                 30
Calendar year 2020...................................                 20
Calendar year 2021...................................                 10
Calendar year 2022 and thereafter....................                  0
------------------------------------------------------------------------

    (d) [Reserved]
    (e) Prompt corrective action. For purposes of 12 CFR part 6, a 
national bank or Federal savings association must calculate its capital 
measures and tangible equity ratio in accordance with the transition 
provisions in this section.
    (f) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association may 
apply the treatment under Sec. Sec.  3.21 and 3.22(c)(2), (5), (6), and 
(d)(2) applicable to an advanced approaches national

[[Page 236]]

bank or Federal savings association during the calendar quarter 
beginning January 1, 2020. During the quarter beginning January 1, 2020, 
a national bank or Federal savings association that makes such an 
election must deduct 80 percent of the amount otherwise required to be 
deducted under Sec.  3.22(d)(2) and must apply a 100 percent risk weight 
to assets not deducted under Sec.  3.22(d)(2). In addition, during the 
quarter beginning January 1, 2020, a national bank or Federal savings 
association that makes such an election must include in its regulatory 
capital 20 percent of any minority interest that exceeds the amount of 
minority interest includable in regulatory capital under Sec.  3.21 as 
it applies to an advanced approaches national bank or Federal savings 
association. A national bank or Federal savings association that is not 
an advanced approaches national bank or Federal savings association must 
apply the treatment under Sec. Sec.  3.21 and 3.22 applicable to a 
national bank or Federal savings association that is not an advanced 
approaches national bank or Federal savings association beginning April 
1, 2020, and thereafter.
    (g) SA-CCR. An advanced approaches national bank or Federal savings 
association may use CEM rather than SA-CCR for purposes of Sec. Sec.  
3.34(a) and 3.132(c) until January 1, 2022. An advanced approaches 
national bank or Federal savings association must provide prior notice 
to the OCC if it decides to begin using SA-CCR before January 1, 2022. 
On January 1, 2022, and thereafter, an advanced approaches national bank 
or Federal savings association must use SA-CCR for purposes of 
Sec. Sec.  3.34(a), 3.132(c), and 3.133(d). Once an advanced approaches 
national bank or Federal savings association has begun to use SA-CCR, 
the advanced approaches national bank or Federal savings association may 
not change to use CEM.
    (h) Default fund contributions. Prior to January 1, 2022, a national 
bank or Federal savings association that calculates the exposure amounts 
of its derivative contracts under the standardized approach for 
counterparty credit risk in Sec.  3.132(c) may calculate the risk-
weighted asset amount for a default fund contribution to a QCCP under 
either method 1 under Sec.  3.35(d)(3)(i) or method 2 under Sec.  
3.35(d)(3)(ii), rather than under Sec.  3.133(d).

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 82 FR 55315, Nov. 21, 
2017; 84 FR 35258, July 22, 2019; 84 FR 61807, Nov. 13, 2019; 85 FR 
4414, Jan. 24, 2020]



Sec.  3.301  Current Expected Credit Losses (CECL) transition.

    (a) CECL transition provision. (1) Except as provided in paragraph 
(d) of this section, a national bank or Federal savings organization may 
elect to use a CECL transition provision pursuant to this section only 
if the national bank or Federal savings association records a reduction 
in retained earnings due to the adoption of CECL as of the beginning of 
the fiscal year in which the national bank or Federal savings 
association adopts CECL.
    (2) Except as provided in paragraph (d) of this section, a national 
bank or Federal savings association that elects to use the CECL 
transition provision must elect to use the CECL transition provision in 
the first Call Report that includes CECL filed by the national bank or 
Federal savings association after it adopts CECL.
    (3) A national bank or Federal savings association that does not 
elect to use the CECL transition provision as of the first Call Report 
that includes CECL filed as described in paragraph (a)(2) of this 
section may not elect to use the CECL transition provision in subsequent 
reporting periods.
    (b) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Transition period means the three-year period beginning the 
first day of the fiscal year in which a national bank or Federal savings 
association adopts CECL and reflects CECL in its first Call Report filed 
after that date; or, for the 2020 CECL transition provision under 
paragraph (d) of this section, the five-year period beginning on the 
earlier of the date a national bank or Federal savings association was 
required to adopt CECL for accounting purposes under GAAP (as in effect 
January 1, 2020), or the first day of the fiscal year that begins during 
the 2020 calendar year in which the national

[[Page 237]]

bank or Federal savings association files regulatory reports that 
include CECL.
    (2) CECL transitional amount means the difference, net of any DTAs, 
in the amount of a national bank's or Federal savings association's 
retained earnings as of the beginning of the fiscal year in which the 
national bank or Federal savings association adopts CECL from the amount 
of the national bank's or Federal savings association's retained 
earnings as of the closing of the fiscal year-end immediately prior to 
the national bank's or Federal savings association's adoption of CECL.
    (3) DTA transitional amount means the difference in the amount of a 
national bank's or Federal savings association's DTAs arising from 
temporary differences as of the beginning of the fiscal year in which 
the national bank or Federal savings association adopts CECL from the 
amount of the national bank's or Federal savings association's DTAs 
arising from temporary differences as of the closing of the fiscal year-
end immediately prior to the national bank's or Federal savings 
association's adoption of CECL.
    (4) AACL transitional amount means the difference in the amount of a 
national bank's or Federal savings association's AACL as of the 
beginning of the fiscal year in which the national bank or Federal 
savings association adopts CECL and the amount of the national bank's or 
Federal savings association's ALLL as of the closing of the fiscal year-
end immediately prior to the national bank's or Federal savings 
association's adoption of CECL.
    (5) Eligible credit reserves transitional amount means the 
difference in the amount of a national bank's or Federal savings 
association's eligible credit reserves as of the beginning of the fiscal 
year in which the national bank or Federal savings association adopts 
CECL from the amount of the national bank's or Federal savings 
association's eligible credit reserves as of the closing of the fiscal 
year-end immediately prior to the national bank's or Federal savings 
association's adoption of CECL.
    (c) Calculation of the three-year CECL transition provision. (1) For 
purposes of the election described in paragraph (a)(1) of this section 
and except as provided in paragraph (d) of this section, a national bank 
or Federal savings association must make the following adjustments in 
its calculation of regulatory capital ratios:
    (i) Increase retained earnings by seventy-five percent of its CECL 
transitional amount during the first year of the transition period, 
increase retained earnings by fifty percent of its CECL transitional 
amount during the second year of the transition period, and increase 
retained earnings by twenty-five percent of its CECL transitional amount 
during the third year of the transition period;
    (ii) Decrease amounts of DTAs arising from temporary differences by 
seventy-five percent of its DTA transitional amount during the first 
year of the transition period, decrease amounts of DTAs arising from 
temporary differences by fifty percent of its DTA transitional amount 
during the second year of the transition period, and decrease amounts of 
DTAs arising from temporary differences by twenty-five percent of its 
DTA transitional amount during the third year of the transition period;
    (iii) Decrease amounts of AACL by seventy-five percent of its AACL 
transitional amount during the first year of the transition period, 
decrease amounts of AACL by fifty percent of its AACL transitional 
amount during the second year of the transition period, and decrease 
amounts of AACL by twenty-five percent of its AACL transitional amount 
during the third year of the transition period; and
    (iv) Increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by seventy-five percent 
of its CECL transitional amount during the first year of the transition 
period, increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by fifty percent of its 
CECL transitional amount during the second year of the transition 
period, and increase average total consolidated assets as reported on 
the Call Report for purposes of the leverage ratio by twenty-five 
percent of its CECL transitional amount during the third year of the 
transition period.

[[Page 238]]

    (2) For purposes of the election described in paragraph (a)(1) of 
this section, an advanced approaches or Category III national bank or 
Federal savings association must make the following additional 
adjustments to its calculation of its applicable regulatory capital 
ratios:
    (i) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its CECL 
transitional amount during the first year of the transition period, 
increase total leverage exposure for purposes of the supplementary 
leverage ratio by fifty percent of its CECL transitional amount during 
the second year of the transition period, and increase total leverage 
exposure for purposes of the supplementary leverage ratio by twenty-five 
percent of its CECL transitional amount during the third year of the 
transition period; and
    (ii) An advanced approaches national bank or Federal savings 
association that has completed the parallel run process and that has 
received notification from the OCC pursuant to Sec.  3.121(d) must 
decrease amounts of eligible credit reserves by seventy-five percent of 
its eligible credit reserves transitional amount during the first year 
of the transition period, decrease amounts of eligible credit reserves 
by fifty percent of its eligible credit reserves transitional amount 
during the second year of the transition provision, and decrease amounts 
of eligible credit reserves by twenty-five percent of its eligible 
credit reserves transitional amount during the third year of the 
transition period.
    (d) 2020 CECL transition provision. Notwithstanding paragraph (a) of 
this section, a national bank or Federal savings association that adopts 
CECL for accounting purposes under GAAP as of the first day of a fiscal 
year that begins during the 2020 calendar year may elect to use the 
transitional amounts and modified transitional amounts in paragraph 
(d)(1) of this section with the 2020 CECL transition provision 
calculation in paragraph (d)(2) of this section to adjust its 
calculation of regulatory capital ratios during each quarter of the 
transition period in which a national bank or Federal savings 
association uses CECL for purposes of its Call Report. A national bank 
or Federal savings association may use the transition provision in this 
paragraph (d) if it has a positive modified CECL transitional amount 
during any quarter ending in 2020, and makes the election in the Call 
Report filed for the same quarter. A national bank or Federal savings 
association that does not calculate a positive modified CECL 
transitional amount in any quarter is not required to apply the 
adjustments in its calculation of regulatory capital ratios in paragraph 
(d)(2) of this section in that quarter.
    (1) Definitions. For purposes of the 2020 CECL transition provision 
calculation in paragraph (d)(2) of this section, the following 
definitions apply:
    (i) Modified CECL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report and 
the AACL as of the beginning of the fiscal year in which the national 
bank or Federal savings association adopts CECL, multiplied by 0.25, 
plus the CECL transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report at the end of the 
second year of the transition period and the AACL as of the beginning of 
the fiscal year in which the national bank or Federal savings 
association adopts CECL, multiplied by 0.25, plus the CECL transitional 
amount.
    (ii) Modified AACL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report and 
the AACL as of the beginning of the fiscal year in which the national 
bank or Federal savings association adopts CECL, multiplied by 0.25, 
plus the AACL transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report at the end of the 
second year of the transition period and the AACL as of the beginning of 
the fiscal year in which the national bank or Federal

[[Page 239]]

savings association adopts CECL, multiplied by 0.25, plus the AACL 
transitional amount.
    (2) Calculation of 2020 CECL transition provision. (i) A national 
bank or Federal savings association that has elected the 2020 CECL 
transition provision described in this paragraph (d) may make the 
following adjustments in its calculation of regulatory capital ratios:
    (A) Increase retained earnings by one-hundred percent of its 
modified CECL transitional amount during the first year of the 
transition period, increase retained earnings by one hundred percent of 
its modified CECL transitional amount during the second year of the 
transition period, increase retained earnings by seventy-five percent of 
its modified CECL transitional amount during the third year of the 
transition period, increase retained earnings by fifty percent of its 
modified CECL transitional amount during the fourth year of the 
transition period, and increase retained earnings by twenty-five percent 
of its modified CECL transitional amount during the fifth year of the 
transition period;
    (B) Decrease amounts of DTAs arising from temporary differences by 
one-hundred percent of its DTA transitional amount during the first year 
of the transition period, decrease amounts of DTAs arising from 
temporary differences by one hundred percent of its DTA transitional 
amount during the second year of the transition period, decrease amounts 
of DTAs arising from temporary differences by seventy-five percent of 
its DTA transitional amount during the third year of the transition 
period, decrease amounts of DTAs arising from temporary differences by 
fifty percent of its DTA transitional amount during the fourth year of 
the transition period, and decrease amounts of DTAs arising from 
temporary differences by twenty-five percent of its DTA transitional 
amount during the fifth year of the transition period;
    (C) Decrease amounts of AACL by one-hundred percent of its modified 
AACL transitional amount during the first year of the transition period, 
decrease amounts of AACL by one hundred percent of its modified AACL 
transitional amount during the second year of the transition period, 
decrease amounts of AACL by seventy-five percent of its modified AACL 
transitional amount during the third year of the transition period, 
decrease amounts of AACL by fifty percent of its modified AACL 
transitional amount during the fourth year of the transition period, and 
decrease amounts of AACL by twenty-five percent of its modified AACL 
transitional amount during the fifth year of the transition period; and
    (D) Increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by one-hundred percent of 
its modified CECL transitional amount during the first year of the 
transition period, increase average total consolidated assets as 
reported on the Call Report for purposes of the leverage ratio by one 
hundred percent of its modified CECL transitional amount during the 
second year of the transition period, increase average total 
consolidated assets as reported on the Call Report for purposes of the 
leverage ratio by seventy-five percent of its modified CECL transitional 
amount during the third year of the transition period, increase average 
total consolidated assets as reported on the Call Report for purposes of 
the leverage ratio by fifty percent of its modified CECL transitional 
amount during the fourth year of the transition period, and increase 
average total consolidated assets as reported on the Call Report for 
purposes of the leverage ratio by twenty-five percent of its modified 
CECL transitional amount during the fifth year of the transition period.
    (ii) An advanced approaches or Category III national bank or Federal 
savings association that has elected the 2020 CECL transition provision 
described in this paragraph (d) may make the following additional 
adjustments to its calculation of its applicable regulatory capital 
ratios:
    (A) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by one-hundred percent of its modified CECL 
transitional amount during the first year of the transition period, 
increase total leverage exposure for purposes of the supplementary 
leverage ratio by one hundred percent

[[Page 240]]

of its modified CECL transitional amount during the second year of the 
transition period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its modified 
CECL transitional amount during the third year of the transition period, 
increase total leverage exposure for purposes of the supplementary 
leverage ratio by fifty percent of its modified CECL transitional amount 
during the fourth year of the transition period, and increase total 
leverage exposure for purposes of the supplementary leverage ratio by 
twenty-five percent of its modified CECL transitional amount during the 
fifth year of the transition period; and
    (B) An advanced approaches national bank or Federal savings 
association that has completed the parallel run process and that has 
received notification from the OCC pursuant to Sec.  3.121(d) must 
decrease amounts of eligible credit reserves by one-hundred percent of 
its eligible credit reserves transitional amount during the first year 
of the transition period, decrease amounts of eligible credit reserves 
by one hundred percent of its eligible credit reserves transitional 
amount during the second year of the transition period, decrease amounts 
of eligible credit reserves by seventy-five percent of its eligible 
credit reserves transitional amount during the third year of the 
transition period, decrease amounts of eligible credit reserves by fifty 
percent of its eligible credit reserves transitional amount during the 
fourth year of the transition period, and decrease amounts of eligible 
credit reserves by twenty-five percent of its eligible credit reserves 
transitional amount during the fifth year of the transition period.
    (e) Eligible credit reserves shortfall. An advanced approaches 
national bank or Federal savings association that has completed the 
parallel run process and that has received notification from the OCC 
pursuant to Sec.  3.121(d), and whose amount of expected credit loss 
exceeded its eligible credit reserves immediately prior to the adoption 
of CECL, and that has an increase in common equity tier 1 capital as of 
the beginning of the fiscal year in which it adopts CECL after including 
the first year portion of the CECL transitional amount (or modified CECL 
transitional amount) must decrease its CECL transitional amount (or 
modified CECL transitional amount) used in paragraph (c) of this section 
by the full amount of its DTA transitional amount.
    (f) Business combinations. Notwithstanding any other requirement in 
this section, for purposes of this paragraph (f), in the event of a 
business combination involving a national bank or Federal savings 
association where one or both of the national banks or Federal savings 
associations have elected the treatment described in this section:
    (1) If the acquirer national bank or Federal savings association (as 
determined under GAAP) elected the treatment described in this section, 
the acquirer national bank or Federal savings association must continue 
to use the transitional amounts (unaffected by the business combination) 
that it calculated as of the date that it adopted CECL through the end 
of its transition period.
    (2) If the acquired insured depository institution (as determined 
under GAAP) elected the treatment described in this section, any 
transitional amount of the acquired insured depository institution does 
not transfer to the resulting national bank or Federal savings 
association.

[85 FR 61586, Sept. 30, 2020]



Sec.  3.302  Exposures related the Money Market Mutual Fund Liquidity Facility.

    Notwithstanding any other section of this part, a national bank or 
federal savings association may exclude exposures acquired pursuant to a 
non-recourse loan that is provided as part of the Money Market Mutual 
Fund Liquidity Facility, announced by the Board on March 18, 2020, from 
total leverage exposure, average total consolidated assets, advanced 
approaches total risk-weighted assets, and standardized total risk-
weighted assets, as applicable. For the purpose of this provision, a 
national bank's or federal savings association's liability under the 
facility must be reduced by the purchase price of the assets acquired 
with funds advanced from the facility.

[85 FR 16236, Mar. 23, 2020]

[[Page 241]]



Sec.  3.303  Temporary changes to the community bank leverage ratio framework.

    (a)(1) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association and 
that meets all the criteria to be a qualifying community banking 
organization under Sec.  3.12(a)(2) but for Sec.  3.12(a)(2)(i) is a 
qualifying community banking organization if it has a leverage ratio 
equal to or greater than 8 percent.
    (2) Notwithstanding Sec.  3.12(a)(1), a qualifying community banking 
organization that has made an election to use the community bank 
leverage ratio framework under Sec.  3.12(a)(3) shall be considered to 
have met the minimum capital requirements under Sec.  3.10, the capital 
ratio requirements for the well capitalized capital category under Sec.  
6.4(b)(1) of this chapter, and any other capital or leverage 
requirements to which the qualifying community banking organization is 
subject, if it has a leverage ratio equal to or greater than 8 percent.
    (b) Notwithstanding Sec.  3.12(c)(6) and subject to Sec.  
3.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of 7 percent or greater has the grace period described in 
Sec.  3.12(c)(1) through (4). A national bank or Federal savings 
association that has a leverage ratio of less than 7 percent does not 
have a grace period and must comply with the minimum capital 
requirements under Sec.  3.10(a)(1) and must report the required capital 
measures under Sec.  3.10(a)(1) for the quarter in which it reports a 
leverage ratio of less than 7 percent.
    (c) Pursuant to section 4012 of the Coronavirus Aid, Relief, and 
Economic Security Act, the requirements provided under paragraphs (a) 
and (b) of this section are effective during the period beginning on 
April 23, 2020 and ending on the sooner of:
    (1) The termination date of the national emergency concerning the 
novel coronavirus disease outbreak declared by the President on March 
13, 2020, under the National Emergencies Act (50 U.S.C. 1601 et seq.); 
or
    (2) December 31, 2020.
    (d) Upon the termination of the requirements in paragraphs (a) and 
(b) of this section as provided in paragraph (c) of this section, a 
qualifying community banking organization, as defined in Sec.  
3.12(a)(2), is subject to the following:
    (1) Through December 31, 2020:
    (i) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association and 
that meets all the criteria to be a qualifying community banking 
organization under Sec.  3.12(a)(2) but for Sec.  3.12(a)(2)(i) is a 
qualifying banking organization if it has a leverage ratio greater than 
8 percent.
    (ii) Notwithstanding Sec.  3.12(a)(1), a qualifying community 
banking organization that has made an election to use the community bank 
leverage ratio framework under Sec.  3.12(a)(3) shall be considered to 
have met the minimum capital requirements under Sec.  3.10, the capital 
ratio requirements for the well capitalized capital category under Sec.  
6.4(b)(1) of this chapter, and any other capital or leverage 
requirements to which the qualifying community banking organization is 
subject, if it has a leverage ratio greater than 8 percent.
    (iii) Notwithstanding Sec.  3.12(c)(6) and subject to Sec.  
3.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of greater than 7 percent has the grace period described 
in Sec.  3.12(c)(1) through (4). A national bank or Federal savings 
association that has a leverage ratio of 7 percent or less does not have 
a grace period and must comply with the minimum capital requirements 
under Sec.  3.10(a)(1) and must report the required capital measures 
under Sec.  3.10(a)(1) for the quarter in which it reports a leverage 
ratio of 7 percent or less.
    (2) From January 1, 2021, through December 31, 2021:
    (i) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association and 
that meets all the criteria to be a qualifying community banking 
organization under Sec.  3.12(a)(2) but for Sec.  3.12(a)(2)(i) is a 
qualifying banking organization if it has a leverage ratio greater than 
8.5 percent.

[[Page 242]]

    (ii) Notwithstanding Sec.  3.12(a)(1), a qualifying community 
banking organization that has made an election to use the community bank 
leverage ratio framework under Sec.  3.12(a)(3) shall be considered to 
have met the minimum capital requirements under Sec.  3.10, the capital 
ratio requirements for the well capitalized capital category under Sec.  
6.4(b)(1) of this chapter, and any other capital or leverage 
requirements to which the qualifying community banking organization is 
subject, if it has a leverage ratio greater than 8.5 percent.
    (iii) Notwithstanding Sec.  3.12(c)(6) and subject to Sec.  
3.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of greater than 7.5 percent has the grace period 
described in Sec.  3.12(c)(1) through (4). A national bank or Federal 
savings association that has a leverage ratio of 7.5 percent or less 
does not have a grace period and must comply with the minimum capital 
requirements under Sec.  3.10(a)(1) and must report the required capital 
measures under Sec.  3.10(a)(1) for the quarter in which it reports a 
leverage ratio of 7.5 percent or less.

[85 FR 22928, Apr. 23, 2020, as amended at 85 FR 22937, Apr. 23, 2020]



Sec.  3.304  Temporary exclusions from total leverage exposure.

    (a) In general. Subject to paragraphs (b) through (g) of this 
section, and notwithstanding any other requirement in this part, a 
national bank or Federal savings association, when calculating on-
balance sheet assets as of each day of a reporting quarter for purposes 
of determining the national bank's or Federal savings association's 
total leverage exposure under Sec.  3.10(d), may exclude the balance 
sheet carrying value of the following items:
    (1) U.S. Treasury securities; and
    (2) Funds on deposit at a Federal Reserve Bank.
    (b) Opt-in period. Before applying the relief provided in paragraph 
(a) of this section, a national bank or Federal savings association must 
first notify the OCC before July 1, 2020.
    (c) Calculation of relief. When calculating on-balance sheet assets 
as of each day of a reporting quarter, the relief provided in paragraph 
(a) of this section applies from the beginning of the reporting quarter 
in which the national bank or Federal savings association filed an opt-
in notice through the termination date specified in paragraph (d) of 
this section.
    (d) Termination of exclusions. This section shall cease to be 
effective after the reporting period that ends March 31, 2021.
    (e) Custody bank. A custody bank must reduce the amount in Sec.  
3.10(c)(2)(x)(A) (to no less than zero) by any amount excluded under 
paragraph (a)(2) of this section.
    (f) Disclosure. Notwithstanding Table 13 to Sec.  3.173, a national 
bank or Federal savings association that is required to make the 
disclosures pursuant to Sec.  3.173 must exclude the items excluded 
pursuant to paragraph (a) of this section from Table 13 to Sec.  3.173.
    (g) OCC approval for distributions. During the calendar quarter 
beginning on July 1, 2020, and until March 31, 2021, no national bank or 
Federal savings association that has opted in to the relief provided 
under paragraph (a) of this section may make a distribution, or create 
an obligation to make such a distribution, without prior OCC approval. 
When reviewing a request under this paragraph (g), the OCC will consider 
all relevant factors, including whether the distribution would be 
contrary to the safety and soundness of the national bank or Federal 
savings association; the nature, purpose, and extent of the request; and 
the particular circumstances giving rise to the request.

[85 FR 32988, June 1, 2020, as amended at 86 FR 731, Jan. 6, 2021]



Sec.  3.305  Exposures related to the Paycheck Protection Program 
Lending Facility.

    Notwithstanding any other section of this part, a national bank or 
Federal savings association may exclude exposures pledged as collateral 
for a non-recourse loan that is provided as part of the Paycheck 
Protection Program Lending Facility, announced by the Federal Reserve 
Board on April 7, 2020, from total leverage exposure, average total 
consolidated assets, advanced approaches total risk-weighted assets, and 
standardized total risk-weighted assets, as applicable. For the purpose

[[Page 243]]

of this section, a national bank's or Federal savings association's 
liability under the facility must be reduced by the principal amount of 
the loans pledged as collateral for funds advanced under the facility.

[85 FR 20393, Apr. 13, 2020]



Subpart H_Establishment of Minimum Capital Ratios for an Individual Bank 
                or Individual Federal Savings Association

    Source: 78 FR 62269, Oct. 11, 2013, unless otherwise noted.



Sec.  3.401  Purpose and scope.

    The rules and procedures specified in this subpart are applicable to 
a proceeding to establish required minimum capital ratios that would 
otherwise be applicable to a national bank or Federal savings 
association under subpart B of this part. The OCC is authorized under 12 
U.S.C. 1464(s)(2) and 3907(a)(2) to establish such minimum capital 
requirements for a national bank or Federal savings association as the 
OCC, in its discretion, deems appropriate in light of the particular 
circumstances at that national bank or Federal savings association. 
Proceedings under this subpart also may be initiated to require a 
national bank or Federal savings association having capital ratios above 
those set forth in subpart B of this part, or other legal authority to 
continue to maintain those higher ratios.



Sec.  3.402  Applicability.

    The OCC may require higher minimum capital ratios for an individual 
national bank or Federal savings association in view of its 
circumstances. For example, higher capital ratios may be appropriate 
for:
    (a) A newly chartered national bank or Federal savings association;
    (b) A national bank or Federal savings association receiving special 
supervisory attention;
    (c) A national bank or Federal savings association that has, or is 
expected to have, losses resulting in capital inadequacy;
    (d) A national bank or Federal savings association with significant 
exposure due to the risks from concentrations of credit, certain risks 
arising from nontraditional activities, or management's overall 
inability to monitor and control financial and operating risks presented 
by concentrations of credit and nontraditional activities;
    (e) A national bank or Federal savings association with significant 
exposure to declines in the economic value of its capital due to changes 
in interest rates;
    (f) A national bank or Federal savings association with significant 
exposure due to fiduciary or operational risk;
    (g) A national bank or Federal savings association exposed to a high 
degree of asset depreciation, or a low level of liquid assets in 
relation to short term liabilities;
    (h) A national bank or Federal savings association exposed to a high 
volume of, or particularly severe, problem loans;
    (i) A national bank or Federal savings association that is growing 
rapidly, either internally or through acquisitions; or
    (j) A national bank or Federal savings association that may be 
adversely affected by the activities or condition of its holding 
company, affiliate(s), or other persons or institutions, including chain 
banking organizations, with which it has significant business 
relationships.



Sec.  3.403  Standards for determination of appropriate individual 
minimum capital ratios.

    The appropriate minimum capital ratios for an individual national 
bank or Federal savings association cannot be determined solely through 
the application of a rigid mathematical formula or wholly objective 
criteria. The decision is necessarily based in part on subjective 
judgment grounded in agency expertise. The factors to be considered in 
the determination will vary in each case and may include, for example:
    (a) The conditions or circumstances leading to the OCC's 
determination that higher minimum capital ratios are appropriate or 
necessary for the national bank or Federal savings association;

[[Page 244]]

    (b) The exigency of those circumstances or potential problems;
    (c) The overall condition, management strength, and future prospects 
of the national bank or Federal savings association and, if applicable, 
its holding company and/or affiliate(s);
    (d) The national bank's or Federal savings association's liquidity, 
capital, risk asset and other ratios compared to the ratios of its peer 
group; and
    (e) The views of the national bank's or Federal savings 
association's directors and senior management.



Sec.  3.404  Procedures.

    (a) Notice. When the OCC determines that minimum capital ratios 
above those set forth in subpart B of this part or other legal authority 
are necessary or appropriate for a particular national bank or Federal 
savings association, the OCC will notify the national bank or Federal 
savings association in writing of the proposed minimum capital ratios 
and the date by which they should be reached (if applicable) and will 
provide an explanation of why the ratios proposed are considered 
necessary or appropriate for the national bank or Federal savings 
association.
    (b) Response. (1) The national bank or Federal savings association 
may respond to any or all of the items in the notice. The response 
should include any matters which the national bank or Federal savings 
association would have the OCC consider in deciding whether individual 
minimum capital ratios should be established for the national bank or 
Federal savings association, what those capital ratios should be, and, 
if applicable, when they should be achieved. The response must be in 
writing and delivered to the designated OCC official within 30 days 
after the date on which the national bank or Federal savings association 
received the notice. The OCC may shorten the time period when, in the 
opinion of the OCC, the condition of the national bank or Federal 
savings association so requires, provided that the national bank or 
Federal savings association is informed promptly of the new time period, 
or with the consent of the national bank or Federal savings association. 
In its discretion, the OCC may extend the time period for good cause.
    (2) Failure to respond within 30 days or such other time period as 
may be specified by the OCC shall constitute a waiver of any objections 
to the proposed minimum capital ratios or the deadline for their 
achievement.
    (c) Decision. After the close of the national bank's or Federal 
savings association's response period, the OCC will decide, based on a 
review of the national bank's or Federal savings association's response 
and other information concerning the national bank or Federal savings 
association, whether individual minimum capital ratios should be 
established for the national bank or Federal savings association and, if 
so, the ratios and the date the requirements will become effective. The 
national bank or Federal savings association will be notified of the 
decision in writing. The notice will include an explanation of the 
decision, except for a decision not to establish individual minimum 
capital requirements for the national bank or Federal savings 
association.
    (d) Submission of plan. The decision may require the national bank 
or Federal savings association to develop and submit to the OCC, within 
a time period specified, an acceptable plan to reach the minimum capital 
ratios established for the national bank or Federal savings association 
by the date required.
    (e) Change in circumstances. If, after the OCC's decision in 
paragraph (c) of this section, there is a change in the circumstances 
affecting the national bank's or Federal savings association's capital 
adequacy or its ability to reach the required minimum capital ratios by 
the specified date, the national bank or Federal savings association may 
propose to the OCC, or the OCC may propose to the national bank or 
Federal savings association, a change in the minimum capital ratios for 
the national bank or Federal savings association, the date when the 
minimums must be achieved, or the national bank's or Federal savings 
association's plan (if applicable). The OCC may decline to consider 
proposals that are not based on a significant change in circumstances or 
are repetitive or frivolous. Pending a decision on reconsideration, the 
OCC's original decision and

[[Page 245]]

any plan required under that decision shall continue in full force and 
effect.



Sec.  3.405  Relation to other actions.

    In lieu of, or in addition to, the procedures in this subpart, the 
required minimum capital ratios for a national bank or Federal savings 
association may be established or revised through a written agreement or 
cease and desist proceedings under 12 U.S.C. 1818 (b) or (c) (12 CFR 
19.0 through 19.21 for national banks and 12 CFR part 109 for Federal 
savings associations) or as a condition for approval of an application.

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, Sec.  3.405 was 
amended by removing the phrase ``(12 CFR 19.0 through 19.21 for national 
banks and 12 CFR part 109 for Federal savings associations)'' and adding 
in its place the phrase ``(12 CFR part 19)'', effective Apr. 1, 2024.



                          Subpart I_Enforcement

    Source: 78 FR 62269, Oct. 11, 2013, unless otherwise noted.



Sec.  3.501  Remedies.

    A national bank or Federal savings association that does not have or 
maintain the minimum capital ratios applicable to it, whether required 
in subpart B of this part, in a decision pursuant to subpart H of this 
part, in a written agreement or temporary or final order under 12 U.S.C. 
1818 (b) or (c), or in a condition for approval of an application, or a 
national bank or Federal savings association that has failed to submit 
or comply with an acceptable plan to attain those ratios, will be 
subject to such administrative action or sanctions as the OCC considers 
appropriate. These sanctions may include the issuance of a Directive 
pursuant to subpart J of this part or other enforcement action, 
assessment of civil money penalties, and/or the denial, conditioning, or 
revocation of applications. A national bank's or Federal savings 
association's failure to achieve or maintain minimum capital ratios in 
subpart B of this part may also be the basis for an action by the 
Federal Deposit Insurance Corporation to terminate Federal deposit 
insurance. See 12 CFR part 308, subpart F.



                    Subpart J_Issuance of a Directive

    Source: 78 FR 62269, Oct. 11, 2013, unless otherwise noted.



Sec.  3.601  Purpose and scope.

    (a) This subpart is applicable to proceedings by the OCC to issue a 
directive under 12 U.S.C. 3907(b)(2) or 12 U.S.C. 1464(s), as 
appropriate. A directive is an order issued to a national bank or 
Federal savings association that does not have or maintain capital at or 
above the minimum ratios set forth in subpart B of this part, or 
established for the national bank or Federal savings association under 
subpart H of this part, by a written agreement under 12 U.S.C. 1818(b), 
or as a condition for approval of an application. A directive may order 
the national bank or Federal savings association to:
    (1) Achieve the minimum capital ratios applicable to it by a 
specified date;
    (2) Adhere to a previously submitted plan to achieve the applicable 
capital ratios;
    (3) Submit and adhere to a plan acceptable to the OCC describing the 
means and time schedule by which the national bank or Federal savings 
association shall achieve the applicable capital ratios;
    (4) Take other action, such as reduction of assets or the rate of 
growth of assets, or restrictions on the payment of dividends, to 
achieve the applicable capital ratios; or
    (5) A combination of any of these or similar actions.
    (b) A directive issued under this rule, including a plan submitted 
under a directive, is enforceable under the provisions of 12 U.S.C. 
1818(i) in the same manner and to the same extent as an effective and 
outstanding cease and desist order issued pursuant to 12 U.S.C. 1818(b) 
that has become final. Violation of a directive may result in assessment 
of civil money penalties in accordance with 12 U.S.C. 3909(d).

[78 FR 62269, Oct. 11, 2013, as amended at 85 FR 42640, July 14, 2020]

[[Page 246]]



Sec.  3.602  Notice of intent to issue a directive.

    The OCC will notify a national bank or Federal savings association 
in writing of its intention to issue a directive. The notice will state:
    (a) Reasons for issuance of the directive; and
    (b) The proposed contents of the directive.



Sec.  3.603  Response to notice.

    (a) A national bank or Federal savings association may respond to 
the notice by stating why a directive should not be issued and/or by 
proposing alternative contents for the directive. The response should 
include any matters which the national bank or Federal savings 
association would have the OCC consider in deciding whether to issue a 
directive and/or what the contents of the directive should be. The 
response may include a plan for achieving the minimum capital ratios 
applicable to the national bank or Federal savings association. The 
response must be in writing and delivered to the designated OCC official 
within 30 days after the date on which the national bank or Federal 
savings association received the notice. The OCC may shorten the 30-day 
time period:
    (1) When, in the opinion of the OCC, the condition of the national 
bank or Federal savings association so requires, provided that the 
national bank or Federal savings association shall be informed promptly 
of the new time period;
    (2) With the consent of the national bank or Federal savings 
association; or
    (3) When the national bank or Federal savings association already 
has advised the OCC that it cannot or will not achieve its applicable 
minimum capital ratios.
    (b) In its discretion, the OCC may extend the time period for good 
cause.
    (c) Failure to respond within 30 days or such other time period as 
may be specified by the OCC shall constitute a waiver of any objections 
to the proposed directive.



Sec.  3.604  Decision.

    After the closing date of the national bank's or Federal savings 
association's response period, or receipt of the national bank's or 
Federal savings association's response, if earlier, the OCC will 
consider the national bank's or Federal savings association's response, 
and may seek additional information or clarification of the response. 
Thereafter, the OCC will determine whether or not to issue a directive, 
and if one is to be issued, whether it should be as originally proposed 
or in modified form.



Sec.  3.605  Issuance of a directive.

    (a) A directive will be served by delivery to the national bank or 
Federal savings association. It will include or be accompanied by a 
statement of reasons for its issuance.
    (b) A directive is effective immediately upon its receipt by the 
national bank or Federal savings association, or upon such later date as 
may be specified therein, and shall remain effective and enforceable 
until it is stayed, modified, or terminated by the OCC.



Sec.  3.606  Change in circumstances.

    Upon a change in circumstances, a national bank or Federal savings 
association may request the OCC to reconsider the terms of its directive 
or may propose changes in the plan to achieve the national bank's or 
Federal savings association's applicable minimum capital ratios. The OCC 
also may take such action on its own motion. The OCC may decline to 
consider requests or proposals that are not based on a significant 
change in circumstances or are repetitive or frivolous. Pending a 
decision on reconsideration, the directive and plan shall continue in 
full force and effect.



Sec.  3.607  Relation to other administrative actions.

    A directive may be issued in addition to, or in lieu of, any other 
action authorized by law, including cease and desist proceedings, civil 
money penalties, or the conditioning or denial of applications. The OCC 
also may, in its discretion, take any action authorized by law, in lieu 
of a directive, in response to a national bank's or Federal savings 
association's failure to achieve or maintain the applicable minimum 
capital ratios.

[[Page 247]]



                        Subpart K_Interpretations

    Source: 78 FR 62272, Oct. 11, 2013, unless otherwise noted.



Sec.  3.701  Capital and surplus.

    For purposes of determining statutory limits that are based on the 
amount of a national bank's capital and/or surplus, the provisions of 
this section are to be used, rather than the definitions of capital 
contained in subparts A through J of this part.
    (a) Capital. The term capital as used in provisions of law relating 
to the capital of national banks shall include the amount of common 
stock outstanding and unimpaired plus the amount of perpetual preferred 
stock outstanding and unimpaired.
    (b) Capital Stock. The term capital stock as used in provisions of 
law relating to the capital stock of national banks, other than 12 
U.S.C. 101, 177, and 178 shall have the same meaning as the term capital 
set forth in paragraph (a) of this section.
    (c) Surplus. The term surplus as used in provisions of law relating 
to the surplus of national banks means the sum of paragraphs (c)(1), 
(2), (3), and (4) of this section:
    (1) Capital surplus; undivided profits; reserves for contingencies 
and other capital reserves (excluding accrued dividends on perpetual and 
limited life preferred stock); net worth certificates issued pursuant to 
12 U.S.C. 1823(i); minority interests in consolidated subsidiaries; and 
allowances for loan and lease losses; minus intangible assets;
    (2) Mortgage servicing assets;
    (3) Mandatory convertible debt to the extent of 20 percent of the 
sum of paragraphs (a) and (c) (1) and (2) of this section;
    (4) Other mandatory convertible debt, limited life preferred stock 
and subordinated notes and debentures to the extent set forth in 
paragraph (f)(2) of this section.
    (d) Unimpaired surplus fund. The term unimpaired surplus fund as 
used in provisions of law relating to the unimpaired surplus fund of 
national banks shall have the same meaning as the term surplus set forth 
in paragraph (c) of this section.
    (e) Definitions. (1) Allowance for loan and lease losses means the 
balance of the valuation reserve on December 31, 1968, plus additions to 
the reserve charged to operations since that date, less losses charged 
against the allowance net of recoveries.
    (2) Capital surplus means the total of those accounts reflecting:
    (i) Amounts paid in in excess of the par or stated value of capital 
stock;
    (ii) Amounts contributed to the national bank other than for capital 
stock;
    (iii) Amounts transferred from undivided profits pursuant to 12 
U.S.C. 60; and
    (iv) Other amounts transferred from undivided profits.
    (3) Intangible assets means those purchased assets that are to be 
reported as intangible assets in accordance with the Instructions--
Consolidated Reports of Condition and Income (Call Report).
    (4) Limited life preferred stock means preferred stock which has a 
maturity or which may be redeemed at the option of the holder.
    (5) Mandatory convertible debt means subordinated debt instruments 
which unqualifiedly require the issuer to exchange either common or 
perpetual preferred stock for such instruments by a date at or before 
the maturity of the instrument. The maturity of these instruments must 
be 12 years or less. In addition, the instrument must meet the 
requirements of paragraphs (f)(1)(i) through (v) of this section for 
subordinated notes and debentures or other requirements published by the 
OCC.
    (6) Minority interest in consolidated subsidiaries means the portion 
of equity capital accounts of all consolidated subsidiaries of the 
national bank that is allocated to minority shareholders of such 
subsidiaries.
    (7) Mortgage servicing assets means the national bank-owned rights 
to service for a fee mortgage loans that are owned by others.
    (8) Perpetual preferred stock means preferred stock that does not 
have a stated maturity date and cannot be redeemed at the option of the 
holder.
    (f) Requirements and restrictions: Limited life preferred stock, 
mandatory convertible debt, and other subordinated debt--(1) 
Requirements. Issues of limited

[[Page 248]]

life preferred stock and subordinated notes and debentures (except 
mandatory convertible debt) shall have original weighted average 
maturities of at least five years to be included in the definition of 
surplus. In addition, a subordinated note or debenture must also:
    (i) Be subordinated to the claims of depositors;
    (ii) State on the instrument that it is not a deposit and is not 
insured by the FDIC;
    (iii) Be unsecured;
    (iv) Be ineligible as collateral for a loan by the issuing national 
bank;
    (v) Provide that once any scheduled payments of principal begin, all 
scheduled payments shall be made at least annually and the amount repaid 
in each year shall be no less than in the prior year; and
    (vi) Provide that no prepayment (including payment pursuant to an 
acceleration clause or redemption prior to maturity) shall be made 
without prior OCC approval unless the national bank remains an eligible 
bank, as defined in 12 CFR 5.3, after the prepayment.
    (2) Restrictions. The total amount of mandatory convertible debt not 
included in paragraph (c)(3) of this section, limited life preferred 
stock, and subordinated notes and debentures considered as surplus is 
limited to 50 percent of the sum of paragraphs (a) and (c) (1), (2) and 
(3) of this section.
    (3) Reservation of authority. The OCC expressly reserves the 
authority to waive the requirements and restrictions set forth in 
paragraphs (f)(1) and (2) of this section, in order to allow the 
inclusion of other limited life preferred stock, mandatory convertible 
notes and subordinated notes and debentures in the capital base of any 
national bank for capital adequacy purposes or for purposes of 
determining statutory limits. The OCC further expressly reserves the 
authority to impose more stringent conditions than those set forth in 
paragraphs (f)(1) and (2) of this section to exclude any component of 
tier 1 or tier 2 capital, in whole or in part, as part of a national 
bank's capital and surplus for any purpose.
    (g) Transitional rules. (1) Equity commitment notes approved by the 
OCC as capital and issued prior to April 15, 1985, may continue to be 
included in paragraph (c)(3) of this section. All other instruments 
approved by the OCC as capital and issued prior to April 15, 1985, are 
to be included in paragraph (c)(4) of this section.
    (2) Intangible assets (other than mortgage servicing assets) 
purchased prior to April 15, 1985, and accounted for in accordance with 
OCC instructions, may continue to be included as surplus up to 25 
percent of the sum of paragraphs (a) and (c)(1) of this section.

[78 FR 62272, Oct. 11, 2013, as amended at 85 FR 80434, Dec. 11, 2020]



PART 4_ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF INFORMATION, 
CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT RESTRICTIONS 
FOR SENIOR EXAMINERS--Table of Contents



                  Subpart A_Organization and Functions

Sec.
4.1 Purpose.
4.2 Office of the Comptroller of the Currency.
4.3 Comptroller of the Currency.
4.4 Washington office and web site.
4.5 Other OCC supervisory offices.
4.6 Frequency of examination of national banks and Federal savings 
          associations.
4.7 Frequency of examination of Federal agencies and branches.
4.8 Service of process upon the OCC or the Comptroller.

 Subpart B_Availability of Information Under the Freedom of Information 
                                   Act

4.11 Purpose and scope.
4.12 Information available under the FOIA.
4.13 Publication in the Federal Register.
4.14 Public inspection in an electronic format.
4.15 How to request records.
4.16 Predisclosure notice for confidential commercial information.
4.17 FOIA request fees.
4.18 How to track a FOIA request.

             Subpart C_Release of Non-Public OCC Information

4.31 Purpose and scope.
4.32 Definitions.
4.33 Requirements for a request of records or testimony.
4.34 Where to submit a request.
4.35 Consideration of requests.

[[Page 249]]

4.36 Disclosure of non-public OCC information.
4.37 Persons and entities with access to OCC information; prohibition on 
          dissemination.
4.38 Restrictions on dissemination of released information.
4.39 Notification of parties and procedures for sharing and using OCC 
          records in litigation.
4.40 Fees for services.

Appendix A to Subpart C of Part 4--Model Stipulation for Protective 
          Order and Model Protective Order

  Subpart D_Minority-, Women-, and Individuals With Disabilities-Owned 
    Business Contracting Outreach Program; Contracting for Goods and 
                                Services

4.61 Purpose.
4.62 Definitions.
4.63 Policy.
4.64 Promotion.
4.65 Certification.
4.66 Oversight and monitoring.

Subpart E_One-Year Restrictions on Post-Employment Activities of Senior 
                                Examiners

4.72 Scope and purpose.
4.73 Definitions.
4.74 One-year post-employment restrictions.
4.75 Waivers.
4.76 Penalties.

                  Subpart F_Use of Supervisory Guidance

4.81 Purpose.
4.82 Implementation of the Statement Clarifying the Role of Supervisory 
          Guidance.
4.83 Rule of construction.

Appendix A to Subpart F of Part 4--Statement Clarifying the Role of 
          Supervisory Guidance

    Authority: 5 U.S.C. 301, 552; 12 U.S.C. 1, 93a, 161, 481, 482, 
484(a), 1442, 1462a, 1463, 1464 1817(a), 1818, 1820, 1821, 1831m, 1831p-
1, 1831o, 1833e, 1867, 1951 et seq., 2601 et seq., 2801 et seq., 2901 et 
seq., 3101 et seq., 3401 et seq., 5321, 5412, 5414; 15 U.S.C. 77uu(b), 
78q(c)(3); 18 U.S.C. 641, 1905, 1906; 29 U.S.C. 1204; 31 U.S.C. 
5318(g)(2), 9701; 42 U.S.C. 3601; 44 U.S.C. 3506, 3510; E.O. 12600 (3 
CFR, 1987 Comp., p. 235).

    Source: 60 FR 57322, Nov. 15, 1995, unless otherwise noted.



                  Subpart A_Organization and Functions



Sec.  4.1  Purpose.

    This subpart describes the organization and functions of the Office 
of the Comptroller of the Currency (OCC), and provides the OCC's 
principal addresses.



Sec.  4.2  Office of the Comptroller of the Currency.

    The OCC is charged with assuring the safety and soundness of, and 
compliance with laws and regulations, fair access to financial services, 
and fair treatment of customers by, the institutions and other persons 
subject to its jurisdiction. The OCC examines, supervises, and regulates 
national banks, Federal branches and agencies of foreign banks, and 
Federal savings associations to carry out this mission. The OCC also 
issues rules and regulations applicable to state savings associations.

[76 FR 43561, July 21, 2011]



Sec.  4.3  Comptroller of the Currency.

    The Comptroller of the Currency (Comptroller), as head of the OCC, 
is responsible for all OCC programs and functions. The Comptroller is 
appointed by the President, by and with the advice and consent of the 
Senate, for a term of five years. The Comptroller serves as a member of 
the board of the Federal Deposit Insurance Corporation, a member of the 
Financial Stability Oversight Council, a member of the Federal Financial 
Institutions Examination Council, and a member of the board of the 
Neighborhood Reinvestment Corporation. The Comptroller is advised and 
assisted by OCC staff, who perform the duties and functions that the 
Comptroller directs.

[60 FR 57322, Nov. 15, 1995, as amended at 76 FR 43561, July 21, 2011]



Sec.  4.4  Washington office and web site.

    The Washington office of the OCC is the main office and headquarters 
of the OCC. The Washington office directs OCC policy, oversees OCC 
operations, and is responsible for the direct supervision of certain 
national banks and Federal savings associations, including the largest 
national banks and the largest Federal savings associations (through the 
Large Bank Supervision Department); other national banks and Federal 
savings associations requiring special supervision; and Federal branches 
and agencies of foreign banks

[[Page 250]]

(through the Large Bank Supervision Department). The Washington office 
is located at 400 7th Street SW., Washington, DC 20219. The OCC's Web 
site is at http://www.occ.gov.

[76 FR 43561, July 21, 2011, as amended at 79 FR 15641, Mar. 21, 2014]



Sec.  4.5  Other OCC supervisory offices.

    (a) Midsize Bank Supervision (MBS). Midsize Bank Supervision is 
responsible for supervising midsize national banks and Federal savings 
associations that present unique supervisory challenges based on size, 
complexity, and/or product line. MBS is headquartered in Chicago, IL and 
located at 425 South Financial Place, Suite 1700, Chicago, IL 60605.
    (b) District offices. Each district office of the OCC is responsible 
for the direct supervision of the national banks and Federal savings 
associations in its district, with the exception of the national banks 
and Federal savings associations supervised by the Washington office 
pursuant to Sec.  4.4 of this part or Midsize Bank Supervision pursuant 
to Sec.  4.5(a). The four district offices cover the United States, 
Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern 
Mariana Islands. The geographical composition of each district follows:

------------------------------------------------------------------------
                                                         Geographical
            District               Office location       composition
------------------------------------------------------------------------
Northeastern District..........  Office of the       Connecticut,
                                  Comptroller of      Delaware, District
                                  the Currency, 340   of Columbia,
                                  Madison Avenue,     northeast
                                  5th Floor, New      Kentucky, Maine,
                                  York, NY 10173-     Maryland,
                                  0002.               Massachusetts, New
                                                      Hampshire, New
                                                      Jersey, New York,
                                                      North Carolina,
                                                      Pennsylvania,
                                                      Puerto Rico, Rhode
                                                      Island, South
                                                      Carolina, Vermont,
                                                      the Virgin
                                                      Islands, Virginia,
                                                      and West Virginia.
Central District...............  Office of the       Illinois, Indiana,
                                  Comptroller of      central and
                                  the Currency, One   southern Kentucky,
                                  Financial Place,    Michigan, northern
                                  Suite 2700, 440     and eastern
                                  South LaSalle       Minnesota, eastern
                                  Street, Chicago,    Missouri, North
                                  IL 60605.           Dakota, Ohio, and
                                                      Wisconsin.
Southern District..............  Office of the       Alabama, Arkansas,
                                  Comptroller of      Florida, Georgia,
                                  the Currency, 500   Louisiana,
                                  North Akard         Mississippi,
                                  Street, Suite       Oklahoma,
                                  1600, Dallas, TX    Tennessee, and
                                  75201.              Texas.
Western District...............  Office of the       Alaska, American
                                  Comptroller of      Samoa, Arizona,
                                  the Currency,       California,
                                  1225 17th Street,   Colorado, Guam,
                                  Suite 300,          Hawaii, Idaho,
                                  Denver, CO 80202.   Iowa, Kansas,
                                                      southwestern
                                                      Minnesota, western
                                                      Missouri, Montana,
                                                      Nebraska, Nevada,
                                                      New Mexico,
                                                      Northern Mariana
                                                      Islands, Oregon,
                                                      South Dakota,
                                                      Utah, Washington,
                                                      and Wyoming.
------------------------------------------------------------------------

    (c) Field offices and other supervisory offices. Field offices and 
other supervisory offices support the bank and savings association 
supervision responsibilities of the district offices.

[80 FR 28414, May 18, 2015, as amended at 85 FR 83726, Dec. 22, 2020]



Sec.  4.6  Frequency of examination of national banks 
and Federal savings associations.

    (a) General. The OCC examines national banks and Federal savings 
associations pursuant to authority conferred by 12 U.S.C. 481 (with 
respect to national banks) and 1463(a)(1) and 1464 (with respect to 
Federal savings associations) and the requirements of 12 U.S.C. 1820(d) 
(with respect to national banks and Federal savings associations). The 
OCC is required to conduct a full-scope, on-site examination of every 
national bank and Federal savings association at least once during each 
12-month period.
    (b) 18-month rule for certain small institutions. The OCC may 
conduct a full-scope, on-site examination of a national bank or a 
Federal savings association at least once during each 18-month period, 
rather than each 12-month period as provided in paragraph (a) of this 
section, if the following conditions are satisfied:
    (1) The bank or Federal savings association has total assets of less 
than $3 billion;
    (2) The bank or Federal savings association is well capitalized as 
defined in part 6 of this chapter;
    (3) At the most recent examination;
    (i) The bank or Federal savings association was assigned a rating of 
1 or 2 for management as part of the bank's

[[Page 251]]

or association's rating under the Uniform Financial Institutions Rating 
System; and
    (ii) The bank or Federal savings association was assigned a 
composite rating of 1 or 2 under the Uniform Financial Institutions 
Rating System;
    (4) The bank or Federal savings association currently is not subject 
to a formal enforcement proceeding or order by the FDIC, OCC, OTS or the 
Federal Reserve System; and
    (5) No person acquired control of the bank or Federal savings 
association during the preceding 12-month period in which a full-scope, 
on-site examination would have been required but for this section.
    (c) Authority to conduct more frequent examinations. This section 
does not limit the authority of the OCC to examine any national bank or 
Federal savings association as frequently as the agency deems necessary.
    (d) Through December 31, 2021, for purposes of determining 
eligibility for the 18-month rule described in paragraph (b) of this 
section, the OCC may determine the total assets of a national bank or 
Federal savings association by reference to the total assets of the 
national bank or Federal savings association as reported by the national 
bank or Federal savings association in its Call Report as of December 
31, 2019.

[81 FR 10068, Feb. 29, 2016, as amended at 83 FR 43965, Aug. 29, 2018; 
85 FR 77359, Dec. 2, 2020]



Sec.  4.7  Frequency of examination of Federal agencies and branches.

    (a) General. The OCC examines Federal agencies and Federal branches 
(as these entities are defined in Sec.  28.11 (g) and (h), respectively, 
of this chapter) pursuant to the authority conferred by 12 U.S.C. 
3105(c)(1)(C). Except as noted in paragraph (b) of this section, the OCC 
will conduct a full-scope, on-site examination of every Federal branch 
and agency at least once during each 12-month period.
    (b) 18-month rule for certain small institutions--(1) Mandatory 
standards. The OCC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month period 
as provided in paragraph (a) of this section, if the Federal branch or 
agency:
    (i) Has total assets of less than $3 billion;
    (ii) Has received a composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance, and asset quality) of 
1 or 2 at its most recent examination;
    (iii) Satisfies the requirements of either paragraph (b)(1)(iii)(A) 
or (B) of this section:
    (A) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, common equity tier 1, tier 1 
and total risk-based capital ratios that satisfy the definition of 
``well capitalized'' set forth at 12 CFR 6.4, respectively, on a 
consolidated basis; or
    (B) The branch or agency has maintained on a daily basis, over the 
past three quarters, eligible assets in an amount not less than 108 
percent of the preceding quarter's average third party liabilities 
(determined consistent with applicable federal and state law), and 
sufficient liquidity is currently available to meet its obligations to 
third parties;
    (iv) Is not subject to a formal enforcement action or order by the 
Federal Reserve Board, the Federal Deposit Insurance Corporation, or the 
OCC; and
    (v) Has not experienced a change in control during the preceding 12-
month period in which a full-scope, on-site examination would have been 
required but for this section.
    (2) Discretionary standards. In determining whether a Federal branch 
or agency that meets the standards of paragraph (b)(1) of this section 
should not be eligible for an 18-month examination cycle pursuant to 
this paragraph (b), the OCC may consider additional factors, including 
whether:
    (i) Any of the individual components of the ROCA rating of the 
Federal branch or agency is rated ``3'' or worse;
    (ii) The results of any off-site supervision indicate a 
deterioration in the condition of the Federal branch or agency;
    (iii) The size, relative importance, and role of a particular office 
when reviewed in the context of the foreign bank's entire U.S. 
operations otherwise

[[Page 252]]

necessitate an annual examination; and
    (iv) The condition of the foreign bank gives rise to such a need.
    (c) Authority to conduct more frequent examinations. Nothing in 
paragraph (a) or (b) of this section limits the authority of the OCC to 
examine any Federal branch or agency as frequently as the OCC deems 
necessary.
    (d) Through December 31, 2021, for purposes of determining 
eligibility for the 18-month rule described in paragraph (b) of this 
section, the OCC may determine total assets of a Federal branch or 
agency by reference to the total assets of the Federal branch or agency 
as reported by the Federal branch or agency as of December 31, 2019.

[81 FR 10068, Feb. 29, 2016, as amended at 83 FR 43965, Aug. 29, 2018; 
85 FR 77359, Dec. 2, 2020]



Sec.  4.8  Service of process upon the OCC or the Comptroller.

    (a) Scope. Paragraphs (b) through (d) of this section apply to 
service of process upon the OCC, the Comptroller acting in their 
official capacity, officers (officials who are not employees of the OCC, 
such as an administrative law judge (ALJ) or employees of the OCC who 
are sued in their official capacity), and officers or employees of the 
OCC who are sued in an individual capacity for an act or omission 
occurring in connection with duties performed on the behalf of the OCC.
    (b) Actions in Federal courts. Service of process for actions in 
Federal courts should be made upon the OCC, the Comptroller, or officers 
or employees of the OCC under the procedures set forth in the Federal 
Rules of Civil Procedure governing the service of process upon the 
United States and its agencies, corporations, officers, or employees.
    (c) Actions in State courts. Service of process for actions in State 
courts should be made upon the OCC, the Comptroller, or officers or 
employees of the OCC by sending copies of the summons and complaint by 
registered or certified mail, same day courier service, or overnight 
delivery service to the Chief Counsel, Office of the Comptroller of the 
Currency, Washington, DC 20219. In these actions, parties also are 
encouraged to provide copies of the summons and complaint to the 
appropriate United States Attorney in accordance with the procedures set 
forth in Rule 4(i) of the Federal Rules of Civil Procedure.
    (d) Receipt of summons or complaint. Only the Washington, DC 
headquarters office of the OCC is authorized to accept service of a 
summons or complaint. The OCC, the Comptroller, and officers or 
employees of the OCC must be served with a copy of the summons or 
complaint at the Washington, DC headquarters office in accordance with 
paragraphs (b) or (c) of this section.
    (e) Service of process upon a national bank, Federal savings 
association, or Federal branch or agency of a foreign bank. The OCC is 
not an agent for service of process upon a national bank, Federal 
savings association, or Federal branch or agency of a foreign bank. 
Parties seeking to serve a national bank, Federal savings association, 
or Federal branch or agency of a foreign bank must serve the summons or 
complaint upon the institution in accordance with the laws and 
procedures for the court in which the action has been filed.

[88 FR 89842, Dec. 28, 2023]

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, Sec.  4.8 was 
added, effective Apr. 1, 2024.



 Subpart B_Availability of Information Under the Freedom of Information 
                                   Act



Sec.  4.11  Purpose and scope.

    (a) Purpose. This subpart sets forth the standards, policies, and 
procedures that the OCC applies in administering the Freedom of 
Information Act (FOIA) (5 U.S.C. 552) to facilitate the OCC's 
interaction with the banking and savings association industries and the 
public.
    (b) Scope. (1) This subpart describes the information that the FOIA 
requires the OCC to disclose to the public (Sec.  4.12), and the three 
methods by which the OCC discloses that information under the FOIA 
(Sec. Sec.  4.13, 4.14, and 4.15).
    (2) This subpart also sets forth predisclosure notice procedures 
that the OCC follows, in accordance with

[[Page 253]]

Executive Order 12600 (3 CFR, 1987 Comp., p. 235), when the OCC receives 
a request under Sec.  4.15 for disclosure of records that arguably are 
exempt from disclosure as confidential commercial information (Sec.  
4.16). Finally, this subpart describes the fees that the OCC assesses 
for the services it renders in providing information under the FOIA 
(Sec.  4.17).
    (3) This subpart does not apply to a request for records pursuant to 
the Privacy Act (5 U.S.C. 552a). A person requesting records from the 
OCC pursuant to the Privacy Act should refer to 31 CFR part 1, subpart 
C, and appendix J of subpart C.

[60 FR 57322, Nov. 15, 1995, as amended at 76 FR 43561, July 21, 2011; 
81 FR 94244, Dec. 23, 2016]



Sec.  4.12  Information available under the FOIA.

    (a) General. Except as otherwise provided by the FOIA, OCC and 
Office of Thrift Supervision (OTS) records are available to the public.
    (b) Exemptions from availability. The following records, or portions 
thereof, are exempt from disclosure under the FOIA:
    (1) A record that is specifically authorized, under criteria 
established by an Executive order, to be kept secret in the interest of 
national defense or foreign policy, and that is properly classified 
pursuant to that Executive order;
    (2) A record relating solely to the internal personnel rules and 
practices of an agency;
    (3) A record specifically exempted from disclosure by statute (other 
than 5 U.S.C. 552b), provided that the statute requires that the matters 
be withheld from the public in such a manner as to leave no discretion 
on the issue; establishes particular criteria for withholding, or refers 
to particular types of matters to be withheld; and, if enacted after the 
date of enactment of the OPEN FOIA Act of 2009, specifically cites to 5 
U.S.C. 552(b)(3);
    (4) A record that is privileged or contains trade secrets, or 
commercial or financial information, furnished in confidence, that 
relates to the business, personal, or financial affairs of any person 
(see Sec.  4.16 for notice requirements regarding disclosure of 
confidential commercial information);
    (5) An intra-agency or interagency memorandum or letter not 
routinely available by law to a private party in litigation, including 
memoranda, reports, and other documents prepared by OCC employees, and 
records of deliberations and discussions at meetings of OCC employees, 
provided that the deliberative process privilege shall not apply to 
records created 25 years or more before the date on which the records 
were requested;
    (6) A personnel, medical, or similar record, including a financial 
record, or any portion thereof, where disclosure would constitute a 
clearly unwarranted invasion of personal privacy;
    (7) A record or information compiled for law enforcement purposes, 
but only to the extent that the OCC reasonably believes that producing 
the record or information may:
    (i) Interfere with enforcement proceedings;
    (ii) Deprive a person of the right to a fair trial or an impartial 
adjudication;
    (iii) Constitute an unwarranted invasion of personal privacy;
    (iv) Disclose the identity of a confidential source, including a 
State, local, or foreign agency or authority, or any private institution 
that furnished information on a confidential basis;
    (v) Disclose information furnished by a confidential source, in the 
case of a record or information compiled by a criminal law enforcement 
authority in the course of a criminal investigation, or by an agency 
conducting a lawful national security intelligence investigation;
    (vi) Disclose techniques and procedures for law enforcement 
investigations or prosecutions, or disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure reasonably 
could be expected to risk circumvention of the law; or
    (vii) Endanger the life or physical safety of any individual;
    (8) A record contained in or related to an examination, operating, 
or condition report prepared by, on behalf of, or for the use of the OCC 
or any other agency responsible for regulating or supervising financial 
institutions; and

[[Page 254]]

    (9) A record containing or relating to geological and geophysical 
information and data, including maps, concerning wells.
    (c) Discretionary disclosure of exempt records. Even if a record is 
exempt under paragraph (b) of this section, the OCC may elect, on a 
case-by-case basis, not to apply the exemption to the requested record. 
The OCC's election not to apply an exemption to a requested record has 
no precedential significance as to the application or nonapplication of 
the exemption to any other requested record, regardless of who requests 
the record or when the OCC receives the request. The OCC will provide 
predisclosure notice to submitters of confidential commercial 
information in accordance with Sec.  4.16.
    (d) Segregability. If the OCC determines that full disclosure of a 
requested record is not possible, the OCC considers whether partial 
disclosure of information is possible and takes reasonable steps 
necessary to segregate and release nonexempt information. The OCC will 
note the location and extent of any deletion, and identify the FOIA 
exemption under which material has been deleted, on the released portion 
of the material, unless doing so would harm an interest protected by the 
exemption under paragraph (b) of this section pursuant to which the 
deletion was made. Where technically feasible, the amount of information 
redacted and the exemption pursuant to which the redaction was made will 
be indicated at the site(s) of the deletion.

[60 FR 57322, Nov. 15, 1995, as amended at 75 FR 17850, Apr. 8, 2010; 76 
FR 43561, July 21, 2011; 81 FR 94244, Dec. 23, 2016]



Sec.  4.13  Publication in the Federal Register.

    The OCC publishes certain documents in the Federal Register for the 
guidance of the public, including the following:
    (a) Proposed and final rules; and
    (b) Certain notices and policy statements of concern to the general 
public.



Sec.  4.14  Public inspection in an electronic format.

    (a) Available information. Subject to the exemptions listed in Sec.  
4.12(b), the OCC makes the following information available for public 
inspection in an electronic format:
    (1) Any final order, agreement, or other enforceable document issued 
in the adjudication of an OCC enforcement case, including a final order 
published pursuant to 12 U.S.C. 1818(u);
    (2) Any final opinion issued in the adjudication of an OCC 
enforcement case;
    (3) Any statement of general policy or interpretation of general 
applicability not published in the Federal Register;
    (4) Any administrative staff manual or instruction to staff that may 
affect a member of the public as such;
    (5) A current index identifying the information referred to in 
paragraphs (a)(1) through (a)(4) of this section issued, adopted, or 
promulgated after July 4, 1967;
    (6) A list of available OCC publications;
    (7) A list of forms available from the OCC, and specific forms and 
instructions; \1\
---------------------------------------------------------------------------

    \1\ Some forms and instructions that national banks and Federal 
savings associations use are not available from the OCC. The OCC will 
provide information on where persons may obtain these forms and 
instructions upon request.
---------------------------------------------------------------------------

    (8) Any public Community Reinvestment Act performance evaluation;
    (9) Any public securities-related filing required under part 11 or 
16 of this chapter;
    (10) Any public comment letter regarding a proposed rule;
    (11) Any records, regardless of form or format, that have been 
released to any person under 5 U.S.C. 552(a)(3) provided that:
    (i) The OCC determines that, because of the nature of their subject 
matter, the records are or are likely to become the subject of 
subsequent requests for substantially the same records; or
    (ii) The records have been requested three or more times;
    (12) Reference materials or a guide for requesting records or 
information from the OCC, including an index of all major OCC 
information systems, a description of major information and record 
locator systems maintained by the OCC, and a handbook for obtaining 
various types and categories of public

[[Page 255]]

information from the OCC pursuant to FOIA and chapter 35 of title 44;
    (13) The public file (as defined in 12 CFR 5.9) with respect to a 
pending application described in part 5 of this chapter; and
    (14) Any OTS information similar to that listed in paragraphs (a)(1) 
through (a)(13) of this section, to the extent this information is in 
the possession of the OCC.
    (b) Redaction of identifying details. To the extent necessary to 
prevent an invasion of personal privacy, the OCC may redact identifying 
details from any information described in paragraph (a) of this section 
before making the information available for public inspection in an 
electronic format.
    (c) Addresses. The information described in paragraphs (a)(1) 
through (14) of this section is available from the Chief FOIA Officer, 
Communications Division, Office of the Comptroller of the Currency, 400 
7th Street SW., Washington, DC 20219. The information described in 
paragraph (a)(13) of this section in the case of both national banks and 
Federal savings associations is available from the Licensing Manager at 
the appropriate district office at the address listed in Sec.  4.5(a), 
or in the case of national banks and Federal savings associations 
supervised by the Large Bank Supervision Department, from the Large Bank 
Licensing Expert, Licensing Division, Office of the Comptroller of the 
Currency, 400 7th Street SW., Washington, DC 20219.

[60 FR 57322, Nov. 15, 1995, as amended at 76 FR 43561, July 21, 2011; 
79 FR 15641, Mar. 21, 2014; 81 FR 94244, Dec. 23, 2016; 85 FR 42640, 
July 14, 2020]



Sec.  4.15  How to request records.

    (a) Available information. Subject to the exemptions described in 
Sec.  4.12(b), any OCC record is available to any person upon specific 
request in accordance with this section.
    (b) Where to submit request or appeal--(1) General. Except as 
provided in paragraph (b)(2) of this section, a person requesting a 
record or filing an administrative appeal must submit the request or 
appeal:
    (i) Through the OCC's FOIA Web portal at https://foia-pal.occ.gov/ 
palMain.aspx;
    (ii) Through the consolidated online request portal maintained by 
the Office of Management and Budget pursuant to 5 U.S.C. 552(m)(1); or
    (iii) Under this section to the Chief FOIA Officer, Communications 
Division, Office of the Comptroller of the Currency, 400 7th Street SW., 
Washington, DC 20219.
    (2) Exceptions--(i) Records at the Federal Deposit Insurance 
Corporation. A person requesting any of the following records, other 
than blank forms (see Sec.  4.14(a)(7)), must submit the request to the 
FDIC, Legal Division, FOIA/PA Group, 550-17th Street NW., Washington, DC 
20429, or fax to (703) 562-2797:
    (A) Consolidated Report of Condition and Income (FFIEC 031, 032, 
033, 034);
    (B) Annual Report of Trust Assets (FFIEC 001);
    (C) Uniform Bank Performance Report; and
    (D) Special Report.
    (ii) Records of another agency. When the OCC receives a request for 
records in its possession that another Federal agency either generated 
or provided to the OCC, the OCC promptly informs the requester and 
immediately forwards the request to that agency for processing in 
accordance with that agency's regulations.
    (c) Request for records--(1) Contact information and what the 
request for records must include. A person requesting records under this 
section must state, in writing:
    (i) The requester's full name, address, telephone number and, at the 
requester's option, electronic mail address.
    (ii) A reasonable description of the records sought (including 
sufficient detail to enable OCC employees who are familiar with the 
subject matter of the request to locate the records with a reasonable 
amount of effort);
    (iii) A statement agreeing to pay all fees that the OCC assesses 
under Sec.  4.17;
    (iv) A description of how the requester intends to use the records, 
if a requester seeks placement in a lower fee category (i.e., a fee 
category other than ``commercial use requester'') under Sec.  4.17; and
    (v) Whether the requester prefers the OCC to deliver a copy of the 
records or to allow the requester to inspect the records at the 
appropriate OCC office.

[[Page 256]]

    (2) Initial determination. The Comptroller or the Comptroller's 
delegate initially determines whether to grant a request for OCC records 
and notifies the requester, in accordance with the time limits set forth 
in paragraph (f) of this section, of the determination and the reasons 
therefore and of the right to seek assistance from the OCC's FOIA Public 
Liaison.
    (3) If request is granted. If the OCC grants a request for records, 
in whole or in part, the OCC promptly discloses the records in one of 
two ways, depending on the requester's stated preference:
    (i) The OCC may deliver a copy of the records to the requester. If 
the OCC delivers a copy of the records to the requester, the OCC 
duplicates the records at reasonable and proper times that do not 
interfere with their use by the OCC or preclude other persons from 
making inspections; or
    (ii) The OCC may allow the requester to inspect the records at 
reasonable and proper times that do not interfere with their use by the 
OCC or preclude other persons from making inspections. If the OCC allows 
the requester to inspect the records, the OCC may place a reasonable 
limit on the number of records that a person may inspect during a day.
    (4) If request is denied. If the OCC denies a request for records, 
in whole or in part, the OCC will notify the requester in writing. The 
notification is dated and contains a brief statement of the reasons for 
the denial, sets forth the name and title or position of the official 
making the decision, advises the requester of the right to seek dispute 
resolution services from the OCC's FOIA Public Liaison or the Office of 
Government Information Services, and advises the requester of the right 
to appeal to the Comptroller of the Currency in accordance with 
paragraph (d) of this section.
    (d) Administrative appeal of a denial--(1) Procedure. A requester 
must submit an administrative appeal of denial of a request for records 
in writing within 90 days after the date of the initial determination. 
The appeal must include the circumstances and arguments supporting 
disclosure of the requested records.
    (2) Appellate determination. The Comptroller or the Comptroller's 
delegate determines whether to grant an appeal of a denial of a request 
for OCC records.
    (3) If appeal is granted. If the OCC grants an appeal, in whole or 
in part, the OCC treats the request as if it were originally granted, in 
whole or in part, by the OCC in accordance with paragraph (c)(3) of this 
section.
    (4) If appeal is denied. If the OCC denies an appeal, in whole or in 
part, the OCC notifies the requester in writing. The notification 
contains a brief statement of the reasons for the denial, sets forth the 
name and title or position of the official making the decision, and 
advises the requester of the right to judicial review of the denial 
under 5 U.S.C. 552(a)(4)(B).
    (e) Judicial review--(1) General. If the OCC denies an appeal 
pursuant to paragraph (d) of this section, or if the OCC fails to make a 
determination within the time limits specified in paragraph (f) of this 
section, the requester may commence an action to compel disclosure of 
records, pursuant to 5 U.S.C. 552(a)(4)(B), in the United States 
district court in:
    (i) The district where the requester resides;
    (ii) The district where the requester's principal place of business 
is located;
    (iii) The district where the records are located; or
    (iv) The District of Columbia.
    (2) Service of process. In commencing an action described in 
paragraph (e)(1) of this section, the requester, in addition to 
complying with the Federal Rules of Civil Procedure (28 U.S.C. appendix) 
for service upon the United States or agencies thereof, must serve 
process on the Chief Counsel or the Chief Counsel's delegate at the 
following location: Office of the Comptroller of the Currency, 400 7th 
Street, SW., Washington, DC 20219.
    (f) Time limits for responding to FOIA requests. (1) The OCC makes 
an initial determination to grant or deny a request for records within 
20 days (excluding Saturdays, Sundays, and holidays) after the date of 
receipt of the request, as described in paragraph (g) of this section, 
except as stated in paragraph (f)(3) of this section.

[[Page 257]]

    (2) Appeal. The OCC makes a determination to grant or deny an 
administrative appeal within 20 business days after the date of receipt 
of the appeal, as described in paragraph (g) of this section, except as 
stated in paragraph (f)(3) of this section.
    (3) Extension of time. The time limits set forth in paragraphs 
(f)(1) and (2) of this section may be extended as follows:
    (i) In unusual circumstances. The OCC may extend the time limits in 
unusual circumstances for a maximum of 10 business days. If the OCC 
extends the time limits, the OCC provides written notice to the person 
making the request or appeal, containing the reason for the extension 
and the date on which the OCC expects to make a determination. Unusual 
circumstances exist when the OCC requires additional time to:
    (A) Search for and collect the requested records from field 
facilities or other buildings that are separate from the office 
processing the request or appeal;
    (B) Search for, collect, and appropriately examine a voluminous 
amount of requested records;
    (C) Consult with another agency that has a substantial interest in 
the determination of the request; or
    (D) Allow two or more components of the OCC that have substantial 
interest in the determination of the request to consult with each other;
    (ii) By agreement. A requester may agree to extend the time limits 
for any amount of time;
    (iii) By judicial action. If a requester commences an action 
pursuant to paragraph (e) of this section for failure to comply with the 
time limits set forth in this paragraph (f), a court with jurisdiction 
may, pursuant to 5 U.S.C. 552(a)(6)(C), allow the OCC additional time to 
complete the review of the records requested, or
    (iv) Tolling of time limits. (A) The OCC may toll the 20-day time 
period to:
    (1) Make one request for additional information from the requester; 
or
    (2) Clarify the applicability or amount of any fees, if necessary, 
with the requester.
    (B) The tolling period ends upon the OCC's receipt of requested 
information from the requester or resolution of the fee issue.
    (4) Requests that require more than a 10-day extension to process. 
If the OCC determines unusual circumstances apply to a request for 
records, and the OCC determines it cannot respond to the request within 
the 10-day extension set forth in paragraph (f)(3)(i) of this section, 
the OCC will:
    (i) Notify the requester that the request cannot be processed within 
the time limit set forth in paragraph (f)(3)(i) of this section;
    (ii) Provide the requester with an opportunity to limit the scope of 
the request so that it may be processed within that 10-day period or to 
arrange with the OCC an alternative time frame for processing the 
request or a modified request;
    (iii) Make available the FOIA Public Liaison, who shall assist in 
the resolution of any disputes between the requester and the OCC; and
    (iv) Notify the requester of the right of the requester to seek 
dispute resolution services from the Office of Government Information 
Services.
    (g) Date of receipt of request or appeal. The date of receipt of a 
request for records or an appeal is the date that Disclosure Services, 
Communications Division receives a request that satisfies the 
requirements of paragraph (c)(1) or (d)(1) of this section, except as 
provided in Sec.  4.17(d).
    (h) Dispute resolution services. Requesters with concerns about the 
handling of their FOIA requests may contact the FOIA Public Liaison or 
the Office of Government Information Services for dispute resolution 
services.
    (1) To apply for dispute resolution assistance from the FOIA Public 
Liaison, requesters should submit a written request to the FOIA Public 
Liaison, Communications Division, Office of the Comptroller of the 
Currency, 400 7th Street SW., Washington, DC 20219.
    (2) For dispute resolution services through the Office of Government 
Services, requesters should contact the Office of Government Services as 
set forth at 36 CFR 1250.32.

[60 FR 57322, Nov. 15, 1995, as amended at 75 FR 17850, Apr. 8, 2010; 76 
FR 43562, July 21, 2011; 79 FR 15641, Mar. 21, 2014; 81 FR 94245, Dec. 
23, 2016]

[[Page 258]]



Sec.  4.16  Predisclosure notice for confidential commercial information.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Confidential commercial information means records that arguably 
contain material exempt from release under Exemption 4 of the FOIA (5 
U.S.C. 552(b)(4); Sec.  4.12(b)(4)), because disclosure reasonably could 
cause substantial competitive harm to the submitter.
    (2) Submitter means any person or entity that provides confidential 
commercial information to the OCC. This term includes corporations, 
State governments, foreign governments, and banks and their employees, 
officers, directors, and principal shareholders.
    (b) Notice to submitter--(1) When provided. In accordance with 
Executive Order 12600 (3 CFR, 1987 Comp., p. 235), when the OCC receives 
a request under Sec.  4.15(c) or, where appropriate, an appeal under 
Sec.  4.15(d) for disclosure of confidential commercial information, the 
OCC provides a submitter with prompt written notice of the receipt of 
that request (except as provided in paragraph (b)(2) of this section) in 
the following circumstances:
    (i) With respect to confidential commercial information submitted to 
the OCC or to the Federal Home Loan Bank Board, the predecessor of the 
OTS, prior to January 1, 1988, if:
    (A) The records are less than 10 years old and the submitter 
designated the information as confidential commercial information;
    (B) The OCC reasonably believes that disclosure of the information 
may cause substantial competitive harm to the submitter; or
    (C) The information is subject to a prior express commitment of 
confidentiality from the OCC or the Federal Home Loan Bank Board, the 
predecessor of the OTS; and
    (ii) With respect to confidential commercial information submitted 
to the OCC or to the OTS (or the Federal Home Loan Bank Board, its 
predecessor agency) on or after January 1, 1988, if:
    (A) The submitter in good faith designated the information as 
confidential commercial information;
    (B) The OCC or the OTS (or the Federal Home Loan Bank Board, its 
predecessor agency) designated the class of information to which the 
requested information belongs as confidential commercial information; or
    (C) The OCC reasonably believes that disclosure of the information 
may cause substantial competitive harm to the submitter.
    (2) Exceptions. The OCC generally does not provide notice under 
paragraph (b)(1) of this section if the OCC determines that:
    (i) It will not disclose the information;
    (ii) The information already has been disclosed officially to the 
public;
    (iii) The OCC is required by law (other than 5 U.S.C. 552) to 
disclose the information;
    (iv) The OCC or the OTS (or the Federal Home Loan Bank Board, its 
predecessor agency) acquired the information in the course of a lawful 
investigation of a possible violation of criminal law;
    (v) The submitter had an opportunity to designate the requested 
information as confidential commercial information at the time of 
submission of the information or a reasonable time thereafter and did 
not do so, unless the OCC has substantial reason to believe that 
disclosure of the information would result in competitive harm; or
    (vi) The OCC determines that the submitter's designation under 
paragraph (b)(1)(ii)(A) of this section is frivolous; in such case, 
however, the OCC will provide the submitter with written notice of any 
final administrative determination to disclose the information at least 
10 business days prior to the date that the OCC intends to disclose the 
information.
    (3) Content of notice. The OCC either describes in the notice the 
exact nature of the confidential commercial information requested or 
includes with the notice copies of the records or portions of records 
containing that information.
    (4) Expiration of notice period. The OCC provides notice under this 
paragraph (b) with respect to information that the submitter designated 
under paragraph (b)(1)(ii)(A) of this section only for a period of 10 
years after the

[[Page 259]]

date of the submitter's designation, unless the submitter requests and 
justifies to the OCC's satisfaction a specific notice period of greater 
duration.
    (5) Certification of confidentiality. If possible, the submitter 
should support the claim of confidentiality with a statement or 
certification that the requested information is confidential commercial 
information that the submitter has not disclosed to the public. This 
statement should be prepared by an officer or authorized representative 
if the submitter is a corporation or other entity.
    (c) Notice to requester. If the OCC provides notice to a submitter 
under paragraph (b) of this section, the OCC notifies the person 
requesting confidential commercial information (requester) that it has 
provided notice to the submitter. The OCC also advises the requester 
that if there is a delay in its decision whether to grant or deny access 
to the information sought, the delay may be considered a denial of 
access to the information, and that the requester may proceed with an 
administrative appeal or seek judicial review. However, the requester 
may agree to a voluntary extension of time to allow the OCC to review 
the submitter's objection to disclosure (see Sec.  4.15(f)(3)(ii)).
    (d) Opportunity to object to disclosure. Within 10 days after 
receiving notice under paragraph (b) of this section, the submitter may 
provide the OCC with a detailed statement of objection to disclosure of 
the information. That statement must specify the grounds for withholding 
any of the information under any exemption of the FOIA. Any statement 
that the submitter provides under this paragraph (d) may be subject to 
disclosure under the FOIA.
    (e) Notice of intent to disclose. The OCC considers carefully a 
submitter's objection and specific grounds for nondisclosure prior to 
determining whether to disclose the requested information. If the OCC 
decides to disclose information over the objection of the submitter, the 
OCC provides to the submitter, with a copy to the requester, a written 
notice that includes:
    (1) A statement of the OCC's reasons for not sustaining the 
submitter's objections to disclosure;
    (2) A description of the information to be disclosed;
    (3) The anticipated disclosure date, which is not less than 10 
business days after the OCC mails the written notice required under this 
paragraph (e); and
    (4) A statement that the submitter must notify the OCC immediately 
if the submitter intends to seek injunctive relief.
    (f) Notice of requester's lawsuit. Whenever the OCC receives service 
of process indicating that a requester has brought suit seeking to 
compel the OCC to disclose information covered by paragraph (b)(1) of 
this section, the OCC promptly notifies the submitter.

[60 FR 57322, Nov. 15, 1995, as amended at 76 FR 43561, July 21, 2011]



Sec.  4.17  FOIA request fees.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Actual costs means those expenditures that the OCC incurs in 
providing services (including searching for, reviewing, and duplicating 
records) in response to a request for records under Sec.  4.15.
    (2) Search means the process of locating a record in response to a 
request, including page-by-page or line-by-line identification of 
material within a record. The OCC may perform a search manually or by 
electronic means.
    (3) Review means the process of examining a record located in 
response to a request to determine which portions of that record should 
be released. It also includes processing a record for disclosure.
    (4) Duplication means the process of copying a record in response to 
a request. A copy may take the form of a paper copy, microform, 
audiovisual materials, or machine readable material (e.g., magnetic tape 
or disk), among others.
    (5) Commercial use requester means a person who seeks records for a 
use or purpose that furthers the commercial, trade, or profit interests 
of the requester or the person on whose behalf the request is made.
    (6) Educational institution requester means a person who seeks 
records on

[[Page 260]]

behalf of a public or private educational institution, including a 
preschool, an elementary or secondary school, an institution of 
undergraduate or graduate higher education, an institution of 
professional education, or an institution of vocational education that 
operates a program of scholarly research.
    (7) Noncommercial scientific institution requester means a person 
who is not a ``commercial use requester,'' as that term is defined in 
paragraph (a)(5) of this section, and who seeks records on behalf of an 
institution operated solely for the purpose of conducting scientific 
research, the results of which are not intended to promote any 
particular product or industry.
    (8) Requester who is a representative of the news media means any 
person who, or entity that, gathers information of potential interest to 
a segment of the public, uses editorial skills to turn the raw materials 
into a distinct work, and distributes that work to an audience. A 
freelance journalist shall be regarded as working for a news media 
entity if the person can demonstrate a solid basis for expecting 
publication through that entity, whether or not the journalist is 
actually employed by that entity. A publication contract is one example 
of a basis for expecting publication that ordinarily would satisfy this 
standard. The OCC also may consider the past publication record of the 
requester in determining whether she or he qualifies as a 
``representative of the news media.''
    (b) Fees--(1) General. The hourly and per page rate that the OCC 
generally charges requesters is set forth in the ``Notice of Comptroller 
of the Currency Fees'' (Notice) described in 12 CFR 8.8. Any interested 
person may request a copy of the Notice from the OCC by mail or may 
obtain a copy at the location described in Sec.  4.14(c). The OCC may 
contract with a commercial service to search for, duplicate, or 
disseminate records, provided that the OCC determines that the fee 
assessed upon a requester is no greater than if the OCC performed the 
tasks itself. The OCC does not contract out responsibilities that the 
FOIA provides that the OCC alone may discharge, such as determining the 
applicability of an exemption or whether to waive or reduce a fee.
    (2) Fee categories. The OCC assesses a fee based on the fee category 
in which the OCC places the requester. If the request states how the 
requester intends to use the requested records (see Sec.  
4.15(c)(1)(iv)), the OCC may place the requester in a lower fee 
category; otherwise, the OCC categorizes the requester as a ``commercial 
use requester.'' If the OCC reasonably doubts the requester's stated 
intended use, or if that use is not clear from the request, the OCC may 
place the requester in the ``commercial use'' category or may seek 
additional clarification. The fee categories are as follows:
    (i) Commercial use requesters. The OCC assesses a fee for a 
requester in this category for the actual cost of search, review, and 
duplication. A requester in this category does not receive any free 
search, review, or duplication services.
    (ii) Educational institution requesters, noncommercial scientific 
institution requesters, and requesters who are representatives of the 
news media. The OCC assesses a fee for a requester in this category for 
the actual cost of duplication. A requester in this category receives 
100 free pages.
    (iii) All other requesters. The OCC assesses a fee for a requester 
who does not fit into either of the above categories for the actual cost 
of search and duplication. A requester in this category receives 100 
free pages and two hours of free search time.
    (3) Special services. The OCC may, in its discretion, accommodate a 
request for special services. The OCC may recover the actual cost of 
providing any special services.
    (4) Waiving or reducing a fee. The OCC may waive or reduce a fee 
under this section whenever, in its opinion, disclosure of records is in 
the public interest because the disclosure:
    (i) Is likely to contribute significantly to public understanding of 
the operations or activities of the government; and
    (ii) Is not primarily in the commercial interest of the requester.
    (5) Fee for unsuccessful search. The OCC may assess a fee for time 
spent searching for records, even if the OCC does not locate the records 
requested.

[[Page 261]]

    (6) No fee if the time limit passes and the OCC has not responded to 
the request. The OCC will not assess search or duplication fees, as 
applicable, if it fails to respond to a requester's FOIA request within 
the time limits specified under 5 U.S.C. 552(a)(6) and 12 CFR 4.15(f), 
except as follows:
    (i) Unusual circumstances--(A) General. If the OCC has determined 
that unusual circumstances (as defined in 5 U.S.C. 552(a)(6)(B) and 
Sec.  4.15(f)(3)(i)) apply and the OCC provides timely written notice to 
the requester in accordance with 5 U.S.C. 552(a)(6)(B), the OCC may 
assess search or duplication fees, as applicable, for an additional 10 
days. If the OCC fails to comply with the extended time limit, the OCC 
will not assess any search or duplication fees, as applicable.
    (B) Voluminous Requests. Notwithstanding paragraph (b)(6)(i)(A) of 
this section, if the OCC has determined that unusual circumstances (as 
defined in 5 U.S.C. 552(a)(6)(B) and Sec.  4.15(f)(3)(i)) apply and more 
than 5,000 pages are necessary to respond to the request, the OCC may 
assess search or duplication fees, as appropriate, if the OCC provides a 
timely written notice to the requester in accordance with 5 U.S.C. 
552(a)(6)(B) and discusses with the requester via written mail, 
electronic mail, or telephone (or makes not less than three good-faith 
attempts to do so) how the requester could effectively limit the scope 
of the request in accordance with 5 U.S.C. 552(a)(6)(B)(ii).
    (ii) In exceptional circumstances. If a court has determined that 
exceptional circumstances (as defined in 5 U.S.C. 552(a)(6)(C)) apply to 
the processing of a request, the OCC may assess search or duplication 
fees, as applicable, for the length of time provided by the court order.
    (c) Payment of fees--(1) General. The OCC generally assesses a fee 
when it delivers the records in response to the request, if any. A 
requester must send payment within 30 calendar days of the billing date 
to the Financial Management, Accounts Receivable, Office of the 
Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
    (2) Fee likely to exceed $25. If the OCC estimates that a fee is 
likely to exceed $25, the OCC notifies the requester of the estimated 
fee, unless the requester has indicated in advance a willingness to pay 
a fee as high as the estimated fee. If so notified by the OCC, the 
requester may confer with OCC employees to revise the request to reflect 
a lower fee.
    (3) Fee likely to exceed $250. If the OCC estimates that a fee is 
likely to exceed $250, the OCC notifies the requester of the estimated 
fee. In this circumstance, the OCC may require, as a condition to 
processing the request, that the requester:
    (i) Provide satisfactory assurance of full payment, if the requester 
has a history of prompt payment; or
    (ii) Pay the estimated fee in full, if the requester does not have a 
history of prompt payment.
    (4) Failure to pay a fee. If the requester fails to pay a fee within 
30 days of the date of the billing, the OCC may require, as a condition 
to processing any further request, that the requester pay any unpaid 
fee, plus interest (as provided in paragraph (c)(5) of this section), 
and any estimated fee in full for that further request.
    (5) Interest on unpaid fee. The OCC may assess interest charges on 
an unpaid fee beginning on the 31st day following the billing date. The 
OCC charges interest at the rate prescribed in 31 U.S.C. 3717.
    (d) Tolling of time limits. Under the circumstances described in 
paragraphs (c) (2), (3), and (4) of this section, the time limits set 
forth in Sec.  4.15(f) (i.e., 20 business days from the receipt of a 
request for records and 20 business days from the receipt of an 
administrative appeal, plus any permissible extension) begin only after 
the OCC receives a revised request under paragraph (c)(2) of this 
section, an assurance of payment under paragraph (c)(3)(i) of this 
section, or the required payments under paragraph (c)(3)(i) or (c)(4) of 
this section.
    (e) Aggregating requests. When the OCC reasonably believes that a 
requester or group of requesters is attempting to break a request into a 
series of requests for the purpose of evading the assessment of a fee, 
the OCC

[[Page 262]]

may aggregate the requests and assess a fee accordingly.

[60 FR 57322, Nov. 15, 1995, as amended at 75 FR 17850, Apr. 8, 2010; 79 
FR 15641, Mar. 21, 2014; 81 FR 94245, Dec. 23, 2016]



Sec.  4.18  How to track a FOIA request.

    (a) Tracking number--(1) Internet requests. The OCC will issue a 
tracking number to all FOIA requesters automatically upon receipt of the 
request (as described in Sec.  4.15(g)) by the OCC's Communications 
Division via the OCC's Freedom of Information Request Portal, https://
foia-pal.occ.gov/ palMain.aspx. The tracking number will be sent via 
electronic mail to the requester.
    (2) If a requester does not have Internet access. The OCC will issue 
a tracking number to FOIA requesters without Internet access within 5 
days of the receipt of the request (as described in Sec.  4.15(g)) in 
the OCC's Communications Division. The OCC will mail the tracking number 
to the requester's physical address, as provided in the FOIA request.
    (b) Status of request. FOIA requesters may track the progress of 
their requests via the OCC's Freedom of Information Request Portal, 
https://foia-pal.occ.gov/ palMain.aspx. Requesters without Internet 
access may continue to contact the Chief FOIA Officer, Communications 
Division, Office of the Comptroller of the Currency, at (202) 649-6700 
to check the status of their FOIA request(s).

[76 FR 43562, July 21, 2011, as amended at 79 FR 15641, Mar. 21, 2014; 
80 FR 28414, May 18, 2015; 81 FR 94246, Dec. 23, 2016]



             Subpart C_Release of Non-Public OCC Information



Sec.  4.31  Purpose and scope.

    (a) Purpose. The purposes of this subpart are to:
    (1) Afford an orderly mechanism for the OCC to process expeditiously 
requests for non-public OCC information; to address the release of non-
public OCC information without a request; and, when appropriate, for the 
OCC to assert evidentiary privileges in litigation;
    (2) Recognize the public's interest in obtaining access to relevant 
and necessary information and the countervailing public interest of 
maintaining the effectiveness of the OCC supervisory process and 
appropriate confidentiality of OCC supervisory information;
    (3) Ensure that the OCC's information is used in a manner that 
supports the public interest and the interests of the OCC;
    (4) Ensure that OCC resources are used in the most efficient manner 
consistent with the OCC's statutory mission;
    (5) Minimize burden on national banks, Federal savings associations, 
the public, and the OCC;
    (6) Limit the expenditure of government resources for private 
purposes; and
    (7) Maintain the OCC's impartiality among private litigants.
    (b) Scope. (1) This subpart applies to requests for, and 
dissemination of, non-public OCC information, including requests for 
records or testimony arising out of civil lawsuits and administrative 
proceedings to which the OCC is not a party and the release of non-
public OCC information without a specific request. Lawsuits and 
administrative proceedings to which the OCC is not a party include 
proceedings in which a Federal agency is a party in opposition to the 
private requester.
    (2) This subpart does not apply to:
    (i) A request for a record or testimony in a proceeding in which the 
OCC is a party; or
    (ii) A request for a record that is required to be disclosed under 
the Freedom of Information Act (FOIA) (5 U.S.C. 552), as described in 
Sec.  4.12.
    (3) A request for a record or testimony made by the Board of 
Governors of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, a government agency of the United States or a foreign 
government, a state agency with authority to investigate violations of 
criminal law, or a state bank or state savings association regulatory 
agency is governed solely by Sec.  4.37(c).
    (4) For purposes of Sec. Sec.  4.35(a)(1), 4.36(a) and 4.37(c) of 
this part, the OCC's decision to disclose records or testimony

[[Page 263]]

involving a Suspicious Activity Report (SAR) filed pursuant to the 
regulations implementing 12 U.S.C. 5318(g), or any information that 
would reveal the existence of a SAR, is governed by 12 CFR 21.11(k).
    (5) This subpart does not apply to requests for non-public 
information filed with the Office of Thrift Supervision (OTS) before 
July 21, 2011. These requests are subject to the rules of the OTS in 
effect on July 20, 2011.

[60 FR 57322, Nov. 15, 1995, as amended at 63 FR 62929, Nov. 10, 1998; 
64 FR 29216, June 1, 1999; 75 FR 75576, Dec. 3, 2010; 76 FR 43562, July 
21, 2011]



Sec.  4.32  Definitions.

    (a) Complete request means a request containing sufficient 
information to allow the OCC to make an informed decision.
    (b) Non-public OCC information. Non-public OCC information:
    (1) Means information that the OCC is not required to release under 
the FOIA (5 U.S.C. 552) or that the OCC has not yet published or made 
available pursuant to 12 U.S.C. 1818(u) and includes:
    (i) A record created or obtained:
    (A) By the OCC in connection with the OCC's performance of its 
responsibilities, such as a record concerning supervision, licensing, 
regulation, and examination of a national bank, a Federal savings 
association, a bank holding company, a savings and loan holding company, 
or an affiliate; or
    (B) By the OTS in connection with the OTS's performance of its 
responsibilities, such as a record concerning supervision, licensing, 
regulation, and examination of a Federal savings association, a savings 
and loan holding company, or an affiliate;
    (ii) A record compiled by the OCC or the OTS in connection with 
either agency's enforcement responsibilities;
    (iii) A report of examination, supervisory correspondence, an 
investigatory file compiled by the OCC or OTS in connection with an 
investigation, and any internal agency memorandum, whether the 
information is in the possession of the OCC or some other individual or 
entity;
    (iv) Confidential OCC information obtained by a third party or 
otherwise incorporated in the records of a third party, including 
another government agency;
    (v) Testimony from, or an interview with, a current or former OCC 
employee, officer, or agent or a former OTS employee, officer, or agent 
concerning information acquired by that person in the course of his or 
her performance of official duties with the OCC or OTS or due to that 
person's official status at the OCC or OTS; and
    (vi) Confidential information relating to operating and no longer 
operating national banks, Federal savings associations, and savings and 
loan holding companies as well as their subsidiaries and their 
affiliates.
    (2) Is the property of the Comptroller.
    (c) Relevant means could contribute substantially to the resolution 
of one or more specifically identified issues in the case.
    (d) Show a compelling need means, in support of a request for 
testimony, demonstrate with as much detail as is necessary under the 
circumstances, that the requested information is relevant and that the 
relevant material contained in the testimony is not available from any 
other source. Sources, without limitation, include the books and records 
of other persons or entities and non-public OCC records that have been, 
or might be, released.
    (e) Supervised entity includes a national bank or Federal savings 
association, a subsidiary of a national bank or Federal savings 
association, or a Federal branch or agency of a foreign bank licensed by 
the OCC as defined under 12 CFR 28.11(g) and (h), or any other entity 
supervised by the OCC.
    (f) Testimony means an interview or sworn testimony on the record.

[60 FR 57322, Nov. 15, 1995, as amended at 63 FR 62929, Nov. 10, 1998; 
64 FR 29216, June 1, 1999; 75 FR 75576, Dec. 3, 2010; 76 FR 43562, July 
21, 2011]



Sec.  4.33  Requirements for a request of records or testimony.

    (a) Generally--(1) Form of request. A person seeking non-public OCC 
information must submit a request in writing to the OCC. The requester 
must explain, in as detailed a description as is necessary under the 
circumstances, the

[[Page 264]]

bases for the request and how the requested non-public OCC information 
relates to the issues in the lawsuit or matter.
    (2) Expedited request. A requester seeking a response in less than 
60 days must explain why the request was not submitted earlier and why 
the OCC should expedite the request.
    (3) Request arising from adversarial matters. Where the requested 
information is to be used in connection with an adversarial matter:
    (i) The OCC generally will require that the lawsuit or 
administrative action has been filed before it will consider the 
request;
    (ii) The request must include:
    (A) A copy of the complaint or other pleading setting forth the 
assertions in the case;
    (B) The caption and docket number of the case;
    (C) The name, address, and phone number of counsel to each party in 
the case; and
    (D) A description of any prior judicial decisions or pending motions 
in the case that may bear on the asserted relevance of the requested 
information;
    (iii) The request must also:
    (A) Show that the information is relevant to the purpose for which 
it is sought;
    (B) Show that other evidence reasonably suited to the requester's 
needs is not available from any other source;
    (C) Show that the need for the information outweighs the public 
interest considerations in maintaining the confidentiality of the OCC 
information and outweighs the burden on the OCC to produce the 
information;
    (D) Explain how the issues in the case and the status of the case 
warrant that the OCC allow disclosure; and
    (E) Identify any other issue that may bear on the question of waiver 
of privilege by the OCC.
    (b) Request for records. If the request is for a record, the 
requester must adequately describe the record or records sought by type 
and date.
    (c) Request for testimony--(1) Generally. A requester seeking 
testimony:
    (i) Must show a compelling need for the requested information; and
    (ii) Should request OCC testimony with sufficient time to obtain the 
testimony in deposition form.
    (2) Trial or hearing testimony. A requester seeking testimony at a 
trial or hearing must show that a deposition would not suffice.



Sec.  4.34  Where to submit a request.

    (a) A request for non-public OCC information. A person requesting 
information under this subpart, requesting authentication of a record 
under Sec.  4.39(d), or submitting a notification of the issuance of a 
subpoena or compulsory process under Sec.  4.37, shall send the request 
or notification to: Office of the Comptroller of the Currency, 400 7th 
Street, SW., Washington, DC 20219, Attention: Director, Litigation 
Division.
    (b) Combined requests for non-public and other OCC information. A 
person requesting public OCC information and non-public OCC information 
under this subpart may submit a combined request for both to the address 
in paragraph (a) of this section. If a requester decides to submit a 
combined request under this section, the OCC will process the combined 
request under this subpart and not under subpart B of this part (FOIA).
    (c) Request by government agencies. A request made pursuant to Sec.  
4.37(c) must be submitted:
    (1) In a civil action, to the Director of the OCC's Litigation 
Division at the Washington office; or
    (2) In a criminal action, to the appropriate district counsel or the 
Director of the OCC's Enforcement Division at the Washington office.

[60 FR 57322, Nov. 15, 1995, as amended at 64 FR 29216, June 1, 1999; 79 
FR 15641, Mar. 21, 2014; 85 FR 42640, July 14, 2020]



Sec.  4.35  Consideration of requests.

    (a) In general--(1) OCC discretion. The OCC decides whether to 
release non-public OCC information based on its weighing of all 
appropriate factors including the requestor's fulfilling of the 
requirements enumerated in Sec.  4.33. Each decision is at the sole 
discretion of the Comptroller or the Comptroller's delegate and is a 
final agency decision. OCC action on a request for non-public

[[Page 265]]

OCC information exhausts administrative remedies for discovery of the 
information.
    (2) Bases for denial. The OCC may deny a request for non-public OCC 
information for reasons that include the following:
    (i) The requester was unsuccessful in showing that the information 
is relevant to the pending matter;
    (ii) The requester seeks testimony and the requestor did not show a 
compelling need for the information;
    (iii) The request arises from an adversarial matter and other 
evidence reasonably suited to the requester's need is available from 
another source;
    (iv) A lawsuit or administrative action has not yet been filed and 
the request was made in connection with potential litigation;
    (v) The production of the information would be contrary to the 
public interest or unduly burdensome to the OCC; or
    (vi) When prohibited by law.
    (3) Additional information. A requester must submit a complete 
request. The OCC may require the requester to provide additional 
information to complete a request. Consistent with the purposes stated 
in Sec.  4.31, the OCC may inquire into the circumstances of any case 
underlying the request and rely on sources of information other than the 
requester, including other parties.
    (4) Time required by the OCC to respond. The OCC generally will 
process requests in the order in which they are received. The OCC will 
notify the requester in writing of the final decision. Absent exigent or 
unusual circumstances, the OCC will respond to a request within 60 days 
from the date that the OCC receives a request that it deems a complete 
request. Consistent with Sec.  4.33(a)(2), the OCC weighs a request to 
respond to provide information in less than 60 days against the 
unfairness to other requesters whose pending requests may be delayed and 
the burden imposed on the OCC by the expedited processing.
    (5) Notice to subject national banks and Federal savings 
associations. Following receipt of a request for non-public OCC 
information, the OCC generally notifies the national bank or Federal 
savings association that is the subject of the requested information, 
unless the OCC, in its discretion, determines that to do so would 
advantage or prejudice any of the parties in the matter at issue.
    (b) Testimony. (1) The OCC generally will not authorize a current 
OCC employee to provide expert or opinion evidence for a private party.
    (2) The OCC may restrict the scope of any authorized testimony and 
may act to ensure that the scope of testimony given by the OCC employee 
adheres to the scope authorized by the OCC.
    (3) Once a request for testimony has been submitted, and before the 
requested testimony occurs, a party to the relevant case, who did not 
join in the request and who wishes to question the witness beyond the 
scope of testimony sought by the request, shall timely submit the 
party's own request for OCC information pursuant to this subpart.
    (4) The OCC may offer the requester the employee's written 
declaration in lieu of testimony.
    (c) Release of non-public OCC information by others. In appropriate 
cases, the OCC may respond to a request for information by authorizing a 
party to the case who is in possession of non-public OCC information to 
release the information to the requester. An OCC authorization to 
release records does not preclude the party in possession from asserting 
its own privilege, arguing that the records are not relevant, or 
asserting any other argument for which it has standing to protect the 
records from release.

[60 FR 57322, Nov. 15, 1995, 75 FR 75576, Dec. 3, 2010; 76 FR 43563, 
July 21, 2011]



Sec.  4.36  Disclosure of non-public OCC information.

    (a) Discretionary disclosure of non-public OCC information. The OCC 
may make non-public OCC information available to a supervised entity and 
to other persons, that in the sole discretion of the Comptroller may be 
necessary or appropriate, without a request for records or testimony.
    (b) OCC policy. It is the OCC's policy regarding non-public OCC 
information that such information is confidential and privileged. 
Accordingly, the OCC

[[Page 266]]

will not normally disclose this information to third parties.
    (c) Conditions and limitations. The OCC may impose any conditions or 
limitations on disclosures under this section, including the 
restrictions on dissemination contained in Sec.  4.38, that it 
determines are necessary to effect the purposes of this section.
    (d) Unauthorized disclosures prohibited. All non-public OCC 
information remains the property of the OCC. No supervised entity, 
government agency, person, or other party to whom the information is 
made available, or any officer, director, employee, or agent thereof, 
may disclose non-public OCC information without the prior written 
permission of the OCC, except in published statistical material that 
does not disclose, either directly or when used in conjunction with 
other publicly available information, the affairs of any individual, 
corporation, or other entity. Except as authorized by the OCC, no person 
obtaining access to non-public OCC information under this section may 
make a copy of the information and no person may remove non-public OCC 
information from the premises of the institution, agency, or other party 
in authorized possession of the information.

[63 FR 62929, Nov. 10, 1998, as amended at 64 FR 29216, June 1, 1999]



Sec.  4.37  Persons and entities with access to OCC information; 
prohibition on dissemination.

    (a) Current and former OCC employees or agents; former OTS employees 
or agents--(1) Generally. Except as authorized by this subpart or 
otherwise by the OCC, no current or former OCC employee or agent or 
former OTS employee or agent, may, in any manner, disclose or permit the 
disclosure of any non-public OCC information to anyone other than an 
employee or agent of the Comptroller for use in the performance of OCC 
duties.
    (2) Duty of person served. Any current or former OCC employee or 
agent or former OTS employee or agent, subpoenaed or otherwise requested 
to provide information covered by this subpart must immediately notify 
the OCC as provided in this paragraph. The OCC may intervene, attempt to 
have the compulsory process withdrawn, and register appropriate 
objections when a current or former OCC employee or agent or former OTS 
employee or agent, receives a subpoena and the subpoena requires the 
current or former employee or agent to appear or produce OCC 
information. If necessary, the current or former employee or agent must 
appear as required and respectfully decline to produce the information 
sought, citing this subpart as authority and United States ex rel. Touhy 
v. Ragen, 340 U.S. 462 (1951). The current or former OCC employee or 
agent or former OTS employee or agent, must immediately notify the OCC 
if subpoenaed or otherwise asked for non-public OCC information:
    (i) In a civil action, by notifying the Director of the OCC's 
Litigation Division at the Washington office; or
    (ii) In a criminal action, by notifying the appropriate district 
counsel for current and former district employees or agents; or the 
Director of the OCC's Enforcement Division at the Washington office, for 
current and former Washington employees or agents and former OTS 
employees or agents.
    (b) Non-OCC employees or entities--(1) Generally. (i) Without OCC 
approval, no person, national bank, Federal savings association, or 
other entity, including one in lawful possession of non-public OCC 
information under paragraph (b)(2) of this section, may disclose 
information covered by this subpart in any manner, except:
    (A) After the requester has sought the information from the OCC 
pursuant to the procedures set forth in this subpart; and
    (B) As ordered by a Federal court in a judicial proceeding in which 
the OCC has had the opportunity to appear and oppose discovery.
    (ii) Any person who discloses or uses non-public OCC information 
except as expressly permitted by the Comptroller of the Currency or as 
ordered by a Federal court, under paragraph (b)(1)(i) of this section, 
may be subject to the penalties provided in 18 U.S.C. 641.
    (2) Exception for national banks and Federal savings associations. 
When necessary or appropriate for business purposes, a national bank, 
Federal savings association, or holding company, or

[[Page 267]]

any director, officer, or employee thereof, may disclose non-public OCC 
information, including information contained in, or related to, OCC 
reports of examination, to a person or organization officially connected 
with the bank or Federal savings association as officer, director, 
employee, attorney, auditor, or independent auditor. A national bank, 
Federal savings association, or holding company or a director, officer, 
or employee thereof, may also release non-public OCC information to a 
consultant under this paragraph if the consultant is under a written 
contract to provide services to the bank or Federal savings association 
and the consultant has a written agreement with the bank or Federal 
savings association in which the consultant:
    (i) States its awareness of, and agreement to abide by, the 
prohibition on the dissemination of non-public OCC information contained 
in paragraph (b)(1) of this section; and
    (ii) Agrees not to use the non-public OCC information for any 
purpose other than as provided under its contract to provide services to 
the bank or Federal savings association.
    (3) Duty of person or entity served. Any person, national bank, 
Federal savings association, or other entity served with a request, 
subpoena, order, motion to compel, or other judicial or administrative 
process to provide non-public OCC information shall:
    (i) Immediately notify the Director of the OCC's Litigation Division 
at the Washington, DC office and inform the Director of all relevant 
facts, including the documents and information requested, so that the 
OCC may intervene in the judicial or administrative action if 
appropriate;
    (ii) Inform the requester of the substance of these rules and, in 
particular, of the obligation to follow the request procedures in 
Sec. Sec.  4.33 and 4.34; and
    (iii) At the appropriate time, inform the court or tribunal that 
issued the process of the substance of these rules.
    (4) Actions of the OCC following notice of service. Following 
receipt of notice pursuant to paragraph (b)(3) of this section, the OCC 
may direct the requester to comply with Sec. Sec.  4.33 and 4.34, 
intervene in the judicial or administrative action, attempt to have the 
compulsory process withdrawn, or register other appropriate objections.
    (5) Return of records. The OCC may require any person in possession 
of OCC records to return the records to the OCC.
    (c) Disclosure to government agencies. When not prohibited by law, 
the Comptroller may make available to the Board of Governors of the 
Federal Reserve System, the Federal Deposit Insurance Corporation, and, 
in the Comptroller's sole discretion, to certain other government 
agencies of the United States and foreign governments, state agencies 
with authority to investigate violations of criminal law, and state bank 
and state savings association regulatory agencies, a copy of a report of 
examination, testimony, or other non-public OCC information for their 
use, when necessary, in the performance of their official duties. All 
non-public OCC information made available pursuant to this paragraph is 
OCC property, and the OCC may condition its use on appropriate 
confidentiality protections, including the mechanisms identified in 
Sec.  4.38.
    (d) Intention of OCC not to waive rights. The possession by any of 
the entities or individuals described in paragraphs (a), (b), and (c) of 
this section of non-public OCC information does not constitute a waiver 
by the OCC of its right to control, or impose limitations on, the 
subsequent use and dissemination of the information.

[60 FR 57322, Nov. 15, 1995. Redesignated and amended at 63 FR 62929, 
Nov. 10, 1998; 64 FR 29217, June 1, 1999; 75 FR 75576, Dec. 3, 2010; 76 
FR 43563, July 21, 2011; 85 FR 42640, July 14, 2020]



Sec.  4.38  Restrictions on dissemination of released information.

    (a) Records. The OCC may condition a decision to release non-public 
OCC information on entry of a protective order by the court or 
administrative tribunal presiding in the particular case or, in non-
adversarial matters, on a written agreement of confidentiality. In a 
case in which a protective order has already been entered, the OCC may 
condition approval for release of non-public OCC information upon the 
inclusion of additional or amended provisions in the protective order. 
The OCC

[[Page 268]]

may authorize a party who obtained records for use in one case to 
provide them to another party in another case.
    (b) Testimony. The OCC may condition its authorization of deposition 
testimony on an agreement of the parties to appropriate limitations, 
such as an agreement to keep the transcript of the testimony under seal 
or to make the transcript available only to the parties, the court, and 
the jury. Upon request or on its own initiative, the OCC may allow use 
of a transcript in other litigation. The OCC may require the requester, 
at the requester's expense, to furnish the OCC with a copy of the 
transcript. The OCC employee whose deposition was transcribed does not 
waive his or her right to review the transcript and to note errors.

[60 FR 57322, Nov. 15, 1995. Redesignated at 63 FR 62929, Nov. 10, 1998]



Sec.  4.39  Notification of parties and procedures for sharing 
and using OCC records in litigation.

    (a) Responsibility of litigants to notify parties of a request for 
testimony. Upon submitting a request to the OCC for the testimony of an 
OCC employee or former OCC or OTS employee, the requester shall notify 
all other parties to the case that a request has been submitted.
    (b) Responsibility of litigants to share released records. The 
requester shall promptly notify other parties to a case of the release 
of non-public OCC information obtained pursuant to this subpart, and, 
upon entry of a protective order, shall provide copies of OCC 
information, including OCC information obtained pursuant to Sec.  4.15, 
to the other parties.
    (c) Retrieval and destruction of released records. At the conclusion 
of an action:
    (1) The requester shall retrieve any non-public OCC information from 
the court's file as soon as the court no longer requires the 
information;
    (2) Each party shall destroy the non-public OCC information covered 
by the protective order; and
    (3) Each party shall certify to the OCC that the non-public OCC 
information covered by the protective order has been destroyed.
    (d) Authentication for use as evidence. Upon request, the OCC 
authenticates released records to facilitate their use as evidence. 
Requesters who require authenticated records or certificates of 
nonexistence of records should, as early as possible, request 
certificates from the OCC's Litigation Division pursuant to Sec.  
4.34(a).

[60 FR 57322, Nov. 15, 1995. Redesignated at 63 FR 62929, Nov. 10, 1998; 
76 FR 43563, July 21, 2011]



Sec.  4.40  Fees for services.

    (a) Fees for records search, copying, and certification. The 
requester shall pay a fee to the OCC, or to a commercial copier under 
contract to the OCC, for any records search, copying, or certification 
in accordance with the standards specified in Sec.  4.17. The OCC may 
require a requester to remit payment prior to providing the requested 
information.
    (b) Witness fees and mileage. A person whose request for testimony 
of a current OCC employee is approved shall, upon completion of the 
testimonial appearance, tender promptly to the OCC payment for the 
witness fees and mileage. The litigant shall compute these amounts in 
accordance with 28 U.S.C. 1821. A litigant whose request for testimony 
of a former OCC employee is approved shall tender promptly to the 
witness any witness fees or mileage due in accordance with 28 U.S.C. 
1821.

[60 FR 57322, Nov. 15, 1995. Redesignated at 63 FR 62929, Nov. 10, 1998]



Sec. Appendix A to Subpart C of Part 4--Model Stipulation for Protective 
                    Order and Model Protective Order

                          I. Model Stipulation

                              CASE CAPTION

                 Model Stipulation for Protective Order

    Whereas, counsel for ______ have applied to the Comptroller of the 
Currency (hereinafter ``Comptroller'') pursuant to 12 CFR part 4, 
Subpart C, for permission to have made available, in connection with the 
captioned action, certain records; and
    Whereas, such records are deemed by the Comptroller to be 
confidential and privileged, pursuant to 12 U.S.C. 481, 1463(a)(1), 
1464(a)(1) and 1464(d)(1)(B)(i); 5 U.S.C. 552(b)(8); 18 U.S.C. 641, 
1906; and 12 CFR 4.12, and part 4, Subpart C; and

[[Page 269]]

    Whereas, following consideration by the Comptroller of the 
application of the above described party, the Comptroller has determined 
that the particular circumstances of the captioned action warrant making 
certain possibly relevant records as denoted in appendix ``A'' to this 
Stipulation [records to be specified by type and date] available to the 
parties in this action, provided that appropriate protection of their 
confidentiality can be secured;
    Therefore, it is hereby stipulated by and between the parties 
hereto, through their respective attorneys that they will be bound by 
the following protective order which may be entered by the Court without 
further notice.
    Dated this ______ day of _______, 19__.

________________________________________________________________________
Attorney for Plaintiff

________________________________________________________________________
Attorney for Defendant

                       II. Model Protective Order

                              CASE CAPTION

                         Model Protective Order

    Whereas, counsel for ______ have applied to the Comptroller of the 
Currency (hereinafter Comptroller'') pursuant to 12 CFR part 4, Subpart 
C, for permission to have made available, in connection with the 
captioned action, certain records; and
    Whereas, such records are deemed by the Comptroller to be 
confidential and privileged, pursuant to 12 U.S.C. 481, 1463(a)(1), 
1464(a)(1) and 1464(d)(1)(B)(i); 5 U.S.C. 552(b)(8); 18 U.S.C. 641, 
1906; and 12 CFR 4.12, and part 4, Subpart C;
    Whereas, following consideration by the Comptroller of the 
application of the above described party, the Comptroller has determined 
that the particular circumstances of the captioned action warrant making 
certain possibly relevant records available to the parties in this 
action, provided that appropriate protection of their confidentiality 
can be secured;
    Now, Therefore, it is Ordered That:
    1. The records, as denoted in appendix ``A'' to the Stipulation for 
this Protective Order, upon being furnished [or released for use] by the 
Comptroller, shall be disclosed only to the parties to this action, 
their counsel, and the court [and the jury].
    2. The parties to this action and their counsel shall keep such 
records and any information contained in such records confidential and 
shall in no way divulge the same to any person or entity, except to such 
experts, consultants and non-party witnesses to whom the records and 
their contents shall be disclosed, solely for the purpose of properly 
preparing for and trying the action.
    3. No person to whom information and records covered by this Order 
are disclosed shall make any copies or otherwise use such information or 
records or their contents for any purpose whatsoever, except in 
connection with this action.
    4. Any party or other person who wishes to use the information or 
records or their contents in any other action shall make a separate 
application to the Comptroller pursuant to 12 CFR part 4, Subpart C.
    5. Should any records covered by this Order be filed with the Court 
or utilized as exhibits at depositions in the captioned action, or 
should information or records or their contents covered by this Order be 
disclosed in the transcripts of depositions or the trial in the 
captioned action, such records, exhibits and transcripts shall be filed 
in sealed envelopes or other sealed containers marked with the title of 
this action, identifying each document and article therein and bearing a 
statement substantially in the following form:

                              CONFIDENTIAL

    Pursuant to the Order of the Court dated ______ this envelope 
containing the above-identified papers filed by (the name of the party) 
is not to be opened nor the contents thereof displayed or revealed 
except to the parties to this action or their counsel or by further 
Order of the Court.
    6. FOR JURY TRIAL: Any party offering any of the records into 
evidence shall offer only those pages, or portions thereof, that are 
relevant and material to the issues to be decided in the action and 
shall block out any portion of any page that contains information not 
relevant or material. Furthermore, the name of any person or entity 
contained on any page of the records who is not a party to this action, 
or whose name is not otherwise relevant or material to the action, shall 
be blocked out prior to the admission of such page into evidence. Any 
disagreement regarding what portion of any page that should be blocked 
out in this manner shall be resolved by the Court in camera, and the 
Court shall decide its admissibility into evidence.
    7. At the conclusion of this action, all parties shall certify to 
the Comptroller that the records covered by this Order have been 
destroyed. Furthermore, counsel for ______, pursuant to 12 CFR 4.39(c), 
shall retrieve any records covered by this Order that may have been 
filed with the Court.

    So Ordered:

________________________________________________________________________
Judge

    Date

[60 FR 57322, Nov. 15, 1995, as amended at 64 FR 29217, June 1, 1999]

[[Page 270]]



 Subpart D_Minority- , Women- , and Individuals With Disabilities-Owned 
    Business Contracting Outreach Program; Contracting for Goods and 
                                Services



Sec.  4.61  Purpose.

    Pursuant to the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989, Sec. 1216(c), Pub. L. 101-73, 103 Stat. 183, 
529 (12 U.S.C. 1833e(c)) and consistent with the Rehabilitation Act of 
1973, as amended (29 U.S.C. 701 et seq.), this subpart establishes the 
OCC Minority- , Women- , and Individuals with Disabilities-Owned 
Business Contracting Outreach Program (Outreach Program). The Outreach 
Program is intended to ensure that firms owned and operated by 
minorities, women, and individuals with disabilities have the 
opportunity to participate, to the maximum extent possible, in all 
contracting activities of the OCC.



Sec.  4.62  Definitions.

    (a) Minority- and/or women-owned (small and large) businesses and 
entities owned by minorities and women (MWOB) means firms at least 51 
percent unconditionally-owned by one or more members of a minority group 
or by one or more women who are citizens of the United States. In the 
case of publicly-owned companies, at least 51 percent of each class of 
voting stock must be unconditionally-owned by one or more members of a 
minority group or by one or more women who are citizens of the United 
States. In the case of a partnership, at least 51 percent of the 
partnership interest must be unconditionally-owned by one or more 
members of a minority group or by one or more women who are citizens of 
the United States. Additionally, for the foregoing cases, the management 
and daily business operations must be controlled by one or more such 
individuals.
    (b) Minority means any African American, Native American (i.e., 
American Indian, Eskimo, Aleut and Native Hawaiian), Hispanic American, 
Asian-Pacific American, or Subcontinent-Asian American.
    (c) Individual with disabilities-owned (small and large) businesses 
and entities owned by individuals with disabilities (IDOB) means firms 
at least 51 percent unconditionally-owned by one or more members who are 
individuals with disabilities and citizens of the United States. In the 
case of publicly-owned companies, at least 51 percent of each class of 
voting stock must be unconditionally-owned by one or more members who 
are individuals with disabilities and who are citizens of the United 
States. In the case of a partnership, at least 51 percent of the 
partnership interest must be unconditionally-owned by one or more 
members who are individuals with disabilities and citizens of the United 
States. Additionally, for the foregoing cases, the management and daily 
business operations must be controlled by one or more such individuals.
    (d) Individual with disabilities means any person who has a physical 
or mental impairment that substantially limits one or more of such 
person's major life activities, has a record of such an impairment, or 
is regarded as having such an impairment. For purposes of this part, it 
does not include an individual who is currently engaging in the illegal 
use of drugs nor an individual who has a currently contagious disease or 
infection and who, by reason of such disease or infection, would 
constitute a direct threat to the health or safety of other individuals 
or who, by reason of the currently contagious disease or infection, is 
unable to perform the duties of the job as defined by the IDOB.
    (e) Unconditional ownership means ownership that is not subject to 
conditions or similar arrangements which cause the benefits of the 
Outreach Program to accrue to persons other than the participating MWOB 
or IDOB.



Sec.  4.63  Policy.

    The OCC's policy is to ensure that MWOBs and IDOBs have the 
opportunity to participate, to the maximum extent possible, in contracts 
awarded by the OCC. The OCC awards contracts consistent with the 
principles of full and open competition and best value acquisition, and 
with the concept of contracting for agency needs at the

[[Page 271]]

lowest practicable cost. The OCC ensures that MWOBs and IDOBs have the 
opportunity to participate fully in all contracting activities that the 
OCC enters into for goods and services, whether generated by the 
headquarters office in Washington, DC, or any other office of the OCC. 
Contracting opportunities may include small purchase awards, contracts 
above the small purchase threshold, and delivery orders issued against 
other governmental agency contracts.



Sec.  4.64  Promotion.

    (a) Scope. The OCC, under the direction of the Deputy Comptroller 
for Resource Management, engages in promotion and outreach activities 
designed to identify MWOBs and IDOBs capable of providing goods and 
services needed by the OCC, to facilitate interaction between the OCC 
and the MWOBs and IDOBs community, and to indicate the OCC's commitment 
to doing business with that community. The Outreach Program is designed 
to facilitate OCC's participation in business promotion events sponsored 
by other government agencies and attended by minorities, women and 
individuals with disabilities. Once the OCC has identified a prospective 
participant, it will assist the minority- or women-owned business or 
individual with disabilities-owned business in understanding the OCC's 
needs and contracting process.
    (b) Outreach activities. OCC's Outreach Program includes the 
following:
    (1) Obtaining various lists and directories of MWOBs and IDOBs 
maintained by government agencies;
    (2) Contacting appropriate firms for participation in the OCC's 
Outreach Program;
    (3) Participating in business promotion events comprised of or 
attended by MWOBs and IDOBs to explain OCC contracting opportunities and 
to obtain names of potential MWOBs and IDOBs;
    (4) Ensuring that the OCC contracting staff understands and actively 
promotes this Outreach Program; and
    (5) Registering MWOBs and IDOBs in the Department of the Treasury's 
database to facilitate their participation in the competitive 
procurement process for OCC contracts. This database is used by OCC 
procurement staff to identify firms to be solicited for OCC 
procurements.



Sec.  4.65  Certification.

    (a) Objective. To preserve the integrity and foster the Outreach 
Program's objectives, each prospective MWOB or IDOB must demonstrate 
that it meets the ownership and control requirements for participation 
in the Outreach Program.
    (b) MWOB. A prospective MWOB may demonstrate its eligibility for 
participation in the Outreach Program by:
    (1) Submitting a valid MWOB certification received from another 
government agency whose definition of MWOB is substantially similar to 
that specified in Sec.  4.62(a);
    (2) Self-certifying MWOB ownership status by filing with the OCC a 
completed and signed certification form as prescribed by the Federal 
Acquisition Regulation, 48 CFR 53.301-129; or
    (3) Submitting a valid MWOB certification received from the Small 
Business Administration.
    (c) IDOB. A prospective IDOB may demonstrate its eligibility for 
participation in the Outreach Program by:
    (1) Submitting a valid IDOB certification received from another 
government agency whose definition of IDOB is substantially similar to 
that specified in Sec.  4.62(c); or
    (2) Self-certifying IDOB ownership status by filing with the OCC a 
completed and signed certification as prescribed in the Federal 
Acquisition Regulation, 48 CFR 53.301-129, and adding an additional 
certifying statement to read as follows:

    I certify that I am an individual with disabilities as defined in 12 
CFR 4.62(d), and that my firm, (Name of Firm) qualifies as an individual 
with disabilities-owned business as defined in 12 CFR 4.62(c).



Sec.  4.66  Oversight and monitoring.

    The Deputy Comptroller for Resource Management shall appoint an 
Outreach Program Manager, who shall appoint an Outreach Program 
Specialist. The Outreach Program Manager is primarily responsible for 
program advocacy, oversight and monitoring.

[[Page 272]]



Subpart E_One-Year Restrictions on Post-Employment Activities of Senior 
                                Examiners

    Source: 70 FR 69637, Nov. 17, 2005, unless otherwise noted.



Sec.  4.72  Scope and purpose.

    This subpart describes those OCC examiners who are subject to the 
post-employment restrictions set forth in section 10(k) of the Federal 
Deposit Insurance Act (FDI Act) (12 U.S.C. 1820(k)) and implements those 
restrictions for officers and employees of the OCC.



Sec.  4.73  Definitions.

    For purposes of this subpart:
    Bank holding company means any company that controls a bank (as 
provided in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841 et seq.)).
    Consultant. For purposes of this subpart, a consultant for a 
national bank, savings association, bank holding company, savings and 
loan holding company, or other company shall include only an individual 
who works directly on matters for, or on behalf of, such bank, savings 
association, bank holding company, savings and loan holding company, or 
other company.
    Control has the meaning given in section 2 of the Bank Holding 
Company Act (12 U.S.C. 1841(a)) or in section 10 of the Home Owners' 
Loan Act (12 U.S.C. 1467a), as applicable under the circumstances. For 
purposes of this subpart, a foreign bank shall be deemed to control any 
branch or agency of the foreign bank.
    Depository institution has the meaning given in section 3 of the FDI 
Act (12 U.S.C. 1813(c)). For purposes of this subpart, a depository 
institution includes an uninsured branch or agency of a foreign bank, if 
such branch or agency is located in any State.
    Federal Reserve means the Board of Governors of the Federal Reserve 
System and the Federal Reserve Banks.
    Foreign bank means any foreign bank or company described in section 
8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)).
    Insured depository institution has the meaning given in section 3 of 
the FDI Act (12 U.S.C. 1813(c)(2)).
    National bank means a national banking association or a Federal 
branch or agency of a foreign bank.
    Savings association has the meaning given in section 3 of the FDI 
Act (12 U.S.C. 1813(b)(1)).
    Savings and loan holding company means any company that controls a 
savings association or any other company that is a savings and loan 
holding company (as provided in section 10 of the Home Owners' Loan Act 
(12 U.S.C. 1467a)).
    Senior examiner. For purposes of this subpart, an officer or 
employee of the OCC is considered to be the ``senior examiner'' for a 
particular national bank or savings association if--
    (1) The officer or employee has been authorized by the OCC to 
conduct examinations on behalf of the OCC;
    (2) The officer or employee has been assigned continuing, broad, and 
lead responsibility for examining the national bank or savings 
association; and
    (3) The officer's or employee's responsibilities for examining the 
national bank or savings association--
    (i) Represent a substantial portion of the officer's or employee's 
assigned responsibilities; and
    (ii) Require the officer or employee to interact routinely with 
officers or employees of the national bank or savings association, or 
its affiliates.''

[70 FR 69637, Nov. 17, 2005, as amended at 76 FR 43563, July 21, 2011]



Sec.  4.74  One-year post-employment restrictions.

    An officer or employee of the OCC who serves as the senior examiner 
of a national bank or savings association for two or more months during 
the last twelve months of such individual's employment with the OCC may 
not, within one year after leaving the employment of the OCC, knowingly 
accept compensation as an employee, officer, director or consultant from 
the national bank, savings association, or any company (including a bank 
holding company or savings and loan holding company) that controls the 
national bank or savings association.

[76 FR 43564, July 21, 2011]

[[Page 273]]



Sec.  4.75  Waivers.

    The post-employment restrictions set forth in section 10(k) of the 
FDI Act (12 U.S.C. 1820(k)) and Sec.  4.74 do not apply to any officer 
or employee of the OCC, or any former officer or employee of the OCC, if 
the Comptroller of the Currency certifies, in writing and on a case-by-
case basis, that granting the individual a waiver of the restrictions 
would not affect the integrity of the OCC's supervisory program.

[76 FR 43564, July 21, 2011]



Sec.  4.76  Penalties.

    (a) Penalties under section 10(k) of FDI Act (12 U.S.C. 1820(k)). If 
a senior examiner of a national bank or savings association, after 
leaving the employment of the OCC, accepts compensation as an employee, 
officer, director, or consultant from that bank, savings association, or 
any company (including a bank holding company or savings and loan 
holding company) that controls that bank or savings association in 
violation of Sec.  4.74, then the examiner shall, in accordance with 
section 10(k)(6) of the FDI Act (12 U.S.C. 1820(k)(6)), be subject to 
one of the following penalties--
    (1) An order--
    (i) Removing the individual from office or prohibiting the 
individual from further participation in the affairs of the relevant 
national bank, savings association, bank holding company, savings and 
loan holding company, or other company that controls such institution 
for a period of up to five years; and
    (ii) Prohibiting the individual from participating in the affairs of 
any insured depository institution for a period of up to five years; or
    (2) A civil monetary penalty of not more than $250,000.
    (b) Enforcement by appropriate Federal banking agency. Violations of 
Sec.  4.74 shall be administered or enforced by the appropriate Federal 
banking agency for the depository institution or depository institution 
holding company that provided compensation to the former senior 
examiner. For purposes of this paragraph, the appropriate Federal 
banking agency for a company that is not a depository institution or 
depository institution holding company shall be the Federal banking 
agency that formerly employed the senior examiner.
    (c) Scope of prohibition orders. Any senior examiner who is subject 
to an order issued under paragraph (a) of this section shall, as 
required by 12 U.S.C. 1820(k)(6)(B), be subject to paragraphs (6) and 
(7) of section 8(e) of the FDI Act (12 U.S.C. 1818(e)(6)-(7)) in the 
same manner and to the same extent as a person subject to an order 
issued under section 8(e).
    (d) Procedures. The procedures applicable to actions under paragraph 
(a) of this section are provided in section 10(k)(6) of the FDI Act (12 
U.S.C. 1820(k)(6)) and in 12 CFR part 19.
    (e) Remedies not exclusive. The OCC may seek both of the penalties 
described in paragraph (a) of this section. In addition, a senior 
examiner who accepts compensation as described in Sec.  4.74 may be 
subject to other administrative, civil or criminal remedies or penalties 
as provided in law.

[60 FR 57322, Nov. 15, 1995, as amended at 76 FR 43564, July 21, 2011]



                  Subpart F_Use of Supervisory Guidance

    Source: 86 FR 9260, Feb. 12, 2021, unless otherwise noted.



Sec.  4.81  Purpose.

    The OCC issues regulations and guidance as part of its supervisory 
function. This subpart reiterates the distinctions between regulations 
and guidance, as stated in the Statement Clarifying the Role of 
Supervisory Guidance (appendix A to this subpart) (Statement).



Sec.  4.82  Implementation of the Statement Clarifying the Role 
of Supervisory Guidance.

    The Statement describes the official policy of the OCC with respect 
to the use of supervisory guidance in the supervisory process. The 
Statement is binding on the OCC.

[[Page 274]]



Sec.  4.83  Rule of construction.

    This subpart does not alter the legal status of guidelines 
authorized by statute, including but not limited to, 12 U.S.C. 1831p-1, 
to create binding legal obligations.



Sec. Appendix A to Subpart F of Part 4--Statement Clarifying the Role of 
                          Supervisory Guidance

          Statement Clarifying the Role of Supervisory Guidance

    The OCC is issuing this statement to explain the role of supervisory 
guidance and to describe the OCC's approach to supervisory guidance.

     Difference Between Supervisory Guidance and Laws or Regulations

    (1) The OCC issues various types of supervisory guidance, including 
interagency statements, advisories, bulletins, policy statements, 
questions and answers, and frequently asked questions, to its supervised 
institutions. A law or regulation has the force and effect of law.\36\ 
Unlike a law or regulation, supervisory guidance does not have the force 
and effect of law, and the OCC does not take enforcement actions based 
on supervisory guidance. Rather, supervisory guidance outlines the OCC's 
supervisory expectations or priorities and articulates the OCC's general 
views regarding appropriate practices for a given subject area. 
Supervisory guidance often provides examples of practices that the OCC 
generally considers consistent with safety-and-soundness standards or 
other applicable laws and regulations, including those designed to 
protect consumers. Supervised institutions at times request supervisory 
guidance, and such guidance is important to provide insight to the 
industry, as well as supervisory staff, in a transparent way that helps 
to ensure consistency in the supervisory approach.
---------------------------------------------------------------------------

    \36\ Government agencies issue regulations that generally have the 
force and effect of law. Such regulations generally take effect only 
after the agency proposes the regulation to the public and responds to 
comments on the Proposal in a final rulemaking document.
---------------------------------------------------------------------------

       Ongoing Efforts To Clarify the Role of Supervisory Guidance

    (2) The OCC is clarifying the following policies and practices 
related to supervisory guidance:
    (i) The OCC intends to limit the use of numerical thresholds or 
other ``bright-lines'' in describing expectations in supervisory 
guidance. Where numerical thresholds are used, the OCC intends to 
clarify that the thresholds are exemplary only and not suggestive of 
requirements. The OCC will continue to use numerical thresholds to 
tailor, and otherwise make clear, the applicability of supervisory 
guidance or programs to supervised institutions, and as required by 
statute.
    (ii) Examiners will not criticize (through the issuance of matters 
requiring attention), a supervised financial institution for, and the 
OCC will not issue an enforcement action on the basis of, a 
``violation'' of or ``non-compliance'' with supervisory guidance. In 
some situations, examiners may reference (including in writing) 
supervisory guidance to provide examples of safe and sound conduct, 
appropriate consumer protection and risk management practices, and other 
actions for addressing compliance with laws or regulations.
    (iii) Supervisory criticisms should continue to be specific as to 
practices, operations, financial conditions, or other matters that could 
have a negative effect on the safety and soundness of the financial 
institution, could cause consumer harm, or could cause violations of 
laws, regulations, final agency orders, or other legally enforceable 
conditions.
    (iv) The OCC has at times sought, and may continue to seek, public 
comment on supervisory guidance. Seeking public comment on supervisory 
guidance does not mean that the guidance is intended to be a regulation 
or have the force and effect of law. The comment process helps the OCC 
to improve its understanding of an issue, to gather information on 
institutions' risk management practices, or to seek ways to achieve a 
supervisory objective most effectively and with the least burden on 
institutions.
    (v) The OCC will aim to reduce the issuance of multiple supervisory 
guidance documents on the same topic and will generally limit such 
multiple issuances going forward.
    (vi) The OCC will continue efforts to make the role of supervisory 
guidance clear in communications to examiners and to supervised 
financial institutions and encourage supervised institutions with 
questions about this statement or any applicable supervisory guidance to 
discuss the questions with their appropriate agency contact.



PART 5_RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES--
Table of Contents



Sec.
5.1 Scope.

                Subpart A_Rules of General Applicability

5.2 Rules of general applicability.
5.3 Definitions.

[[Page 275]]

5.4 Filing required.
5.5 Filing fees.
5.6 [Reserved]
5.7 Investigations.
5.8 Public notice.
5.9 Public availability.
5.10 Comments.
5.11 Hearings and other meetings.
5.12 Computation of time.
5.13 Decisions.

                      Subpart B_Initial Activities

5.20 Organizing a national bank or Federal savings association.
5.21 Federal mutual savings association charter and bylaws.
5.22 Federal stock savings association charter and bylaws.
5.23 Conversion to become a Federal savings association.
5.24 Conversion to become a national bank.
5.25 Conversion from a national bank or Federal savings association to a 
          State bank or State savings association.
5.26 Fiduciary powers of national banks and Federal savings 
          associations.

                    Subpart C_Expansion of Activities

5.30 Establishment, acquisition, and relocation of a branch of a 
          national bank.
5.31 Establishment, acquisition, and relocation of a branch and 
          establishment of an agency office of a Federal savings 
          association.
5.32 Expedited procedures for certain reorganizations of a national 
          bank.
5.33 Business combinations involving a national bank or Federal savings 
          association.
5.34 Operating subsidiaries of a national bank.
5.35 Bank service company investments by a national bank or Federal 
          savings association.
5.36 Other equity investments by a national bank.
5.37 Investment in national bank or Federal savings association 
          premises.
5.38 Operating subsidiaries of a Federal savings association.
5.39 Financial subsidiaries of a national bank.

          Subpart D_Other Changes in Activities and Operations

5.40 Change in location of a main office of a national bank or home 
          office of a Federal savings association.
5.42 Corporate title of a national bank or Federal savings association.
5.43 National bank director residency and citizenship waivers.
5.45 Increases in permanent capital of a Federal stock savings 
          association.
5.46 Changes in permanent capital of a national bank.
5.47 Subordinated debt issued by a national bank.
5.48 Voluntary liquidation of a national bank or Federal savings 
          association.
5.50 Change in control of a national bank or Federal savings 
          association; reporting of stock loans.
5.51 Changes in directors and senior executive officers of a national 
          bank or Federal savings association.
5.52 Change of address of a national bank or Federal savings 
          association.
5.53 Substantial asset change by a national bank or Federal savings 
          association.
5.55 Capital distributions by Federal savings associations.
5.56 Inclusion of subordinated debt securities and mandatorily 
          redeemable preferred stock as Federal savings association 
          supplementary (tier 2) capital.
5.58 Pass-through investments by a Federal savings association.
5.59 Service corporations of Federal savings associations.

            Subpart E_Payment of Dividends by National Banks

5.60 Authority, scope, and exceptions to rules of general applicability.
5.61 Definitions.
5.62 Date of declaration of dividend.
5.63 Capital limitation under 12 U.S.C. 56.
5.64 Earnings limitation under 12 U.S.C. 60.
5.65 Restrictions on undercapitalized institutions.
5.66 Dividends payable in property other than cash.
5.67 Fractional shares.

                 Subpart F_Federal Branches and Agencies

5.70 Federal branches and agencies.

    Authority: 12 U.S.C. 1 et seq., 24a, 35, 93a, 214a, 215, 215a, 215a-
1, 215a-2, 215a-3, 215c, 371d, 481, 1462a, 1463, 1464, 1817(j), 1831i, 
1831u, 2901 et seq., 3101 et seq., 3907, and 5412(b)(2)(B).

    Source: 61 FR 60363, Nov. 27, 1996, unless otherwise noted.



Sec.  5.1  Scope.

    This part establishes rules, policies and procedures of the Office 
of the Comptroller of the Currency (OCC) for corporate activities and 
transactions involving national banks and Federal savings associations. 
It contains information on rules of general and specific applicability, 
where and how to file, and requirements and policies applicable to 
filings. This part also establishes

[[Page 276]]

the corporate filing procedures for Federal branches and agencies of 
foreign banks.

[80 FR 28414, May 18, 2015]



                Subpart A_Rules of General Applicability

    Source: 80 FR 28414, May 18, 2015, unless otherwise noted.



Sec.  5.2  Rules of general applicability.

    (a) In general. The rules in this subpart apply to all sections in 
this part unless otherwise stated.
    (b) Exceptions. The OCC may adopt materially different procedures 
for a particular filing, or class of filings as it deems necessary, for 
example, in exceptional circumstances or for unusual transactions, after 
providing notice of the change to the filer and to any other party that 
the OCC determines should receive notice.
    (c) Comptroller's Licensing Manual. The ``Comptroller's Licensing 
Manual'' provides additional filing guidance, including policies and 
procedures. This Manual and sample forms are available at www.occ.gov.
    (d) Electronic filing. The OCC encourages electronic filing for all 
filings. The Comptroller's Licensing Manual describes the OCC's 
electronic filing procedures.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80434, Dec. 11, 2020]



Sec.  5.3  Definitions.

    As used in this part:
    Application means a submission requesting OCC approval to engage in 
various corporate activities and transactions.
    Appropriate Federal banking agency has the meaning set forth in 
section 3(q) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(q).
    Appropriate OCC licensing office means the OCC office that is 
responsible for processing applications or notices to engage in various 
corporate activities or transactions, as described at www.occ.gov.
    Appropriate OCC supervisory office means the OCC office that is 
responsible for the supervision of a national bank or Federal savings 
association, as described in subpart A of 12 CFR part 4.
    Capital and surplus means:
    (1) For qualifying community banking organizations that have elected 
to use the community bank leverage ratio framework, as set forth under 
the OCC's Capital Adequacy Standards at part 3 of this chapter:
    (i) A qualifying community banking organization's tier 1 capital, as 
used under Sec.  3.12 of this chapter; plus
    (ii) A qualifying community banking organization's allowance for 
loan and lease losses or adjusted allowances for credit losses, as 
applicable, as reported in the national bank's or Federal savings 
association's Consolidated Report of Condition and Income (Call Report); 
or
    (2) For all other national banks and Federal savings associations:
    (i) A national bank's or Federal savings association's tier 1 and 
tier 2 capital calculated under the OCC's risk-based capital standards 
set forth in part 3 of this chapter, as applicable, as reported in the 
Call Report, respectively; plus
    (ii) The balance of the national bank's or Federal savings 
association's allowance for loan and lease losses or adjusted allowances 
for credit losses, as applicable, not included in the institution's tier 
2 capital, for purposes of the calculation of risk-based capital 
described in paragraph (2)(i) of this definition, as reported in the 
Call Report.
    Depository institution means any bank or savings association.
    Eligible bank or eligible savings association means a national bank 
or Federal savings association that:
    (1) Is well capitalized under Sec.  5.3;
    (2) Has a composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System (CAMELS);
    (3) Has a Community Reinvestment Act (CRA), 12 U.S.C. 2901 et seq., 
rating of ``Outstanding'' or ``Satisfactory,'' if applicable;
    (4) Has a consumer compliance rating of 1 or 2 under the Uniform 
Interagency Consumer Compliance Rating System; and
    (5) Is not subject to a cease and desist order, consent order, 
formal written

[[Page 277]]

agreement, or Prompt Corrective Action directive (see 12 CFR part 6, 
subpart B) or, if subject to any such order, agreement, or directive, is 
informed in writing by the OCC that the bank or savings association may 
be treated as an ``eligible bank or eligible savings association'' for 
purposes of this part.
    Eligible depository institution means:
    (1) With respect to a national bank, a State bank or a Federal or 
State savings association that meets the criteria for an ``eligible bank 
or eligible savings association'' under Sec.  5.3 and is FDIC-insured; 
and
    (2) With respect to a Federal savings association, a State or 
national bank or a State savings association that meets the criteria for 
an ``eligible bank or eligible savings association'' under Sec.  5.3 and 
is FDIC-insured.
    FDIC means the Federal Deposit Insurance Corporation.
    Filer means a person or entity that submits a notice or application 
to the OCC under this part.
    Filing means an application or notice submitted to the OCC under 
this part.
    GAAP means generally accepted accounting principles as used in the 
United States.
    MSA means metropolitan statistical area as defined by the Director 
of the Office of Management and Budget.
    Nonconforming assets and nonconforming activities mean assets or 
activities, respectively, that are impermissible for national banks or 
Federal savings associations to hold or conduct, as applicable, or, if 
permissible, are held or conducted in a manner that exceeds limits 
applicable to national banks or Federal savings associations, as 
applicable. Assets include investments in subsidiaries or other 
entities.
    Notice, in general, means a submission notifying the OCC that a 
national bank or Federal savings association intends to engage in or has 
commenced certain corporate activities or transactions. The specific 
meaning of notice depends on the context of the rule in which it is used 
and may provide the OCC with authority to disapprove the notice or may 
be informational requiring no official OCC action.
    OTS means the former Office of Thrift Supervision.
    Previously approved activity means:
    (1) In the case of a national bank, any activity approved in 
published OCC precedent for a national bank, an operating subsidiary of 
a national bank, or a non-controlling investment of a national bank; and
    (2) In the case of a Federal savings association, any activity 
approved in published OCC or OTS precedent for a Federal savings 
association, an operating subsidiary of a Federal savings association, 
or a pass-through investment of a Federal savings association.
    Principal city means an area designated as a ``principal city'' by 
the Office of Management and Budget.
    Short-distance relocation means moving the premises of a branch or 
main office of a national bank or a branch or home office of a Federal 
savings association within a:
    (1) One thousand foot-radius of the site if the branch, main office, 
or home office is located within a principal city of an MSA;
    (2) One-mile radius of the site if the branch, main office, or home 
office is not located within a principal city, but is located within an 
MSA; or
    (3) Two-mile radius of the site if the branch, main office, or home 
office is not located within an MSA.
    Well capitalized means:
    (1) In the case of a national bank or Federal savings association, 
the capital level described in 12 CFR 6.4(b)(1);
    (2) In the case of a Federal branch or agency, the capital level 
described in 12 CFR 4.7(b)(1)(iii); or
    (3) In the case of another depository institution, the capital level 
designated as ``well capitalized'' by the institution's appropriate 
Federal banking agency pursuant to section 38 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831o).
    Well managed means:
    (1) In the case of a national bank or Federal savings association:
    (i) Unless otherwise determined in writing by the OCC, the national 
bank or Federal savings association has received a composite rating of 1 
or 2 under the Uniform Financial Institutions Rating System in 
connection with its most recent examination, and at least a rating of 2 
for management, if such a rating is given; or

[[Page 278]]

    (ii) In the case of a national bank or Federal savings association 
that has not been examined by the OCC, the existence and use of 
managerial resources that the OCC determines are satisfactory.
    (2) In the case of a Federal branch or agency of a foreign bank:
    (i) Unless determined otherwise in writing by the OCC, the Federal 
branch or agency has received a composite ROCA supervisory rating (which 
rates risk management, operational controls, compliance, and asset 
quality) of 1 or 2 at its most recent examination, and at least a rating 
of 2 for risk management, if such a rating is given; or
    (ii) In the case of a Federal branch or agency that has not been 
examined by the OCC, the existence and use of managerial resources that 
the OCC determines are satisfactory.
    (3) In the case of another depository institution:
    (i) Unless otherwise determined in writing by the appropriate 
Federal banking agency, the institution has received a composite rating 
of 1 or 2 under the Uniform Financial Institutions Rating System (or an 
equivalent rating under an equivalent rating system) in connection with 
the most recent examination or subsequent review of the depository 
institution and, at least a rating of 2 for management, if such a rating 
is given; or
    (ii) In the case of another depository institution that has not been 
examined by its appropriate Federal banking agency, the existence and 
use of managerial resources that the appropriate Federal banking agency 
determines are satisfactory.

[85 FR 80434, Dec. 11, 2020]



Sec.  5.4  Filing required.

    (a) Filing. A depository institution must file an application or 
notice with the OCC to engage in corporate activities and transactions 
as described in this part.
    (b) Availability of forms. Forms and instructions for filing are 
available at www.occ.gov.
    (c) Other agency's applications or filings. At the request of the 
filer, the OCC may accept an application or other filing submitted to 
another Federal agency that covers the proposed action or transaction 
and contains substantially the same information as required by the OCC. 
The OCC also may require the filer to submit supplemental information.
    (d) Where to file. A filer should address a filing or other 
submission under this part to the appropriate OCC licensing office or 
appropriate OCC supervisory office, unless the OCC advises a filer 
otherwise. Relevant addresses are listed on www.occ.gov.
    (e) Incorporation of other material. A filer may incorporate any 
material contained in any other application or filing filed with the OCC 
or other Federal agency by reference, provided that the material is 
attached to the application and is current and responsive to the 
information requested by the OCC. The filing must clearly indicate that 
the information is so incorporated and include a cross-reference to the 
information incorporated.
    (f) Prefiling meeting. Before submitting a filing to the OCC, a 
potential filer is encouraged to contact the appropriate OCC licensing 
office to determine the need for a prefiling meeting. The OCC decides 
whether to require a prefiling meeting on a case-by-case basis. 
Submission of a draft business plan or other relevant information before 
any prefiling meeting may expedite the filing review process. A 
potential filer considering a novel, complex, or unique proposal is 
encouraged to contact the appropriate OCC licensing office to schedule a 
prefiling meeting early in the development of its proposal for the early 
identification and consideration of policy issues. Information on model 
business plans can be found in the Comptroller's Licensing Manual.
    (g) Certification. A filer must certify that any filing or 
supporting material submitted to the OCC contains no material 
misrepresentations or omissions. The OCC may review and verify any 
information filed in connection with a notice or an application. Any 
person responsible for any material misrepresentation or omission in a 
filing or supporting materials may be subject to enforcement action and 
other penalties,

[[Page 279]]

including criminal penalties provided in 18 U.S.C. 1001.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80435, Dec. 11, 2020]



Sec.  5.5  Filing fees.

    (a) Procedure. A filer must submit the appropriate filing fee, if 
any, in connection with its filing. Filing fees must be paid by check 
payable to the OCC or by other means acceptable to the OCC. Additional 
information on filing fees, including where to file, can be found in the 
Comptroller's Licensing Manual. The OCC generally does not refund the 
filing fees.
    (b) Fee schedule. The OCC publishes a fee schedule in the ``Notice 
of Comptroller of the Currency Fees,'' as described in 12 CFR 8.8.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



Sec.  5.6  [Reserved]



Sec.  5.7  Investigations.

    (a) Authority. The OCC may examine or investigate and evaluate facts 
related to a filing to the extent necessary to reach an informed 
decision.
    (b) Fingerprints. For certain filings, the OCC collects fingerprints 
for submission to the Federal Bureau of Investigation for a national 
criminal history background check.
    (c) Fees. As described in 12 CFR 8.6, the OCC may assess fees for 
investigations or examinations conducted under paragraph (a) of this 
section. The OCC publishes a fee schedule in the ``Notice of Comptroller 
of the Currency Fees,'' as described in 12 CFR 8.8.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



Sec.  5.8  Public notice.

    (a) In general. A filer must publish a public notice of its filing 
in a newspaper of general circulation in the community in which the 
filer proposes to engage in business, on the date of filing, or as soon 
as practicable before or after the date of filing. This notice must be 
published in the English language but if the OCC determines that the 
primary language of a significant number of adult residents of the 
community is a language other than English, the OCC may require that an 
additional notice(s) simultaneously be published in the community in the 
appropriate language(s).
    (b) Contents of the public notice. The public notice must state that 
a filing is being made, the date of the filing, the name and address of 
the filer, the subject matter of the filing (including the name of the 
institution that is the subject of the filing), that the public may 
submit comments to the appropriate OCC licensing office, the address of 
the appropriate OCC licensing office where comments should be sent, the 
closing date of the public comment period (if known at the time of 
publication of the notice), that the public portion of the filing is 
available on request, that the public may find information about the 
filing (including the closing date of the comment period) in the OCC's 
Weekly Bulletin available at www.occ.gov, and any other information that 
the OCC requires.
    (c) Confirmation of public notice. Promptly following publication, 
the filer must mail or otherwise deliver to the appropriate OCC 
licensing office a statement containing the date of publication, the 
name and address of the newspaper that published the public notice, a 
copy of the public notice, and any other information that the OCC 
requires.
    (d) Multiple transactions. The OCC may consider more than one 
transaction, or a series of transactions, to be a single filing for 
purposes of the publication requirements of this section. When filing a 
single public notice for multiple transactions, the filer must explain 
in the notice how the transactions are related.
    (e) Joint public notices accepted. Upon the request of a filer, for 
a transaction subject to a public notice requirement of both the OCC and 
another Federal agency, the OCC may accept publication of a single joint 
notice containing the information required by both the OCC and the other 
Federal agency, provided that the notice states that comments must be 
submitted to both the OCC and, if applicable, the other Federal agency.
    (f) Public notice by the OCC. In addition to the foregoing, the OCC 
may require or give public notice and request

[[Page 280]]

comment on any filing and in any manner the OCC determines appropriate 
for the particular filing.
    (g) New public notice. At the OCC's discretion, a filer may be 
required to publish a new public notice if:
    (1) The filer submits either a revised filing or new or additional 
information related to a filing;
    (2) A major issue of law or change in circumstance arises after a 
filing; or
    (3) The OCC determines that a new public notice is appropriate.

[80 FR 28414, May 18, 2015, as amended at 82 FR 8103, Jan. 23, 2017; 85 
FR 80436, Dec. 11, 2020]



Sec.  5.9  Public availability.

    (a) In general. The OCC provides a copy of the public file to any 
person who requests it. A requestor should submit a written request for 
the public file concerning a pending filing to the appropriate OCC 
licensing office. A requestor should submit a written request for the 
public file concerning a decided or closed filing to the OCC's Freedom 
of Information Act Officer, Communications Division, at the address 
listed on www.occ.gov. The OCC may impose a fee in accordance with 12 
CFR 4.17 and at the rate the OCC publishes in the ``Notice of 
Comptroller of the Currency Fees,'' described in 12 CFR 8.8.
    (b) Public file. A public file consists of the portions of the 
filing, supporting data, supplementary information, and information 
submitted by interested persons, to the extent that those documents have 
not been afforded confidential treatment. Filers and other interested 
persons may request that confidential treatment be afforded information 
submitted to the OCC pursuant to paragraph (c) of this section.
    (c) Confidential treatment. The filer or an interested person 
submitting information may request that specific information be treated 
as confidential under the Freedom of Information Act, 5 U.S.C. 552 (see 
12 CFR 4.12(b)). A submitter should draft its request for confidential 
treatment narrowly to extend only to those portions of a document it 
considers confidential. If a submitter requests confidential treatment 
for information that the OCC does not consider to be confidential, the 
OCC may include that information in the public file after providing 
notice to the submitter. Moreover, at its own initiative, the OCC may 
determine that certain information should be treated as confidential and 
withhold that information from the public file. A person requesting 
information withheld from the public file should submit the request to 
the OCC's Freedom of Information Act Officer, Communications Division, 
under the procedures described in 12 CFR part 4, subpart B. That request 
may be subject to the predisclosure notice procedures of 12 CFR 4.16.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



Sec.  5.10  Comments.

    (a) Submission of comments. During the comment period, any person 
may submit written comments on a filing to the appropriate OCC licensing 
office.
    (b) Comment period--(1) In general. Unless otherwise stated, the 
comment period is 30 days after publication of the public notice 
required by Sec.  5.8(a). If a new public notice is required under Sec.  
5.8(g), the OCC may require a new comment period of up to 30 days after 
publication of the new public notice.
    (2) Extension. The OCC may extend a comment period if:
    (i) The filer fails to file all required publicly available 
information on a timely basis to permit review by interested persons or 
makes a request for confidential treatment not granted by the OCC that 
delays the public availability of that information;
    (ii) Any person requesting an extension of time satisfactorily 
demonstrates to the OCC that additional time is necessary to develop 
factual information that the OCC determines is necessary to consider the 
filing; or
    (iii) The OCC determines that other extenuating circumstances exist.
    (3) Filer response. The OCC may give the filer an opportunity to 
respond to comments received.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



Sec.  5.11  Hearings and other meetings.

    (a) Hearing requests. Prior to the end of the comment period, any 
person may

[[Page 281]]

submit to the appropriate OCC office a written request for a hearing on 
a filing. The request must describe the nature of the issues or facts to 
be presented and the reasons why written submissions would be 
insufficient to make an adequate presentation of those issues or facts 
to the OCC. A person requesting a hearing must simultaneously submit a 
copy of the request to the filer.
    (b) Action on a hearing request. The OCC may grant or deny a request 
for a hearing and may limit the issues to those it deems relevant or 
material. The OCC generally grants a hearing request only if the OCC 
determines that written submissions would be insufficient or that a 
hearing would otherwise benefit the decision-making process. The OCC 
also may order a hearing if it concludes that a hearing would be in the 
public interest.
    (c) Denial of a hearing request. If the OCC denies a hearing 
request, it will notify the person requesting the hearing of the reason 
for the denial.
    (d) OCC procedures prior to the hearing--(1) Notice of hearing. The 
OCC issues a Notice of Hearing if it grants a request for a hearing or 
orders a hearing because it is in the public interest. The OCC sends a 
copy of the Notice of Hearing to the filer, to the person requesting the 
hearing, and anyone else requesting a copy. The Notice of Hearing states 
the subject and date of the filing, the time and place of the hearing, 
and the issues to be addressed. The OCC may limit the issues considered 
at a hearing to those it determines are relevant or material.
    (2) Presiding officer. The OCC appoints a presiding officer to 
conduct the hearing. The presiding officer is responsible for all 
procedural questions not governed by this section.
    (e) Participation in the hearing. Any person who wishes to appear 
(participant) must notify the appropriate OCC licensing office of their 
intent to participate in the hearing within 10 days from the date the 
OCC issues the Notice of Hearing. At least five days before the hearing, 
each participant must submit to the appropriate OCC licensing office, 
the filer, and any other person the OCC requires, the names of witnesses 
and one copy of each exhibit the participant intends to present.
    (f) Hearing transcripts. The OCC arranges for a hearing transcript. 
The person requesting the hearing may be required to bear the cost of 
one copy of the transcript for their use.
    (g) Conduct of the hearing--(1) Presentations. Subject to the 
rulings of the presiding officer, the filer and participants may make 
opening statements and present witnesses, material, and data.
    (2) Information submitted. A person presenting documentary material 
must furnish one copy to the OCC and one copy to the filer and each 
participant.
    (3) Laws not applicable to hearings. The Administrative Procedure 
Act (5 U.S.C. 551 et seq.), the Federal Rules of Evidence (28 U.S.C. 
appendix), the Federal Rules of Civil Procedure (28 U.S.C. Rule 1 et 
seq.), and the OCC's Rules of Practice and Procedure (12 CFR part 19) do 
not apply to hearings under this section.
    (h) Closing the hearing record. At the filer's or participant's 
request, the OCC may keep the hearing record open for up to 14 days 
following the OCC's receipt of the transcript. The OCC resumes 
processing the filing after the record closes.
    (i) Other meetings--(1) Public meetings. The OCC may arrange for a 
public meeting in connection with a filing, either upon receipt during 
the comment period of a written request for such a meeting or upon the 
OCC's own initiative, if the OCC finds that written submissions are 
insufficient to address facts or issues raised in the filing or 
otherwise determines that a meeting will benefit the decision-making 
process. Public meetings will be arranged and presided over by a 
presiding officer.
    (2) Private meetings. The OCC may arrange a meeting with a filer or 
other interested parties to clarify and narrow the issues and to 
facilitate the resolution of the issues.
    (3) Issues at meetings. The OCC may limit the issues considered at a 
meeting to those it determines are relevant or material.
    (4) Meeting format. The OCC may conduct a meeting in the format that 
it determines is appropriate, including a

[[Page 282]]

telephone conference, a face-to-face meeting, or a more formal meeting.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



Sec.  5.12  Computation of time.

    In computing the period of days, the OCC does not include the day of 
the act or event (e.g., the date a filing is received by the OCC) from 
which the period begins to run. When the last day of a time period is a 
Saturday, Sunday, or Federal holiday, the time period runs until the end 
of the next day that is not a Saturday, Sunday or Federal holiday.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



Sec.  5.13  Decisions.

    (a) In general. The OCC may approve, conditionally approve, or deny 
a filing after appropriate review and consideration of the record. In 
reviewing a filing, the OCC may consider the activities, resources, or 
condition of an affiliate of the filer that may reasonably reflect on or 
affect the filer. It also may consider information available from any 
source, including any comments submitted by interested parties or views 
expressed by interested parties at meetings with the OCC.
    (1) Conditional approval. The OCC may impose conditions on any 
approval, including to address a significant supervisory, CRA (if 
applicable), or compliance concern, if the OCC determines that the 
conditions are necessary or appropriate to ensure that approval is 
consistent with relevant statutory and regulatory standards and OCC 
policies thereunder and safe and sound banking practices.
    (2) Expedited review. The OCC grants qualifying national banks and 
Federal savings associations expedited review within a specified time 
after filing or commencement of the public comment period for certain 
filings.
    (i) The OCC may extend the expedited review period or remove a 
filing from expedited review procedures if it concludes that the filing, 
or an adverse comment regarding the filing, presents a significant 
supervisory, CRA (if applicable), or compliance concern or raises a 
significant legal or policy issue requiring additional OCC review. The 
OCC will provide the filer with a written explanation if it decides not 
to process an application from a qualifying national bank or Federal 
savings association under expedited review pursuant to this paragraph.
    (ii) Adverse comments that the OCC determines do not raise a 
significant supervisory, CRA (if applicable), or compliance concern or a 
significant legal or policy issue; are frivolous, non-substantive, or 
filed primarily as a means of delaying action on the filing; or raise a 
CRA concern that has been satisfactorily resolved do not affect the 
OCC's decision under paragraph (a)(2)(i) of this section. The OCC 
considers a comment to be non-substantive if it is a generalized opinion 
that a filing should or should not be approved or a conclusory 
statement, lacking factual or analytical support. The OCC considers a 
CRA concern to have been satisfactorily resolved if the OCC previously 
reviewed (e.g., in an examination, other supervisory activity, or a 
prior filing made by the current filer) a concern presenting 
substantially the same issue in substantially the same assessment area 
during substantially the same time, and the OCC determines that the 
concern would not warrant denial or imposition of a condition on 
approval of the application.
    (iii) If a bank or savings association makes a filing for any 
activity or transaction that is dependent upon the approval of another 
filing under this part, or if requests for approval for more than one 
activity or transaction are combined in a single filing under applicable 
sections of this part, none of the subject filings may be deemed 
approved upon expiration of the applicable time periods, unless all of 
the filings are subject to expedited review procedures and the longest 
of the time periods expires without the OCC issuing a decision or 
notifying the bank or savings association that the filings are not 
eligible for expedited review under the standards in paragraph (a)(2)(i) 
of this section.
    (b) Denial. The OCC may deny a filing if:
    (1) A significant supervisory, CRA (if applicable), or compliance 
concern exists with respect to the filer;

[[Page 283]]

    (2) Approval of the filing is inconsistent with applicable law, 
regulation, or OCC policy thereunder; or
    (3) The filer fails to provide information requested by the OCC that 
is necessary for the OCC to make an informed decision.
    (c) Required information and abandonment of filing. A filing must 
contain information required by the applicable section set forth in this 
part. To the extent necessary to evaluate an application, the OCC may 
require a filer to provide additional information. The OCC may deem a 
filing abandoned if information required or requested by the OCC in 
connection with the filing is not furnished within the time period 
specified by the OCC. The OCC may return an application without a 
decision if it finds the filing to be materially deficient. A filing is 
materially deficient if it lacks sufficient information for the OCC to 
make a determination under the applicable statutory or regulatory 
criteria.
    (d) Notification of final disposition. The OCC notifies the filer, 
and any person who makes a written request, of the final disposition of 
a filing, including confirmation of an expedited review under this part. 
If the OCC denies a filing, the OCC notifies the filer in writing of the 
reasons for the denial.
    (e) Publication of decision. The OCC will issue a public decision 
when a decision represents a new or changed policy or presents issues of 
general interest to the public or the banking industry. In rendering its 
decisions, the OCC may elect not to disclose information that the OCC 
deems to be private or confidential.
    (f) Appeal. A filer may file an appeal of an OCC decision in writing 
with the Deputy Comptroller for Licensing or with the Ombudsman at the 
address listed on www.occ.gov. In the event that the Deputy Comptroller 
for Licensing was the deciding official of the matter appealed, or was 
involved personally and substantially in the matter, the appeal may be 
referred instead to the Chief Counsel or the Ombudsman.
    (g) Extension of time. When the OCC approves or conditionally 
approves a filing, the OCC generally gives the filer a specified period 
of time to commence that new or expanded activity. The OCC does not 
generally grant an extension of the time specified to commence a new or 
expanded corporate activity approved under this part, unless the OCC 
determines that the delay is beyond the filer's control.
    (h) Nullifying a decision. The OCC may nullify any decision on a 
filing either prior to or after consummation of the transaction if:
    (1) The OCC discovers a material misrepresentation or omission in 
any information provided to the OCC in the filing or supporting 
materials;
    (2) The decision is contrary to law, regulation, or OCC policy 
thereunder; or
    (3) The decision was granted due to clerical or administrative 
error, or a material mistake of law or fact.
    (i) Modifying, Suspending, or Rescinding a Decision. The OCC may 
modify, suspend, or rescind a decision on a filing if a material change 
in the information or circumstance on which the OCC relied occurs prior 
to the date of the consummation of the transaction to which the decision 
pertains.

[80 FR 28414, May 18, 2015, as amended at 85 FR 80436, Dec. 11, 2020]



                      Subpart B_Initial Activities



Sec.  5.20  Organizing a national bank or Federal savings association.

    (a) Authority. 12 U.S.C. 21, 22, 24(Seventh), 26, 27, 92a, 93a, 
1814(b), 1816, 1462a, 1463, 1464, 2903, and 5412(b)(2)(B).
    (b) Licensing requirements. Any person desiring to establish a 
national bank or a Federal savings association must submit an 
application and obtain prior OCC approval. An existing national bank or 
Federal savings association desiring to change the purpose of its 
charter must submit an application and obtain prior OCC approval.
    (c) Scope. This section describes the procedures and requirements 
governing OCC review and approval of an application to establish a 
national bank or a Federal stock or mutual savings association, 
including a national bank or a Federal savings association with a 
special purpose. Information regarding an

[[Page 284]]

application to establish an interim national bank or an interim Federal 
savings association solely to facilitate a business combination is set 
forth in Sec.  5.33. This section also describes the requirements for an 
existing national bank or Federal savings association to change the 
purpose of its charter and refers such institutions to Sec.  5.53 for 
the procedures to follow.
    (d) Definitions. For purposes of this section:
    (1) Bankers' bank means a bank owned exclusively (except to the 
extent directors' qualifying shares are required by law) by other 
depository institutions or depository institution holding companies (as 
that term is defined in section 3 of the Federal Deposit Insurance Act, 
12 U.S.C. 1813), the activities of which are limited by its articles of 
association exclusively to providing services to or for other depository 
institutions, their holding companies, and the officers, directors, and 
employees of such institutions and companies, and to providing 
correspondent banking services at the request of other depository 
institutions or their holding companies.
    (2) Control means with respect to an application to establish a 
national bank, control as used in section 2(a)(2) of the Bank Holding 
Company Act, 12 U.S.C. 1841(a)(2), and with respect to an application to 
establish a Federal savings association, control as used in section 
10(a)(2) of the Home Owners' Loan Act, 12 U.S.C. 1467a(a)(2).
    (3) Final approval means the OCC action issuing a charter and 
authorizing a national bank or Federal savings association to open for 
business.
    (4) Holding company means any company that controls or proposes to 
control a national bank or a Federal savings association whether or not 
the company is a bank holding company under section 2 of the Bank 
Holding Company Act, 12 U.S.C. 1841(a)(1), or a savings and loan holding 
company under section 10 of the Home Owners' Loan Act, 12 U.S.C. 1467a.
    (5) Lead depository institution means the largest depository 
institution controlled by a bank holding company or savings and loan 
holding company based on a comparison of the average total assets 
controlled by each depository institution as reported in its 
Consolidated Report of Condition and Income required to be filed for the 
immediately preceding four calendar quarters.
    (6) Institution means either a national bank or Federal savings 
association.
    (7) Organizer means a member of the organizing group.
    (8) Organizing group means five or more natural persons acting on 
their own behalf, or serving as representatives of a sponsoring holding 
company, who apply to the OCC for a national bank or Federal savings 
association charter.
    (9) Preliminary approval means a decision by the OCC permitting an 
organizing group to go forward with the organization of the proposed 
national bank or Federal savings association. A preliminary approval 
generally is subject to certain conditions that a filer must satisfy 
before the OCC will grant final approval.
    (10) Principal shareholder means a person who directly or indirectly 
or acting in concert with one or more persons or companies, or together 
with members of their immediate family, will own, control, or hold 10 
percent or more of the voting stock of the proposed national bank or 
Federal savings association.
    (e) Requirements--(1) In general. (i) The OCC charters a national 
bank under the authority of the National Bank Act of 1864, as amended, 
12 U.S.C. 1 et seq. The bank may be a special purpose bank that limits 
its activities to fiduciary activities or to any other activities within 
the business of banking. A special purpose bank that conducts activities 
other than fiduciary activities must conduct at least one of the 
following three core banking functions: Receiving deposits; paying 
checks; or lending money. The name of a proposed national bank must 
include the word ``national.''
    (ii) The OCC charters a Federal savings association under the 
authority of section 5 of the Home Owners' Loan Act, 12 U.S.C. 1464, 
which in an application to establish a Federal savings association 
requires the OCC to consider:
    (A) Whether the filers are persons of good character and 
responsibility;

[[Page 285]]

    (B) Whether a necessity exists for the association in the community 
to be served;
    (C) Whether there is a reasonable probability of the association's 
usefulness and success; and
    (D) Whether the association can be established without undue injury 
to properly conducted existing local savings associations and home 
financing institutions.
    (iii) In determining whether to approve an application to establish 
a national bank or Federal savings association, the OCC verifies that 
the proposed national bank or Federal savings association has complied 
with the following requirements. A national bank or a Federal savings 
association must:
    (A) File either articles of association (for a national bank), or a 
charter and by-laws (for a Federal savings association) with the OCC;
    (B) In the case of an application to establish a national bank, file 
an organization certificate containing specified information with the 
OCC;
    (C) Ensure that all capital stock is paid in, or in the case of a 
Federal mutual savings association, ensure that at least a minimum 
amount of capital is paid in; and
    (D) Have at least five elected directors.
    (2) Community Reinvestment Act. Twelve CFR part 25 requires the OCC 
to take into account a proposed insured national bank's or Federal 
savings association's description of how it will meet its CRA 
objectives.
    (3) Federal Deposit Insurance. Preliminary approval for an 
application to establish a Federal savings association will be 
conditioned on the savings association applying for and receiving 
approval for deposit insurance from the FDIC. Final approval for an 
application to establish a Federal savings association will not be 
issued until receipt by the OCC of written confirmation by the FDIC that 
the accounts of the Federal savings association will be insured by the 
FDIC.
    (f) Policy--(1) In general. In determining whether to approve an 
application to establish a national bank or Federal savings association, 
the OCC is guided by the following principles:
    (i) Maintaining a safe and sound banking system;
    (ii) Encouraging a national bank or Federal savings association to 
provide fair access to financial services by helping to meet the credit 
needs of its entire community;
    (iii) Ensuring compliance with laws and regulations; and
    (iv) Promoting fair treatment of customers including efficiency and 
better service.
    (2) Policy considerations. (i) In evaluating an application to 
establish a national bank or Federal savings association, the OCC 
considers whether the proposed institution:
    (A) Has organizers who are familiar with national banking laws and 
regulations or Federal savings association laws and regulations, 
respectively;
    (B) Has competent management, including a board of directors, with 
ability and experience relevant to the types of services to be provided;
    (C) Has capital that is sufficient to support the projected volume 
and type of business;
    (D) Can reasonably be expected to achieve and maintain 
profitability;
    (E) Will be operated in a safe and sound manner; and
    (F) Does not have a title that misrepresents the nature of the 
institution or the services it offers.
    (ii) In evaluating an application to establish a Federal savings 
association, the OCC considers whether the proposed Federal savings 
association will be operated as a qualified thrift lender under section 
10(m) of the Home Owners' Loan Act, 12 U.S.C. 1467a(m).
    (iii) The OCC may also consider additional factors listed in section 
6 of the Federal Deposit Insurance Act, 12 U.S.C. 1816, including the 
risk to the Federal deposit insurance fund, and whether the proposed 
institution's corporate powers are consistent with the purposes of the 
Federal Deposit Insurance Act, the National Bank Act, and the Home 
Owners' Loan Act, as applicable.
    (3) OCC evaluation. The OCC evaluates a proposed institution's 
organizing group and its business plan or operating plan together. The 
OCC's judgment concerning one may affect the evaluation of the other. An 
organizing

[[Page 286]]

group and its business plan or operating plan must be stronger in 
markets where economic conditions are marginal or competition is 
intense.
    (g) Organizing group--(1) In general. Strong organizing groups 
generally include diverse business and financial interests and community 
involvement. An organizing group must have the experience, competence, 
willingness, and ability to be active in directing the proposed 
institution's affairs in a safe and sound manner. The institution's 
initial board of directors generally is comprised of many, if not all, 
of the organizers. The business plan or operating plan and other 
information supplied in the application must demonstrate an organizing 
group's collective ability to establish and operate a successful 
national bank or Federal savings association in the economic and 
competitive conditions of the market to be served. Each organizer should 
be knowledgeable about the business plan or operating plan. A poor 
business plan or operating plan reflects adversely on the organizing 
group's ability, and the OCC generally denies applications with poor 
business plans or operating plans.
    (2) Management selection. The initial board of directors must select 
competent senior executive officers before the OCC grants final 
approval. Early selection of executive officers, especially the chief 
executive officer, contributes favorably to the preparation and review 
of a business plan or operating plan that is accurate, complete, and 
appropriate for the type of national bank or Federal savings association 
proposed and its market, and reflects favorably upon an application. As 
a condition of the charter approval, the OCC retains the right to object 
to and preclude the hiring of any officer, or the appointment or 
election of any director, for a two-year period from the date the 
institution commences business, or longer as appropriate.
    (3) Financial resources. (i) Each organizer must have a history of 
responsibility, personal honesty, and integrity. Personal wealth is not 
a prerequisite to become an organizer or director of a national bank or 
Federal savings association. However, directors' stock purchases, or, in 
the case of a Federal mutual savings association, capital contributions, 
individually and in the aggregate, should reflect a financial commitment 
to the success of the institution that is reasonable in relation to 
their individual and collective financial strength. A director should 
not have to depend on institution dividends, fees, or other compensation 
to satisfy financial obligations.
    (ii) Because directors are often the primary source of additional 
capital for an institution not affiliated with a holding company, it is 
desirable that the proposed directors of the national bank or Federal 
savings association, as a group, be able to supply or have a realistic 
plan to enable the institution to obtain capital when needed.
    (iii) Any financial or other business arrangement, direct or 
indirect, between the organizing group or other insiders and the 
proposed national bank or Federal savings association must be on 
nonpreferential terms.
    (4) Organizational expenses. (i) Organizers are expected to 
contribute time and expertise to the organization of the national bank 
or Federal savings association. Organizers should not bill excessive 
charges to the institution for professional and consulting services or 
unduly rely upon these fees as a source of income.
    (ii) A proposed national bank or Federal savings association may not 
pay any fee that is contingent upon an OCC decision. Such action 
generally is grounds for denial of the application or nullification or 
rescission of a preliminary approval. Organizational expenses for denied 
applications are the sole responsibility of the organizing group.
    (5) Sponsor's experience and support. A sponsor must be financially 
able to support the new institution's operations and to provide or 
locate capital when needed. The OCC primarily considers the financial 
and managerial resources of the sponsor and the sponsor's record of 
performance, rather than the financial and managerial resources of the 
organizing group, if an organizing group is sponsored by:
    (i) An existing holding company;
    (ii) Individuals currently affiliated with other depository 
institutions; or

[[Page 287]]

    (iii) Individuals who, in the OCC's view, are otherwise collectively 
experienced in banking and have demonstrated the ability to work 
together effectively.
    (h) Business plan or Operating plan--(1) In general. (i) Organizers 
of a proposed national bank or Federal savings association must submit a 
business plan or operating plan that adequately addresses the statutory 
and policy considerations set forth in paragraphs (e) and (f)(2) of this 
section. In the case of a proposed Federal savings association the plan 
must also specifically address meeting qualified thrift lender 
requirements. The plan must reflect sound banking principles and 
demonstrate realistic assessments of risk in light of economic and 
competitive conditions in the market to be served.
    (ii) The OCC may offset deficiencies in one factor by strengths in 
one or more other factors. However, deficiencies in some factors, such 
as unrealistic earnings prospects, may have a negative influence on the 
evaluation of other factors, such as capital adequacy, or may be serious 
enough by themselves to result in denial. The OCC considers inadequacies 
in a business plan or operating plan to reflect negatively on the 
organizing group's ability to operate a successful institution.
    (2) Earnings prospects. The organizing group must submit pro forma 
balance sheets and income statements as part of the business plan or 
operating plan. The OCC reviews all projections for reasonableness of 
assumptions and consistency with the business plan or operating plan.
    (3) Management. (i) The organizing group must include in the 
business plan or operating plan information sufficient to permit the OCC 
to evaluate the overall management ability of the organizing group. If 
the organizing group has limited banking experience or community 
involvement, the senior executive officers must be able to compensate 
for such deficiencies.
    (ii) The organizing group may not hire an officer or elect or 
appoint a director if the OCC objects to that person at any time prior 
to the date the institution commences business.
    (4) Capital. A proposed bank or Federal savings association must 
have sufficient initial capital, net of any organizational expenses that 
will be charged to the institution's capital after it begins operations, 
to support the institution's projected volume and type of business.
    (5) Community service. (i) The business plan or operating plan must 
indicate the organizing group's knowledge of and plans for serving the 
community. The organizing group must evaluate the banking needs of the 
community, including its consumer, business, nonprofit, and government 
sectors. The business plan or operating plan must demonstrate how the 
proposed national bank or Federal savings association responds to those 
needs consistent with the safe and sound operation of the institution. 
The provisions of this paragraph may not apply to an application to 
organize an institution for a special purpose.
    (ii) As part of its business plan or operating plan, the organizing 
group must submit a statement that demonstrates its plans to achieve CRA 
objectives.
    (iii) Because community support is important to the long-term 
success of a national bank or Federal savings association, the 
organizing group must include plans for attracting and maintaining 
community support.
    (6) Safety and soundness. The business plan or operating plan must 
demonstrate that the organizing group (and the sponsoring company, if 
any), is aware of, and understands, applicable depository institution 
laws and regulations, and safe and sound banking operations and 
practices. The OCC will deny an application that does not meet these 
safety and soundness requirements.
    (7) Fiduciary powers. The business plan or operating plan must 
indicate if the proposed institution intends to exercise fiduciary 
powers. The information required by Sec.  5.26 must be filed with the 
charter application. A separate application is not required.
    (i) Procedures--(1) Prefiling meeting. The OCC normally requires a 
prefiling meeting with the organizers of a proposed national bank or 
Federal savings association before the organizers file an application. 
Organizers should be familiar with the OCC's chartering policy

[[Page 288]]

and procedural requirements in the Comptroller's Licensing Manual before 
the prefiling meeting. The prefiling meeting normally is held in the 
district office where the application will be filed but may be held at 
another location at the request of the filer.
    (2) Business plan or operating plan. An organizing group must file a 
business plan or operating plan that addresses the subjects discussed in 
paragraph (h) of this section.
    (3) Biographical and financial reports. (i) Each proposed organizer, 
director, executive officer, or principal shareholder must submit to the 
appropriate OCC licensing office:
    (A) The information prescribed in the Interagency Biographical and 
Financial Report, available at www.occ.gov; and
    (B) Legible fingerprints.
    (ii) The OCC may require additional information about any proposed 
organizer, director, executive officer, or principal shareholder, if 
appropriate. The OCC may waive any of the information requirements of 
this paragraph if the OCC determines that it is in the public interest.
    (4) Contact person. The organizing group must designate a contact 
person to represent the organizing group in all contacts with the OCC. 
The contact person must be an organizer and proposed director of the new 
national bank or Federal savings association, except a representative of 
the sponsor or sponsors may serve as contact person if an application is 
sponsored by an existing holding company, individuals currently 
affiliated with other depository institutions, or individuals who, in 
the OCC's view, are otherwise collectively experienced in banking and 
have demonstrated the ability to work together effectively.
    (5) Decision notification. The OCC notifies the contact person and 
other relevant parties in writing of its decision on an application.
    (6) Activities. (i) Before the OCC grants final approval, a proposed 
national bank or Federal savings association must be established as a 
legal entity. A national bank becomes a legal entity after it has filed 
its organization certificate and articles of association with the OCC as 
required by law. A Federal savings association becomes a legal entity 
after it has filed its proposed charter and bylaws with the OCC. A 
proposed national bank may offer and sell securities prior to OCC 
preliminary approval of the proposed national bank's charter 
application, provided that the proposed national bank has filed articles 
of association, an organization certificate, and a completed charter 
application and the bank complies with paragraph (i)(6)(iii) of this 
section. A proposed Federal stock savings association may offer and sell 
securities prior to OCC preliminary approval of the proposed Federal 
stock savings association's charter application, provided that the 
proposed Federal stock savings association has filed a proposed charter, 
bylaws, and a completed charter application and the Federal stock 
savings association complies with paragraph (i)(6)(iii) of this section.
    (ii)(A) After the OCC grants preliminary approval, the organizing 
group must elect a board of directors, take steps necessary to organize 
the proposed national bank or Federal savings association and prepare it 
for commencing business.
    (B) A proposed national bank may not conduct the business of banking 
until the OCC grants final approval and issues a charter. A proposed 
Federal savings association may not commence business until the OCC 
grants final approval and issues a charter, which must be in the form 
provided in this part.
    (iii) For all capital obtained through a public offering a proposed 
national bank or Federal savings association must use an offering 
circular that complies with the OCC's securities offering regulations, 
12 CFR part 16, as applicable. All securities of a particular class in 
the initial offering must be sold at the same price.
    (iv) A national bank or Federal savings association in organization 
must raise its capital before it commences business. Preliminary 
approval expires if the proposed national bank or Federal savings 
association does not raise the required capital within 12 months from 
the date the OCC grants preliminary approval. Preliminary approval 
expires if the proposed national bank

[[Page 289]]

or Federal savings association does not commence business within 18 
months from the date of preliminary approval, unless the OCC grants an 
extension. If preliminary approval expires, all cash collected on 
subscriptions must be returned.
    (j) Expedited review. An application to establish a full-service 
national bank or Federal savings association that is sponsored by a bank 
holding company or savings and loan holding company whose lead 
depository institution is an eligible bank or eligible savings 
association is deemed preliminarily approved by the OCC as of the 15th 
day after the close of the public comment period or the 45th day after 
the filing is received by the OCC, whichever is later, unless the OCC:
    (1) Notifies the filer prior to that date that the filing has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2); or
    (2) Notifies the filer prior to that date that the OCC has 
determined that the proposed bank will offer banking services that are 
materially different than those offered by the lead depository 
institution.
    (k) National bankers' banks--(1) Activities and customers. In 
addition to the other requirements of this section, when an organizing 
group seeks to organize a national bankers' bank, the organizing group 
must list in the application the anticipated activities and customers or 
clients of the proposed national bankers' bank.
    (2) Waiver of requirements. At the organizing group's request, the 
OCC may waive requirements that are applicable to national banks in 
general if those requirements are inappropriate for a national bankers' 
bank and would impede its ability to provide desired services to its 
market. A filer must submit a request for a waiver with the application 
and must support the request with adequate justification and legal 
analysis. A national bankers' bank that is already in operation may also 
request a waiver. The OCC cannot waive statutory provisions that 
specifically apply to national bankers' banks pursuant to 12 U.S.C. 
27(b)(1).
    (3) Investments. A national bank or Federal savings association may 
invest up to 10 percent of its capital and surplus in a bankers' bank 
and may own five percent or less of any class of a bankers' bank's 
voting securities.
    (l) Special purpose institutions--(1) In general. A filer for a 
national bank or Federal savings association charter that will limit its 
activities to fiduciary activities, credit card operations, or another 
special purpose must adhere to established charter procedures with 
modifications appropriate for the circumstances as determined by the 
OCC. A filer for a national bank or Federal savings association charter 
that will have a community development focus must also adhere to 
established charter procedures with modifications appropriate for the 
circumstances as determined by the OCC. A national bank that seeks to 
invest in a bank or savings association with a community development 
focus must comply with applicable requirements of 12 CFR part 24. A 
Federal savings association that seeks to invest in a bank or savings 
association with a community development focus must comply with Sec.  
160.36 or any other applicable requirements.
    (2) Changes in charter purpose. An existing national bank or Federal 
savings association whose activities are limited to a special purpose 
that desires to change to another special purpose, to add another 
special purpose, or to no longer be limited to a special purpose charter 
must submit an application and obtain prior OCC approval under Sec.  
5.53. An existing national bank or Federal savings association whose 
activities are not limited that desires to limit its activities and 
become a special purpose institution must submit an application and 
obtain prior OCC approval under Sec.  5.53.

[80 FR 28418, May 18, 2015, as amended at 82 FR 8103, Jan. 23, 2017; 85 
FR 80437, Dec. 11, 2020; 85 FR 80437, Dec. 11, 2020]



Sec.  5.21  Federal mutual savings association charter and bylaws.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, and 2901 et seq.
    (b) Licensing requirements. A Federal mutual savings association 
must file an application, notice, or other filing as prescribed by this 
section when adopting or amending its charter or bylaws.

[[Page 290]]

    (c) Scope. This section describes the procedures and requirements 
governing charters and bylaws for Federal mutual savings associations.
    (d) Exceptions to rules of general applicability. Notwithstanding 
any other provision of this part, Sec. Sec.  5.8 through 5.11 do not 
apply to this section.
    (e) Charter form. Except as provided in paragraphs (f) and (g) of 
this section, a Federal mutual savings association must have a charter 
in the following form. A charter for a Federal mutual savings bank must 
substitute the term ``savings bank'' for ``association.'' The term 
``trustee'' may be substituted for the term ``director.'' Associations 
adopting this charter with existing borrower members must grandfather 
those borrower members who were members as of the date of issuance of 
the new charter by the OCC. Such borrowers will have one vote for the 
period of time such borrowings are in existence.

                         Federal Mutual Charter

    Section 1. Corporate title. The full corporate title of the Federal 
savings association is ___.
    Section 2. Office. The home office is located in ___ [city, state].
    Section 3. Duration. The duration of the association is perpetual.
    Section 4. Purpose and powers. The purpose of the association is to 
pursue any or all of the lawful objectives of a Federal mutual savings 
association chartered under section 5 of the Home Owners' Loan Act and 
to exercise all the express, implied, and incidental powers conferred 
thereby and by all acts amendatory thereof and supplemental thereto, 
subject to the Constitution and laws of the United States as they are 
now in effect, or as they may hereafter be amended, and subject to all 
lawful and applicable rules, regulations, and orders of the Office of 
the Comptroller of the Currency (``OCC'').
    Section 5. Capital. The association may raise capital by accepting 
payments on savings and demand accounts and by any other means 
authorized by the OCC.
    Section 6. Members. All holders of the association's savings, 
demand, or other authorized accounts are members of the association. In 
the consideration of all questions requiring action by the members of 
the association, each holder of an account is permitted to cast one vote 
for each $100, or fraction thereof, of the withdrawal value of the 
member's account. No member, however, may cast more than 1,000 votes. 
All accounts are nonassessable.
    Section 7. Directors. The association is under the direction of a 
board of directors. The authorized number of directors may not be fewer 
than five nor more than fifteen persons, as fixed in the association's 
bylaws, except that the number of directors may be decreased to a number 
less than five or increased to a number greater than fifteen with the 
prior approval of the OCC.
    Section 8. Capital, surplus, and distribution of earnings. The 
association will maintain for the purpose of meeting losses the amount 
of capital required by section 5 of the Home Owners' Loan Act and by 
regulations of the OCC. The association will distribute net earnings on 
its accounts on such basis and in accordance with such terms and 
conditions as may from time to time be authorized by the OCC: Provided, 
That the association may establish minimum-balance requirements for 
accounts to be eligible for distribution of earnings. All holders of 
accounts of the association will be entitled to equal distribution of 
assets, pro rata to the value of their accounts, in the event of 
voluntary or involuntary liquidation, dissolution, or winding up of the 
association. Moreover, in any such event, or in any other situation in 
which the priority of such accounts is in controversy, all such accounts 
will, to the extent of their withdrawal value, be debts of the 
association having the same priority as the claims of general creditors 
of the association not having priority (other than any priority arising 
or resulting from consensual subordination) over other general creditors 
of the association.
    Section 9. Amendment of charter. Adoption of any preapproved charter 
amendment will be effective after such preapproved amendment has been 
approved by the members at a legal meeting. Any other amendment, 
addition, change, or repeal of this charter must be approved by the OCC 
prior to approval by the members at a legal meeting, and will be 
effective upon filing with the OCC in accordance with regulatory 
procedures.

Attest:_________________________________________________________________
Secretary of the Association

By:_____________________________________________________________________
President or Chief Executive Officer of the Association

Attest:_________________________________________________________________
Deputy Comptroller for Licensing

By:_____________________________________________________________________
Comptroller of the Currency

Effective Date:_________________________________________________________

    (f) Charter amendments. In order to adopt a charter amendment, a 
Federal mutual savings association must comply with the following 
requirements:
    (1) Board of directors approval. The board of directors of the 
association must adopt a resolution proposing the

[[Page 291]]

charter amendment that states the text of such amendment;
    (2) Form of filing--(i) Application requirement. Except as provided 
in paragraph (f)(2)(ii) of this section, a Federal mutual savings 
association must file the proposed charter amendment with, and obtain 
the prior approval of, the OCC.
    (A) Expedited review. Except as provided in paragraph (f)(2)(i)(B) 
of this section, the charter amendment will be deemed approved as of the 
30th day after filing, unless the OCC notifies the filer that the 
amendment is denied or that the amendment contains procedures of the 
type described in paragraph (f)(2)(i)(B) of this section and is not 
eligible for expedited review, provided the association follows the 
requirements of its charter in adopting the amendment.
    (B) Amendments exempted from expedited review. Expedited review is 
not available for a charter amendment that would render more difficult 
or discourage a merger, proxy contest, the assumption of control by a 
mutual account holder of the association, or the removal of incumbent 
management; or involve a significant issue of law or policy.
    (ii) Notice requirement. No application under paragraph (f)(2)(i) of 
this section is required if the text of the amendment is contained 
within paragraphs (e) or (g) of this section. In such case, the Federal 
mutual savings association must submit a notice with the charter 
amendment to the OCC within 30 days after adoption.
    (3) Effectiveness. A charter amendment is effective after approval 
by the OCC, if required pursuant to paragraph (f)(2) of this section, 
and adoption by the association, provided the association follows the 
requirements of its charter in adopting the amendment.
    (g) Optional charter amendments. The following charter amendments 
are subject to the notice requirement in paragraph (f)(2)(ii) of this 
section if adopted without change:
    (1) Purpose and powers. Add a second paragraph to section 4, as 
follows:

    Section 4. Purpose and powers. * * * The association has the express 
power: (i) To act as fiscal agent of the United States when designated 
for that purpose by the Secretary of the Treasury, under such 
regulations as the Secretary may prescribe, to perform all such 
reasonable duties as fiscal agent of the United States as may be 
required, and to act as agent for any other instrumentality of the 
United States when designated for that purpose by any such 
instrumentality; (ii) To sue and be sued, complain and defend in any 
court of law or equity; (iii) To have a corporate seal, affixed by 
imprint, facsimile or otherwise; (iv) To appoint officers and agents as 
its business requires and allow them suitable compensation; (v) To adopt 
bylaws not inconsistent with the Constitution or laws of the United 
States and rules and regulations adopted thereunder and under this 
Charter; (vi) To raise unlimited capital by accepting payments on 
savings, demand, or other accounts, as are authorized by rules and 
regulations made by the OCC, and the holders of all such accounts or 
other accounts as will, to such extent as may be provided by such rules 
and regulations, be members of the association and will have such voting 
rights and such other rights as are thereby provided; (vii) To issue 
notes, bonds, debentures, or other obligations, or securities, provided 
by or under any provision of Federal statute as from time to time is in 
effect; (viii) To provide for redemption of insured accounts; (ix) To 
borrow money without limitation and pledge and otherwise encumber any of 
its assets to secure its debts; (x) To lend and otherwise invest its 
funds as authorized by statute and the rules and regulations of the OCC; 
(xi) To wind up and dissolve, merge, consolidate, convert, or 
reorganize; (xii) To purchase, hold, and convey real estate and 
personalty consistent with its objects, purposes, and powers; (xiii) To 
mortgage or lease any real estate and personalty and take such property 
by gift, devise, or bequest; and (xiv) To exercise all powers conferred 
by law. In addition to the foregoing powers expressly enumerated, this 
association has the power to do all things reasonably incident to the 
accomplishment of its express objects and the performance of its express 
powers.

    (2) Title change. A Federal mutual savings association that complies 
with Sec.  5.42 may amend its charter by substituting a new corporate 
title in section 1.
    (3) Home office. A Federal mutual savings association may amend its 
charter by substituting a new home office in section 2, if it has 
complied with applicable requirements of Sec.  5.40.
    (4) Maximum number of votes. A Federal mutual savings association 
may amend its charter by substituting any number of votes per member 
between 1 and 1000 in section 6.

[[Page 292]]

    (h) Reissuance of charter. A Federal mutual savings association that 
has amended its charter may apply to have its charter, including the 
amendments, reissued by the OCC. Such request for reissuance should be 
filed at the appropriate OCC licensing office and contain signatures 
required under paragraph (e) of this section, together with such 
supporting documents as may be needed to demonstrate that the amendments 
were properly adopted.
    (i) Availability of chartering documents. A Federal mutual savings 
association must make available a true copy of its charter and bylaws 
and all amendments thereto to accountholders at all times in each office 
of the savings association, and must upon request deliver to any 
accountholders a copy of such charter and bylaws or amendments thereto.
    (j) Bylaws for Federal mutual savings associations--(1) In general. 
A Federal mutual savings association must operate under bylaws that 
contain provisions that comply with all requirements specified by the 
OCC in this paragraph and that are not otherwise inconsistent with the 
provisions of this paragraph; the association's charter; and all other 
applicable laws, rules, and regulations provided that, a bylaw provision 
inconsistent with the provisions of this paragraph may be adopted with 
the approval of the OCC. Bylaws may be adopted, amended or repealed by a 
majority of the votes cast by the members at a legal meeting or a 
majority of the association's board of directors. The bylaws for a 
Federal mutual savings bank must substitute the term ``savings bank'' 
for ``association''. The term ``trustee'' may be substituted for the 
term ``director''.
    (2) Requirements. The following requirements are applicable to 
Federal mutual savings associations:
    (i) Annual meetings of members. (A) An association must provide for 
and conduct an annual meeting of its members for the election of 
directors and at which any other business of the association may be 
conducted. Such meeting must be held at any convenient place the board 
of directors may designate, and at a date and time within 150 days after 
the end of the association's fiscal year. The association's bylaws may 
provide for telephonic or electronic participation of members at an 
annual meeting. Members participating in an annual meeting 
telephonically or electronically will be deemed present in person for 
purposes of the quorum requirement in paragraph (j)(2)(v) of this 
section.
    (B) At each annual meeting, the officers must make a full report of 
the financial condition of the association and of its progress for the 
preceding year and must outline a program for the succeeding year.
    (C) If the association's bylaws provide for telephonic or electronic 
participation in member meetings, the association must follow the 
procedures for telephonic or electronic participation of the State 
corporate governance provisions it is permitted to elect pursuant to 
paragraph (j)(3)(ii) of this section, if those State corporate 
governance provisions include telephonic or electronic participation 
procedures; the Delaware General Corporation Law, Del. Code Ann. Tit. 8 
(1991, as amended 1994, and as amended thereafter) (with ``member'' 
substituting for ``stockholder''); or the Model Business Corporation Act 
(with ``member'' substituting for ``shareholder''), provided, however, 
that such procedures are not inconsistent with applicable Federal 
statutes and regulations and safety and soundness. The association must 
indicate the use of these procedures in its bylaws.
    (ii) Special meetings of members. Procedures for calling any special 
meeting of the members and for conducting such a meeting must be set 
forth in the bylaws. The board of directors of the association or the 
holders of 10 percent or more of the voting capital must be entitled to 
call a special meeting. The association's bylaws may provide for 
telephonic or electronic participation of members at a special meeting 
pursuant to the procedures specified in paragraph (j)(2)(i)(C) of this 
section. Members participating in a special meeting telephonically or 
electronically will be deemed present in person for purposes of the 
quorum requirement in paragraph (j)(2)(v) of this section. For purposes 
of this paragraph, ``voting capital'' means FDIC-insured deposits as of 
the voting record date.

[[Page 293]]

    (iii) Notice of meeting of members. Notice specifying the date, 
time, and place of the annual or any special meeting and adequately 
describing any business to be conducted must be published for two 
successive weeks immediately prior to the week in which such meeting 
will convene in a newspaper of general circulation in the city or county 
in which the principal place of business of the association is located, 
or mailed postage prepaid at least 15 days and not more than 45 days 
prior to the date on which such meeting will convene to each of its 
members of record. A similar notice must be posted in a conspicuous 
place in each of the offices of the association during the 14 days 
immediately preceding the date on which such meeting will convene. The 
bylaws may permit a member to waive in writing any right to receive 
personal delivery of the notice. When any meeting is adjourned for 30 
days or more, notice of the adjournment and reconvening of the meeting 
must be given as in the case of the original meeting.
    (iv) Fixing of record date. The bylaws must provide for the fixing 
of a record date and a method for determining from the books of the 
association the members entitled to vote. Such date may not be more than 
60 days nor fewer than 10 days prior to the date on which the action, 
requiring such determination of members, is to be taken. The same 
determination must apply to any adjourned meeting.
    (v) Member quorum. Any number of members present and voting, 
represented in person or by proxy, at a regular or special meeting of 
the members constitutes a quorum. A majority of all votes cast at any 
meeting of the members determines any question, unless otherwise 
required by regulation. At any adjourned meeting, any business may be 
transacted that might have been transacted at the meeting as originally 
called. Members present at a duly constituted meeting may continue to 
transact business until adjournment.
    (vi) Voting by proxy. Procedures must be established for voting at 
any annual or special meeting of the members by proxy pursuant to the 
rules and regulations of the OCC. Proxies may be given telephonically or 
electronically as long as the holder uses a procedure for verifying the 
identity of the member. All proxies with a term greater than eleven 
months or solicited at the expense of the association must run to the 
board of directors as a whole, or to a committee appointed by a majority 
of such board.
    (vii) Communications between members. Provisions relating to 
communications between members must be consistent with Sec.  144.8 of 
this chapter. No member, however, may have the right to inspect or copy 
any portion of any books or records of a Federal mutual savings 
association containing:
    (A) A list of depositors in or borrowers from such association;
    (B) Their addresses;
    (C) Individual deposit or loan balances or records; or
    (D) Any data from which such information could be reasonably 
constructed.
    (viii) Number of directors, membership. The bylaws must set forth a 
specific number of directors, not a range. The number of directors may 
not be fewer than five nor more than fifteen, unless a higher or lower 
number has been authorized by the OTS prior to July 21, 2011 or by the 
OCC. Each director of the association must be a member of the 
association. Directors may be elected for periods of one to three years 
and until their successors are elected and qualified, but if a staggered 
board is chosen, provision must be made for the election of 
approximately one-third or one-half of the board each year, as 
appropriate. State-chartered savings banks converting to Federal savings 
banks may include alternative provisions for the election and term of 
office of directors so long as such provisions are authorized by the 
OCC, and provide for compliance with the standard provisions of this 
paragraph no later than six years after the conversion to a Federal 
savings association.
    (ix) Meetings of the board. The board of directors determines the 
place, frequency, time, procedure for notice, which must be at least 24 
hours unless waived by the directors, and waiver of notice for all 
regular and special meetings. The board also may permit telephonic or 
electronic participation at meetings. The bylaws may provide for

[[Page 294]]

action to be taken without a meeting if unanimous written consent is 
obtained for such action. A majority of the authorized directors 
constitutes a quorum for the transaction of business. The act of a 
majority of the directors present at any meeting at which there is a 
quorum will be the act of the board.
    (x) Officers, employees and agents. (A) The bylaws must contain 
provisions regarding the officers of the association, their functions, 
duties, and powers. The officers of the association must consist of a 
president, one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom must be elected annually by the board of 
directors. Such other officers and assistant officers and agents as may 
be deemed necessary may be elected or appointed by the board of 
directors or chosen in such other manner as may be prescribed in the 
bylaws. Any two or more offices may be held by the same person, except 
the offices of president and secretary.
    (B) Any officer may be removed by the board of directors with or 
without cause, but such removal, other than for cause, must be without 
prejudice to the contractual rights, if any, of the person so removed. 
Termination for cause, for purposes of this section and Sec.  5.22, 
includes termination because of the person's personal dishonesty; 
incompetence; willful misconduct; breach of fiduciary duty involving 
personal profit; intentional failure to perform stated duties; willful 
violation of any law, rule, or regulation (other than traffic violations 
or similar offenses) or final cease and desist order; or material breach 
of any provision of an employment contract.
    (xi) Vacancies, resignation or removal of directors. In the event of 
a vacancy on the board, the board of directors may, by its affirmative 
vote, fill such vacancy, even if the remaining directors constitute less 
than a quorum. A director elected to fill a vacancy may serve only until 
the next election of directors by the members. The bylaws must set out 
the procedure for the resignation of a director. Directors may be 
removed only for cause, as defined in paragraph (j)(2)(x)(B) of this 
section, by a vote of the holders of a majority of the shares then 
entitled to vote at an election of directors.
    (xii) Powers of the board. The board of directors has the power to 
exercise any and all of the powers of the association not expressly 
reserved by the charter to the members.
    (xiii) Nominations for directors. The bylaws must provide that 
nominations for directors may be made at the annual meeting by any 
member and must be voted upon, except, however, the bylaws may require 
that nominations by a member must be submitted to the secretary and then 
prominently posted in the principal place of business at least 10 days 
prior to the date of the annual meeting. However, if such provision is 
made for prior submission of nominations by a member, then the bylaws 
must provide for a nominating committee, which, except in the case of a 
nominee substituted as a result of death or other incapacity, must 
submit nominations to the secretary and have such nominations similarly 
posted at least 15 days prior to the date of the annual meeting.
    (xiv) New business. The bylaws must provide procedures for the 
introduction of new business at the annual meeting.
    (xv) Amendment. Bylaws may include any provision for their amendment 
that would be consistent with applicable law, rules, and regulations and 
adequately addresses its subject and purpose.
    (A) Amendments will be effective:
    (1) After approval by a majority vote of the authorized board, or by 
a majority of the vote cast by the members of the association at a legal 
meeting; and
    (2) After receipt of any applicable regulatory approval.
    (B) When an association fails to meet its quorum requirement, solely 
due to vacancies on the board, the bylaws may be amended by an 
affirmative vote of a majority of the sitting board.
    (xvi) Miscellaneous. The bylaws also may address any other subjects 
necessary or appropriate for effective operation of the association.
    (3) Form of filing--(i) Application requirement. Except as provided 
in paragraphs (j)(3)(ii) or (j)(3)(iii) of this section, a Federal 
mutual savings association must file the proposed bylaw

[[Page 295]]

amendment with, and obtain the prior approval of, the OCC.
    (A) Expedited review. Except as provided in paragraph (j)(3)(i)(B) 
of this section, the bylaw amendment will be deemed approved as of the 
30th day after filing, unless the OCC notifies the filer that the bylaw 
amendment is denied or that the amendment contains procedures of the 
type described in paragraph (j)(3)(i)(B) of this section and is not 
eligible for expedited review, provided the association follows the 
requirements of its charter and bylaws in adopting the amendment.
    (B) Amendments not subject to expedited review. A bylaw amendment is 
not subject to expedited review if it would render more difficult or 
discourage a merger, proxy contest, the assumption of control by a 
mutual account holder of the association, or the removal of incumbent 
management; involve a significant issue of law or policy, including 
indemnification, conflicts of interest, and limitations on director or 
officer liability; or be inconsistent with the requirements of this 
paragraph or with applicable laws, rules, regulations, or the 
association's charter.
    (ii) Corporate governance election and notice requirement. A Federal 
mutual association may elect to follow the corporate governance 
provisions of the laws of any State in which the home office or any 
branch of the association is located, provided that such provisions are 
not inconsistent with applicable Federal statutes, regulations, and 
safety and soundness, and such provisions are not of the type described 
in paragraph (j)(3)(i)(B) of this section. If this election is selected, 
a Federal mutual association must designate in its bylaws the provision 
or provisions from the body of law selected for its corporate governance 
provisions, and must submit a notice containing a copy of such bylaws, 
within 30 days after adoption. The notice must indicate, where not 
obvious, why the bylaw provisions meet the requirements stated in 
paragraph (j)(3)(i)(B) of this section.
    (iii) No filing required. No filing is required for purposes of 
paragraph (j)(3) of this section if a bylaw amendment adopts the 
language of the OCC's model or optional bylaws without change.
    (4) Effectiveness. A bylaw amendment is effective after approval by 
the OCC, if required, and adoption by the association, provided that the 
association follows the requirements of its charter and bylaws in 
adopting the amendment.
    (5) Effect of subsequent charter or bylaw change. Notwithstanding 
any subsequent change to its charter or bylaws, the authority of a 
Federal mutual savings association to engage in any transaction is 
determined only by the association's charter or bylaws then in effect.

[80 FR 28421, May 18, 2015, as amended at 82 FR 8103, Jan. 23, 2017; 85 
FR 31948, May 28, 2020; 85 FR 80437, Dec. 11, 2020; 85 FR 83726, Dec. 
22, 2020]



Sec.  5.22  Federal stock savings association charter and bylaws.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, and 2901 et seq.
    (b) Licensing requirements. A Federal stock savings association must 
file an application, notice, or other filing as prescribed by this 
section when adopting or amending its charter or bylaws.
    (c) Scope. This section describes the procedures and requirements 
governing charters and bylaws for Federal stock savings associations.
    (d) Exceptions to rules of general applicability. Notwithstanding 
any other provision of this part, Sec. Sec.  5.8 through 5.11 do not 
apply to this section.
    (e) Charter form. The charter of a Federal stock association must be 
in the following form, except as provided in this section. An 
association that has converted from the mutual form pursuant to part 192 
of this chapter must include in its charter a section establishing a 
liquidation account as required by Sec.  192.485 of this chapter. A 
charter for a Federal stock savings bank must substitute the term 
``savings bank'' for ``association.'' Charters may also include any 
preapproved optional provision contained in this section.

                          Federal Stock Charter

    Section 1. Corporate title. The full corporate title of the 
association is __.
    Section 2. Office. The home office is located in __ [city, state].
    Section 3. Duration. The duration of the association is perpetual.

[[Page 296]]

    Section 4. Purpose and powers. The purpose of the association is to 
pursue any or all of the lawful objectives of a Federal savings 
association chartered under section 5 of the Home Owners' Loan Act and 
to exercise all of the express, implied, and incidental powers conferred 
thereby and by all acts amendatory thereof and supplemental thereto, 
subject to the Constitution and laws of the United States as they are 
now in effect, or as they may hereafter be amended, and subject to all 
lawful and applicable rules, regulations, and orders of the Office of 
the Comptroller of the Currency (``OCC'').
    Section 5. Capital stock. The total number of shares of all classes 
of the capital stock that the association has the authority to issue is 
____, all of which is common stock of par [or if no par is specified 
then shares have a stated] value of ____per share. The shares may be 
issued from time to time as authorized by the board of directors without 
the approval of its shareholders, except as otherwise provided in this 
Section 5 or to the extent that such approval is required by governing 
law, rule, or regulation. The consideration for the issuance of the 
shares must be paid in full before their issuance and may not be less 
than the par [or stated] value. Neither promissory notes nor future 
services may constitute payment or part payment for the issuance of 
shares of the association. The consideration for the shares must be 
cash, tangible or intangible property (to the extent direct investment 
in such property would be permitted to the association), labor, or 
services actually performed for the association, or any combination of 
the foregoing. In the absence of actual fraud in the transaction, the 
value of such property, labor, or services, as determined by the board 
of directors of the association, is conclusive. Upon payment of such 
consideration, such shares are deemed to be fully paid and 
nonassessable. In the case of a stock dividend, that part of the 
retained earnings of the association that is transferred to common stock 
or paid-in capital accounts upon the issuance of shares as a stock 
dividend is deemed to be the consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association from 
the mutual to stock form of capitalization, no shares of capital stock 
(including shares issuable upon conversion, exchange, or exercise of 
other securities) may be issued, directly or indirectly, to officers, 
directors, or controlling persons of the association other than as part 
of a general public offering or as qualifying shares to a director, 
unless the issuance or the plan under which they would be issued has 
been approved by a majority of the total votes eligible to be cast at a 
legal meeting. The holders of the common stock exclusively possess all 
voting power. Each holder of shares of common stock is entitled to one 
vote for each share held by such holder, except as to the cumulation of 
votes for the election of directors, unless the charter provides that 
there will be no such cumulative voting. Subject to any provision for a 
liquidation account, in the event of any liquidation, dissolution, or 
winding up of the association, the holders of the common stock will be 
entitled, after payment or provision for payment of all debts and 
liabilities of the association, to receive the remaining assets of the 
association available for distribution, in cash or in kind. Each share 
of common stock must have the same relative rights as and be identical 
in all respects with all the other shares of common stock.
    Section 6. Preemptive rights. Holders of the capital stock of the 
association are not entitled to preemptive rights with respect to any 
shares of the association which may be issued.
    Section 7. Directors. The association will be under the direction of 
a board of directors. The authorized number of directors, as stated in 
the association's bylaws, may not be fewer than five nor more than 
fifteen except when a greater or lesser number is approved by the OCC.
    Section 8. Amendment of charter. Except as provided in Section 5, no 
amendment, addition, alteration, change or repeal of this charter may be 
made, unless such is proposed by the board of directors of the 
association, approved by the shareholders by a majority of the votes 
eligible to be cast at a legal meeting, unless a higher vote is 
otherwise required, and approved or preapproved by the OCC.

Attest:_________________________________________________________________
Secretary of the Association

By:_____________________________________________________________________
President or Chief Executive Officer of the Association

Attest:_________________________________________________________________
Deputy Comptroller for Licensing

By:_____________________________________________________________________
Comptroller of the Currency

Effective Date:_________________________________________________________

    (f) Charter amendments. In order to adopt a charter amendment, a 
Federal stock savings association must comply with the following 
requirements:
    (1) Board of directors approval. The board of directors of the 
association must adopt a resolution proposing the charter amendment that 
states the text of such amendment;
    (2) Form of filing--(i) Application requirement. Except as provided 
in paragraph (f)(2)(ii) of this section, a Federal stock savings 
association must file the

[[Page 297]]

proposed charter amendment with, and obtain the prior approval of the 
OCC.
    (A) Expedited review. Except as provided in paragraph (f)(2)(i)(B) 
of this section, the charter amendment will be deemed approved as of the 
30th day after filing, unless the OCC notifies the filer that the 
amendment is denied or that the amendment contains procedures of the 
type described in paragraph (f)(2)(ii)(B) of this section and is not 
subject to expedited review, provided the association follows the 
requirements of its charter in adopting the amendment.
    (B) Amendments exempted from expedited review. Expedited review is 
not available for a charter amendment that would render more difficult 
or discourage a merger, tender offer, or proxy contest, the assumption 
of control by a holder of a block of the association's stock, the 
removal of incumbent management, or involve a significant issue of law 
or policy.
    (ii) Notice requirement. No application under paragraph (f)(2)(i) of 
this section is required if the amendment is contained within paragraphs 
(e) or (g) of this section. In such case, the Federal stock savings 
association must submit a notice with the charter amendment to the OCC 
within 30 days after adoption.
    (3) Effectiveness. A charter amendment is effective after approval 
by the OCC, if required, and adoption by the association, provided the 
association follows the requirements of its charter in adopting the 
amendments.
    (g) Optional charter amendments. The following charter amendments 
are subject to the notice requirement in paragraph (f)(2)(ii) of this 
section if adopted without change:
    (1) Title change. A Federal stock association that complies with 
Sec.  5.42 of this chapter may amend its charter by substituting a new 
corporate title in section 1.
    (2) Home office. A Federal savings association may amend its charter 
by substituting a new home office in section 2, if it has complied with 
applicable requirements of Sec.  5.40.
    (3) Number of shares of stock and par value. A Federal stock 
association may amend Section 5 of its charter to change the number of 
authorized shares of stock, the number of shares within each class of 
stock, and the par or stated value of such shares.
    (4) Capital stock. A Federal stock association may amend its charter 
by revising Section 5 to read as follows:

    Section 5. Capital stock. The total number of shares of all classes 
of capital stock that the association has the authority to issue is 
____, of which ____is common stock of par [or if no par value is 
specified the stated] value of ____per share and of which [list the 
number of each class of preferred and the par or if no par value is 
specified the stated value per share of each such class]. The shares may 
be issued from time to time as authorized by the board of directors 
without further approval of shareholders, except as otherwise provided 
in this Section 5 or to the extent that such approval is required by 
governing law, rule, or regulation. The consideration for the issuance 
of the shares must be paid in full before their issuance and may not be 
less than the par [or stated] value. Neither promissory notes nor future 
services may constitute payment or part payment for the issuance of 
shares of the association. The consideration for the shares must be 
cash, tangible or intangible property (to the extent direct investment 
in such property would be permitted), labor, or services actually 
performed for the association, or any combination of the foregoing. In 
the absence of actual fraud in the transaction, the value of such 
property, labor, or services, as determined by the board of directors of 
the association, will be conclusive. Upon payment of such consideration, 
such shares will be deemed to be fully paid and nonassessable. In the 
case of a stock dividend, that part of the retained earnings of the 
association that is transferred to common stock or paid-in capital 
accounts upon the issuance of shares as a stock dividend will be deemed 
to be the consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association from 
the mutual to the stock form of capitalization, no shares of capital 
stock (including shares issuable upon conversion, exchange, or exercise 
of other securities) may be issued, directly or indirectly, to officers, 
directors, or controlling persons of the association other than as part 
of a general public offering or as qualifying shares to a director, 
unless their issuance or the plan under which they would be issued has 
been approved by a majority of the total votes eligible to be cast at a 
legal meeting.
    Nothing contained in this Section 5 (or in any supplementary 
sections hereto) entitles the holders of any class of a series of 
capital stock to vote as a separate class or series or to more than one 
vote per share, except as to

[[Page 298]]

the cumulation of votes for the election of directors, unless the 
charter otherwise provides that there will be no such cumulative voting: 
Provided, That this restriction on voting separately by class or series 
does not apply:
    i. To any provision which would authorize the holders of preferred 
stock, voting as a class or series, to elect some members of the board 
of directors, less than a majority thereof, in the event of default in 
the payment of dividends on any class or series of preferred stock;
    ii. To any provision that would require the holders of preferred 
stock, voting as a class or series, to approve the merger or 
consolidation of the association with another corporation or the sale, 
lease, or conveyance (other than by mortgage or pledge) of properties or 
business in exchange for securities of a corporation other than the 
association if the preferred stock is exchanged for securities of such 
other corporation: Provided, That no provision may require such approval 
for transactions undertaken with the assistance or pursuant to the 
direction of the OCC or the Federal Deposit Insurance Corporation;
    iii. To any amendment which would adversely change the specific 
terms of any class or series of capital stock as set forth in this 
Section 5 (or in any supplementary sections hereto), including any 
amendment which would create or enlarge any class or series ranking 
prior thereto in rights and preferences. An amendment which increases 
the number of authorized shares of any class or series of capital stock, 
or substitutes the surviving association in a merger or consolidation 
for the association, is not considered to be such an adverse change.
    A description of the different classes and series (if any) of the 
association's capital stock and a statement of the designations, and the 
relative rights, preferences, and limitations of the shares of each 
class of and series (if any) of capital stock are as follows:
    A. Common stock. Except as provided in this Section 5 (or in any 
supplementary sections thereto) the holders of the common stock 
exclusively possess all voting power. Each holder of shares of the 
common stock is entitled to one vote for each share held by each holder, 
except as to the cumulation of votes for the election of directors, 
unless the charter otherwise provides that there will be no such 
cumulative voting.
    Whenever there has been paid, or declared and set aside for payment, 
to the holders of the outstanding shares of any class of stock having 
preference over the common stock as to the payment of dividends, the 
full amount of dividends and of sinking fund, retirement fund, or other 
retirement payments, if any, to which such holders are respectively 
entitled in preference to the common stock, then dividends may be paid 
on the common stock and on any class or series of stock entitled to 
participate therewith as to dividends out of any assets legally 
available for the payment of dividends.
    In the event of any liquidation, dissolution, or winding up of the 
association, the holders of the common stock (and the holders of any 
class or series of stock entitled to participate with the common stock 
in the distribution of assets) will be entitled to receive, in cash or 
in kind, the assets of the association available for distribution 
remaining after: (i) Payment or provision for payment of the 
association's debts and liabilities; (ii) distributions or provision for 
distributions in settlement of its liquidation account; and (iii) 
distributions or provision for distributions to holders of any class or 
series of stock having preference over the common stock in the 
liquidation, dissolution, or winding up of the association. Each share 
of common stock will have the same relative rights as and be identical 
in all respects with all the other shares of common stock.
    B. Preferred stock. The association may provide in supplementary 
sections to its charter for one or more classes of preferred stock, 
which must be separately identified. The shares of any class may be 
divided into and issued in series, with each series separately 
designated so as to distinguish the shares thereof from the shares of 
all other series and classes. The terms of each series must be set forth 
in a supplementary section to the charter. All shares of the same class 
must be identical except as to the following relative rights and 
preferences, as to which there may be variations between different 
series:
    a. The distinctive serial designation and the number of shares 
constituting such series;
    b. The dividend rate or the amount of dividends to be paid on the 
shares of such series, whether dividends are cumulative and, if so, from 
which date(s), the payment date(s) for dividends, and the participating 
or other special rights, if any, with respect to dividends;
    c. The voting powers, full or limited, if any, of shares of such 
series;
    d. Whether the shares of such series are redeemable and, if so, the 
price(s) at which, and the terms and conditions on which, such shares 
may be redeemed;
    e. The amount(s) payable upon the shares of such series in the event 
of voluntary or involuntary liquidation, dissolution, or winding up of 
the association;
    f. Whether the shares of such series are entitled to the benefit of 
a sinking or retirement fund to be applied to the purchase or redemption 
of such shares, and if so entitled, the amount of such fund and the 
manner of its application, including the price(s) at which such shares 
may be redeemed or purchased through the application of such fund;
    g. Whether the shares of such series are convertible into, or 
exchangeable for, shares

[[Page 299]]

of any other class or classes of stock of the association and, if so, 
the conversion price(s) or the rate(s) of exchange, and the adjustments 
thereof, if any, at which such conversion or exchange may be made, and 
any other terms and conditions of such conversion or exchange.
    h. The price or other consideration for which the shares of such 
series are issued; and
    i. Whether the shares of such series which are redeemed or converted 
have the status of authorized but unissued shares of serial preferred 
stock and whether such shares may be reissued as shares of the same or 
any other series of serial preferred stock.
    Each share of each series of serial preferred stock must have the 
same relative rights as and be identical in all respects with all the 
other shares of the same series.
    The board of directors has authority to divide, by the adoption of 
supplementary charter sections, any authorized class of preferred stock 
into series, and, within the limitations set forth in this section and 
the remainder of this charter, fix and determine the relative rights and 
preferences of the shares of any series so established.
    Prior to the issuance of any preferred shares of a series 
established by a supplementary charter section adopted by the board of 
directors, the association must file with the OCC a dated copy of that 
supplementary section of this charter established and designating the 
series and fixing and determining the relative rights and preferences 
thereof.

    (5) Limitations on subsequent issuances. A Federal stock association 
may amend its charter to require shareholder approval of the issuance or 
reservation of common stock or securities convertible into common stock 
under circumstances which would require shareholder approval under the 
rules of the New York Stock Exchange if the shares were then listed on 
the New York Stock Exchange.
    (6) Cumulative voting. A Federal stock association may amend its 
charter by substituting the following sentence for the second sentence 
in the third paragraph of Section 5: ``Each holder of shares of common 
stock will be entitled to one vote for each share held by such holder 
and there will be no right to cumulate votes in an election of 
directors.''
    (7) Anti-takeover provisions following mutual to stock conversion. 
Notwithstanding the law of the State in which the association is 
located, a Federal stock association may amend its charter by 
renumbering existing sections as appropriate and adding a new section 8 
as follows:

    Section 8. Certain Provisions Applicable for Five Years. 
Notwithstanding anything contained in the Association's charter or 
bylaws to the contrary, for a period of [specify number of years up to 
five] years from the date of completion of the conversion of the 
Association from mutual to stock form, the following provisions will 
apply:
    A. Beneficial Ownership Limitation. No person may directly or 
indirectly offer to acquire or acquire the beneficial ownership of more 
than 10 percent of any class of an equity security of the association. 
This limitation does not apply to a transaction in which the association 
forms a holding company without change in the respective beneficial 
ownership interests of its stockholders other than pursuant to the 
exercise of any dissenter and appraisal rights, the purchase of shares 
by underwriters in connection with a public offering, or the purchase of 
less than 25 percent of a class of stock by a tax-qualified employee 
stock benefit plan as defined in 12 CFR 192.25.
    In the event shares are acquired in violation of this section 8, all 
shares beneficially owned by any person in excess of 10 percent will be 
considered ``excess shares'' and will not be counted as shares entitled 
to vote and may not be voted by any person or counted as voting shares 
in connection with any matters submitted to the stockholders for a vote.
    For purposes of this section 8, the following definitions apply:
    1. The term ``person'' includes an individual, a group acting in 
concert, a corporation, a partnership, an association, a joint stock 
company, a trust, an unincorporated organization or similar company, a 
syndicate or any other group formed for the purpose of acquiring, 
holding or disposing of the equity securities of the association.
    2. The term ``offer'' includes every offer to buy or otherwise 
acquire, solicitation of an offer to sell, tender offer for, or request 
or invitation for tenders of, a security or interest in a security for 
value.
    3. The term ``acquire'' includes every type of acquisition, whether 
effected by purchase, exchange, operation of law or otherwise.
    4. The term ``acting in concert'' means (a) knowing participation in 
a joint activity or parallel action towards a common goal of acquiring 
control whether or not pursuant to an express agreement, or (b) a 
combination or pooling of voting or other interests in the securities of 
an issuer for a common purpose pursuant to any contract, understanding, 
relationship, agreement or other arrangement, whether written or 
otherwise.

[[Page 300]]

    B. Cumulative Voting Limitation. Stockholders may not cumulate their 
votes for election of directors.
    C. Call for Special Meetings. Special meetings of stockholders 
relating to changes in control of the association or amendments to its 
charter may be called only upon direction of the board of directors.

    (h) Anti-takeover provisions. The OCC may grant approval to a 
charter amendment not listed in paragraph (g) of this section regarding 
the acquisition by any person or persons of its equity securities 
provided that the association files as part of its application pursuant 
to paragraph (f)(2)(i) of this section an opinion, acceptable to the 
OCC, of counsel independent from the association that the proposed 
charter provision would be permitted to be adopted by a corporation 
chartered by the State in which the principal office of the association 
is located. Any such provision must be consistent with applicable 
statutes, regulations, and OCC policies. Further, any such provision 
that would have the effect of rendering more difficult a change in 
control of the association and would require for any corporate action 
(other than the removal of directors) the affirmative vote of a larger 
percentage of shareholders than is required by this part, may not be 
effective unless adopted by a percentage of shareholder vote at least 
equal to the highest percentage that would be required to take any 
action under such provision.
    (i) Reissuance of charter. A Federal stock association that has 
amended its charter may apply to have its charter, including the 
amendments, reissued by the OCC. Such requests for reissuance should be 
filed with the appropriate OCC licensing office, and contain signatures 
required in the form ``Federal Stock Charter'' in paragraph (e) of this 
section, together with such supporting documents as needed to 
demonstrate that the amendments were properly adopted.
    (j) Bylaws for Federal stock savings associations--(1) In general. 
Bylaws may be adopted, amended or repealed by either a majority of the 
votes cast by the shareholders at a legal meeting or a majority of the 
board of directors. A bylaw provision inconsistent with paragraph (k), 
(l), (m) or (n) of this section may be adopted only with the approval of 
the OCC.
    (2) Form of filing--(i) Application requirement. Except as provided 
in paragraphs (j)(2)(ii) or (j)(2)(iii) of this section, a Federal stock 
savings association must file the proposed bylaw amendment with, and 
obtain the prior approval of, the OCC.
    (A) Expedited review. Except as provided in paragraph (j)(2)(i)(B) 
of this section, the bylaw amendment will be deemed approved as of the 
30th day after filing, unless the OCC notifies the filer that the 
application is denied or that the amendment contains procedures of the 
type described in paragraph (j)(2)(i)(B) of this section and is not 
eligible for expedited review, provided the association follows the 
requirements of its charter and bylaws in adopting the amendment.
    (B) Amendments exempted from expedited review. Expedited review is 
not available for a bylaw amendment that would:
    (1) Render more difficult or discourage a merger, tender offer, or 
proxy contest, the assumption of control by a holder of a large block of 
the association's stock, or the removal of incumbent management; or
    (2) Be inconsistent with paragraphs (k) through (n) of this section, 
with applicable laws, rules, regulations or the association's charter or 
involve a significant issue of law or policy, including indemnification, 
conflicts of interest, and limitations on director or officer liability.
    (ii) Corporate governance election and notice requirement. A Federal 
stock association may elect to follow the corporate governance 
provisions of: The laws of any State in which the home office or any 
branch of the association is located; the laws of any State in which a 
holding company of the association is incorporated or chartered; 
Delaware General Corporation law; or the Model Business Corporation Act, 
provided that such provisions may be elected to the extent not 
inconsistent with applicable Federal statutes and regulations and safety 
and soundness, and such provisions are not of the type described in 
paragraph (j)(2)(i)(B) of this section. If this election is selected,

[[Page 301]]

a Federal stock association must designate in its bylaws the provision 
or provisions from the body or bodies of law selected for its corporate 
governance provisions, and must file a notice containing a copy of such 
bylaws, within 30 days after adoption. The notice must indicate, where 
not obvious, why the bylaw provisions meet the requirements stated in 
paragraph (j)(2)(i)(B) of this section. A Federal stock savings 
association that has elected to follow the corporate governance 
provisions of the law of the State in which its holding company is 
incorporated may continue to use those provisions even if the 
association is no longer controlled by that holding company.
    (iii) No filing required. No filing is required for purposes of 
paragraph (j)(2) of this section if a bylaw amendment adopts the 
language of the OCC's model or optional bylaws without change.
    (3) Effectiveness. A bylaw amendment is effective after approval by 
the OCC, if required, and adoption by the association, provided that the 
association follows the requirements of its charter and bylaws in 
adopting the amendment.
    (4) Effect of subsequent charter or bylaw change. Notwithstanding 
any subsequent change to its charter or bylaws, the authority of a 
Federal savings association to engage in any transaction is determined 
only by the association's charter or bylaws then in effect.
    (k) Shareholders of Federal stock savings associations--(1) 
Shareholder meetings--(i) In general. A meeting of the shareholders of 
the association for the election of directors and for the transaction of 
any other business of the association must be held annually within 150 
days after the end of the association's fiscal year. Unless otherwise 
provided in the association's charter, special meetings of the 
shareholders may be called by the board of directors or on the request 
of the holders of 10 percent or more of the shares entitled to vote at 
the meeting, or by such other persons as may be specified in the bylaws 
of the association.
    (ii) Location of shareholder meetings--(A) In general. All annual 
and special meetings of shareholders of the association may be held at 
any convenient place the board of directors may designate. The 
association's bylaws may provide for the telephonic or electronic 
participation of shareholders in these meetings. Shareholders 
participating in an annual or special meeting telephonically or 
electronically will be deemed present in person for purposes of the 
quorum requirement in paragraph (k)(5) of this section.
    (B) Procedures for telephonic or electronic participation. If the 
association's bylaws provide for telephonic or electronic participation 
in shareholder meetings, the association must elect to follow corporate 
governance provisions for these meetings pursuant to paragraph 
(j)(2)(ii) of this section that include procedures for telephonic or 
electronic participation in shareholder meetings. The association must 
indicate the use of these elected procedures in its bylaws.
    (2) Notice of shareholder meetings. Written notice stating the 
place, day, and hour of the meeting and the purpose or purposes for 
which the meeting is called must be delivered not fewer than 20 nor more 
than 50 days before the date of the meeting, either personally or by 
mail, by or at the direction of the chair of the board, the president, 
the secretary, or the directors, or other persons calling the meeting, 
to each shareholder of record entitled to vote at such meeting. If 
mailed, such notice will be deemed to be delivered when deposited in the 
mail, addressed to the shareholder at the address appearing on the stock 
transfer books or records of the association as of the record date 
prescribed in paragraph (k)(3) of this section, with postage thereon 
prepaid. When any shareholders' meeting, either annual or special, is 
adjourned for 30 days or more, notice of the adjourned meeting must be 
given as in the case of an original meeting. Notwithstanding anything in 
this section, however, a Federal stock association that is wholly owned 
is not subject to the shareholder notice requirement.
    (3) Fixing of record date. For the purpose of determining 
shareholders entitled to notice of or to vote at any

[[Page 302]]

meeting of shareholders or any adjournment thereof, or shareholders 
entitled to receive payment of any dividend, or in order to make a 
determination of shareholders for any other proper purpose, the board of 
directors must fix in advance a date as the record date for any such 
determination of shareholders. Such date in any case may not be more 
than 60 days and, in case of a meeting of shareholders, not less than 10 
days prior to the date on which the particular action, requiring such 
determination of shareholders, is to be taken. When a determination of 
shareholders entitled to vote at any meeting of shareholders has been 
made as provided in this section, such determination will apply to any 
adjournment thereof.
    (4) Voting lists. (i) At least 20 days before each meeting of the 
shareholders, the officer or agent having charge of the stock transfer 
books for the shares of the association must make a complete list of the 
stockholders of record entitled to vote at such meeting, or any 
adjournments thereof, arranged in alphabetical order, with the address 
and the number of shares held by each. This list of shareholders must be 
kept on file at the home office of the association and is subject to 
inspection by any shareholder of record or the stockholder's agent 
during the entire time of the meeting. The original stock transfer book 
will constitute prima facie evidence of the stockholders entitled to 
examine such list or transfer books or to vote at any meeting of 
stockholders. Notwithstanding anything in this section, however, a 
Federal stock association that is wholly owned is not subject to the 
voting list requirements.
    (ii) In lieu of making the shareholders list available for 
inspection by any shareholders as provided in paragraph (k)(4)(i) of 
this section, the board of directors may perform such acts as required 
by paragraphs (a) and (b) of Rule 14a-7 of the General Rules and 
Regulations under the Securities and Exchange Act of 1934 (17 CFR 
240.14a-7) as may be duly requested in writing, with respect to any 
matter which may be properly considered at a meeting of shareholders, by 
any shareholder who is entitled to vote on such matter and who must 
defray the reasonable expenses to be incurred by the association in 
performance of the act or acts required.
    (5) Shareholder quorum. A majority of the outstanding shares of the 
association entitled to vote, represented in person or by proxy, 
constitutes a quorum at a meeting of shareholders. The shareholders 
present at a duly organized meeting may continue to transact business 
until adjournment, notwithstanding the withdrawal of enough shareholders 
to leave less than a quorum. If a quorum is present, the affirmative 
vote of the majority of the shares represented at the meeting and 
entitled to vote on the subject matter will be the act of the 
stockholders, unless the vote of a greater number of stockholders voting 
together or voting by classes is required by law or the charter. 
Directors, however, are elected by a plurality of the votes cast at an 
election of directors.
    (6) Shareholder voting--(i) Proxies. Unless otherwise provided in 
the association's charter, at all meetings of shareholders, a 
shareholder may vote in person or by proxy executed in writing by the 
shareholder or by a duly authorized attorney in fact. Proxies may be 
given telephonically or electronically as long as the holder uses a 
procedure for verifying the identity of the shareholder. Proxies 
solicited on behalf of the management must be voted as directed by the 
shareholder or, in the absence of such direction, as determined by a 
majority of the board of directors. No proxy maybe valid more than 
eleven months from the date of its execution except for a proxy coupled 
with an interest.
    (ii) Shares controlled by association. Neither treasury shares of 
its own stock held by the association nor shares held by another 
corporation, if a majority of the shares entitled to vote for the 
election of directors of such other corporation are held by the 
association, may be voted at any meeting or counted in determining the 
total number of outstanding shares at any given time for purposes of any 
meeting.
    (7) Nominations and new business submitted by shareholders. 
Nominations for directors and new business submitted by shareholders 
must be voted upon at

[[Page 303]]

the annual meeting if such nominations or new business are submitted in 
writing and delivered to the secretary of the association at least five 
days prior to the date of the annual meeting. Ballots bearing the names 
of all the persons nominated must be provided for use at the annual 
meeting.
    (8) Informal action by stockholders. If the bylaws of the 
association so provide, any action required to be taken at a meeting of 
the stockholders, or any other action that may be taken at a meeting of 
the stockholders, may be taken without a meeting if consent in writing 
has been given by all the stockholders entitled to vote with respect to 
the subject matter.
    (l) Board of directors--(1) General powers and duties. The business 
and affairs of the association must be under the direction of its board 
of directors. Directors need not be stockholders unless the bylaws so 
require.
    (2) Number and term. The bylaws must set forth a specific number of 
directors, not a range. The number of directors may not be fewer than 
five nor more than fifteen, unless a higher or lower number has been 
authorized by the OTS prior to July 21, 2011 or the OCC. Directors must 
be elected for a term of one to three years and until their successors 
are elected and qualified. If a staggered board is chosen, the directors 
must be divided into two or three classes as nearly equal in number as 
possible and one class must be elected by ballot annually.
    (3) Regular meetings. The board of directors determines the place, 
frequency, time and procedure for notice of regular meetings. The bylaws 
may provide for telephonic or electronic participation at these 
meetings.
    (4) Quorum. A majority of the number of directors constitutes a 
quorum for the transaction of business at any meeting of the board of 
directors. The act of the majority of the directors present at a meeting 
at which a quorum is present will be the act of the board of directors, 
unless a greater number is prescribed by regulation of the OCC.
    (5) Vacancies. Any vacancy occurring in the board of directors may 
be filled by the affirmative vote of a majority of the remaining 
directors even with less than a quorum of the board of directors. A 
director elected to fill a vacancy may serve only until the next 
election of directors by the shareholders. Any directorship to be filled 
by reason of an increase in the number of directors may be filled by 
election by the board of directors for a term of office continuing only 
until the next election of directors by the shareholders.
    (6) Removal or resignation of directors. (i) At a meeting of 
shareholders called expressly for that purpose, any director may be 
removed only for cause, as termination for cause is defined in Sec.  
5.21(j)(2)(x)(B), by a vote of the holders of a majority of the shares 
then entitled to vote at an election of directors. Associations may 
provide for procedures regarding resignations in the bylaws.
    (ii) If less than the entire board is to be removed, no one of the 
directors may be removed if the votes cast against the removal would be 
sufficient to elect a director if then cumulatively voted at an election 
of the class of directors of which such director is a part.
    (iii) Whenever the holders of the shares of any class are entitled 
to elect one or more directors by the provisions of the charter or 
supplemental sections thereto, the provisions of this section apply, in 
respect to the removal of a director or directors so elected, to the 
vote of the holders of the outstanding shares of that class and not to 
the vote of the outstanding shares as a whole.
    (7) Executive and other committees. The board of directors, by 
resolution adopted by a majority of the full board, may designate from 
among its members an executive committee and one or more other 
committees. No committee may have the authority of the board of 
directors with reference to: The declaration of dividends; the amendment 
of the charter or bylaws of the association; recommending to the 
stockholders a plan of merger, consolidation, or conversion; the sale, 
lease, or other disposition of all, or substantially all, of the 
property and assets of the association otherwise than in the usual and 
regular course of its business; a voluntary dissolution of the 
association; a revocation of any of the foregoing; or the approval of a 
transaction in which

[[Page 304]]

any member of the executive committee, directly or indirectly, has any 
material beneficial interest. The designation of any committee and the 
delegation of authority thereto does not operate to relieve the board of 
directors, or any director, of any responsibility imposed by law or 
regulation.
    (8) Notice of special meetings. Written notice of at least 24 hours 
regarding any special meeting of the board of directors or of any 
committee designated thereby must be given to each director in 
accordance with the bylaws, although such notice may be waived by the 
director. The attendance of a director at a meeting constitutes a waiver 
of notice of such meeting, except where a director attends a meeting for 
the express purpose of objecting to the transaction of any business 
because the meeting is not lawfully called or convened. Neither the 
business to be transacted at, nor the purpose of, any meeting need be 
specified in the notice or waiver of notice of such meeting. The bylaws 
may provide for telephonic or electronic participation at a special 
meeting.
    (9) Action without a meeting. Any action required or permitted to be 
taken by the board of directors at a meeting may be taken without a 
meeting if a consent in writing, setting forth the actions so taken, is 
signed by all of the directors.
    (10) Presumption of assent. A director of the association who is 
present at a meeting of the board of directors at which action on any 
association matter is taken is presumed to have assented to the action 
taken unless their dissent or abstention is entered in the minutes of 
the meeting or unless a written dissent to such action is filed with the 
person acting as the secretary of the meeting before the adjournment 
thereof or is forwarded by registered mail to the secretary of the 
association within five days after the date on which a copy of the 
minutes of the meeting is received. Such right to dissent does not apply 
to a director who voted in favor of such action.
    (11) Age limitation on directors. A Federal association may provide 
a bylaw on age limitation for directors. Bylaws on age limitations must 
comply with all Federal laws, rules and regulations.
    (m) Officers--(1) Positions. The officers of the association must 
consist of a president, one or more vice presidents, a secretary, and a 
treasurer or comptroller, each of whom must be elected by the board of 
directors. The board of directors may also designate the chair of the 
board as an officer. The offices of the secretary and treasurer or 
comptroller may be held by the same person and the vice president may 
also be either the secretary or the treasurer or comptroller. The board 
of directors may designate one or more vice presidents as executive vice 
president or senior vice president.
    (2) Removal. Any officer may be removed by the board of directors 
whenever in its judgment the best interests of the association will be 
served thereby; but such removal, other than for cause, as termination 
for cause is defined in Sec.  5.21(j)(2)(x)(B), will be without 
prejudice to the contractual rights, if any, of the person so removed.
    (3) Age limitation on officers. A Federal association may provide a 
bylaw on age limitation for officers. Bylaws on age limitations must 
comply with all Federal laws, rules, and regulations.
    (n) Certificates for shares and their transfer--(1) Certificates for 
shares. Certificates representing shares of capital stock of the 
association must be in such form as determined by the board of directors 
and approved by the OCC. The name and address of the person to whom the 
shares are issued, with the number of shares and date of issue, must be 
entered on the stock transfer books of the association. All certificates 
surrendered to the association for transfer must be cancelled and no new 
certificate may be issued until the former certificate for a like number 
of shares has been surrendered and cancelled, except that in the case of 
a lost or destroyed certificate a new certificate may be issued upon 
such terms and indemnity to the association as the board of directors 
may prescribe.
    (2) Transfer of shares. Transfer of shares of capital stock of the 
association may be made only on its stock transfer books. Authority for 
such transfer may be given only by the holder of record or by a legal 
representative, who must furnish proper evidence of such authority, or 
by an attorney

[[Page 305]]

authorized by a duly executed power of attorney and filed with the 
association. The transfer may be made only on surrender for cancellation 
of the certificate for the shares. The person in whose name shares of 
capital stock stand on the books of the association is deemed by the 
association to be the owner for all purposes.

[80 FR 28425, May 18, 2015, as amended at 82 FR 8103, Jan. 23, 2017; 85 
FR 31948, May 28, 2020; 85 FR 80440, Dec. 11, 2020; 85 FR 83726, Dec. 
22, 2020]



Sec.  5.23  Conversion to become a Federal savings association.

    (a) Authority. 12 U.S.C. 35, 1462a, 1463, 1464, 1467a, 2903, and 
5412(b)(2)(B).
    (b) Scope. (1) This section describes procedures and standards 
governing OCC review and approval of an application by a mutual 
depository institution to convert to a Federal mutual savings 
association or an application by a stock depository institution to 
convert to a Federal stock savings association.
    (2) As used in this section, depository institution means any 
commercial bank (including a private bank), a savings bank, a trust 
company, a savings and loan association, a building and loan 
association, a homestead association, a cooperative bank, an industrial 
bank, or a credit union chartered in the United States and having its 
principal office located in the United States.
    (c) Licensing requirements. A depository institution that is mutual 
in form (``mutual depository institution'') must submit an application 
and obtain prior OCC approval to convert to a Federal mutual savings 
association. A stock depository institution must submit an application 
and obtain prior OCC approval to convert to a Federal stock savings 
association. At the time of conversion, the filer must have deposits 
insured by the FDIC. An institution that is not already insured by the 
FDIC must apply to the FDIC, and obtain FDIC approval, for deposit 
insurance before converting.
    (d) Conversion of a mutual depository institution or a stock 
depository institution to a Federal savings association--(1) Policy. 
Consistent with the OCC's chartering policy, it is OCC policy to allow 
conversion to a Federal savings association charter by another financial 
institution that can operate safely and soundly as a Federal savings 
association in compliance with applicable laws, regulations, and 
policies. This includes consideration of the factors set out in section 
5(e) of the Home Owners' Loan Act, 12 U.S.C. 1464(e). The converting 
financial institution must obtain all necessary regulatory and 
shareholder or member approvals. The OCC may deny an application by any 
mutual depository institution or stock depository institution to convert 
to a Federal mutual savings association charter or Federal stock 
association charter, respectively, on the basis of the standards for 
denial set forth in Sec.  5.13(b) or when conversion would permit the 
filer to escape supervisory action by its current regulators.
    (2) Procedures--(i) Prefiling communications. The filer should 
consult with the appropriate OCC licensing office prior to filing if it 
anticipates that its application will raise unusual or complex issues. 
If a prefiling meeting is appropriate, it will normally be held in the 
OCC licensing office where the application will be filed, but may be 
held at another location at the request of the filer.
    (ii) Application. A mutual depository institution or a stock 
depository institution must submit its application to convert to a 
Federal mutual savings association or Federal stock depository 
association, respectively, to the appropriate OCC licensing office and 
must send a copy of the application to its current appropriate Federal 
banking agency. The application must:
    (A) Identify each branch that the resulting financial institution 
expects to operate after conversion;
    (B) Include the institution's most recent audited financial 
statements (if any);
    (C) Include the latest report of condition and report of income (the 
most recent daily statement of condition will suffice if the institution 
does not file these reports);
    (D) Unless otherwise advised by the OCC in a prefiling 
communication, include an opinion of counsel that, in the case of State-
chartered institutions, the conversion is not in contravention of 
applicable State law, or in the case

[[Page 306]]

of Federally-chartered institutions, the conversion is not in 
contravention of applicable Federal law;
    (E) State whether the institution wishes to exercise fiduciary 
powers after the conversion;
    (F) Identify all subsidiaries, service corporation investments, bank 
service company investments, and other equity investments that will be 
retained following the conversion, and provide the information and 
analysis of the subsidiaries' activities and the service corporation 
investments and other equity investments that would be required if the 
converting mutual institution or stock institution were a Federal mutual 
savings association or Federal stock savings association, respectively, 
establishing each subsidiary or making each service corporation or other 
equity investment pursuant to Sec.  5.35, Sec.  5.38, Sec.  5.58, or 
Sec.  5.59, or other applicable law and regulation;
    (G) Identify any nonconforming assets (including nonconforming 
subsidiaries) and nonconforming activities that the institution engages 
in and describe the plans to retain or divest those assets and 
activities;
    (H) Include a business plan if the converting institution has been 
operating for less than three years, plans to make significant changes 
to its business after the conversion, or at the request of the OCC;
    (I) Include a list of all outstanding conditions or other 
requirements imposed by the institution's current appropriate Federal 
banking agency and, if applicable, current State bank supervisor or 
State attorney-general in any cease and desist order, written agreement, 
other formal enforcement order, memorandum of understanding, approval of 
any application, notice or request, commitment letter, board resolution, 
or in any other manner, including the converting institution's analysis 
whether any such actions prohibit conversion under 12 U.S.C. 35, and the 
converting institution's plans regarding adhering to such conditions and 
requirements after conversion;
    (J) If the converting institution does not meet the qualified thrift 
lender test of 12 U.S.C. 1467a(m), include a plan to achieve compliance 
within a reasonable period of time and a request for an exception from 
the OCC;
    (K) Include a list of directors and senior executive officers, as 
defined in Sec.  5.51, of the converting institution; and
    (L) Include a list of individuals, directors, and shareholders who 
directly or indirectly, or acting in concert with one or more persons or 
companies, or together with members of their immediate family, do or 
will own, control, or hold 10 percent or more of the institution's 
voting stock.
    (iii) The OCC may permit a Federal savings association to retain 
nonconforming assets of a converting institution for the time period 
prescribed by the OCC following a conversion, subject to conditions and 
an OCC determination of the carrying value of the retained assets 
consistent with the requirements of section 5(c) of the Home Owners' 
Loan Act (12 U.S.C. 1464(c)) relating to loans and investments. The OCC 
may permit a Federal savings association to continue nonconforming 
activities of a converting institution for the time period prescribed by 
the OCC following a conversion, subject to conditions.
    (iv) The OCC may require directors and senior executive officers of 
the converting institution to submit the Interagency Biographical and 
Financial Report, available at www.occ.gov, and legible fingerprints.
    (v) Approval for an institution to convert to a Federal savings 
association expires if the conversion has not occurred within six months 
of the OCC's approval of the application, unless the OCC grants an 
extension of time.
    (vi) When the OCC determines that the filer has satisfied all 
statutory and regulatory requirements and any other conditions, the OCC 
issues a charter. The charter provides that the institution is 
authorized to begin conducting business as a Federal mutual savings 
association or a Federal stock savings association as of a specified 
date.
    (3) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may

[[Page 307]]

determine that any or all parts of Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (4) Expedited review. An application by an eligible bank to convert 
to a Federal savings association charter is deemed approved by the OCC 
as of the 45th day after the filing is received by the OCC, unless the 
OCC notifies the filer prior to that date that the filing has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2).
    (e) Conversion of a mutual depository institution to a Federal 
mutual savings association--supplemental rules. In addition to the rules 
and procedures set forth in paragraph (d) of this section, a filer 
converting from a mutual depository institution to a Federal mutual 
savings association must comply with the following: After a Federal 
charter is issued to a converting institution, the association's members 
must after due notice, or upon a valid adjournment of a previous legal 
meeting, hold a meeting to elect directors and take care of all other 
actions necessary to fully effectuate the conversion and operate the 
association in accordance with law and these rules and regulations. 
Immediately thereafter, the board of directors must meet, elect 
officers, and transact any other appropriate business.
    (f) Conversion of a national bank to a Federal stock savings 
association--supplemental rules--(1) Additional procedures. A national 
bank may convert to a Federal stock savings association. In addition to 
the rules and procedures set forth in paragraph (d) of this section, a 
national bank that desires to convert to a Federal stock savings 
association must follow the requirements and procedures set forth in 12 
U.S.C. 214a as if it were converting to a State bank and include in its 
application information demonstrating compliance with the applicable 
requirements of 12 U.S.C. 214a.
    (2) Termination and change of status. The appropriate OCC licensing 
office provides instructions to the converting national bank for 
terminating its status as a national bank and beginning its status as a 
Federal savings association.
    (g) Continuation of business and entity. The existence of the 
converting institution continues in the resulting Federal savings 
association. The resulting Federal savings association is considered the 
same business and entity as the converting institution, although as to 
rights, powers, and duties, the resulting Federal savings association is 
a Federal savings association. Any and all of the assets and other 
property (whether real, personal, mixed, tangible or intangible, 
including choses in action, rights, and credits) of the converting 
institution become assets and property of the resulting Federal savings 
association when the conversion occurs. Similarly, any and all of the 
obligations and debts of and claims against the converting institution 
become obligations and debts of and claims against the Federal savings 
association when the conversion occurs.

[80 FR 28430, May 18, 2015, as amended at 85 FR 80445, Dec. 11, 2020]



Sec.  5.24  Conversion to become a national bank.

    (a) Authority. 12 U.S.C. 35, 93a, 214a, 214b, 214c, and 2903.
    (b) Licensing requirements. A State bank, a stock State savings 
association, or a Federal stock savings association must submit an 
application and obtain prior OCC approval to convert to a national bank 
charter. A Federal mutual savings association that plans to convert to a 
national bank must first convert to a Federal stock savings association 
under 12 CFR part 192.
    (c) Scope. (1) This section describes procedures and standards 
governing OCC review and approval of an application by a State bank, a 
stock State savings association, or a Federal stock savings association 
to convert to a national bank charter.
    (2) As used in this section, State bank includes a State bank as 
defined in 12 U.S.C. 214(a).
    (d) Policy. Consistent with the OCC's chartering policy, it is OCC 
policy to allow conversion to a national bank charter by another 
financial institution that can operate safely and soundly as a national 
bank in compliance with applicable laws, regulations, and policies. A 
converting financial institution also must obtain all necessary 
regulatory and shareholder approvals. The OCC may deny an application by 
any

[[Page 308]]

State bank, stock State savings association, and any Federal stock 
savings association to convert to a national bank charter on the basis 
of the standards for denial set forth in Sec.  5.13(b), or when 
conversion would permit the filer to escape supervisory action by its 
current regulators.
    (e) Procedures--(1) Prefiling communications. The filer should 
consult with the appropriate OCC licensing office prior to filing if it 
anticipates that its application will raise unusual or complex issues. 
If a prefiling meeting is appropriate, it will normally be held at the 
OCC licensing office where the application will be filed, but may be 
held at another location at the request of the filer.
    (2) Application. A State bank, a Stock state savings association, or 
a Federal stock savings association must submit its application to 
convert to a national bank to the appropriate OCC licensing office and 
send a copy to its current appropriate Federal banking agency. The 
application must:
    (i) Identify each branch that the resulting bank expects to operate 
after conversion;
    (ii) Include the institution's most recent audited financial 
statements (if any);
    (iii) Include the latest report of condition and report of income 
(the most recent daily statement of condition will suffice if the 
institution does not file these reports);
    (iv) Unless otherwise advised by the OCC in a prefiling 
communication, include an opinion of counsel that, in the case of a 
State bank, the conversion is not in contravention of applicable State 
law, or in the case of a Federal stock savings association, the 
conversion is not in contravention of applicable Federal law;
    (v) State whether the institution wishes to exercise fiduciary 
powers after the conversion;
    (vi) Identify all subsidiaries, bank service company investments, 
and other equity investments that will be retained following the 
conversion, and provide the information and analysis of the 
subsidiaries' activities, the bank service company investments, and the 
other equity investments that would be required if the converting bank 
or savings association were a national bank establishing each subsidiary 
or making each bank service company investment or other equity 
investment pursuant to Sec.  5.34, Sec.  5.35, Sec.  5.36, Sec.  5.39, 
12 CFR part 1, or other applicable law and regulation;
    (vii) Identify any nonconforming assets (including nonconforming 
subsidiaries) and nonconforming activities that the institution engages 
in and describe the plans to retain or divest those assets and 
activities;
    (viii) Include a business plan if the converting institution has 
been operating for fewer than three years, plans to make significant 
changes to its business after the conversion, or at the request of the 
OCC;
    (ix) List all outstanding conditions or other requirements imposed 
by the institution's current appropriate Federal banking agency and, if 
applicable, current State bank supervisor or State attorney-general in 
any cease and desist order, written agreement, other formal enforcement 
order, memorandum of understanding, approval of any application, notice 
or request, commitment letter, board resolution, or in any other manner, 
including the converting institution's analysis whether the conversion 
is prohibited under 12 U.S.C. 35, and State the institution's plans 
regarding adhering to such conditions or requirements after conversion;
    (x) Include a list of directors and senior executive officers, as 
defined in Sec.  5.51, of the converting institution; and
    (xi) Include a list of individuals, directors, and shareholders who 
directly or indirectly, or acting in concert with one or more persons or 
companies, or together with members of their immediate family, do or 
will own, control, or hold 10 percent or more of the institution's 
voting stock.
    (3) The OCC may permit a national bank to retain nonconforming 
assets of a State bank or stock State savings association, subject to 
conditions and an OCC determination of the carrying value of the 
retained assets, pursuant to 12 U.S.C. 35. The OCC may permit a national 
bank to continue nonconforming activities of a State bank or stock State 
savings association, or to retain the nonconforming assets or 
nonconforming activities of a Federal

[[Page 309]]

stock savings association, for a reasonable period of time following a 
conversion, subject to conditions imposed by the OCC.
    (4) The OCC may require directors and senior executive officers of 
the converting institution to submit the Interagency Biographical and 
Financial Report, available at www.occ.gov, and legible fingerprints.
    (5) Approval for an institution to convert to a national bank 
expires if the conversion has not occurred within six months of the 
OCC's approval of the application, unless the OCC grants an extension of 
time.
    (6) When the OCC determines that the filer has satisfied all 
statutory and regulatory requirements, including those set forth in 12 
U.S.C. 35, and any other conditions, the OCC issues a charter 
certificate. The certificate provides that the institution is authorized 
to begin conducting business as a national bank as of a specified date.
    (f) Conversion of a Federal stock savings association to a national 
bank--supplemental rules--(1) Additional information. A Federal stock 
savings association may convert to a national bank. In addition to the 
rules and procedures set forth in paragraph (e) of this section, a 
Federal stock savings association that desires to convert to a national 
bank must include in its application information demonstrating 
compliance with applicable laws regarding the permissibility, 
requirements, and procedures for conversions, including any applicable 
stockholder or account holder approval requirements.
    (2) Termination and change of status. The appropriate OCC licensing 
office provides instructions to the converting Federal stock savings 
association for terminating its status as a Federal stock savings 
association and beginning its status as a national bank.
    (g) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that any or all of 
Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (h) Expedited review. An application by an eligible savings 
association to convert to a national bank charter is deemed approved by 
the OCC as of the 45th day after the filing is received by the OCC, 
unless the OCC notifies the filer prior to that date that the filing has 
been removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2).
    (i) Continuation of business and corporate entity. The corporate 
existence of the converting institution continues in the resulting 
national bank. The resulting national bank is considered the same 
business and corporate entity as the converting institution, although as 
to rights, powers, and duties, the resulting national bank is a national 
bank. Any and all of the assets and other property (whether real, 
personal, mixed, tangible or intangible, including choses in action, 
rights, and credits) of the converting institution become assets and 
property of the resulting national bank when the conversion occurs. 
Similarly, any and all of the obligations and debts of and claims 
against the converting institution become obligations and debts of and 
claims against the national bank when the conversion occurs.

[80 FR 28432, May 18, 2015, as amended at 85 FR 80446, Dec. 11, 2020]



Sec.  5.25  Conversion from a national bank or Federal savings association 
to a State bank or State savings association.

    (a) Authority. 12 U.S.C. 93a, 214a, 214b, 214c, 214d, 1462a, 1463, 
1464, and 5412(b)(2)(B).
    (b) Licensing requirement. A national bank must give notice to the 
OCC before converting to a State bank (including a State bank as defined 
in 12 U.S.C. 214(a)) or a State savings association. A Federal savings 
association must give notice to the OCC before converting to a State 
savings association or a State bank. A Federal mutual savings 
association that plans to convert to a stock State bank must first 
convert to a Federal stock savings association under 12 CFR part 192.
    (c) Scope. This section describes the procedures for a national bank 
seeking to convert to a State bank or a State savings association or for 
a Federal savings association seeking to convert to a State savings 
association or a State bank.

[[Page 310]]

    (d) Procedures--(1) National banks. A national bank may convert to a 
State bank (including a State bank as defined in 12 U.S.C. 214(a)) or a 
State savings association in accordance with 12 U.S.C. 214a and 214c, 
without prior OCC approval, subject to compliance with 12 U.S.C. 214d. 
Termination of a national bank's status as a national bank occurs upon 
the bank's completion of the requirements of 12 U.S.C. 214a, and upon 
the OCC's receipt of the bank's national bank charter in connection with 
the consummation of the conversion.
    (2) Federal savings associations. A Federal savings association may 
convert to a State savings association or to a State bank, without prior 
OCC approval, subject to compliance with 12 U.S.C. 1464(i)(6). 
Termination of a Federal savings association's status as a Federal 
savings association occurs upon receipt of the Federal savings 
association's charter in connection with the consummation of the 
conversion.
    (3) Notice of intent. (i) A national bank that desires to convert to 
a State bank (including a State bank as defined in 12 U.S.C. 214(a)) or 
State savings association, or a Federal savings association that desires 
to convert to a State savings association or a State bank,must submit a 
notice of intent to convert to the appropriate OCC licensing office. The 
national bank or Federal savings association must file this notice with 
the OCC at the time it files a conversion application with the 
appropriate State authority or the prospective appropriate Federal 
banking agency. The national bank or Federal savings association also 
must transmit a copy of the conversion application to the prospective 
appropriate Federal banking agency if it has not already done so.
    (ii) The notice must include:
    (A) A copy of the conversion application; and
    (B) An analysis demonstrating that the conversion is in compliance 
with laws of the applicable jurisdictions regarding the permissibility, 
requirements, and procedures for conversions, including any applicable 
stockholder or account holder approval requirements.
    (4) Consultation. The OCC may consult with the appropriate State 
authorities or the prospective appropriate Federal banking agency 
regarding the proposed conversion.
    (5) Termination of status. After receipt of the notice, the 
appropriate OCC licensing office provides instructions to the national 
bank or Federal savings association for terminating its status as a 
national bank or Federal savings association.
    (e) Exceptions to rules of general applicability. Sections 5.5 
through 5.8 and 5.10 through 5.13 do not apply to this section.

[80 FR 28433, May 18, 2015, as amended at 85 FR 80446, Dec. 11, 2020]



Sec.  5.26  Fiduciary powers of national banks and Federal 
savings associations.

    (a) Authority. 12 U.S.C. 92a, 1462a, 1463, 1464(n), and 
5412(b)(2)(B).
    (b) Licensing requirements. A national bank or Federal savings 
association must submit an application and obtain prior approval from, 
or in certain circumstances file a notice with, the OCC in order to 
exercise fiduciary powers. No approval or notice is required in the 
following circumstances:
    (1) Where two or more national banks consolidate or merge, and any 
of the national banks has, prior to the consolidation or merger, 
received OCC approval to exercise fiduciary powers and that approval is 
in force at the time of the consolidation or merger, the resulting 
national bank may exercise fiduciary powers in the same manner and to 
the same extent as the national bank to which approval was originally 
granted;
    (2) Where two or more Federal savings associations consolidate or 
merge, and any of the Federal savings associations has, prior to the 
consolidation or merger, received approval from the OCC or the OTS to 
exercise fiduciary powers and that approval is in force at the time of 
the consolidation or merger, the resulting Federal savings association 
may exercise fiduciary powers in the same manner and to the same extent 
as the Federal savings association to which approval was originally 
granted;
    (3) Where a national bank with prior OCC approval to exercise 
fiduciary

[[Page 311]]

powers is the resulting bank in a merger or consolidation with a State 
bank, State savings association, or Federal savings association and the 
national bank will exercise fiduciary powers in the same manner and to 
the same extent to which approval was originally granted; and
    (4) Where a Federal savings association with prior approval from the 
OCC or the OTS to exercise fiduciary powers is the resulting savings 
association in a merger or consolidation with a State bank, State 
savings association, or national bank and the Federal savings 
association will exercise fiduciary powers in the same manner and to the 
same extent to which approval was originally granted.
    (c) Scope. This section sets forth the procedures governing OCC 
review and approval of an application, and in certain cases the filing 
of a notice, by a national bank or Federal savings association to 
exercise fiduciary powers. Fiduciary activities of national banks are 
subject to the provisions of 12 CFR part 9. Fiduciary activities of 
Federal savings associations are subject to the provisions of 12 CFR 
part 150.
    (d) Policy. The exercise of fiduciary powers is primarily a 
management decision of the national bank or Federal savings association. 
The OCC generally permits a national bank or Federal savings association 
to exercise fiduciary powers if the bank or savings association is 
operating in a satisfactory manner, the proposed activities comply with 
applicable statutes and regulations, and the bank or savings association 
retains qualified fiduciary management.
    (e) Procedure--(1) In general. The following institutions must 
obtain approval from the OCC in order to exercise fiduciary powers:
    (i) A national bank or Federal savings association without fiduciary 
powers:
    (ii) A national bank without fiduciary powers that desires to 
exercise fiduciary powers as the resulting bank after merging with a 
State bank, State savings association, or Federal savings association 
with fiduciary powers or a Federal savings association without fiduciary 
powers that desires to exercise fiduciary powers as the resulting 
savings association after merging with a State bank, State savings 
association or national bank with fiduciary powers;
    (iii) A national bank that results from the conversion of a State 
bank or a State or Federal savings association that was exercising 
fiduciary powers prior to the conversion or a Federal savings 
association that results from a conversion of a State or national bank 
or a State savings association that was exercising fiduciary powers 
prior to the conversion; and
    (iv) A national bank or Federal savings association that has 
received approval from the OCC to exercise limited fiduciary powers that 
desires to exercise full fiduciary powers.
    (2) Application. (i) Except as provided in paragraph (e)(2)(ii) of 
this section, a national bank or Federal savings association that 
desires to exercise fiduciary powers must submit to the OCC an 
application requesting approval. The application must contain:
    (A) A statement requesting full or limited powers (specifying which 
powers);
    (B) A statement that the capital and surplus of the national bank or 
Federal savings association is not less than the capital and surplus 
required by State law of State banks, trust companies, and other 
corporations exercising comparable fiduciary powers;
    (C) Sufficient biographical information on proposed senior trust 
management personnel, as identified by the OCC, to enable the OCC to 
assess their qualifications, including, if requested by the OCC, legible 
fingerprints and the Interagency Biographical and Financial Report, 
available at www.occ.gov;
    (D) A description of the locations where the national bank or 
Federal savings association will conduct fiduciary activities;
    (E) If requested by the OCC, an opinion of counsel that the proposed 
activities do not violate applicable Federal or State law, including 
citations to applicable law; and
    (F) Any other information necessary to enable the OCC to 
sufficiently assess the factors described in paragraph (e)(2)(iii) of 
this section.

[[Page 312]]

    (ii) If approval to exercise fiduciary powers is desired in 
connection with any other transaction subject to an application under 
this part, the filer covered under paragraph (e)(1)(ii), (e)(1)(iii), or 
(e)(1)(iv) of this section may include a request for approval of 
fiduciary powers, including the information required by paragraph 
(e)(2)(i) of this section, as part of its other application. The OCC 
does not require a separate application requesting approval to exercise 
fiduciary powers under these circumstances.
    (iii) When reviewing any application filed under this section, the 
OCC considers factors such as the following:
    (A) The financial condition of the national bank or Federal savings 
association;
    (B) The adequacy of the national bank's or Federal savings 
association's capital and surplus and whether it is sufficient under the 
circumstances and not less than the capital and surplus required by 
State law or State banks, trust companies, and other corporations 
exercising comparable fiduciary powers;
    (C) The character and ability of proposed trust management, 
including qualifications, experience, and competency. The OCC must 
approve any trust management change the bank or savings association 
makes prior to commencing trust activities;
    (D) The adequacy of the proposed business plan, if applicable;
    (E) The needs of the community to be served; and
    (F) Any other factors or circumstances that the OCC considers 
proper.
    (3) Expedited review. An application by an eligible bank or eligible 
savings association to exercise fiduciary powers is deemed approved by 
the OCC as of the 30th day after the application is received by the OCC, 
unless the OCC notifies the bank or savings association prior to that 
date that the filing has been removed from expedited review, or the 
expedited review process is extended, under Sec.  5.13(a)(2).
    (4) Permit. Approval of an application under this section 
constitutes a permit under 12 U.S.C. 92a for national banks and 12 
U.S.C. 1464(n) for Federal savings associations to conduct the fiduciary 
powers requested in the application.
    (5) Notice required. A national bank or Federal savings association 
that has ceased to conduct previously approved fiduciary powers for 18 
consecutive months must provide the OCC with a notice describing the 
nature and manner of the activities proposed to be conducted and 
containing the information required by paragraph (e)(2)(i) of this 
section 60 days prior to commencing any fiduciary activity.
    (6) Notice of fiduciary activities in additional States. (i) Except 
as provided in paragraphs (e)(6)(iii) through (iv) of this section, a 
national bank or Federal savings association with existing OCC approval 
to exercise fiduciary powers must provide written notice to the OCC no 
later than 10 days after it begins to engage in any of the activities 
specified in Sec.  9.7(d) of this chapter in a State in addition to the 
State or States described in the application for fiduciary powers that 
the OCC has approved.
    (ii) A notice submitted pursuant to paragraph (e)(6)(i) of this 
section must identify the new State or States involved, identify the 
fiduciary activities to be conducted, and describe the extent to which 
the activities differ materially from the fiduciary activities the 
national bank or Federal savings association previously conducted.
    (iii) No notice under paragraph (e)(6)(i) of this section is 
required if the national bank or Federal savings association provides 
the information required by paragraph (e)(6)(ii) of this section through 
other means, such as a merger application.
    (iv) No notice is required if the national bank or Federal savings 
association is conducting only activities ancillary to its fiduciary 
business through a trust representative office or otherwise.
    (7) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that any or all 
parts of Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (8) Expiration of approval. Approval expires if a national bank or 
Federal

[[Page 313]]

savings association does not commence fiduciary activities within 18 
months from the date of approval, unless the OCC grants an extension of 
time.

[80 FR 28433, May 18, 2015, as amended at 85 FR 80446, Dec. 11, 2020]



                    Subpart C_Expansion of Activities



Sec.  5.30  Establishment, acquisition, and relocation of a branch 
of a national bank.

    (a) Authority. 12 U.S.C. 1-42 and 2901-2907.
    (b) Licensing requirements. A national bank must submit an 
application and obtain prior OCC approval in order to establish or 
relocate a branch.
    (c) Scope--(1) In general. This section describes the procedures and 
standards governing OCC review and approval of an application by a 
national bank to establish a new branch or to relocate a branch.
    (2) Branch established through a conversion or business combination. 
The standards of this section governing review and approval of 
applications by the OCC and, as applicable, 12 U.S.C. 36(b), but not the 
application procedures set forth in this section, apply to branches 
acquired or retained in a conversion approved under Sec.  5.24 or a 
business combination approved under Sec.  5.33. A branch acquired or 
retained in a conversion or business combination is subject to the 
application procedures set forth in Sec.  5.24 or Sec.  5.33.
    (d) Definitions--(1) Branch includes any branch bank, branch office, 
branch agency, additional office, or any branch place of business 
established by a national bank in the United States or its territories 
at which deposits are received, checks paid, or money lent.
    (i) A branch established by a national bank includes a seasonal 
agency described in 12 U.S.C. 36(c), a mobile facility, a temporary 
facility, or an intermittent facility.
    (ii) A facility otherwise described in this paragraph (d)(1) is not 
a branch if:
    (A) The bank establishing the facility does not permit members of 
the public to have physical access to the facility for purposes of 
making deposits, paying checks, or borrowing money (e.g., an office 
established by the bank that receives deposits only through the mail); 
or
    (B) It is located at the site of, or is an extension of, an approved 
main office or branch office of the national bank. The OCC determines 
whether a facility is an extension of an existing main office or branch 
office on a case-by-case basis. For this purpose, the OCC will consider 
a drive-in or pedestrian facility located within 500 feet of a public 
entrance to an existing main office or branch office to be an extension 
of the existing main office or branch office, provided the functions 
performed at the drive-in or pedestrian facility are limited to 
functions that are ordinarily performed at a teller window.
    (iii) A branch does not include a remote service unit (RSU) as 
described in 12 CFR 7.1027. This encompasses RSUs that are automated 
teller machines (ATMs), including interactive ATMs. A branch also does 
not include a loan production office, a deposit production office, a 
trust office, an administrative office, a data processing office, or any 
other office that does not engage in at least one of the activities in 
paragraph (d)(1) of this section.
    (2) Home State means the State in which the national bank's main 
office is located.
    (3) Intermittent branch means a branch that is operated by a 
national bank for one or more limited periods of time to provide branch 
banking services at a specified recurring event, on the grounds or 
premises where the event is held or at a fixed site adjacent to the 
grounds or premises where the event is held, and exclusively during the 
occurrence of the event. Examples of an intermittent branch include the 
operation of a branch on the campus of, or at a fixed site adjacent to 
the campus of, a specific college during school registration periods; or 
the operation of a branch during a State fair on State fairgrounds or at 
a fixed site adjacent to the fairgrounds.
    (4) Messenger service has the meaning set forth in 12 CFR 7.1012.
    (5) Mobile branch is a branch of a national bank, other than a 
messenger service branch, that does not have a single, permanent site, 
and includes a vehicle that travels to various public

[[Page 314]]

locations to enable customers to conduct their banking business. A 
mobile branch may provide services at various regularly scheduled 
locations or it may be open at irregular times and locations such as at 
county fairs, sporting events, or school registration periods. A mobile 
branch may be stationed continuously at a single location within the 
geographic area it is approved to serve for a period of up to four 
months. A branch license is needed for each mobile unit.
    (6) Temporary branch means a branch of a national bank that is 
located at a fixed site and which, from the time of its opening, is 
scheduled to, and will, permanently close no later than a certain date 
(not longer than one year after the branch is first opened) specified in 
the branch application and the public notice.
    (e) Policy. In determining whether to approve an application to 
establish or relocate a branch, the OCC is guided by the following 
principles:
    (1) Maintaining a safe and sound banking system;
    (2) Encouraging a national bank to provide fair access to financial 
services by helping to meet the credit needs of its entire community;
    (3) Ensuring compliance with laws and regulations; and
    (4) Promoting fair treatment of customers including efficiency and 
better service.
    (f) Procedures--(1) In general. Except as provided in paragraphs 
(f)(2) or (f)(3) of this section, each national bank proposing to 
establish a branch must submit to the appropriate OCC licensing office a 
separate application for each proposed branch.
    (2) Messenger services. A national bank may request approval, 
through a single application, for multiple messenger services to serve 
the same general geographic area. (See 12 CFR 7.1012). Unless otherwise 
required by law, the bank need not list the specific locations to be 
served.
    (3) Jointly established branches. If a national bank proposes to 
establish a branch jointly with one or more national banks or other 
depository institutions, only one of the national banks must submit a 
branch application. The national bank submitting the application may act 
as agent for all national banks in the group of depository institutions 
proposing to share the branch. The application must include the name and 
main office address of each national bank in the group.
    (4) Intermittent branches. Prior to operating an intermittent 
branch, a national bank must file a branch application and publish 
notice in accordance with Sec.  5.8, both of which must identify the 
event at which the branch will be operated; designate a location for 
operation of the branch which must be on the grounds or premises at 
which the event is held or on a fixed site adjacent to those grounds or 
premises; and specify the approximate time period during which the event 
will be held and during which the branch will operate, including whether 
operation of the branch will be on an annual or otherwise recurring 
basis. If the branch is approved, then the bank need not obtain approval 
each time it seeks to operate the branch in accordance with the original 
application and approval.
    (5) Authorization. The OCC authorizes operation of the branch when 
all requirements and conditions for opening are satisfied.
    (6) Expedited review. An application submitted by an eligible bank 
to establish or relocate a branch is deemed approved by the OCC as of 
the 15th day after the close of the applicable public comment period or 
the 45th day after the filing is received by the OCC (or in the case of 
a short-distance relocation the 30th day after the filing is received by 
the OCC), whichever is later, unless the OCC notifies the bank prior to 
that date that the filing has been removed from expedited review, or the 
expedited review process is extended, under Sec.  5.13(a)(2). An 
application to establish or relocate more than one branch is deemed 
approved by the OCC as of the 15th day after the close of the last 
public comment period.
    (g) Interstate branches. A national bank that seeks to establish and 
operate a de novo branch in any State other than the bank's home State 
or a State in which the bank already has a branch must satisfy the 
standards and requirements of 12 U.S.C. 36(g).
    (h) Exceptions to rules of general applicability. (1) A national 
bank filing an

[[Page 315]]

application for a mobile branch or messenger service branch must publish 
a public notice, as described in Sec.  5.8, in the communities in which 
the bank proposes to engage in business.
    (2) The comment period on an application to engage in a short-
distance relocation is 15 days.
    (3) The OCC may waive or reduce the public notice and comment 
period, as appropriate, with respect to an application to establish a 
branch to restore banking services to a community affected by a disaster 
or to temporarily replace banking facilities where, because of an 
emergency, the bank cannot provide services or must curtail banking 
services.
    (4) The OCC may waive or reduce the public notice and comment 
period, as appropriate, for an application by a national bank with a CRA 
rating of Satisfactory or better to establish a temporary branch which, 
if it were established by a State bank to operate in the manner 
proposed, would be permissible under State law without State approval.
    (i) Expiration of approval. Approval expires if a branch has not 
commenced business within 18 months after the date of approval unless 
the OCC grants an extension.
    (j) Branch closings. A national bank must comply with the 
requirements of 12 U.S.C. 1831r-1 with respect to procedures for branch 
closings.

[80 FR 28435, May 18, 2015, as amended at 85 FR 80447, Dec. 11, 2020; 85 
FR 83726, Dec. 22, 2020]



Sec.  5.31  Establishment, acquisition, and relocation of a branch 
and establishment of an agency office of a Federal savings association.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, 2901-2907, and 
5412(b)(2)(B).
    (b) Licensing requirements. A Federal savings association must 
submit an application and obtain prior OCC approval in order to 
establish or relocate a branch or to establish an agency office or 
conduct additional activities at an agency office, if required under 
this section.
    (c) Scope--(1) In general. This section describes the procedures and 
standards governing OCC review and approval of an application by a 
Federal savings association to establish a new branch or to relocate a 
branch and the circumstances in which a Federal savings association may 
establish or relocate a branch without application to the OCC. It also 
describes the authority of a Federal savings association to establish an 
agency office.
    (2) Branch established through a conversion or business combination. 
The standards of this section governing review and approval of 
applications by the OCC, but not the application procedures set forth in 
this section, apply to branches acquired or retained in a conversion 
approved under Sec.  5.23 or a business combination approved under Sec.  
5.33. A branch acquired or retained in a conversion or business 
combination is subject to the application procedures set forth in Sec.  
5.23 or Sec.  5.33.
    (3) Branching by savings associations in the District of Columbia. 
This section also implements section 5(m) of the Home Owners' Loan Act, 
12 U.S.C. 1464(m), addressing branching by savings associations in the 
District of Columbia.
    (d) Definitions. (1) A branch of a Federal savings association for 
purposes of this section is a branch office as defined in 12 CFR 
145.92(a).
    (2) Home State means the State in which the Federal savings 
association's home office is located.
    (e) Policy. In determining whether to approve an application to 
establish or relocate a branch, the OCC is guided by the following 
principles:
    (1) Maintaining a safe and sound banking system;
    (2) Encouraging a Federal savings association to provide fair access 
to financial services by helping to meet the credit needs of its entire 
community;
    (3) Ensuring compliance with laws and regulations; and
    (4) Promoting fair treatment of customers including efficiency and 
better service.
    (f) Procedures--(1) Application requirements. (i) Except as provided 
in paragraph (f)(2) of this section, each Federal savings association 
proposing to establish or relocate a branch must submit to the 
appropriate OCC licensing office a separate application for each 
proposed branch.

[[Page 316]]

    (ii) Authorization. The OCC authorizes operation of the branch when 
all requirements and conditions for opening are satisfied.
    (iii) Expedited review. If an application to establish or relocate a 
branch is required of an eligible savings association, the application 
is deemed approved by the OCC as of the 15th day after the close of the 
applicable public comment period or the 45th day after the filing is 
received by the OCC, whichever is later, unless the OCC notifies the 
savings association prior to that date that the filing has been removed 
from expedited review, or the expedited review process is extended, 
under Sec.  5.13(a)(2). An application to establish or relocate more 
than one branch is deemed approved by the OCC as of the 15th day after 
the close of the last public comment period.
    (2) Exceptions. Except as provided in paragraph (j) of this section, 
a Federal savings association is not required to submit an application 
and receive OCC approval under the following circumstances:
    (i) Drive-in or pedestrian offices. A Federal savings association 
may establish a drive-in or pedestrian office that is located within 500 
feet of a public entrance to its existing home or branch office, 
provided the functions performed at the office are limited to functions 
that are ordinarily performed at a teller window.
    (ii) Short-distance relocation. A Federal savings association may 
change the permanent location of an existing branch office to a site 
that is within the market area and short-distance location area.
    (iii) Highly rated Federal savings associations. A Federal savings 
association that is an eligible savings association may change the 
permanent location of, or establish a new, branch office if it meets all 
of the following requirements:
    (A) It published a public notice under Sec.  5.8 of its intent to 
change the location of the branch office or establish a new branch 
office. The public notice must be published at least 35 days before the 
proposed action establishment or relocation. If the notice is published 
more than 12 months before the proposed action, the publication is 
invalid.
    (B) If the Federal savings association intends to change the 
location of an existing branch office, it must post a notice of its 
intent in a prominent location in the existing office to be relocated. 
This notice must be posted for 30 days from the date of publication of 
the initial public notice described in paragraph (f)(2)(iii)(A) of this 
section.
    (C)(1) No person files a comment opposing the proposed action within 
30 days after the date of the publication of the public notice; or
    (2) A person files a comment opposing the proposed action and the 
OCC determines that the comment raises issues that are not relevant to 
the approval standards for an application for a branch or that OCC 
action in response to the comment is not required.
    (3) Notice of branch opening. If a Federal savings association is 
not required to file an application to establish or relocate a branch 
pursuant to paragraph (f)(2)(iii) of this section, the Federal savings 
association must file a notice with the OCC with the date the branch was 
established or relocated and the address of the branch within 10 days 
after the opening of the branch.
    (g) Exceptions to rules of general applicability. (1) The OCC may 
waive or reduce the public notice and comment period, as appropriate, 
with respect to an application to establish a branch to restore banking 
services to a community affected by a disaster or to temporarily replace 
banking facilities where, because of an emergency, the savings 
association cannot provide services or must curtail banking services.
    (2) The OCC may waive or reduce the public notice and comment 
period, as appropriate, for an application by a Federal savings 
association with a CRA rating of Satisfactory or better to establish a 
temporary branch which, if it were established by a State bank to 
operate in the manner proposed, would be permissible under State law 
without State approval.
    (h) Expiration of approval. Approval expires if a branch has not 
commenced business within 18 months after the date of approval unless 
the OCC grants an extension.
    (i) Branch closings. A Federal savings association must comply with 
the applicable requirements of 12 U.S.C.

[[Page 317]]

1831r-1 with respect to procedures for branch closings.
    (j) Section 5(m) of the Home Owners' Loan Act. (1) Under section 
5(m)(1) of the Home Owners' Loan Act (12 U.S.C. 1464(m)(1)), no savings 
association may establish or move any branch in the District of Columbia 
or move its principal office in the District of Columbia without the 
OCC's prior written approval.
    (2) Any Federal savings association that must obtain approval of the 
OCC under 12 U.S.C. 1464(m)(1) must follow the application procedures of 
this section. Any State savings association that must obtain approval of 
the OCC under 12 U.S.C. 1464(m)(1) must follow the application 
procedures of this section as if it were a Federal savings association.
    (3) For purposes of 12 U.S.C. 1464(m)(1), a branch in the District 
of Columbia includes any location at which accounts are opened, payments 
are received, or withdrawals are made. This includes an Automated Teller 
Machine that performs one or more of these functions.
    (k) Agency offices--(1) In general. A Federal savings association 
may establish or maintain an agency office to engage in one or more of 
the following activities:
    (i) Servicing, originating, or approving loans and contracts;
    (ii) Managing or selling real estate owned by the Federal savings 
association; and
    (iii) Conducting fiduciary activities or activities ancillary to the 
association's fiduciary business in compliance with Sec.  5.26(e).
    (2) Additional services--(i) In general. A Federal savings 
association may request, and the OCC may approve, any service not listed 
in paragraph (k)(1) of this section, except for payment on savings 
accounts.
    (ii) Application required. A Federal savings association desiring to 
engage in such additional services must submit an application to the 
appropriate OCC licensing office.
    (iii) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to filings under this paragraph (k)(2). 
However, if the OCC concludes that an application presents significant 
or novel policy, supervisory, or legal issues, the OCC may determine 
that some or all provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (3) Records. A Federal savings association must maintain records of 
all business it transacts at an agency office. It must maintain these 
records at the agency office, and must transmit copies to a home or 
branch office.

[80 FR 28436, May 18, 2015, as amended at 85 FR 80447, Dec. 11, 2020]



Sec.  5.32  Expedited procedures for certain reorganizations 
of a national bank.

    (a) Authority. 12 U.S.C. 93a and 215a-2.
    (b) Scope. This section prescribes the procedures for OCC review and 
approval of a national bank's reorganization to become a subsidiary of a 
bank holding company or a company that will, upon consummation of such 
reorganization, become a bank holding company. For purposes of this 
section, a ``bank holding company'' means any company that owns or 
controls a national bank, or will own or control one as a result of the 
reorganization.
    (c) Licensing requirements. A national bank must submit an 
application to, and obtain approval from, the OCC prior to participating 
in a reorganization described in paragraph (b) of this section.
    (d) Procedures--(1) General. An application filed in accordance with 
this section is deemed approved on the 30th day after the OCC receives 
the application, unless the OCC notifies the bank otherwise. Approval is 
subject to the condition that the bank provide the OCC with 60 days' 
prior notice of any significant deviation from the bank's business plan 
or any significant deviation from the proposed changes to the bank's 
business plan described in the bank's plan of reorganization.
    (2) Reorganization plan. The application must include a 
reorganization plan that:
    (i) Specifies the manner in which the reorganization will be carried 
out;
    (ii) Is approved by a majority of the entire board of directors of 
the national bank;
    (iii) Specifies:
    (A) The amount and type of consideration that the bank holding 
company

[[Page 318]]

will provide to the shareholders of the reorganizing bank for their 
shares of stock of the bank;
    (B) The date as of which the rights of each shareholder to 
participate in that exchange will be determined; and
    (C) The manner in which the exchange will be carried out;
    (iv) Is submitted to the shareholders of the reorganizing bank at a 
meeting to be held at the call of the directors in accordance with the 
procedures prescribed in connection with a merger of a national bank 
under section 3 of the National Bank Consolidation and Merger Act, 12 
U.S.C. 215a(a)(2); and
    (v) Describes any changes to the bank's business plan resulting from 
the reorganization.
    (3) Financial and managerial resources and future prospects. In 
reviewing an application under this section, the OCC will consider the 
impact of the proposed affiliation on the financial and managerial 
resources and future prospects of the national bank.
    (4) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (e) Rights of dissenting shareholders. Any shareholder of a bank who 
has voted against an approved reorganization at the meeting referred to 
in paragraph (d)(2)(iv) of this section, or who has given notice of 
dissent in writing to the presiding officer at or prior to that meeting, 
is entitled to receive the value of their shares by providing a written 
request to the bank within 30 days after the consummation of the 
reorganization, as provided by section 3 of the National Bank 
Consolidation and Merger Act, 12 U.S.C. 215a(b) and (c), for the merger 
of a national bank.
    (f) Approval under the Bank Holding Company Act. This section does 
not affect the applicability of the Bank Holding Company Act of 1956. 
Filers must indicate in their application the status of any application 
required to be filed with the Board of Governors of the Federal Reserve 
System.
    (g) Expiration of approval. Approval expires if a national bank has 
not completed the reorganization within one year of the date of 
approval.
    (h) Adequacy of disclosure. (1) A filer must inform shareholders of 
all material aspects of a reorganization and comply with applicable 
requirements of the Federal securities laws, including the OCC's 
securities regulations at 12 CFR part 11.
    (2) Any filer not subject to the registration provisions of the 
Securities Exchange Act of 1934 must submit the proxy materials or 
information statements it uses in connection with the reorganization to 
the appropriate OCC licensing office no later than when the materials 
are sent to the shareholders.

[68 FR 70129, Dec. 17, 2003, as amended at 80 FR 28437, May 18, 2015; 85 
FR 80447, Dec. 11, 2020]



Sec.  5.33  Business combinations involving a national bank 
or Federal savings association.

    (a) Authority. 12 U.S.C. 24(Seventh), 93a, 181, 214a, 214b, 215, 
215a, 215a-1, 215a-3, 215b, 215c, 1462a, 1463, 1464, 1467a, 1828(c), 
1831u, 2903, and 5412(b)(2)(B).
    (b) Scope. This section sets forth the provisions governing business 
combinations and the standards for:
    (1) OCC review and approval of an application by a national bank or 
a Federal savings association for a business combination resulting in a 
national bank or Federal savings association; and
    (2) Requirements of notices and other procedures for national banks 
and Federal savings associations involved in other combinations in which 
a national bank or Federal savings association is not the resulting 
institution.
    (c) Licensing requirements. As prescribed by this section, a 
national bank or Federal savings association must submit an application 
and obtain prior OCC approval for a business combination when the 
resulting institution is a national bank or Federal savings association. 
As prescribed by this section, a national bank or Federal savings 
association must give notice to the OCC

[[Page 319]]

prior to engaging in any other combination where the resulting 
institution will not be a national bank or Federal savings 
association.\1\ A national bank must submit an application and obtain 
prior OCC approval for any merger between the national bank and one or 
more of its nonbank affiliates.
---------------------------------------------------------------------------

    \1\ Other combinations, as defined in paragraph (d)(10) of this 
section, do not require an application under this section. However, some 
may require an application under Sec.  5.53.
---------------------------------------------------------------------------

    (d) Definitions. For purposes of this section:
    (1) Bank means any national bank or any State bank.
    (2) Business combination means:
    (i) Any merger or consolidation between a national bank or a Federal 
savings association and one or more depository institutions or State 
trust companies, in which the resulting institution is a national bank 
or Federal savings association;
    (ii) In the case of a Federal savings association, any merger or 
consolidation with a credit union in which the resulting institution is 
a Federal savings association;
    (iii) In the case of a national bank, any merger between a national 
bank and one or more of its nonbank affiliates;
    (iv) The acquisition by a national bank or a Federal savings 
association of all, or substantially all, of the assets of another 
depository institution; or
    (v) The assumption by a national bank or a Federal savings 
association of any deposit liabilities of another insured depository 
institution or any deposit accounts or other liabilities of a credit 
union or any other institution that will become deposits at the national 
bank or Federal savings association.
    (3) Business reorganization means either:
    (i) A business combination between eligible banks and eligible 
savings associations, or between an eligible bank or an eligible savings 
association and an eligible depository institution, that are controlled 
by the same holding company or that will be controlled by the same 
holding company prior to the combination; or
    (ii) A business combination between an eligible bank or an eligible 
savings association and an interim national bank or interim Federal 
savings association chartered in a transaction in which a person or 
group of persons exchanges its shares of the eligible bank or eligible 
savings association for shares of a newly formed holding company and 
receives after the transaction substantially the same proportional share 
interest in the holding company as it held in the eligible bank or 
eligible savings association (except for changes in interests resulting 
from the exercise of dissenters' rights), and the reorganization 
involves no other transactions involving the bank or savings 
association.
    (4) Company means a corporation, limited liability company, 
partnership, business trust, association, or similar organization.
    (5) For business combinations under paragraphs (g)(4) and (5) of 
this section, a company or shareholder is deemed to control another 
company if:
    (i) Such company or shareholder, directly or indirectly, or acting 
through one or more other persons owns, controls, or has power to vote 
25 percent or more of any class of voting securities of the other 
company; or
    (ii) Such company or shareholder controls in any manner the election 
of a majority of the directors or trustees of the other company. No 
company is deemed to own or control another company by virtue of its 
ownership or control of shares in a fiduciary capacity.
    (6) Credit union means a financial institution subject to 
examination by the National Credit Union Administration Board.
    (7) Home State means, with respect to a national bank, the State in 
which the main office of the national bank is located and, with respect 
to a State bank, the State by which the bank is chartered.
    (8) Interim national bank or interim Federal savings association 
means a national bank or Federal savings association that does not 
operate independently but exists solely as a vehicle to accomplish a 
business combination.
    (9) Nonbank affiliate of a national bank means any company (other 
than a bank or Federal savings association) that controls, is controlled 
by, or is

[[Page 320]]

under common control with the national bank.
    (10) Other combination means:
    (i) Any merger or consolidation between a national bank or a Federal 
savings association and one or more depository institutions or State 
trust companies, in which the resulting institution is not a national 
bank or Federal savings association;
    (ii) In the case of a Federal stock savings association, any merger 
or consolidation with a credit union in which the resulting institution 
is a credit union;
    (iii) The transfer by a national bank or a Federal savings 
association of any deposit liabilities to another insured depository 
institution, a credit union or any other institution; or
    (iv) The acquisition by a national bank or a Federal savings 
association of all, or substantially all, of the assets, or the 
assumption of all or substantially all of the liabilities, of any 
company other than a depository institution.
    (11) Savings association and State savings association have the 
meaning set forth in section 3(b) of the Federal Deposit Insurance Act, 
12 U.S.C. 1813(b).
    (12) State trust company means a trust company organized under State 
law that is not engaged in the business of receiving deposits, other 
than trust funds.
    (e) Policy and related filing requirements--(1) Factors--(i) In 
general. When the OCC evaluates any application for a business 
combination, the OCC considers the following factors:
    (A) The capital level of any resulting national bank or Federal 
savings association;
    (B) The conformity of the transaction to applicable law, regulation, 
and supervisory policies;
    (C) The purpose of the transaction;
    (D) The impact of the transaction on safety and soundness of the 
national bank or Federal savings association; and
    (E) The effect of the transaction on the national bank's or Federal 
savings association's shareholders (or members in the case of a mutual 
savings association), depositors, other creditors, and customers.
    (ii) Bank Merger Act. When the OCC evaluates an application for a 
business combination under the Bank Merger Act, the OCC also considers 
the following factors:
    (A) Competition. (1) The OCC considers the effect of a proposed 
business combination on competition. The filer must provide a 
competitive analysis of the transaction, including a definition of the 
relevant geographic market or markets. A filer may refer to the 
Comptroller's Licensing Manual for procedures to expedite its 
competitive analysis.
    (2) The OCC will deny an application for a business combination if 
the combination would result in a monopoly or would be in furtherance of 
any combination or conspiracy to monopolize or attempt to monopolize the 
business of banking in any part of the United States. The OCC also will 
deny any proposed business combination whose effect in any section of 
the United States may be substantially to lessen competition, or tend to 
create a monopoly, or which in any other manner would be in restraint of 
trade, unless the probable effects of the transaction in meeting the 
convenience and needs of the community clearly outweigh the 
anticompetitive effects of the transaction. For purposes of weighing 
against anticompetitive effects, a business combination may have 
favorable effects in meeting the convenience and needs of the community 
if the depository institution being acquired has limited long-term 
prospects, or if the resulting national bank or Federal savings 
association will provide significantly improved, additional, or less 
costly services to the community.
    (B) Financial and managerial resources and future prospects. The OCC 
considers the financial and managerial resources and future prospects of 
the existing or proposed institutions.
    (C) Convenience and needs of community. The OCC considers the 
probable effects of the business combination on the convenience and 
needs of the community served. The filer must describe these effects in 
its application, including any planned office closings or reductions in 
services following the business combination and the likely impact on the 
community. The OCC also

[[Page 321]]

considers additional relevant factors, including the resulting national 
bank's or Federal savings association's ability and plans to provide 
expanded or less costly services to the community.
    (D) Money laundering. The OCC considers the effectiveness of any 
insured depository institution involved in the business combination in 
combating money laundering activities, including in overseas branches.
    (E) Financial stability. The OCC considers the risk to the stability 
of the United States banking and financial system.
    (F) Deposit concentration limit. The OCC will not approve a 
transaction that would violate the deposit concentration limit in 12 
U.S.C. 1828(c)(13) for interstate merger transactions, as defined in 12 
U.S.C. 1828(c)(13)(C)(i).
    (iii) Community Reinvestment Act--(A) In General. The OCC takes into 
account the filer's Community Reinvestment Act (CRA) record of 
performance in considering an application for a business combination. 
The OCC's conclusion of whether the CRA performance is or is not 
consistent with approval of an application is considered in conjunction 
with the other factors of this section.
    (B) Interstate mergers under 12 U.S.C. 1831u. The OCC considers the 
CRA record of performance of the filer and its resulting bank affiliates 
and the filer's record of compliance with applicable State community 
reinvestment laws when required by 12 U.S.C. 1831u(b)(3).
    (C) CRA Sunshine. A filer must:
    (1) Disclose whether it has entered into and disclosed a covered 
agreement, as defined in 12 CFR 35.2, in accordance with 12 CFR 35.6 and 
35.7; and
    (2) Provide summaries of, or documents relating to, all substantive 
discussions with respect to the development of the content of a covered 
agreement disclosed in (e)(1)(iii)(C)(1) that include the names of 
participants, dates, and synopsis of the discussions.
    (iv) Interstate mergers under 12 U.S.C. 1831u. The OCC considers the 
standards and requirements contained in 12 U.S.C. 1831u for interstate 
merger transactions between insured banks, when applicable.
    (2) Acquisition and retention of branches. A filer must disclose the 
location of any branch it will acquire and retain in a business 
combination, including approved but unopened branches. The OCC considers 
the acquisition and retention of a branch under the standards set out in 
Sec.  5.30 or Sec.  5.31, as applicable, but it does not require a 
separate application.
    (3) Subsidiaries. (i) A filer must identify any subsidiary, 
financial subsidiary investment, bank service company investment, 
service corporation investment, or other equity investment to be 
acquired in a business combination and state the activities of each 
subsidiary or other company in which the filer would be acquiring an 
investment. The OCC does not require a separate application or notice 
under Sec. Sec.  5.34, 5.35, 5.36, 5.38, 5.39, 5.58, and 5.59.
    (ii) A national bank filer proposing to acquire, through a business 
combination, a subsidiary, financial subsidiary investment, bank service 
company investment, service corporation investment, or other equity 
investment of any entity other than a national bank must provide the 
same information and analysis of the subsidiary's activities, or of the 
investment, that would be required if the filer were establishing the 
subsidiary, or making such investment, pursuant to Sec. Sec.  5.34, 
5.35, 5.36, or 5.39.
    (iii) A Federal savings association filer proposing to acquire, 
through a business combination, a subsidiary, bank service company 
investment, service corporation investment, or other equity investment 
of any entity other than a Federal savings association must provide the 
same information and analysis of the subsidiary's activities, or of the 
investment, that would be required if the filer were establishing the 
subsidiary, or making such investment, pursuant to Sec. Sec.  5.35, 
5.38, 5.58, or 5.59.
    (4) Interim national bank or interim Federal savings association--
(i) Application. A filer for a business combination that plans to use an 
interim national bank or interim Federal savings association to 
accomplish the transaction must file an application to organize an 
interim national bank or interim Federal savings association as part of 
the

[[Page 322]]

application for the related business combination.
    (ii) Conditional approval. The OCC grants conditional preliminary 
approval to form an interim national bank or interim Federal savings 
association when it acknowledges receipt of the application for the 
related business combination.
    (iii) Corporate status. An interim national bank or interim Federal 
savings association becomes a legal entity and may enter into legally 
valid agreements when it has filed, and the OCC has accepted, the 
interim national bank's duly executed articles of association and 
organization certificate or the Federal savings association's charter 
and bylaws. OCC acceptance occurs:
    (A) On the date the OCC advises the interim national bank that its 
articles of association and organization certificate are acceptable or 
advises the interim Federal savings association that its charter and 
bylaws are acceptable; or
    (B) On the date the interim national bank files articles of 
association and an organization certificate that conform to the form for 
those documents provided by the OCC in the Comptroller's Licensing 
Manual or the date the interim Federal savings association files a 
charter and bylaws that conform to the requirements set out in this part 
5.
    (iv) Other corporate procedures. A filer should consult the 
Comptroller's Licensing Manual to determine what other information is 
necessary to complete the chartering of the interim national bank as a 
national bank or the interim Federal savings association as a Federal 
savings association.
    (5) Nonconforming assets. (i) A filer must identify any 
nonconforming activities and assets, including nonconforming 
subsidiaries, of other institutions involved in the business combination 
that will not be disposed of or discontinued prior to consummation of 
the transaction. The OCC generally requires a national bank or Federal 
savings association to divest or conform nonconforming assets, or 
discontinue nonconforming activities, within a reasonable time following 
the business combination.
    (ii) Any resulting Federal savings association must conform to the 
requirements of sections 5(c) and 10(m) of the Home Owners' Loan Act (12 
U.S.C. 1464(c) and 1467a(m)) within the time period prescribed by the 
OCC.
    (6) Fiduciary powers. (i) A filer must state whether the resulting 
national bank or Federal savings association intends to exercise 
fiduciary powers pursuant to Sec.  5.26(b).
    (ii) If a filer intends to exercise fiduciary powers after the 
combination and requires OCC approval for such powers, the filer must 
include the information required under Sec.  5.26(e)(2).
    (7) Expiration of approval. Approval of a business combination, and 
conditional approval to form an interim national bank or interim Federal 
savings association, if applicable, expires if the business combination 
is not consummated within six months after the date of OCC approval, 
unless the OCC grants an extension of time.
    (8) Adequacy of disclosure. (i) A filer must inform shareholders of 
all material aspects of a business combination and must comply with any 
applicable requirements of the Federal securities laws and securities 
regulations of the OCC. Accordingly, a filer must ensure that all proxy 
and information statements prepared in connection with a business 
combination do not contain any untrue or misleading statement of a 
material fact, or omit to state a material fact necessary in order to 
make the statements made, in the light of the circumstances under which 
they were made, not misleading.
    (ii) A national bank or Federal savings association filer with one 
or more classes of securities subject to the registration provisions of 
section 12(b) or (g) of the Securities Exchange Act of 1934, 15 U.S.C. 
78l(b) or 78l(g), must file preliminary proxy material or information 
statements for review with the Director, Bank Advisory, OCC, Washington, 
DC 20219. Any other filer must submit the proxy materials or information 
statements it uses in connection with the combination to the appropriate 
OCC licensing office no later than when the materials are sent to the 
shareholders.
    (f) Exceptions to rules of general applicability--(1) National bank 
or Federal

[[Page 323]]

savings association filer--(i) In general. Sections 5.8, 5.10, and 5.11 
do not apply to this section. However, if the OCC concludes that an 
application presents significant or novel policy, supervisory, or legal 
issues, the OCC may determine that some or all provisions in Sec. Sec.  
5.8, 5.10 and 5.11 apply.
    (ii) Statutory notice. If an application is subject to the Bank 
Merger Act or to another statute that requires notice to the public, a 
national bank or Federal savings association filer must follow the 
public notice requirements contained in 12 U.S.C. 1828(c)(3) or the 
other statute and Sec. Sec.  5.8(b) through 5.8(e), 5.10, and 5.11.
    (2) Interim national bank or interim Federal savings association. 
Sections 5.8, 5.10, and 5.11 do not apply to an application to organize 
an interim national bank or interim Federal savings association. 
However, if the OCC concludes that an application presents significant 
or novel policy, supervisory, or legal issues, the OCC may determine 
that any or all parts of Sec. Sec.  5.8, 5.10, and 5.11 apply. The OCC 
treats an application to organize an interim national bank or interim 
Federal savings association as part of the related application to engage 
in a business combination and does not require a separate public notice 
and public comment process.
    (3) State bank, or State savings association, State trust company, 
or credit union as resulting institution. Sections 5.7 through 5.13 do 
not apply to transactions covered by paragraphs (g)(7) through (g)(9) of 
this section.
    (g) Provisions governing consolidations and mergers with different 
types of entities--(1) Consolidations and mergers under 12 U.S.C. 215 or 
215a of a national bank with other national banks and State banks as 
defined in 12 U.S.C. 215b(1) resulting in a national bank. A national 
bank entering into a consolidation or merger authorized pursuant to 12 
U.S.C. 215 or 215a, respectively, is subject to the approval procedures 
and requirements with respect to treatment of dissenting shareholders 
set forth in those provisions.
    (2) Interstate consolidations and mergers under 12 U.S.C. 215a-1 
resulting in a national bank. (i) With the approval of the OCC, an 
insured national bank may consolidate or merge with an insured out-of-
State bank, as defined in 12 U.S.C. 1831u(g)(8), with the national bank 
as the resulting institution.
    (ii) Unless it has elected to follow the procedures set out in 
paragraph (h) of this section, the resulting national bank entering into 
the consolidation or merger must comply with the procedures of 12 U.S.C. 
215 or 215a, as applicable.
    (iii) Unless it has elected to follow the procedures applicable to 
State banks under paragraph (h)(1)(i), any national bank that will not 
be the resulting bank in a consolidation or merger pursuant to 12 U.S.C. 
215a-1 must comply with the procedures of 12 U.S.C. 215 or 215a, as 
applicable.
    (iv) Corporate existence. The corporate existence of each bank 
participating in a consolidation or merger continues in the resulting 
national bank, and all the rights, franchises, property, appointments, 
liabilities, and other interests of the participating bank are 
transferred to the resulting national bank, as set forth in 12 U.S.C. 
215(b), (e), and (f) or 12 U.S.C. 215a(a), (e), and (f), as applicable.
    (3) Consolidations and mergers of a national bank with Federal 
savings associations under 12 U.S.C. 215c resulting in a national bank. 
(i) With the approval of the OCC, any national bank and any Federal 
savings association may consolidate or merge with a national bank as the 
resulting institution by complying with the following procedures:
    (A) Unless it has elected to follow the procedures set out in 
paragraph (h) of this section, a national bank entering into the 
consolidation or merger must follow the procedures of 12 U.S.C. 215 or 
215a, respectively, as if the Federal savings association were a 
national bank.
    (B)(1) A Federal savings association entering into the consolidation 
or merger must comply with the requirements of paragraph (n) of this 
section and follow the procedures set out in paragraph (o) of this 
section.
    (2) For purposes of this paragraph (g)(3), a combination in which a 
national bank acquires all or substantially all of the assets, or 
assumes all or substantially all of the liabilities, of a Federal 
savings association will be treated as a consolidation for the Federal 
savings association.

[[Page 324]]

    (ii)(A) Unless the national bank has elected to follow the 
procedures set out in paragraph (h) of this section, national bank 
shareholders who dissent from a plan to consolidate may receive in cash 
the value of their national bank shares if they comply with the 
requirements of 12 U.S.C. 215 as if the Federal savings association were 
a national bank.
    (B) Unless the Federal savings association has elected to follow the 
procedures applicable to State savings associations pursuant to 
paragraph (o)(1)(i)(A) of this section, Federal savings association 
shareholders who dissent from a plan to consolidate or merge may receive 
in cash the value of their Federal savings association shares if they 
comply with the requirements of 12 U.S.C. 215 or 215a as if the Federal 
savings association were a national bank.
    (C) Unless the national bank or Federal savings association has 
elected to follow the procedures applicable to State banks or State 
savings associations, respectively, pursuant to paragraph (h)(1)(i) or 
(o)(1)(i)(A) of this section, respectively, the OCC will conduct an 
appraisal or reappraisal of the value of a national bank or Federal 
savings association held by dissenting shareholders in accordance with 
the provisions of 12 U.S.C. 215 or 215a, as applicable, except that the 
costs and expenses of any appraisal or reappraisal may be apportioned 
and assessed by the Comptroller as he or she may deem equitable against 
all or some of the parties. In making this determination the Comptroller 
will consider whether any party has acted arbitrarily or not in good 
faith in respect to the rights provided by this paragraph.
    (iii) The consolidation or merger agreement must address the effect 
upon, and the terms of the assumption of, any liquidation account of any 
participating institution by the resulting institution.
    (4) Mergers of a national bank with its nonbank affiliates under 12 
U.S.C. 215a-3 resulting in a national bank. (i) With the approval of the 
OCC, a national bank may merge with one or more of its nonbank 
affiliates, with the national bank as the resulting institution, in 
accordance with the provisions of this paragraph, provided that the law 
of the State or other jurisdiction under which the nonbank affiliate is 
organized allows the nonbank affiliate to engage in such mergers. If the 
national bank is an insured bank, the transaction is also subject to 
approval by the FDIC under the Bank Merger Act, 12 U.S.C. 1828(c).
    (ii) Unless it has elected to follow the procedures set out in 
paragraph (h) of this section, a national bank entering into the merger 
must follow the procedures of 12 U.S.C. 215a as if the nonbank affiliate 
were a State bank, except as otherwise provided herein.
    (iii) A nonbank affiliate entering into the merger must follow the 
procedures for such mergers set out in the law of the State or other 
jurisdiction under which the nonbank affiliate is organized.
    (iv) The rights of dissenting shareholders and appraisal of 
dissenters' shares of stock in the nonbank affiliate entering into the 
merger must be determined in the manner prescribed by the law of the 
State or other jurisdiction under which the nonbank affiliate is 
organized.
    (v) The corporate existence of each institution participating in the 
merger continues in the resulting national bank, and all the rights, 
franchises, property, appointments, liabilities, and other interests of 
the participating institutions are transferred to the resulting national 
bank, as set forth in 12 U.S.C. 215a(a), (e), and (f) in the same manner 
and to the same extent as in a merger between a national bank and a 
State bank under 12 U.S.C. 215a(a), as if the nonbank affiliate were a 
State bank.
    (5) Mergers of an uninsured national bank with its nonbank 
affiliates under 12 U.S.C. 215a-3 resulting in a nonbank affiliate. (i) 
With the approval of the OCC, a national bank that is not an insured 
bank as defined in 12 U.S.C. 1813(h) may merge with one or more of its 
nonbank affiliates, with the nonbank affiliate as the resulting entity, 
in accordance with the provisions of this paragraph, provided that the 
law of the State or other jurisdiction under which the nonbank affiliate 
is organized allows

[[Page 325]]

the nonbank affiliate to engage in such mergers.
    (ii) Unless it has elected to follow the procedures applicable to 
State banks under paragraph (h)(1)(i) of this section, a national bank 
entering into the merger must follow the procedures of 12 U.S.C. 214a, 
as if the nonbank affiliate were a State bank, except as otherwise 
provided in this section.
    (iii) A nonbank affiliate entering into the merger must follow the 
procedures for such mergers set out in the law of the State or other 
jurisdiction under which the nonbank affiliate is organized.
    (iv)(A) National bank shareholders who dissent from an approved plan 
to merge may receive in cash the value of their national bank shares if 
they comply with the requirements of 12 U.S.C. 214a as if the nonbank 
affiliate were a State bank. The OCC may conduct an appraisal or 
reappraisal of dissenters' shares of stock in a national bank involved 
in the merger if all parties agree that the determination is final and 
binding on each party and agree on how the total expenses of the OCC in 
making the appraisal will be divided among the parties and paid to the 
OCC.
    (B) The rights of dissenting shareholders and appraisal of 
dissenters' shares of stock in the nonbank affiliate involved in the 
merger must be determined in the manner prescribed by the law of the 
State or other jurisdiction under which the nonbank affiliate is 
organized.
    (v) The corporate existence of each entity participating in the 
merger continues in the resulting nonbank affiliate, and all the rights, 
franchises, property, appointments, liabilities, and other interests of 
the participating national bank are transferred to the resulting nonbank 
affiliate as set forth in 12 U.S.C. 214b, in the same manner and to the 
same extent as in a merger between a national bank and a State bank 
under 12 U.S.C. 214a, as if the nonbank affiliate were a State bank.
    (6) Consolidations and mergers of a Federal savings association with 
other Federal savings associations, national banks, State banks, State 
savings banks, State savings associations, State trust companies, or 
credit unions resulting in a Federal savings association. (i) With the 
approval of the OCC, a Federal savings association may consolidate or 
merge with another Federal savings association, a national bank, a State 
bank, a State savings association, a State trust company, or a credit 
union with the Federal savings association as the resulting institution 
by complying with the following procedures:
    (A)(1) The filer Federal savings association must comply with the 
requirements of paragraph (n) of this section and follow the procedures 
set out in paragraph (o) of this section.
    (2) For purposes of this paragraph (g)(6), a combination in which a 
Federal savings association acquires all or substantially all of the 
assets, or assumes all or substantially all of the liabilities, of 
another other participating institution will be treated as a 
consolidation for the acquiring Federal savings association and as a 
consolidation by a Federal savings association whose assets are 
acquired, if any.
    (B)(1) Unless it has elected to follow the procedures applicable to 
State banks under paragraph (h)(1)(i) of this section, a national bank 
entering into a merger or consolidation with a Federal savings 
association when the resulting institution will be a Federal savings 
association must comply with the requirements of 12 U.S.C. 214a and 12 
U.S.C. 214c as if the Federal savings association were a State bank. 
However, for these purposes the references in 12 U.S.C. 214c to ``law of 
the State in which such national banking association is located'' and 
``any State authority'' mean ``laws and regulations governing Federal 
savings associations'' and ``Office of the Comptroller of the Currency'' 
respectively.
    (2) Unless the national bank has elected to follow the procedures 
applicable to State banks under paragraph (h)(1)(i) of this section, 
national bank shareholders who dissent from a plan to merge or 
consolidate may receive in cash the value of their national bank shares 
if they comply with the requirements of 12 U.S.C. 214a as if the Federal 
savings association were a State bank. The OCC will conduct an appraisal 
or reappraisal of the value of the national bank shares held by 
dissenting shareholders in accordance with the provisions of 12 U.S.C. 
214a, except that the

[[Page 326]]

costs and expenses of any appraisal or reappraisal may be apportioned 
and assessed by the Comptroller as he or she may deem equitable against 
all or some of the parties. In making this determination the Comptroller 
will consider whether any party has acted arbitrarily or not in good 
faith in respect to the rights provided by this paragraph.
    (C)(1) A Federal savings association entering into a merger or 
consolidation with another Federal savings association when the 
resulting institution will be the other Federal savings association must 
comply with the requirements of paragraph (n) of this section and the 
procedures of paragraph (o) of this section.
    (2) Unless the Federal savings association has elected to follow the 
procedures applicable to State savings associations under paragraph 
(o)(1)(i)(A), Federal savings association shareholders who dissent from 
a plan to merge or consolidate may receive in cash the value of their 
Federal savings association shares if they comply with the requirements 
of 12 U.S.C. 214a as if the other Federal savings association were a 
State bank. The OCC will conduct an appraisal or reappraisal of the 
value of the Federal savings association shares held by dissenting 
shareholders in accordance with the provisions of 12 U.S.C. 214a, except 
that the costs and expenses of any appraisal or reappraisal may be 
apportioned and assessed by the Comptroller as he or she may deem 
equitable against all or some of the parties. In making this 
determination the Comptroller will consider whether any party has acted 
arbitrarily or not in good faith in respect to the rights provided by 
this paragraph.
    (3) Unless the Federal savings association has elected to follow the 
procedures applicable to State savings associations under paragraph 
(o)(1)(i)(A), the plan of merger or consolidation must provide the 
manner of disposing of the shares of the resulting Federal savings 
association not taken by the dissenting shareholders of the Federal 
savings association.
    (D)(1) A State bank, State savings association, State trust company, 
or credit union entering into a consolidation or merger with a Federal 
savings association when the resulting institution will be a Federal 
savings association must follow the procedures for such consolidations 
or mergers set out in the law of the State or other jurisdiction under 
which the State bank, State savings association, State trust company, or 
credit union is organized.
    (2) The rights of dissenting shareholders and appraisal of 
dissenters' shares of stock in the State bank, State savings 
association, or State trust company, entering into the consolidation or 
merger will be determined in the manner prescribed by the law of the 
State or other jurisdiction under which the State bank, State savings 
association, or State trust company is organized.
    (ii) The consolidation or merger agreement must address the effect 
upon, and the terms of the assumption of, any liquidation account of any 
participating institution by the resulting institution.
    (7) Consolidations and mergers under 12 U.S.C. 214a of a national 
bank with State banks resulting in a State bank as defined in 12 U.S.C. 
214(a)--(i) In general. Prior OCC approval is not required for the 
merger or consolidation of a national bank with a State bank as defined 
in 12 U.S.C. 214(a). Termination of a national bank's existence and 
status as a national banking association is automatic, and its charter 
cancelled, upon completion of the statutory and regulatory requirements 
for engaging in the consolidation or merger and consummation of the 
consolidation or merger.
    (ii) Procedures. A national bank desiring to merge or consolidate 
with a State bank as defined in 12 U.S.C. 214(a) when the resulting 
institution will be a State bank must comply with the requirements and 
follow the procedures of 12 U.S.C. 214a and 214c and must provide notice 
to the OCC under paragraph (k) of this section.
    (iii) Dissenters' rights and appraisal procedures. National bank 
shareholders who dissent from a plan to merge or consolidate may receive 
in cash the value of their national bank shares if they comply with the 
requirements of 12 U.S.C. 214a. The OCC conducts an appraisal or 
reappraisal of the value of

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the national bank shares held by dissenting shareholders as provided for 
in 12 U.S.C. 214a.
    (iv) Liquidation account. The consolidation or merger agreement must 
address the effect upon, and the terms of the assumption of, any 
liquidation account of any participating institution by the resulting 
institution.
    (8) Interstate consolidations and mergers between an insured 
national bank and insured State banks resulting in a State bank--(i) In 
general. Prior OCC approval is not required for the merger or 
consolidation of an insured national bank with an insured out-of-State 
State bank, as defined in 12 U.S.C. 1831u(g)(8), with the State bank as 
the resulting institution, that has been approved by the appropriate 
Federal banking agency for the State bank. Termination of a national 
bank's existence and status as a national banking association is 
automatic, and its charter cancelled, upon completion of the statutory 
and regulatory requirements for engaging in the consolidation or merger 
and consummation of the consolidation or merger.
    (ii) Procedures. Unless it has elected to follow the procedures 
applicable to State banks under paragraph (h)(1)(i) of this section, the 
national bank entering into the consolidation or merger must comply with 
the procedures of 12 U.S.C. 214a, as applicable.
    (iii) Notice. The national bank must provide a notice to the OCC 
under paragraph (k) of this section.
    (9) Consolidations and mergers of a Federal savings association with 
State banks, State savings banks, State savings associations, State 
trust companies, or credit unions resulting in a State bank, State 
savings bank, State savings association, State trust company, or credit 
union--(i) Policy. Prior OCC approval is not required for the merger or 
consolidation of a Federal savings association with a State bank, State 
savings bank, State savings association, State trust company, or credit 
union when the resulting institution will be a State institution or 
credit union. Termination of a national bank's or Federal savings 
association's existence and status as a national banking association or 
Federal savings association is automatic, and its charter cancelled, 
upon completion of the statutory and regulatory requirements for 
engaging in the consolidation or merger and consummation of the 
consolidation or merger.
    (ii) Procedures. (A) A Federal savings association desiring to merge 
or consolidate with a State bank, State savings bank, State savings 
association, State trust company, or credit union when the resulting 
institution will be a State institution or credit union must comply with 
the requirements of paragraph (n) of this section and the procedures of 
paragraph (o) of this section and must provide notice to the OCC under 
paragraph (k) of this section.
    (B) For purposes of this paragraph (g)(9), a combination in which a 
State bank, State savings bank, State savings association, State trust 
company, or credit union acquires all or substantially all of the 
assets, or assumes all or substantially all of the liabilities, of a 
Federal savings association must be treated as a consolidation by the 
Federal savings association.
    (iii) Dissenters' rights and appraisal procedures. (A) Unless the 
Federal savings association has elected to follow the procedures 
applicable to State savings associations under paragraph (o)(1)(i)(A), 
Federal savings association shareholders who dissent from a plan to 
merge or consolidate may receive in cash the value of their Federal 
savings association shares if they comply with the requirements of 12 
U.S.C. 214a as if the Federal savings association were a national bank. 
The OCC conducts an appraisal or reappraisal of the value of the Federal 
savings association shares held by dissenting shareholders only if all 
parties agree that the determination will be final and binding. The 
parties also must agree on how the total expenses of the OCC in making 
the appraisal will be divided among the parties and paid to the OCC.
    (B) Unless the Federal savings association has elected to follow the 
procedures applicable to State savings associations under paragraph 
(o)(1)(i)(A), the plan of merger or consolidation must provide the 
manner of disposing of the shares of the resulting State institution not 
taken by the dissenting shareholders of the Federal savings association.

[[Page 328]]

    (iv) Liquidation account. The consolidation or merger agreement must 
address the effect upon, and the terms of the assumption of, any 
liquidation account of any participating institution by the resulting 
institution.
    (h) Procedural requirements for national bank combinations--(1) 
Permissible elections. A national bank participating in a combination 
pursuant to paragraph (g)(2), (g)(3), (g)(4), (g)(5), (g)(6), or (g)(8) 
of this section may elect to follow with respect to the combination:
    (i) The procedures applicable to a State bank chartered by the State 
where the national bank's main office is located; or
    (ii) Paragraph (p) of this section, if applicable.
    (2) Rules of Construction. For purposes of paragraph (h)(1) of this 
section:
    (i) Any references to a State agency in the applicable State 
procedures should be read as referring to the OCC; and
    (ii) Unless otherwise specified in Federal law, all filings required 
by the applicable State procedures must be made to the OCC.
    (i) Expedited review for business reorganizations and streamlined 
applications. A filing that qualifies as a business reorganization as 
defined in paragraph (d)(3) of this section, or a filing that qualifies 
as a streamlined application as described in paragraph (j) of this 
section, is deemed approved by the OCC as of the 15th day after the 
close of the comment period, unless the OCC notifies the filer that the 
filing is not eligible for expedited review, or the expedited review 
process is extended, under Sec.  5.13(a)(2). An application under this 
paragraph must contain all necessary information for the OCC to 
determine if it qualifies as a business reorganization or streamlined 
application.
    (j) Streamlined applications. (1) A filer may qualify for a 
streamlined business combination application in the following 
situations:
    (i) At least one party to the transaction is an eligible bank or 
eligible savings association, and all other parties to the transaction 
are eligible banks, eligible savings associations, or eligible 
depository institutions, the resulting national bank or resulting 
Federal savings association will be well capitalized immediately 
following consummation of the transaction, and the total assets of the 
target institution are no more than 50 percent of the total assets of 
the acquiring bank or Federal savings association, as reported in each 
institution's Consolidated Report of Condition and Income filed for the 
quarter immediately preceding the filing of the application;
    (ii) The acquiring bank or Federal savings association is an 
eligible bank or eligible savings association, the target bank or 
savings association is not an eligible bank, eligible savings 
association, or an eligible depository institution, the resulting 
national bank or resulting Federal savings association will be well 
capitalized immediately following consummation of the transaction, and 
the filers in a prefiling communication request and obtain approval from 
the appropriate OCC licensing office to use the streamlined application;
    (iii) The acquiring bank or Federal savings association is an 
eligible bank or eligible savings association, the target bank or 
savings association is not an eligible bank, eligible savings 
association, or an eligible depository institution, the resulting bank 
or resulting Federal savings association will be well capitalized 
immediately following consummation of the transaction, and the total 
assets acquired do not exceed 10 percent of the total assets of the 
acquiring national bank or acquiring Federal savings association, as 
reported in each institution's Consolidated Report of Condition and 
Income filed for the quarter immediately preceding the filing of the 
application; or
    (iv) In the case of a transaction under paragraph (g)(4) of this 
section, the acquiring bank is an eligible bank, the resulting national 
bank will be well capitalized immediately following consummation of the 
transaction, the filers in a prefiling communication request and obtain 
approval from the appropriate OCC licensing office to use the 
streamlined application, and the total assets acquired do not exceed 10 
percent of the total assets of the acquiring national bank, as reported 
in the bank's Consolidated Report of Condition and Income filed for the 
quarter

[[Page 329]]

immediately preceding the filing of the application.
    (2) Notwithstanding paragraph (j)(1) of this section, a filer does 
not qualify for a streamlined business combination application if the 
transaction is part of a conversion under part 192 of this chapter.
    (3) When a business combination qualifies for a streamlined 
application, the filer should consult the Comptroller's Licensing Manual 
to determine the abbreviated application information required by the 
OCC. The OCC encourages prefiling communications between the filers and 
the appropriate OCC licensing office before filing under paragraph (j) 
of this section.
    (k) Exit notice to OCC--(1) Notice required. As provided in 
paragraphs (g)(7)(ii), (g)(8)(iii), and (g)(9)(ii) of this section, a 
national bank or Federal savings association engaging in a consolidation 
or merger in which it is not the filer and the resulting institution 
must file a notice rather than an application to the appropriate OCC 
licensing office advising of its intention.
    (2) Timing of notice. The national bank or Federal savings 
association must submit the notice at the time the application to merge 
or consolidate is filed with the responsible agency under the Bank 
Merger Act, 12 U.S.C. 1828(c), or if there is no such filing then no 
later than 30 days prior to the effective date of the merger or 
consolidation.
    (3) Content of notice. The notice must include the following:
    (i)(A) A short description of the material features of the 
transaction, the identity of the acquiring institution, the identity of 
the State or Federal regulator to whom the application was made, and the 
date of the application; or
    (B) A copy of a filing made with another Federal or State regulatory 
agency seeking approval from that agency for the transaction under the 
Bank Merger Act or other applicable statute;
    (ii) The planned consummation date for the transaction;
    (iii) Information to demonstrate compliance by the national bank or 
Federal savings association with applicable requirements to engage in 
the transactions (e.g., board approval or shareholder or accountholder 
requirements); and
    (iv) If the national bank or Federal savings association submitting 
the notice maintains a liquidation account established pursuant to part 
192 of this chapter, the notice must state that the resulting 
institution will assume such liquidation account.
    (4) Termination of status. The national bank or Federal savings 
association must advise the OCC when the transaction is about to be 
consummated. Termination of a national bank's or Federal savings 
association's existence and status as a national banking association or 
Federal savings association is automatic, and its charter cancelled, 
upon completion of the statutory and regulatory requirements and 
consummation of the consolidation or merger. When the national bank or 
Federal savings association files the notice under paragraph (k)(1) of 
this section, the OCC provides instructions to the national bank or 
Federal savings association for terminating its status as a national 
bank or Federal savings association, including surrendering its charter 
to the OCC immediately after consummation of the transaction.
    (5) Expiration. If the action contemplated by the notice is not 
completed within six months after the OCC's receipt of the notice, a new 
notice must be submitted to the OCC, unless the OCC grants an extension 
of time.
    (l) Mergers and consolidations; transfer of assets and liabilities 
to the resulting institution. (1) In any consolidation or merger in 
which the resulting institution is a national bank or Federal savings 
association, on the effective date of the merger or consolidation, all 
assets and property (real, personal and mixed, tangible and intangible, 
choses in action, rights, and credits) then owned by each participating 
institution or which would inure to any of them, immediately by 
operation of law and without any conveyance, transfer, or further 
action, become the property of the resulting national bank or Federal 
savings association. The resulting national bank or Federal savings 
association is deemed to be a continuation of the entity of each 
participating institution, and will succeed to such

[[Page 330]]

rights and obligations of each participating institution and the duties 
and liabilities connected therewith.
    (2) The authority in paragraph (l)(1) of this section is in addition 
to any authority granted by applicable statutes for specific 
transactions and is subject to the National Bank Act, the Home Owners' 
Loan Act, and other applicable statutes.
    (m) Certification of combination; effective date. (1) When a 
national bank or Federal savings association is the filer and will be 
the resulting entity in a consolidation or merger, after receiving 
approval from the OCC, it must complete any remaining steps needed to 
complete the transaction, provide the OCC with a certification that all 
other required regulatory or shareholder approvals have been obtained, 
and inform the OCC of the planned consummation date.
    (2) When the transaction is consummated, the filer must notify the 
OCC of the consummation date. The OCC will issue a letter certifying 
that the combination was effective on the date specified in the filer's 
notice.
    (n) Authority for and certain limits on business combinations and 
other transactions by Federal savings associations. (1) Federal savings 
associations may enter into business combinations only in accordance 
with this section, the Bank Merger Act, and sections 5(d)(3)(A) and 
10(s) of the Home Owners' Loan Act (12 U.S.C. 1464(d)(3)(A) and 
1467a(s)).
    (2) A Federal savings association may consolidate or merge with 
another depository institution, a State trust company or a credit union, 
may engage in another business combination listed in paragraphs 
(d)(2)(iv) and (v) of this section, or may engage in any other 
combination listed in paragraph (d)(10), provided that:
    (i) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (ii) Any resulting Federal savings association meets the 
requirements for insurance of accounts; and
    (iii) A consolidation or merger involving a mutual savings 
association or the transfer of all or substantially all of the deposits 
of a mutual savings association must result in a mutually held 
depository institution that is insured by the FDIC, unless:
    (A) The transaction is approved under part 192 governing mutual to 
stock conversions;
    (B) The transaction involves a mutual holding company reorganization 
under 12 U.S.C. 1467a(o) or a similar transaction under State law; or
    (C) The transaction is part of a voluntary liquidation for which the 
OCC has provided non-objection under Sec.  5.48.
    (3) Where the resulting institution is a Federal mutual savings 
association, the OCC may approve a temporary increase in the number of 
directors of the resulting institution provided that the association 
submits a plan for bringing the board of directors into compliance with 
the requirements of Sec.  5.21(e) within a reasonable period of time.
    (4)(i) The Federal savings associations described in paragraph 
(n)(4)(ii) of this section below must provide affected accountholders 
with a notice of a proposed account transfer and an option of retaining 
the account in the transferring Federal savings association. The notice 
must allow affected accountholders at least 30 days to consider whether 
to retain their accounts in the transferring Federal savings 
association.
    (ii) The following savings associations must provide the notices:
    (A) A Federal mutual savings association transferring account 
liabilities to an institution the accounts of which are not insured by 
the Deposit Insurance Fund or the National Credit Union Share Insurance 
Fund; and
    (B) Any Federal mutual savings association transferring account 
liabilities to a stock form depository institution.
    (o) Procedural requirements for Federal savings association approval 
of combinations--(1) In general--(i) Permissible elections. A Federal 
savings association participating in a combination may elect to follow 
the applicable procedures with respect to the combination:
    (A) The procedures applicable to a State savings association 
chartered by the State where the Federal savings association's home 
office is located: or
    (B) The standard procedures provided in paragraph (o)(2) of this 
section.

[[Page 331]]

    (ii) Rules of Construction. For purposes of paragraph (o)(1)(i) of 
this section:
    (A) Any references to a State agency in the applicable State 
procedures should be read as referring to the OCC; and
    (B) Unless otherwise specified in Federal law, all filings required 
by the applicable State procedures must be made to the OCC.
    (2) Standard procedures--(i) Board approval. Before a Federal 
savings association files a notice or application for any consolidation 
or merger, the combination and combination agreement must be approved by 
majority vote of the entire board of each constituent Federal savings 
association in the case of Federal stock savings associations or a two-
thirds vote of the entire board of each constituent Federal savings 
association in the case of Federal mutual savings associations.
    (ii) Shareholder vote--(A) General rule. Except as otherwise 
provided in this paragraph (o)(2)(ii), an affirmative vote of two-thirds 
of the outstanding voting stock of any constituent Federal stock savings 
association is required for approval of a consolidation or merger. If 
any class of shares is entitled to vote as a class pursuant to Sec.  
5.22(g)(4), an affirmative vote of a majority of the shares of each 
voting class and two-thirds of the total voting shares is required. The 
required vote must be taken at a meeting of the savings association.
    (B) General exception. Stockholders of the resulting Federal stock 
savings association need not authorize a consolidation or merger if the 
transaction meets the requirements of paragraph (p) of this section.
    (C) Exceptions for certain combinations involving an interim 
association. Stockholders of a Federal stock savings association need 
not authorize by a two-thirds affirmative vote consolidations or mergers 
involving an interim Federal savings association or interim State 
savings association when the resulting Federal stock savings association 
is acquired pursuant to the regulations of the Board of Governors of the 
Federal Reserve System at 12 CFR 238.15(e) (relating to the creation of 
a savings and loan holding company by a savings association). In those 
cases, an affirmative vote of 50 percent of the shares of the 
outstanding voting stock of the Federal stock savings association plus 
one affirmative vote is required. If any class of shares is entitled to 
vote as a class pursuant to the charter provisions in Sec.  5.22(g)(4), 
an affirmative vote of 50 percent of the shares of each voting class 
plus one affirmative vote is required. The required votes must be taken 
at a meeting of the association.
    (3) Change of name or home office. If the name of the resulting 
Federal savings association or the location of the home office of the 
resulting Federal savings association will change as a result of the 
business combination, the resulting Federal savings association must 
amend its charter accordingly.
    (4) Mutual member vote. Notwithstanding any other provision of this 
section, the OCC may require that a consolidation, merger or other 
business combination be submitted to the voting members of any mutual 
savings association participating in the proposed transaction at duly 
called meetings and that the transaction, to be effective, must be 
approved by such voting members.
    (p) Exception to voting requirements. Shareholders of a resulting 
national bank or Federal stock savings association need not authorize a 
consolidation or merger if:
    (1) Either:
    (i) The transaction does not involve an interim bank or an interim 
savings association; or
    (ii) The transaction involves an interim bank or an interim savings 
association and the existing shareholders of the national bank or 
Federal stock savings association will directly hold the shares of the 
resulting national bank or Federal stock savings association;
    (2) The national bank's articles of association or the Federal stock 
savings association's charter, as applicable, is not changed;
    (3) Each share of stock outstanding immediately prior to the 
effective date of the consolidation or merger is to be an identical 
outstanding share or a treasury share of the resulting national bank or 
Federal stock savings

[[Page 332]]

association after such effective date; and
    (4) Either:
    (i) No shares of voting stock of the resulting national bank or 
Federal stock savings association and no securities convertible into 
such stock are to be issued or delivered under the plan of combination; 
or
    (ii) The authorized unissued shares or the treasury shares of voting 
stock of the resulting national bank or Federal stock savings 
association to be issued or delivered under the plan of merger or 
consolidation, plus those initially issuable upon conversion of any 
securities to be issued or delivered under such plan, do not exceed 20 
percent of the total shares of voting stock of such national bank or 
Federal stock savings association outstanding immediately prior to the 
effective date of the consolidation or merger.

[85 FR 80448, Dec. 11, 2020; 86 FR 1255, Jan. 8, 2021]



Sec.  5.34  Operating subsidiaries of a national bank.

    (a) Authority. 12 U.S.C. 24 (Seventh), 24a, 25b, 93a, 3102(b).
    (b) Licensing requirements. A national bank must file an application 
or notice as prescribed in this section to acquire or establish an 
operating subsidiary, or to commence a new activity in an existing 
operating subsidiary.
    (c) Scope. This section sets forth authorized activities and 
application or notice procedures for national banks engaging in 
activities through an operating subsidiary. The procedures in this 
section do not apply to financial subsidiaries authorized under Sec.  
5.39. Unless provided otherwise, this section applies to a Federal 
branch or agency that acquires, establishes, or maintains any subsidiary 
that a national bank is authorized to acquire or establish under this 
section in the same manner and to the same extent as if the Federal 
branch or agency were a national bank, except that the ownership 
interest required in paragraphs (e)(2) and (f)(2)(i)(C)(2) of this 
section applies to the parent foreign bank of the Federal branch or 
agency and not to the Federal branch or agency. The OCC may, at any 
time, limit a national bank's investment in an operating subsidiary or 
may limit or refuse to permit any activities in an operating subsidiary 
for supervisory, legal, or safety and soundness reasons.
    (d) Definition. For purposes of this section, authorized product 
means a product that would be defined as insurance under section 302(c) 
of the Gramm-Leach-Bliley Act (15 U.S.C. 6712) that, as of January 1, 
1999, the OCC had determined in writing that national banks may provide 
as principal or national banks were in fact lawfully providing the 
product as principal, and as of that date no court of relevant 
jurisdiction had, by final judgment, overturned a determination by the 
OCC that national banks may provide the product as principal. An 
authorized product does not include title insurance, or an annuity 
contract the income of which is subject to treatment under section 72 of 
the Internal Revenue Code of 1986 (26 U.S.C. 72).
    (e) Standards and requirements--(1) Authorized activities. (i) A 
national bank may conduct in an operating subsidiary activities that are 
permissible for a national bank to engage in directly either as part of, 
or incidental to, the business of banking, as determined by the OCC, or 
otherwise under other statutory authority, including:
    (A) Providing authorized products as principal; and
    (B) Providing title insurance as principal if the national bank or 
subsidiary thereof was actively and lawfully underwriting title 
insurance before November 12, 1999, and no affiliate of the national 
bank (other than a subsidiary) provides insurance as principal. A 
subsidiary may not provide title insurance as principal if the State had 
in effect before November 12, 1999, a law which prohibits any person 
from underwriting title insurance with respect to real property in that 
State.
    (ii) In addition to OCC authorization, before it begins business an 
operating subsidiary also must comply with other laws applicable to it 
and its proposed business, including applicable licensing or 
registration requirements, if any, such as registration requirements 
under securities laws.
    (2) Qualifying subsidiaries. (i) An operating subsidiary in which a 
national

[[Page 333]]

bank may invest includes a corporation, limited liability company, 
limited partnership, or similar entity if:
    (A) The bank has the ability to control the management and 
operations of the subsidiary, and no other person or entity has the 
ability to exercise effective control or influence over the management 
or operations of the subsidiary to an extent equal to or greater than 
that of the bank or an operating subsidiary thereof;
    (B) The parent bank owns and controls more than 50 percent of the 
voting (or similar type of controlling) interest of the operating 
subsidiary, or the parent bank otherwise controls the operating 
subsidiary and no other party controls a percentage of the voting (or 
similar type of controlling) interest of the operating subsidiary 
greater than the bank's interest; and
    (C) The operating subsidiary is consolidated with the bank under 
GAAP.
    (ii) However, the following entities are not operating subsidiaries 
subject to this section:
    (A) A subsidiary in which the bank's investment is made pursuant to 
specific authorization in a statute or OCC regulation (e.g., a bank 
service company under 12 U.S.C. 1861 et seq., a financial subsidiary 
under section 5136A of the Revised Statutes (12 U.S.C. 24a), or a 
community development corporation subsidiary under 12 U.S.C. 24 
(Eleventh) and 12 CFR part 24;
    (B) A subsidiary in which the bank has acquired, in good faith, 
shares through foreclosure on collateral, by way of compromise of a 
doubtful claim, or to avoid a loss in connection with a debt previously 
contracted; and
    (C) A trust formed for purposes of securitizing assets held by the 
bank as part of its banking business.
    (iii) Notwithstanding the requirements of paragraph (e)(2)(i) of 
this section,
    (A) A national bank must have reasonable policies and procedures to 
preserve the limited liability of the bank and its operating 
subsidiaries; and
    (B) OCC regulations may not be construed as requiring a national 
bank and its operating subsidiaries to operate as a single entity.
    (3) Examination and supervision. An operating subsidiary conducts 
activities authorized under this section pursuant to the same 
authorization, terms and conditions that apply to the conduct of such 
activities by its parent national bank, unless otherwise specifically 
provided by statute, regulation, or published OCC policy, including 
sections 1044 and 1045 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 25b) with respect to the application of State 
law. If the OCC determines that the operating subsidiary is operating in 
violation of law, regulation, or written condition, or in an unsafe or 
unsound manner or otherwise threatens the safety or soundness of the 
bank, the OCC will direct the bank or operating subsidiary to take 
appropriate remedial action, which may include requiring the bank to 
divest or liquidate the operating subsidiary, or discontinue specified 
activities. OCC authority under this paragraph is subject to the 
limitations and requirements of section 45 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831v) and section 115 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1820a).
    (4) Consolidation of figures--(i) National banks. Pertinent book 
figures of the parent national bank and its operating subsidiary will be 
combined for the purpose of applying statutory or regulatory limitations 
when combination is needed to effect the intent of the statute or 
regulation, e.g., for purposes of 12 U.S.C. 56, 59, 60, 84, and 371d.
    (ii) Federal branches or agencies. Transactions conducted by all of 
a foreign bank's Federal branches and agencies and State branches and 
agencies, and their operating subsidiaries, will be combined for the 
purpose of applying any limitation or restriction as provided in 12 CFR 
28.14.
    (f) Procedures--(1) Application required. (i) Except for an 
operating subsidiary that qualifies for the notice procedures in 
paragraph (f)(2) of this section or is exempt from application or notice 
requirements under paragraph (f)(6) of this section, a national bank 
must first submit an application to, and receive prior approval from, 
the OCC to establish or acquire an operating subsidiary or to perform a 
new activity in an existing operating subsidiary.

[[Page 334]]

    (ii) The application must explain, as appropriate, how the bank 
``controls'' the enterprise, describing in full detail structural 
arrangements where control is based on factors other than bank ownership 
of more than 50 percent of the voting interest of the subsidiary and the 
ability to control the management and operations of the subsidiary by 
holding voting interests sufficient to select the number of directors 
needed to control the subsidiary's board and to select and terminate 
senior management. In the case of a limited partnership or limited 
liability company that does not qualify for the notice procedures set 
forth in paragraph (f)(2) of this section, the bank must provide a 
statement explaining why it is not eligible. The application also must 
include a complete description of the bank's investment in the 
subsidiary, the proposed activities of the subsidiary, the 
organizational structure and management of the subsidiary, the relations 
between the bank and the subsidiary, and other information necessary to 
adequately describe the proposal. To the extent that the application 
relates to the initial affiliation of the bank with a company engaged in 
insurance activities, the bank must describe the type of insurance 
activity in which the company is engaged and has present plans to 
conduct. The bank must also list for each State the lines of business 
for which the company holds, or will hold, an insurance license, 
indicating the State where the company holds a resident license or 
charter, as applicable. The application must state whether the operating 
subsidiary will conduct any activity at a location other than the main 
office or a previously approved branch of the bank. The OCC may require 
a filer to submit a legal analysis if the proposal is novel, unusually 
complex, or raises substantial unresolved legal issues. In these cases, 
the OCC encourages filers to have a prefiling meeting with the OCC. Any 
bank receiving approval under this paragraph is deemed to have agreed 
that the subsidiary will conduct the activity in a manner consistent 
with published OCC guidance.
    (2) Notice process only for certain qualifying filings. (i) Except 
for an operating subsidiary that is exempt from application or notice 
procedures under paragraph (f)(6) of this section, a national bank that 
is well capitalized and well managed may establish or acquire an 
operating subsidiary, or perform a new activity in an existing operating 
subsidiary, by providing the appropriate OCC licensing office written 
notice prior to, or within 10 days after, acquiring or establishing the 
subsidiary, or commencing the new activity, if:
    (A) The activity is listed in paragraph (f)(5) of this section or, 
except as provided in paragraph (f)(2)(ii) of this section, the activity 
is substantively the same as a previously approved activity and the 
activity will be conducted in accordance with the same terms and 
conditions applicable to the previously approved activity;
    (B) The entity is a corporation, limited liability company, limited 
partnership, or trust; and
    (C) The bank or an operating subsidiary thereof:
    (1) Has the ability to control the management and operations of the 
subsidiary and no other person or entity has the ability to exercise 
effective control or influence over the management or operations of the 
subsidiary to an extent equal to or greater than that of the bank or an 
operating subsidiary thereof. The ability to control the management and 
operations means:
    (i) In the case of a subsidiary that is a corporation, the bank or 
an operating subsidiary thereof holds voting interests sufficient to 
select the number of directors needed to control the subsidiary's board 
and to select and terminate senior management;
    (ii) In the case of a subsidiary that is a limited partnership, the 
bank or an operating subsidiary thereof has the ability to control the 
management and operations of the subsidiary by controlling the selection 
and termination of senior management;
    (iii) In the case of a subsidiary that is a limited liability 
company, the bank or an operating subsidiary thereof has the ability to 
control the management and operations of the subsidiary by controlling 
the selection and termination of senior management; or

[[Page 335]]

    (iv) In the case of a subsidiary that is a trust, the bank or an 
operating subsidiary thereof has the ability to replace the trustee at 
will;
    (2) Holds more than 50 percent of the voting, or equivalent, 
interests in the subsidiary and:
    (i) In the case of a subsidiary that is a limited partnership, the 
bank or an operating subsidiary thereof is the sole general partner of 
the limited partnership, provided that under the partnership agreement, 
limited partners have no authority to bind the partnership by virtue 
solely of their status as limited partners;
    (ii) In the case of a subsidiary that is a limited liability 
company, the bank or an operating subsidiary thereof is the sole 
managing member of the limited liability company, provided that under 
the limited liability company agreement, other limited liability company 
members have no authority to bind the limited liability company by 
virtue solely of their status as members; or
    (iii) In the case of a subsidiary that is a trust, the bank or an 
operating subsidiary thereof is the sole beneficial owner of the trust; 
and
    (3) Is required to consolidate its financial statements with those 
of the subsidiary under GAAP.
    (ii) A national bank must file an application under paragraph (f)(1) 
of this section if a State has or will charter or license the proposed 
operating subsidiary as a bank, trust company, or savings association.
    (iii) The written notice must include a complete description of the 
bank's investment in the subsidiary and of the activity conducted and a 
representation and undertaking that the activity will be conducted in 
accordance with OCC policies contained in guidance issued by the OCC 
regarding the activity. To the extent that the notice relates to the 
initial affiliation of the bank with a company engaged in insurance 
activities, the bank must describe the type of insurance activity in 
which the company is engaged and has present plans to conduct. The bank 
also must list for each State the lines of business for which the 
company holds, or will hold, an insurance license, indicating the State 
where the company holds a resident license or charter, as applicable. 
Any bank receiving approval under this paragraph is deemed to have 
agreed that the subsidiary will conduct the activity in a manner 
consistent with published OCC guidance.
    (3) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (4) OCC review and approval. The OCC reviews a national bank's 
application to determine whether the proposed activities are legally 
permissible under Federal banking laws and to ensure that the proposal 
is consistent with safe and sound banking practices and OCC policy and 
does not endanger the safety or soundness of the parent national bank. 
As part of this process, the OCC may request additional information and 
analysis from the filer.
    (5) Activities eligible for notice. The following activities qualify 
for the notice procedures in paragraph (f)(2) of this section, provided 
the activity is conducted pursuant to the same terms and conditions as 
would be applicable if the activity were conducted directly by a 
national bank:
    (i) Holding and managing assets acquired by the parent bank or its 
operating subsidiaries, including investment assets and property 
acquired by the bank through foreclosure or otherwise in good faith to 
compromise a doubtful claim, or in the ordinary course of collecting a 
debt previously contracted;
    (ii) Providing services to or for the bank or its affiliates, 
including accounting, auditing, appraising, advertising and public 
relations, and financial advice and consulting;
    (iii) Making loans or other extensions of credit, and selling money 
orders, savings bonds, and travelers checks;
    (iv) Purchasing, selling, servicing, or warehousing loans or other 
extensions of credit, or interests therein;
    (v) Providing courier services between financial institutions;

[[Page 336]]

    (vi) Providing management consulting, operational advice, and 
services for other financial institutions;
    (vii) Providing check guaranty, verification and payment services;
    (viii) Providing data processing, data warehousing and data 
transmission products, services, and related activities and facilities, 
including associated equipment and technology, for the bank or its 
affiliates;
    (ix) Acting as investment adviser (including an adviser with 
investment discretion) or financial adviser or counselor to governmental 
entities or instrumentalities, businesses, or individuals, including 
advising registered investment companies and mortgage or real estate 
investment trusts, furnishing economic forecasts or other economic 
information, providing investment advice related to futures and options 
on futures, and providing consumer financial counseling;
    (x) Providing tax planning and preparation services;
    (xi) Providing financial and transactional advice and assistance, 
including advice and assistance for customers in structuring, arranging, 
and executing mergers and acquisitions, divestitures, joint ventures, 
leveraged buyouts, swaps, foreign exchange, derivative transactions, 
coin and bullion, and capital restructurings;
    (xii) Underwriting and reinsuring credit related insurance to the 
extent permitted under section 302 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6712);
    (xiii) Leasing of personal property and acting as an agent or 
adviser in leases for others;
    (xiv) Providing securities brokerage or acting as a futures 
commission merchant, and providing related credit and other related 
services;
    (xv) Underwriting and dealing, including making a market, in bank 
permissible securities and purchasing and selling as principal, asset 
backed obligations;
    (xvi) Acting as an insurance agent or broker, including title 
insurance to the extent permitted under section 303 of the Gramm-Leach-
Bliley Act (15 U.S.C. 6713);
    (xvii) Reinsuring mortgage insurance on loans originated, purchased, 
or serviced by the bank, its subsidiaries, or its affiliates, provided 
that if the subsidiary enters into a quota share agreement, the 
subsidiary assumes less than 50 percent of the aggregate insured risk 
covered by the quota share agreement. A ``quota share agreement'' is an 
agreement under which the reinsurer is liable to the primary insurance 
underwriter for an agreed upon percentage of every claim arising out of 
the covered book of business ceded by the primary insurance underwriter 
to the reinsurer;
    (xviii) Acting as a finder pursuant to 12 CFR 7.1002 to the extent 
permitted by published OCC precedent for national banks; \2\
---------------------------------------------------------------------------

    \2\ See, e.g., the OCC's monthly publication ``Interpretations and 
Actions.'' Beginning with the May 1996 issue, electronic versions of 
``Interpretations and Actions'' are available at www.occ.gov.
---------------------------------------------------------------------------

    (xix) Offering correspondent services to the extent permitted by 
published OCC precedent for national banks;
    (xx) Acting as agent or broker in the sale of fixed or variable 
annuities;
    (xxi) Offering debt cancellation or debt suspension agreements;
    (xxii) Providing real estate settlement, closing, escrow, and 
related services; and real estate appraisal services for the subsidiary, 
parent bank, or other financial institutions;
    (xxiii) Acting as a transfer or fiscal agent;
    (xxiv) Acting as a digital certification authority to the extent 
permitted by published OCC precedent for national banks, subject to the 
terms and conditions contained in that precedent;
    (xxv) Providing or selling public transportation tickets, event and 
attraction tickets, gift certificates, prepaid phone cards, promotional 
and advertising material, postage stamps, and Electronic Benefits 
Transfer (EBT) script, and similar media, to the extent permitted by 
published OCC precedent for national banks, subject to the terms and 
conditions contained in that precedent;
    (xxvi) Providing data processing, and data transmission services, 
facilities (including equipment, technology, and personnel), databases, 
advice and access to such services, facilities, databases and advice, 
for the parent bank

[[Page 337]]

and for others, pursuant to 12 CFR 7.5006 to the extent permitted by 
published OCC precedent for national banks;
    (xxvii) Providing bill presentment, billing, collection, and claims-
processing services;
    (xxviii) Providing safekeeping for personal information or valuable 
confidential trade or business information, such as encryption keys, to 
the extent permitted by published OCC precedent for national banks;
    (xxix) Providing payroll processing;
    (xxx) Providing branch management services;
    (xxxi) Providing merchant processing services except when the 
activity involves the use of third parties to solicit or underwrite 
merchants; and
    (xxxii) Performing administrative tasks involved in benefits 
administration.
    (6) No application or notice required. A national bank may acquire 
or establish an operating subsidiary, or perform a new activity in an 
existing operating subsidiary, without filing an application or 
providing notice to the OCC, if the bank is well managed and well 
capitalized and the:
    (i) Activities of the new subsidiary are limited to those activities 
previously reported by the bank in connection with the establishment or 
acquisition of a prior operating subsidiary;
    (ii) Activities in which the new subsidiary will engage continue to 
be legally permissible for the subsidiary;
    (iii) Activities of the new subsidiary will be conducted in 
accordance with any conditions imposed by the OCC in approving the 
conduct of these activities for any prior operating subsidiary of the 
bank; and
    (iv) The standards set forth in paragraphs (f)(2)(i)(B) and (C) of 
this section are satisfied.
    (7) Fiduciary powers. (i) If an operating subsidiary proposes to 
accept fiduciary appointments for which fiduciary powers are required, 
such as acting as trustee or executor, then the national bank must have 
fiduciary powers under 12 U.S.C. 92a and the subsidiary also must have 
its own fiduciary powers under the law applicable to the subsidiary.
    (ii) Unless the subsidiary is a registered investment adviser, if an 
operating subsidiary proposes to exercise investment discretion on 
behalf of customers or provide investment advice for a fee, the national 
bank must have prior OCC approval to exercise fiduciary powers pursuant 
to Sec.  5.26 and 12 CFR part 9.
    (8) Expiration of approval. Approval expires if the national bank 
has not established or acquired the operating subsidiary or commenced 
the new activity in an existing operating subsidiary within 12 months 
after the date of the approval, unless the OCC shortens or extends the 
time period.
    (g) Grandfathered operating subsidiaries. Notwithstanding the 
requirements for a qualifying operating subsidiary in paragraph (e)(2) 
of this section and unless otherwise notified by the OCC with respect to 
a particular operating subsidiary, an entity that a national bank 
lawfully acquired or established as an operating subsidiary before April 
24, 2008 may continue to operate as a national bank operating subsidiary 
under this section, provided that the bank and the operating subsidiary 
were, and continue to be, conducting authorized activities in compliance 
with the standards and requirements applicable when the bank established 
or acquired the operating subsidiary.

[80 FR 28444, May 18, 2015, as amended at 85 FR 80455, Dec. 11, 2020]



Sec.  5.35  Bank service company investments by a national bank 
or Federal savings association.

    (a) Authority. 12 U.S.C. 93a, 1462a, 1463, 1464, 1861-1867, and 
5412(b)(2)(B).
    (b) Licensing requirements. Except where otherwise provided, a 
national bank or Federal savings association must submit a notice and 
obtain prior OCC approval to invest in the equity of a bank service 
company or to perform new activities in an existing bank service 
company.
    (c) Scope. This section describes the procedures and requirements 
regarding OCC review and approval of a notice by a national bank or 
Federal savings association to invest in the equity of a bank service 
company. The OCC may, at any time, limit a national bank's or

[[Page 338]]

Federal savings association's investment in a bank service company or 
may limit or refuse to permit any activities in any bank service company 
for which a national bank or Federal savings association is the 
principal investor for supervisory, legal, or safety and soundness 
reasons.
    (d) Definitions--(1) Bank service company means a corporation or 
limited liability company organized to provide services authorized by 
the Bank Service Company Act, 12 U.S.C. 1861 et seq., all of whose 
capital stock is owned by one or more insured depository institutions in 
the case of a corporation, or all of the members of which are one or 
more insured depository institutions in the case of a limited liability 
company.
    (2) Limited liability company means any company, partnership, trust, 
or similar business entity organized under the law of a State (as 
defined in section 3(a)(3) of the Federal Deposit Insurance Act, 12 
U.S.C. 1813(a)(3)) which provides that a member or manager of such 
company is not personally liable for a debt, obligation, or liability of 
the company solely by reason of being, or acting as, a member or manager 
of such company.
    (3) Depository institution for purposes of this section, means, 
except when such term appears in connection with the term 'insured 
depository institution', an insured bank (as defined in section 3(h) of 
the Federal Deposit Insurance Act, 12 U.S.C. 1813(h)), a savings 
association (as defined in section 3(b)(1) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1813(b)(1)), a financial institution subject to 
examination by the appropriate Federal banking agency or the National 
Credit Union Administration Board, or a financial institution the 
accounts or deposits of which are insured or guaranteed under State law 
and are eligible to be insured by the FDIC or the National Credit Union 
Administration Board.
    (4) Insured depository institution, for purposes of this section, 
has the same meaning as in section 3(c)(2) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1813(c)(2).
    (5) Invest includes making any advance of funds to a bank service 
company, whether by the purchase of stock, the making of a loan, or 
otherwise, except a payment for rent earned, goods sold and delivered, 
or services rendered before the payment was made.
    (6) Principal investor means the insured depository institution that 
has the largest amount invested in the equity of a bank service company. 
In any case where two or more insured depository institutions have equal 
amounts invested and no other insured depository institution has a 
larger amount invested, the bank service company must designate one of 
those insured depository institutions as its principal investor.
    (e) Standards and requirements. A national bank or Federal savings 
association may invest in a bank service company that conducts 
activities described in paragraphs (f)(3) and (f)(4) of this section and 
activities (other than taking deposits) permissible for the national 
bank or Federal savings association and other insured depository 
institution shareholders or members of the bank service company.
    (f) Procedures--(1) OCC notice and approval required. Except as 
provided in paragraphs (f)(3) and (f)(4) of this section, a national 
bank or Federal savings association that intends to invest in the equity 
of a bank service company, or to perform new activities in an existing 
bank service company, must submit a notice to and receive prior approval 
from the OCC. The notice must include the information required by 
paragraph (g) of this section. The OCC approves or denies a proposed 
investment within 60 days after the filing is received by the OCC, 
unless the OCC notifies the bank prior to that date that the filing 
presents a significant supervisory or compliance concern, or raises a 
significant legal or policy issue.
    (2) Expedited review for certain activities. (i) A notice to invest 
in the equity of a bank service company, or to perform new activities in 
an existing bank service company, that meets the requirements of this 
paragraph is deemed approved by the OCC as of the 30th day after the 
notice is received by the OCC, unless the OCC notifies the filer prior 
to that date that the filing is not eligible for expedited review or the 
expedited review process is extended. Any bank or savings association 
making an

[[Page 339]]

investment pursuant to this paragraph is deemed to have agreed that the 
bank service company will conduct the activity in a manner consistent 
with the published OCC guidance.
    (ii) A notice is eligible for expedited review if all of the 
following requirements are met:
    (A) The national bank or Federal savings association is well 
capitalized and well managed; and
    (B) The bank service company engages only in activities that are 
permissible for the bank service company under 12 U.S.C. 1864 and that 
are listed in Sec.  5.34(f)(5) or Sec.  5.38(f)(5), as applicable.
    (3) Investments requiring no approval or notice. A national bank or 
Federal savings association does not need to submit a notice or obtain 
OCC approval to invest in a bank service company, or to perform a new 
activity in an existing bank service company, if the bank service 
company will provide only the following services only for depository 
institutions: Check and deposit posting and sorting; computation and 
posting of interest and other credits and charges; preparation and 
mailing of checks, statements, notices, and similar items; or any other 
clerical, bookkeeping, accounting, statistical, or similar functions.
    (4) Federal Reserve approval. A national bank or Federal savings 
association also may, with the approval of the Board of Governors of the 
Federal Reserve System (Federal Reserve Board), invest in the equity of 
a bank service company that provides any other service (except deposit 
taking) that the Federal Reserve Board has determined, by regulation, to 
be permissible for a bank holding company under 12 U.S.C. 1843(c)(8).
    (5) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to a request for approval to invest in a 
bank service company. However, if the OCC concludes that an application 
presents significant or novel policy, supervisory, or legal issues, the 
OCC may determine that any or all provisions of Sec. Sec.  5.8, 5.10, 
and 5.11 apply.
    (g) Required information. A notice required under paragraph (f)(1) 
of this section must contain the following:
    (1) The name and location of the bank service company;
    (2) A complete description of the activities the bank service 
company will conduct and a representation and undertaking that the 
activities will be conducted in accordance with OCC guidance. To the 
extent the notice relates to the initial affiliation of the national 
bank or Federal savings association with a company engaged in insurance 
activities, the national bank or Federal savings association should 
describe the type of insurance activity that the company is engaged in 
and has present plans to conduct. The national bank or Federal savings 
association also must list for each State the lines of business for 
which the company holds, or will hold, an insurance license, indicating 
the State where the company holds a resident license or charter, as 
applicable;
    (3) A complete description of the national bank's or Federal savings 
association's investment in the bank service company and information 
demonstrating that the national bank or Federal savings association will 
comply with the investment limitations of paragraph (i) of this section; 
and
    (4) Information demonstrating that the bank service company will 
perform only those services that each insured depository institution 
shareholder or member is authorized to perform under applicable Federal 
or State law and will perform such services only at locations in a State 
in which each such shareholder or member is authorized to perform such 
services unless performing services that are authorized by the Federal 
Reserve Board under the authority of 12 U.S.C. 1865(b).
    (h) Examination and supervision. Each bank service company in which 
a national bank or Federal savings association is the principal investor 
is subject to examination and supervision by the OCC in the same manner 
and to the same extent as that national bank or Federal savings 
association. OCC authority under this paragraph is subject to the 
limitations and requirements of section 45 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831v) and section 115 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1820a).
    (i) Investment limitations. A national bank or Federal savings 
association

[[Page 340]]

must comply with the investment limitations specified in 12 U.S.C. 1862.

[80 FR 28448, May 18, 2015, as amended at 85 FR 80458, Dec. 11, 2020]



Sec.  5.36  Other equity investments by a national bank.

    (a) Authority. 12 U.S.C. 1 et seq., 24(Seventh), 93a, and 3101 et 
seq.
    (b) Scope. National banks are permitted to make various types of 
equity investments pursuant to 12 U.S.C. 24(Seventh) and other statutes. 
These investments are in addition to those subject to Sec. Sec.  5.34, 
5.35, 5.37, and 5.39. This section describes the procedure governing the 
filing of the application or notice that the OCC requires in connection 
with certain of these investments. Other permissible equity investments 
may be reviewed on a case-by-case basis by the OCC.
    (c) Definitions. For purposes of this section:
    (1) Enterprise means any corporation, limited liability company, 
partnership, trust, or similar business entity.
    (2) Non-controlling investment means an equity investment made 
pursuant to 12 U.S.C. 24(Seventh) that is not governed by procedures 
prescribed by another OCC rule. A non-controlling investment does not 
include a national bank holding interests in a trust formed for the 
purposes of securitizing assets held by the bank as part of its banking 
business or for the purposes of holding multiple legal titles of motor 
vehicles or equipment in conjunction with lease financing transactions.
    (d) Procedure. (1) A national bank must provide the appropriate OCC 
licensing office with written notice within ten days after making an 
equity investment in the following:
    (i) An agricultural credit corporation;
    (ii) A savings association eligible to be acquired under section 13 
of the Federal Deposit Insurance Act (12 U.S.C. 1823); and
    (iii) Any other equity investment that may be authorized by statute 
after February 12, 1990, if not covered by other applicable OCC 
regulation.
    (2) The written notice required by paragraph (d)(1) of this section 
must include a description, and the amount, of the bank's investment.
    (3) The OCC reserves the right to require additional information as 
necessary.
    (e) Non-controlling investments; notice procedure. Except as 
provided in paragraphs (f), (g), and (h) of this section, a national 
bank may make a non-controlling investment, directly or through its 
operating subsidiary, in an enterprise that engages in an activity 
described in Sec.  5.34(f)(5) or in an activity that is substantively 
the same as a previously approved activity by filing a written notice. 
The bank must file this written notice with the appropriate OCC 
licensing office no later than 10 days after making the investment. The 
written notice must:
    (1) Describe the structure of the investment and the activity or 
activities conducted by the enterprise in which the bank is investing. 
To the extent the notice relates to the initial affiliation of the bank 
with a company engaged in insurance activities, the bank should describe 
the type of insurance activity that the company is engaged in and has 
present plans to conduct. The bank must also list for each State the 
lines of business for which the company holds, or will hold, an 
insurance license, indicating the State where the company holds a 
resident license or charter, as applicable;
    (2) State:
    (i) Which paragraphs of Sec.  5.34(f)(5) describe the activity; or
    (ii) If the activity is substantively the same as a previously 
approved activity:
    (A) How the activity is substantively the same as a previously 
approved activity;
    (B) The citation to the applicable precedent; and
    (C) That the activity will be conducted in accordance with the same 
terms and conditions applicable to the previously approved activity;
    (3) Certify that the bank is well capitalized and well managed at 
the time of the investment;
    (4) Describe how the bank has the ability to prevent the enterprise 
from engaging in activities that are not set forth in Sec.  5.34(f)(5) 
or not contained in published OCC precedent for previously approved 
activities, or how the bank

[[Page 341]]

otherwise has the ability to withdraw its investment;
    (5) Describe how the investment is convenient and useful to the bank 
in carrying out its business and not a mere passive investment unrelated 
to the bank's banking business;
    (6) Certify that the bank's loss exposure is limited as a legal 
matter and that the bank does not have unlimited liability for the 
obligations of the enterprise; and
    (7) Certify that the enterprise in which the bank is investing 
agrees to be subject to OCC supervision and examination, subject to the 
limitations and requirements of section 45 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831v) and section 115 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1820a).
    (f) Non-controlling investment; application procedure--(1) In 
general. A national bank must file an application and obtain prior 
approval before making or acquiring, either directly or through an 
operating subsidiary, a non-controlling investment in an enterprise if 
the non-controlling investment does not qualify for the notice procedure 
set forth in paragraph (e) of this section because the bank is unable to 
make the representation required by paragraph (e)(2) or the 
certifications required by paragraphs (e)(3) or (e)(7) of this section. 
The application must include the information required in paragraphs 
(e)(1) and (e)(4) through (e)(6) of this section and, if possible, the 
information required by paragraphs (e)(2), (e)(3), and (e)(7) of this 
section. If the bank is unable to make the representation set forth in 
paragraph (e)(2) of this section, the bank's application must explain 
why the activity in which the enterprise engages is a permissible 
activity for a national bank and why the filer should be permitted to 
hold a non-controlling investment in an enterprise engaged in that 
activity. A bank may not make a non-controlling investment if it is 
unable to make the representations and certifications specified in 
paragraphs (e)(1) and (e)(4) through (e)(6) of this section.
    (2) Expedited review. An application submitted by a national bank is 
deemed approved by the OCC as of the 10th day after the application is 
received by the OCC if:
    (i) The national bank makes the representation required by paragraph 
(e)(2) and the certification required by paragraph (e)(3) of this 
section;
    (ii) The book value of the national bank's non-controlling 
investment for which the application is being submitted is no more than 
1% of the bank's capital and surplus;
    (iii) No more than 50% of the enterprise is owned or controlled by 
banks or savings associations subject to examination by an appropriate 
Federal banking agency or credit unions insured by the National Credit 
Union Association; and
    (iv) The OCC has not notified the national bank that the application 
has been removed from expedited review, or the expedited review process 
is extended, under Sec.  5.13(a)(2).
    (g) Non-controlling investment; no application or notice required. A 
national bank may make or acquire, either directly or through an 
operating subsidiary, a non-controlling investment in an enterprise 
without an application or notice to the OCC, if the:
    (1) Activities of the enterprise are limited to those activities 
previously reported by the bank in connection with the making or 
acquiring of a non-controlling investment;
    (2) Activities of the enterprise continue to be legally permissible 
for a national bank;
    (3) The bank's non-controlling investment will be made in accordance 
with any conditions imposed by the OCC in approving any prior non-
controlling investment in an enterprise conducting these same 
activities; and
    (4) The bank is able to make the representations and certifications 
specified in paragraphs (e)(3) through (e)(7) of this section.
    (h) Non-controlling investments in entities holding assets in 
satisfaction of debts previously contracted. Certain non-controlling 
investments may be eligible for expedited treatment where the bank's 
investment is in an entity holding assets in satisfaction of debts 
previously contracted or the bank acquires shares of a company in 
satisfaction of debts previously contracted.

[[Page 342]]

    (1) Notice required. A national bank that is well capitalized and 
well managed may acquire a non-controlling investment, directly or 
through its operating subsidiary, in an enterprise that engages in the 
activities of holding and managing assets acquired by the parent bank 
through foreclosure or otherwise in good faith to compromise a doubtful 
claim, or in the ordinary course of collecting a debt previously 
contracted, by filing a written notice in accordance with this paragraph 
(h)(1). The activities of the enterprise must be conducted pursuant to 
the same terms and conditions as would be applicable if the activity 
were conducted directly by a national bank. The bank must file the 
written notice with the appropriate OCC licensing office no later than 
10 days after making the non-controlling investment. This notice must 
include a complete description of the bank's investment in the 
enterprise and the activities conducted, a description of how the bank 
plans to divest the non-controlling investment or the underlying assets 
within applicable statutory time frames, and a representation and 
undertaking that the bank will conduct the activities in accordance with 
OCC policies contained in guidance issued by the OCC regarding the 
activities. Any national bank receiving approval under this paragraph 
(h)(1) is deemed to have agreed that the enterprise will conduct the 
activity in a manner consistent with published OCC guidance.
    (2) No notice or application required. A national bank is not 
required to file a notice or application under this Sec.  5.36 if it 
acquires a non-controlling investment in shares of a company through 
foreclosure or otherwise in good faith to compromise a doubtful claim, 
or in the ordinary course of collecting a debt previously contracted.
    (i) Non-controlling investments by Federal branches. A Federal 
branch that is well capitalized and well managed may make a non-
controlling investment in accordance with paragraph (e) of this section 
in the same manner and subject to the same conditions and requirements 
as a national bank, and subject to any additional requirements that may 
apply under 12 CFR 28.10(c).
    (j) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.9, 5.10, and 5.11 apply.

[61 FR 60363, Nov. 27, 1996, as amended at 65 FR 12913, Mar. 10, 2000; 
65 FR 41560, July 6, 2000; 68 FR 70698, Dec. 19, 2003; 73 FR 22239, Apr. 
24, 2008; 79 FR 11310, Feb. 28, 2014; 80 FR 28449, May 18, 2015; 85 FR 
80458, Dec. 11, 2020]



Sec.  5.37  Investment in national bank or Federal savings 
association premises.

    (a) Authority. 12 U.S.C. 29, 93a, 371d, 1464(c)(2), 1464(c)(4)(B), 
1828(m), and 5412(b)(2)(B).
    (b) Scope. This section addresses a national bank's or Federal 
savings association's investment in banking premises and other premises-
related investments, loans, or indebtedness. This section also sets 
forth the quantitative investment limitations and procedures governing 
the OCC's review and approval of an application by a national bank or 
Federal savings association to invest in these premises.
    (c) Definitions. The following definitions apply for purposes of 
this section.
    (1) Banking premises includes:
    (i) Premises that are owned and occupied (or to be occupied, if 
under construction) by a national bank or Federal savings association, 
its respective branches, or its consolidated subsidiaries;
    (ii) Capitalized leases and leasehold improvements, vaults, and 
fixed machinery and equipment;
    (iii) Remodeling costs to existing premises;
    (iv) Real estate acquired and intended, in good faith, for use in 
future expansion; or
    (v) Parking facilities that are used by customers or employees of 
the national bank or Federal savings association.
    (2) Capital stock means, for national banks and Federal stock 
savings associations, the amount of common stock outstanding and 
unimpaired plus the amount of perpetual preferred stock

[[Page 343]]

outstanding and unimpaired. With respect to Federal mutual savings 
associations, ``capital stock'' should be read to mean the amount of the 
association's retained earnings.
    (d) Procedure--(1) Premises application--(i) When required. A 
national bank or Federal savings association must submit an application 
to the appropriate OCC supervisory office to invest in banking premises, 
or in the stock, bonds, debentures, or other such obligations of any 
corporation, partnership, or similar entity (e.g., a limited liability 
company) holding the premises of the national bank or Federal savings 
association, or to make loans to or upon the security of the stock of 
such corporation, if the aggregate of all such investments and loans, 
together with the indebtedness incurred by any such corporation that is 
an affiliate of the national bank or Federal savings association, as 
defined in 12 U.S.C. 221a or 12 U.S.C. 1462, respectively, will exceed 
the amount of the capital stock of the national bank or Federal savings 
association, or, in the case of a Federal mutual savings association the 
amount of retained earnings.
    (ii) Contents of premises application. The application must include:
    (A) A description of the national bank's or Federal savings 
association's present investment in banking premises;
    (B) The investment in banking premises that the national bank or 
Federal savings association intends to make, and the business reason for 
making the investment; and
    (C) The amount by which the national bank's or Federal savings 
association's aggregate investment will exceed the amount of the 
national bank's or Federal stock savings association's capital stock, 
or, in the case of a Federal mutual savings association, the amount of 
retained earnings.
    (2) Approval of premises application. An application from a national 
bank or Federal savings association to invest in banking premises or in 
certain banking premises-related investments, loans or indebtedness, as 
described in paragraph (d)(1)(i) of this section, is deemed approved as 
of the 30th day after the filing is received by the OCC, unless the OCC 
notifies the national bank or Federal savings association prior to that 
date that the filing presents a significant supervisory or compliance 
concern, or raises a significant legal or policy issue. An approval for 
a specified amount under this section remains valid up to that amount 
until the OCC notifies the national bank or Federal savings association 
otherwise.
    (3) Premises notice process--(i) General rule. Notwithstanding 
paragraph (d)(1)(i) of this section, a national bank or Federal savings 
association that is rated 1 or 2 under the Uniform Financial 
Institutions Rating System (CAMELS) may make an aggregate investment in 
banking premises up to 150 percent of the national bank's or Federal 
savings association's capital and surplus without the OCC's prior 
approval, provided that the national bank or Federal savings association 
is well capitalized and will continue to be well capitalized after the 
investment or loan is made. However, the national bank or Federal 
savings association must notify the appropriate OCC supervisory office 
in writing of the investment within 30 days after the investment or loan 
is made. The written notice must include a description of the national 
bank's or Federal savings association's investment or loan.
    (ii) Exception. If a Federal savings association that would 
otherwise be eligible for the premises notice process described in 
paragraph (d)(3)(i) of this section proposes to establish or acquire a 
subsidiary to make an investment in banking premises, or if investing in 
banking premises would be a new activity for such a subsidiary, the 
Federal savings association would not be eligible for the premises 
notice process and would be required to comply with the provisions of 
Sec.  5.59 in the case of a service corporation, or Sec.  5.38 in the 
case of an operating subsidiary.
    (4) Service corporation. A Federal savings association that invests 
in banking premises through a service corporation is not subject to the 
premises application and premises notice requirements of paragraph (d) 
of this section; however, it must include this investment when 
calculating the quantitative limitations in paragraph (d) of

[[Page 344]]

this section, and must comply with Sec.  5.59.
    (5) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that any or all 
parts of Sec. Sec.  5.8, 5.9, 5.10, and 5.11 apply.

[80 FR 28449, May 18, 2015, as amended at 84 FR 4240, Feb. 14, 2019; 84 
FR 61794, Nov. 13, 2019; 84 FR 69297, Dec. 18, 2019; 85 FR 80459, Dec. 
11, 2020]



Sec.  5.38  Operating subsidiaries of a Federal savings association.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, 1465, 1828, and 
5412(b)(2)(B).
    (b) Licensing requirements. When required by section 18(m) of the 
Federal Deposit Insurance Act (12 U.S.C. 1828(m)), a Federal savings 
association must file an application as prescribed in this section to 
acquire or establish an operating subsidiary, or to commence a new 
activity in an existing operating subsidiary.
    (c) Scope. This section sets forth authorized activities and 
application procedures for Federal savings associations engaging in 
activities through an operating subsidiary. The OCC may, at any time, 
limit a Federal savings association's investment in an operating 
subsidiary or may limit or refuse to permit any activities in an 
operating subsidiary for supervisory, legal, or safety and soundness 
reasons.
    (d) [Reserved]
    (e) Standards and requirements--(1) Authorized activities. (i) A 
Federal savings association may conduct in an operating subsidiary 
activities that are permissible for a Federal savings association to 
engage in directly.
    (ii) In addition to OCC authorization, before it begins business an 
operating subsidiary also must comply with other laws applicable to it 
and its proposed business, including applicable licensing or 
registration requirements, if any, such as registration requirements 
under securities laws.
    (2) Qualifying subsidiaries. (i) An operating subsidiary in which a 
Federal savings association may invest includes a corporation, limited 
liability company, limited partnership, or similar entity if:
    (A) The savings association has the ability to control the 
management and operations of the subsidiary, and no other person or 
entity has the ability to exercise effective control or influence over 
the management or operations of the subsidiary to an extent equal to or 
greater than that of the savings association or an operating subsidiary 
thereof;
    (B) The parent savings association owns and controls more than 50 
percent of the voting (or similar type of controlling) interest of the 
operating subsidiary, or the parent savings association otherwise 
controls the operating subsidiary and no other party controls a 
percentage of the voting (or similar type of controlling) interest of 
the operating subsidiary greater than the savings association's 
interest; and
    (C) The operating subsidiary is consolidated with the savings 
association under GAAP.
    (ii) Subject to the requirements in this section, a Federal savings 
association may hold another insured depository institution as an 
operating subsidiary.
    (iii) However, the following entities are not operating subsidiaries 
subject to this section:
    (A) A subsidiary in which the savings association's investment is 
made pursuant to specific authorization in a statute or OCC regulation 
(e.g., a service corporation under 12 U.S.C. 1464(c)(4) or a bank 
service company under 12 U.S.C. 1861 et seq.);
    (B) A subsidiary in which the savings association has acquired, in 
good faith, shares through foreclosure on collateral, by way of 
compromise of a doubtful claim, or to avoid a loss in connection with a 
debt previously contracted; and
    (C) A trust formed for purpose of securitizing assets held by the 
savings association as part of its business.
    (iv) Notwithstanding the requirements of paragraph (e)(2)(i) of this 
section:
    (A) A Federal savings association must have reasonable policies and 
procedures to preserve the limited liability of the savings association 
and its operating subsidiaries; and

[[Page 345]]

    (B) OCC regulations may not be construed as requiring a Federal 
savings association and its operating subsidiaries to operate as a 
single entity.
    (3) Examination and supervision. An operating subsidiary conducts 
activities authorized under this section pursuant to the same 
authorization, terms and conditions that apply to the conduct of such 
activities by its parent Federal savings association, unless otherwise 
specifically provided by statute, regulation, or published OCC policy, 
including sections 1045 and 1046 of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (12 U.S.C. 25b and 1465) with respect to the 
application of State law. If the OCC determines that the operating 
subsidiary is operating in violation of law, regulation, or written 
condition, or in an unsafe or unsound manner or otherwise threatens the 
safety or soundness of the savings association, the OCC will direct the 
savings association or operating subsidiary to take appropriate remedial 
action, which may include requiring the savings association to divest or 
liquidate the operating subsidiary, or discontinue specified activities. 
OCC authority under this paragraph is subject to the limitations and 
requirements of section 45 of the Federal Deposit Insurance Act (12 
U.S.C. 1831v) and section 115 of the Gramm-Leach-Bliley Act (12 U.S.C. 
1820a).
    (4) Consolidation of figures. (i) Except as provided in paragraph 
(e)(4)(ii) of this section, pertinent book figures of the parent Federal 
savings association and its operating subsidiary must be combined for 
the purpose of applying statutory or regulatory limitations when 
combination is needed to effect the intent of the statute or regulation, 
e.g., for purposes of 12 U.S.C. 1464(c) and 1464(u).
    (ii) Consolidation for purposes of calculating portfolio assets and 
qualified thrift investments is subject to 12 U.S.C. 1467a(m)(5).
    (f) Procedures--(1) Application required. (i) A Federal savings 
association must first submit an application to, and receive prior 
approval from, the OCC to establish or acquire an operating subsidiary, 
or to perform a new activity in an existing operating subsidiary.
    (ii) The application must explain, as appropriate, how the savings 
association ``controls'' the enterprise, describing in full detail 
structural arrangements where control is based on factors other than 
savings association ownership of more than 50 percent of the voting 
interest of the subsidiary and the ability to control the management and 
operations of the subsidiary by holding voting interests sufficient to 
select the number of directors needed to control the subsidiary's board 
and to select and terminate senior management. In the case of a limited 
partnership or limited liability company that does not qualify for the 
expedited review procedure set forth in paragraph (f)(2) of this 
section, the savings association must provide a statement explaining why 
it is not eligible. The application also must include a complete 
description of the savings association's investment in the subsidiary, 
the proposed activities of the subsidiary, the organizational structure 
and management of the subsidiary, the relations between the savings 
association and the subsidiary, and other information necessary to 
adequately describe the proposal. To the extent that the application 
relates to the initial affiliation of the savings association with a 
company engaged in insurance activities, the savings association must 
describe the type of insurance activity in which the company is engaged 
and has present plans to conduct. The savings association must also list 
for each State the lines of business for which the company holds, or 
will hold, an insurance license, indicating the State where the company 
holds a resident license or charter, as applicable. The application must 
state whether the operating subsidiary will conduct any activity at a 
location other than the home office or a previously approved branch of 
the savings association. The OCC may require a filer to submit a legal 
analysis if the proposal is novel, unusually complex, or raises 
substantial unresolved legal issues. In these cases, the OCC encourages 
filers to have a prefiling meeting with the OCC. Any savings association 
receiving approval under this paragraph is deemed to have agreed that

[[Page 346]]

the subsidiary will conduct the activity in a manner consistent with 
published OCC guidance.
    (2) Expedited review. (i) An application to establish or acquire an 
operating subsidiary, or to perform a new activity in an existing 
operating subsidiary, that meets the requirements of this paragraph is 
deemed approved by the OCC as of the 30th day after the filing is 
received by the OCC, unless the OCC notifies the filer prior to that 
date that the filing has been removed from expedited review, or the 
expedited review process is extended under Sec.  5.13(a)(2). Any savings 
association receiving approval under this paragraph is deemed to have 
agreed that the subsidiary will conduct the activity in a manner 
consistent with published OCC guidance.
    (ii) An application is eligible for expedited review if all of the 
following requirements are met:
    (A) The savings association is well capitalized and well managed;
    (B) The activity is listed in paragraph (f)(5) this section or is 
substantively the same as a previously approved activity and the 
activity will be conducted in accordance with the same terms and 
conditions applicable to the previously approved activity;
    (C) The entity is a corporation, limited liability company, limited 
partnership or trust; and
    (D) The savings association or an operating subsidiary thereof:
    (1) Has the ability to control the management and operations of the 
subsidiary and no other person or entity has the ability to exercise 
effective control or influence over the management or operations of the 
subsidiary to an extent equal to or greater than that of the savings 
association or an operating subsidiary thereof. The ability to control 
the management and operations means:
    (i) In the case of a subsidiary that is a corporation, the savings 
association or an operating subsidiary thereof holds voting interests 
sufficient to select the number of directors needed to control the 
subsidiary's board and to select and terminate senior management;
    (ii) In the case of a subsidiary that is a limited partnership, the 
savings association or an operating subsidiary thereof has the ability 
to control the management and operations of the subsidiary by 
controlling the selection and termination of senior management;
    (iii) In the case of a subsidiary that is a limited liability 
company, the savings association or an operating subsidiary thereof has 
the ability to control the management and operations of the subsidiary 
by controlling the selection and termination of senior management; or
    (iv) In the case of a subsidiary that is a trust, the savings 
association or an operating subsidiary thereof has the ability to 
replace the trustee at will;
    (2) Holds more than 50 percent of the voting, or equivalent, 
interests in the subsidiary, and:
    (i) In the case of a subsidiary that is a limited partnership, the 
savings association or an operating subsidiary thereof is the sole 
general partner of the limited partnership, provided that under the 
partnership agreement, limited partners have no authority to bind the 
partnership by virtue solely of their status as limited partners;
    (ii) In the case of a subsidiary that is a limited liability 
company, the savings association or an operating subsidiary thereof is 
the sole managing member of the limited liability company, provided that 
under the limited liability company agreement, other limited liability 
company members have no authority to bind the limited liability company 
by virtue solely of their status as members; or
    (iii) In the case of a subsidiary that is a trust, the savings 
association or an operating subsidiary thereof is the sole beneficial 
owner of the trust; and
    (3) Is required to consolidate its financial statements with those 
of the subsidiary under GAAP. A filer proposing to qualify for expedited 
review must include in the application all necessary information showing 
the application meets the requirements.
    (3) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply.

[[Page 347]]

    (4) OCC review and approval. The OCC reviews a Federal savings 
association's application to determine whether the proposed activities 
are legally permissible under Federal savings association law and to 
ensure that the proposal is consistent with safe and sound banking 
practices and OCC policy and does not endanger the safety or soundness 
of the parent Federal savings association. As part of this process, the 
OCC may request additional information and analysis from the filer.
    (5) Activities eligible for expedited review. The following 
activities qualify for the expedited review procedures in paragraph 
(f)(2) of this section, provided the activity is conducted pursuant to 
the same terms and conditions as would be applicable if the activity 
were conducted directly by a Federal savings association:
    (i) Holding and managing assets acquired by the parent savings 
association or its operating subsidiaries, including investment assets 
and property acquired by the savings association through foreclosure or 
otherwise in good faith to compromise a doubtful claim, or in the 
ordinary course of collecting a debt previously contracted;
    (ii) Providing services to or for the savings association or its 
affiliates, including accounting, auditing, appraising, advertising and 
public relations, and financial advice and consulting;
    (iii) Making loans or other extensions of credit, and selling money 
orders and travelers checks;
    (iv) Purchasing, selling, servicing, or warehousing loans or other 
extensions of credit, or interests therein;
    (v) Providing management consulting, operational advice, and 
services for other financial institutions;
    (vi) Providing check payment services;
    (vii) Acting as investment adviser (including an adviser with 
investment discretion) or financial adviser or counselor to governmental 
entities or instrumentalities, businesses, or individuals, including 
advising registered investment companies and mortgage or real estate 
investment trusts;
    (viii) Providing financial and transactional advice and assistance, 
including advice and assistance for customers in structuring, arranging, 
and executing mergers and acquisitions, divestitures, joint ventures, 
leveraged buyouts, swaps, foreign exchange, derivative transactions, 
coin and bullion, and capital restructurings;
    (ix) Underwriting and reinsuring credit life and disability 
insurance;
    (x) Leasing of personal property;
    (xi) Providing securities brokerage;
    (xii) Underwriting and dealing, including making a market, in 
savings association permissible securities and purchasing and selling as 
principal, asset backed obligations;
    (xiii) Acting as an insurance agent or broker for credit life, 
disability, and unemployment insurance; single property interest 
insurance; and title insurance;
    (xiv) Offering correspondent services to the extent permitted by 
published OCC precedent for Federal savings associations;
    (xv) Acting as agent or broker in the sale of fixed annuities;
    (xvi) Offering debt cancellation or debt suspension agreements;
    (xvii) Providing escrow services;
    (xviii) Acting as a transfer agent; and
    (xix) Providing or selling postage stamps.
    (6) Redesignation. A Federal savings association that proposes to 
redesignate a service corporation as an operating subsidiary must submit 
a notification to the OCC at least 30 days prior to the redesignation 
date. The notification must include a description of how the 
redesignated service corporation meets all of the requirements of this 
section to be an operating subsidiary, a resolution of the savings 
association's board of directors approving the redesignation, and the 
proposed effective date of the redesignation. The savings association 
may effect the redesignation on the proposed date unless the OCC 
notifies the savings association otherwise prior to that date. The OCC 
may require an application if the redesignation presents policy, 
supervisory, or legal issues.
    (7) Fiduciary powers. (i) If an operating subsidiary proposes to 
accept fiduciary appointments for which fiduciary powers are required, 
such as acting as trustee or executor, then the Federal savings 
association must have fiduciary powers under section 5(n) of

[[Page 348]]

the Home Owners' Loan Act, 12 U.S.C. 1464(n), and the subsidiary also 
must have its own fiduciary powers under the law applicable to the 
subsidiary.
    (ii) Unless the subsidiary is a registered investment adviser, if an 
operating subsidiary proposes to exercise investment discretion on 
behalf of customers or provide investment advice for a fee, the Federal 
savings association must have prior OCC approval to exercise fiduciary 
powers pursuant to Sec.  5.26 (or a predecessor provision) and 12 CFR 
part 150.
    (8) Expiration of approval. Approval expires if the Federal savings 
association has not established or acquired the operating subsidiary, or 
commenced the new activity in an existing operating subsidiary within 12 
months after the date of the approval, unless the OCC shortens or 
extends the time period.
    (g) Grandfathered operating subsidiaries. Notwithstanding the 
requirements for a qualifying operating subsidiary in paragraph (e)(2) 
of this section and unless otherwise notified by the OCC with respect to 
a particular operating subsidiary, an entity that a Federal savings 
association lawfully acquired or established as an operating subsidiary 
before May 18, 2015, may continue to operate as a Federal savings 
association operating subsidiary under this section, provided that the 
savings association and the operating subsidiary were, and continue to 
be, conducting authorized activities in compliance with the standards 
and requirements applicable when the savings association established or 
acquired the operating subsidiary.
    (h) Issuances of securities by operating subsidiaries. An operating 
subsidiary may not state or imply that the securities it issues are 
covered by Federal deposit insurance. An operating subsidiary may not 
issue any security the payment, maturity, or redemption of which may be 
accelerated upon the condition that the controlling Federal savings 
association is insolvent or has been placed into receivership. For as 
long as any securities are outstanding, the controlling Federal savings 
association must maintain all records generated through each securities 
issuance in the ordinary course of business, including but not limited 
to a copy of the prospectus, offering circular, or similar document 
concerning such issuance, and make such records available for 
examination by the OCC.

[80 FR 28450, May 18, 2015, as amended at 85 FR 80459, Dec. 11, 2020]



Sec.  5.39  Financial subsidiaries of a national bank.

    (a) Authority. 12 U.S.C. 24a and 93a.
    (b) Approval requirements. A national bank must file an application 
as prescribed in this section prior to acquiring a financial subsidiary 
or engaging in activities authorized pursuant to section 
5136A(a)(2)(A)(i) of the Revised Statutes (12 U.S.C. 24a(a)(2)(A)(i)) 
through a financial subsidiary. When a financial subsidiary proposes to 
conduct a new activity permitted under Sec.  5.34, the bank must follow 
the procedures in Sec.  5.34(f) instead of paragraph (i) of this 
section.
    (c) Scope. This section sets forth authorized activities, approval 
procedures, and, where applicable, conditions for national banks 
engaging in activities through a financial subsidiary.
    (d) Definitions. For purposes of this Sec.  5.39:
    (1) Affiliate has the meaning set forth in section 2 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841), except that the term 
``affiliate'' for purposes of paragraph (h)(5) of this section has the 
meaning set forth in sections 23A or 23B of the Federal Reserve Act (12 
U.S.C. 371c and 371c-1), as implemented by Regulation W, 12 CFR part 
223, as applicable.
    (2) Company has the meaning set forth in section 2 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841), and includes a limited 
liability company (LLC).
    (3) Control has the meaning set forth in section 2 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841).
    (4) Eligible debt means unsecured long-term debt that is:
    (i) Not supported by any form of credit enhancement, including a 
guaranty or standby letter of credit; and
    (ii) Not held in whole or in any significant part by any affiliate, 
officer, director, principal shareholder, or employee of the bank or any 
other person

[[Page 349]]

acting on behalf of or with funds from the bank or an affiliate of the 
bank.
    (5) Financial subsidiary means any company that is controlled by one 
or more insured depository institutions, other than a subsidiary that:
    (i) Engages solely in activities that national banks may engage in 
directly and that are conducted subject to the same terms and conditions 
that govern the conduct of these activities by national banks; or
    (ii) A national bank is specifically authorized to control by the 
express terms of a Federal statute (other than section 5136A of the 
Revised Statutes), and not by implication or interpretation, such as by 
section 25 of the Federal Reserve Act (12 U.S.C. 601-604a), section 25A 
of the Federal Reserve Act (12 U.S.C. 611-631), or the Bank Service 
Company Act (12 U.S.C. 1861 et seq.)
    (6) Insured depository institution has the meaning set forth in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
    (7) Long term debt means any debt obligation with an initial 
maturity of 360 days or more.
    (8) Subsidiary has the meaning set forth in section 2 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841).
    (9) Tangible equity has the meaning set forth in 12 CFR 6.2.
    (e) Authorized activities. A financial subsidiary may engage only in 
the following activities:
    (1) Activities that are financial in nature and activities 
incidental to a financial activity, authorized pursuant to 
5136A(a)(2)(A)(i) of the Revised Statutes (12 U.S.C. 24a(a)(2)(A)(i)) 
(to the extent not otherwise permitted under paragraph (e)(2) of this 
section), including:
    (i) Lending, exchanging, transferring, investing for others, or 
safeguarding money or securities;
    (ii) Engaging as agent or broker in any State for purposes of 
insuring, guaranteeing, or indemnifying against loss, harm, damage, 
illness, disability, death, defects in title, or providing annuities as 
agent or broker;
    (iii) Providing financial, investment, or economic advisory 
services, including advising an investment company as defined in section 
3 of the Investment Company Act (15 U.S.C. 80a-3);
    (iv) Issuing or selling instruments representing interests in pools 
of assets permissible for a bank to hold directly;
    (v) Underwriting, dealing in, or making a market in securities;
    (vi) Engaging in any activity that the Board of Governors of the 
Federal Reserve System has determined, by order or regulation in effect 
on November 12, 1999, to be so closely related to banking or managing or 
controlling banks as to be a proper incident thereto (subject to the 
same terms and conditions contained in the order or regulation, unless 
the order or regulation is modified by the Board of Governors of the 
Federal Reserve System);
    (vii) Engaging, in the United States, in any activity that a bank 
holding company may engage in outside the United States and the Board of 
Governors of the Federal Reserve System has determined, under 
regulations prescribed or interpretations issued pursuant to section 
4(c)(13) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(c)(13)) 
as in effect on November 11, 1999, to be usual in connection with the 
transaction of banking or other financial operations abroad; and
    (viii) Activities that the Secretary of the Treasury in consultation 
with the Board of Governors of the Federal Reserve System, as provided 
in section 5136A of the Revised Statutes, determines to be financial in 
nature or incidental to a financial activity; and
    (2) Activities that may be conducted by an operating subsidiary 
pursuant to Sec.  5.34.
    (f) Impermissible activities. A financial subsidiary may not engage 
as principal in the following activities:
    (1) Insuring, guaranteeing, or indemnifying against loss, harm, 
damage, illness, disability or death, or defects in title (except to the 
extent permitted under sections 302 or 303(c) of the Gramm-Leach-Bliley 
Act, (15 U.S.C. 6712 or 15 U.S.C. 6713)) or providing or issuing 
annuities the income of which is subject to tax treatment under section 
72 of the Internal Revenue Code (26 U.S.C. 72);
    (2) Real estate development or real estate investment, unless 
otherwise expressly authorized by law; and
    (3) Activities authorized for bank holding companies by section 
4(k)(4)(H)

[[Page 350]]

or (I) of the Bank Holding Company Act (12 U.S.C. 1843(k)(4)(H) or (I)), 
except activities authorized under section 4(k)(4)(H) that may be 
permitted in accordance with section 122 of the Gramm-Leach-Bliley Act 
(12 U.S.C. 1843 note).
    (g) Qualifications. A national bank may, directly or indirectly, 
control a financial subsidiary or hold an interest in a financial 
subsidiary only if:
    (1) The national bank and each depository institution affiliate of 
the national bank are well capitalized and well managed;
    (2) The aggregate consolidated total assets of all financial 
subsidiaries of the national bank do not exceed the lesser of 45 percent 
of the consolidated total assets of the parent bank or $50 billion (or 
such greater amount as is determined according to an indexing mechanism 
jointly established by regulation by the Secretary of the Treasury and 
the Board of Governors of the Federal Reserve System); and
    (3) If the national bank is one of the 100 largest insured banks, 
determined on the basis of the bank's consolidated total assets at the 
end of the calendar year, the bank has not fewer than one issue of 
outstanding debt that meets such standards of creditworthiness or other 
criteria as the Secretary of the Treasury and the Federal Reserve Board 
may jointly establish pursuant to Section 5136A of title LXII of the 
Revised Statutes (12 U.S.C. 24a).
    (4) Paragraph (g)(3) of this section does not apply if the financial 
subsidiary is engaged solely in activities in an agency capacity.
    (h) Safeguards. The following safeguards apply to a national bank 
that establishes or maintains a financial subsidiary:
    (1) For purposes of determining regulatory capital the national bank 
may not consolidate the assets and liabilities of a financial subsidiary 
with those of the bank and must deduct the aggregate amount of its 
outstanding equity investment, including retained earnings, in its 
financial subsidiaries from regulatory capital as provided by Sec.  
3.22(a)(7) of this chapter;
    (2) Any published financial statement of the national bank must, in 
addition to providing information prepared in accordance withGAAP, 
separately present financial information for the bank in the manner 
provided in paragraph (h)(1) of this section;
    (3) The national bank must have reasonable policies and procedures 
to preserve the separate corporate identity and limited liability of the 
bank and the financial subsidiaries of the bank;
    (4) The national bank must have procedures for identifying and 
managing financial and operational risks within the bank and the 
financial subsidiary that adequately protect the national bank from such 
risks;
    (5) Except for a subsidiary of a bank that is considered a financial 
subsidiary under paragraph (d)(5) of this section solely because the 
subsidiary engages in the sale of insurance as agent or broker in a 
manner that is not permitted for national banks, sections 23A and 23B of 
the Federal Reserve Act (12 U.S.C. 371c and 371c-1), as implemented by 
Regulation W, 12 CFR part 223, apply to transactions involving a 
financial subsidiary in the following manner:
    (i) A financial subsidiary is deemed to be an affiliate of the bank 
and is not deemed to be a subsidiary of the bank;
    (ii) [Reserved]
    (iii) A bank's purchase of or investment in a security issued by a 
financial subsidiary of the bank must be valued at the greater of:
    (A) The total amount of consideration given (including liabilities 
assumed) by the bank, reduced to reflect amortization of the security to 
the extent consistent with GAAP, or
    (B) The carrying value of the security (adjusted so as not to 
reflect the bank's pro rata portion of any earnings retained or losses 
incurred by the financial subsidiary after the bank's acquisition of the 
security).
    (iv) Any purchase of, or investment in, the securities of a 
financial subsidiary of a bank by an affiliate of the bank will be 
considered to be a purchase of or investment in such securities by the 
bank;
    (v) Any extension of credit to a financial subsidiary of a bank by 
an affiliate of the bank is treated as an extension of credit by the 
bank to the financial subsidiary if the extension of credit is

[[Page 351]]

treated as capital of the financial subsidiary under any Federal or 
State law, regulation, or interpretation applicable to the subsidiary; 
and
    (vi) Any other extension of credit by an affiliate of a bank to a 
financial subsidiary of the bank may be considered an extension of 
credit by the bank to the financial subsidiary if the Board of Governors 
of the Federal Reserve System determines that such treatment is 
necessary or appropriate to prevent evasions of the Federal Reserve Act 
and the Gramm-Leach-Bliley Act.
    (6) A financial subsidiary is deemed a subsidiary of a bank holding 
company and not a subsidiary of the bank for purposes of the anti-tying 
prohibitions set forth in 12 U.S.C. 1971 et seq.
    (i) Procedures to engage in activities through a financial 
subsidiary. A national bank that intends, directly or indirectly, to 
acquire control of, or hold an interest in, a financial subsidiary, or 
to commence a new activity in an existing financial subsidiary, must 
obtain OCC approval through the procedures set forth in paragraph (i)(1) 
or (i)(2) of this section.
    (1) Certification with subsequent application. (i) At any time, a 
national bank may file a ``Financial Subsidiary Certification'' with the 
appropriate OCC licensing office listing the bank's depository 
institution affiliates and certifying that the bank and each of those 
affiliates is well capitalized and well managed.
    (ii) Thereafter, at such time as the bank seeks OCC approval to 
acquire control of, or hold an interest in, a new financial subsidiary, 
or commence a new activity authorized under section 5136A(a)(2)(A)(i) of 
the Revised Statutes (12 U.S.C. 24a(a)(2)(A)(i)) in an existing 
subsidiary, the bank may file an application with the appropriate OCC 
licensing office at the time of acquiring control of, or holding an 
interest in, a financial subsidiary, or commencing such activity in an 
existing subsidiary. The application must be labeled ``Financial 
Subsidiary Application'' and must:
    (A) State that the bank's Certification remains valid;
    (B) Describe the activity or activities conducted by the financial 
subsidiary. To the extent the application relates to the initial 
affiliation of the bank with a company engaged in insurance activities, 
the bank should describe the type of insurance activity that the company 
is engaged in and has present plans to conduct. The bank must also list 
for each State the lines of business for which the company holds, or 
will hold, an insurance license, indicating the State where the company 
holds a resident license or charter, as applicable;
    (C) Cite the specific authority permitting the activity to be 
conducted by the financial subsidiary. (Where the authority relied on is 
an agency order or interpretation under section 4(c)(8) or 4(c)(13), 
respectively, of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8) or (c)(13)), a copy of the order or interpretation should be 
attached);
    (D) Certify that the bank will be well capitalized after making 
adjustments required by paragraph (h)(1) of this section;
    (E) Demonstrate the aggregate consolidated total assets of all 
financial subsidiaries of the national bank do not exceed the lesser of 
45 percent of the bank's consolidated total assets or $50 billion (or 
the increased level established by the indexing mechanism); and
    (F) If applicable, certify that the bank meets the eligible debt 
requirement in paragraph (g)(3) of this section.
    (2) Combined certification and application. A national bank may file 
a combined certification and application with the appropriate OCC 
licensing office at least five business days prior to acquiring control 
of, or holding an interest in, a financial subsidiary, or commencing a 
new activity authorized pursuant to section 5136A(a)(2)(A)(i) of the 
Revised Statutes (12 U.S.C. 24a(a)(2)(A)(i)) in an existing subsidiary. 
The written application must be labeled ``Financial Subsidiary 
Certification and Application'' and must:
    (i) List the bank's depository institution affiliates and certify 
that the bank and each depository institution affiliate of the bank is 
well capitalized and well managed;
    (ii) Describe the activity or activities to be conducted in the 
financial subsidiary. To the extent the application relates to the 
initial affiliation of the

[[Page 352]]

bank with a company engaged in insurance activities, the bank should 
describe the type of insurance activity that the company is engaged in 
and has present plans to conduct. The bank must also list for each State 
the lines of business for which the company holds, or will hold, an 
insurance license, indicating the State where the company holds a 
resident license or charter, as applicable;
    (iii) Cite the specific authority permitting the activity to be 
conducted by the financial subsidiary. (Where the authority relied on is 
an agency order or interpretation under section 4(c)(8) or 4(c)(13), 
respectively, of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8) or (c)(13)), a copy of the order or interpretation should be 
attached);
    (iv) Certify that the bank will remain well capitalized after making 
the adjustments required by paragraph (h)(1) of this section;
    (v) Demonstrate the aggregate consolidated total assets of all 
financial subsidiaries of the national bank do not exceed the lesser of 
45% of the bank's consolidated total assets or $50 billion (or the 
increased level established by the indexing mechanism); and
    (vi) If applicable, certify that the bank meets the eligible debt 
requirement in paragraph (g)(3) of this section.
    (3) Approval. An application is deemed approved upon filing the 
information required by paragraphs (i)(1) or (i)(2) of this section 
within the time frames provided therein.
    (4) Exceptions to rules of general applicability. Sections 5.8, 
5.10, 5.11, and 5.13 do not apply to activities authorized under this 
section.
    (5) Community Reinvestment Act (CRA). A national bank may not apply 
under this paragraph (i) to commence a new activity authorized under 
section 5136A(a)(2)(A)(i) of the Revised Statutes (12 U.S.C. 
24a(a)(2)(A)(i)), or directly or indirectly acquire control of a company 
engaged in any such activity, if the bank or any of its insured 
depository institution affiliates received a CRA rating of less than 
``satisfactory record of meeting community credit needs'' on its most 
recent CRA examination prior to when the bank would file an application 
under this section.
    (j) Failure to continue to meet certain qualification requirements--
(1) Qualifications and safeguards. A national bank, or, as applicable, 
its affiliated depository institutions, must continue to satisfy the 
qualification requirements set forth in paragraphs (g)(1) and (2) of 
this section and the safeguards in paragraphs (h)(1), (2), (3) and (4) 
of this section following its acquisition of control of, or an interest 
in, a financial subsidiary. A national bank that fails to continue to 
satisfy these requirements will be subject to the following procedures 
and requirements:
    (i) The OCC will give notice to the national bank and, in the case 
of an affiliated depository institution to that depository institution's 
appropriate Federal banking agency, promptly upon determining that the 
national bank, or, as applicable, its affiliated depository institution, 
does not continue to meet the requirements in paragraph (g)(1) or (2) of 
this section or the safeguards in paragraph (h)(1), (2), (3), or (4) of 
this section. The bank is deemed to have received such notice three 
business days after mailing of the letter by the OCC;
    (ii) Not later than 45 days after receipt of the notice under 
paragraph (j)(1)(i) of this section, or any additional time as the OCC 
may permit, the national bank must execute an agreement with the OCC to 
comply with the requirements in paragraphs (g)(1) and (2) and (h)(1), 
(2), (3), and (4) of this section;
    (iii) The OCC may impose limitations on the conduct or activities of 
the national bank or any subsidiary of the national bank as the OCC 
determines appropriate under the circumstances and consistent with the 
purposes of section 5136A of the Revised Statutes; and
    (iv) The OCC may require a national bank to divest control of a 
financial subsidiary if the national bank does not correct the 
conditions giving rise to the notice within 180 days after receipt of 
the notice provided under paragraph (j)(1)(i) of this section.
    (2) Eligible debt requirement. A national bank that does not 
continue to meet the qualification requirement set forth in paragraph 
(g)(3) of this section, applicable where the bank's financial

[[Page 353]]

subsidiary is engaged in activities other than solely in an agency 
capacity, may not directly or through a subsidiary, purchase or acquire 
any additional equity capital of any such financial subsidiary until the 
bank meets the requirement in paragraph (g)(3) of this section. For 
purposes of this paragraph (j)(2), the term ``equity capital'' includes, 
in addition to any equity investment, any debt instrument issued by the 
financial subsidiary if the instrument qualifies as capital of the 
subsidiary under Federal or State law, regulation, or interpretation 
applicable to the subsidiary.
    (k) Examination and supervision. A financial subsidiary is subject 
to examination and supervision by the OCC, subject to the limitations 
and requirements of section 45 of the Federal Deposit Insurance Act (12 
U.S.C. 1831v) and section 115 of the Gramm-Leach-Bliley Act (12 U.S.C. 
1820a).

[65 FR 12914, Mar. 10, 2000, as amended at 73 FR 22240, Apr. 24, 2008; 
77 FR 35258, June 13, 2012; 78 FR 62275, Oct. 11, 2013; 79 FR 11310, 
Feb. 28, 2014; 80 FR 28452, May 18, 2015; 85 FR 80461, Dec. 11, 2020]



          Subpart D_Other Changes in Activities and Operations



Sec.  5.40  Change in location of a main office of a national bank 
or home office of a Federal savings association.

    (a) Authority. 12 U.S.C. 30, 93a, 1462a, 1463, 1464, 1828, 2901-
2907, and 5412(b)(2)(B).
    (b) Scope. This section describes OCC procedures and approval 
standards for an application or a notice by a national bank to change 
the location of its main office or by a Federal savings association to 
change the location of its home office.\3\ A national bank or Federal 
savings association must follow the procedures described in paragraph 
(c) of this section to relocate its main office or home office, as 
applicable.
---------------------------------------------------------------------------

    \3\ A national bank's main office is the place identified in the 
bank's original organization certificate under 12 U.S.C. 22 or the 
subsequent location to which the main office has been changed under this 
Sec.  5.40, 12 U.S.C. 30(b), or other applicable law, as reflected in 
the national bank's amended articles of association. A Federal savings 
association's home office is the office identified as such in the 
savings association's original charter or the subsequent location to 
which the home office has been changed under this Sec.  5.40, or other 
applicable law, as reflected in the savings association's amended 
charter. These terms are functionally the same but are used in our 
regulations in order to be consistent with the relevant statutes that 
govern national banks and Federal savings associations, respectively.
---------------------------------------------------------------------------

    (c) Licensing requirements and procedures--(1) Main office or home 
office relocation to an authorized branch location within city, town, or 
village limits. A national bank or Federal savings association may 
change the location of its main office or home office, as applicable, to 
an authorized branch location (approved or existing branch site) within 
the limits of the same city, town, or village. The national bank or 
Federal savings association must give prior notice to the appropriate 
OCC licensing office before the relocation. The notice must include the 
new address of the main office or home office, as applicable, and the 
effective date of the relocation.
    (2) To any other location--(i) National banks. A national bank must 
submit an application to the appropriate OCC licensing office and obtain 
prior OCC approval to relocate its main office to any other location in 
the city, town, or village in which the main office of the bank is 
located other than an authorized branch location or to any other 
location within 30 miles of the limits of such city, town, or village. 
If relocating the main office outside the limits of its city, town, or 
village, a national bank must also obtain the approval of shareholders 
owning two-thirds of the voting stock of the bank and must amend its 
articles of association.
    (ii) Federal savings associations. A Federal savings association 
must submit an application to the appropriate OCC licensing office and 
obtain prior OCC approval to relocate its home office to any location 
other than an authorized branch location within the city, town, or 
village in which the home office of the savings association is located. 
If relocating the home office outside the limits of its city, town, or 
village, a Federal savings association

[[Page 354]]

must obtain any shareholder or member approval required under its 
charter for such relocation and must amend its charter.
    (3) Establishment of a branch at site of former main office or home 
office. A national bank or Federal savings association desiring to 
establish a branch at its former main office or home office location, as 
applicable, must follow the provisions of Sec.  5.30 or Sec.  5.31, 
respectively.
    (4) Expedited review. A main office or home office relocation 
application submitted by an eligible bank or eligible savings 
association under paragraph (c)(2) of this section is deemed approved by 
the OCC as of the 15th day after the close of the public comment period 
or the 45th day after the filing is received by the OCC (or in the case 
of a short-distance relocation the 30th day after the filing is received 
by the OCC), whichever is later, unless the OCC notifies the bank or 
savings association prior to that time that the filing has been removed 
from expedited review, or the expedited review period is extended, under 
Sec.  5.13(a)(2).
    (5) Exceptions to rules of general applicability. (i) Sections 5.8, 
5.9, 5.10, and 5.11 do not apply to a main office or home office 
relocation to an authorized branch location within the limits of the 
city, town, or village as described in paragraph (c)(1) of this section. 
However, if the OCC concludes that the notice under paragraph (c)(1) of 
this section presents a significant or novel policy, supervisory, or 
legal issue, the OCC may determine that any or all parts of Sec. Sec.  
5.8, 5.9, 5.10, and 5.11 apply.
    (ii) The comment period on any application filed under paragraph 
(c)(2) of this section to engage in a short-distance relocation of a 
main office or home office is 15 days.
    (d) Expiration of approval. Approval expires if the national bank or 
Federal savings association has not opened its main office or home 
office, as applicable, at the relocated site within 18 months of the 
date of approval, unless the OCC grants an extension.

[80 FR 28452, May 18, 2015, as amended at 85 FR 80462, Dec. 11, 2020]



Sec.  5.42  Corporate title of a national bank or Federal savings association.

    (a) Authority. 12 U.S.C. 21a, 30, 93a, 1462a, 1463, 1464, 1467a, 
2901 et. seq. and, 5412(b)(2)(B).
    (b) Scope. This section describes the method by which a national 
bank or Federal savings association may change its corporate title.
    (c) Standards. (1) A national bank or Federal savings association 
may change its corporate title provided that the new title complies with 
applicable laws, including 18 U.S.C. 709, regarding false advertising 
and the misuse of names to indicate a Federal agency, and any applicable 
OCC guidance.
    (2) For a national bank, the new title must include the word 
``national.''
    (d) Procedures--(1) Notice process. A national bank or Federal 
savings association must promptly notify the appropriate OCC licensing 
office if it changes its corporate title. The notice must contain the 
old and new titles and the effective date of the change.
    (2) Amendment to articles of association. A national bank whose 
corporate title is specified in its articles of association must amend 
its articles, in accordance with the procedures of 12 U.S.C. 21a, to 
change its title.
    (3) Amendment to charter. A Federal savings association must amend 
its charter in accordance with Sec.  5.21 or Sec.  5.22, as applicable, 
to change its title.
    (4) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, 5.11, and 5.13 do not apply to a national bank or Federal savings 
association's change of corporate title. However, if the OCC concludes 
that the notice presents a significant or novel policy, supervisory, or 
legal issue, the OCC may determine that any or all parts of Sec. Sec.  
5.8, 5.9, 5.10, 5.11, and 5.13 apply.

[80 FR 28453, May 18, 2015, as amended at 85 FR 80462, Dec. 11, 2020]



Sec.  5.43  National bank director residency and citizenship waivers.

    (a) Authority. 12 U.S.C. 72 and 93a.
    (b) Scope. This section describes the procedures for the OCC to 
waive the residency and citizenship requirements for national bank 
directors set forth at 12 U.S.C. 72.

[[Page 355]]

    (c) Application Procedures--(1) Residency. A national bank may 
request a waiver of the residency requirement for any number of 
directors by filing a written application with the OCC. The OCC may 
grant a waiver on an individual basis or for any number of director 
positions. The waiver is valid until the OCC revokes it in accordance 
with paragraph (d) of this section, or, if granted on an individual 
basis, until the individual no longer serves on the board.
    (2) Citizenship. A national bank may request a waiver of the 
citizenship requirements for individuals who comprise up to a minority 
of the total number of directors by filing a written application with 
the OCC. The OCC may grant a waiver on an individual basis. A 
citizenship waiver is valid until the individual no longer serves on the 
board or the OCC revokes the waiver in accordance with paragraph (d) of 
this section.
    (3) Biographical and Financial Reports. (i) Each subject of a 
citizenship waiver application must submit to the appropriate OCC 
licensing office the information prescribed in the Interagency 
Biographical and Financial Report, available at www.occ.gov.
    (ii) The OCC may require additional information about any subject of 
a citizenship waiver application, including legible fingerprints, if 
appropriate. The OCC may waive any of the information requirements of 
paragraph (c)(3)(i) if the OCC determines that doing so is in the public 
interest.
    (4) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, and 5.11 do not apply to this section.
    (d) Revocation of waiver--(1) Procedure. The OCC may revoke a 
residency or citizenship waiver. Before revocation, the OCC will provide 
written notice to the national bank and affected director(s) of its 
intention to revoke a residency or citizenship waiver and the basis for 
its intention. The bank and affected director(s) may respond in writing 
to the OCC within 10 calendar days, unless the OCC determines that a 
shorter period is appropriate in light of relevant circumstances. The 
OCC will consider the written responses of the bank and affected 
director(s), if any, prior to deciding whether or not to revoke a 
residency or citizenship waiver. The OCC will notify the national bank 
and the director of the OCC's decision to revoke a residency or 
citizenship waiver in writing.
    (2) Effective date. The OCC's decision to revoke a residency or 
citizenship waiver is effective:
    (i) If the director or national bank, or both, appeals pursuant to 
paragraph (e) of this section, upon the director's receipt of the 
decision of the Comptroller, an authorized delegate, or the appellate 
official, to uphold the initial decision to revoke the residency or 
citizenship waiver; or
    (ii) If neither the director nor national bank appeals pursuant to 
paragraph (e) of this section, upon the expiration of the period to 
appeal.
    (e) Appeal. (1) A director or national bank, or both, may seek 
review by appealing the OCC's decision to revoke a residency or 
citizenship waiver to the Comptroller, or an authorized delegate, within 
15 days of the receipt of the OCC's written decision to revoke. The 
director or national bank, or both, may appeal on the grounds that the 
reasons for revocation are contrary to fact or arbitrary and capricious. 
The appellant must submit all documents and written arguments that the 
appellant wishes to be considered in support of the appeal.
    (2) The Comptroller, or an authorized delegate, may designate an 
appellate official who was not previously involved in the decision 
leading to the appeal at issue. The Comptroller, an authorized delegate, 
or the appellate official considers all information submitted with the 
original application for the residency or citizenship waiver, the 
material before the OCC official who made the initial decision, and any 
information submitted by the appellant at the time of appeal.
    (3) The Comptroller, an authorized delegate, or the appellate 
official will independently determine whether the reasons given for the 
initial decision to revoke are contrary to fact or arbitrary and 
capricious. If they determine either to be the case, the Comptroller, an 
authorized delegate, or the appellate official may reverse the initial 
decision to revoke the waiver.

[[Page 356]]

    (4) Upon completion of the review, the Comptroller, an authorized 
delegate, or the appellate official will notify the appellant in writing 
of the decision. If the initial decision is upheld, the decision to 
revoke the waiver is effective pursuant to paragraph (d)(2)(i) of this 
section.
    (f) Prior waivers. Any waiver granted by the OCC before January 11, 
2021 remains in effect unless revoked pursuant to paragraph (d) of this 
section or, for a waiver granted to an individual, until the individual 
no longer serves on the board.

[85 FR 80462, Dec. 11, 2020]



Sec.  5.45  Increases in permanent capital of a Federal stock 
savings association.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, 1467a, 1831o and 
5412(b)(2)(B).
    (b) Licensing requirements. Generally a Federal stock savings 
association is not required to apply for an increase in capital unless 
the method of increase itself requires a filing (such as issuance of a 
new class of stock). However, in certain circumstances, a Federal stock 
savings association is required to submit an application and obtain OCC 
approval.
    (c) Scope. This section describes procedures and standards relating 
to a transaction resulting in an increase in a Federal stock savings 
association's permanent capital.
    (d) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to increases in a Federal stock savings 
association's permanent capital.
    (e) Definitions. For the purposes of this section the following 
definitions apply:
    (1) Capital plan means a plan describing the manner and schedule by 
which a Federal stock savings association will attain specified capital 
levels or ratios and a capital restoration plan filed with the OCC under 
12 U.S.C. 1831o and 12 CFR 6.5.
    (2) Capital stock means the total amount of common stock and 
preferred stock.
    (3) Capital surplus means the total of:
    (i) The amount paid in on capital stock in excess of the par or 
stated value;
    (ii) Direct capital contributions representing the amounts paid in 
to the Federal stock savings association other than for capital stock;
    (iii) The amount transferred from retained net income; and
    (iv) The amount transferred from retained net income reflecting 
stock dividends.
    (4) Permanent capital means the sum of capital stock and capital 
surplus.
    (5) Retained net income means the net income of a specified period 
less the amount of all dividends and other capital distributions 
declared in that period.
    (f) Policy. In determining whether to approve a proposed increase in 
a Federal stock savings association's permanent capital, the OCC 
considers whether the change is:
    (1) Consistent with law, regulation, and OCC policy thereunder;
    (2) Provides an adequate capital structure; and
    (3) If appropriate, complies with the Federal stock savings 
association's capital plan.
    (g) Procedures--(1) When prior approval is required. A Federal stock 
savings association must submit an application to the appropriate OCC 
licensing office and obtain prior OCC approval to increase its permanent 
capital if the Federal stock savings association is:
    (i) Required to receive OCC approval pursuant to letter, order, 
directive, written agreement or otherwise;
    (ii) Selling common or preferred stock for consideration other than 
cash; or
    (iii) Receiving a material noncash contribution to capital surplus.
    (2) Content of application. The application must:
    (i) Describe the type and amount of the proposed change in permanent 
capital and explain the reason for the change;
    (ii) In the case of a material noncash contribution to capital, 
provide a description of the method of valuing the contribution; and
    (iii) State if the Federal stock savings association is subject to a 
capital

[[Page 357]]

plan with the OCC and how the proposed change would conform to a capital 
plan or if a capital plan is otherwise required in connection with the 
proposed change in permanent capital.
    (3) Expedited review. An eligible savings association's application 
is deemed approved by the OCC 15 days after the date the OCC receives 
the application, unless the OCC notifies the savings association prior 
to that date that the application is not eligible for expedited review, 
or the expedited review process is extended, under Sec.  5.13(a)(2).
    (4) Notice of increase. (i) If prior approval is required pursuant 
to this paragraph (g), after a Federal stock savings association 
completes an increase in capital it must submit a notice to the 
appropriate OCC licensing office. The notice must contain:
    (A) The amount, including the par value of the stock, and effective 
date of the increase;
    (B) A certification that the funds have been paid in, if applicable; 
and
    (C) A statement that the Federal stock savings association has 
complied with all laws, regulations and conditions imposed by the OCC.
    (5) Expiration of approval. Approval expires if a Federal stock 
savings association has not completed its change in permanent capital 
within one year of the date of approval.
    (h) Offers and sales of stock. A Federal stock savings association 
must comply with the Securities Offering Disclosure Rules in 12 CFR part 
16 for offers and sales of common and preferred stock.
    (i) Shareholder approval. A Federal stock savings association must 
obtain the necessary shareholder approval required by statute for any 
change in its permanent capital.

[80 FR 28453, May 18, 2015, as amended at 82 FR 8104, Jan. 23, 2017; 85 
FR 80463, Dec. 11, 2020]



Sec.  5.46  Changes in permanent capital of a national bank.

    (a) Authority. 12 U.S.C. 21a, 51a, 51b, 51b-1, 52, 56, 57, 59, 60, 
and 93a.
    (b) Licensing requirements. A national bank must submit an 
application and obtain OCC approval to decrease its permanent capital. 
Generally, a national bank need only submit a notice to increase its 
permanent capital, although, in certain circumstances, a national bank 
may be required to submit an application and obtain OCC approval.
    (c) Scope. This section describes procedures and standards relating 
to a transaction resulting in a change in a national bank's permanent 
capital.
    (d) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to changes in a national bank's permanent 
capital.
    (e) Definitions. For the purposes of this section the following 
definitions apply:
    (1) Capital plan means a plan describing the manner and schedule by 
which a national bank will attain specified capital levels or ratios and 
a capital restoration plan filed with the OCC under 12 U.S.C. 1831o and 
12 CFR 6.5.
    (2) Capital stock means the total amount of common stock and 
preferred stock.
    (3) Capital surplus means the total of:
    (i) The amount paid in on capital stock in excess of the par or 
stated value;
    (ii) Direct capital contributions representing the amounts paid in 
to the national bank other than for capital stock;
    (iii) The amount transferred from undivided profits; and
    (iv) The amount transferred from undivided profits reflecting stock 
dividends.
    (4) Permanent capital means the sum of capital stock and capital 
surplus.
    (f) Policy. In determining whether to approve a proposed change to a 
national bank's permanent capital, the OCC considers whether the change 
is:
    (1) Consistent with law, regulation, and OCC policy thereunder;
    (2) Provides an adequate capital structure; and
    (3) If appropriate, complies with the bank's capital plan.
    (g) Increases in permanent capital--(1) Approval--(i) Prior approval 
not required. If a national bank is not required to file an application 
and obtain prior approval under paragraph (g)(1)(ii) of this section, 
the bank need not submit an application. It must submit the notice of 
capital increase under paragraph (i)(3) of this section. The increase in

[[Page 358]]

capital is deemed approved by the OCC as of the date the increase was 
made, once the bank has filed the notice of capital increase and the OCC 
certifies the increase, as provided in paragraph (i)(3).
    (ii) Prior approval required. In addition to a notice of capital 
increase under paragraph (i)(3) of this section, a national bank must 
submit an application under paragraph (i)(1) or (i)(2) of this section 
and obtain prior OCC approval to increase its permanent capital if the 
bank is:
    (A) Required to receive OCC approval pursuant to letter, order, 
directive, written agreement, or otherwise;
    (B) Selling common or preferred stock for consideration other than 
cash; or
    (C) Receiving a material noncash contribution to capital surplus.
    (2) Preferred stock. Notwithstanding paragraph (g)(1)(i) of this 
section, in the case of a sale of preferred stock, the national bank 
must also submit provisions in the articles of association concerning 
preferred stock dividends, voting and conversion rights, retirement of 
the stock, and rights to exercise control over management to the 
appropriate OCC licensing office prior to the sale of the preferred 
stock. The provisions will be deemed approved by the OCC within 15 days 
of its receipt, unless the OCC notifies the filer otherwise, including a 
statement of the reason for the delay.
    (h) Decreases in permanent capital. A national bank must submit an 
application and obtain prior approval under paragraph (i)(1) or (i)(2) 
of this section for any reduction of its permanent capital. A national 
bank may request approval for a reduction in capital for multiple 
quarters. The request need only specify a total dollar amount for the 
requested period and need not specify amounts for each quarter.
    (i) Procedures--(1) Prior approval. A national bank proposing to 
make a change in its permanent capital that requires prior OCC approval 
under paragraphs (g) or (h) of this section must submit an application 
to the appropriate OCC licensing office. The application must:
    (i) Describe the type and amount of the proposed change in permanent 
capital and explain the reason for the change;
    (ii) In the case of a reduction in capital, provide a schedule 
detailing the present and proposed capital structure;
    (iii) In the case of a material noncash contribution to capital, 
provide a description of the method of valuing the contribution; and
    (iv) State if the bank is subject to a capital plan with the OCC and 
how the proposed change would conform to a capital plan or if a capital 
plan is otherwise required in connection with the proposed change in 
permanent capital.
    (2) Expedited review. An eligible bank's application is deemed 
approved by the OCC 15 days after the date the OCC receives the 
application described in paragraph (i)(1) of this section, unless the 
OCC notifies the bank prior to that date that the application has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2). An eligible bank seeking to decrease 
its capital may request OCC approval for up to four consecutive 
quarters. The request need only specify a total dollar amount for the 
four-quarter period and need not specify amounts for each quarter. An 
eligible bank may decrease its capital pursuant to such a plan only if 
the bank maintains its eligible bank status before and after each 
decrease in its capital.
    (3) Notice of increase. (i) After a bank completes an increase in 
capital it must submit a notice to the appropriate OCC licensing office. 
The notice must be acknowledged before a notary public by the bank's 
president, vice president, or cashier and contain:
    (A) A description of the transaction, unless already provided 
pursuant to paragraph (i)(1) of this section;
    (B) The amount, including the par value of the stock, and effective 
date of the increase;
    (C) A certification that the funds have been paid in, if applicable;
    (D) A certified copy of the amendment to the articles of 
association, if required; and
    (E) A statement that the bank has complied with all laws, 
regulations and conditions imposed by the OCC.

[[Page 359]]

    (ii) After it receives the notice of capital increase, the OCC 
issues a certification specifying the amount of the increase and the 
effective date (i.e., the date on which the increase occurred). In the 
case of a capital increase for which prior approval was not required 
pursuant to paragraph (g)(1)(i), the increase is deemed certified by the 
OCC seven days after receipt of the notice if the OCC has not issued a 
certification prior to that date.
    (4) Notice of decrease. A national bank that decreases its capital 
in accordance with paragraphs (i)(1) or (i)(2) of this section must 
notify the appropriate OCC licensing office following the completion of 
the transaction.
    (5) Expiration of approval. Approval expires if a national bank has 
not completed its change in permanent capital within one year of the 
date of approval, unless the OCC specifies a longer period.
    (6) Exception for accounting adjustments. (i) Changes to the 
permanent capital accounts that result solely from application of GAAP 
are not subject to the prior approval or notice requirements in 
paragraph (i)(1), (3), or (4) of this section, as applicable.
    (ii) Within 30 days after the end of the quarter in which the 
adjustment occurred, a bank must notify the OCC if the accounting 
adjustment resulted in an increase or decrease to permanent capital in 
an amount greater than 5% of the bank's total permanent capital prior to 
the adjustments; or, if the bank is subject to a letter, order, 
directive, written agreement, or otherwise related to changes in 
permanent capital. The notification must include the amount and 
description of the adjustment, including the applicable provision of 
GAAP.
    (j) Offers and sales of stock. A national bank must comply with the 
Securities Offering Disclosure Rules in 12 CFR part 16 for offers and 
sales of common and preferred stock.
    (k) Shareholder approval. A national bank must obtain the necessary 
shareholder approval required by statute for any change in its permanent 
capital.

[80 FR 28454, May 18, 2015, as amended at 82 FR 8104, Jan. 23, 2017; 85 
FR 80463, Dec. 11, 2020]



Sec.  5.47  Subordinated debt issued by a national bank.

    (a) Authority. 12 U.S.C. 93a, 1831o, and 3907.
    (b) Scope. This section sets forth the requirements applicable to 
all subordinated debt issued by national banks and the procedures for 
OCC review and approval of a national bank's application to issue or 
prepay subordinated debt and a notice to include subordinated debt in 
tier 2 capital.
    (c) Definitions. The following definitions apply to this section:
    Capital plan means a plan describing the means and schedule by which 
a national bank will attain specified capital levels or ratios, 
including a capital restoration plan filed with the OCC under 12 U.S.C. 
1831o and 12 CFR 6.5.
    Original maturity means the stated maturity of the subordinated debt 
note. If the subordinated debt note does not have a stated maturity, 
then original maturity means the earliest possible date the subordinated 
debt note may be redeemed, repurchased, prepaid, terminated, or 
otherwise retired by the national bank pursuant to the terms of the 
subordinated debt note.
    Payment on subordinated debt means principal and interest, and 
premium, if any.
    Subordinated debt document means any document pertaining to an 
issuance of subordinated debt, and any renewal, extension, amendment, 
modification, or replacement thereof, including the subordinated debt 
note and any global note, pricing supplement, note agreement, trust 
indenture, paying agent agreement, or underwriting agreement.
    Tier 2 capital has the same meaning as set forth in 12 CFR 3.20(d).
    (d) Requirements for issuance of subordinated debt. A national bank 
issuing subordinated debt must satisfy the requirements of this 
paragraph (d).
    (1) Minimum terms. The terms of any subordinated debt note issued by 
a national bank must:
    (i) Have a minimum original maturity of at least five years;
    (ii) Not be a deposit and not insured by the FDIC;
    (iii) Be subordinated to the claims of depositors;

[[Page 360]]

    (iv) Be unsecured, which would include prohibiting the establishment 
of any legally enforceable fund earmarked for payment of the 
subordinated debt note through:
    (A) A sinking fund; or
    (B) A compensating balance or any other funds or assets subject to a 
legal right of offset, as defined by applicable State law;
    (v) Be ineligible as collateral for a loan by the issuing national 
bank;
    (vi) Provide that once any scheduled payments of principal begin, 
all scheduled payments must be made at least annually and the amount 
repaid in each year may be no less than in the prior year; and
    (vii) Provide that, where applicable, no payment (including payment 
pursuant to an acceleration clause, redemption prior to maturity, 
repurchase, or exercising a call option) may be made without prior OCC 
approval.
    (2) Corporate authority. A subordinated debt document must not 
include any provision or covenant that unduly restricts or otherwise 
acts to unduly limit the authority of a national bank or interferes with 
the OCC's supervision of the national bank. Specifically, this would 
include a provision or covenant that:
    (i) Maintains a certain minimum amount in its capital accounts or 
other metric, such as minimum capital assets, liquidity, or loan ratios;
    (ii) Unreasonably restricts a national bank's ability to raise 
additional capital through the issuance of additional subordinated debt 
or other regulatory capital instruments;
    (iii) Provides for default and acceleration of the subordinated debt 
as the result of a change in control, if such change in control results 
from the OCC's exercise of its statutory authority to require a national 
bank to sell stock in that national bank, enter into a merger or 
consolidation, or be acquired by a bank holding company;
    (iv) Requires the prior approval of a purchaser or holder of the 
subordinated debt note in the case of a voluntary merger by a national 
bank where the resulting institution:
    (A) Assumes the due and punctual performance of all conditions of 
the subordinated debt note and agreement; and
    (B) Is not in default of the various covenants of the subordinated 
debt; and
    (v) Provides for default and acceleration of the subordinated debt 
as the result of a default by a subsidiary (including a limited 
liability company) of the national bank, unless:
    (A) There is a separate agreement between the subsidiary and the 
purchaser of the national bank's subordinated debt note; and
    (B) Such agreement has been reviewed and approved by the OCC.
    (3) Disclosure requirements. (i) A national bank must disclose 
clearly on the face of any subordinated debt note the following language 
in all capital letters:
    (A) THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE 
FEDERAL DEPOSIT INSURANCE CORPORATION; and
    (B) THIS OBLIGATION IS SUBORDINATED TO CLAIMS OF DEPOSITORS AND 
GENERAL CREDITORS, IS UNSECURED, AND IS INELIGIBLE AS COLLATERAL FOR A 
LOAN BY [INSERT NAME OF ISSUING NATIONAL BANK].
    (ii) A national bank must disclose clearly and accurately in the 
subordinated debt note:
    (A) The order and level of subordination, and in addition to being 
subordinated to the claims of depositors, provide that, at a minimum, 
the subordinated debt note is subordinate and junior in its right of 
payment to the obligations of all creditors, including both secured and 
unsecured or general creditors, except those specifically designated as 
ranking on a parity with, or subordinated to, the subordinated debt 
note;
    (B) A general description of the OCC's regulatory authority with 
respect to a national bank in danger of insolvency that includes:
    (1) With respect to insolvency, that the FDIC, acting as receiver, 
has authority to transfer a national bank's obligation under the 
subordinated debt note and to supersede or void any default, 
acceleration, or subordination that may have occurred;

[[Page 361]]

    (2) If a national bank that is ``undercapitalized'' as defined by 
applicable law fails to satisfactorily implement a required capital 
restoration plan, the national bank may be subject to all the additional 
restrictions and requirements applicable to a ``significantly 
undercapitalized'' institution, as defined by applicable law, including 
being required to sell shares in the national bank, being acquired by a 
depository institution holding company, or being merged or consolidated 
with another depository institution, and this authority supersedes and 
voids any defaults that may have occurred; and
    (3) If a national bank is ``critically undercapitalized,'' as 
defined by applicable law, the national bank is prohibited from making 
principal or interest payments on the subordinated debt note without 
prior regulatory approval; and
    (C) A description of the OCC's authority under 12 CFR 3.11 to limit 
distributions, including interest payments on any tier 2 capital 
instrument if the national bank has full discretion to permanently or 
temporarily suspend such payments without triggering an event of 
default, if applicable to the subordinated debt issuance.
    (D) A statement that the obligation may be fully subordinated to 
interests held by the U.S. government in the event that the national 
bank enters into a receivership, insolvency, liquidation, or similar 
proceeding.
    (iii) A national bank must comply with the Securities Offering 
Disclosure Rules in 12 CFR part 16.
    (e) Additional requirements to qualify as tier 2 capital. In order 
to qualify as tier 2 capital, a national bank's subordinated debt must 
meet the requirements in 12 CFR 3.20(d).
    (f) Process and procedures--(1) Issuance of subordinated debt--(i) 
Approval--(A) Eligible bank. An eligible bank is required to receive 
prior approval from the OCC to issue any subordinated debt, in 
accordance with paragraph (g)(1)(i) of this section, if:
    (1) The national bank will not continue to be an eligible bank after 
the transaction;
    (2) The OCC has previously notified the national bank that prior 
approval is required; or
    (3) Prior approval is required by law.
    (B) National bank not an eligible bank. A national bank that is not 
an eligible bank must receive prior OCC approval to issue any 
subordinated debt, in accordance with paragraph (g)(1)(i) of this 
section.
    (ii) Application to include subordinated debt in tier 2 capital. A 
national bank that intends to include subordinated debt in tier 2 
capital must submit an application to the OCC for approval, in 
accordance with paragraph (h) of this section, before or within ten days 
after issuing the subordinated debt. Where a national bank's application 
to issue subordinated debt has been deemed to be approved, in accordance 
with paragraph (g)(2)(i) of this section, and the national bank does not 
contemporaneously receive approval from the OCC to include the 
subordinated debt as tier 2 capital, the national bank must submit an 
application for approval to include subordinated debt in tier 2 capital, 
pursuant to paragraph (h) of this section, after issuance of the 
subordinated debt. A national bank may not include subordinated debt in 
tier 2 capital unless the national bank has filed the application with 
the OCC and received approval from the OCC that the subordinated debt 
issued by the national bank qualifies as tier 2 capital.
    (2) Prepayment of subordinated debt--(i) Subordinated debt not 
included in tier 2 capital--(A) Eligible bank. An eligible bank is 
required to receive prior approval from the OCC to prepay any 
subordinated debt that is not included in tier 2 capital (including 
acceleration, repurchase, redemption prior to maturity, and exercising a 
call option), in accordance with paragraph (g)(1)(ii) of this section, 
only if:
    (1) The national bank will not be an eligible bank after the 
transaction;
    (2) The OCC has previously notified the national bank that prior 
approval is required;
    (3) Prior approval is required by law; or
    (4) The amount of the proposed prepayment is equal to or greater 
than one percent of the national bank's total capital, as defined in 12 
CFR 3.2.
    (B) National bank not an eligible bank. A national bank that is not 
an eligible bank must receive prior OCC approval

[[Page 362]]

to prepay any subordinated debt that is not included in tier 2 capital 
(including acceleration, repurchase, redemption prior to maturity, and 
exercising a call option), in accordance with paragraph (g)(1)(ii) of 
this section.
    (ii) Subordinated debt included in tier 2 capital. All national 
banks must receive prior OCC approval to prepay subordinated debt 
included in tier 2 capital, in accordance with paragraph (g)(1)(ii) of 
this section.
    (3) Material changes to existing subordinated debt documents. A 
national bank must receive prior approval from the OCC in accordance 
with paragraph (g)(1)(iii) of this section prior to making a material 
change to an existing subordinated debt document if the bank would have 
been required to receive OCC approval to issue the security under 
paragraph (f)(1)(i) of this section or to include it in tier 2 capital 
under paragraph (h) of this section.
    (g) Prior approval procedure--(1) Application--(i) Issuance of 
subordinated debt. A national bank required to obtain OCC approval 
before issuing subordinated debt must submit an application to the 
appropriate OCC licensing office. The application must include:
    (A) A description of the terms and amount of the proposed issuance;
    (B) A statement of whether the national bank is subject to a capital 
plan or required to file a capital plan with the OCC and, if so, how the 
proposed change conforms to the capital plan;
    (C) A copy of the proposed subordinated note and any other 
subordinated debt documents; and
    (D) A statement that the subordinated debt issue complies with all 
applicable laws and regulations.
    (ii) Prepayment of subordinated debt. A national bank required to 
obtain OCC approval before prepaying subordinated debt, pursuant to 
paragraph (f)(2) of this section, must submit an application to the 
appropriate OCC licensing office. The application must include:
    (A) A description of the terms and amount of the proposed 
prepayment;
    (B) A statement of whether the national bank is subject to a capital 
plan or required to file a capital plan with the OCC and, if so, how the 
proposed change conforms to the capital plan;
    (C) A copy of the subordinated debt note the national bank is 
proposing to prepay and any other subordinated debt documents; and
    (D) Either:
    (1) A statement explaining why the national bank believes that 
following the proposed prepayment the national bank would continue to 
hold an amount of capital commensurate with its risk; or
    (2) A description of the replacement capital instrument that meets 
the criteria for tier 1 or tier 2 capital under 12 CFR 3.20, including 
the amount of such instrument, and the time frame for issuance.
    (iii) Material changes to existing subordinated debt. A national 
bank required to obtain OCC approval before making a material change to 
an existing subordinated debt document, pursuant to paragraph (f)(3) of 
this section, must submit an application to the appropriate OCC 
licensing office. The application must include:
    (A) A description of all proposed changes;
    (B) A statement of whether the national bank is subject to a capital 
plan or required to file a capital plan with the OCC and, if so, how the 
proposed change conforms to the capital plan;
    (C) A copy of the revised subordinated debt documents reflecting all 
proposed changes; and
    (D) A statement that the proposed changes to the subordinated debt 
documents complies with all applicable laws and regulations.
    (iv) Additional information. The OCC reserves the right to request 
additional relevant information, as appropriate.
    (2) Approval--(i) General. The application is deemed approved by the 
OCC as of the 30th day after the filing is received by the OCC, unless 
the OCC notifies the national bank prior to that date that the filing 
presents a significant supervisory or compliance concern or raises a 
significant legal or policy issue.
    (ii) Prepayment. Notwithstanding this paragraph (g)(2)(i) of this 
section, if the application for prior approval is for prepayment, the 
national bank must receive affirmative approval from the OCC. If the OCC 
requires the national bank to replace the subordinated debt,

[[Page 363]]

the national bank must receive affirmative approval that the replacement 
capital instrument meets the criteria for tier 1 or tier 2 capital under 
12 CFR 3.20 and must issue the replacement instrument prior to prepaying 
the subordinated debt, or immediately thereafter.\4\
---------------------------------------------------------------------------

    \4\ A national bank may replace tier 2 capital instruments 
concurrent with the redemption of existing tier 2 capital instruments.
---------------------------------------------------------------------------

    (iii) Tier 2 capital. Following notification to the OCC pursuant to 
paragraph (f)(1)(ii) of this section that the national bank has issued 
the subordinated debt, the OCC will notify the national bank whether the 
subordinated debt qualifies as tier 2 capital.
    (iv) Expiration of approval. Approval expires if a national bank 
does not complete the sale of the subordinated debt within one year of 
approval.
    (h) Application procedure for inclusion in tier 2 capital. (1) A 
national bank must submit an application to the appropriate OCC 
licensing office in writing before or within ten days after issuing 
subordinated debt that it intends to include in tier 2 capital. A 
national bank may not include such subordinated debt in tier 2 capital 
unless the national bank has received approval from the OCC that the 
subordinated debt qualifies as tier 2 capital.
    (2) The application must include:
    (i) The terms of the issuance;
    (ii) The amount or projected amount and date or projected date of 
receipt of funds;
    (iii) The interest rate or expected calculation method for the 
interest rate;
    (iv) Copies of the final subordinated debt documents; and
    (v) A statement that the issuance complies with all applicable laws 
and regulations.
    (i) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to transactions governed by this section.
    (j) Subordinated debt issued under the Emergency Capital Investment 
Program. A provision or covenant included in a subordinated debt 
document does not unduly restrict or otherwise act to unduly limit the 
authority of a national bank or interfere with the OCC's supervision of 
the national bank, for purposes of paragraph (d)(2) of this section, if 
the provision or covenant is included pursuant to requirements imposed 
by the U.S. Department of the Treasury and the subordinated debt is 
issued under the U.S. Department of the Treasury's Emergency Capital 
Investment Program pursuant to section 104A of the Community Development 
Banking and Financial Institutions Act of 1994, added by the 
Consolidated Appropriations Act, 2021.

[79 FR 75421, Dec. 18, 2014, as amended at 80 FR 28455, May 18, 2015; 85 
FR 80464, Dec. 11, 2020; 86 FR 15080, Mar. 22, 2021]



Sec.  5.48  Voluntary liquidation of a national bank 
or Federal savings association.

    (a) Authority. 12 U.S.C. 93a, 181, 182, 1463, 1464, and 
5412(b)(1)(B).
    (b) Licensing requirements. A national bank or a Federal savings 
association considering going into voluntary liquidation must provide 
preliminary notice to the OCC. The bank or savings association must also 
file a notice with the OCC once a liquidation plan is definite. The bank 
or savings association may not begin liquidation unless the OCC has 
notified it that the OCC does not object to the liquidation plan.
    (c) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to a voluntary liquidation. However, if the 
OCC concludes that the notice presents significant or novel policy, 
supervisory or legal issues, the OCC may determine that any or all parts 
of Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (d) Standards--(1) In general. In reviewing a proposed liquidation 
plan, the OCC will consider:
    (i) The purpose of the liquidation;
    (ii) Its impact on the safety and soundness of the national bank or 
Federal savings association; and
    (iii) Its impact on the bank's or savings association's depositors, 
other creditors, and customers.
    (2) National banks. For national banks, the OCC also will review 
liquidation plans for compliance with 12 U.S.C. 181 and 182.

[[Page 364]]

    (3) Federal mutual savings associations. For Federal mutual savings 
associations, the OCC also will assess the advisability of, and 
alternatives to, liquidation and the effect of liquidation on all 
concerned.
    (e) Procedure--(1) Preliminary notice of voluntary liquidation. A 
national bank or Federal savings association that is considering going 
into voluntary liquidation must provide preliminary notice to the 
appropriate OCC licensing office.
    (2) Submission of liquidation plan and nonobjection. (i) After a 
national bank or Federal savings association provides preliminary notice 
under paragraph (e)(1) of this section, if the bank or savings 
association plans to proceed with liquidation, it must submit a 
voluntary liquidation plan to the OCC. A liquidation plan may be 
effected in whole or part through purchase and assumption transactions.
    (ii) The national bank or Federal savings association must receive 
the OCC's non-objection to the liquidation plan before beginning the 
liquidation.
    (3) Notice upon commencing liquidation--(i) In general. When the 
board of directors and the shareholders of a solvent national bank or 
Federal savings association, or in the case of a Federal mutual savings 
association, the board of directors and the members, have voted to 
voluntarily liquidate, the bank or savings association must:
    (A) File a notice with the appropriate OCC licensing office; and
    (B) provide notice to depositors, other known creditors, and known 
claimants of the bank or savings association.
    (ii) National banks. A vote to liquidate a national bank must comply 
with 12 U.S.C. 181. In addition, a national bank must publish notice in 
accordance with 12 U.S.C. 182.
    (iii) Federal savings associations. A Federal savings association 
must publish public notice if so directed by the OCC.
    (4) Report of condition. The national bank's or Federal savings 
association's liquidating agent or committee must submit a report to the 
appropriate OCC licensing office at the start of liquidation showing the 
bank's or savings association's balance sheet as of the start of 
liquidation. The liquidating national bank or Federal savings 
association must submit reports of the condition of its commercial, 
trust, and other departments to the appropriate OCC licensing office by 
filing the quarterly Consolidated Reports of Condition and Income (Call 
Reports).
    (5) Report of progress. The national bank's or Federal savings 
association's liquidating agent or committee must submit a ``Report of 
Progress of Liquidation'' annually to the appropriate OCC licensing 
office until the liquidation is complete.
    (6) Final report. The national bank's or Federal savings 
association's liquidating agent or committee must submit a final report 
at the conclusion of liquidation showing that all creditors have been 
satisfied, remaining assets have been distributed to shareholders, 
resolutions to dissolve the bank or savings association have been 
adopted, and the bank or savings association has been dissolved. The 
national bank or Federal savings association also must return its 
charter certificate to the OCC.
    (f) Expedited liquidations in connection with acquisitions--(1) In 
general. When an acquiring depository institution in a business 
combination purchases all the assets, and assumes all the liabilities, 
including all contingent liabilities, of a target national bank or 
Federal savings association, the target national bank or Federal savings 
association may be dissolved immediately after the combination. However, 
if any liabilities will remain in the target national bank or Federal 
savings association, then the standard liquidation procedures apply. 
This paragraph (f) does not apply to dissolutions of Federal mutual 
savings associations, which are subject to the standard liquidation 
procedures.
    (2) Procedure. After its board of directors and shareholders have 
voted to liquidate and the national bank or Federal savings association 
has notified the appropriate OCC licensing office of its plans, the bank 
or savings association may surrender its charter and dissolve 
immediately, if:
    (i) The acquiring depository institution certifies to the OCC that 
it has purchased all the assets and assumed

[[Page 365]]

all the liabilities, including all contingent liabilities, of the 
national bank or Federal savings association in liquidation; and
    (ii) The acquiring depository institution and the national bank or 
Federal savings association in liquidation have published notice that 
the bank or savings association will dissolve after the purchase and 
assumption to the acquiror. This notice must be included in the notice 
and publication for the purchase and assumption required under the Bank 
Merger Act, 12 U.S.C. 1828(c).

[80 FR 28455, May 18, 2015, as amended at 82 FR 8104, Jan. 23, 2017; 85 
FR 80465, Dec. 11, 2020]



Sec.  5.50  Change in control of a national bank or Federal 
savings association; reporting of stock loans.

    (a) Authority. 12 U.S.C. 93a, 1817(j), and 1831aa.
    (b) Licensing requirements. Any person seeking to acquire control of 
a national bank or Federal savings association must provide 60 days 
prior written notice of a change in control to the OCC, except where 
otherwise provided in this section.
    (c) Scope--(1) In general. This section describes the procedures and 
standards governing OCC review of notices for a change in control of a 
national bank or Federal savings association and reports of stock loans.
    (2) Exempt transactions. The following transactions are not subject 
to the requirements of this section:
    (i) The acquisition of additional shares of a national bank or 
Federal savings association by a person who:
    (A) Has, continuously since March 9, 1979, (or since that 
institution commenced business, if later) held power to vote 25 percent 
or more of the voting securities of that bank or Federal savings 
association; or
    (B) Under paragraph (f)(2)(ii) of this section, would be presumed to 
have controlled that bank or Federal savings association continuously 
since March 9, 1979, if the transaction will not result in that person's 
direct or indirect ownership or power to vote 25 percent or more of any 
class of voting securities of the national bank or Federal savings 
association; or, in other cases, where the OCC determines that the 
person has controlled the bank or savings association continuously since 
March 9, 1979;
    (ii) Unless the OCC otherwise provides in writing, the acquisition 
of additional shares of a national bank or Federal savings association 
by a person who has lawfully acquired and maintained continuous control 
of the bank or Federal savings association under paragraph (f) of this 
section after complying with the procedures and filing the notice 
required by this section;
    (iii) A transaction subject to approval under section 3 of the Bank 
Holding Company Act, 12 U.S.C. 1842, section 18(c) of Federal Deposit 
Insurance Act, 12 U.S.C. 1828(c), or section 10 of the Home Owners' Loan 
Act, 12 U.S.C. 1467a;
    (iv) Any transaction described in section 2(a)(5) or 3(a) (A) or (B) 
of the Bank Holding Company Act, 12 U.S.C. 1841(a)(5) and 1842(a) (A) 
and (B), by a person described in those provisions;
    (v) A customary one-time proxy solicitation or receipt of pro rata 
stock dividends; and
    (vi) The acquisition of shares of a foreign bank that has a 
Federally licensed branch in the United States. This exemption does not 
extend to the reports and information required under paragraph (i) of 
this section.
    (3) Prior notice exemption. The following transactions are not 
subject to the prior notice requirements of this section but are 
otherwise subject to this section, including filing a notice and paying 
the appropriate filing fee, within 90 calendar days after the 
transaction occurs:
    (i) The acquisition of control as a result of acquisition of voting 
shares of a national bank or Federal savings association through testate 
or intestate succession;
    (ii) The acquisition of control as a result of acquisition of voting 
shares of a national bank or Federal savings association as a bona fide 
gift;
    (iii) The acquisition of voting shares of a national bank or Federal 
savings association resulting from a redemption of voting securities;
    (iv) The acquisition of control of a national bank or Federal 
savings association as a result of actions by third

[[Page 366]]

parties (including the sale of securities) that are not within the 
control of the acquiror; and
    (v) The acquisition of control as a result of the acquisition of 
voting shares of a national bank or Federal savings association in 
satisfaction of a debt previously contracted in good faith.
    (A) ``Good faith'' means that a person must either make, renew, or 
acquire a loan secured by voting securities of a national bank or 
Federal savings association in advance of any knowledge of a default or 
of the substantial likelihood that a default is forthcoming. A person 
who purchases a previously defaulted loan, or a loan for which there is 
a substantial likelihood of default, secured by voting securities of a 
national bank or Federal savings association may not rely on this 
paragraph (c)(3)(v) to foreclose on that loan, seize or purchase the 
underlying collateral, and acquire control of the national bank or 
Federal savings association without complying with the prior notice 
requirements of this section.
    (B) To ensure compliance with this section, the acquiror of a 
defaulted loan secured by a controlling amount of a national bank's or a 
Federal savings association's voting securities must file a notice prior 
to the time the loan is acquired unless the acquiror can demonstrate to 
the satisfaction of the OCC that the voting securities are not the 
anticipated source of repayment for the loan.
    (d) Definitions. As used in this section:
    (1) Acquire when used in connection with the acquisition of stock of 
a national bank or Federal savings association means obtaining 
ownership, control, power to vote, or sole power of disposition of 
stock, directly or indirectly or through one or more transactions or 
subsidiaries, through purchase, assignment, transfer, pledge, exchange, 
succession, or other disposition of voting stock, including:
    (i) An increase in percentage ownership resulting from a redemption, 
repurchase, reverse stock split or a similar transaction involving other 
securities of the same class, and
    (ii) The acquisition of stock by a group of persons and/or companies 
acting in concert, which is deemed to occur upon formation of such 
group.
    (2) Acting in concert means:
    (i) Knowing participation in a joint activity or parallel action 
towards a common goal of acquiring control whether or not pursuant to an 
express agreement; or
    (ii) A combination or pooling of voting or other interests in the 
securities of an issuer for a common purpose pursuant to any contract, 
understanding, relationship, agreement, or other arrangement, whether 
written or otherwise.
    (3) Company means any corporation, partnership, trust, association, 
joint venture, pool, syndicate, unincorporated organization, joint-stock 
company or similar organization.
    (4) Control means the power, directly or indirectly, to direct the 
management or policies of a national bank or Federal savings association 
or to vote 25 percent or more of any class of voting securities of a 
national bank or Federal savings association.
    (5) Controlling shareholder means any person who directly or 
indirectly or acting in concert with one or more persons or companies, 
or together with members of their immediate family, owns, controls, or 
holds with power to vote 10 percent or more of the voting stock of a 
company or controls in any manner the election or appointment of a 
majority of the company's board of directors.
    (6) Depository institution means a depository institution as defined 
in section 3(c)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 
1813(c)(1).
    (7) Federal savings association means a Federal savings association 
or a Federal savings bank chartered under section 5 of the Home Owners' 
Loan Act, 12 U.S.C. 1464.
    (8) Immediate family includes a person's spouse, father, mother, 
stepfather, stepmother, brother, sister, stepbrother, stepsister, 
children, stepchildren, grandparent, grandchildren, father-in-law, 
mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-
law, and the spouse of any of the forgoing.
    (9) Management official means any president, chief executive 
officer, chief

[[Page 367]]

operating officer, vice president, director, partner, or trustee, or any 
other person who performs or has a representative or nominee performing 
similar policymaking functions, including executive officers of 
principal business units or divisions or subsidiaries who perform 
policymaking functions, for a national bank, savings association, or a 
company, whether or not incorporated.
    (10) Notice means a filing by a person in accordance with paragraph 
(f) of this section.
    (11) Person means an individual or a corporation, partnership, 
trust, association, joint venture, pool, syndicate, sole proprietorship, 
unincorporated organization, or any other form of entity, and includes 
voting trusts and voting agreements and any group of persons acting in 
concert.
    (12) Similar organization for purposes of paragraph (d)(3) of this 
section means a combination of parties with the potential for or 
practical likelihood of continuing rather than temporary existence, 
where the parties thereto have knowingly and voluntarily associated for 
a common purpose pursuant to identifiable and binding relationships 
which govern the parties with respect to either:
    (i) The transferability and voting of any stock or other indicia of 
participation in another entity, or
    (ii) Achievement of a common or shared objective, such as to 
collectively manage or control another entity.
    (13) Stock means common or preferred stock, general or limited 
partnership shares or interests, or similar interests.
    (14) Voting securities means:
    (i) Shares of stock, if the shares or interests, by statute, 
charter, or in any manner, allow the holder to vote for or select 
directors (or persons exercising similar functions) of the issuing 
national bank or Federal savings association, or to vote on or to direct 
the conduct of the operations or other significant policies of the 
issuing national bank or Federal savings association. However, preferred 
stock or similar interests are not voting securities if:
    (A) Any voting rights associated with the shares or interests are 
limited solely to voting rights customarily provided by statute 
regarding matters that would significantly affect the rights or 
preference of the security or other interest. This includes the issuance 
of additional amounts of classes of senior securities, the modification 
of the terms of the security or interest, the dissolution of the issuing 
national bank, or the payment of dividends by the issuing national bank 
or Federal savings association when preferred dividends are in arrears;
    (B) The shares or interests are a passive investment or financing 
device and do not otherwise provide the holder with control over the 
issuing national bank or Federal savings association; and
    (C) The shares or interests do not allow the holder by statute, 
charter, or in any manner, to select or to vote for the selection of 
directors (or persons exercising similar functions) of the issuing 
national bank or Federal savings association.
    (ii) Securities, other instruments, or similar interests that are 
immediately convertible, at the option of the owner or holder thereof, 
into voting securities.
    (e) Policy--(1) In general. The OCC seeks to enhance and maintain 
public confidence in the banking system by preventing a change in 
control of a national bank or Federal savings association that could 
have serious adverse effects on a national bank's or Federal savings 
association's financial stability or management resources, the interests 
of the bank's or Federal savings association's customers, the Deposit 
Insurance Fund, or competition.
    (2) Acquisitions subject to the Bank Holding Company Act. (i) If 
corporations, partnerships, certain trusts, associations, and similar 
organizations, that are not already bank holding companies, are not 
required to secure prior Federal Reserve Board approval to acquire 
control of a bank under section 3 of the Bank Holding Company Act, 12 
U.S.C. 1842, other than indirectly through the acquisition of shares of 
a bank holding company, they are subject to the notice requirements of 
this section.
    (ii) Certain transactions, including foreclosures by depository 
institutions

[[Page 368]]

and other institutional lenders, fiduciary acquisitions by depository 
institutions, and increases of majority holdings by bank holding 
companies, are described in sections 2(a)(5)(D) and 3(a) (A) and (B) of 
the Bank Holding Company Act, 12 U.S.C. 1841(a)(5)(D) and 12 U.S.C. 
1842(a) (A) and (B), but do not require the Federal Reserve Board's 
prior approval. For purposes of this section, they are considered 
subject to section 3 of the Bank Holding Company Act, 12 U.S.C. 1842, 
and do not require either a prior or subsequent notice to the OCC under 
this section.
    (3) Assessing financial condition. In assessing the financial 
condition of the acquiring person, the OCC weighs any debt servicing 
requirements in light of the acquiring person's overall financial 
strength; the institution's earnings performance, asset condition, 
capital adequacy, and future prospects; and the likelihood of the 
acquiring party making unreasonable demands on the resources of the 
institution.
    (f) Procedures--(1) Exceptions to rules of general applicability. 
Sections 5.8(a), 5.9, 5.10, 5.11, and 5.13(a) through (f) do not apply 
to filings under this section. When complying with Sec.  5.8(b) no 
address is required for a notice filed by one or more individuals under 
this section.
    (2) Who must file. (i) Any person seeking to acquire the power, 
directly or indirectly, to direct the management or policies, or to vote 
25 percent or more of a class of voting securities of a national bank or 
Federal savings association, must file a notice with the OCC 60 days 
prior to the proposed acquisition, unless the acquisition is exempt 
under paragraph (c)(2) of this section.
    (ii) The following persons are presumed to be acting in concert for 
purposes of this section:
    (A) A company and any controlling shareholder, partner, trustee or 
management official of such company if both the company and the person 
own stock in the national bank or Federal savings association;
    (B) A person and the members of the person's immediate family;
    (C) Companies under common control;
    (D) Persons that have made, or propose to make, a joint filing under 
section 13 or 14 of the Securities Exchange Act of 1934, 15 U.S.C. 78m 
or 78n, and the rules thereunder promulgated by the Securities and 
Exchange Commission;
    (E) A person or company will be presumed to be acting in concert 
with any trust for which such person or company serves as trustee, 
except that a tax-qualified employee stock benefit plan as defined in 12 
CFR 192.25 is not be presumed to be acting in concert with its trustee 
or person acting in a similar fiduciary capacity solely for the purposes 
of determining whether to combine the holdings of a plan and its trustee 
or fiduciary; and
    (F) Persons that are parties to any agreement, contract, 
understanding, relationship, or other arrangement, whether written or 
otherwise, regarding the acquisition, voting or transfer of control of 
voting securities of a national bank or Federal savings association, 
other than through a revocable proxy in connection with a proxy 
solicitation for the purposes of conducting business at a regular or 
special meeting of the institution, if the proxy terminates within a 
reasonable period after the meeting.
    (iii) The OCC presumes, unless rebutted, that an acquisition or 
other disposition of voting securities through which any person proposes 
to acquire ownership of, or the power to vote, 10 percent or more of a 
class of voting securities of a national bank or Federal savings 
association is an acquisition by a person of the power to direct the 
bank's or savings association's management or policies if:
    (A) The securities to be acquired or voted are subject to the 
registration requirements of section 12 of the Securities Exchange Act 
of 1934, 15 U.S.C. 78l; or
    (B) Immediately after the transaction no other person will own or 
have the power to vote a greater proportion of that class of voting 
securities.
    (iv) The OCC will consider a rebuttal of the presumption of control 
where the person or company intends to have no more than one 
representative on the board of directors of the national bank or Federal 
savings association.

[[Page 369]]

    (v) The presumption of control may not be rebutted if the total 
equity investment by the person or company in the national bank or 
Federal savings association, including 15 percent or more of any class 
of voting securities, equals or exceeds one third of the total equity of 
the national bank or Federal savings association.
    (vi) Other transactions resulting in a person's control of less than 
25 percent of a class of voting securities of a national bank or Federal 
savings association are not deemed by the OCC to result in control for 
purposes of this section.
    (vii) If two or more persons, not acting in concert, each propose to 
acquire simultaneously equal percentages of 10 percent or more of a 
class of a national bank's or Federal savings association's voting 
securities, and either the acquisitions are of a class of securities 
subject to the registration requirements of section 12 of the Securities 
Exchange Act of 1934, 15 U.S.C. 78l, or immediately after the 
transaction no other shareholder of the national bank or Federal savings 
association would own or have the power to vote a greater percentage of 
the class, each of the acquiring persons must either file a notice or 
rebut the presumption of control.
    (viii) An acquiring person may seek to rebut a presumption 
established in paragraph (f)(2)(ii) or (iii) of this section by 
presenting relevant information in writing to the appropriate OCC 
licensing office. The OCC will respond in writing to any person that 
seeks to rebut the presumption of control or the presumption of 
concerted action. No rebuttal filing is effective unless the OCC 
indicates in writing that the information submitted has been found to be 
sufficient to rebut the presumption of control.
    (3) Filings. (i) The OCC does not accept a notice of a change in 
control unless it is technically complete, i.e., the information 
provided is responsive to every item listed in the notice form and is 
accompanied by the appropriate fee.
    (A) The notice must contain the information required under 12 U.S.C. 
1817(j)(6)(A), and the information prescribed in the Interagency 
Biographical and Financial Report. This form is available at 
www.occ.gov. The OCC may waive any of the informational requirements of 
the notice if the OCC determines that it is in the public interest.
    (B) When the acquiring person is an individual, or group of 
individuals acting in concert, the requirement to provide personal 
financial data may be satisfied with a current statement of assets and 
liabilities and an income summary, together with a statement of any 
material changes since the date of the statement or summary. However, 
the OCC may require additional information, if appropriate.
    (ii) The OCC has 60 days from the date it declares the notice to be 
technically complete to review the notice.
    (A) When the OCC declares a notice technically complete, the 
appropriate OCC licensing office sends a letter of acknowledgment to the 
filer indicating the technically complete date.
    (B) As set forth in paragraph (g) of this section, the filer must 
publish an announcement within 10 days of filing the notice with the 
OCC. The publication of the announcement triggers a 20-day public 
comment period. The OCC may waive or shorten the public comment period 
if an emergency exists. The OCC also may shorten the comment period for 
other good cause. The OCC may act on a proposed change in control prior 
to the expiration of the public comment period if the OCC makes a 
written determination that an emergency exists.
    (C) A filer must notify the OCC immediately of any material changes 
in a notice submitted to the OCC, including changes in financial or 
other conditions that may affect the OCC's decision on the filing.
    (iii) Within the 60-day period, the OCC may inform the filer that 
the acquisition has been disapproved, has not been disapproved, or that 
the OCC will extend the 60-day review period for up to an additional 30 
days. The period or the OCC's review of a notice may be further extended 
not to exceed two additional times for not more than 45 days each time 
if:
    (A) The OCC determines that any acquiring party has not furnished 
all the information required under this part;

[[Page 370]]

    (B) In the OCC's judgment, any material information submitted is 
substantially inaccurate;
    (C) The OCC has been unable to complete an investigation of each 
acquirer because of any delay caused by, or the inadequate cooperation 
of, such acquirer; or
    (D) The OCC determines that additional time is needed to investigate 
and determine that no acquiring party has a record of failing to comply 
with the requirements of subchapter II of chapter 53 of title 31 of the 
United States Code.
    (4) Conditional actions. The OCC may impose conditions on its action 
not to disapprove a notice to assure satisfaction of the relevant 
statutory criteria for non-objection to a notice.
    (5) Disapproval. The OCC may disapprove a notice if it finds that 
any of the following factors exist:
    (i) The proposed acquisition of control would result in a monopoly 
or would be in furtherance of any combination or conspiracy to 
monopolize or to attempt to monopolize the business of banking in any 
part of the United States;
    (ii) The effect of the proposed acquisition of control in any 
section of the country may be substantially to lessen competition or to 
tend to create a monopoly or the proposed acquisition of control would 
in any other manner be in restraint of trade, and the anticompetitive 
effects of the proposed acquisition of control are not clearly 
outweighed in the public interest by the probable effect of the 
transaction in meeting the convenience and needs of the community to be 
served;
    (iii) Either the financial condition of any acquiring person or the 
future prospects of the institution is such as might jeopardize the 
financial stability of the bank or Federal savings association or 
prejudice the interests of the depositors of the bank or Federal savings 
association;
    (iv) The competence, experience, or integrity of any acquiring 
person, or of any of the proposed management personnel, indicates that 
it would not be in the interest of the depositors of the bank or Federal 
savings association, or in the interest of the public, to permit that 
person to control the bank or Federal savings association;
    (v) An acquiring person neglects, fails, or refuses to furnish the 
OCC all the information it requires; or
    (vi) The OCC determines that the proposed transaction would result 
in an adverse effect on the Deposit Insurance Fund.
    (6) Notification of disapproval--(i) Written notice by OCC. If the 
OCC disapproves a notice, it will notify the filer in writing within 
three days after the decision. The OCC's written disapproval will 
contain a statement of the basis for disapproval and indicate that the 
filer may request a hearing.
    (ii) Hearing Request. The filer may request a hearing by the OCC 
within 10 days of receipt of disapproval, pursuant to the procedures in 
12 CFR part 19, subpart H. Following final agency action under 12 CFR 
part 19, further review by the courts is available. (See 12 U.S.C. 
1817(j)(5)).
    (iii) Failure to request a hearing. If a filer fails to request a 
hearing with a timely request, the notice of disapproval constitutes a 
final and unappealable order.
    (g) Disclosure--(1) Announcement. The filer must publish an 
announcement in a newspaper of general circulation in the community 
where the affected national bank or Federal savings association is 
located within 10 days of filing. The OCC may authorize a delayed 
announcement if an immediate announcement would not be in the public 
interest.
    (i) In addition to the information required by Sec.  5.8(b), the 
announcement must include the name of the national bank or Federal 
savings association named in the notice and the comment period (i.e., 20 
days from the date of the announcement). The announcement also must 
state that the public portion of the notice is available upon request.
    (ii) Notwithstanding any other provisions of this paragraph (g), if 
the OCC determines in writing that an emergency exists and that the 
announcement requirements of this paragraph (g) would seriously threaten 
the safety and soundness of the national bank or Federal savings 
association to be acquired, including situations where the OCC must act 
immediately in order to

[[Page 371]]

prevent the probable failure of a national bank or Federal savings 
association, the OCC may waive or shorten the publication requirement.
    (2) Release of information. (i) Upon the request of any person, the 
OCC releases the information provided in the public portion of the 
notice and makes it available for public inspection and copying as soon 
as possible after a notice has been filed. In certain circumstances the 
OCC may determine that the release of the information would not be in 
the public interest. In addition, the OCC makes the date that the notice 
is filed, the disposition of the notice and the date thereof, and the 
consummation date of the transaction, if applicable, publicly available 
in the OCC's ``Weekly Bulletin.''
    (ii) The OCC handles requests for the non-public portion of the 
notice as requests under the Freedom of Information Act, 5 U.S.C. 552, 
and other applicable law.
    (h) Reporting requirement. After the consummation of the change in 
control, the national bank or Federal savings association must notify 
the OCC in writing of any changes or replacements of its chief executive 
officer or of any director occurring during the 12-month period 
beginning on the date of consummation. This notice must be filed within 
10 days of such change or replacement and must include a statement of 
the past and current business and professional affiliations of the new 
chief executive officers or directors.
    (i) Reporting of stock loans--(1) Requirements. (i) Any foreign 
bank, or any affiliate thereof, must file a consolidated report with the 
appropriate OCC supervisory office of the national bank or Federal 
savings association if the foreign bank or any affiliate thereof, has 
credit outstanding to any person or group of persons that, in the 
aggregate, is secured, directly or indirectly, by 25 percent or more of 
any class of voting securities of the same national bank or Federal 
savings association.
    (ii) The foreign bank, or any affiliate thereof, must also file a 
copy of the report with its appropriate OCC supervisory office if that 
office is different from the national bank's or Federal savings 
association's appropriate OCC supervisory office. If the foreign bank, 
or any affiliate thereof, is not supervised by the OCC, it must file a 
copy of the report filed with the OCC with its appropriate Federal 
banking agency.
    (iii) Any shares of the national bank or Federal savings association 
held by the foreign bank, or any affiliate thereof, as principal must be 
included in the calculation of the number of shares in which the foreign 
bank or any affiliate thereof has a security interest for purposes of 
paragraph (i)(1)(i) of this section.
    (2) Definitions. For purposes of this paragraph (i):
    (i) Foreign bank and affiliate have the same meanings as in section 
1 of the International Banking Act of 1978, 12 U.S.C. 3101.
    (ii) Credit outstanding includes any loan or extension of credit; 
the issuance of a guarantee, acceptance, or letter of credit, including 
an endorsement or standby letter of credit; and any other type of 
transaction that extends credit or financing to a person or group of 
persons.
    (iii) Group of persons includes any number of persons that a foreign 
bank, or an affiliate thereof, has reason to believe:
    (A) Are acting together, in concert, or with one another to acquire 
or control shares of the same insured national bank or Federal savings 
association, including an acquisition of shares of the same national 
bank or Federal savings association at approximately the same time under 
substantially the same terms; or
    (B) Have made, or propose to make, a joint filing under 15 U.S.C. 
78m regarding ownership of the shares of the same depository 
institution.
    (3) Exceptions. Compliance with paragraph (i)(1) of this section is 
not required if:
    (i) The person or group of persons referred to in paragraph (i)(1) 
of this section has disclosed the amount borrowed and the security 
interest therein to the appropriate OCC licensing office in connection 
with a notice filed under this section or any other application filed 
with the appropriate OCC licensing office as a substitute for a notice 
under this section, such as for a national bank or Federal savings 
association charter; or

[[Page 372]]

    (ii) The transaction involves a person or group of persons that has 
been the owner or owners of record of the stock for a period of one year 
or more or, if the transaction involves stock issued by a newly 
chartered bank or Federal savings association, before the bank's or 
Federal savings association's opening.
    (4) Report requirements. (i) The consolidated report must indicate 
the number and percentage of shares securing each applicable extension 
of credit, the identity of the borrower, and the number of shares held 
as principal by the foreign bank and any affiliate thereof.
    (ii) The foreign bank and all affiliates thereof must file the 
consolidated report in writing within 30 days of the date on which the 
foreign bank or affiliate thereof first believes that the security for 
any outstanding credit consists of 25 percent or more of any class of 
voting securities of a national bank or Federal savings association.
    (5) Other reporting requirements. A foreign bank or any affiliate 
thereof, supervised by the OCC and required to report credit outstanding 
secured by the shares of a depository institution to another Federal 
banking agency also must file a copy of the report with its appropriate 
OCC supervisory office.

[80 FR 28456, May 18, 2015, as amended at 82 FR 8104, Jan. 23, 2017; 85 
FR 80465, Dec. 11, 2020]



Sec.  5.51  Changes in directors and senior executive officers 
of a national bank or Federal savings association.

    (a) Authority. 12 U.S.C. 1831i, 3102(b), and 5412(b)(2)(B).
    (b) Scope. This section describes the circumstances when a national 
bank or a Federal savings association must notify the OCC of a change in 
its directors and senior executive officers, and the OCC's authority to 
disapprove those notices.
    (c) Definitions--(1) Director means an individual who serves on the 
board of directors of a national bank or a Federal savings association, 
except:
    (i) A director of a foreign bank that operates a Federal branch; and
    (ii) An advisory director who does not have the authority to vote on 
matters before the board of directors or any committee of the board of 
directors and provides solely general policy advice to the board of 
directors or any committee.
    (2) Federal savings association means a Federal savings association 
or Federal savings bank chartered under 12 U.S.C. 1464.
    (3) National bank includes a Federal branch for purposes of this 
section only.
    (4) Senior executive officer means the president, chief executive 
officer, chief operating officer, chief financial officer, chief lending 
officer, chief investment officer, chief risk officer, and any other 
individual the OCC identifies in writing to the national bank or Federal 
savings association who exercises significant influence over, or 
participates in, major policy making decisions of the national bank or 
Federal savings association without regard to title, salary, or 
compensation. The term also includes employees of entities retained by a 
national bank or Federal savings association to perform such functions 
in lieu of directly hiring the individuals, and, with respect to a 
Federal branch operated by a foreign bank, the individual functioning as 
the chief managing official of the Federal branch.
    (5) Technically complete notice means a notice that provides all the 
information requested in paragraph (e)(2) of this section, including 
complete explanations where material issues arise regarding the 
competence, experience, character, or integrity of proposed directors or 
senior executive officers, and any additional information that the OCC 
may request following a determination that the notice was not 
technically complete.
    (6) Technically complete notice date means the date on which the OCC 
has received a technically complete notice.
    (7) Troubled condition means a national bank or Federal savings 
association that
    (i) Has a composite rating of 4 or 5 under the Uniform Financial 
Institutions Rating System (CAMELS);
    (ii) Is subject to a cease and desist order, a consent order, or a 
formal written agreement, that requires action to improve the financial 
condition

[[Page 373]]

of the national bank or Federal savings association unless otherwise 
informed in writing by the OCC; or
    (iii) Is informed in writing by the OCC that, based on information 
pertaining to such national bank or Federal savings association, it has 
been designated in ``troubled condition'' for purposes of this section.
    (d) Prior notice. A national bank or Federal savings association 
must provide written notice to the OCC at least 90 calendar days before 
adding or replacing any member of its board of directors, employing any 
individual as a senior executive officer of the national bank or Federal 
savings association, or changing the responsibilities of any senior 
executive officer so that the individual would assume a different senior 
executive officer position, if:
    (1) The national bank or Federal savings association is not in 
compliance with minimum capital requirements, as prescribed in 12 CFR 
part 3 or is otherwise in troubled condition; or
    (2) The OCC determines, in writing, in connection with the review by 
the agency of the plan required under section 38 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831o), or otherwise, that such prior notice is 
appropriate.
    (e) Procedures--(1) Filing notice. A national bank or Federal 
savings association must file a notice with its appropriate supervisory 
office. When a national bank or Federal savings association files a 
notice, the individual to whom the filing pertains must attest to the 
validity of the information pertaining to that individual. The 90-day 
review period begins on the technically complete notice date.
    (2) Content of notice. (i) The notice must include:
    (A) The information required under 12 U.S.C. 1817(j)(6)(A), and the 
information prescribed in the Interagency Notice of Change in Director 
or Senior Executive Officer, the biographical and certification portions 
of the Interagency Biographical and Financial Report (``IBFR''), and 
unless otherwise determined by the OCC in writing, the financial portion 
of the IBFR. These forms are available from the OCC;
    (B) Legible fingerprints of the individual, except that fingerprints 
are not required for any individual who, within the three years 
immediately preceding the initial submission date of the notice 
currently under review, has been the subject of a notice filed with the 
OCC or the OTS pursuant to 12 U.S.C. 1831i, or this section, and has 
previously submitted fingerprints; and
    (C) Such other information required by the OCC.
    (ii) Modification of content requirements. The OCC may require or 
accept other information in place of the content requirements in 
paragraph (e)(2)(i) of this section.
    (3) Requests for additional information. (i) Following receipt of a 
technically complete notice, the OCC may request additional information. 
Such request must be in writing, must explain why the information is 
needed, and must specify a time period during which the information must 
be provided.
    (ii) If the national bank or Federal savings association cannot 
provide the information requested by the OCC within the time specified 
in paragraph (e)(3)(i) of this section, the national bank or Federal 
savings association may request in writing that the OCC suspend 
processing of the notice. The OCC will advise the national bank or 
Federal savings association in writing whether the suspension request is 
granted and, if granted, the length of the suspension.
    (iii) If the national bank or Federal savings association fails to 
provide the requested information within the time specified in 
paragraphs (e)(3)(i) or (ii) of this section, the OCC may deem the 
filing abandoned under Sec.  5.13(c) or may review the notice based on 
the information provided.
    (4) Notice of disapproval. The OCC may disapprove an individual 
proposed as a member of the board of directors or as a senior executive 
officer if the OCC determines on the basis of the individual's 
competence, experience, character, or integrity that it would not be in 
the best interests of the depositors of the national bank or Federal 
savings association or the public to permit the individual to be 
employed by, or associated with, the national bank or Federal savings 
association. The OCC must send a written notice of disapproval to

[[Page 374]]

both the national bank or Federal savings association and the individual 
stating the basis for disapproval.
    (5) Notice of intent not to disapprove. An individual proposed as a 
member of the board of directors or as a senior executive officer may 
begin service before the expiration of the review period if the OCC 
notifies the individual and the national bank or Federal savings 
association in writing that the OCC does not disapprove the proposed 
director or senior executive officer and all other applicable legal 
requirements are satisfied.
    (6) Waiver of prior notice--(i) Waiver request. (A) A national bank 
or Federal savings association may send a letter to the appropriate 
supervisory office requesting a waiver of the prior notice requirement.
    (B) The OCC may grant the waiver if it issues a written finding 
that:
    (1) Delay could adversely affect the safety and soundness of the 
national bank or Federal savings association;
    (2) Delay would not be in the public interest; or
    (3) Other extraordinary circumstances justify waiver of prior 
notice.
    (C) The OCC will determine the length of the waiver on a case-by-
case basis. All waivers that the OCC grants under this paragraph (e)(6) 
are subject to the condition that the national bank or Federal savings 
association must file a technically complete notice under this section 
within the time period specified by the OCC.
    (D) Subject to paragraph (e)(6)(i)(C) of this section, the proposed 
individual may assume the position on an interim basis until the 
earliest of the following events:
    (1) The individual and the national bank or the Federal savings 
association receive a notice of intent not to disapprove, at which time 
the individual may assume the position on a permanent basis, provided 
all other applicable legal requirements are satisfied;
    (2) The individual and the national bank or the Federal savings 
association receive a notice of disapproval within 90 calendar days 
after the submission of a technically complete notice. In this event the 
individual must immediately resign from the position upon receipt of the 
notice of disapproval and may assume the position on a permanent basis 
only if the notice of disapproval is reversed on appeal and all other 
applicable legal requirements are satisfied; or
    (3) The OCC does not act within 90 calendar days after the 
submission of a technically complete notice. In this event, the 
individual may assume the position on a permanent basis 91 calendar days 
after the submission of a technically complete notice.
    (E) If the technically complete notice is not filed within the time 
period specified in the waiver, the proposed individual must immediately 
resign their position. Thereafter, the individual may assume the 
position only after a technically complete notice has been filed, all 
other applicable requirements are satisfied, and:
    (1) The national bank or the Federal savings association receives a 
notice of intent not to disapprove;
    (2) The review period expires; or
    (3) A notice of disapproval has been overturned on appeal as set 
forth in paragraph (f) of this section.
    (F) Notwithstanding the grant of a waiver, the OCC has authority to 
issue a notice of disapproval within 30 days of the expiration of such 
waiver.
    (ii) Automatic waiver. An individual who has been elected to the 
board of directors of a national bank or Federal savings association may 
serve as a director on an interim basis before a notice has been filed 
under this section, provided the individual was not nominated by 
management, and the national bank or Federal savings association submits 
a notice under this section not later than seven days after the 
individual has been notified of the election. The individual may serve 
on an interim basis until the occurrence of the earliest of the events 
described in paragraphs (e)(6)(i)(D)(1), (2), or (3) of this section.
    (7) Commencement of service. An individual proposed as a member of 
the board of directors or as a senior executive officer who satisfies 
all other applicable legal requirements may assume the office on a 
permanent basis:
    (i) Prior to the expiration of the review period, only if the OCC 
notifies

[[Page 375]]

the national bank or Federal savings association in writing that the OCC 
does not disapprove the proposed director or senior executive officer 
pursuant to paragraph (e)(5) of this section; or
    (ii) Following the expiration of the review period, unless:
    (A) The OCC issues a written notice of disapproval during the review 
period; or
    (B) The national bank or Federal savings association does not 
provide additional information within the time period required by the 
OCC pursuant to paragraph (e)(3) of this section and the OCC deems the 
notice to be abandoned pursuant to Sec.  5.13(c).
    (8) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, 5.11, and 5.13(a) through (f) do not apply to a notice for a 
change in directors and senior executive officers, except that Sec.  
5.13(c) will apply to the extent provided for in paragraphs (e)(3)(iii) 
and (e)(7) of this section.
    (f) Appeal. (1) If the national bank or Federal savings association, 
the proposed individual, or both, disagree with a disapproval, they may 
seek review by appealing the disapproval to the Comptroller, or an 
authorized delegate, within 15 days of the receipt of the notice of 
disapproval. The national bank or Federal savings association or the 
individual may appeal on the grounds that the reasons for disapproval 
are contrary to fact or insufficient to justify disapproval. The 
appellant must submit all documents and written arguments that the 
appellant wishes to be considered in support of the appeal.
    (2) The Comptroller, or an authorized delegate, may designate an 
appellate official who was not previously involved in the decision 
leading to the appeal at issue. The Comptroller, an authorized delegate, 
or the appellate official considers all information submitted with the 
original notice, the material before the OCC official who made the 
initial decision, and any information submitted by the appellant at the 
time of the appeal.
    (3) The Comptroller, an authorized delegate, or the appellate 
official will independently determine whether the reasons given for the 
disapproval are contrary to fact or insufficient to justify the 
disapproval. If either is determined to be the case, the Comptroller, an 
authorized delegate, or the appellate official may reverse the 
disapproval.
    (4) Upon completion of the review, the Comptroller, an authorized 
delegate, or the appellate official will notify the appellant in writing 
of the decision. If the original decision is reversed, the individual 
may assume the position in the national bank or Federal savings 
association for which he or she was proposed.

[80 FR 28460, May 18, 2015, as amended at 85 FR 80466, Dec. 11, 2020]



Sec.  5.52  Change of address of a national bank or Federal 
savings association.

    (a) Authority. 12 U.S.C. 93a, 161, 481, 1462a, 1463, 1464 and 
5412(b)(2)(B).
    (b) Scope. This section describes the obligation of a national bank 
or a Federal savings association to notify the OCC of any change in its 
address.
    (c) Notice process. (1) Any national bank with a change in the 
address of its main office or in its post office box or a Federal 
savings association with a change in the address of its home office or 
post office box must send a written notice to the appropriate OCC 
licensing office.
    (2) No notice is required if the change in address results from a 
transaction approved under this part or if notice has been provided 
pursuant to Sec.  5.40(c)(1) with respect to the relocation of a main 
office or home office to a branch location in the same city, town or 
village.
    (d) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, 5.11, and 5.13 do not apply to changes in a national bank's or 
Federal savings association's address.

[80 FR 28462, May 18, 2015, as amended at 85 FR 80466, Dec. 11, 2020]



Sec.  5.53  Substantial asset change by a national bank or Federal 
savings association.

    (a) Authority. 12 U.S.C. 93a, 1818, 1462a, 1463, 1464, 1467a, and 
5412(b)(2)(B).
    (b) Scope. This section requires a national bank or a Federal 
savings association to obtain the approval of the OCC for a substantial 
asset change.

[[Page 376]]

    (c) Definition--(1) In general. Except as provide in paragraph 
(c)(2) of this section, substantial asset change means:
    (i) The sale or other disposition of all, or substantially all, of 
the national bank's or Federal savings association's assets in a 
transaction or a series of transactions;
    (ii) After having sold or disposed of all, or substantially all, of 
its assets, subsequent purchases or other acquisitions or other 
expansions of the national bank's or Federal savings association's 
operations;
    (iii) Any other purchases, acquisitions or other expansions of 
operations that are part of a plan to increase the size of the national 
bank or Federal savings association by more than 25 percent in a one 
year period;
    (iv) Any other material increase or decrease in the size of the 
national bank or Federal savings association or a material alteration in 
the composition of the types of assets or liabilities of the national 
bank or Federal savings association (including the entry or exit of 
business lines), on a case-by-case basis, as determined by the OCC; or
    (v) Any change in the purpose of the charter of the national bank or 
Federal savings association as described in Sec.  5.20(l)(2).
    (2) Exceptions. The term ``substantial asset change'' does not 
include, and this section does not apply, to a change in composition of 
all, or substantially all, of a bank's or savings association's assets:
    (i) That the bank or savings association undertakes in response to 
direction from the OCC (e.g., in an enforcement action pursuant to 12 
U.S.C. 1818);
    (ii) That is part of a voluntary liquidation under Sec.  5.48, if 
the bank or savings association in liquidation has obtained the OCC's 
non-objection to its plan of liquidation under Sec.  5.48 and has 
stipulated in its notice of liquidation to the OCC that its liquidation 
will be completed, the bank or savings association dissolved and its 
charter returned to the OCC within one year of the date it filed the 
notice of liquidation, unless the OCC extends the time period;
    (iii) That occurs as a result of a bank's or savings association's 
ordinary and ongoing business of originating and securitizing loans; or
    (iv) That are subject to OCC approval under another application to 
the OCC.
    (d) Procedures--(1) Consultation. A national bank or Federal savings 
association considering a transaction or series of transactions that may 
constitute a material change under paragraph (c)(1)(iv) of this section 
must consult with the appropriate OCC supervisory office for a 
determination whether the OCC will require an application under this 
section. In determining whether to require an application, the OCC 
considers the size and nature of the transaction and the condition of 
the institutions involved.
    (2) Approval requirement. A national bank or Federal savings 
association must file an application and obtain the prior written 
approval of the OCC before engaging in a substantial asset change.
    (3) Factors--(i) In general. (A) In determining whether to approve 
an application filed under paragraph (d)(2) of this section, the OCC 
considers the following factors:
    (1) The capital level of any resulting national bank or Federal 
savings association;
    (2) The conformity of the transaction to applicable law, regulation, 
and supervisory policies;
    (3) The purpose of the transaction;
    (4) The impact of the transaction on safety and soundness of the 
national bank or Federal savings association; and
    (5) The effect of the transaction on the national bank or Federal 
savings association's shareholders, depositors, other creditors, and 
customers.
    (B) The OCC may deny the application if the transaction would have a 
negative effect in any of these respects.
    (ii) Additional factors. The OCC's review of any substantial asset 
change that involves the purchase or other acquisition or other 
expansions of the bank's or savings association's operations or that 
involves a change in the purpose of the bank's or association's charter, 
as described in Sec.  5.20(l)(2), will include, in addition to the 
foregoing factors, the factors governing the organization of a bank or 
savings association under Sec.  5.20.
    (e) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do

[[Page 377]]

not apply with respect to applications filed pursuant to this section. 
However, if the OCC concludes that an application presents significant 
or novel policy, supervisory, or legal issues, the OCC may determine 
that some or all of the provisions of Sec. Sec.  5.8, 5.10, and 5.11 
apply.

[80 FR 28462, May 18, 2015, as amended at 82 FR 8104, Jan. 23, 2017; 85 
FR 80466, Dec. 11, 2020]



Sec.  5.55  Capital distributions by Federal savings associations.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, 1467a, 1831o, and 
5412(b)(2)(B).
    (b) Licensing requirements. A Federal savings association must file 
an application before making a capital distribution, as provided in this 
section.
    (c) Scope. This section applies to all capital distributions by a 
Federal savings association and sets forth the procedures and standards 
relating to a capital distribution.
    (d) Definitions. The following definitions apply to this section:
    (1) Affiliate means an affiliate, as defined under regulations of 
the Board of Governors of the Federal Reserve System regarding 
transactions with affiliates, 12 CFR part 223 (Regulation W).
    (2) Capital distribution means:
    (i) A distribution of cash or other property to owners of a Federal 
savings association made on account of their ownership, but excludes:
    (A) Any dividend consisting only of the shares of the savings 
association or rights to purchase the shares; or
    (B) If the savings association is a Federal mutual savings 
association, any payment that the savings association is required to 
make under the terms of a deposit instrument and any other amount paid 
on deposits that the OCC determines is not a distribution for the 
purposes of this section;
    (ii) A Federal savings association's payment to repurchase, redeem, 
retire or otherwise acquire any of its shares or other ownership 
interests; any payment to repurchase, redeem, retire, or otherwise 
acquire debt instruments included in its total capital under 12 CFR part 
3; and any extension of credit to finance an affiliate's acquisition of 
the savings association's shares or interests;
    (iii) Any direct or indirect payment of cash or other property to 
owners or affiliates made in connection with a corporate restructuring. 
This includes the Federal savings association's payment of cash or 
property to shareholders of another association or to shareholders of 
its holding company to acquire ownership in that association, other than 
by a distribution of shares;
    (iv) Any other distribution charged against a Federal savings 
association's capital accounts if the savings association would not be 
well capitalized, as set forth in 12 CFR 6.4, following the 
distribution; and
    (v) Any transaction that the OCC determines, by order or regulation, 
to be in substance a distribution of capital.
    (3) Control has the same meaning as in section 10(a)(2) of the Home 
Owners' Loan Act (12 U.S.C. 1467a(a)(2)).
    (4) Net income means a Federal savings association's net income 
computed in accordance with GAAP.
    (5) Retained net income means a Federal savings association's net 
income for a specified period less total capital distributions declared 
in that period.
    (6) Shares means common and preferred stock, and any options, 
warrants, or other rights for the acquisition of such stock. The term 
``share'' also includes convertible securities upon their conversion 
into common or preferred stock. The term does not include convertible 
debt securities prior to their conversion into common or preferred stock 
or other securities that are not equity securities at the time of a 
capital distribution.
    (e) Filing requirements--(1) Application required. A Federal savings 
association must file an application with the OCC before making a 
capital distribution if:
    (i) The Federal savings association would not be at least well 
capitalized or would not otherwise remain an eligible savings 
association following the distribution;
    (ii) The total amount of all of the Federal savings association's 
capital distributions (including the proposed capital distribution) for 
the applicable calendar year exceeds its net income for that year to 
date plus retained net income for the preceding two years. If

[[Page 378]]

the capital distribution is from retained earnings, the aggregate 
limitation in this paragraph may be calculated in accordance with Sec.  
5.64(c)(2), substituting ``capital distributions'' for ``dividends'' in 
that section;
    (iii) The Federal savings association's proposed capital 
distribution would reduce the amount of or retire any part of its common 
or preferred stock or retire any part of debt instruments such as notes 
or debentures included in capital under 12 CFR part 3 (other than 
regular payments required under a debt instrument approved under Sec.  
5.56);
    (iv) The Federal savings association's proposed capital distribution 
is payable in property other than cash;
    (v) The Federal savings association is directly or indirectly 
controlled by a mutual savings and loan holding company or by a company 
that is not a savings and loan holding company; or
    (vi) The Federal savings association's proposed capital distribution 
would violate a prohibition contained in any applicable statute, 
regulation, or agreement between the Federal savings association and the 
OCC or the OTS, or violate a condition imposed on the Federal savings 
association in an application or notice approved by the OCC or the OTS.
    (2) No application required. A Federal savings association may make 
a capital distribution without filing an application with the OCC if it 
does not meet the filing requirements in paragraph (e)(1) of this 
section.
    (3) Informational copy of Federal Reserve System notice required. If 
the Federal savings association is a subsidiary of a savings and loan 
holding company that is filing a notice with the Board of Governors of 
the Federal Reserve System (Board) for a dividend solely under 12 U.S.C. 
1467a(f) and not also under 12 U.S.C. 1467a(o)(11), and no application 
under paragraph (e)(1) of this section is required, then the savings 
association must provide an informational copy to the OCC of the notice 
filed with the Board, at the same time the notice is filed with the 
Board.
    (f) Application format--(1) Contents. The application must:
    (i) Be in narrative form;
    (ii) Include all relevant information concerning the proposed 
capital distribution, including the amount, timing, and type of 
distribution; and
    (iii) Demonstrate compliance with paragraph (h) of this section.
    (2) Schedules. The application may include a schedule proposing 
capital distributions over a specified period.
    (3) Combined filings. A Federal savings association may combine the 
application required under paragraph (e)(1) of this section with any 
other notice or application, if the capital distribution is a part of, 
or is proposed in connection with, another transaction requiring a 
notice or application under this chapter. If submitting a combined 
filing, the Federal savings association must state that the related 
notice or application is intended to serve as an application under this 
section.
    (g) Filing procedures--(1) Application. When a Federal savings 
association is required to file an application under paragraph (e)(1) of 
this section, it must file the application at least 30 days before the 
proposed declaration of dividend or approval of the proposed capital 
distribution by its board of directors. Except as provided in paragraph 
(g)(2) of this section, the OCC is deemed to have approved an 
application from an eligible savings association upon the expiration of 
30 days after the filing date of the application unless, before the 
expiration of that time period, the OCC notifies the Federal savings 
association that:
    (i) Additional information is required to supplement the 
application;
    (ii) The application has been removed from expedited review, or the 
expedited review process is extended, under 5.13(a)(2); or
    (iii) The application is denied.
    (2) Applications not subject to expedited review. An application is 
not subject to expedited review if:
    (i) The Federal savings association is not an eligible savings 
association;
    (ii) The total amount of all of the Federal savings association's 
capital distributions (including the proposed capital distribution) for 
the applicable calendar year exceeds its net income for that year to 
date plus retained net income for the preceding two years;

[[Page 379]]

    (iii) The Federal savings association would not be at least 
adequately capitalized, as set forth in 12 CFR 6.4, following the 
distribution; or
    (iv) The Federal savings association's proposed capital distribution 
would violate a prohibition contained in any applicable statute, 
regulation, or agreement between the savings association and the OCC or 
the OTS, or violate a condition imposed on the savings association in an 
application or notice approved by the OCC or the OTS.
    (3) OCC filing office--(i) Appropriate licensing office. Except as 
provided in paragraph (g)(3)(ii) of this section, a Federal savings 
association that is required to file an application under paragraph 
(e)(1) of this section or an informational copy of a notice under 
paragraph (e)(3) of this section must submit the application or notice 
to the appropriate OCC licensing office.
    (ii) Appropriate supervisory office. A Federal savings association 
that is required to file an application under paragraph (e)(1) of this 
section for capital distributions involving solely a cash dividend from 
retained earnings or involving a cash dividend from retained earnings 
and a concurrent cash distribution from permanent capital must submit 
the application to the appropriate OCC supervisory office.
    (h) OCC review of capital distributions. After review of an 
application submitted pursuant to paragraph (e)(1) of this section:
    (1) The OCC may deny the application in whole or in part, if it 
makes any of the following determinations:
    (i) The Federal savings association will be undercapitalized, 
significantly undercapitalized, or critically undercapitalized as set 
forth in 12 CFR 6.4, as applicable, following the capital distribution. 
If so, the OCC will determine if the capital distribution is permitted 
under 12 U.S.C. 1831o(d)(1)(B).
    (ii) The proposed capital distribution raises safety or soundness 
concerns.
    (iii) The proposed capital distribution violates a prohibition 
contained in any statute, regulation, agreement between the Federal 
savings association and the OCC or the OTS, or a condition imposed on 
the Federal savings association in an application or notice approved by 
the OCC or the OTS.
    (2) The OCC may approve the application in whole or in part. 
Notwithstanding paragraph (h)(1)(iii) of this section, the OCC may waive 
any waivable prohibition or condition to permit a distribution.
    (i) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to capital distributions made by Federal 
savings associations.

[80 FR 28463, May 18, 2015, as amended at 85 FR 80466, Dec. 11, 2020]



Sec.  5.56  Inclusion of subordinated debt securities and mandatorily 
redeemable preferred stock as Federal savings association supplementary 
(tier 2) capital.

    (a) Scope and definitions. (1) A Federal savings association must 
comply with this section in order to include subordinated debt 
securities or mandatorily redeemable preferred stock (``covered 
securities'') in tier 2 capital under 12 CFR 3.20(d) and to prepay 
covered securities included in tier 2 capital. A savings association 
that does not include covered securities in tier 2 capital is not 
required to comply with this section. Covered securities not included in 
tier 2 capital are subject to the requirements of Sec.  163.80 of this 
chapter.
    (2) For purposes of this section, mandatorily redeemable preferred 
stock means mandatorily redeemable preferred stock that was issued 
before July 23, 1985 or issued pursuant to regulations and memoranda of 
the Federal Home Loan Bank Board and approved in writing by the Federal 
Savings and Loan Insurance Corporation for inclusion as regulatory 
capital before or after issuance.
    (b) Application procedures--(1) Application to include covered 
securities in tier 2 capital--(i) Application required. A Federal 
savings association must file an application seeking the OCC's approval 
of the inclusion of covered securities in tier 2 capital. The savings 
association may file its application before or after it issues covered 
securities, but may not include covered securities in tier 2 capital 
until the OCC approves the application and the securities are issued.
    (ii) Expedited review. The OCC is deemed to have approved an 
application from an eligible savings association to include covered 
securities in

[[Page 380]]

tier 2 capital upon the expiration of 30 days after the filing date of 
the application unless, before the expiration of that time period, the 
OCC notifies the Federal savings association that:
    (A) Additional information is required to supplement the 
application;
    (B) The application has been removed from expedited review or the 
expedited review process is extended under Sec.  5.13(a)(2); or
    (C) The OCC denies the application.
    (iii) Securities offering rules. A Federal savings association also 
must comply with the securities offering rules at 12 CFR part 16 by 
filing an offering circular for a proposed issuance of covered 
securities, unless the offering qualifies for an exemption under that 
part.
    (2) Application required to prepay covered securities included in 
tier 2 capital--(i) In general. A Federal savings association must file 
an application to, and receive prior approval from, the OCC before 
prepaying covered securities included in tier 2 capital. The application 
must include:
    (A) A statement explaining why the Federal savings association 
believes that following the proposed prepayment the savings association 
would continue to hold an amount of capital commensurate with its risk; 
or
    (B) A description of the replacement capital instrument that meets 
the criteria for tier 1 or tier 2 capital under 12 CFR 3.20, including 
the amount of such instrument and the time frame for issuance.
    (ii) Replacement covered security. If the OCC conditions approval of 
prepayment on a requirement that a Federal savings association must 
replace the covered security with a covered security of an equivalent 
amount that satisfies the requirements for tier 1 or tier 2 capital, the 
savings association must file an application to issue the replacement 
covered security and must receive prior OCC approval.
    (c) General requirements. A covered security issued under this 
section must satisfy the requirements for tier 2 capital in 12 CFR 
3.20(d).
    (d) Securities requirements for inclusion in tier 2 capital. To be 
included in tier 2 capital, covered securities must satisfy the 
requirements in 12 CFR 3.20(d). In addition, such covered securities 
must meet the following requirements:
    (1) Form. (i) Each certificate evidencing a covered security must:
    (A) Bear the following legend on its face, in bold type: ``This 
security is not a savings account or deposit and it is not insured by 
the United States or any agency or fund of the United States;''
    (B) State that the security is subordinated on liquidation, as to 
principal, interest, and premium, to all claims against the savings 
association that have the same priority as savings accounts or a higher 
priority;
    (C) State that the security is not secured by the savings 
association's assets or the assets of any affiliate of the savings 
association. An affiliate means any person or company that controls, is 
controlled by, or is under common control with the savings association;
    (D) State that the security is not eligible collateral for a loan by 
the savings association;
    (E) State the prohibition on the payment of dividends or interest at 
12 U.S.C. 1828(b) and, in the case of subordinated debt securities, 
state the prohibition on the payment of principal and interest at 12 
U.S.C. 1831o(h), 12 CFR 3.11, and any other relevant restrictions;
    (F) For subordinated debt securities, state or refer to a document 
stating the terms under which the savings association may prepay the 
obligation;
    (G) Where applicable, state or refer to a document stating that the 
savings association must obtain OCC's prior approval before the 
acceleration of payment of principal or interest on subordinated debt 
securities, redemption of subordinated debt securities prior to 
maturity, repurchase of subordinated debt securities, or exercising a 
call option in connection with a subordinated debt security; and
    (H) State that the security may be fully subordinated to interests 
held by the U.S. government in the event that the savings association 
enters into a receivership, insolvency, liquidation, or similar 
proceeding;
    (ii) A Federal savings association must include such additional 
statements as the OCC may prescribe for certificates, purchase 
agreements, indentures, and other related documents.

[[Page 381]]

    (2) Indenture. (i) Except as provided in paragraph (d)(2)(ii) of 
this section, a Federal savings association must use an indenture for 
subordinated debt securities. If the aggregate amount of subordinated 
debt securities publicly offered (excluding sales in a non-public 
offering as defined in 12 CFR 16.7) and sold in any consecutive 12-month 
or 36-month period exceeds $5,000,000 or $10,000,000 respectively (or 
such lesser amount that the Securities and Exchange Commission may 
establish by rule or regulation under 15 U.S.C. 77ddd), the indenture 
must provide for the appointment of a trustee other than the savings 
association or an affiliate of the savings association (as defined in 
paragraph (d)(1)(i)(C) of this section) and for collective enforcement 
of the security holders' rights and remedies.
    (ii) A Federal savings association is not required to use an 
indenture if the subordinated debt securities are sold only to 
accredited investors, as that term is defined in 15 U.S.C. 77b(a)(15). A 
savings association must have an indenture that meets the requirements 
of paragraph (d)(2)(i) of this section in place before any debt 
securities for which an exemption from the indenture requirement is 
claimed, are transferred to any non-accredited investor. If a savings 
association relies on this exemption from the indenture requirement, it 
must place a legend on the debt securities indicating that an indenture 
must be in place before the debt securities are transferred to any non-
accredited investor.
    (e) Review by the OCC. (1) In reviewing applications under this 
section, the OCC will consider whether:
    (i) The issuance of the covered securities is authorized under 
applicable laws and regulations and is consistent with the savings 
association's charter and bylaws;
    (ii) The savings association is at least adequately capitalized 
under 12 CFR 6.4 and meets the regulatory capital requirements at 12 CFR 
3.10;
    (iii) The savings association is or will be able to service the 
covered securities;
    (iv) The covered securities are consistent with the requirements of 
this section;
    (v) The covered securities and related transactions sufficiently 
transfer risk from the Deposit Insurance Fund; and
    (vi) The OCC has no objection to the issuance based on the savings 
association's overall policies, condition, and operations.
    (2) The OCC's approval is conditioned upon no material changes to 
the information disclosed in the application submitted to the OCC. The 
OCC may impose such additional requirements or conditions as it may deem 
necessary to protect purchasers, the savings association, the OCC, or 
the Deposit Insurance Fund.
    (f) Amendments. If a Federal savings association amends the covered 
securities or related documents following the completion of the OCC's 
review, it must obtain the OCC's approval under this section before it 
may include the amended securities in tier 2 capital.
    (g) Sale of covered securities. The Federal savings association must 
complete the sale of covered securities within one year after the OCC's 
approval under this section. A savings association may request an 
extension of the offering period by filing a written request with the 
OCC. The savings association must demonstrate good cause for the 
extension and file the request at least 30 days before the expiration of 
the offering period or any extension of the offering period.
    (h) Issuance of a replacement regulatory capital instrument in 
connection with prepaying a covered security. The OCC may require a 
Federal savings association seeking prior approval to prepay a covered 
security included in tier 2 capital to issue a replacement covered 
security of an equivalent amount that qualifies as tier 1 or tier 2 
capital under 12 CFR 3.20. If the OCC imposes such a requirement, the 
savings association must complete the sale of such covered security 
prior to, or immediately after, the prepayment.\5\
---------------------------------------------------------------------------

    \5\ A Federal savings association may replace tier 2 capital 
instruments concurrent with the redemption of existing tier 2 capital 
instruments.
---------------------------------------------------------------------------

    (i) Reports. A Federal savings association must file the following 
information with the OCC within 30 days after the savings association 
completes the

[[Page 382]]

sale of covered securities includable as tier 2 capital. If the savings 
association filed its application following the completion of the sale, 
it must submit this information with its application:
    (1) A written report indicating the number of purchasers, the total 
dollar amount of securities sold, the net proceeds received by the 
savings association from the issuance, and the amount of covered 
securities, net of all expenses, to be included as tier 2 capital;
    (2) Three copies of an executed form of the securities and a copy of 
any related documents governing the issuance or administration of the 
securities; and
    (3) A certification by the appropriate executive officer indicating 
that the savings association complied with all applicable laws and 
regulations in connection with the offering, issuance, and sale of the 
securities.

[80 FR 28464, May 18, 2015, as amended at 85 FR 80467, Dec. 11, 2020]



Sec.  5.58  Pass-through investments by a Federal savings association.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464, 1828, and 5412(b)(2)(B).
    (b) Scope. Federal savings associations are permitted to make 
various types of equity investments pursuant to 12 U.S.C. 1464 and other 
statutes, including pass-through investments authorized under 12 CFR 
160.32(a). These investments are in addition to those subject to 
Sec. Sec.  5.35, 5.37, 5.38, and 5.59. This section describes the 
procedure governing the filing of the application or notice that the OCC 
requires in connection with certain of these investments. The OCC may 
review other permissible equity investments on a case-by-case basis.
    (c) Licensing requirements. A Federal savings association must file 
a notice or application as prescribed in this section to make a pass-
through investment authorized under 12 CFR 160.32(a).
    (d) Definitions. For purposes of this section:
    (1) Enterprise means any corporation, limited liability company, 
partnership, trust, or similar business entity.
    (2) Pass-through investment means an investment authorized under 12 
CFR 160.32(a). A pass-through investment does not include a Federal 
savings association holding interests in a trust formed for the purposes 
of securitizing assets held by the savings association as part of its 
business or for the purposes of holding multiple legal titles of motor 
vehicles or equipment in conjunction with lease financing transactions.
    (e) Pass-through investments; notice procedure. Except as provided 
in paragraphs (f) through (i) of this section, a Federal savings 
association may make a pass-through investment, directly or through its 
operating subsidiary, in an enterprise that engages in an activity 
described in Sec.  5.38(f)(5) or in an activity that is substantively 
the same as a previously approved activity by filing a written notice. 
The Federal savings association must file this written notice with the 
appropriate OCC licensing office no later than 10 days after making the 
investment. The written notice must:
    (1) Describe the structure of the investment and the activity or 
activities conducted by the enterprise in which the Federal savings 
association is investing. To the extent the notice relates to the 
initial affiliation of the Federal savings association with a company 
engaged in insurance activities, the savings association should describe 
the type of insurance activity that the company is engaged in and has 
present plans to conduct. The Federal savings association must also list 
for each State the lines of business for which the company holds, or 
will hold, an insurance license, indicating the State where the company 
holds a resident license or charter, as applicable;
    (2) State:
    (i) Which paragraphs of Sec.  5.38(f)(5) describe the activity; or
    (ii) If the activity is substantively the same as a previously 
approved activity:
    (A) How, the activity is substantively the same as a previously 
approved activity;
    (B) The citation to the applicable precedent; and
    (C) That the activity will be conducted in accordance with the same 
terms and conditions applicable to the previously approved activity;
    (3) Certify that the Federal savings association is well capitalized 
and well

[[Page 383]]

managed at the time of the investment;
    (4) Describe how the Federal savings association has the ability to 
prevent the enterprise from engaging in an activity that is not set 
forth in Sec.  5.38(f)(5) or not contained in published OCC (including 
published former OTS) precedent for previously approved activities, or 
how the savings association otherwise has the ability to withdraw its 
investment;
    (5) Describe how the investment is convenient and useful to the 
Federal savings association in carrying out its business and not a mere 
passive investment unrelated to the savings association's banking 
business;
    (6) Certify that the Federal savings association's loss exposure is 
limited as a legal matter and that the savings association does not have 
unlimited liability for the obligations of the enterprise; and
    (7) Certify that the enterprise in which the Federal savings 
association is investing agrees to be subject to OCC supervision and 
examination, subject to the limitations and requirements of section 45 
of the Federal Deposit Insurance Act (12 U.S.C. 1831v) and section 115 
of the Gramm-Leach-Bliley Act (12 U.S.C. 1820a).
    (f) Pass-through investments; application procedure--(1) In general. 
A Federal savings association must file an application and obtain prior 
approval before making or acquiring, either directly or through an 
operating subsidiary, a pass-through investment in an enterprise if the 
pass-through investment does not qualify for the notice procedure set 
forth in paragraph (e) of this section because the savings association 
is unable to make the representation required by paragraph (e)(2) or the 
certification required by paragraphs (e)(3) or (e)(7) of this section. 
The application must include the information required in paragraphs 
(e)(1) and (e)(4) through (e)(6) of this section and, if possible, 
paragraphs (e)(2), (e)(3), and (e)(7) of this section. If the Federal 
savings association is unable to make the representation set forth in 
paragraph (e)(2) of this section, the savings association's application 
must explain why the activity in which the enterprise engages is a 
permissible activity for a Federal savings association and why the filer 
should be permitted to hold a pass-through investment in an enterprise 
engaged in that activity. A Federal savings association may not make a 
pass-through investment if it is unable to make the representations and 
certifications specified in paragraphs (e)(1) and (e)(4) through (e)(6) 
of this section.
    (2) Expedited review. An application submitted by a Federal savings 
association is deemed approved by the OCC as of the 10th day after the 
application is received by the OCC if:
    (A) The Federal savings association makes the representation 
required by paragraph (e)(2) and the certification required by paragraph 
(e)(3) of this section;
    (B) The book value of the Federal savings association's pass-through 
investment for which the application is being submitted is no more than 
1% of the savings association's capital and surplus;
    (C) No more than 50% of the enterprise is owned or controlled by 
banks or savings associations subject to examination by an appropriate 
Federal banking agency or credit unions insured by the National Credit 
Union Association; and
    (D) The OCC has not notified the Federal savings association that 
the application has been removed from expedited review, or the expedited 
review process is extended, under Sec.  5.13(a)(2).
    (3) Investments requiring a filing under 12 U.S.C. 1828(m). 
Notwithstanding any other provision in this section, if an enterprise in 
which a Federal savings association proposes to invest would be a 
subsidiary of the Federal savings association for purposes of 12 U.S.C. 
1828(m) and the enterprise would not be an operating subsidiary or a 
service corporation, the Federal savings association must file an 
application with the OCC under paragraph (f)(3) of this section at least 
30 days prior to making the investment and obtain prior approval from 
the OCC before making the investment. The application must include the 
information required in paragraphs (e)(1) and (e)(4) through (e)(6) of 
this section and, if possible, paragraphs (e)(2), (e)(3), and (e)(7) of 
this section. If

[[Page 384]]

the Federal savings association is unable to make the representation set 
forth in paragraph (e)(2) of this section, the savings association's 
application must explain why the activity in which the enterprise 
engages is a permissible activity for a Federal savings association and 
why the filer should be permitted to hold a pass-through investment in 
an enterprise engaged in that activity. A Federal savings association 
may not make a pass-through investment if it is unable to make the 
representations and certifications specified in paragraphs (e)(1) and 
(e)(4) through (e)(6) of this section.
    (g) Pass-through investments; no application or notice required. A 
Federal savings association may make or acquire, either directly or 
through an operating subsidiary, a pass-through investment in an 
enterprise, without an application or notice to the OCC, if:
    (1) The activities of the enterprise are limited to those activities 
previously reported by the savings association in connection with the 
making or acquiring of a pass-through investment;
    (2) The activities in the enterprise continue to be legally 
permissible for a Federal savings association;
    (3) The savings association's pass-through investment will be made 
in accordance with any conditions imposed by the OCC or OTS in approving 
any prior pass-through investment conducting these activities;
    (4) The savings association is able to make the representations and 
certifications specified in paragraphs (e)(3) through (e)(7) of this 
section; and
    (5) The enterprise will not be a subsidiary for purposes of 12 
U.S.C. 1828(m).
    (h) Pass-through investments in enterprises holding assets in 
satisfaction of debts previously contracted. Certain pass-through 
investments may be eligible for expedited treatment where the Federal 
savings association's investment is in an enterprise holding assets in 
satisfaction of debts previously contracted or the savings association 
acquires shares of a company in satisfaction of debts previously 
contracted.
    (1) Notice required. A Federal savings association that is well 
capitalized and well managed may acquire a pass-through investment, 
directly or through its operating subsidiary, in an enterprise that 
engages in the activities of holding and managing assets acquired by the 
parent savings association through foreclosure or otherwise in good 
faith to compromise a doubtful claim, or in the ordinary course of 
collecting a debt previously contracted, by filing a written notice in 
accordance with this paragraph (h)(1). The activities of the enterprise 
must be conducted pursuant to the same terms and conditions as would be 
applicable if the activity were conducted directly by a Federal savings 
association. The Federal savings association must file the written 
notice with the appropriate OCC licensing office no later than 10 days 
after making the pass-through investment. This notice must include a 
complete description of the Federal savings association's investment in 
the enterprise and the activities conducted, a description of how the 
savings association plans to divest the pass-through investment or the 
underlying assets within applicable statutory time frames, and a 
representation and undertaking that the savings association will conduct 
the activities in accordance with OCC policies contained in guidance 
issued by the OCC regarding the activities. Any Federal savings 
association receiving approval under this paragraph (h)(1) is deemed to 
have agreed that the enterprise will conduct the activity in a manner 
consistent with published OCC guidance.
    (2) No notice or application required. A Federal savings association 
is not required to file a notice or application under this Sec.  5.58 if 
it acquires a non-controlling investment in shares of a company through 
foreclosure or otherwise in good faith to compromise a doubtful claim, 
or in the ordinary course of collecting a debt previously contracted.
    (i) Additional exception to filing requirement. A Federal savings 
association may make a pass-through investment without filing a notice 
or application to the OCC if all of the following conditions are met:
    (1) The investment is in an investment company the portfolio of 
which consists exclusively of assets that the

[[Page 385]]

Federal savings association may hold directly;
    (2) The Federal savings association is not investing more than 10 
percent of its total capital (or, in the case of a Federal savings 
association that is a qualifying community banking organization that has 
elected to use the community bank leverage ratio framework, 10 percent 
of its tier 1 capital, as used under Sec.  3.12 of this chapter) in one 
company;
    (3) The book value of the Federal savings association's aggregate 
pass-through investments does not exceed 25 percent of its total capital 
(or, in the case of a Federal savings association that is a qualifying 
community banking organization that has elected to use the community 
bank leverage ratio framework, 25 percent of its tier 1 capital, as used 
under Sec.  3.12 of this chapter) after making the investment;
    (4) The investment would not give Federal savings association direct 
or indirect control of the company; and
    (5) The Federal savings association's liability is limited to the 
amount of its investment.
    (j) Exceptions to rules of general applicability. Sections 5.8, 5.9, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.9, 5.10, and 5.11 apply.

[80 FR 28466, May 18, 2015, as amended at 84 FR 61794, Nov. 13, 2019; 84 
FR 69297, Dec. 18, 2019; 85 FR 80468, Dec. 11, 2020; 86 FR 1255, Jan. 8, 
2021]



Sec.  5.59  Service corporations of Federal savings associations.

    (a) Authority. 12 U.S.C. 1462a, 1463, 1464(c)(4)(B), 1828, and 
5412(b)(2)(B).
    (b) Licensing requirements. When required by section 18(m) of the 
Federal Deposit Insurance Act (12 U.S.C. 1828(m)), a Federal savings 
association must file an application as prescribed in this section to:
    (1) Acquire or establish a service corporation; or
    (2) Commence a new activity in an existing service corporation 
subsidiary.
    (c) Scope. This section sets forth the OCC's requirements regarding 
service corporations of Federal savings associations, and sets forth 
procedures governing OCC review and approval of filings by Federal 
savings associations to establish or acquire service corporations and 
filings by Federal savings associations to conduct new activities in 
existing service corporation subsidiaries, pursuant to the authority 
provided in section 5(c)(4)(B) of the Home Owners' Loan Act, 12 U.S.C. 
1464(c)(4)(B).
    (d) Definitions--(1) Control has the meaning set forth at 12 U.S.C. 
1841 and the Federal Reserve Board's regulations thereunder, at 12 CFR 
part 225.
    (2) GAAP-consolidated subsidiary means a service corporation in 
which a Federal savings association has a direct or indirect ownership 
interest and whose assets are consolidated with those of the savings 
association for purposes of reporting under GAAP.
    (3) Ownership interest means any equity interest in a business 
organization, including stock, limited or general partnership interests, 
or shares in a limited liability company.
    (4) Service corporation means any entity that satisfies all of the 
requirements for service corporations in 12 U.S.C. 1464(c)(4)(B) and 
this part, and that is designated by the investing Federal savings 
association as a service corporation pursuant to this section. A service 
corporation may be a first-tier service corporation of a Federal savings 
association or may be a lower-tier service corporation.
    (5) Service corporation subsidiary means a service corporation of a 
Federal savings association that is controlled by that savings 
association.
    (e) Standards and requirements--(1) Ownership. Only Federal or 
State-chartered savings associations with home offices in the State 
where the relevant Federal savings association has its home office may 
have an ownership interest in a first-tier service corporation. A 
Federal savings association need not have any minimum percentage 
ownership interest or have control of a service corporation in order to 
designate an entity as a service corporation.
    (2) Geographic restrictions. A first-tier service corporation must 
be organized under the laws of the State where the

[[Page 386]]

relevant Federal savings association's home office is located.
    (3) Authorized activities. A service corporation may engage in any 
of the designated permissible service corporation activities listed in 
paragraph (f) of this section, subject to any applicable filing 
requirement under paragraph (h) of this section. In addition, a Federal 
savings association may request OCC approval for a service corporation 
to engage in any other activity reasonably related to the activities of 
financial institutions.
    (4) Investment limitations. A Federal savings association's 
investment in service corporations is subject to the limitations set 
forth in paragraph (g) of this section. The assets of a Federal savings 
association's service corporations are not subject to the investment 
limitations applicable to the savings association under section 5(c) of 
the Home Owners' Loan Act, 12 U.S.C. 1464(c).
    (5) Form of organization. A service corporation may be organized as 
a corporation, or may be organized in any other organizational form that 
provides the same protections as the corporate form of organization, 
including limited liability.
    (6) Qualified thrift lender test. In accordance with 12 U.S.C. 
1467a(m)(5), a Federal savings association may determine whether to 
consolidate the assets of a particular service corporation for purposes 
of calculating qualified thrift investments. If a service corporation's 
assets are not consolidated with the assets of the Federal savings 
association for that purpose, the savings association's investment in 
the service corporation will be considered in calculating the savings 
association's qualified thrift investments.
    (7) Supervisory, legal or safety or soundness considerations. (i) 
Each service corporation must be well managed and operate safely and 
soundly. In addition, each service corporation must pursue financial 
policies that are safe and consistent with the purposes of savings 
associations. Each service corporation must maintain sufficient 
liquidity to ensure its safe and sound operation.
    (ii) The OCC may, at any time, limit a Federal savings association's 
investment in a service corporation, or limit or refuse to permit any 
activity of a service corporation, for supervisory, legal, or safety or 
soundness reasons.
    (8) Separate corporate identity. Federal savings associations and 
service corporations thereof must be operated in a manner that 
demonstrates to the public that each maintains a separate corporate 
existence. Each must operate so that:
    (i) Their respective business transactions, accounts, and records 
are not intermingled;
    (ii) Each observes the formalities of their separate corporate 
procedures;
    (iii) Each is held out to the public as a separate enterprise; and
    (iv) Unless the parent Federal savings association has guaranteed a 
loan to the service corporation, all borrowings by the service 
corporation indicate that the savings association is not liable.
    (9) Issuances of securities by service corporations. A service 
corporation must not state or imply that the securities it issues are 
covered by Federal deposit insurance. A service corporation subsidiary 
must not issue any security the payment, maturity, or redemption of 
which may be accelerated upon the condition that the controlling Federal 
savings association is insolvent or has been placed into receivership. 
For as long as any securities are outstanding, the controlling Federal 
savings association must maintain all records generated through each 
securities issuance in the ordinary course of business, including but 
not limited to a copy of the prospectus, offering circular, or similar 
document concerning such issuance, and make such records available for 
examination by the OCC.
    (10) Certain pre-existing non-controlling investments. A Federal 
savings association that made a non-controlling investment in a service 
corporation before May 18, 2015, but did not submit a filing under 12 
U.S.C. 1828(m) with respect to such service corporation investment, is 
not required to file a service corporation application with respect to 
such investment pursuant to paragraph (b), provided that the Federal 
savings association does not acquire additional stock or similar 
interests in the service corporation, and the

[[Page 387]]

service corporation does not engage in any activities in which it was 
not engaged as of May 18, 2015.
    (f) Authorized service corporation activities. Subject to the prior 
filing requirements set forth in paragraph (h) of this section and the 
provisions of paragraph (e)(3) of this section, a service corporation 
may engage in the following activities:
    (1) Any activity that all Federal savings associations may conduct 
directly.
    (2) Business and professional services. Service corporations may 
engage in the following activities only when such activities are limited 
to financial documents or financial clients or are generally finance-
related:
    (i) Accounting or internal audit;
    (ii) Advertising, market research and other marketing;
    (iii) Clerical;
    (iv) Consulting;
    (v) Courier;
    (vi) Data processing;
    (vii) Data storage facilities operation and related services;
    (viii) Office supplies, furniture, and equipment purchasing and 
distribution;
    (ix) Personnel benefit program development or administration;
    (x) Printing and selling forms that require Magnetic Ink Character 
Recognition (MICR) encoding;
    (xi) Relocation of personnel;
    (xii) Research studies and surveys;
    (xiii) Software development and systems integration; and
    (xiv) Remote service unit operation, leasing, ownership or 
establishment.
    (3) Credit-related activities. (i) Abstracting;
    (ii) Acquiring and leasing personal property;
    (iii) Appraising;
    (iv) Collection agency;
    (v) Credit analysis;
    (vi) Check or credit card guaranty and verification;
    (vii) Escrow agent or trustee (under deeds of trust, including 
executing and delivery of conveyances, reconveyances and transfers of 
title); and
    (viii) Loan inspection.
    (4) Consumer services. (i) Financial advice or consulting;
    (ii) Foreign currency exchange;
    (iii) Home ownership counseling;
    (iv) Income tax return preparation;
    (v) Postal services;
    (vi) Stored value instrument sales;
    (vii) Welfare benefit distribution;
    (viii) Check printing and related services; and
    (ix) Remote service unit operation, leasing, ownership, or 
establishment.
    (5) Real estate related services. (i) Acquiring real estate for 
prompt development or subdivision, for construction of improvements, for 
resale or leasing to others for such construction, or for use as 
manufactured home sites, in accordance with a prudent program of 
property development;
    (ii) Acquiring improved real estate or manufactured homes to be held 
for rental or resale, for remodeling, renovating or demolishing and 
rebuilding for resale or rental, or to be used for offices and related 
facilities of a stockholder of the service corporation;
    (iii) Maintaining and managing real estate; and
    (iv) Real estate brokerage for property owned by a savings 
association that owns capital stock of the service corporation, or a 
lower-tier service corporation in which the service corporation invests.
    (6) Securities activities, liquidity management, and coins. (i) 
Execution of transactions in securities on an agency or riskless 
principal basis solely upon the order and for the account of customers 
or the provision of investment advice. The service corporation must 
register with the Securities and Exchange Commission and State 
securities regulators, as required by applicable Federal and State law 
and regulations;
    (ii) Liquidity management;
    (iii) Issuing notes, bonds, debentures, or other obligations or 
securities; and
    (iv) Purchase or sale of coins issued by the U.S. Treasury.
    (7) Investments. (i) Tax-exempt bonds used to finance residential 
real property for family units;
    (ii) Tax-exempt obligations of public housing agencies used to 
finance housing projects with rental assistance subsidies;
    (iii) Small business investment companies and new markets venture 
capital companies licensed by the U.S. Small Business Administration;

[[Page 388]]

    (iv) Rural business investment companies licensed by the U.S. 
Department of Agriculture; and
    (v) Investing in savings accounts of an investing thrift.
    (8) Community development investments. Community and economic 
development or public welfare investments that are permissible under 
part 24 of this chapter.
    (9) Charitable activities. Establishing or acquiring a corporation 
that is recognized by the Internal Revenue Service as organized for 
charitable purposes under 26 U.S.C. 501(c)(3) of the Internal Revenue 
Code and making a reasonable contribution to capitalize it, provided 
that the corporation engages exclusively in activities designed to 
promote the well-being of communities in which the owners of the service 
corporation operate.
    (10) Activities conducted as agent. Activities conducted on behalf 
of a customer on other than an ``as principal'' basis.
    (11) Incidental activities. Activities reasonably incident to those 
listed in paragraphs (f)(1) through (f)(10) of this section if the 
service corporation engages in those activities.
    (g) Limitations on investments in service corporations--(1) In 
general. Under the authority of section 5(c)(4)(B) of the Home Owners' 
Loan Act (12 U.S.C. 1464(c)(4)(B)), a Federal savings association may 
invest up to 3 percent of its assets in the capital stock, obligations, 
and other securities of service corporations. Any investment that would 
cause a Federal savings association's investment in service 
corporations, in the aggregate, to exceed 2 percent of assets, or made 
while the savings association's investments in service corporations 
exceeds 2 percent of assets, must serve primarily community, inner city, 
or community and economic development or public welfare purposes 
consistent with 12 CFR part 24. A Federal savings association must 
designate the investments serving those purposes.
    (2) Loans. In addition to the amounts that a Federal savings 
association may invest under paragraph (g)(1) of this section, and to 
the extent that a Federal savings association has authority under other 
provisions of section 5(c) of the Home Owners' Loan Act (12 U.S.C. 
1464(c)), this part 5, and 12 CFR part 160, and available capacity 
within any applicable investment limits, a Federal savings association 
may make loans to any service corporation subject to the following 
conditions:
    (i) Loans to service corporations other than a GAAP-consolidated 
subsidiary are subject to the lending limits in part 32 of this chapter.
    (ii) The OCC may limit the amount of loans to any service 
corporation where safety and soundness considerations warrant such 
action.
    (3) Definition. For purposes of this paragraph (g), the terms 
``loans'' and ``obligations'' include all loans and other debt 
instruments (except accounts payable incurred in the ordinary course of 
business and paid within 60 days) and all guarantees or take-out 
commitments of such loans or debt instruments.
    (4) GAAP-consolidated subsidiaries. Both debt and equity investments 
in service corporations that are GAAP-consolidated subsidiaries are 
considered investments in subsidiaries for purposes of 12 CFR part 3.
    (h) Filing requirements--(1) Application. (i) When required by 
section 18(m) of the Federal Deposit Insurance Act (12 U.S.C. 1828(m)), 
a Federal savings association must file an application at least 30 days 
before:
    (A) Acquiring or establishing a service corporation; or
    (B) Commencing a new activity in an existing service corporation 
subsidiary.
    (ii) The application must include a complete description of the 
savings association's investment in the service corporation, the 
proposed activities of the service corporation, the organizational 
structure and management of the service corporation, the relations 
between the savings association and the service corporation, and other 
information necessary to adequately describe the proposal. If the 
service corporation proposes to engage in insurance activities, the 
savings association must describe the type of insurance activity in 
which the service corporation proposes to engage. The savings 
association must also list for each State the lines of business for 
which the company holds, or will hold, an insurance

[[Page 389]]

license, indicating the State where the service corporation holds a 
resident license or charter, as applicable. The OCC may require a filer 
to submit a legal analysis if the proposal is novel, unusually complex, 
or raises substantial unresolved legal issues. In these cases, the OCC 
encourages filers to have a prefiling meeting with the OCC. Any savings 
association receiving approval under this paragraph is deemed to have 
agreed that the service corporation will conduct the activity in a 
manner consistent with published OCC guidance.
    (2) Expedited review. (i) An application to establish or acquire a 
service corporation, or to perform a new activity in an existing service 
corporation subsidiary, that meets the requirements of this paragraph is 
deemed approved by the OCC as of the 30th day after the filing is 
received by the OCC, unless the OCC notifies the filer prior to that 
date that the filing has been removed from expedited review, or the 
expedited review period is extended, under Sec.  5.13(a)(2). Any savings 
association receiving approval under this paragraph is deemed to have 
agreed that the service corporation will conduct the activity in a 
manner consistent with published OCC guidance.
    (ii) An application is eligible for expedited review if the 
following requirements are met:
    (A) The savings association is well capitalized and well managed; 
and
    (B) The service corporation engages only in one or more of the 
preapproved activities listed in paragraph (f) of this section.
    (3) OCC review and approval. The OCC reviews a Federal savings 
association's application to determine whether the proposal is legally 
permissible and to ensure that the proposal is consistent with the 
requirements of this section, safe and sound banking practices and OCC 
policy and does not endanger the safety or soundness of the parent 
Federal savings association. As part of this process, the OCC may 
request additional information and analysis from the filer.
    (4) Redesignation. A Federal savings association that proposes to 
redesignate an operating subsidiary as a service corporation must submit 
a notification to the OCC at least 30 days prior to the redesignation 
date. The notification must include a description of how the 
redesignated entity will meet all of the requirements of this section, a 
resolution of the savings association's board of directors approving the 
redesignation, and the proposed effective date of the redesignation. The 
savings association may effect the redesignation on the proposed date 
unless the OCC notifies the savings association otherwise prior to that 
date. The OCC may require an application if the redesignation presents 
policy, supervisory, or legal issues.
    (5) Exception to rules of general applicability. Sections 5.8, 5.10 
and 5.11 do not apply to this section. However, if the OCC concludes 
that an application presents significant or novel policy, supervisory, 
or legal issues, the OCC may determine that some or all provisions in 
Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (i) Exercise of salvage powers through service corporations. (1) In 
accordance with this section, a Federal savings association may exercise 
its salvage power to make a contribution or a loan (including a 
guarantee of a loan made by any other person) to a service corporation 
(``salvage investment'') that exceeds the maximum amount otherwise 
permitted under law or regulation. A Federal savings association must 
notify the appropriate supervisory office at least 30 days before making 
such a salvage investment. The notification must demonstrate:
    (i) The salvage investment protects the savings association's 
interest in the service corporation;
    (ii) The salvage investment is consistent with safety and soundness; 
and
    (iii) The savings association considered alternatives to the salvage 
investment and determined that such alternatives would not adequately 
satisfy paragraphs (i)(1)(i) and (ii) of this section.
    (2) If the OCC notifies the Federal savings association within 30 
days of the filing of the notification that the notification presents 
supervisory concerns, or raises significant issues of law or policy, the 
Federal savings association must apply for and receive the OCC's prior 
written approval before making the salvage investment.

[[Page 390]]

    (3) If a service corporation is a GAAP-consolidated subsidiary, the 
salvage investment will be considered an investment in a subsidiary for 
purposes of 12 CFR part 3.
    (j) Failure to comply with the requirements applicable to service 
corporations. If a service corporation fails to meet any of the 
requirements of this section, the Federal savings association must 
notify the appropriate OCC licensing office. Unless the Federal savings 
association is otherwise advised by the OCC, if the service corporation 
cannot comply with the requirements of this section within 90 days of 
failing to meet such requirements, or otherwise resolve such failure to 
comply with this section, the Federal savings association must promptly 
dispose of its investment in the service corporation.

[80 FR 28467, May 18, 2015, as amended at 85 FR 80469, Dec. 11, 2020]



            Subpart E_Payment of Dividends by National Banks



Sec.  5.60  Authority, scope, and exceptions to rules of general applicability.

    (a) Authority. 12 U.S.C. 56, 60, and 93a.
    (b) Scope. Except as otherwise provided, the restrictions in this 
subpart apply to the declaration and payment of all dividends by a 
national bank, including dividends paid in property. However, the 
provisions contained in Sec.  5.64 do not apply to dividends paid in 
stock of the bank.
    (c) Exceptions to the rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this subpart.



Sec.  5.61  Definitions.

    For the purposes of subpart E, the following definitions apply:
    (a) Capital stock, capital surplus, and permanent capital have the 
same meaning as set forth in Sec.  5.46.
    (b) Retained net income means the net income of a specified period 
less the total amount of all dividends declared in that period.



Sec.  5.62  Date of declaration of dividend.

    A national bank must use the date a dividend is declared for the 
purposes of determining compliance with this subpart.

[61 FR 60363, Nov. 27, 1996, as amended at 85 FR 80469, Dec. 11, 2020]



Sec.  5.63  Capital limitation under 12 U.S.C. 56.

    (a) General limitation. Except as provided by 12 U.S.C. 59 and Sec.  
5.46, a national bank may not withdraw, or permit to be withdrawn, 
either in the form of a dividend or otherwise, any portion of its 
permanent capital. Further, a national bank may not declare a dividend 
in excess of undivided profits.
    (b) Preferred stock. The provisions of 12 U.S.C. 56 do not apply to 
dividends on preferred stock. However, if the undivided profits of the 
national bank are not sufficient to cover a proposed dividend on 
preferred stock, the proposed dividend constitutes a reduction in 
capital subject to 12 U.S.C. 59 and Sec.  5.46.



Sec.  5.64  Earnings limitation under 12 U.S.C. 60.

    (a) Definitions. As used in this section, the term ``current year'' 
means the calendar year in which a national bank declared, or proposes 
to declare, a dividend. The term ``current year minus one'' means the 
year immediately preceding the current year. The term ``current year 
minus two'' means the year that is two years prior to the current year. 
The term ``current year minus three'' means the year that is three years 
prior to the current year. The term ``current year minus four'' means 
the year that is four years prior to the current year.
    (b) Dividends from undivided profits. Subject to 12 U.S.C. 56 and 
this subpart, the directors of a national bank may declare and pay 
dividends of so much of the undivided profits as they judge to be 
expedient.
    (c) Earnings limitations under 12 U.S.C. 60--(1) General rule. For 
purposes of 12 U.S.C. 60, unless approved by the OCC in accordance with 
paragraph (c)(3) of this section, a national bank may not declare a 
dividend if the total amount of all dividends (common and preferred), 
including the proposed dividend, declared by the national bank in any 
current year exceeds the total of the national bank's net income for the 
current year to date, combined with its

[[Page 391]]

retained net income of current year minus one and current year minus 
two, less the sum of any transfers required by the OCC and any transfers 
required to be made to a fund for the retirement of any preferred stock.
    (2) Excess dividends in prior periods. (i) If in current year minus 
one or current year minus two the bank declared dividends in excess of 
that year's net income, the excess does not reduce retained net income 
for the three-year period specified in paragraph (c)(1) of this section, 
provided that the amount of excess dividends can be offset by retained 
net income in current year minus three or current year minus four. If 
the bank declared dividends in excess of net income in current year 
minus one, the excess is offset by retained net income in current year 
minus three and then by retained net income in current year minus two. 
If the bank declared dividends in excess of net income in current year 
minus two, the excess is first offset by retained net income in current 
year minus four and then by retained net income in current year minus 
three.
    (ii) If the bank's retained net income in current year minus three 
and current year minus four was insufficient to offset the full amount 
of the excess dividends declared, as calculated in accordance with 
paragraph (c)(2)(i) of this section, then the amount that is not offset 
will reduce the retained net income available to pay dividends in the 
current year.
    (iii) The calculation in paragraphs (c)(2)(i) and (c)(2)(ii) of this 
section applies only to retained net loss that results from dividends 
declared in excess of a single year's net income and does not apply to 
other types of current earnings deficits.
    (3) Prior approval required. A national bank may declare a dividend 
in excess of the amount described in paragraphs (c)(1) and (c)(2) of 
this section, provided that the dividend is approved by the OCC. A 
national bank must submit a request for prior approval of a dividend 
under 12 U.S.C. 60 to the appropriate OCC supervisory office.

[73 FR 22241, Apr. 24, 2008, as amended at 80 FR 28470, May 18, 2015; 85 
FR 80469, Dec. 11, 2020]



Sec.  5.65  Restrictions on undercapitalized institutions.

    Notwithstanding any other provision in this subpart, a national bank 
may not declare or pay any dividend if, after making the dividend, the 
national bank would be ``undercapitalized'' as defined in 12 CFR part 6.



Sec.  5.66  Dividends payable in property other than cash.

    In addition to cash dividends, directors of a national bank may 
declare dividends payable in property, with the approval of the OCC. A 
national bank must submit a request for prior approval of a noncash 
dividend to the appropriate OCC licensing office. The dividend is 
equivalent to a cash dividend in an amount equal to the actual current 
value of the property, regardless of whether the book value is higher or 
lower under GAAP. Before the dividend is declared, the bank should show 
the difference between actual value and book value on the books of the 
national bank as a gain or loss, as applicable, and the dividend should 
then be declared in the amount of the actual current value of the 
property being distributed.

[85 FR 80469, Dec. 11, 2020]



Sec.  5.67  Fractional shares.

    A national bank issuing additional stock may adopt arrangements to 
preclude the issuance of fractional shares. The bank may remit the cash 
equivalent of the fraction not being issued to those to whom fractional 
shares would otherwise be issued. The cash equivalent is based on the 
market value of the stock, if there is an established and active market 
in the national bank's stock. In the absence of such a market, the cash 
equivalent is based on a reliable and disinterested determination as to 
the fair market value of the stock if such stock is available. The bank 
may propose an alternate method in the application for the stock 
issuance filed with the OCC.

[85 FR 80470, Dec. 11, 2020]

[[Page 392]]



                 Subpart F_Federal Branches and Agencies



Sec.  5.70  Federal branches and agencies.

    (a) Authority. 12 U.S.C. 93a and 3101 et seq.
    (b) Scope. This subpart describes the filing requirements for 
corporate activities and transactions involving Federal branches and 
agencies of foreign banks. Substantive rules and policies for specific 
applications are contained in 12 CFR part 28.
    (c) Definitions. For purposes of this subpart:
    (1) To establish a Federal branch or agency means to:
    (i) Open and conduct business through an initial or additional 
Federal branch or agency;
    (ii) Acquire directly, through merger, consolidation, or similar 
transaction with another foreign bank, the operations of a Federal 
branch or agency that is open and conducting business;
    (iii) Acquire a Federal branch or agency through the acquisition of 
a foreign bank subsidiary that will cease to operate in the same 
corporate form following the acquisition;
    (iv) Convert a State branch or State agency operated by a foreign 
bank, or a commercial lending company controlled by a foreign bank, into 
a Federal branch or agency;
    (v) Relocate a Federal branch or agency within a State or from one 
State to another; or
    (vi) Convert a Federal agency or a limited Federal branch into a 
Federal branch.
    (2) Federal branch includes a limited Federal branch unless 
otherwise provided.
    (d) Filing requirements--(1) General. Unless otherwise provided in 
12 CFR part 28, a Federal branch or agency must comply with the 
applicable requirements of this part.
    (2) Applications. A foreign bank must submit an application and 
obtain prior approval from the OCC before it:
    (i) Establishes a Federal branch or agency; or
    (ii) Exercises fiduciary powers at a Federal branch. A foreign bank 
may submit an application to exercise fiduciary powers at the time of 
filing an application for a Federal branch license or at any subsequent 
date.
    (3) Biographical and Financial Reports. The OCC may require any 
senior executive officer of a Federal branch or agency submitting a 
filing to submit an Interagency Biographical and Financial Report, 
available at www.occ.gov, and legible fingerprints.

[61 FR 60363, Nov. 27, 1996, as amended at 68 FR 70698, Dec. 19, 2003; 
85 FR 80470, Dec. 11, 2020]



PART 6_PROMPT CORRECTIVE ACTION--Table of Contents



                      Subpart A_Capital Categories

Sec.
6.1 Authority, purpose, scope, other supervisory authority, disclosure 
          of capital categories, and transition procedures.
6.2 Definitions.
6.3 Notice of capital category.
6.4 Capital measures and capital categories.
6.5 Capital restoration plan.
6.6 Mandatory and discretionary supervisory actions.

          Subpart B_Directives To Take Prompt Corrective Action

6.20 Scope.
6.21 Notice of intent to issue a directive.
6.22 Response to notice.
6.23 Decision and issuance of a prompt corrective action directive.
6.24 Request for modification or rescission of directive.
6.25 Enforcement of directive.

    Authority: 12 U.S.C. 93a, 1831o, 5412(b)(2)(B).

    Source: 78 FR 62275, Oct. 11, 2013, unless otherwise noted.



                      Subpart A_Capital Categories



Sec.  6.1  Authority, purpose, scope, other supervisory authority, 
disclosure of capital categories, and transition procedures.

    (a) Authority. This part is issued by the Office of the Comptroller 
of the Currency (OCC) pursuant to section 38 (section 38) of the Federal 
Deposit Insurance Act (FDI Act) as added by section 131 of the Federal 
Deposit Insurance Corporation Improvement Act of 1991 (Pub. L. 102-242, 
105 Stat. 2236 (1991)) (12 U.S.C. 1831o).

[[Page 393]]

    (b) Purpose. Section 38 of the FDI Act establishes a framework of 
supervisory actions for insured depository institutions that are not 
adequately capitalized. The principal purpose of this subpart is to 
define, for insured national banks and insured Federal savings 
associations, the capital measures and capital levels, and for insured 
Federal branches, comparable asset-based measures and levels, that are 
used for determining the supervisory actions authorized under section 38 
of the FDI Act. This part 6 also establishes procedures for submission 
and review of capital restoration plans and for issuance and review of 
directives and orders pursuant to section 38.
    (c) Scope. This subpart implements the provisions of section 38 of 
the FDI Act as they apply to insured national banks, insured Federal 
branches, and insured Federal savings associations. Certain of these 
provisions also apply to officers, directors, and employees of these 
insured institutions. Other provisions apply to any company that 
controls an insured national bank, insured Federal branch, or insured 
Federal savings association and to the affiliates of an insured national 
bank, insured Federal branch, or insured Federal savings association.
    (d) Other supervisory authority. Neither section 38 nor this part in 
any way limits the authority of the OCC under any other provision of law 
to take supervisory actions to address unsafe or unsound practices, 
deficient capital levels, violations of law, unsafe or unsound 
conditions, or other practices. Action under section 38 of the FDI Act 
and this part may be taken independently of, in conjunction with, or in 
addition to any other enforcement action available to the OCC, including 
issuance of cease and desist orders, capital directives, approval or 
denial of applications or notices, assessment of civil money penalties, 
or any other actions authorized by law.
    (e) Disclosure of capital categories. The assignment of an insured 
national bank, insured Federal branch, or insured Federal savings 
association under this subpart within a particular capital category is 
for purposes of implementing and applying the provisions of section 38. 
Unless permitted by the OCC or otherwise required by law, no national 
bank or Federal savings association may state in any advertisement or 
promotional material its capital category under this subpart or that the 
OCC or any other Federal banking agency has assigned the national bank 
or Federal savings association to a particular capital category.
    (f) Transition procedures. (1) [Reserved]
    (2) Timing. On January 1, 2015 and thereafter, the calculation of 
the definitions of common equity tier 1 capital, the common equity tier 
1 risk-based capital ratio, the leverage ratio, the supplementary 
leverage ratio, tangible equity, tier 1 capital, the tier 1 risk-based 
capital ratio, total assets, total leverage exposure, the total risk-
based capital ratio, and total risk-weighted assets under this subpart 
is subject to the timing provisions at 12 CFR Sec.  3.1(f) and the 
transitions at 12 CFR part 3, subpart G.

[78 FR 62275, Oct. 11, 2013, as amended at 84 FR 56374, Oct. 22, 2019]



Sec.  6.2  Definitions.

    For purposes of this subpart, except as modified in this section or 
unless the context otherwise requires, the terms used have the same 
meanings as set forth in section 38 and section 3 of the FDI Act.
    Advanced approaches national bank or advanced approaches Federal 
savings association means a national bank or Federal savings association 
that is subject to subpart E of part 3 of this chapter.
    Common equity tier 1 capital means common equity tier 1 capital, as 
defined in accordance with the OCC's definition in subpart A of part 3 
of this chapter.
    Common equity tier 1 risk-based capital ratio means the ratio of 
common equity tier 1 capital to total risk-weighted assets, as 
calculated in accordance with subpart B of part 3 of this chapter, as 
applicable.
    Control. (1) Control has the same meaning assigned to it in section 
2 of the Bank Holding Company Act (12 U.S.C. 1841), and the term 
controlled shall be construed consistently with the term control.
    (2) Exclusion for fiduciary ownership. No insured depository 
institution or

[[Page 394]]

company controls another insured depository institution or company by 
virtue of its ownership or control of shares in a fiduciary capacity. 
Shares shall not be deemed to have been acquired in a fiduciary capacity 
if the acquiring insured depository institution or company has sole 
discretionary authority to exercise voting rights with respect thereto.
    (3) Exclusion for debts previously contracted. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares acquired in 
securing or collecting a debt previously contracted in good faith, until 
two years after the date of acquisition. The two-year period may be 
extended at the discretion of the appropriate Federal banking agency for 
up to three one-year periods.
    Controlling person means any person having control of an insured 
depository institution and any company controlled by that person.
    Federal savings association means an insured Federal savings 
association or an insured Federal savings bank chartered under section 5 
of the Home Owners' Loan Act of 1933.
    Leverage ratio means the ratio of tier 1 capital to average total 
consolidated assets, as calculated in accordance with subpart B of part 
3 of this chapter.
    Management fee means any payment of money or provision of any other 
thing of value to a company or individual for the provision of 
management services or advice to the national bank or Federal savings 
association or related overhead expenses, including payments related to 
supervisory, executive, managerial, or policymaking functions, other 
than compensation to an individual in the individual's capacity as an 
officer or employee of the national bank or Federal savings association.
    National bank means all insured national banks and all insured 
Federal branches, except where otherwise provided in this subpart.
    Supplementary leverage ratio means the ratio of tier 1 capital to 
total leverage exposure, as calculated in accordance with subpart B of 
part 3 of this chapter.
    Tangible equity means the amount of tier 1 capital, as calculated in 
accordance with subpart B of part 3 of this chapter, plus the amount of 
outstanding perpetual preferred stock (including related surplus) not 
included in tier 1 capital.
    Tier 1 capital means the amount of tier 1 capital as defined in 
subpart B of part 3 of this chapter.
    Tier 1 risk-based capital ratio means the ratio of tier 1 capital to 
risk-weighted assets, as calculated in accordance with subpart B of part 
3 of this chapter.
    Total assets means quarterly average total assets as reported in a 
national bank's or Federal savings association's Consolidated Reports of 
Condition and Income (Call Report), minus any deductions as provided in 
Sec.  3.22(a), (c), and (d) of this chapter. The OCC reserves the right 
to require a national bank or Federal savings association to compute and 
maintain its capital ratios on the basis of actual, rather than average, 
total assets when computing tangible equity.
    Total leverage exposure means the total leverage exposure, as 
calculated in accordance with subpart B of part 3 of this chapter.
    Total risk-based capital ratio means the ratio of total capital to 
total risk-weighted assets, as calculated in accordance with subpart B 
of part 3 of this chapter.
    Total risk-weighted assets means standardized total risk-weighted 
assets, and for an advanced approaches national bank or advanced 
approaches Federal savings association also includes advanced approaches 
total risk-weighted assets, as defined in subpart B of part 3 of this 
chapter.

[78 FR 62275, Oct. 11, 2013, as amended at 84 FR 56374, Oct. 22, 2019]



Sec.  6.3  Notice of capital category.

    (a) Effective date of determination of capital category. A national 
bank or Federal savings association shall be deemed to be within a given 
capital category for purposes of section 38 of the FDI Act and this part 
as of the date the national bank or Federal savings association is 
notified of, or is deemed to have notice of, its capital category

[[Page 395]]

pursuant to paragraph (b) of this section.
    (b) Notice of capital category. A national bank or Federal savings 
association shall be deemed to have been notified of its capital levels 
and its capital category as of the most recent date:
    (1) A Consolidated Reports of Condition and Income (Call Report) is 
required to be filed with the OCC;
    (2) A final report of examination is delivered to the national bank 
or Federal savings association; or
    (3) Written notice is provided by the OCC to the national bank or 
Federal savings association of its capital category for purposes of 
section 38 of the FDI Act and this part or that the national bank's or 
Federal savings association's capital category has changed pursuant to 
paragraph (c) of this section, or Sec.  6.4(e) and with respect to 
national banks, subpart M of part 19 of this chapter, and with respect 
to Federal savings associations Sec.  165.8 of this chapter.
    (c) Adjustments to reported capital levels and capital category--(1) 
Notice of adjustment by national bank or Federal savings association. A 
national bank or Federal savings association shall provide the OCC with 
written notice that an adjustment to the national bank's or Federal 
savings association's capital category may have occurred no later than 
15 calendar days following the date that any material event has occurred 
that would cause the national bank or Federal savings association to be 
placed in a lower capital category from the category assigned to the 
national bank or Federal savings association for purposes of section 38 
and this part on the basis of the national bank's or Federal savings 
association's most recent Call Report or report of examination.
    (2) Determination to change capital category. After receiving notice 
pursuant to paragraph (c)(1) of this section, the OCC shall determine 
whether to change the capital category of the national bank or Federal 
savings association and shall notify the national bank or Federal 
savings association of the OCC's determination.

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, Sec.  6.3 
paragraph (b)(3) was amended by removing the phrase ``and with respect 
to national banks, subpart M of part 19 of this chapter, and with 
respect to Federal savings associations Sec.  165.8 of this chapter'' 
and adding in its place the phrase ``and subpart M of part 19 of this 
chapter'', effective Apr. 1, 2024.



Sec.  6.4  Capital measures and capital categories.

    (a) Capital measures. (1) For purposes of section 38 of the FDI Act 
and this part, the relevant capital measures shall be:
    (i) Total Risk-Based Capital Measure: the total risk-based capital 
ratio;
    (ii) Tier 1 Risk-Based Capital Measure: the tier 1 risk-based 
capital ratio;
    (iii) Common Equity Tier 1 Capital Measure: The common equity tier 1 
risk-based capital ratio;
    (iv) The Leverage Measure:
    (A) The leverage ratio; and
    (B) With respect to an advanced approaches national bank or advanced 
approaches Federal savings association, on January 1, 2018, and 
thereafter, the supplementary leverage ratio; and
    (2) For a qualifying community banking organization (as defined in 
Sec.  3.12 of this chapter), that has elected to use the community bank 
leverage ratio framework (as defined in Sec.  3.12 of this chapter), the 
leverage ratio calculated in accordance with Sec.  3.12(b) of this 
chapter is used to determine the well capitalized capital category under 
paragraph (b)(1)(i) (A) through (D) of this section.
    (b) Capital categories. For purposes of section 38 of the FDI Act 
and this part, a national bank or Federal savings association shall be 
deemed to be:
    (1)(i) Well capitalized if:
    (A) Total Risk-Based Capital Measure: The national bank or Federal 
savings association has a total risk-based capital ratio of 10.0 percent 
or greater;
    (B) Tier 1 Risk-Based Capital Measure: The national bank or Federal 
savings association has a tier 1 risk-based capital ratio of 8.0 percent 
or greater;
    (C) Common Equity Tier 1 Capital Measure: The national bank or 
Federal savings association has a common equity tier 1 risk-based 
capital ratio of 6.5 percent or greater;
    (D) Leverage Measure:
    (1) The national bank or Federal savings association has a leverage 
ratio of 5.0 percent or greater; and

[[Page 396]]

    (2) With respect to a national bank or Federal savings association 
that is a subsidiary of a U.S. top-tier bank holding company that has 
more than $700 billion in total assets as reported on the company's most 
recent Consolidated Financial Statement for Bank Holding Companies (Form 
FR Y-9C) or more than $10 trillion in assets under custody as reported 
on the company's most recent Banking Organization Systemic Risk Report 
(Form FR Y-15), on January 1, 2018, and thereafter, the national bank or 
Federal savings association has a supplementary leverage ratio of 6.0 
percent or greater; and
    (E) The national bank or Federal savings association is not subject 
to any written agreement, order or capital directive, or prompt 
corrective action directive issued by the OCC pursuant to section 8 of 
the FDI Act, the International Lending Supervision Act of 1983 (12 
U.S.C. 3907), the Home Owners' Loan Act (12 U.S.C. 1464(t)(6)(A)(ii)), 
or section 38 of the FDI Act, or any regulation thereunder, to meet and 
maintain a specific capital level for any capital measure.
    (ii) Qualifying community banking organization: A qualifying 
community banking organization, as defined under Sec.  3.12 of this 
chapter, that has elected to use the community bank leverage ratio 
framework under Sec.  3.12 of this chapter, shall be considered to have 
met the capital ratio requirements for the well capitalized capital 
category in paragraph (b)(1)(i) (A) through (D) of this section.
    (2) Adequately capitalized if:
    (i) Total Risk-Based Capital Measure: the national bank or Federal 
savings association has a total risk-based capital ratio of 8.0 percent 
or greater;
    (ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal 
savings association has a tier 1 risk-based capital ratio of 6.0 percent 
or greater;
    (iii) Common Equity Tier 1 Capital Measure: the national bank or 
Federal savings association has a common equity tier 1 risk-based 
capital ratio of 4.5 percent or greater;
    (iv) Leverage Measure:
    (A) The national bank or Federal savings association has a leverage 
ratio of 4.0 percent or greater; and
    (B) With respect to an advanced approaches or Category III national 
bank or advanced approaches or Category III Federal savings association, 
the national bank or Federal savings association has a supplementary 
leverage ratio of 3.0 percent or greater; and
    (v) The national bank or Federal savings association does not meet 
the definition of a ``well capitalized'' national bank or Federal 
savings association.
    (3) Undercapitalized if:
    (i) Total Risk-Based Capital Measure: the national bank or Federal 
savings association has a total risk-based capital ratio of less than 
8.0 percent;
    (ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal 
savings association has a tier 1 risk-based capital ratio of less than 
6.0 percent;
    (iii) Common Equity Tier 1 Capital Measure: the national bank or 
Federal savings association has a common equity tier 1 risk-based 
capital ratio of less than 4.5 percent; or
    (iv) Leverage Measure:
    (A) The national bank or Federal savings association has a leverage 
ratio of less than 4.0 percent; or
    (B) With respect to an advanced approaches or Category III national 
bank or advanced approaches or Category III Federal savings association, 
on January 1, 2018, and thereafter, the national bank or Federal savings 
association has a supplementary leverage ratio of less than 3.0 percent.
    (4) Significantly undercapitalized if:
    (i) Total Risk-Based Capital Measure: the national bank or Federal 
savings association has a total risk-based capital ratio of less than 
6.0 percent;
    (ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal 
savings association has a tier 1 risk-based capital ratio of less than 
4.0 percent;
    (iii) Common Equity Tier 1 Capital Measure: the national bank or 
Federal savings association has a common equity tier 1 risk-based 
capital ratio of less than 3.0 percent; or
    (iv) Leverage Ratio: the national bank or Federal savings 
association has a leverage ratio of less than 3.0 percent.
    (5) Critically undercapitalized if the national bank or Federal 
savings association has a ratio of tangible equity to

[[Page 397]]

total assets that is equal to or less than 2.0 percent.
    (c) Capital categories for insured Federal branches. For purposes of 
the provisions of section 38 of the FDI Act and this part, an insured 
Federal branch shall be deemed to be:
    (1) Well capitalized if the insured Federal branch:
    (i) Maintains the pledge of assets required under 12 CFR 347.209; 
and
    (ii) Maintains the eligible assets prescribed under 12 CFR 347.210 
at 108 percent or more of the preceding quarter's average book value of 
the insured branch's third-party liabilities; and
    (iii) Has not received written notification from:
    (A) The OCC to increase its capital equivalency deposit pursuant to 
Sec.  28.15 of this chapter, or to comply with asset maintenance 
requirements pursuant to Sec.  28.20 of this chapter; or
    (B) The FDIC to pledge additional assets pursuant to 12 CFR 347.209 
or to maintain a higher ratio of eligible assets pursuant to 12 CFR 
347.210.
    (2) Adequately capitalized if the insured Federal branch:
    (i) Maintains the pledge of assets prescribed under 12 CFR 347.209;
    (ii) Maintains the eligible assets prescribed under 12 CFR 347.210 
at 106 percent or more of the preceding quarter's average book value of 
the insured branch's third-party liabilities; and
    (iii) Does not meet the definition of a well capitalized insured 
Federal branch.
    (3) Undercapitalized if the insured Federal branch:
    (i) Fails to maintain the pledge of assets required under 12 CFR 
347.209; or
    (ii) Fails to maintain the eligible assets prescribed under 12 CFR 
347.210 at 106 percent or more of the preceding quarter's average book 
value of the insured branch's third-party liabilities.
    (4) Significantly undercapitalized if it fails to maintain the 
eligible assets prescribed under 12 CFR 347.210 at 104 percent or more 
of the preceding quarter's average book value of the insured Federal 
branch's third-party liabilities.
    (5) Critically undercapitalized if it fails to maintain the eligible 
assets prescribed under 12 CFR 347.210 at 102 percent or more of the 
preceding quarter's average book value of the insured Federal branch's 
third-party liabilities.
    (d) Reclassification based on supervisory criteria other than 
capital. The OCC may reclassify a well capitalized national bank or 
Federal savings association as adequately capitalized and may require an 
adequately capitalized or an undercapitalized national bank or Federal 
savings association to comply with certain mandatory or discretionary 
supervisory actions as if the national bank or Federal savings 
association were in the next lower capital category (except that the OCC 
may not reclassify a significantly undercapitalized national bank or 
Federal savings association as critically undercapitalized) (each of 
these actions are hereinafter referred to generally as 
reclassifications) in the following circumstances:
    (1) Unsafe or unsound condition. The OCC has determined, after 
notice and opportunity for hearing pursuant to subpart M of part 19 of 
this chapter with respect to national banks and Sec.  165.8 of this 
chapter with respect to Federal savings associations, that the national 
bank or Federal savings association is in unsafe or unsound condition; 
or
    (2) Unsafe or unsound practice. The OCC has determined, after notice 
and opportunity for hearing pursuant to subpart M of part 19 of this 
chapter with respect to national banks and Sec.  165.8 of this chapter 
with respect to Federal savings associations, that in the most recent 
examination of the national bank or Federal savings association, the 
national bank or Federal savings association received, and has not 
corrected a less-than-satisfactory rating for any of the categories of 
asset quality, management, earnings, or liquidity.

[78 FR 62275, Oct. 11, 2013, as amended at 79 FR 24539, May 1, 2014; 84 
FR 61794, Nov. 13, 2019; 85 FR 10968, Feb. 26, 2020; 85 FR 32989, June 
1, 2020]

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, Sec.  6.4 
paragraphs (d)(1) and (2) were amended by removing the phrase ``with 
respect to national banks and Sec.  165.8 of this chapter with respect 
to Federal savings associations'' each time it appears, effective Apr. 
1, 2024.

[[Page 398]]



Sec.  6.5  Capital restoration plan.

    (a) Schedule for filing plan--(1) In general. A national bank or 
Federal savings association shall file a written capital restoration 
plan with the OCC within 45 days of the date that the national bank or 
Federal savings association receives notice or is deemed to have notice 
that the national bank or Federal savings association is 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized, unless the OCC notifies the national bank or Federal 
savings association in writing that the plan is to be filed within a 
different period. An adequately capitalized national bank or Federal 
savings association that has been required, pursuant to Sec.  6.4 and 
subpart M of part 19 of this chapter with respect to national banks, and 
Sec. Sec.  6.4 and 165.8 of this chapter with respect to Federal savings 
associations, to comply with supervisory actions as if the national bank 
or Federal savings association were undercapitalized is not required to 
submit a capital restoration plan solely by virtue of the 
reclassification.
    (2) Additional capital restoration plans. Notwithstanding paragraph 
(a)(1) of this section, a national bank or Federal savings association 
that has already submitted and is operating under a capital restoration 
plan approved under section 38 and this subpart is not required to 
submit an additional capital restoration plan based on a revised 
calculation of its capital measures or a reclassification of the 
institution pursuant to Sec.  6.4 and subpart M of part 19 of this 
chapter with respect to national banks and Sec. Sec.  6.4 and 165.8 of 
this chapter with respect to Federal savings associations, unless the 
OCC notifies the national bank or Federal savings association that it 
must submit a new or revised capital plan. A national bank or Federal 
savings association that is notified that it must submit a new or 
revised capital restoration plan shall file the plan in writing with the 
OCC within 45 days of receiving such notice, unless the OCC notifies the 
national bank or Federal savings association in writing that the plan 
must be filed within a different period.
    (b) Contents of plan. All financial data submitted in connection 
with a capital restoration plan shall be prepared in accordance with the 
instructions provided on the Call Report, unless the OCC instructs 
otherwise. The capital restoration plan shall include all of the 
information required to be filed under section 38(e)(2) of the FDI Act. 
A national bank or Federal savings association that is required to 
submit a capital restoration plan as the result of a reclassification of 
the national bank or Federal savings association, pursuant to Sec.  6.4 
and subpart M of part 19 of this chapter with respect to national banks, 
and Sec. Sec.  6.4 and 165.8 of this chapter with respect to Federal 
savings associations, shall include a description of the steps the 
national bank or Federal savings association will take to correct the 
unsafe or unsound condition or practice. No plan shall be accepted 
unless it includes any performance guarantee described in section 
38(e)(2)(C) of that Act by each company that controls the national bank 
or Federal savings association.
    (c) Review of capital restoration plans. Within 60 days after 
receiving a capital restoration plan under this subpart, the OCC shall 
provide written notice to the national bank or Federal savings 
association of whether the plan has been approved. The OCC may extend 
the time within which notice regarding approval of a plan shall be 
provided.
    (d) Disapproval of capital restoration plan. If a capital 
restoration plan is not approved by the OCC, the national bank or 
Federal savings association shall submit a revised capital restoration 
plan within the time specified by the OCC. Upon receiving notice that 
its capital restoration plan has not been approved, any undercapitalized 
national bank or Federal savings association (as defined in Sec.  6.4) 
shall be subject to all of the provisions of section 38 and this part 
applicable to significantly undercapitalized institutions. These 
provisions shall be applicable until such time as a new or revised 
capital restoration plan submitted by the national bank or Federal 
savings association has been approved by the OCC.
    (e) Failure to submit a capital restoration plan. A national bank or 
Federal savings association that is undercapitalized (as defined in 
Sec.  6.4) and that

[[Page 399]]

fails to submit a written capital restoration plan within the period 
provided in this section shall, upon the expiration of that period, be 
subject to all of the provisions of section 38 and this part applicable 
to significantly undercapitalized national banks or Federal savings 
associations.
    (f) Failure to implement a capital restoration plan. Any 
undercapitalized national bank or Federal savings association that 
fails, in any material respect, to implement a capital restoration plan 
shall be subject to all of the provisions of section 38 and this part 
applicable to significantly undercapitalized national banks or Federal 
savings associations.
    (g) Amendment of capital restoration plan. A national bank or 
Federal savings association that has submitted an approved capital 
restoration plan may, after prior written notice to and approval by the 
OCC, amend the plan to reflect a change in circumstance. Until such time 
as a proposed amendment has been approved, the national bank or Federal 
savings association shall implement the capital restoration plan as 
approved prior to the proposed amendment.
    (h) Notice to FDIC. Within 45 days of the effective date of OCC 
approval of a capital restoration plan, or any amendment to a capital 
restoration plan, the OCC shall provide a copy of the plan or amendment 
to the Federal Deposit Insurance Corporation.
    (i) Performance guarantee by companies that control a national bank 
or Federal savings association--(1) Limitation on liability--(i) Amount 
limitation. The aggregate liability under the guarantee provided under 
section 38 and this subpart for all companies that control a specific 
national bank or Federal savings association that is required to submit 
a capital restoration plan under this subpart shall be limited to the 
lesser of:
    (A) An amount equal to 5.0 percent of the national bank's or Federal 
savings association's total assets at the time the national bank or 
Federal savings association was notified or deemed to have notice that 
the national bank or Federal savings association was undercapitalized; 
or
    (B) The amount necessary to restore the relevant capital measures of 
the national bank or Federal savings association to the levels required 
for the national bank or Federal savings association to be classified as 
adequately capitalized, as those capital measures and levels are defined 
at the time that the national bank or Federal savings association 
initially fails to comply with a capital restoration plan under this 
subpart.
    (ii) Limit on duration. The guarantee and limit of liability under 
section 38 and this subpart shall expire after the OCC notifies the 
national bank or Federal savings association that it has remained 
adequately capitalized for each of four consecutive calendar quarters. 
The expiration or fulfillment by a company of a guarantee of a capital 
restoration plan shall not limit the liability of the company under any 
guarantee required or provided in connection with any capital 
restoration plan filed by the same national bank or Federal savings 
association after expiration of the first guarantee.
    (iii) Collection on guarantee. Each company that controls a given 
national bank or Federal savings association shall be jointly and 
severally liable for the guarantee for such national bank or Federal 
savings association as required under section 38 and this subpart, and 
the OCC may require payment of the full amount of that guarantee from 
any or all of the companies issuing the guarantee.
    (2) Failure to provide guarantee. In the event that a national bank 
or Federal savings association that is controlled by any company submits 
a capital restoration plan that does not contain the guarantee required 
under section 38(e)(2) of the FDI Act, the national bank or Federal 
savings association shall, upon submission of the plan, be subject to 
the provisions of section 38 and this part that are applicable to 
national banks or Federal savings associations that have not submitted 
an acceptable capital restoration plan.
    (3) Failure to perform guarantee. Failure by any company that 
controls a national bank or Federal savings association to perform fully 
its guarantee of any capital plan shall constitute a material failure to 
implement the plan for

[[Page 400]]

purposes of section 38(f) of the FDI Act. Upon such failure, the 
national bank or Federal savings association shall be subject to the 
provisions of section 38 and this part that are applicable to national 
banks or Federal savings associations that have failed in a material 
respect to implement a capital restoration plan.
    (j) Enforcement of capital restoration plan. The failure of a 
national bank or Federal savings association to implement, in any 
material respect, a capital restoration plan required under section 38 
and this section shall subject the national bank or Federal savings 
association to the assessment of civil money penalties pursuant to 
section 8(i)(2)(A) of the FDI Act.

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, Sec.  6.5 was 
amended by:
    a. In paragraphs (a)(1) and (b), removing the phrase ``with respect 
to national banks, and Sec. Sec.  6.4 and 165.8 of this chapter with 
respect to Federal savings associations,'' each time it appears.
    b. In paragraph (a)(2), removing the phrase ``with respect to 
national banks and Sec. Sec.  6.4 and 165.8 of this chapter with respect 
to Federal savings associations,'', effective Apr. 1, 2024.



Sec.  6.6  Mandatory and discretionary supervisory actions.

    (a) Mandatory supervisory actions--(1) Provisions applicable to all 
national banks and Federal savings associations. All national banks and 
Federal savings associations are subject to the restrictions contained 
in section 38(d) of the FDI Act on payment of distributions and 
management fees.
    (2) Provisions applicable to undercapitalized, significantly 
undercapitalized, and critically undercapitalized national banks or 
Federal savings associations. Immediately upon receiving notice or being 
deemed to have notice, as provided in Sec.  6.3, that the national bank 
or Federal savings association is undercapitalized, significantly 
undercapitalized, or critically undercapitalized, the national bank or 
Federal savings association shall become subject to the provisions of 
section 38 of the FDI Act:
    (i) Restricting payment of distributions and management fees 
(section 38(d));
    (ii) Requiring that the OCC monitor the condition of the national 
bank or Federal savings association (section 38(e)(1));
    (iii) Requiring submission of a capital restoration plan within the 
schedule established in this subpart (section 38(e)(2));
    (iv) Restricting the growth of the national bank's or Federal 
savings association's assets (section 38(e)(3)); and
    (v) Requiring prior approval of certain expansion proposals (section 
38(e)(4)).
    (3) Additional provisions applicable to significantly 
undercapitalized, and critically undercapitalized national banks or 
Federal savings associations. In addition to the provisions of section 
38 of the FDI Act described in paragraph (a)(2) of this section, 
immediately upon receiving notice or being deemed to have notice, as 
provided in this subpart, that the national bank or Federal savings 
association is significantly undercapitalized, or critically 
undercapitalized, or that the national bank or Federal savings 
association is subject to the provisions applicable to institutions that 
are significantly undercapitalized because it has failed to submit or 
implement, in any material respect, an acceptable capital restoration 
plan, the national bank or Federal savings association shall become 
subject to the provisions of section 38 of the FDI Act that restrict 
compensation paid to senior executive officers of the institution 
(section 38(f)(4)).
    (4) Additional provisions applicable to critically undercapitalized 
national banks or Federal savings associations. In addition to the 
provisions of section 38 of the FDI Act described in paragraphs (a)(2) 
and (3) of this section, immediately upon receiving notice or being 
deemed to have notice, as provided in Sec.  6.3, that the national bank 
or Federal savings association is critically undercapitalized, the 
national bank or Federal savings association shall become subject to the 
provisions of section 38 of the FDI Act:
    (i) Restricting the activities of the national bank or Federal 
savings association (section 38 (h)(1)); and
    (ii) Restricting payments on subordinated debt of the national bank 
or Federal savings association (section 38 (h)(2)).

[[Page 401]]

    (b) Discretionary supervisory actions. In taking any action under 
section 38 that is within the OCC's discretion to take in connection 
with a national bank or Federal savings association that is deemed to be 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized, or has been reclassified as undercapitalized or 
significantly undercapitalized; an officer or director of such national 
bank or Federal savings association; or a company that controls such 
national bank or Federal savings association, the OCC shall follow the 
procedures for issuing directives under subpart B of this part and 
subpart N of part 19 of this chapter with respect to national banks and 
subpart B of this part and Sec.  165.9 of this chapter with respect to 
Federal savings associations, unless otherwise provided in section 38 of 
the FDI Act or this part.

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, Sec.  6.6 
paragraph (b) was amended by removing the phrase ``with respect to 
national banks and subpart B of this part and Sec.  165.9 of this 
chapter with respect to Federal savings associations'', effective Apr. 
1, 2024.



          Subpart B_Directives To Take Prompt Corrective Action



Sec.  6.20  Scope.

    The rules and procedures set forth in this subpart apply to insured 
national banks, insured Federal branches, Federal savings associations, 
and senior executive officers and directors of national banks and 
Federal savings associations that are subject to the provisions of 
section 38 of the Federal Deposit Insurance Act (section 38) and subpart 
A of this part.



Sec.  6.21  Notice of intent to issue a directive.

    (a) Notice of intent to issue a directive--(1) In general. The OCC 
shall provide an undercapitalized, significantly undercapitalized, or 
critically undercapitalized national bank or Federal savings association 
prior written notice of the OCC's intention to issue a directive 
requiring such national bank, Federal savings association, or company to 
take actions or to follow proscriptions described in section 38 that are 
within the OCC's discretion to require or impose under section 38 of the 
FDI Act, including section 38(e)(5), (f)(2), (f)(3), or (f)(5). The 
national bank or Federal savings association shall have such time to 
respond to a proposed directive as provided under Sec.  6.22.
    (2) Immediate issuance of final directive. If the OCC finds it 
necessary in order to carry out the purposes of section 38 of the FDI 
Act, the OCC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue a directive requiring a national bank or 
Federal savings association immediately to take actions or to follow 
proscriptions described in section 38 that are within the OCC's 
discretion to require or impose under section 38 of the FDI Act, 
including section 38(e)(5), (f)(2), (f)(3), or (f)(5). A national bank 
or Federal savings association that is subject to such an immediately 
effective directive may submit a written appeal of the directive to the 
OCC. Such an appeal must be received by the OCC within 14 calendar days 
of the issuance of the directive, unless the OCC permits a longer 
period. The OCC shall consider any such appeal, if filed in a timely 
matter, within 60 days of receiving the appeal. During such period of 
review, the directive shall remain in effect unless the OCC, in its sole 
discretion, stays the effectiveness of the directive.
    (b) Contents of notice. A notice of intention to issue a directive 
shall include:
    (1) A statement of the national bank's or Federal savings 
association's capital measures and capital levels;
    (2) A description of the restrictions, prohibitions or affirmative 
actions that the OCC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of such affirmative 
actions; and
    (4) The date by which the national bank or Federal savings 
association subject to the directive may file with the OCC a written 
response to the notice.



Sec.  6.22  Response to notice.

    (a) Time for response. A national bank or Federal savings 
association may file a written response to a notice of intent

[[Page 402]]

to issue a directive within the time period set by the OCC. The date 
shall be at least 14 calendar days from the date of the notice unless 
the OCC determines that a shorter period is appropriate in light of the 
financial condition of the national bank or Federal savings association 
or other relevant circumstances.
    (b) Content of response. The response should include:
    (1) An explanation why the action proposed by the OCC is not an 
appropriate exercise of discretion under section 38;
    (2) Any recommended modification of the proposed directive; and
    (3) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
national bank or Federal savings association regarding the proposed 
directive.
    (c) Failure to file response. Failure by a national bank or Federal 
savings association to file with the OCC, within the specified time 
period, a written response to a proposed directive shall constitute a 
waiver of the opportunity to respond and shall constitute consent to the 
issuance of the directive.



Sec.  6.23  Decision and issuance of a prompt corrective action directive.

    (a) OCC consideration of response. After considering the response, 
the OCC may:
    (1) Issue the directive as proposed or in modified form;
    (2) Determine not to issue the directive and so notify the national 
bank or Federal savings association; or
    (3) Seek additional information or clarification of the response 
from the national bank or Federal savings association, or any other 
relevant source.
    (b) [Reserved]



Sec.  6.24  Request for modification or rescission of directive.

    Any national bank or Federal savings association that is subject to 
a directive under this subpart may, upon a change in circumstances, 
request in writing that the OCC reconsider the terms of the directive, 
and may propose that the directive be rescinded or modified. Unless 
otherwise ordered by the OCC, the directive shall continue in place 
while such request is pending before the OCC.



Sec.  6.25  Enforcement of directive.

    (a) Judicial remedies. Whenever a national bank or Federal savings 
association fails to comply with a directive issued under section 38, 
the OCC may seek enforcement of the directive in the appropriate United 
States district court pursuant to section 8(i)(1) of the FDI Act.
    (b) Administrative remedies. Pursuant to section 8(i)(2)(A) of the 
FDI Act, the OCC may assess a civil money penalty against any national 
bank or Federal savings association that violates or otherwise fails to 
comply with any final directive issued under section 38 and against any 
institution-affiliated party who participates in such violation or 
noncompliance.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the OCC may seek enforcement 
of the provisions of section 38 or this part through any other judicial 
or administrative proceeding authorized by law.



PART 7_ACTIVITIES AND OPERATIONS--Table of Contents



     Subpart A_National Bank and Federal Savings Association Powers

Sec.
7.1000 Activities that are part of, or incidental to, the business of 
          banking.
7.1001 National bank acting as general insurance agent.
7.1002 National bank and Federal savings association acting as finder.
7.1003 Money lent by a national bank at banking offices or at facilities 
          other than banking offices.
7.1004 Establishment of a loan production office by a national bank.
7.1005 [Reserved]
7.1006 Loan agreement providing for a national bank or Federal savings 
          association share in profits, income, or earnings or for stock 
          warrants.
7.1007 National Bank Acceptances.
7.1008 Preparation by a national bank of income tax returns for 
          customers or public.
7.1009 [Reserved]
7.1010 Postal services by national banks and Federal savings 
          associations.
7.1011 National bank acting as payroll issuer.

[[Page 403]]

7.1012 Establishment, operation, or use of a messenger service by a 
          national bank.
7.1014 Sale of money orders at nonbanking outlets by a national bank.
7.1015 National bank and Federal savings association investments in 
          small business investment companies.
7.1016 Independent undertakings issued by a national bank or Federal 
          savings association to pay against documents.
7.1017 National bank as guarantor or surety on indemnity bond.
7.1018 National bank automatic payment plan accounts.
7.1020 Purchase of open accounts by a national bank.
7.1021 Financial literacy programs not branches of national banks.
7.1022 National banks' authority to buy and sell exchange, coin, and 
          bullion.
7.1023 Federal savings associations, prohibition on industrial or 
          commercial metal dealing or investing.
7.1024 National bank or Federal savings association ownership of 
          property.
7.1025 Tax equity finance transactions by national banks and Federal 
          savings associations.
7.1026 National bank and Federal savings association payment system 
          memberships.
7.1027 Establishment and operation of a remote service unit by a 
          national bank.
7.1028 Establishment and operation of a deposit production office by a 
          national bank.
7.1029 Combination of national bank loan production office, deposit 
          production office, and remote service unit.
7.1030 Permissible derivatives activities for national banks.

                      Subpart B_Corporate Practices

7.2000 National bank corporate governance.
7.2001 National bank adoption of anti-takeover provisions.
7.2002 National bank director or attorney as proxy.
7.2003 National bank shareholder meetings; Board of directors meetings.
7.2004 Honorary national bank directors or advisory boards.
7.2005 Ownership of stock necessary to qualify as director of a national 
          bank.
7.2006 Cumulative voting in election of national bank directors.
7.2007 Filling vacancies and increasing board of directors of a national 
          bank other than by shareholder action.
7.2008 Oath of national bank directors.
7.2009 Quorum of a national bank board of directors; proxies not 
          permissible.
7.2010 National bank directors' responsibilities.
7.2011 National bank compensation plans.
7.2012 President as director of a national bank.
7.2013 Fidelity bonds covering national bank officers and employees.
7.2014 Indemnification of national bank and Federal savings association 
          institution-affiliated parties.
7.2015 National bank cashier.
7.2016 Restricting transfer of national bank stock and record dates; 
          stock certificates.
7.2019 Loans secured by a national bank's own shares.
7.2021 National bank preemptive rights.
7.2022 National bank voting trusts.
7.2023 National bank reverse stock splits.
7.2024 Staggered terms for national bank directors and size of bank 
          board.
7.2025 Capital stock-related activities of a national bank.

   Subpart C_National Bank and Federal Savings Association Operations

7.3000 National bank and Federal savings association operating hours and 
          closings.
7.3001 Sharing national bank or Federal association space and employees.

                          Subpart D_Preemption

7.4000 Visitorial powers with respect to national banks.
7.4001 Charging interest by national banks at rates permitted competing 
          institutions; charging interest to corporate borrowers.
7.4002 National bank charges.
7.4006 [Reserved]
7.4007 Deposit-taking by national banks.
7.4008 Lending by national banks.
7.4009 [Reserved]
7.4010 Applicability of state law and visitorial powers to Federal 
          savings associations and subsidiaries.

              Subpart E_National Bank Electronic Activities

7.5000 Scope.
7.5001 Electronic activities that are incidental to the business of 
          banking.
7.5002 Furnishing of products and services by electronic means and 
          facilities.
7.5003 Composite authority to engage in electronic activities.
7.5004 Sale of excess electronic capacity and by-products.
7.5005 National bank acting as digital certification authority.
7.5006 Data processing.
7.5007 Correspondent services.
7.5008 Location of national bank conducting electronic activities.
7.5009 Location under 12 U.S.C. 85 of national banks operating 
          exclusively through the Internet.

[[Page 404]]

7.5010 Shared electronic space.

    Authority: 12 U.S.C. 1 et seq., 25b, 29, 71, 71a, 92, 92a, 93, 93a, 
95(b)(1), 371, 371d, 481, 484, 1462a, 1463, 1464, 1465, 1818, 1828, 
3102(b), and 5412(b)(2)(B).

    Source: 61 FR 4862, Feb. 9, 1996, unless otherwise noted.



     Subpart A_National Bank and Federal Savings Association Powers



Sec.  7.1000  Activities that are part of, or incidental to, 
the business of banking.

    (a) Purpose. This section identifies the criteria that the Office of 
the Comptroller of the Currency (OCC) uses to determine whether an 
activity is authorized as part of, or incidental to, the business of 
banking under 12 U.S.C. 24(Seventh) or other statutory authority.
    (b) Restrictions and conditions on activities. The OCC may determine 
that activities are permissible under 12 U.S.C. 24(Seventh) or other 
statutory authority only if they are subject to standards or conditions 
designed to provide that the activities function as intended and are 
conducted safely and soundly, in accordance with other applicable 
statutes, regulations, or supervisory policies.
    (c) Activities that are part of the business of banking. (1) An 
activity is permissible for national banks as part of the business of 
banking if the activity is authorized under 12 U.S.C. 24(Seventh) or 
other statutory authority. In determining whether an activity that is 
not specifically included in 12 U.S.C. 24(Seventh) or other statutory 
authority is part of the business of banking, the OCC considers the 
following factors:
    (i) Whether the activity is the functional equivalent to, or a 
logical outgrowth of, a recognized banking activity;
    (ii) Whether the activity strengthens the bank by benefiting its 
customers or its business;
    (iii) Whether the activity involves risks similar in nature to those 
already assumed by banks; and
    (iv) Whether the activity is authorized for State-chartered banks.
    (2) The weight accorded each factor set out in paragraph (c)(1) of 
this section depends on the facts and circumstances of each case.
    (d) Activities that are incidental to the business of banking. (1) 
An activity is authorized for a national bank as incidental to the 
business of banking if it is convenient or useful to an activity that is 
specifically authorized for national banks or to an activity that is 
otherwise part of the business of banking. In determining whether an 
activity is convenient or useful to such activities, the OCC considers 
the following factors:
    (i) Whether the activity facilitates the production or delivery of a 
bank's products or services, enhances the bank's ability to sell or 
market its products or services, or improves the effectiveness or 
efficiency of the bank's operations, in light of risks presented, 
innovations, strategies, techniques and new technologies for producing 
and delivering financial products and services; and
    (ii) Whether the activity enables the bank to use capacity acquired 
for its banking operations or otherwise avoid economic loss or waste.
    (2) The weight accorded each factor set out in paragraph (d)(1) of 
this section depends on the facts and circumstances of each case.

[85 FR 83726, Dec. 22, 2020]



Sec.  7.1001  National bank acting as general insurance agent.

    Pursuant to 12 U.S.C. 92, a national bank may act as an agent for 
any fire, life, or other insurance company in any place the population 
of which does not exceed 5,000 inhabitants. This section is applicable 
to any office of a national bank when the office is located in a 
community having a population of less than 5,000, even though the 
principal office of such bank is located in a community whose population 
exceeds 5,000.

[85 FR 35374, June 10, 2020]



Sec.  7.1002  National bank and Federal savings association acting as finder.

    (a) In general. A finder may identify potential parties, make 
inquiries as to interest, introduce or arrange contacts or meetings of 
interested parties, act

[[Page 405]]

as an intermediary between interested parties, and otherwise bring 
parties together for a transaction that the parties themselves negotiate 
and consummate. It is part of the business of banking under 12 U.S.C. 
24(Seventh) for a national bank to act as a finder. A Federal savings 
association may act as a finder to the extent those activities are 
incidental to the powers expressly authorized by the Home Owners' Loan 
Act (HOLA) (12 U.S.C. 1461 et seq).
    (b) Permissible finder activities--(1) National banks. The following 
list provides examples of permissible finder activities for national 
banks. This list is illustrative and not exclusive; the OCC may 
determine that other activities are permissible pursuant to a national 
bank's authority to act as a finder:
    (i) Communicating information about providers of products and 
services, and proposed offering prices and terms to potential markets 
for these products and services;
    (ii) Communicating to the seller an offer to purchase or a request 
for information, including forwarding completed applications, 
application fees, and requests for information to third-party providers;
    (iii) Arranging for third-party providers to offer reduced rates to 
those customers referred by the national bank;
    (iv) Providing administrative, clerical, and record keeping 
functions related to the national bank's finder activity, including 
retaining copies of documents, instructing and assisting individuals in 
the completion of documents, scheduling sales calls on behalf of 
sellers, and conducting market research to identify potential new 
customers for retailers;
    (v) Conveying between interested parties expressions of interest, 
bids, offers, orders, and confirmations relating to a transaction;
    (vi) Conveying other types of information between potential buyers, 
sellers, and other interested parties;
    (vii) Establishing rules of general applicability governing the use 
and operation of the finder service, including rules that:
    (A) Govern the submission of bids and offers by buyers, sellers, and 
other interested parties that use the finder service and the 
circumstances under which the finder service will pair bids and offers 
submitted by buyers, sellers, and other interested parties; and
    (B) Govern the manner in which buyers, sellers, and other interested 
parties may bind themselves to the terms of a specific transaction; and
    (viii) Acting as an electronic finder pursuant to Sec.  
7.5002(a)(1).
    (2) Federal savings associations. The following list provides 
examples of finder activities that are permissible for Federal savings 
associations. This list is illustrative and not exclusive; the OCC may 
determine that other activities are permissible pursuant to a Federal 
savings association's incidental powers:
    (i) Referring customers to a third party; and
    (ii) Providing services and products to customers indirectly through 
a third-party discount program.
    (c) Limitation. The authority to act as a finder does not enable a 
national bank or a Federal savings association to engage in brokerage 
activities that have not been found to be permissible for national banks 
or Federal savings associations, respectively.
    (d) Advertisement and fee. Unless otherwise prohibited by Federal 
law, a national bank or Federal savings association may advertise the 
availability of, and accept a fee for, the services provided pursuant to 
this section.

[85 FR 83727, Dec. 22, 2020]



Sec.  7.1003  Money lent by a national bank at banking offices 
or at facilities other than banking offices.

    (a) In general. For purposes of what constitutes a branch within the 
meaning of 12 U.S.C. 36(j) and 12 CFR 5.30, ``money'' is deemed to be 
``lent'' only at the place, if any, where the borrower in-person 
receives loan proceeds directly from national bank funds:
    (1) From the lending national bank or its operating subsidiary; or
    (2) At a facility that is established by the lending national bank 
or its operating subsidiary.
    (b) Receipt of national bank funds representing loan proceeds. Loan 
proceeds directly from national bank funds may be received by a borrower 
in person at a place that is not the national bank's

[[Page 406]]

main office and is not licensed as a branch without violating 12 U.S.C. 
36, 12 U.S.C. 81 and 12 CFR 5.30, provided that a third party is used to 
deliver the funds and the place is not established by the lending 
national bank or its operating subsidiary. A third party includes a 
person who satisfies the requirements of Sec.  7.1012(c)(2), or one who 
customarily delivers loan proceeds directly from national bank funds 
under accepted industry practice, such as an attorney or escrow agent at 
a real estate closing.
    (c) Services on equivalent terms to those offered customers of 
unrelated banks. An operating subsidiary owned by a national bank may 
distribute loan proceeds from its own funds or bank funds directly to 
the borrower in person at offices the operating subsidiary has 
established without violating 12 U.S.C. 36, 12 U.S.C. 81 and 12 CFR 5.30 
provided that the operating subsidiary provides similar services on 
substantially similar terms and conditions to customers of unaffiliated 
entities including unaffiliated banks.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83727, Dec. 22, 2020]



Sec.  7.1004  Establishment of a loan production office by a national bank.

    (a) In general. A national bank or its operating subsidiary may 
engage in loan production activities at a site other than the main 
office or a branch of the bank. A national bank or its operating 
subsidiary may solicit loan customers, market loan products, assist 
persons in completing application forms and related documents to obtain 
a loan, originate and approve loans, make credit decisions regarding a 
loan application, and offer other lending-related services such as loan 
information and applications at a loan production office without 
violating 12 U.S.C. 36 and 12 U.S.C. 81, provided that ``money'' is not 
deemed to be ``lent'' at that site within the meaning of Sec.  7.1003 
and the site does not accept deposits or pay withdrawals.
    (b) Services of other persons. A national bank may use the services 
of, and compensate, persons not employed by the bank in its loan 
production activities.

[85 FR 83727, Dec. 22, 2020]



Sec.  7.1005  [Reserved]



Sec.  7.1006  Loan agreement providing for a national bank or Federal savings 
association share in profits, income, or earnings or for stock warrants.

    A national bank or Federal savings association may take as 
consideration for a loan a share in the profit, income, or earnings from 
a business enterprise of a borrower. A national bank or Federal savings 
association also may take as consideration for a loan a stock warrant 
issued by a business enterprise of a borrower, provided that the bank or 
savings association does not exercise the warrant. The share or stock 
warrant may be taken in addition to, or in lieu of, interest. The 
borrower's obligation to repay principal, however, may not be 
conditioned upon the value of the profit, income, or earnings of the 
business enterprise or upon the value of the warrant received.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83728, Dec. 22, 2020]



Sec.  7.1007  National Bank Acceptances.

    A national bank is not limited in the character of acceptances it 
may make in financing credit transactions. Bankers' acceptances may be 
used for such purpose, since the making of acceptances is an essential 
part of banking authorized by 12 U.S.C. 24.



Sec.  7.1008  Preparation by a national bank of income tax returns 
for customers or public.

    A national bank may assist its customers in preparing their tax 
returns, either gratuitously or for a fee.

[68 FR 70131, Dec. 17, 2003]



Sec.  7.1009  [Reserved]



Sec.  7.1010  Postal services by national banks and Federal 
savings associations.

    (a) In general. A national bank or Federal savings association may 
provide postal services and receive income from those services. The 
services performed are those permitted under applicable rules of the 
United States

[[Page 407]]

Postal Service and may include meter stamping of letters and packages 
and the sale of related insurance. The national bank or Federal savings 
association may advertise, develop, and extend the services to attract 
customers to the institution.
    (b) Postal regulations. A national bank or Federal savings 
association providing postal services must do so in accordance with the 
rules and regulations of the United States Postal Service. The national 
bank or Federal savings association must keep the books and records of 
the postal services separate from those of other banking operations. 
Under 39 U.S.C. 404 and regulations issued under that statute (see 39 
CFR chapter I), the United States Postal Service may inspect the books 
and records pertaining to the postal services.

[85 FR 83728, Dec. 22, 2020]



Sec.  7.1011  National bank acting as payroll issuer.

    A national bank may disburse to an employee of a customer payroll 
funds deposited with the bank by that customer. The bank may disburse 
those funds by direct payment to the employee, by crediting an account 
in the employee's name at the disbursing bank, or by forwarding funds to 
another institution in which an employee maintains an account.



Sec.  7.1012  Establishment, operation, or use of a messenger service 
by a national bank.

    (a) Definition. For purposes of this section, a ``messenger 
service'' means any service, such as a courier service or armored car 
service, used by a national bank and its customers to pick up from, and 
deliver to, specific customers at locations such as their homes or 
offices, items relating to transactions between the bank and those 
customers.
    (b) Pick-up and delivery of items constituting nonbranching 
activities. Pursuant to 12 U.S.C. 24 (Seventh), a national bank may 
establish and operate a messenger service, or use, with its customers, a 
third party messenger service. The bank may use the messenger service to 
transport items relevant to the bank's transactions with its customers 
without regard to the branching limitations set forth in 12 U.S.C. 36, 
provided the service does not engage in branching functions within the 
meaning of 12 U.S.C. 36(j). In establishing or using such a facility, 
the national bank may establish terms, conditions, and limitations 
consistent with this section and appropriate to assure compliance with 
safe and sound banking practices.
    (c) Pick-up and delivery of items constituting branching functions 
by a messenger service established by a third party. (1) Pursuant to 12 
U.S.C. 24 (Seventh), a national bank and its customers may use a 
messenger service to pick up from and deliver to customers items that 
relate to branching functions within the meaning of 12 U.S.C. 36, 
provided the messenger service is established and operated by a third 
party. In using such a facility, a national bank may establish terms, 
conditions, and limitations, consistent with this section and 
appropriate to assure compliance with safe and sound banking practices.
    (2) The OCC reviews whether a messenger service is established by a 
third party on a case-by-case basis, considering all of the 
circumstances. However, a messenger service is clearly established by a 
third party if:
    (i) A party other than the national bank owns or rents the messenger 
service and its facilities and employs the persons who provide the 
service;
    (ii)(A) The messenger service retains the discretion to determine in 
its own business judgment which customers and geographic areas it will 
serve; or
    (B) If the messenger service and the bank are under common ownership 
or control, the messenger service actually provides its services to the 
general public, including other depository institutions, and retains the 
discretion to determine in its own business judgment which customers and 
geographic areas it will serve;
    (iii) The messenger service maintains ultimate responsibility for 
scheduling, movement, and routing;
    (iv) The messenger service does not operate under the name of the 
bank, and the bank and the messenger service do not advertise, or 
otherwise represent, that the bank itself is providing

[[Page 408]]

the service, although the bank may advertise that its customers may use 
one or more third party messenger services to transact business with the 
bank;
    (v) The messenger service assumes responsibility for the items 
during transit and for maintaining adequate insurance covering thefts, 
employee fidelity, and other in-transit losses; and
    (vi) The messenger service acts as the agent for the customer when 
the items are in transit. The bank deems items intended for deposit to 
be deposited when credited to the customer's account at the bank's main 
office, one of its branches, or another permissible facility, such as a 
back-office facility that is not a branch. The bank deems items 
representing withdrawals to be paid when the items are given to the 
messenger service.
    (3) A national bank may defray all or part of the costs incurred by 
a customer in transporting items through a messenger service. Payment of 
those costs may only cover expenses associated with each transaction 
involving the customer and the messenger service. The national bank may 
impose terms, conditions, and limitations that it deems appropriate with 
respect to the payment of such costs.
    (d) Pickup and delivery of items pertaining to branching activities 
where the messenger service is established by the national bank. A 
national bank may establish and operate a messenger service to transport 
items relevant to the bank's transactions with its customers if such 
transactions constitute one or more branching functions within the 
meaning of 12 U.S.C. 36(j), provided the bank receives approval to 
establish a branch pursuant to 12 CFR 5.30.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60098, Nov. 4, 1999; 85 
FR 83728, Dec. 22, 2020]



Sec.  7.1014  Sale of money orders at nonbanking outlets by a national bank.

    A national bank may designate bonded agents to sell the bank's money 
orders at nonbanking outlets. The responsibility of both the bank and 
its agent should be defined in a written agreement setting forth the 
duties of both parties and providing for remuneration of the agent. The 
bank's agents need not report on sales and transmit funds from the 
nonbanking outlets more frequently than at the end of the third business 
day following receipt of the funds.



Sec.  7.1015  National bank and Federal savings association investments 
in small business investment companies.

    (a) National banks. A national bank may invest in a small business 
investment company (SBIC) or in any entity established solely to invest 
in SBICs, including purchasing the stock of a SBIC, subject to 
appropriate capital limitations (see e.g., 15 U.S.C. 682(b)), and may 
receive the benefits of such stock ownership (e.g., stock dividends). 
The receipt and retention of a dividend by a national bank from a SBIC 
in the form of stock of a corporate borrower of the SBIC is not a 
purchase of stock within the meaning of 12 U.S.C. 24(Seventh).
    (b) Federal savings associations. Federal savings associations may 
invest in a SBIC or in any entity established solely to invest in SBICs 
as provided in 12 CFR 160.30.
    (c) Qualifying SBIC. A national bank or Federal savings association 
may invest in a SBIC that is either:
    (1) Already organized and has obtained a license from the Small 
Business Administration; or
    (2) In the process of being organized.
    (d) SBIC wind-down. A national bank or Federal savings association 
may retain an interest in a SBIC that has voluntarily surrendered its 
license to operate as a SBIC in accordance with 13 CFR 107.1900 and does 
not make any new investments (other than investments in cash 
equivalents, which, for the purposes of this paragraph (d), means high 
quality, highly liquid investments whose maturity corresponds to the 
issuer's expected or potential need for funds and whose currency 
corresponds to the issuer's assets) after such voluntary surrender.

[85 FR 83728, Dec. 22, 2020]



Sec.  7.1016  Independent undertakings issued by a national bank 
or Federal savings association to pay against documents.

    (a) In general. A national bank or Federal savings association may 
issue and commit to issue letters of credit

[[Page 409]]

and other independent undertakings within the scope of applicable laws 
or rules of practice recognized by law.\1\ Under such independent 
undertakings, the national bank's or Federal savings association's 
obligation to honor depends upon the presentation of specified documents 
and not upon nondocumentary conditions or resolution of questions of 
fact or law at issue between the applicant and the beneficiary. A 
national bank or Federal savings association also may confirm or 
otherwise undertake to honor or purchase specified documents upon their 
presentation under another person's independent undertaking within the 
scope of such laws or rules.
---------------------------------------------------------------------------

    \1\ Examples of such laws or rules of practice include: The 
applicable version of Article 5 of the Uniform Commercial Code (UCC) 
(1962, as amended 1990) or revised Article 5 of the UCC (as amended 
1995); the Uniform Customs and Practice for Documentary Credits 
(International Chamber of Commerce (ICC) Publication No. 600 or any 
applicable prior version); the Supplements to UCP 500 & 600 for 
Electronic Presentation (eUCP v. 1.0, 1.1, & 2.0) (Supplements to the 
Uniform Customs and Practices for Documentary Credits for Electronic 
Presentation); International Standby Practices (ISP98) (ICC Publication 
No. 590); the United Nations Convention on Independent Guarantees and 
Stand-by Letters of Credit (adopted by the U.N. General Assembly in 1995 
and signed by the U.S. in 1997); and the Uniform Rules for Bank-to-Bank 
Reimbursements Under Documentary Credits (ICC Publication No. 725).
---------------------------------------------------------------------------

    (b) Safety and soundness considerations--(1) Terms. As a matter of 
safe and sound banking practice, national banks and Federal savings 
associations that issue independent undertakings should not be exposed 
to undue risk. At a minimum, national banks and Federal savings 
associations should consider the following:
    (i) The independent character of the undertaking should be apparent 
from its terms (such as terms that subject it to laws or rules providing 
for its independent character);
    (ii) The undertaking should be limited in amount;
    (iii) The undertaking should:
    (A) Be limited in duration; or
    (B) Permit the national bank or Federal savings association to 
terminate the undertaking either on a periodic basis (consistent with 
the bank's or savings association's ability to make any necessary credit 
assessments) or at will upon either notice or payment to the 
beneficiary; or
    (C) Entitle the national bank or Federal savings association to cash 
collateral from the applicant on demand (with a right to accelerate the 
applicant's obligations, as appropriate); and
    (iv) The national bank or Federal savings association either should 
be fully collateralized or have a post-honor right of reimbursement from 
the applicant or from another issuer of an independent undertaking. 
Alternatively, if the national bank's or Federal savings association's 
undertaking is to purchase documents of title, securities, or other 
valuable documents, the bank or savings association should obtain a 
first priority right to realize on the documents if the bank or savings 
association is not otherwise to be reimbursed.
    (2) Additional considerations in special circumstances. Certain 
undertakings require particular protections against credit, operational, 
and market risk:
    (i) In the event that the undertaking is to honor by delivery of an 
item of value other than money, the national bank or Federal savings 
association should ensure that market fluctuations that affect the value 
of the item will not cause the bank or savings association to assume 
undue market risk;
    (ii) In the event that the undertaking provides for automatic 
renewal, the terms for renewal should be consistent with the national 
bank's or Federal savings association's ability to make any necessary 
credit assessments prior to renewal;
    (iii) In the event that a national bank or Federal savings 
association issues an undertaking for its own account, the underlying 
transaction for which it is issued must be within the bank's or savings 
association's authority and comply with any safety and soundness 
requirements applicable to that transaction.
    (3) Operational expertise. The national bank or Federal savings 
association should possess operational expertise that is commensurate 
with the sophistication of its independent undertaking activities.

[[Page 410]]

    (4) Documentation. The national bank or Federal savings association 
must accurately reflect the bank's or savings association's undertakings 
in its records, including any acceptance or deferred payment or other 
absolute obligation arising out of its contingent undertaking.
    (c) Coverage. An independent undertaking within the meaning of this 
section is not subject to the provisions of Sec.  7.1017.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 68 
FR 70131, Dec. 17, 2003; 73 FR 22241, Apr. 24, 2008; 85 FR 83728, Dec. 
22, 2020]



Sec.  7.1017  National bank as guarantor or surety on indemnity bond.

    (a) A national bank may lend its credit, bind itself as a surety to 
indemnify another, or otherwise become a guarantor (including, pursuant 
to 12 CFR 28.4, guaranteeing the deposits and other liabilities of its 
Edge corporations and Agreement corporations and of its corporate 
instrumentalities in foreign countries), if:
    (1) The bank has a substantial interest in the performance of the 
transaction involved (for example, a bank, as fiduciary, has a 
sufficient interest in the faithful performance by a cofiduciary of its 
duties to act as surety on the bond of such cofiduciary); or
    (2) The transaction is for the benefit of a customer and the bank 
obtains from the customer a segregated deposit that is sufficient in 
amount to cover the bank's total potential liability. A segregated 
deposit under this section includes collateral:
    (i) In which the bank has perfected its security interest (for 
example, if the collateral is a printed security, the bank must have 
obtained physical control of the security, and, if the collateral is a 
book entry security, the bank must have properly recorded its security 
interest); and
    (ii) That has a market value, at the close of each business day, 
equal to the bank's total potential liability and is composed of:
    (A) Cash;
    (B) Obligations of the United States or its agencies;
    (C) Obligations fully guaranteed by the United States or its 
agencies as to principal and interest; or
    (D) Notes, drafts, or bills of exchange or bankers' acceptances that 
are eligible for rediscount or purchase by a Federal Reserve Bank; or
    (iii) That has a market value, at the close of each business day, 
equal to 110 percent of the bank's total potential liability and is 
composed of obligations of a State or political subdivision of a State.
    (b) In addition to paragraph (a) of this section, a national bank 
may guarantee obligations of a customer, subsidiary or affiliate that 
are financial in character, provided the amount of the bank's financial 
obligation is reasonably ascertainable and otherwise consistent with 
applicable law.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 73 
FR 22241, Apr. 24, 2008]



Sec.  7.1018  National bank automatic payment plan accounts.

    A national bank may, for the benefit and convenience of its savings 
depositors, adopt an automatic payment plan under which a savings 
account will earn dividends at the current rate paid on regular savings 
accounts. The depositor, upon reaching a previously designated age, 
receives his or her accumulated savings and earned interest in 
installments of equal amounts over a specified period.



Sec.  7.1020  Purchase of open accounts by a national bank.

    (a) General. The purchase of open accounts is a part of the business 
of banking and within the power of a national bank.
    (b) Export transactions. A national bank may purchase open accounts 
in connection with export transactions; the accounts should be protected 
by insurance such as that provided by the Foreign Credit Insurance 
Association and the Export-Import Bank.



Sec.  7.1021  Financial literacy programs not branches of national banks.

    A financial literacy program is a program the principal purpose of 
which is to be educational for members of the

[[Page 411]]

community. The premises of, or a facility used by, a school or other 
organization at which a national bank participates in a financial 
literacy program is not a branch for purposes of 12 U.S.C. 36 provided 
the bank does not establish and operate the premises or facility. The 
OCC considers establishment and operation in this context on a case by 
case basis, considering the facts and circumstances. However, the 
premises or facility is not a branch of the national bank if the safe 
harbor test in Sec.  7.1012(c)(2) applicable to messenger services 
established by third parties is satisfied. The factor discussed in Sec.  
7.1012(c)(2)(i) can be met if bank employee participation in the 
financial literacy program consists of managing the program or 
conducting or engaging in financial education activities provided the 
school or other organization retains control over the program and over 
the premises or facilities at which the program is held.

[85 FR 83729, Dec. 22, 2020]



Sec.  7.1022  National banks' authority to buy and sell exchange, coin, 
and bullion.

    (a) In this section, industrial or commercial metal means metal 
(including an alloy) in a physical form primarily suited to industrial 
or commercial use, for example, copper cathodes.
    (b) Scope of authorization. Section 24(Seventh) of the National Bank 
Act authorizes national banks to buy and sell exchange, coin, and 
bullion. Industrial or commercial metal is not exchange, coin, and 
bullion within the meaning of this authorization.
    (c) Buying and selling metal as part of or incidental to the 
business of banking. Section 24(Seventh) authorizes national banks to 
engage in activities that are part of, or incidental to, the business of 
banking. Buying and selling industrial or commercial metal for the 
purpose of dealing or investing in that metal is not part of or 
incidental to the business of banking pursuant to section 24(Seventh). 
Accordingly, national banks may not acquire industrial or commercial 
metal for purposes of dealing or investing.
    (d) Other authorities not affected. This section may not be 
construed to preclude a national bank from acquiring or selling metal in 
connection with its incidental authority to foreclose on loan 
collateral, compromise doubtful claims, or avoid loss in connection with 
a debt previously contracted. This section also may not be construed to 
preclude a national bank from buying and selling physical metal to hedge 
a derivative for which that metal is the reference asset so long as the 
amount of the physical metal used for hedging purposes is nominal.
    (e) Nonconforming holdings. National banks that hold industrial or 
commercial metal as a result of dealing or investing in that metal must 
dispose of such metal as soon as practicable, but not later than one 
year from April 1, 2018. The OCC may grant up to four separate one-year 
extensions to dispose of industrial or commercial metal if a national 
bank makes a good faith effort to dispose of the metal and retention of 
the metal for an additional year is not inconsistent with the safe and 
sound operation of the bank.

[81 FR 96360, Dec. 30, 2016, as amended at 85 FR 83729, Dec. 22, 2020]



Sec.  7.1023  Federal savings associations, prohibition on industrial 
or commercial metal dealing or investing.

    (a) In this section, industrial or commercial metal means metal 
(including an alloy) in a physical form primarily suited to industrial 
or commercial use, for example, copper cathodes.
    (b) Federal savings associations may not deal or invest in 
industrial or commercial metal.
    (c) Other authorities not affected. This section may not be 
construed to preclude a Federal savings association from acquiring or 
selling metal in connection with its authority to foreclose on loan 
collateral, compromise doubtful claims, or avoid loss in connection with 
a debt previously contracted.
    (d) Nonconforming holdings. Federal savings associations that hold 
industrial or commercial metal as a result of dealing or investing in 
that metal must dispose of such metal as soon as practicable, but not 
later than one year from April 1, 2018. The OCC may grant up to four 
separate one-year extensions to dispose of industrial or commercial 
metal if a Federal savings association makes a good faith effort

[[Page 412]]

to dispose of the metal and retention of the metal for an additional 
year is not inconsistent with safe and sound operation of the 
association.

[81 FR 96360, Dec. 30, 2016, as amended at 85 FR 83729, Dec. 22, 2020]



Sec.  7.1024  National bank or Federal savings association 
ownership of property.

    (a) Investment in real estate necessary for the transaction of 
business--(1) In general. A national bank or Federal savings association 
may invest in real estate that is necessary for the transaction of its 
business.
    (2) Type of real estate. Real estate investments permissible under 
this section include:
    (i) Premises that are owned and occupied (or to be occupied, if 
under construction) by the national bank or Federal savings association, 
or its respective branches or consolidated subsidiaries;
    (ii) Real estate acquired and intended, in good faith, for use in 
future expansion;
    (iii) Parking facilities that are used by customers or employees of 
the national bank or Federal savings association, or its respective 
branches or consolidated subsidiaries;
    (iv) Residential property for the use of officers or employees of 
the national bank or Federal savings association who are:
    (A) Located in remote areas where suitable housing at a reasonable 
price is not readily available; or
    (B) Temporarily assigned to a foreign country, including foreign 
nationals temporarily assigned to the United States; and
    (v) Property for the use of national bank or Federal savings 
association officers, employees, or customers, or for the temporary 
lodging of such persons in areas where suitable commercial lodging is 
not readily available, provided that the purchase and operation of the 
property qualifies as a deductible business expense for Federal tax 
purposes.
    (3) Permissible means of holding. (i) A national bank or Federal 
savings association may acquire and hold real estate under this 
paragraph (a) by any reasonable and prudent means, including ownership 
in fee, a leasehold estate, or in an interest in a cooperative. The 
national bank or Federal savings association may hold this real estate 
directly or through one or more subsidiaries. The national bank or 
Federal savings association may organize a banking premises subsidiary 
as a corporation, partnership, or similar entity (e.g., a limited 
liability company).
    (ii) A Federal savings association also may acquire and hold banking 
premises through a service corporation in accordance with 12 CFR 5.59.
    (b) Fixed assets. A national bank or Federal savings association may 
own fixed assets necessary for the transaction of its business, such as 
fixtures, furniture, and data processing equipment.
    (c) Investment in banking premises--(1) Investment limitation. 
Twelve CFR 5.37(d)(1)(i) and (d)(3)(i) provide quantitative investment 
limitations that govern when OCC approval is required for a national 
bank or Federal savings association to invest in banking premises.
    (2) Premises approval. (i) A national bank or Federal savings 
association must seek approval from the OCC in accordance with 12 CFR 
5.37(d).
    (ii) A Federal savings association that invests in banking premises 
through a service corporation must comply with the quantitative 
limitations in 12 CFR 5.37(d) and, to the extent applicable, 12 CFR 
5.59.
    (3) Option to purchase. An unexercised option to purchase banking 
premises or stock in a corporation holding banking premises is not an 
investment in banking premises. However, a national bank or Federal 
savings association seeking to exercise such an option must comply with 
the requirements in 12 CFR 5.37(d).
    (d) Future national bank or Federal savings association expansion. A 
national bank or Federal savings association normally should use real 
estate acquired for future national bank or Federal savings association 
expansion within five years. After holding such real estate for one 
year, the national bank or Federal savings association must state, by 
resolution of its board

[[Page 413]]

of directors or an appropriately authorized bank or savings association 
official or subcommittee of the board, definite plans for its use. The 
resolution or other official action must be available for inspection by 
OCC examiners.
    (e) Transition. If, on May 18, 2015, a Federal savings association 
holds an investment in real estate, fixed assets, banking premises, or 
other real property that complies with the legal requirements in effect 
prior to May 18, 2015, but would violate any provision of this section 
or Sec.  5.37, the savings association may continue to hold such 
investment in accordance with the prior legal requirements. However, a 
Federal savings association that holds such an investment may not 
modify, expand or improve this investment, except for routine 
maintenance, without the prior approval of the appropriate OCC 
supervisory office.

[80 FR 28470, May 18, 2015. Redesignated and amended at 85 FR 83726, 
83729, Dec. 22, 2020]



Sec.  7.1025  Tax equity finance transactions by national banks 
and Federal savings associations.

    (a) Tax equity finance transactions. A national bank or Federal 
savings association may engage in a tax equity finance transaction 
pursuant to 12 U.S.C. 24(Seventh) and 1464 only if the transaction is 
the functional equivalent of a loan, as provided in paragraph (c) of 
this section, and the transaction satisfies applicable conditions in 
paragraph (d) of this section. The authority to engage in tax equity 
finance transactions under this section is pursuant to 12 U.S.C. 
24(Seventh) and 1464 lending authority and is separate from, and does 
not limit, other investment authorities available to national banks and 
Federal savings associations.
    (b) Definitions. For purposes of this section:
    (1) Appropriate OCC supervisory office means the OCC office that is 
responsible for the supervision of a national bank or Federal savings 
association, as described in subpart A of 12 CFR part 4;
    (2) Capital and surplus has the same meaning that this term has in 
12 CFR 32.2.
    (3) Tax equity finance transaction means a transaction in which a 
national bank or Federal savings association provides equity financing 
to fund a project or projects that generate tax credits or other tax 
benefits and the use of an equity-based structure allows the transfer of 
those credits and other tax benefits to the national bank or Federal 
savings association.
    (c) Functional equivalent of a loan. A tax equity finance 
transaction is the functional equivalent of a loan if:
    (1) The structure of the transaction is necessary for making the tax 
credits or other tax benefits available to the national bank or Federal 
savings association;
    (2) The transaction is of limited tenure and is not indefinite, 
including retaining a limited investment interest that is required by 
law to obtain continuing tax benefits or needed to obtain the expected 
rate of return;
    (3) The tax benefits and other payments received by the national 
bank or Federal savings association from the transaction repay the 
investment and provide the expected rate of return at the time of 
underwriting;
    (4) Consistent with paragraph (c)(3) of this section, the national 
bank or Federal savings association does not rely on appreciation of 
value in the project or property rights underlying the project for 
repayment;
    (5) The national bank or Federal savings association uses 
underwriting and credit approval criteria and standards that are 
substantially equivalent to the underwriting and credit approval 
criteria and standards used for a traditional commercial loan;
    (6) The national bank or Federal savings association is a passive 
investor in the transaction and is unable to direct the affairs of the 
project company; and
    (7) The national bank or Federal savings association appropriately 
accounts for the transaction initially and on an ongoing basis and has 
documented contemporaneously its accounting assessment and conclusion.
    (d) Conditions on tax equity finance transactions. A national bank 
or Federal savings association may engage in tax equity finance 
transactions only if:
    (1) The national bank or Federal savings association cannot control 
the sale of energy, if any, from the project;
    (2) The national bank or Federal savings association limits the 
total dollar

[[Page 414]]

amount of tax equity finance transactions undertaken pursuant to this 
section to no more than five percent of its capital and surplus, unless 
the OCC determines, by written approval of a written request by the 
national bank or Federal savings association to exceed the five percent 
limit, that a higher aggregate limit will not pose an unreasonable risk 
to the national bank or Federal savings association and that the tax 
equity finance transactions in the national bank's or Federal savings 
association's portfolio will not be conducted in an unsafe or unsound 
manner; provided, however, that in no case may a national bank or 
Federal savings association's total dollar amount of tax equity finance 
transactions undertaken pursuant to this section exceed 15 percent of 
its capital and surplus;
    (3) The national bank or Federal savings association has provided 
written notification to the appropriate OCC supervisory office, prior to 
engaging in each tax equity finance transaction that includes its 
evaluation of the risks posed by the transaction;
    (4) The national bank or Federal savings association can identify, 
measure, monitor, and control the associated risks of its tax equity 
finance transaction activities individually and as a whole on an ongoing 
basis to ensure that such activities are conducted in a safe and sound 
manner; and
    (5) The national bank or Federal savings association obtains a legal 
opinion or has other good faith, reasoned bases for making a 
determination that tax credits or other tax benefits are available 
before engaging in a tax equity finance transaction.
    (e) Applicable legal requirements. The transaction is subject to the 
substantive legal requirements of a loan, including the lending limits 
prescribed by 12 U.S.C. 84 and 12 U.S.C. 1464(u), as appropriate, as 
implemented by 12 CFR part 32, and if the active investor or project 
sponsor of the transaction is an affiliate of the bank, to the 
restrictions on transactions with affiliates prescribed by 12 U.S.C. 
371c and 371c-1, as implemented by 12 CFR part 223.

[85 FR 83729, Dec. 22, 2020]



Sec.  7.1026  National bank and Federal savings association 
payment system memberships.

    (a) In general. National banks and Federal savings associations may 
become members of payment systems, subject to the requirements of this 
section.
    (b) Definitions. As used in this section:
    (1) Appropriate OCC supervisory office means the OCC office that is 
responsible for the supervision of a national bank or Federal savings 
association, as described in subpart A of 12 CFR part 4;
    (2) Member includes a national bank or Federal savings association 
designated as a ``member,'' or ``participant,'' or other similar role by 
a payment system, including by a payment system that requires the 
national bank or Federal savings association to share in operational 
losses or maintain a reserve with the payment system to offset potential 
liability for operational losses. This definition includes indirect 
members only if they agree to be bound by the rules of the payment 
system and the rules of the payment system indicate indirect members are 
covered;
    (3) Open-ended liability refers to liability for operational losses 
that is not capped under the rules of the payment system and includes 
indemnifications of third parties provided as a condition of membership 
in the payment system;
    (4) Operational loss means a charge resulting from sources other 
than defaults by other members of the payment system. Examples of 
operational losses include losses that are due to: Employee misconduct, 
fraud, misjudgment, or human error; management failure; information 
systems failures; disruptions from internal or external events that 
result in the degradation or failure of services provided by the payment 
system; security breaches or cybersecurity events; or payment or 
settlement delays, constrained liquidity, contagious disruptions, and 
resulting litigation; and
    (5) Payment system means ``financial market utility'' as defined in 
12 U.S.C. 5462(6), wherever operating, and includes both retail and 
wholesale payment systems. Payment system does

[[Page 415]]

not include a derivatives clearing organization registered under the 
Commodity Exchange Act, a clearing agency registered under the 
Securities Exchange Act of 1934, or foreign organization that would be 
considered a derivatives clearing organization or clearing agency were 
it operating in the United States.
    (c) Notice requirements--(1) Prior notice required. A national bank 
or Federal savings association must provide written notice to its 
appropriate OCC supervisory office at least 30 days prior to joining a 
payment system that exposes it to open-ended liability.
    (2) After-the-fact notice. A national bank or Federal savings 
association must provide written notice to its appropriate OCC 
supervisory office within 30 days of joining a payment system that does 
not expose it to open-ended liability.
    (d) Content of notice--(1) In general. A notice required by 
paragraph (c) of this section must include representations that the 
national bank or Federal savings association:
    (i) Has complied with the safety and soundness review requirements 
in paragraph (e)(1) of this section; and
    (ii) Will comply with the safety and soundness review and 
notification requirements in paragraphs (e)(2) and (3) of this section.
    (2) Payment system with limits on liability or no liability. A 
notice filed under paragraph (c)(2) of this section also must include a 
representation that either:
    (i) The rules of the payment system do not impose liability for 
operational losses on members; or
    (ii) The national bank's or Federal savings association's liability 
for operational losses is limited by the rules of the payment system to 
specific and appropriate limits that do not exceed the lower of:
    (A) The legal lending limit under 12 CFR part 32; or
    (B) The limit set for the bank or savings association by the OCC.
    (e) Safety and soundness procedures. (1) Prior to joining a payment 
system, a national bank or Federal savings association must:
    (i) Identify and evaluate the risks posed by membership in the 
payment system, taking into account whether the liability of the bank or 
savings association is limited; and
    (ii) Ensure that it can measure, monitor, and control the risks 
identified pursuant to paragraph (e)(1)(i) of this section.
    (2) After joining a payment system, a national bank or Federal 
savings association must manage the risks of the payment system on an 
ongoing basis. This ongoing risk management must:
    (i) Identify and evaluate the risks posed by membership in the 
payment system, taking into account whether the liability of the bank or 
savings association is limited; and
    (ii) Measure, monitor, and control the risks identified pursuant to 
paragraph (e)(2)(i) of this section.
    (3) If the national bank or Federal savings association identifies 
risks during the ongoing risk management required by paragraph (e)(2) of 
this section that raise safety and soundness concerns, such as a 
material change to the bank's or savings association's liability or 
indemnification responsibilities, the national bank or Federal savings 
association must:
    (i) Notify the appropriate OCC supervisory office as soon as the 
safety and soundness concern is identified; and
    (ii) Take appropriate actions to remediate the risk.
    (4) A national bank or Federal savings association that believes its 
open-ended liability is otherwise limited (e.g., by negotiated 
agreements or laws of an appropriate jurisdiction) may consider its 
liability to be limited for purposes of the reviews required by 
paragraphs (e)(1) and (2) of this section so long as:
    (i) Prior to joining the payment system, the bank or savings 
association obtains a written legal opinion that:
    (A) Describes how the payment system allocates liability for 
operational losses; and
    (B) Concludes the potential liability for operational losses for the 
national bank or Federal savings association is in fact limited to 
specific and appropriate limits that do not exceed the lower of:
    (1) The legal lending limit under 12 CFR part 32; or

[[Page 416]]

    (2) The limit set for the bank or savings association by the OCC; 
and
    (ii) There are no material changes to the liability or 
indemnification requirements applicable to the bank or savings 
association since the issuance of the written legal opinion.
    (f) Safety and soundness considerations. (1) A national bank or 
Federal savings association should evaluate, at a minimum, the following 
payment system characteristics when conducting an analysis required by 
paragraph (e) of this section:
    (i) Does the processing occur on a real-time gross settlement basis 
or provide reasonable assurance (e.g., prefunding, etc.) that members 
will meet settlement obligations?
    (ii) How does the payment system's rules limit its liability to 
members?
    (iii) Does the payment system have insurance coverage and/or self-
insurance arrangements to cover operational losses?
    (iv) Do the payment system's rules provide an unambiguous pro-rata 
loss allocation methodology under its indemnity provisions and does the 
methodology provide members the opportunity to reduce or eliminate 
liability exposure by decreasing or ceasing use of the payment system?
    (v) Do the payment system's rules provide for unambiguous membership 
withdrawal procedures that do not require the prior approval of the 
system?
    (vi) Does the payment system have appropriate admission and 
continuing participation requirements for system participants? Such 
requirements should address, among other things:
    (A) The participants' access to sufficient financial resources to 
meet obligations arising from participation;
    (B) The adequacy of participants' operational capacities to meet 
obligations arising from participation; and
    (C) The adequacy of the participants' own risk management processes.
    (vii) Does the payment system have processes and controls in place 
to verify and monitor on an ongoing basis the compliance of each 
participant with admission and participation requirements?
    (viii) Does the payment system have written policies and procedures 
for addressing participant failures to meet ongoing participation 
requirements?
    (ix) Are the payment system's rules relating to the system's 
emergency authorities unambiguous and may they be amended or otherwise 
altered without prior notification to all members and an opportunity to 
withdraw?
    (x) Is the payment system governed by uniform, comprehensive and 
clear legal standards in its operating jurisdiction that address payment 
and/or settlement activities?
    (xi) Is the payment system subject to and in compliance (or 
observance) with the Committee on Payment and Settlement Systems and the 
Technical Committee of the International Organization of Securities 
Commissions (CPSS--IOSCO) Principles for Financial Market 
Infrastructures?
    (xii) Is the payment system designated as a systemically important 
financial market utility (SIFMU) by the Financial Stability Oversight 
Counsel (FSOC) or is it the international or foreign equivalent?
    (xiii) Does the payment system provide members with information 
relevant to governance, risk management practices, and operations in a 
timely manner and with sufficient transparency and particularity for the 
bank to ascertain with reasonable certainty the bank's level of risk 
exposure to the system?
    (xiv) Is the payment system operated by or subject to oversight of a 
central bank or regulatory authority?
    (xv) Is the payment system legally organized as a not-for-profit 
enterprise or is it owned and operated by a government entity?
    (xvi) Does the payment system have appropriate systems and controls 
for communicating to members in a timely manner about material events 
that relate to or could result in potential operational losses, e.g. 
fraud, system failures, natural disasters, etc.?
    (xvii) Has the payment system ever exercised its authority under 
indemnification provisions?
    (2) A national bank or Federal savings association should consider, 
at a minimum, the following characteristics of its risk management 
program when conducting an analysis required by paragraph (e) of this 
section:

[[Page 417]]

    (i) Does the bank or savings association have appropriate board 
supervision and managerial and staff expertise?
    (ii) Does the bank or savings association have comprehensive 
policies and operating procedures with respect to its risk 
identification, measurement and management information systems that are 
routinely reviewed?
    (iii) Does the bank or savings association have effective risk 
controls and processes to oversee and ensure the continuing 
effectiveness of the risk management process? The program should include 
a formal process for approval of payment system memberships as well as 
ongoing monitoring and measurement of activity against predetermined 
risk limits.
    (iv) Does the bank or savings association's membership evaluation 
process include assessments and analyses of:
    (A) The credit quality of the entity;
    (B) The entity's risk management practices;
    (C) Settlement and default procedures of the entity;
    (D) Any default or loss-sharing precedents and any other applicable 
limits or restrictions of the entity;
    (E) Key risks associated with joining the entity; and
    (F) The incremental effect of additional memberships in aggregate 
exposure to payment system risk?
    (v) Does the bank or savings association's risk management program 
include policies and procedures that identify and estimate the level of 
potential operational risks, at both inception of membership and on an 
on-going basis?
    (vi) Does the bank or savings association have auditing procedures 
to ensure the integrity of risk measurement, control and reporting 
systems?
    (vii) Does the program include mechanisms to monitor, estimate, and 
maintain control over the bank or savings association's potential 
liabilities for operational losses on an ongoing basis. This should 
include:
    (A) Limits and other controls with respect to each identified risk 
factor;
    (B) Reports generated throughout the processes that accurately 
present the nature and level(s) of risk taken and demonstrate compliance 
with approved polices and limits; and
    (C) Identification of the business unit and/or individuals 
responsible for measuring and monitoring risk exposures, as well as 
those individuals responsible for monitoring compliance with policies 
and risk exposure limits.
    (viii) Does a bank or savings association with memberships in 
multiple payment systems have the ability to monitor and report 
aggregate risk exposures and measurement against risk limits both at the 
sponsoring business line level and the total exposure organizationally?

[85 FR 83730, Dec. 22, 2020]



Sec.  7.1027  Establishment and operation of a remote service unit 
by a national bank.

    A remote service unit (RSU) is an automated or unstaffed facility, 
operated by a customer of a bank with at most delimited assistance from 
bank personnel, that conducts banking functions such as receiving 
deposits, paying withdrawals, or lending money. A national bank may 
establish and operate an RSU pursuant to 12 U.S.C. 24(Seventh). An RSU 
includes an automated teller machine, automated loan machine, automated 
device for receiving deposits, personal computer, telephone, other 
similar electronic devices, and drop boxes. An RSU may be equipped with 
a telephone or tele-video device that allows contact with bank 
personnel. An RSU is not a ``branch'' within the meaning of 12 U.S.C. 
36(j), and is not subject to State geographic or operational 
restrictions or licensing laws.

[85 FR 83731, Dec. 22, 2020]



Sec.  7.1028  Establishment and operation of a deposit production office 
by a national bank.

    (a) In general. A national bank or its operating subsidiary may 
engage in deposit production activities at a site other than the main 
office or a branch of the bank. A national bank or its operating 
subsidiary may solicit deposits, provide information about deposit 
products, and assist persons in completing application forms and related 
documents to open a deposit account at a deposit production office 
(DPO). A

[[Page 418]]

DPO is not a branch within the meaning of 12 U.S.C. 36(j) and 12 CFR 
5.30(d)(1) so long as it does not receive deposits, pay withdrawals, or 
make loans. All deposit and withdrawal transactions of a bank customer 
using a DPO must be performed by the customer, either in person at the 
main office or a branch office of the bank, or by mail, electronic 
transfer, or a similar method of transfer.
    (b) Services of other persons. A national bank may use the services 
of, and compensate, persons not employed by the bank in its deposit 
production activities.

[85 FR 83732, Dec. 22, 2020]



Sec.  7.1029  Combination of national bank loan production office, 
deposit production office, and remote service unit.

    A location at which a national bank operates a loan production 
office (LPO), a deposit production office (DPO), and a remote service 
unit (RSU) is not a ``branch'' within the meaning of 12 U.S.C. 36(j) by 
virtue of that combination. Since an LPO, DPO, or RSU is not, 
individually, a branch under 12 U.S.C. 36(j), any combination of these 
facilities at one location does not create a branch. The RSU at such a 
combined location must be primarily operated by the customer with at 
most delimited assistance from bank personnel.

[85 FR 83732, Dec. 22, 2020]



Sec.  7.1030  Permissible derivatives activities for national banks.

    (a) Authority. This section is issued pursuant to 12 U.S.C. 
24(Seventh). A national bank may only engage in derivatives transactions 
in accordance with the requirements of this section.
    (b) Definitions. For purposes of this section:
    (1) Customer-driven means a transaction is entered into for a 
customer's valid and independent business purpose (and a customer-driven 
transaction does not include a transaction the principal purpose of 
which is to deliver to a national bank assets that the national bank 
could not invest in directly);
    (2) Perfectly-matched means two back-to-back derivatives 
transactions that offset risk with respect to all economic terms (e.g., 
amount, maturity, duration, and underlying);
    (3) Portfolio-hedged means a portfolio of derivatives transactions 
that are hedged based on net unmatched positions or exposures in the 
portfolio;
    (4) Physical hedging or physically-hedged means holding title to or 
acquiring ownership of an asset (for example, by warehouse receipt or 
book-entry) solely to manage the risks arising out of permissible 
customer-driven derivatives transactions;
    (5) Physical settlement or physically-settled means accepting title 
to or acquiring ownership of an asset;
    (6) Transitory title transfer means accepting and immediately 
relinquishing title to an asset; and
    (7) Underlying means the reference asset, rate, obligation, or index 
on which the payment obligation(s) between counterparties to a 
derivative transaction is based.
    (c) In general. A national bank may engage in the following 
derivatives transactions after notice in accordance with paragraph (d) 
of this section, as applicable:
    (1) Derivatives transactions with payments based on underlyings a 
national bank is permitted to purchase directly as an investment;
    (2) Derivatives transactions with any underlying to hedge the risks 
arising from bank-permissible activities;
    (3) Derivatives transactions as a financial intermediary with any 
underlying that are customer-driven, cash-settled, and either perfectly-
matched or portfolio-hedged;
    (4) Derivatives transactions as a financial intermediary with any 
underlying that are customer-driven, physically-settled by transitory 
title transfer, and either perfectly-matched or portfolio-hedged; and
    (5) Derivatives transactions as a financial intermediary with any 
underlying that are customer-driven, physically-hedged, and either 
portfolio-hedged or hedged on a transaction-by-transaction basis, and 
provided that:
    (i) The national bank does not take physical delivery of any 
commodity by receipt of physical quantities of the commodity on bank 
premises; and

[[Page 419]]

    (ii) Physical hedging activities meet the requirements of paragraph 
(e) of this section.
    (d) Notice procedure. (1) A national bank must provide notice to its 
Examiner-in-Charge prior to engaging in any of the following with 
respect to derivatives transactions with payments based on underlyings 
that a national bank is not permitted to purchase directly as an 
investment:
    (i) Engaging in derivatives hedging activities pursuant to paragraph 
(c)(2) of this section;
    (ii) Expanding the bank's derivatives hedging activities pursuant to 
paragraph (c)(2) of this section to include a new category of underlying 
for derivatives transactions;
    (iii) Engaging in customer-driven financial intermediation 
derivatives activities pursuant to paragraph (c)(3), (4), or (5) of this 
section; and
    (iv) Expanding the bank's customer-driven financial intermediation 
derivatives activities pursuant to paragraph (c)(3), (4), or (5) of this 
section to include any new category of underlyings.
    (2) The notice pursuant to paragraph (d)(1) of this section must be 
submitted in writing at least 30 days before the national bank commences 
the activity and include the following information:
    (i) A detailed description of the proposed activity, including the 
relevant underlyings;
    (ii) The anticipated start date of the activity; and
    (iii) A detailed description of the bank's risk management system 
(policies, processes, personnel, and control systems) for identifying, 
measuring, monitoring, and controlling the risks of the activity.
    (e) Additional requirements for physical hedging activities. (1) A 
national bank engaging in physical hedging activities pursuant to 
paragraph (c)(5) of this section must hold the underlying solely to 
hedge risks arising from derivatives transactions originated by 
customers for the customers' valid and independent business purposes.
    (2) The physical hedging activities must offer a cost-effective 
means to hedge risks arising from permissible banking activities.
    (3) The national bank must not take anticipatory or maintain 
residual positions in the underlying except as necessary for the orderly 
establishment or unwinding of a hedging position.
    (4) The national bank must not acquire equity securities for hedging 
purposes that constitute more than 5 percent of a class of voting 
securities of any issuer.
    (5) With respect to physical hedging involving commodities:
    (i) A national bank's physical position in a particular physical 
commodity (including, as applicable, delivery point, purity, grade, 
chemical composition, weight, and size) must not be more than 5 percent 
of the gross notional value of the bank's derivatives that are in that 
particular physical commodity and allow for physical settlement within 
30 days. Title to commodities acquired and immediately sold by a 
transitory title transfer does not count against the 5 percent limit;
    (ii) The physical position must more effectively reduce risk than a 
cash-settled hedge referencing the same commodity; and
    (iii) The physical position hedges a physically-settled customer-
driven commodity derivative transaction(s).
    (f) Safe and sound banking practices. A national bank must adhere to 
safe and sound banking practices in conducting the activities described 
in this section. The bank must have a risk management system (policies, 
processes, personnel, and control system) that effectively manages 
(identifies, measures, monitors, and controls) these activities' 
interest rate, credit, liquidity, price, operational, compliance, and 
strategic risks.

[85 FR 83732, Dec. 22, 2020]



                      Subpart B_Corporate Practices



Sec.  7.2000  National bank corporate governance.

    (a) In general. The corporate governance provisions in a national 
bank's articles of association and bylaws and the bank's conduct of its 
corporate governance affairs must comply with applicable Federal banking 
statutes and regulations and safe and sound banking practices.
    (b) Other sources of guidance. To the extent not inconsistent with 
applicable

[[Page 420]]

Federal banking statutes or regulations, or bank safety and soundness, a 
national bank may elect to follow the corporate governance provisions of 
the law of any State in which the main office or any branch of the bank 
is located, the law of any State in which a holding company of the bank 
is incorporated, the Delaware General Corporation Law, Del. Code Ann. 
tit. 8 (1991, as amended 1994, and as amended thereafter), or the Model 
Business Corporation Act (1984, as amended 1994, and as amended 
thereafter). A national bank must designate in its bylaws the body of 
law selected for its corporate governance provisions.
    (c) Continued use of former holding company State. A national bank 
that has elected to follow the corporate governance provisions of the 
law of the State in which its holding company is incorporated may 
continue to use those provisions even if the bank is no longer 
controlled by that holding company.
    (d) Request for OCC staff position. A national bank may request the 
views of OCC staff on the permissibility of a national bank's adoption 
of a particular State corporate governance provision. Requests must 
include the following information:
    (1) The name of the national bank;
    (2) Citation to the State statutes or regulations involved;
    (3) A discussion as to whether a similarly situated State bank is 
subject to or may adopt the corporate governance provision;
    (4) Identification of all Federal banking statutes or regulations 
that are on the same subject as, or otherwise have a bearing on, the 
subject of the proposed State corporate governance provision; and
    (5) An analysis of how the proposed practice is not inconsistent 
with applicable Federal statutes or regulations and is not inconsistent 
with bank safety and soundness.

[61 FR 4862, Feb. 9, 1996, as amended at 79 FR 15641, Mar. 21, 2014; 80 
FR 28471, May 18, 2015; 85 FR 83733, Dec. 22, 2020]



Sec.  7.2001  National bank adoption of anti-takeover provisions.

    (a) In general. Pursuant to Sec.  7.2000(b), a national bank may 
adopt anti-takeover provisions included in State corporate governance 
law if the provisions are not inconsistent with Federal banking statutes 
or regulations and not inconsistent with bank safety and soundness.
    (b) State anti-takeover provisions that are not inconsistent with 
Federal banking statutes or regulations. State anti-takeover provisions 
that are not inconsistent with Federal banking statutes or regulations 
include the following:
    (1) Restrictions on business combinations with interested 
shareholders. State provisions that prohibit, or that permit the 
corporation to prohibit in its certificate of incorporation or other 
governing document, the corporation from engaging in a business 
combination with an interested shareholder or any related entity for a 
specified period of time from the date on which the shareholder first 
becomes an interested shareholder, subject to certain exceptions such as 
board approval. An interested shareholder is one that owns an amount of 
stock specified in the State provision.
    (2) Poison pill. State provisions that provide, or that permit the 
corporation to provide in its certificate of incorporation or other 
governing document, that all the shareholders, other than the hostile 
acquiror, have the right to purchase additional stock at a substantial 
discount upon the occurrence of a triggering event.
    (3) Requiring all shareholder actions to be taken at a meeting. 
State provisions that provide, or that permit the corporation to provide 
in its certificate of incorporation or other governing document, that 
all actions to be taken by shareholders must occur at a meeting and that 
shareholders may not take action by written consent.
    (4) Limits on shareholders' authority to call special meetings. 
State provisions that provide, or that permit the corporation to provide 
in its certificate of incorporation or other governing document, that:
    (i) Only the board of directors, and not the shareholders, have the 
right to call special meetings of the shareholders; or

[[Page 421]]

    (ii) If shareholders have the right to call special meetings, a high 
percentage of shareholders is needed to call the meeting.
    (5) Shareholder removal of a director only for cause. State 
provisions that provide, or that permit the corporation to provide in 
its certificate of incorporation or other governing document, that 
shareholders may remove a director only for cause, and not both for 
cause and without cause.
    (c) State anti-takeover provisions that are inconsistent with 
Federal banking statutes or regulations. The following State anti-
takeover provisions are inconsistent with Federal banking statutes or 
regulations:
    (1) Supermajority voting requirements. State provisions that 
require, or that permit the corporation to require in its certificate of 
incorporation or other governing document, a supermajority of the 
shareholders to approve specified matters are inconsistent when applied 
to matters for which Federal banking statutes or regulations specify the 
required level of shareholder approval.
    (2) Restrictions on a shareholder's right to vote all the shares it 
owns. State provisions that prohibit, or that permit the corporation in 
its certificate of incorporation or other governing document to 
prohibit, a person from voting shares acquired that increase their 
percentage of ownership of the company's stock above a certain level are 
inconsistent when applied to shareholder votes governed by 12 U.S.C. 61.
    (d) Bank safety and soundness--(1) In general. Except as provided in 
paragraph (d)(2) of this section, any State corporate governance 
provision, including anti-takeover provisions, that would render more 
difficult or discourage an injection of capital by purchase of bank 
stock, a merger, the acquisition of the bank, a tender offer, a proxy 
contest, the assumption of control by a holder of a large block of the 
bank's stock, or the removal of the incumbent board of directors or 
management is inconsistent with bank safety and soundness if:
    (i) The bank is less than adequately capitalized (as defined in 12 
CFR part 6);
    (ii) The bank is in troubled condition (as defined in 12 CFR 
5.51(c)(7));
    (iii) Grounds for the appointment of a receiver under 12 U.S.C. 191, 
as determined by the OCC, are present; or
    (iv) The bank is otherwise in less than satisfactory condition, as 
determined by the OCC.
    (2) Exception. Anti-takeover provisions are not inconsistent with 
bank safety and soundness if, at the time the bank adopts the 
provisions:
    (i) The bank is not subject to any of the conditions in paragraph 
(d)(1) of this section; and
    (ii) The bank includes, in its articles of association or its 
bylaws, as applicable pursuant to paragraph (f) of this section, a 
limitation that would make the provisions ineffective if:
    (A) The conditions in paragraph (d)(1) of this section exist; or
    (B) The OCC otherwise directs the bank not to follow the provision 
for supervisory reasons.
    (e) Case-by-case review--(1) OCC determination. Based on the 
substance of the provision or the individual circumstances of a national 
bank, the OCC may determine that a State anti-takeover provision, as 
proposed or adopted by a bank, is:
    (i) Inconsistent with Federal banking statutes or regulations, 
notwithstanding paragraph (b) of this section; or
    (ii) Inconsistent with bank safety and soundness other than as 
provided in paragraph (d) of this section.
    (2) Review. The OCC may initiate a review, or a bank may request OCC 
review pursuant to Sec.  7.2000(d), of a State anti-takeover provision.
    (f) Method of adoption for anti-takeover provisions--(1) Board and 
shareholder approval. A national bank must follow the provisions for 
approval by the board of directors and approval of shareholders for the 
adoption of an anti-takeover provision in the State corporate governance 
law it has elected to follow. However, if the provision is included in 
the bank's articles of association, the bank's shareholders must approve 
the amendment of the articles pursuant to 12 U.S.C. 21a, even if the 
State law does not require approval by the shareholders.
    (2) Documentation. If the State corporate governance law requires 
the anti-takeover provision to be in the

[[Page 422]]

company's articles of incorporation, certificate of incorporation, or 
similar document, the national bank must include the provision in its 
articles of association. If the State corporate governance law does not 
require the provision to be in the company's articles of incorporation, 
certificate of incorporation, or similar document, but allows it to be 
in the bylaws, then the national bank must include the provision in 
either its articles of association or in its bylaws, provided, however, 
that if the State corporate governance law requires shareholder approval 
for changes to the corporation's bylaws, then the national bank must 
include the provision in its articles of association.

[85 FR 83733, Dec. 22, 2020]



Sec.  7.2002  National bank director or attorney as proxy.

    Any person or group of persons, except the national bank's officers, 
clerks, tellers, or bookkeepers, may be designated to act as proxy for 
shareholder voting. The national bank's directors or attorneys may act 
as proxy for shareholder voting if they are not also employed as an 
officer, clerk, teller or bookkeeper of the bank.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83734, Dec. 22, 2020]



Sec.  7.2003  National bank shareholder meetings; Board of directors meetings.

    (a) Notice of shareholders' meetings. A national bank must mail 
shareholders notice of the time, place, and purpose of all shareholders' 
meetings at least 10 days prior to the meeting by first class mail, 
unless the OCC determines that an emergency circumstance exists. Where a 
national bank is a wholly-owned subsidiary, the sole shareholder is 
permitted to waive notice of the shareholder's meeting. The articles of 
association, bylaws, or law applicable to a national bank may require a 
longer period of notice.
    (b) Annual meeting for election of directors. When the day fixed for 
the regular annual meeting of the shareholders falls on a legal holiday 
in the State in which the bank is located, the shareholders' meeting 
must be held, and the directors elected, on the next following banking 
day.
    (c) Virtual participation at shareholder meetings--(1) In general. A 
national bank may provide for telephonic or electronic participation at 
shareholder meetings.
    (2) Procedures. A national bank must follow the procedures for 
telephonic or electronic participation in a shareholder meeting of the 
corporate governance provisions it has elected to follow pursuant to 
Sec.  7.2000(b), if those elected provisions include telephonic or 
electronic participation procedures; the Delaware General Corporation 
Law, Del. Code Ann. Tit. 8 (1991, as amended 1994, and as amended 
thereafter); or the Model Business Corporation Act, provided, however, 
that such procedures are not inconsistent with applicable Federal 
statutes and regulations and safety and soundness. The national bank 
must indicate the use of these procedures in its bylaws.
    (d) Virtual participation at board of directors meetings. A national 
bank may provide for telephonic or electronic participation at a meeting 
of its board of directors.

[85 FR 83734, Dec. 22, 2020]



Sec.  7.2004  Honorary national bank directors or advisory boards.

    A national bank may appoint honorary or advisory members of a board 
of directors to act in advisory capacities without voting power or power 
of final decision in matters concerning the business of the bank. Any 
listing of honorary or advisory directors must distinguish between them 
and the bank's board of directors or indicate their advisory status.



Sec.  7.2005  Ownership of stock necessary to qualify as director 
of a national bank.

    (a) In general. A national bank director must own a qualifying 
equity interest in a national bank or a company that has control of a 
national bank. The director must own the qualifying equity interest in 
his or her own right and meet a certain minimum threshold ownership.

[[Page 423]]

    (b) Qualifying equity interest--(1) Minimum required equity 
interest. For purposes of this section, a qualifying equity interest 
includes common or preferred stock of the bank or of a company that 
controls the bank that has not less than an aggregate par value of 
$1,000, an aggregate shareholders' equity of $1,000, or an aggregate 
fair market value of $1,000.
    (i) The value of the common or preferred stock held by a national 
bank director is valued as of the date purchased or the date on which 
the individual became a director, whichever value is greater.
    (ii) In the case of a company that owns more than one national bank, 
a director may use his or her equity interest in the controlling company 
to satisfy, in whole or in part, the equity interest requirement for any 
or all of the controlled national banks.
    (iii) Upon request, the OCC may consider whether other interests in 
a company controlling a national bank constitute an interest equivalent 
to $1,000 par value of national bank stock.
    (2) Joint ownership and tenancy in common. Shares held jointly or as 
a tenant in common are qualifying shares held by a director in his or 
her own right only to the extent of the aggregate value of the shares 
which the director would be entitled to receive on dissolution of the 
joint tenancy or tenancy in common.
    (3) Shares in a living trust. Shares deposited by a person in a 
living trust (inter vivos trust) as to which the person is a trustee and 
retains an absolute power of revocation are shares owned by the person 
in his or her own right.
    (4) Other arrangements--(i) Shares held through retirement plans and 
similar arrangements. A director may hold his or her qualifying interest 
through a profit-sharing plan, individual retirement account, retirement 
plan, or similar arrangement, if the director retains beneficial 
ownership and legal control over the shares.
    (ii) Shares held subject to buyback agreements. A director may 
acquire and hold his or her qualifying interest pursuant to a stock 
repurchase or buyback agreement with a transferring shareholder under 
which the director purchases the qualifying shares subject to an 
agreement that the transferring shareholder will repurchase the shares 
when, for any reason, the director ceases to serve in that capacity. The 
agreement may give the transferring shareholder a right of first refusal 
to repurchase the qualifying shares if the director seeks to transfer 
ownership of the shares to a third person.
    (iii) Assignment of right to dividends or distributions. A director 
may assign the right to receive all dividends or distributions on his or 
her qualifying shares to another, including a transferring shareholder, 
if the director retains beneficial ownership and legal control over the 
shares.
    (iv) Execution of proxy. A director may execute a revocable or 
irrevocable proxy authorizing another, including a transferring 
shareholder, to vote his or her qualifying shares, provided the director 
retains beneficial ownership and legal control over the shares.
    (c) Non-qualifying ownership. The following are not shares held by a 
director in his or her own right:
    (1) Shares pledged by the holder to secure a loan. However, all or 
part of the funds used to purchase the required qualifying equity 
interest may be borrowed from any party, including the bank or its 
affiliates;
    (2) Shares purchased subject to an absolute option vested in the 
seller to repurchase the shares within a specified period; and
    (3) Shares deposited in a voting trust where the depositor 
surrenders:
    (i) Legal ownership (depositor ceases to be registered owner of the 
stock);
    (ii) Power to vote the stock or to direct how it must be voted; or
    (iii) Power to transfer legal title to the stock.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 85 
FR 83734, Dec. 22, 2020]



Sec.  7.2006  Cumulative voting in election of national bank directors.

    When electing national bank directors, a shareholder must have as 
many votes as the number of directors to be elected multiplied by the 
number of the shareholder's shares. If permitted by the national bank's 
articles of association, the shareholder may cast all

[[Page 424]]

these votes for one candidate or distribute the votes among as many 
candidates as the shareholder chooses. If, after the first ballot, 
subsequent ballots are necessary to elect directors, a shareholder may 
not vote shares that he or she has already fully cumulated and voted in 
favor of a successful candidate.

[61 FR 4862, Feb. 9, 1996, as amended at 73 FR 22241, Apr. 24, 2008; 85 
FR 83734, Dec. 22, 2020]



Sec.  7.2007  Filling vacancies and increasing board of directors 
of a national bank other than by shareholder action.

    (a) Increasing board of directors. If authorized by the national 
bank's articles of association, between shareholder meetings a majority 
of the board of directors may increase the number of the bank's 
directors within the limits specified in 12 U.S.C. 71a. The board of 
directors may increase the number of directors only by up to two 
directors, when the number of directors last elected by shareholders was 
15 or fewer, and by up to four directors, when the number of directors 
last elected by shareholders was 16 or more.
    (b) Vacancies. If a vacancy occurs on the national bank's board of 
directors, including a vacancy resulting from an increase in the number 
of directors, the vacancy may be filled by the shareholders, a majority 
of the board of directors remaining in office, or, if the directors 
remaining in office constitute fewer than a quorum, by an affirmative 
vote of a majority of all the directors remaining in office.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020]



Sec.  7.2008  Oath of national bank directors.

    (a) Administration of the oath. The oath of directors must be 
administered by:
    (1) A notary public, including one who is a director but not an 
officer of the national bank; or
    (2) Any person, including one who is a director but not an officer 
of the national bank, having an official seal and authorized by the 
State to administer oaths.
    (b) Execution of the oath. Each national bank director must execute 
either a joint or individual oath at the first meeting of the board of 
directors that the director attends after the director is appointed or 
elected. A national bank director must take another oath upon re-
election, notwithstanding uninterrupted service. Appropriate sample 
oaths may be found in the Charter Booklet of the Comptroller's Licensing 
Manual available at www.occ.gov.
    (c) Filing and recordkeeping. A national bank must file the original 
executed oaths of directors with the appropriate OCC licensing office, 
as defined in 12 CFR 5.3, and retain a copy in the bank's records.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 82 
FR 8104, Jan. 23, 2017; 85 FR 80470, Dec. 11, 2020; 85 FR 83735, Dec. 
22, 2020]



Sec.  7.2009  Quorum of a national bank board of directors; 
proxies not permissible.

    A national bank must provide in its articles of association or 
bylaws that for the transaction of business, a quorum of the board of 
directors is at least a majority of the entire board then in office. A 
national bank director may not vote by proxy.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020]



Sec.  7.2010  National bank directors' responsibilities.

    The business and affairs of a national bank must be managed by or 
under the direction of the board of directors. The board of directors 
should refer to OCC published guidance for additional information 
regarding responsibilities of directors.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020]



Sec.  7.2011  National bank compensation plans.

    Consistent with safe and sound banking practices and the 
compensation provisions of 12 CFR part 30, a national bank may adopt 
compensation plans, including, among others, the following:
    (a) Bonus and profit-sharing plans. A national bank may adopt a 
bonus or profit-sharing plan designed to ensure adequate remuneration of 
bank officers and employees.

[[Page 425]]

    (b) Pension plans. A national bank may provide employee pension 
plans and make reasonable contributions to the cost of the pension plan.
    (c) Employee stock option and stock purchase plans. A national bank 
may provide employee stock option and stock purchase plans.



Sec.  7.2012  President as director of a national bank.

    Pursuant to 12 U.S.C. 76, the person serving as, or in the function 
of, president of a national bank, regardless of title, must be a member 
of the board of directors. A director other than the person serving as, 
or in the function of, president may be elected chairman of the board.

[85 FR 83735, Dec. 22, 2020]



Sec.  7.2013  Fidelity bonds covering national bank officers and employees.

    (a) Adequate coverage. All officers and employees of a national bank 
or Federal savings association must have adequate fidelity bond 
coverage. The failure of directors to require bonds with adequate 
sureties and in sufficient amount may make the directors liable for any 
losses that the bank or savings association sustains because of the 
absence of such bonds. Directors should not serve as sureties on such 
bonds. Directors should consider whether agents who have access to 
assets of the bank or savings association should also have fidelity bond 
coverage.
    (b) Factors. The board of directors of the national bank or Federal 
savings association, or a committee thereof, must determine the amount 
of such coverage, premised upon a consideration of factors, including:
    (1) Internal auditing safeguards employed;
    (2) Number of employees;
    (3) Amount of deposit liabilities; and
    (4) Amount of cash and securities normally held by the bank or 
savings association.

[61 FR 4862, Feb. 9, 1996, as amended at 82 FR 8104, Jan. 23, 2017]



Sec.  7.2014  Indemnification of national bank and Federal savings association 
institution-affiliated parties.

    (a) Indemnification under State law. Subject to the limitations of 
paragraph (b) of this section, a national bank or Federal savings 
association may indemnify an institution-affiliated party for damages 
and expenses, including the advancement of expenses and legal fees, in 
accordance with the law of the State the bank or savings association has 
designated for its corporate governance pursuant to Sec.  7.2000(b) (for 
national banks), 12 CFR 5.21(j)(3)(ii) (for Federal mutual savings 
associations), or 12 CFR 5.22(j)(2)(ii) (for Federal stock savings 
associations), provided such payments are consistent with safe and sound 
banking practices. The term ``institution-affiliated party'' has the 
same meaning as set forth at 12 U.S.C. 1813(u).
    (b) Administrative proceedings or civil actions initiated by Federal 
banking agencies. With respect to an administrative proceeding or civil 
action initiated by any Federal banking agency, a national bank or 
Federal savings association may only make or agree to make 
indemnification payments to an institution-affiliated party that are 
reasonable and consistent with the requirements of 12 U.S.C. 1828(k) and 
12 CFR chapter III.
    (c) Written agreement required for advancement. Before advancing 
funds to an institutional-affiliated party under this section, a 
national bank or Federal savings association must obtain a written 
agreement that the institution-affiliated party will reimburse the bank 
or savings association, as appropriate, for any portion of that 
indemnification that the institution-affiliated party is ultimately 
found not to be entitled to under 12 U.S.C. 1828(k) and 12 CFR chapter 
III, except to the extent that the bank's or savings association's 
expenses have been reimbursed by an insurance policy or fidelity bond.
    (d) Insurance premiums. A national bank or Federal savings 
association may provide for the payment of reasonable premiums for 
insurance covering the expenses, legal fees, and liability of 
institution-affiliated parties to the extent that the expenses, fees, or 
liability could be indemnified under this section.

[85 FR 83735, Dec. 22, 2020]

[[Page 426]]



Sec.  7.2015  National bank cashier.

    A national bank's bylaws, board of directors, or a duly designated 
officer may assign some or all of the duties previously performed by the 
bank's cashier to its president, chief executive officer, or any other 
officer.



Sec.  7.2016  Restricting transfer of national bank stock and record dates; 
stock certificates.

    (a) Restricting transfer of stock and record dates--(1) Conditions 
for stock transfer. Under 12 U.S.C. 52, a national bank may impose 
conditions upon the transfer of its stock reasonably calculated to 
simplify the work of the bank with respect to stock transfers, voting at 
shareholders' meetings, and related matters and to protect it against 
fraudulent transfers.
    (2) Record dates. A national bank may close its stock records for a 
reasonable period to ascertain shareholders for voting purposes. The 
board of directors may fix a record date for determining the 
shareholders entitled to notice of, and to vote at, any meeting of 
shareholders. The record date should be in reasonable proximity to the 
date that notice is given to the shareholders of the meeting.
    (b) Bank stock certificates. (1) A national bank may prescribe the 
manner in which its stock must be transferred in its bylaws or articles 
of association. A bank issuing stock in certificated form must comply 
with the requirements of 12 U.S.C. 52, including as to:
    (i) The name and location of the bank;
    (ii) The name of the holder of record of the stock represented 
thereby;
    (iii) The number and class of shares which the certificate 
represents;
    (iv) If the bank issues more than one class of stock, the respective 
rights, preferences, privileges, voting rights, powers, restrictions, 
limitations, and qualifications of each class of stock issued (unless 
incorporated by reference to the articles of association);
    (v) Signatures of the president and cashier of the bank, or such 
other officers as the bylaws of the bank provide; and
    (vi) The seal of the bank.
    (2) The requirements of paragraph (b)(1)(v) of this section may be 
met through the use of electronic means or by facsimile.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020]



Sec.  7.2019  Loans secured by a national bank's own shares.

    (a) Permitted agreements, relating to bank shares. A national bank 
may require a borrower holding shares of the bank to execute agreements:
    (1) Not to pledge, give away, transfer, or otherwise assign such 
shares;
    (2) To pledge such shares at the request of the bank when necessary 
to prevent loss; and
    (3) To leave such shares in the bank's custody.
    (b) Use of capital notes and debentures. A national bank may not 
make loans secured by a pledge of the bank's own capital notes and 
debentures. Such notes and debentures must be subordinated to the claims 
of depositors and other creditors of the issuing bank, and are, 
therefore, capital instruments within the purview of 12 U.S.C. 83.



Sec.  7.2021  National bank preemptive rights.

    A national bank in its articles of association must grant or deny 
preemptive rights to the bank's shareholders. Any amendment to a 
national bank's articles of association which modifies such preemptive 
rights must be approved by a vote of the holders of two-thirds of the 
bank's outstanding voting shares.



Sec.  7.2022  National bank voting trusts.

    The shareholders of a national bank may establish a voting trust 
under the applicable law of a State selected by the participants and 
designated in the trust agreement, provided the implementation of the 
trust is consistent with safe and sound banking practices.

[61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83736, Dec. 22, 2020]



Sec.  7.2023  National bank reverse stock splits.

    (a) Authority to engage in reverse stock splits. A national bank may 
engage in a reverse stock split if the transaction serves a legitimate 
corporate purpose

[[Page 427]]

and provides adequate dissenting shareholders' rights.
    (b) Legitimate corporate purpose. Examples of legitimate corporate 
purposes include a reverse stock split to:
    (1) Reduce the number of shareholders in order to qualify as a 
Subchapter S corporation; and
    (2) Reduce costs associated with shareholder communications and 
meetings.

[64 FR 60099, Nov. 4, 1999]



Sec.  7.2024  Staggered terms for national bank directors 
and size of bank board.

    (a) Staggered terms. Any national bank may adopt bylaws that provide 
for staggering the terms of its directors. National banks must provide 
the OCC with copies of any bylaws so amended.
    (b) Maximum term. Any national bank director may hold office for a 
term that does not exceed three years.
    (c) Number of directors. A national bank's board of directors must 
consist of no fewer than 5 and no more than 25 members. A national bank 
may, after notice to the OCC, increase the size of its board of 
directors above the 25 member limit. A national bank seeking to increase 
the number of its directors must notify the OCC any time the proposed 
size would exceed 25 directors. The bank's notice must specify the 
reason(s) for the increase in the size of the board of directors beyond 
the statutory limit.

[68 FR 70131, Dec. 17, 2003, as amended at 85 FR 83736, Dec. 22, 2020]



Sec.  7.2025  Capital stock-related activities of a national bank.

    (a) In general. A national bank must obtain the necessary 
shareholder approval required by 12 U.S.C. 51a, 57, or 59 for any change 
in its permanent capital. An increase or decrease in the amount of a 
national bank's common or preferred stock is a change in permanent 
capital subject to the notice and approval requirements of 12 CFR 5.46 
and applicable law. A national bank may obtain the required shareholder 
approval of changes in permanent capital, as provided in paragraphs (b), 
(c), and (d) of this section.
    (b) Issuance of previously approved and authorized common stock. In 
compliance with 12 U.S.C. 57, a national bank may issue common stock up 
to an amount previously approved and authorized in the national bank's 
articles of association by holders of two-thirds of the national bank's 
shares without obtaining additional shareholder approval for each 
subsequent issuance within the authorized amount.
    (c) Issuance, repurchase, and redemption of preferred stock pursuant 
to certain procedures. Subject to the requirements of 12 U.S.C. 51a and 
59, a national bank may adopt procedures to authorize the board of 
directors to issue, determine the terms of, repurchase, and redeem one 
or more series of preferred stock, if permitted by the corporate 
governance provisions adopted by the bank under Sec.  7.2000. To satisfy 
the shareholder approval requirements of 12 U.S.C. 51a and 59, the 
adoption of such procedures must be approved by shareholders in advance 
through an amendment to the national bank's articles of association. Any 
amendment to a national bank's articles of association that authorizes 
both the issuance and the repurchase and redemption of shares must be 
approved by holders of two-thirds of the national bank's shares.
    (d) Share repurchase programs. Subject to the requirements of 12 
U.S.C. 59, a national bank may establish a program for the repurchase, 
from time to time, of the national bank's common or preferred stock, if 
permitted by the corporate governance provisions adopted by the bank 
under Sec.  7.2000. To satisfy the shareholder approval requirement of 
12 U.S.C. 59, the repurchase program must be approved in advance by the 
holders of two-thirds of the national bank's shares, including through 
an amendment to the national bank's articles of association that 
authorizes the board of directors to repurchase the national bank's 
common or preferred stock from time to time under board-determined 
parameters that can limit the frequency, type, aggregate limit, or 
purchase price of repurchases.
    (e) Preferred Stock Features. A national bank's preferred stock may 
be cumulative or non-cumulative and may

[[Page 428]]

or may not have voting rights on one or more series.

[85 FR 83736, Dec. 22, 2020]



   Subpart C_National Bank and Federal Savings Association Operations



Sec.  7.3000  National bank and Federal savings association 
operating hours and closings.

    (a) Operating hours. The board of directors of a national bank or 
Federal savings association, or an equivalent person or committee of a 
Federal branch or agency, should review its hours of operations for 
customers and, independently of any other bank, savings association, or 
Federal branch or agency, take appropriate action to establish a 
schedule of operating hours for customers.
    (b) Emergency closings declared by the Comptroller. Pursuant to 12 
U.S.C. 95(b)(1) and 1463(a)(1)(A), the Comptroller of the Currency 
(Comptroller), may declare any day a legal holiday if emergency 
conditions exist. That day is a legal holiday for national banks, 
Federal savings associations, and Federal branches or agencies in the 
affected geographic area (i.e., throughout the United States, in a 
State, or in part of a State), and national banks, Federal savings 
associations, and Federal branches and agencies may temporarily limit or 
suspend operations at their affected offices, unless the Comptroller by 
written order directs otherwise. Emergency conditions may be caused by 
acts of nature or of man and may include natural and other disasters, 
public health or safety emergencies, civil and municipal emergencies, 
and cyber threats or other unauthorized intrusions (e.g., severe 
flooding, a pandemic, terrorism, a cyber-attack on bank systems, or a 
power emergency declared by a local power company or government 
requesting that businesses in the affected area close). The Comptroller 
may issue a proclamation authorizing the emergency closing in 
anticipation of the emergency condition, at the time of the emergency 
condition, or soon thereafter. In the absence of a Comptroller 
declaration of a bank holiday, a national bank, Federal savings 
associations, or Federal branch or agency may choose to temporarily 
close offices in response to an emergency condition. The national bank, 
Federal savings associations, or Federal branch or agency should notify 
the OCC of such temporary closure as soon as feasible.
    (c) Emergency and ceremonial closings declared by a State or State 
official. In the event a State or a legally authorized State official 
declares any day to be a legal holiday for emergency or ceremonial 
reasons in that State or part of the State, that same day is a legal 
holiday for national banks, Federal savings associations, and Federal 
branches or agencies or their offices in the affected geographic area. 
National banks, Federal savings associations, and Federal branches or 
agencies or their affected offices may close their affected offices or 
remain open on such a State-designated holiday, unless the Comptroller 
by written order directs otherwise.
    (d) Liability. A national bank, Federal savings association, or 
Federal branch or agency should assure that all liabilities or other 
obligations under the applicable law due to its closing are satisfied.
    (e) Definition. For the purpose of this subpart, the term ``State'' 
means any of the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Northern Mariana Islands, Guam, the 
Virgin Islands, American Samoa, the Trust Territory of the Pacific 
Islands, or any other territory or possession of the United States.

[85 FR 83736, Dec. 22, 2020]



Sec.  7.3001  Sharing national bank or Federal association space and employees.

    (a) Sharing space. A national bank or Federal savings association 
may:
    (1) Consistent with Sec.  7.1024, lease excess space on national 
bank or Federal savings association premises to one or more other 
businesses (including other financial institutions);
    (2) Share space jointly held with one or more other businesses; or
    (3) Offer its services in space owned by or leased to other 
businesses.

[[Page 429]]

    (b) Sharing employees. When sharing space with other businesses as 
described in paragraph (a) of this section, a national bank or Federal 
savings association may provide, under one or more written agreements 
between the national bank or Federal savings association, the other 
businesses, and their employees, that:
    (1) A national bank or Federal savings association employee may act 
as agent for the other business; or
    (2) An employee of the other business may act as agent for the 
national bank or Federal savings association.
    (c) Supervisory conditions. When a national bank or Federal savings 
association engages in arrangements of the types listed in paragraphs 
(a) and (b) of this section, the national bank or Federal savings 
association must ensure that:
    (1) The other business is conspicuously, accurately, and separately 
identified;
    (2) Shared employees clearly and fully disclose the nature of their 
agency relationship to customers of the national bank or Federal savings 
association and of the other businesses so that customers will know the 
identity of the national bank, Federal savings association, or other 
business that is providing the product or service;
    (3) The arrangement does not constitute a joint venture or 
partnership with the other business under applicable State law;
    (4) All aspects of the relationship between the national bank or 
Federal savings association and the other business are conducted at 
arm's length, unless a special arrangement is warranted because the 
other business is a subsidiary of the national bank or Federal savings 
association;
    (5) Security issues arising from the activities of the other 
business on the premises are addressed;
    (6) The activities of the other business do not adversely affect the 
safety and soundness of the national bank or Federal savings 
association;
    (7) The shared employees or the entity for which they perform 
services are duly licensed or meet qualification requirements of 
applicable statutes and regulations pertaining to agents or employees of 
such other business; and
    (8) The assets and records of the parties are segregated.
    (d) Other legal requirements. When entering into arrangements of the 
types described in paragraphs (a) and (b) of this section, and in 
conducting operations pursuant to those arrangements, a national bank or 
Federal savings association must ensure that each arrangement complies 
with all applicable laws and regulations. If the arrangement involves an 
affiliate or a shareholder, director, officer or employee of the 
national bank or Federal savings association:
    (1) The national bank or Federal savings association must ensure 
compliance with all applicable statutory and regulatory provisions 
governing national bank or Federal savings association transactions with 
these persons or entities;
    (2) The parties must comply with all applicable fiduciary duties; 
and
    (3) The parties, if they are in competition with each other, must 
consider limitations, if any, imposed by applicable antitrust laws.
    (e) Transition. If, on May 18, 2015, a Federal savings association 
shares space or employees with another business under an agreement that 
complies with the legal requirements that were in effect prior to May 
18, 2015, but which would violate any provision of this section, the 
Federal savings association may continue sharing under the existing 
agreement but it may not amend, renew, or extend the agreement without 
prior approval of the appropriate OCC supervisory office.

[80 FR 28471, May 18, 2015, as amended at 85 FR 83737, Dec. 22, 2020]



                          Subpart D_Preemption



Sec.  7.4000  Visitorial powers with respect to national banks.

    (a) General rule. (1) Under 12 U.S.C. 484, only the OCC or an 
authorized representative of the OCC may exercise visitorial powers with 
respect to national banks. State officials may not exercise visitorial 
powers with respect to national banks, such as conducting examinations, 
inspecting or requiring the production of books or records of

[[Page 430]]

national banks, or prosecuting enforcement actions, except in limited 
circumstances authorized by federal law. However, production of a bank's 
records (other than non-public OCC information under 12 CFR part 4, 
subpart C) may be required under normal judicial procedures.
    (2) For purposes of this section, visitorial powers include:
    (i) Examination of a bank;
    (ii) Inspection of a bank's books and records;
    (iii) Regulation and supervision of activities authorized or 
permitted pursuant to federal banking law; and
    (iv) Enforcing compliance with any applicable Federal or state laws 
concerning those activities, including through investigations that seek 
to ascertain compliance through production of non-public information by 
the bank, except as otherwise provided in paragraphs (a), (b), and (c) 
of this section.
    (3) Unless otherwise provided by Federal law, the OCC has exclusive 
visitorial authority with respect to the content and conduct of 
activities authorized for national banks under Federal law.
    (b) Exclusion. In accordance with the decision of the Supreme Court 
in Cuomo v. Clearing House Assn., L. L. C., 129 S. Ct. 2710 (2009), an 
action against a national bank in a court of appropriate jurisdiction 
brought by a state attorney general (or other chief law enforcement 
officer) to enforce an applicable law against a national bank and to 
seek relief as authorized by such law is not an exercise of visitorial 
powers under 12 U.S.C. 484.
    (c) Exceptions to the general rule. Under 12 U.S.C. 484, the OCC's 
exclusive visitorial powers are subject to the following exceptions:
    (1) Exceptions authorized by Federal law. National banks are subject 
to such visitorial powers as are provided by Federal law. Examples of 
laws vesting visitorial power in other governmental entities include 
laws authorizing state or other Federal officials to:
    (i) Inspect the list of shareholders, provided that the official is 
authorized to assess taxes under state authority (12 U.S.C. 62; this 
section also authorizes inspection of the shareholder list by 
shareholders and creditors of a national bank);
    (ii) Review, at reasonable times and upon reasonable notice to a 
bank, the bank's records solely to ensure compliance with applicable 
state unclaimed property or escheat laws upon reasonable cause to 
believe that the bank has failed to comply with those laws (12 U.S.C. 
484(b));
    (iii) Verify payroll records for unemployment compensation purposes 
(26 U.S.C. 3305(c));
    (iv) Ascertain the correctness of Federal tax returns (26 U.S.C. 
7602);
    (v) Enforce the Fair Labor Standards Act (29 U.S.C. 211); and
    (vi) Functionally regulate certain activities, as provided under the 
Gramm-Leach-Bliley Act, Pub. L. 106-102, 113 Stat. 1338 (Nov. 12, 1999).
    (2) Exception for courts of justice. National banks are subject to 
such visitorial powers as are vested in the courts of justice. This 
exception pertains to the powers inherent in the judiciary.
    (3) Exception for Congress. National banks are subject to such 
visitorial powers as shall be, or have been, exercised or directed by 
Congress or by either House thereof or by any committee of Congress or 
of either House duly authorized.
    (d) Report of examination. The report of examination made by an OCC 
examiner is designated solely for use in the supervision of the bank. 
The bank's copy of the report is the property of the OCC and is loaned 
to the bank and any holding company thereof solely for its confidential 
use. The bank's directors, in keeping with their responsibilities both 
to depositors and to shareholders, should thoroughly review the report. 
The report may be made available to other persons only in accordance 
with the rules on disclosure in 12 CFR part 4.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60100, Nov. 4, 1999; 69 
FR 1904, Jan. 13, 2004; 76 FR 43565, July 21, 2011]

[[Page 431]]



Sec.  7.4001  Charging interest by national banks at rates permitted 
competing institutions; charging interest to corporate borrowers.

    (a) Definition. The term ``interest'' as used in 12 U.S.C. 85 
includes any payment compensating a creditor or prospective creditor for 
an extension of credit, making available of a line of credit, or any 
default or breach by a borrower of a condition upon which credit was 
extended. It includes, among other things, the following fees connected 
with credit extension or availability: numerical periodic rates, late 
fees, creditor-imposed not sufficient funds (NSF) fees charged when a 
borrower tenders payment on a debt with a check drawn on insufficient 
funds, overlimit fees, annual fees, cash advance fees, and membership 
fees. It does not ordinarily include appraisal fees, premiums and 
commissions attributable to insurance guaranteeing repayment of any 
extension of credit, finders' fees, fees for document preparation or 
notarization, or fees incurred to obtain credit reports.
    (b) Authority. A national bank located in a state may charge 
interest at the maximum rate permitted to any state-chartered or 
licensed lending institution by the law of that state. If state law 
permits different interest charges on specified classes of loans, a 
national bank making such loans is subject only to the provisions of 
state law relating to that class of loans that are material to the 
determination of the permitted interest. For example, a national bank 
may lawfully charge the highest rate permitted to be charged by a state-
licensed small loan company, without being so licensed, but subject to 
state law limitations on the size of loans made by small loan companies.
    (c) Effect on state definitions of interest. The Federal definition 
of the term ``interest'' in paragraph (a) of this section does not 
change how interest is defined by the individual states (nor how the 
state definition of interest is used) solely for purposes of state law. 
For example, if late fees are not ``interest'' under state law where a 
national bank is located but state law permits its most favored lender 
to charge late fees, then a national bank located in that state may 
charge late fees to its intrastate customers. The national bank may also 
charge late fees to its interstate customers because the fees are 
interest under the Federal definition of interest and an allowable 
charge under state law where the national bank is located. However, the 
late fees would not be treated as interest for purposes of evaluating 
compliance with state usury limitations because state law excludes late 
fees when calculating the maximum interest that lending institutions may 
charge under those limitations.
    (d) Usury. A national bank located in a state the law of which 
denies the defense of usury to a corporate borrower may charge a 
corporate borrower any rate of interest agreed upon by a corporate 
borrower.
    (e) Transferred loans. Interest on a loan that is permissible under 
12 U.S.C. 85 shall not be affected by the sale, assignment, or other 
transfer of the loan.

[61 FR 4862, Feb. 9, 1996, as amended at 66 FR 34791, July 2, 2001; 85 
FR 33536, June 2, 2020]



Sec.  7.4002  National bank charges.

    (a) Authority to impose charges and fees. A national bank may charge 
its customers non-interest charges and fees, including deposit account 
service charges.
    (b) Considerations. (1) All charges and fees should be arrived at by 
each bank on a competitive basis and not on the basis of any agreement, 
arrangement, undertaking, understanding, or discussion with other banks 
or their officers.
    (2) The establishment of non-interest charges and fees, their 
amounts, and the method of calculating them are business decisions to be 
made by each bank, in its discretion, according to sound banking 
judgment and safe and sound banking principles. A national bank 
establishes non-interest charges and fees in accordance with safe and 
sound banking principles if the bank employs a decision-making process 
through which it considers the following factors, among others:
    (i) The cost incurred by the bank in providing the service;
    (ii) The deterrence of misuse by customers of banking services;

[[Page 432]]

    (iii) The enhancement of the competitive position of the bank in 
accordance with the bank's business plan and marketing strategy; and
    (iv) The maintenance of the safety and soundness of the institution.
    (c) Interest. Charges and fees that are ``interest'' within the 
meaning of 12 U.S.C. 85 are governed by Sec.  7.4001 and not by this 
section.
    (d) State law. The OCC applies preemption principles derived from 
the United States Constitution, as interpreted through judicial 
precedent, when determining whether State laws apply that purport to 
limit or prohibit charges and fees described in this section.
    (e) National bank as fiduciary. This section does not apply to 
charges imposed by a national bank in its capacity as a fiduciary, which 
are governed by 12 CFR part 9.

[66 FR 34791, July 2, 2001]



Sec.  7.4006  [Reserved]



Sec.  7.4007  Deposit-taking by national banks.

    (a) Authority of national banks. A national bank may receive 
deposits and engage in any activity incidental to receiving deposits, 
including issuing evidence of accounts, subject to such terms, 
conditions, and limitations prescribed by the Comptroller of the 
Currency and any other applicable Federal law.
    (b) Applicability of state law. A national bank may exercise its 
deposit-taking powers without regard to state law limitations 
concerning:
    (1) Abandoned and dormant accounts;\3\
---------------------------------------------------------------------------

    \3\ This does not apply to state laws of the type upheld by the 
United States Supreme Court in Anderson Nat'l Bank v. Luckett, 321 U.S. 
233 (1944), which obligate a national bank to ``pay [deposits] to the 
persons entitled to demand payment according to the law of the state 
where it does business.'' Id. at 248-249.
---------------------------------------------------------------------------

    (2) Checking accounts;
    (3) Disclosure requirements;
    (4) Funds availability;
    (5) Savings account orders of withdrawal;
    (6) State licensing or registration requirements (except for 
purposes of service of process); and
    (7) Special purpose savings services; \4\
---------------------------------------------------------------------------

    \4\ State laws purporting to regulate national bank fees and charges 
are addressed in 12 CFR 7.4002.
---------------------------------------------------------------------------

    (c) State laws that are not preempted. State laws on the following 
subjects are not inconsistent with the deposit-taking powers of national 
banks and apply to national banks to the extent consistent with the 
decision of the Supreme Court in Barnett Bank of Marion County, N.A. v. 
Nelson, Florida Insurance Commissioner, et al. 517 U.S. 25 (1996):
    (1) Contracts;
    (2) Torts;
    (3) Criminal law; \5\
---------------------------------------------------------------------------

    \5\ But see the distinction drawn by the Supreme Court in Easton v. 
Iowa, 188 U.S. 220, 238 (1903), where the Court stated that 
``[u]ndoubtedly a state has the legitimate power to define and punish 
crimes by general laws applicable to all persons within its jurisdiction 
* * *. But it is without lawful power to make such special laws 
applicable to banks organized and operating under the laws of the United 
States.'' Id. at 239 (holding that Federal law governing the operations 
of national banks preempted a state criminal law prohibiting insolvent 
banks from accepting deposits).
---------------------------------------------------------------------------

    (4) Rights to collect debts;
    (5) Acquisition and transfer of property;
    (6) Taxation;
    (7) Zoning; and
    (8) Any other law that the OCC determines to be applicable to 
national banks in accordance with the decision of the Supreme Court in 
Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance 
Commissioner, et al. 517 U.S. 25 (1996), or that is made applicable by 
Federal law.

[69 FR 1916, Jan. 13, 2004, as amended at 76 FR 43565, July 21, 2011]



Sec.  7.4008  Lending by national banks.

    (a) Authority of national banks. A national bank may make, sell, 
purchase, participate in, or otherwise deal in loans and interests in 
loans that are not secured by liens on, or interests in, real estate, 
subject to such terms, conditions, and limitations prescribed by the 
Comptroller of the Currency and any other applicable Federal law.

[[Page 433]]

    (b) Standards for loans. A national bank shall not make a consumer 
loan subject to this Sec.  7.4008 based predominantly on the bank's 
realization of the foreclosure or liquidation value of the borrower's 
collateral, without regard to the borrower's ability to repay the loan 
according to its terms. A bank may use any reasonable method to 
determine a borrower's ability to repay, including, for example, the 
borrower's current and expected income, current and expected cash flows, 
net worth, other relevant financial resources, current financial 
obligations, employment status, credit history, or other relevant 
factors.
    (c) Unfair and deceptive practices. A national bank shall not engage 
in unfair or deceptive practices within the meaning of section 5 of the 
Federal Trade Commission Act, 15 U.S.C. 45(a)(1), and regulations 
promulgated thereunder in connection with loans made under this Sec.  
7.4008.
    (d) Applicability of state law. A national bank may make non-real 
estate loans without regard to state law limitations concerning:
    (1) Licensing, registration (except for purposes of service of 
process), filings, or reports by creditors;
    (2) The ability of a creditor to require or obtain insurance for 
collateral or other credit enhancements or risk mitigants, in 
furtherance of safe and sound banking practices;
    (3) Loan-to-value ratios;
    (4) The terms of credit, including the schedule for repayment of 
principal and interest, amortization of loans, balance, payments due, 
minimum payments, or term to maturity of the loan, including the 
circumstances under which a loan may be called due and payable upon the 
passage of time or a specified event external to the loan;
    (5) Escrow accounts, impound accounts, and similar accounts;
    (6) Security property, including leaseholds;
    (7) Access to, and use of, credit reports;
    (8) Disclosure and advertising, including laws requiring specific 
statements, information, or other content to be included in credit 
application forms, credit solicitations, billing statements, credit 
contracts, or other credit-related documents;
    (9) Disbursements and repayments; and
    (10) Rates of interest on loans. \6\
---------------------------------------------------------------------------

    \6\ The limitations on charges that comprise rates of interest on 
loans by national banks are determined under Federal law. See 12 U.S.C. 
85; 12 CFR 7.4001. State laws purporting to regulate national bank fees 
and charges that do not constitute interest are addressed in 12 CFR 
7.4002.
---------------------------------------------------------------------------

    (e) State laws that are not preempted. State laws on the following 
subjects are not inconsistent with the non-real estate lending powers of 
national banks and apply to national banks to the extent consistent with 
the decision of the Supreme Court in Barnett Bank of Marion County, N.A. 
v. Nelson, Florida Insurance Commissioner, et al., 517 U.S. 25 (1996):
    (1) Contracts;
    (2) Torts;
    (3) Criminal law;\7\
---------------------------------------------------------------------------

    \7\ See supra note 5 regarding the distinction drawn by the Supreme 
Court in Easton v. Iowa, 188 U.S. 220, 238 (1903).
---------------------------------------------------------------------------

    (4) Rights to collect debts;
    (5) Acquisition and transfer of property;
    (6) Taxation;
    (7) Zoning; and
    (8) Any other law that the OCC determines to be applicable to 
national banks in accordance with the decision of the Supreme Court in 
Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance 
Commissioner, et al., 517 U.S. 25 (1996) or that is made applicable by 
Federal law.

[69 FR 1916, Jan. 13, 2004, as amended at 76 FR 43565, July 21, 2011]



Sec.  7.4009  [Reserved]



Sec.  7.4010  Applicability of state law and visitorial powers 
to Federal savings associations and subsidiaries.

    (a) In accordance with section 1046 of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (12 U.S.C. 25b), Federal savings 
associations and their subsidiaries shall be subject to the same laws 
and legal standards, including regulations of the OCC, as are applicable 
to national banks and their subsidiaries, regarding the preemption of 
state law.

[[Page 434]]

    (b) In accordance with section 1047 of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (12 U.S.C. 1465), the provisions of 
section 5136C(i) of the Revised Statutes regarding visitorial powers 
apply to Federal savings associations and their subsidiaries to the same 
extent and in the same manner as if they were national banks or national 
bank subsidiaries.

[76 FR 43566, July 21, 2011]



              Subpart E_National Bank Electronic Activities

    Source: 67 FR 35004, May 17, 2002, unless otherwise noted.



Sec.  7.5000  Scope.

    This subpart applies to a national bank's use of technology to 
deliver services and products consistent with safety and soundness.



Sec.  7.5001  Electronic activities that are incidental to the business 
of banking.

    In addition to the electronic activities specifically permitted in 
Sec.  7.5004 (sale of excess electronic capacity and by-products) and 
Sec.  7.5006 (incidental non-financial data processing), the OCC has 
determined that the following electronic activities are incidental to 
the business of banking, pursuant to Sec.  7.1000. This list of 
activities is illustrative and not exclusive; the OCC may determine that 
other activities are permissible pursuant to this authority.
    (a) Website development where incidental to other banking services;
    (b) Internet access and email provided on a non-profit basis as a 
promotional activity;
    (c) Advisory and consulting services on electronic activities where 
the services are incidental to customer use of electronic banking 
services; and
    (d) Sale of equipment that is convenient or useful to customer's use 
of related electronic banking services, such as specialized terminals 
for scanning checks that will be deposited electronically by wholesale 
customers of banks under the Check Clearing for the 21st Century Act, 
Public Law 108-100 (12 U.S.C. 5001-5018) (the Check 21 Act).

[85 FR 83737, Dec. 22, 2020]



Sec.  7.5002  Furnishing of products and services by electronic 
means and facilities.

    (a) Use of electronic means and facilities. A national bank may 
perform, provide, or deliver through electronic means and facilities any 
activity, function, product, or service that it is otherwise authorized 
to perform, provide, or deliver, subject to Sec.  7.5001(b) and 
applicable OCC guidance. The following list provides examples of 
permissible activities under this authority. This list is illustrative 
and not exclusive; the OCC may determine that other activities are 
permissible pursuant to this authority.
    (1) Acting as an electronic finder by:
    (i) Establishing, registering, and hosting commercially enabled web 
sites in the name of sellers;
    (ii) Establishing hyperlinks between the bank's site and a third-
party site, including acting as a ``virtual mall'' by providing a 
collection of links to web sites of third-party vendors, organized by-
product type and made available to bank customers;
    (iii) Hosting an electronic marketplace on the bank's Internet web 
site by providing links to the web sites of third-party buyers or 
sellers through the use of hypertext or other similar means;
    (iv) Hosting on the bank's servers the Internet web site of:
    (A) A buyer or seller that provides information concerning the 
hosted party and the products or services offered or sought and allows 
the submission of interest, bids, offers, orders and confirmations 
relating to such products or services; or
    (B) A governmental entity that provides information concerning the 
services or benefits made available by the governmental entity, assists 
persons in completing applications to receive such services or benefits 
and permits persons to transmit their applications for such services or 
benefits;
    (v) Operating an Internet web site that permits numerous buyers and 
sellers to exchange information concerning the products and services 
that they are willing to purchase or sell, locate potential counter-
parties for transactions, aggregate orders for goods or services with 
those made by

[[Page 435]]

other parties, and enter into transactions between themselves;
    (vi) Operating a telephone call center that provides permissible 
finder services; and
    (vii) Providing electronic communications services relating to all 
aspects of transactions between buyers and sellers;
    (2) Providing electronic bill presentment services;
    (3) Offering electronic stored value systems;
    (4) Safekeeping for personal information or valuable confidential 
trade or business information, such as encryption keys; and
    (5) Issuing electronic letters of credit within the scope of 12 CFR 
7.1016.
    (b) Applicability of guidance and requirements not affected. When a 
national bank performs, provides, or delivers through electronic means 
and facilities an activity, function, product, or service that it is 
otherwise authorized to perform, provide, or deliver, the electronic 
activity is not exempt from the regulatory requirements and supervisory 
guidance that the OCC would apply if the activity were conducted by non-
electronic means or facilities.
    (c) State laws. As a general rule, and except as provided by Federal 
law, State law is not applicable to a national bank's conduct of an 
authorized activity through electronic means or facilities if the State 
law, as applied to the activity, would be preempted pursuant to 
traditional principles of Federal preemption derived from the Supremacy 
Clause of the U.S. Constitution and applicable judicial precedent. 
Accordingly, State laws that stand as an obstacle to the ability of 
national banks to exercise uniformly their Federally authorized powers 
through electronic means or facilities, are not applicable to national 
banks.

[61 FR 4862, Feb. 9, 1996, as amended at 73 FR 22242, Apr. 24, 2008]



Sec.  7.5003  Composite authority to engage in electronic activities.

    Unless otherwise prohibited by Federal law, a national bank may 
engage in an electronic activity that is comprised of several component 
activities if each of the component activities is itself part of or 
incidental to the business of banking or is otherwise permissible under 
Federal law.



Sec.  7.5004  Sale of excess electronic capacity and by-products.

    (a) A national bank may, in order to optimize the use of the bank's 
resources or avoid economic loss or waste, market and sell to third 
parties electronic capacities legitimately acquired or developed by the 
bank for its banking business.
    (b) With respect to acquired equipment or facilities, legitimate 
excess electronic capacity that may be sold to others can arise in a 
variety of situations, including the following:
    (1) Due to the characteristics of the desired equipment or 
facilities available in the market, the capacity of the most practical 
optimal equipment or facilities available to meet the bank's 
requirements exceeds its present needs;
    (2) The acquisition and retention of additional capacity, beyond 
present needs, reasonably may be necessary for planned future expansion 
or to meet the expected future banking needs during the useful life of 
the equipment;
    (3) Requirements for capacity fluctuate because a bank engages in 
batch processing of banking transactions or because a bank must have 
capacity to meet peak period demand with the result that the bank has 
periods when its capacity is underutilized; and
    (4) After the initial acquisition of capacity thought to be fully 
needed for banking operations, the bank experiences either a decline in 
level of the banking operations or an increase in the efficiency of the 
banking operations using that capacity.
    (c) Types of electronic capacity in equipment or facilities that 
banks may have legitimately acquired and that may be sold to third 
parties if excess to the bank's needs for banking purposes include:
    (1) Data processing services;
    (2) Production and distribution of non-financial software;
    (3) Providing periodic back-up call answering services;
    (4) Providing full Internet access;
    (5) Providing electronic security system support services;
    (6) Providing long line communications services; and

[[Page 436]]

    (7) Electronic imaging and storage.
    (d) A national bank may sell to third parties electronic by-products 
legitimately acquired or developed by the bank for its banking business. 
Examples of electronic by-products that banks may have legitimately 
acquired that may be sold to third parties if excess to the bank's needs 
include:
    (1) Software acquired (not merely licensed) or developed by the bank 
for banking purposes or to support its banking business; and
    (2) Electronic databases, records, or media (such as electronic 
images) developed by the bank for or during the performance of its 
permissible data processing activities.



Sec.  7.5005  National bank acting as digital certification authority.

    (a) It is part of the business of banking under 12 U.S.C. 
24(Seventh) for a national bank to act as a certificate authority and to 
issue digital certificates verifying the identity of persons associated 
with a particular public/private key pair. As part of this service, the 
bank may also maintain a listing or repository of public keys.
    (b) A national bank may issue digital certificates verifying 
attributes in addition to identity of persons associated with a 
particular public/private key pair where the attribute is one for which 
verification is part of or incidental to the business of banking. For 
example, national banks may issue digital certificates verifying certain 
financial attributes of a customer as of the current or a previous date, 
such as account balance as of a particular date, lines of credit as of a 
particular date, past financial performance of the customer, and 
verification of customer relationship with the bank as of a particular 
date.
    (c) When a national bank issues a digital certificate relating to 
financial capacity under this section, the bank shall include in that 
certificate an express disclaimer stating that the bank does not thereby 
promise or represent that funds will be available or will be advanced 
for any particular transaction.



Sec.  7.5006  Data processing.

    (a) Eligible activities. It is part of the business of banking under 
12 U.S.C. 24(Seventh) for a national bank to provide data processing, 
and data transmission services, facilities (including equipment, 
technology, and personnel), data bases, advice and access to such 
services, facilities, data bases and advice, for itself and for others, 
where the data is banking, financial, or economic data, and other types 
of data if the derivative or resultant product is banking, financial, or 
economic data. For this purpose, economic data includes anything of 
value in banking and financial decisions.
    (b) Other data. A national bank also may perform the activities 
described in paragraph (a) of this section for itself and others with 
respect to additional types of data to the extent convenient or useful 
to provide the data processing services described in paragraph (a), 
including where reasonably necessary to conduct those activities on a 
competitive basis. The total revenue attributable to the bank's data 
processing activities under this section must be derived predominantly 
from processing the activities described in paragraph (a) of this 
section.
    (c) Software for performance of authorized banking functions. A 
national bank may produce, market, or sell software that performs 
services or functions that the bank could perform directly, as part of 
the business of banking.

[61 FR 4862, Feb. 9, 1996, as amended at 73 FR 22242, Apr. 24, 2008]



Sec.  7.5007  Correspondent services.

    It is part of the business of banking for a national bank to offer 
as a correspondent service to any of its affiliates or to other 
financial institutions any service it may perform for itself. The 
following list provides examples of electronic activities that banks may 
offer correspondents under this authority. This list is illustrative and 
not exclusive; the OCC may determine that other activities are 
permissible pursuant to this authority.
    (a) The provision of computer networking packages and related 
hardware;
    (b) Data processing services;

[[Page 437]]

    (c) The sale of software that performs data processing functions;
    (d) The development, operation, management, and marketing of 
products and processing services for transactions conducted at 
electronic terminal devices;
    (e) Item processing services and related software;
    (f) Document control and record keeping through the use of 
electronic imaging technology;
    (g) The provision of Internet merchant hosting services for resale 
to merchant customers;
    (h) The provision of communication support services through 
electronic means; and
    (i) Digital certification authority services.



Sec.  7.5008  Location of a national bank conducting electronic activities.

    A national bank shall not be considered located in a State solely 
because it physically maintains technology, such as a server or 
automated loan center, in that state, or because the bank's products or 
services are accessed through electronic means by customers located in 
the state.



Sec.  7.5009  Location under 12 U.S.C. 85 of national banks operating 
exclusively through the Internet.

    For purposes of 12 U.S.C. 85, the main office of a national bank 
that operates exclusively through the Internet is the office identified 
by the bank under 12 U.S.C. 22(Second) or as relocated under 12 U.S.C. 
30 or other appropriate authority.



Sec.  7.5010  Shared electronic space.

    National banks that share electronic space, including a co-branded 
web site, with a bank subsidiary, affiliate, or another third-party must 
take reasonable steps to clearly, conspicuously, and understandably 
distinguish between products and services offered by the bank and those 
offered by the bank's subsidiary, affiliate, or the third-party.



PART 8_ASSESSMENT OF FEES--Table of Contents



Sec.
8.1 Scope and application.
8.2 Semiannual assessment.
8.6 Fees for special examinations and investigations.
8.7 Payment of interest on delinquent assessments and examination and 
          investigation fees.
8.8 Notice of Office of the Comptroller of the Currency fees and 
          assessments.

    Authority: 12 U.S.C. 16, 93a, 481, 482, 1467, 1831c, 1867, 3102, 
3108, and 5412(b)(2)(B); and 15 U.S.C. 78c and 78l.

    Source: 44 FR 20065, Apr. 4, 1979, unless otherwise noted.



Sec.  8.1  Scope and application.

    The assessments contained in this part are made pursuant to the 
authority contained in 12 U.S.C. 16, 93a, 481, 482, 1467, 1831c, 1867, 
3102, and 3108; and 15 U.S.C. 78c and 78l.

[76 FR 43566, July 21, 2011]



Sec.  8.2  Semiannual assessment.

    (a) Each national bank and each Federal savings association shall 
pay to the OCC a semiannual assessment fee, due by March 31 and 
September 30 of each year, for the six-month period beginning on January 
1 and July 1 before each payment date. The OCC will calculate the amount 
due under this section and provide a notice of assessments to each 
national bank and each Federal savings association no later than 7 
business days prior to collection on March 31 and September 30 of each 
year. In setting assessments, the OCC may take into account the nature 
and scope of the activities of a national bank or Federal savings 
association, the amount and type of assets that the entity holds, the 
financial and managerial condition of the entity, and any other factor 
the OCC determines is appropriate, as provided by 12 U.S.C. 16. The 
semiannual assessment will be calculated as follows:

[[Page 438]]



                        Table 1 to Paragraph (a)
------------------------------------------------------------------------
  If the national bank's or          The semiannual assessment is:
       Federal savings       -------------------------------------------
 association's total assets
 (consolidated domestic and
 foreign subsidiaries) are:    This amount--      Plus        Of excess
-----------------------------   base amount     marginal       over--
               But not over--                     rates
    Over--
------------------------------------------------------------------------
   Column A       Column B       Column C       Column D      Column E
------------------------------------------------------------------------
   Million        Million                                      Million
  (dollars)      (dollars)       (dollars)                    (dollars)
------------------------------------------------------------------------
           0              2              X1              0
           2             20              X2             Y1             2
          20            100              X3             Y2            20
         100            200              X4             Y3           100
         200          1,000              X5             Y4           200
       1,000          2,000              X6             Y5         1,000
       2,000          6,000              X7             Y6         2,000
       6,000         20,000              X8             Y7         6,000
      20,000         40,000              X9             Y8        20,000
      40,000        250,000             X10             Y9        40,000
     250,000   .............            X11            Y10       250,000
------------------------------------------------------------------------

    (1) Every national bank and every Federal savings association falls 
into one of the asset-size brackets denoted by Columns A and B. A 
national bank's or Federal savings association's semiannual assessment 
is composed of two parts. The first part is the calculation of a base 
amount of the assessment, which is computed on the assets of the 
national bank or Federal savings association up to the lower endpoint 
(Column A) of the bracket in which it falls. This base amount of the 
assessment is calculated by the OCC in Column C.
    (2) The second part is the calculation of assessments due on the 
remaining assets of the national bank or Federal savings association in 
excess of Column E. The excess is assessed at the marginal rate shown in 
Column D.
    (3) The total semiannual assessment is the amount in Column C, plus 
the amount of the national bank's or Federal savings association's 
assets in excess of Column E times the marginal rate in Column D:

Assessments = C + [(Assets - E) x D].

    (4) Each year, the OCC may index the marginal rates in Column D to 
adjust for the percent change in the level of prices, as measured by 
changes in the Gross Domestic Product Implicit Price Deflator (GDPIPD) 
for each June-to-June period. The OCC may at its discretion adjust 
marginal rates by amounts other than the percentage change in the 
GDPIPD. The OCC will also adjust the amounts in Column C to reflect any 
change made to the marginal rate.
    (5)(i) The specific marginal rates and complete assessment schedule 
will be published in the ``Notice of Office of the Comptroller of the 
Currency Fees and Assessments,'' provided for at Sec.  8.8. Each 
semiannual assessment is based upon the total assets shown in the 
national bank's or Federal savings association's most recent 
``Consolidated Reports of Condition and Income'' (Call Report) preceding 
the payment date. Each national bank or Federal savings association 
subject to the jurisdiction of the OCC on the date of the second or 
fourth quarterly Call Report as appropriate, required by the OCC under 
12 U.S.C. 161 and 12 U.S.C. 1464(v), is subject to the full assessment 
for the next six-month period. National banks and Federal savings 
associations that are no longer subject to the jurisdiction of the OCC 
as of the date of the first or third quarterly Call Report, as 
appropriate, will receive a refund of assessments for the second three 
months of the semiannual assessment period.
    (ii) [Reserved]
    (6)(i) Notwithstanding any other provision of this part, the OCC may 
reduce the semiannual assessment for each non-lead national bank or non-
lead Federal savings association by a percentage that it will specify in 
the ``Notice of Office of the Comptroller of the

[[Page 439]]

Currency Fees and Assessments'' described in Sec.  8.8.
    (ii) For purposes of this paragraph (a)(6):
    (A) Lead national bank or lead Federal savings association means the 
largest national bank or Federal savings association controlled by a 
company, based on a comparison of the total assets held by each national 
bank or Federal savings association controlled by that company as 
reported in each national bank's or Federal savings association's Call 
Report filed for the quarter immediately preceding the payment of a 
semiannual assessment.
    (B) Non-lead national bank or non-lead Federal savings association 
means a national bank or Federal savings association that is not the 
lead national bank or lead Federal savings association controlled by a 
company that controls two or more national banks or Federal savings 
associations.
    (C) Control and company with respect to national banks have the same 
meanings as these terms have in sections 2(a)(2) and 2(b), respectively, 
of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(2) and (b)).
    (D) Control and company with respect to Federal savings associations 
have the same meanings as these terms have in section 10(a) of the Home 
Owners' Loan Act (12 U.S.C. 1467a(a).
    (b)(1) Each Federal branch and each Federal agency shall pay to the 
OCC a semiannual assessment fee, due by March 31 and September 30 of 
each year, for the six-month period beginning on January 1 and July 1 
before each payment date. The OCC will calculate the amount due under 
this section and provide a notice of assessments to each Federal branch 
and agency no later than 7 business days prior to March 31 and September 
30 of each year.
    (2) The amount of the semiannual assessment paid by each Federal 
branch and Federal agency shall be computed at the same rate as provided 
in the Table in 12 CFR 8.2(a); however, only the total domestic assets 
of the Federal branch or agency shall be subject to assessment.
    (3)(i) Each semiannual assessment of each Federal branch and each 
agency is based upon the total assets shown in the Federal branch's or 
agency's Call Report most recently preceding the payment date. Each 
Federal branch or agency subject to the jurisdiction of the OCC on the 
date of the second and fourth Call Reports is subject to the full 
assessment for the next six-month period. Federal branches and agencies 
that are no longer subject to the jurisdiction of the OCC as of the date 
of the first or third quarterly Call Report, as appropriate, will 
receive a refund of assessments for the second three months of the 
semiannual assessment period.
    (ii) [Reserved]
    (4)(i) Notwithstanding any other provision of this part, the OCC may 
reduce the semiannual assessment for each non-lead Federal branch and 
agency by an amount that it will specify in the ``Notice of Office of 
the Comptroller of the Currency Fees and Assessments'' described in 
Sec.  8.8.
    (ii) For purposes of this paragraph (b)(4):
    (A) Lead Federal branch or agency means the largest Federal branch 
or agency of a foreign bank, based on a comparison of the total assets 
held by each Federal branch or agency of that foreign bank as reported 
in each Federal branch's or agency's Call Report filed for the quarter 
immediately preceding the payment of a semiannual assessment.
    (B) Non-lead Federal branch or agency means a Federal branch or 
agency that is not the lead Federal branch or agency of a foreign bank 
that controls two or more Federal branches or agencies.
    (c) Additional assessment for independent credit card national banks 
and independent credit card Federal savings associations--(1) General 
rule. In addition to the assessment calculated according to paragraph 
(a) of this section, each independent credit card national bank and 
independent credit card Federal savings association will pay an 
assessment based on receivables attributable to credit card accounts 
owned by the national bank or Federal savings association. This 
assessment will be computed by adding to its asset-based assessment an 
additional amount determined by its level of receivables attributable. 
The dollar amount of the additional assessment

[[Page 440]]

will be published in the ``Notice of Office of the Comptroller of the 
Currency Fees and Assessments,'' described at Sec.  8.8.
    (2) Independent credit card national banks and independent credit 
card Federal savings associations affiliated with full-service national 
banks or Federal savings associations. The OCC will assess an 
independent credit card national bank and an independent credit card 
Federal savings association in accordance with paragraph (c)(1) of this 
section, notwithstanding that the national bank or Federal savings 
association is affiliated with a full-service national bank or full-
service Federal savings association, if the OCC concludes that the 
affiliation is intended to evade this part.
    (3) Definitions. For purposes of this paragraph (c), the following 
definitions apply:
    (i) Affiliate, with respect to national banks, has the same meaning 
as this term has in 12 U.S.C. 221a(b).
    (ii) Affiliate, with respect to Federal savings associations, has 
the same meaning as in 12 U.S.C. 1462(9).
    (iii) Engaged primarily in card operations means a bank described in 
section 2(c)(2)(F) of the Bank Holding Company Act (12 U.S.C. 
1841(c)(2)(F)) or a national bank or a Federal savings association whose 
ratio of total gross receivables attributable to the national bank's or 
Federal savings association's balance sheet assets exceeds 50%.
    (iv) Full-service national bank is a national bank that generates 
more than 50% of its interest and non-interest income from activities 
other than credit card operations or trust activities and is authorized 
according to its charter to engage in all types of permissible banking 
activities.
    (v) Full-service Federal savings association is a Federal savings 
association that generates more than 50% of its interest and non-
interest income from activities other than credit card operations or 
trust activities and is authorized according to its charter to engage in 
all types of activities permissible for Federal savings associations.
    (vi) Independent credit card national bank is a national bank that 
engages primarily in credit card operations and is not affiliated with a 
full-service national bank.
    (vii) Independent credit card Federal savings association is a 
Federal savings association that engages primarily in credit card 
operations and is not affiliated with a full-service Federal savings 
association.
    (viii) Receivables attributable is the total amount of outstanding 
balances due on credit card accounts owned by an independent credit card 
national bank or an independent credit card Federal savings association 
(the receivables attributable to those accounts) on the last day of the 
assessment period, minus receivables retained on the national bank's or 
Federal savings association's balance sheet as of that day.
    (4) Reports of receivables attributable. Independent credit card 
national banks and independent credit card Federal savings associations 
will report receivables attributable data to the OCC semiannually at a 
time specified by the OCC.
    (d) Surcharge based on the condition of the national bank, Federal 
savings association, or Federal branch or agency. Subject to any limit 
that the OCC prescribes in the ``Notice of Office of the Comptroller of 
the Currency Fees and Assessments,'' the OCC shall apply a surcharge to 
the semiannual assessment computed in accordance with paragraphs (a) 
through (c) of this section. This surcharge will be determined by 
multiplying the semiannual assessment computed in accordance with 
paragraphs (a) through (c) of this section by--
    (1) 1.5, in the case of any national bank or Federal savings 
association that receives a composite rating of 3 under the Uniform 
Financial Institutions Rating System (UFIRS) and any Federal branch or 
agency that receives a composite rating of 3 under the ROCA rating 
system (which rates risk management, operational controls, compliance, 
and asset quality) at its most recent examination prior to December 31 
or June 30, as appropriate; and
    (2) 2.0, in the case of any national bank or Federal savings 
association that receives a composite UFIRS rating of 4 or 5 and any 
Federal branch or

[[Page 441]]

agency that receives a composite rating of 4 or 5 under the ROCA rating 
system at its most recent examination prior to December 31 or June 30, 
as appropriate.

[76 FR 43566, July 21, 2011, as amended at 79 FR 38772, July 9, 2014; 84 
FR 43478, Aug. 21, 2019; 85 FR 37734, June 24, 2020]



Sec.  8.6  Fees for special examinations and investigations.

    (a) Fees. The OCC may assess a fee for:
    (1) Examining the fiduciary activities of national banks, Federal 
branches of foreign banks, and Federal savings associations and related 
entities;
    (2) Conducting special examinations and investigations of national 
banks, Federal branches or agencies of foreign banks, and Federal 
savings associations;
    (3) Conducting special examinations and investigations of an entity 
with respect to its performance of activities described in section 7(c) 
of the Bank Service Company Act (12 U.S.C. 1867(c)) if the OCC 
determines that assessment of the fee is warranted with regard to a 
particular national bank, Federal branch or agency of a foreign bank, or 
Federal savings association because of the high risk or unusual nature 
of the activities performed; the significance to the national bank's, 
Federal branch's or agency's, or Federal saving association's operations 
and income of the activities performed; or the extent to which the 
national bank, Federal branch or agency, or Federal savings association 
has sufficient systems, controls, and personnel to adequately monitor, 
measure, and control risks arising from such activities;
    (4) Conducting special examinations and investigations of affiliates 
of national banks, Federal savings associations, and Federal branches or 
agencies of foreign banks;
    (5) Conducting examinations and investigations made pursuant to 12 
CFR part 5, Rules, Policies, and Procedures for Corporate Activities; 
and
    (6) Conducting examinations of depository-institution permissible 
activities of nondepository institution subsidiaries of depository 
institution holding companies pursuant to section 605(a) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 1831c).
    (b) Notice of Office of the Comptroller of the Currency Fees and 
Assessments. The OCC publishes the fee schedule for fiduciary 
activities, special examinations and investigations, examinations of 
affiliates and examinations related to corporate activities in the 
``Notice of Office of the Comptroller of the Currency Fees and 
Assessments'' described in Sec.  8.8.
    (c) Additional assessments on trust national banks and trust Federal 
savings associations--(1) Independent trust national banks and 
independent trust Federal savings associations. The assessment of 
independent trust national banks and independent trust Federal savings 
associations will include a fiduciary and related asset component, in 
addition to the assessment calculated according to Sec.  8.2 of this 
part, as follows:
    (i) Minimum fee. All independent trust national banks and 
independent trust Federal savings associations will pay a minimum fee, 
to be provided in the ``Notice of Office of the Comptroller of the 
Currency Fees and Assessments.''
    (ii) Additional amount for independent trust national banks and 
independent trust Federal savings associations with fiduciary and 
related assets in excess of $1 billion. Independent trust national banks 
and independent trust Federal savings associations with fiduciary and 
related assets in excess of $1 billion will pay an amount that exceeds 
the minimum fee. The amount to be paid will be calculated by multiplying 
the amount of fiduciary and related assets by a rate or rates provided 
by the OCC in the ``Notice of Office of the Comptroller of the Currency 
Fees and Assessments.''
    (iii) Surcharge based on the condition of the independent trust 
national bank or of the independent trust Federal savings association. 
Subject to any limit that the OCC prescribes in the ``Notice of Office 
of the Comptroller of the Currency Fees and Assessments,'' the OCC shall 
adjust the semiannual assessment computed in accordance with paragraphs 
(c)(1)(i) and (ii) of this section by multiplying that figure by 1.5 for 
each independent trust national bank and independent trust Federal 
savings association that receives a composite

[[Page 442]]

UFIRS rating of 3 at its most recent examination prior to December 31 or 
June 30, as appropriate, and by 2.0 for each independent trust national 
bank and independent trust Federal savings association that receives a 
composite UFIRS rating of 4 or 5 at such examination.
    (2) Trust national banks affiliated with full-service national banks 
and trust Federal savings associations affiliated with full-service 
Federal savings associations. The OCC will assess a trust national bank 
and a trust Federal savings association in accordance with paragraph 
(c)(1) of this section, notwithstanding that the national bank is 
affiliated with a full-service national bank, or that the Federal 
savings association is affiliated with a full-service Federal savings 
association, if the OCC concludes that the affiliation is intended to 
evade the assessment regulation.
    (3) Definitions. For purposes of this paragraph (c) of this section, 
the following definitions apply:
    (i) Affiliate, with respect to a national bank, has the same meaning 
as this term has in 12 U.S.C. 221a(b);
    (ii) Affiliate, with respect to Federal savings associations, has 
the same meaning as in 12 U.S.C. 1462(9).
    (iii) Full-service national bank is a national bank that generates 
more than 50% of its interest and non-interest income from activities 
other than credit card operations or trust activities and is authorized 
according to its charter to engage in all types of permissible banking 
activities.
    (iv) Full-service Federal savings association is a Federal savings 
association that generates more than 50% of its interest and non-
interest income from activities other than credit card operations or 
trust activities and is authorized according to its charter to engage in 
all types of activities permissible for Federal savings associations.
    (v) Independent trust national bank is a national bank that has 
trust powers, does not primarily offer full-service banking, and is not 
affiliated with a full-service national bank;
    (vi) Independent trust Federal savings association is a Federal 
savings association that has trust powers, does not primarily offer 
full-service banking, and is not affiliated with a full-service Federal 
savings association; and
    (vii) Fiduciary and related assets are those assets reported on 
Schedule RC-T of FFIEC Forms 031 and 041, Line 10 (columns A and B) and 
Line 11 (column B), any successor form issued by the FFIEC, and any 
other fiduciary and related assets defined in the ``Notice of Office of 
the Comptroller of the Currency Fees and Assessments.''

[76 FR 43568, July 21, 2011, as amended at 76 FR 43568, July 7, 2011; 82 
FR 8104, Jan. 23, 2017; 84 FR 43479, Aug. 21, 2019]



Sec.  8.7  Payment of interest on delinquent assessments and examination 
and investigation fees.

    (a) Each national bank, Federal savings association, Federal branch, 
and Federal agency shall pay to the OCC interest on its delinquent 
payments of semiannual assessments. In addition, each institution 
subject to a special examination or investigation fee shall pay to the 
OCC interest on its delinquent payments of special examination and 
investigation fees. Semiannual assessment payments will be considered 
delinquent if they are received after the time for payment specified in 
Sec.  8.2. Special examination and investigation fees will be considered 
delinquent if not received by the OCC within 30 calendar days of the 
invoice date.
    (b) In the event that an institution believes that the notice of 
assessments or special examination and investigation fees contains an 
error or miscalculation, the institution may provide the OCC with a 
written request for a revised notice and a refund of any overpayments. 
Any such request for a revised notice and refund must be made after 
timely payment of the semiannual assessment under the dates specified in 
Sec.  8.2 or timely payment of the special examination and investigation 
fee within 30 calendar days of the invoice date.
    (1) Within 30 calendar days of receipt of such request, the OCC 
shall either--
    (i) Refund the amount of the overpayment; or
    (ii) Provide notice of its unwillingness to accept the request for a 
revised notice of assessments. In the latter instance, the OCC and the 
entity claiming the overpayment shall thereafter

[[Page 443]]

attempt to reach agreement on the amount, if any, to be refunded; the 
OCC shall refund this amount within 30 calendar days of such agreement.
    (2) The OCC shall be considered delinquent if it fails to return an 
overpayment in accordance with the time limitations specified in this 
paragraph (b). The OCC shall pay interest on any such delinquent 
payments.
    (c) Interest on delinquent payments, as described in paragraphs (a) 
and (b) of this section, will be assessed beginning the first calendar 
day on which payment is considered delinquent, and on each calendar day 
thereafter up to and including the day payment is received. Interest 
will be simple interest, calculated for each day payment is delinquent 
by multiplying the daily equivalent of the applicable interest rate by 
the amount delinquent. The rate of interest will be the United States 
Treasury Department's current value of funds rate (the ``TFRM rate''); 
that rate is issued under the Treasury Fiscal Requirements Manual and is 
published quarterly in the Federal Register. The interest rates 
applicable to a delinquent payment will be determined as follows:
    (1) For delinquent days occurring from January 1 to March 31, the 
rate will be the TFRM rate that is published the preceding December for 
the first quarter of the ensuing year.
    (2) For delinquent days occurring from April 1 to June 30, the rate 
will be the TFRM rate that is published the preceding March for the 
second quarter of that year.
    (3) For delinquent days occurring from July 1 to September 30, the 
rate will be the TFRM rate that is published the preceding June for the 
third quarter of that year.
    (4) For delinquent days occurring from October 1 to December 31, the 
rate will be the TFRM rate that is published the preceding September for 
the fourth quarter of that year.

[48 FR 30599, July 1, 1983. Redesignated and amended at 49 FR 50605, 
Dec. 31, 1984; 70 FR 69643, Nov. 17, 2005; 76 FR 43568, July 21, 2011; 
84 FR 43479, Aug. 21, 2019]



Sec.  8.8  Notice of Office of the Comptroller of the Currency fees 
and assessments.

    (a) December notice of fees. A ``Notice of Office of the Comptroller 
of the Currency Fees and Assessments'' (Notice of Fees) shall be 
published no later than the first business day in December of each year 
for fees to be charged by the OCC during the upcoming year. These fees 
will be effective January 1 of that upcoming year.
    (b) Interim and amended notice of fees. The OCC may issue a ``Notice 
of Interim Office of the Comptroller of the Currency Fees and 
Assessments'' or a ``Notice of Amended Office of the Comptroller of the 
Currency Fees and Assessments'' from time to time throughout the year as 
necessary. Interim or amended notices will be effective 30 days after 
issuance.

[79 FR 38772, July 9, 2014, as amended at 84 FR 43479, Aug. 21, 2019]



PART 9_FIDUCIARY ACTIVITIES OF NATIONAL BANKS--Table of Contents



                               Regulations

Sec.
9.1 Authority, purpose, and scope.
9.2 Definitions.
9.3 Approval requirements.
9.4 Administration of fiduciary powers.
9.5 Policies and procedures.
9.6 Review of fiduciary accounts.
9.7 Multi-state fiduciary operations.
9.8 Recordkeeping.
9.9 Audit of fiduciary activities.
9.10 Fiduciary funds awaiting investment or distribution.
9.11 Investment of fiduciary funds.
9.12 Self-dealing and conflicts of interest.
9.13 Custody of fiduciary assets.
9.14 Deposit of securities with state authorities.
9.15 Fiduciary compensation.
9.16 Receivership or voluntary liquidation of bank.
9.17 Surrender or revocation of fiduciary powers.
9.18 Collective investment funds.
9.20 Transfer agents.

                             Interpretations

9.100 Acting as indenture trustee and creditor.
9.101 Providing investment advice for a fee.

    Authority: 12 U.S.C. 24 (Seventh), 92a, and 93a; 15 U.S.C. 78q, 78q-
1, and 78w.

[[Page 444]]


    Source: 61 FR 68554, Dec. 30, 1996, unless otherwise noted.

                               Regulations



Sec.  9.1  Authority, purpose, and scope.

    (a) Authority. The Office of the Comptroller of the Currency (OCC) 
issues this part pursuant to its authority under 12 U.S.C. 24 (Seventh), 
92a, and 93a, and 15 U.S.C. 78q, 78q-1, and 78w.
    (b) Purpose. The purpose of this part is to set forth the standards 
that apply to the fiduciary activities of national banks.
    (c) Scope. This part applies to all national banks that act in a 
fiduciary capacity, as defined in Sec.  9.2(e). This part also applies 
to all Federal branches of foreign banks to the same extent as it 
applies to national banks.



Sec.  9.2  Definitions.

    For the purposes of this part, the following definitions apply:
    (a) Affiliate has the same meaning as in 12 U.S.C. 221a(b).
    (b) Applicable law means the law of a state or other jurisdiction 
governing a national bank's fiduciary relationships, any applicable 
Federal law governing those relationships, the terms of the instrument 
governing a fiduciary relationship, or any court order pertaining to the 
relationship.
    (c) Custodian under a uniform gifts to minors act means a fiduciary 
relationship established pursuant to a state law substantially similar 
to the Uniform Gifts to Minors Act or the Uniform Transfers to Minors 
Act as published by the American Law Institute.
    (d) Fiduciary account means an account administered by a national 
bank acting in a fiduciary capacity.
    (e) Fiduciary capacity means: trustee, executor, administrator, 
registrar of stocks and bonds, transfer agent, guardian, assignee, 
receiver, or custodian under a uniform gifts to minors act; investment 
adviser, if the bank receives a fee for its investment advice; any 
capacity in which the bank possesses investment discretion on behalf of 
another; or any other similar capacity that the OCC authorizes pursuant 
to 12 U.S.C. 92a.
    (f) Fiduciary officers and employees means all officers and 
employees of a national bank to whom the board of directors or its 
designee has assigned functions involving the exercise of the bank's 
fiduciary powers.
    (g) Fiduciary powers means the authority the OCC permits a national 
bank to exercise pursuant to 12 U.S.C. 92a.
    (h) Guardian means the guardian or conservator, by whatever name 
used by state law, of the estate of a minor, an incompetent person, an 
absent person, or a person over whose estate a court has taken 
jurisdiction, other than under bankruptcy or insolvency laws.
    (i) Investment discretion means, with respect to an account, the 
sole or shared authority (whether or not that authority is exercised) to 
determine what securities or other assets to purchase or sell on behalf 
of the account. A bank that delegates its authority over investments and 
a bank that receives delegated authority over investments are both 
deemed to have investment discretion.
    (j) Trust office means an office of a national bank, other than a 
main office or a branch, at which the bank engages in one or more of the 
activities specified in Sec.  9.7(d). Pursuant to 12 U.S.C. 36(j), a 
trust office is not a ``branch'' for purposes of 12 U.S.C. 36, unless it 
is also an office at which deposits are received, or checks paid, or 
money lent.
    (k) Trust representative office means an office of a national bank, 
other than a main office, branch, or trust office, at which the bank 
performs activities ancillary to its fiduciary business, but does not 
engage in any of the activities specified in Sec.  9.7(d). Examples of 
ancillary activities include advertising, marketing, and soliciting for 
fiduciary business; contacting existing or potential customers, 
answering questions, and providing information about matters related to 
their accounts; acting as a liaison between the trust office and the 
customer (e.g., forwarding requests for distribution or changes in 
investment objectives, or forwarding forms and funds received from the 
customer); inspecting or maintaining custody of fiduciary assets or 
holding title to real property. This list is illustrative and not 
comprehensive. Other

[[Page 445]]

activities may also be ``ancillary activities'' for the purposes of this 
definition. Pursuant to 12 U.S.C. 36(j), a trust representative office 
is not a ``branch'' for purposes of 12 U.S.C. 36, unless it is also an 
office at which deposits are received, or checks paid, or money lent.

[61 FR 68554, Dec. 30, 1996, as amended at 66 FR 34797, July 2, 2001]



Sec.  9.3  Approval requirements.

    (a) A national bank may not exercise fiduciary powers unless it 
obtains prior approval from the OCC to the extent required under 12 CFR 
5.26.
    (b) A national bank that has obtained the OCC s approval to exercise 
fiduciary powers is not required to obtain the OCC s prior approval to 
engage in any of the activities specified in Sec.  9.7(d) in a new state 
or to conduct, in a new state, activities that are ancillary to its 
fiduciary business. Instead, the national bank must follow the notice 
procedures prescribed by 12 CFR 5.26(e).
    (c) A person seeking approval to organize a special-purpose national 
bank limited to fiduciary powers shall file an application with the OCC 
pursuant to 12 CFR 5.20.

[61 FR 68554, Dec. 30, 1996, as amended at 66 FR 34798, July 2, 2001]



Sec.  9.4  Administration of fiduciary powers.

    (a) Responsibilities of the board of directors. A national bank's 
fiduciary activities shall be managed by or under the direction of its 
board of directors. In discharging its responsibilities, the board may 
assign any function related to the exercise of fiduciary powers to any 
director, officer, employee, or committee thereof.
    (b) Use of other personnel. The national bank may use any qualified 
personnel and facilities of the bank or its affiliates to perform 
services related to the exercise of its fiduciary powers, and any 
department of the bank or its affiliates may use fiduciary officers, 
employees, and facilities to perform services unrelated to the exercise 
of fiduciary powers, to the extent not prohibited by applicable law.
    (c) Agency agreements. Pursuant to a written agreement, a national 
bank exercising fiduciary powers may perform services related to the 
exercise of fiduciary powers for another bank or other entity, and may 
purchase services related to the exercise of fiduciary powers from 
another bank or other entity.
    (d) Bond requirement. A national bank shall ensure that all 
fiduciary officers and employees are adequately bonded.



Sec.  9.5  Policies and procedures.

    A national bank exercising fiduciary powers shall adopt and follow 
written policies and procedures adequate to maintain its fiduciary 
activities in compliance with applicable law. Among other relevant 
matters, the policies and procedures should address, where appropriate, 
the bank's:
    (a) Brokerage placement practices;
    (b) Methods for ensuring that fiduciary officers and employees do 
not use material inside information in connection with any decision or 
recommendation to purchase or sell any security;
    (c) Methods for preventing self-dealing and conflicts of interest;
    (d) Selection and retention of legal counsel who is readily 
available to advise the bank and its fiduciary officers and employees on 
fiduciary matters; and
    (e) Investment of funds held as fiduciary, including short-term 
investments and the treatment of fiduciary funds awaiting investment or 
distribution.



Sec.  9.6  Review of fiduciary accounts.

    (a) Pre-acceptance review. Before accepting a fiduciary account, a 
national bank shall review the prospective account to determine whether 
it can properly administer the account.
    (b) Initial post-acceptance review. Upon the acceptance of a 
fiduciary account for which a national bank has investment discretion, 
the bank shall conduct a prompt review of all assets of the account to 
evaluate whether they are appropriate for the account.
    (c) Annual review. At least once during every calendar year, a bank 
shall conduct a review of all assets of each fiduciary account for which 
the bank has investment discretion to evaluate whether they are 
appropriate, individually and collectively, for the account.

[[Page 446]]



Sec.  9.7  Multi-state fiduciary operations.

    (a) Acting in a fiduciary capacity in more than one state. Pursuant 
to 12 U.S.C. 92a and this section, a national bank may act in a 
fiduciary capacity in any state. If a national bank acts, or proposes to 
act, in a fiduciary capacity in a particular state, the bank may act in 
the following specific capacities:
    (1) Any of the eight fiduciary capacities expressly listed in 12 
U.S.C. 92a(a), unless the state prohibits its own state banks, trust 
companies, and other corporations that compete with national banks in 
that state from acting in that capacity; and
    (2) Any other fiduciary capacity the state permits for its own state 
banks, trust companies, or other corporations that compete with national 
banks in that state.
    (b) Serving customers in other states. While acting in a fiduciary 
capacity in one state, a national bank may market its fiduciary services 
to, and act as fiduciary for, customers located in any state, and it may 
act as fiduciary for relationships that include property located in 
other states. The bank may use a trust representative office for this 
purpose.
    (c) Offices in more than one state. A national bank with fiduciary 
powers may establish trust offices or trust representative offices in 
any state.
    (d) Determination of the state referred to in 12 U.S.C. 92a. For 
each fiduciary relationship, the state referred to in section 92a is the 
state in which the bank acts in a fiduciary capacity for that 
relationship. A national bank acts in a fiduciary capacity in the state 
in which it accepts the fiduciary appointment, executes the documents 
that create the fiduciary relationship, and makes discretionary 
decisions regarding the investment or distribution of fiduciary assets. 
If these activities take place in more than one state, then the state in 
which the bank acts in a fiduciary capacity for section 92a purposes is 
the state that the bank designates from among those states.
    (e) Application of state law--(1) State laws used in section 92a. 
The state laws that apply to a national bank's fiduciary activities by 
virtue of 12 U.S.C. 92a are the laws of the state in which the bank acts 
in a fiduciary capacity.
    (2) Other state laws. Except for the state laws made applicable to 
national banks by virtue of 12 U.S.C. 92a, state laws limiting or 
establishing preconditions on the exercise of fiduciary powers are not 
applicable to national banks.

[66 FR 34798, July 2, 2001]



Sec.  9.8  Recordkeeping.

    (a) Documentation of accounts. A national bank shall adequately 
document the establishment and termination of each fiduciary account and 
shall maintain adequate records for all fiduciary accounts.
    (b) Retention of records. A national bank shall retain records 
described in paragraph (a) of this section for a period of three years 
from the later of the termination of the account or the termination of 
any litigation relating to the account.
    (c) Separation of records. A national bank shall ensure that records 
described in paragraph (a) of this section are separate and distinct 
from other records of the bank.



Sec.  9.9  Audit of fiduciary activities.

    (a) Annual audit. At least once during each calendar year, a 
national bank shall arrange for a suitable audit (by internal or 
external auditors) of all significant fiduciary activities, under the 
direction of its fiduciary audit committee, unless the bank adopts a 
continuous audit system in accordance with paragraph (b) of this 
section. The bank shall note the results of the audit (including 
significant actions taken as a result of the audit) in the minutes of 
the board of directors.
    (b) Continuous audit. In lieu of performing annual audits under 
paragraph (a) of this section, a national bank may adopt a continuous 
audit system under which the bank arranges for a discrete audit (by 
internal or external auditors) of each significant fiduciary activity 
(i.e., on an activity-by-activity basis), under the direction of its 
fiduciary audit committee, at an interval commensurate with the nature 
and risk of that activity. Thus, certain fiduciary activities may 
receive audits at intervals greater or less than one year, as

[[Page 447]]

appropriate. A bank that adopts a continuous audit system shall note the 
results of all discrete audits performed since the last audit report 
(including significant actions taken as a result of the audits) in the 
minutes of the board of directors at least once during each calendar 
year .
    (c) Fiduciary audit committee. A national bank's fiduciary audit 
committee must consist of a committee of the bank's directors or an 
audit committee of an affiliate of the bank. However, in either case, 
the committee:
    (1) Must not include any officers of the bank or an affiliate who 
participate significantly in the administration of the bank's fiduciary 
activities; and
    (2) Must consist of a majority of members who are not also members 
of any committee to which the board of directors has delegated power to 
manage and control the fiduciary activities of the bank.



Sec.  9.10  Fiduciary funds awaiting investment or distribution.

    (a) In general. With respect to a fiduciary account for which a 
national bank has investment discretion or discretion over 
distributions, the bank may not allow funds awaiting investment or 
distribution to remain uninvested and undistributed any longer than is 
reasonable for the proper management of the account and consistent with 
applicable law. With respect to a fiduciary account for which a national 
bank has investment discretion, the bank shall obtain for funds awaiting 
investment or distribution a rate of return that is consistent with 
applicable law.
    (b) Self-deposits--(1) In general. A national bank may deposit funds 
of a fiduciary account that are awaiting investment or distribution in 
the commercial, savings, or another department of the bank, unless 
prohibited by applicable law. To the extent that the funds are not 
insured by the Federal Deposit Insurance Corporation, the bank shall set 
aside collateral as security, under the control of appropriate fiduciary 
officers and employees, in accordance with paragraph (b)(2) of this 
section. The market value of the collateral set aside must at all times 
equal or exceed the amount of the uninsured fiduciary funds.
    (2) Acceptable collateral. A national bank may satisfy the 
collateral requirement of paragraph (b)(1) of this section with any of 
the following:
    (i) Direct obligations of the United States, or other obligations 
fully guaranteed by the United States as to principal and interest;
    (ii) Securities that qualify as eligible for investment by national 
banks pursuant to 12 CFR part 1;
    (iii) Readily marketable securities of the classes in which state 
banks, trust companies, or other corporations exercising fiduciary 
powers are permitted to invest fiduciary funds under applicable state 
law;
    (iv) Surety bonds, to the extent they provide adequate security, 
unless prohibited by applicable law; and
    (v) Any other assets that qualify under applicable state law as 
appropriate security for deposits of fiduciary funds.
    (c) Affiliate deposits. A national bank, acting in its fiduciary 
capacity, may deposit funds of a fiduciary account that are awaiting 
investment or distribution with an affiliated insured depository 
institution, unless prohibited by applicable law. A national bank may 
set aside collateral as security for a deposit by or with an affiliate 
of fiduciary funds awaiting investment or distribution, unless 
prohibited by applicable law.



Sec.  9.11  Investment of fiduciary funds.

    A national bank shall invest funds of a fiduciary account in a 
manner consistent with applicable law.



Sec.  9.12  Self-dealing and conflicts of interest.

    (a) Investments for fiduciary accounts--(1) In general. Unless 
authorized by applicable law, a national bank may not invest funds of a 
fiduciary account for which a national bank has investment discretion in 
the stock or obligations of, or in assets acquired from: the bank or any 
of its directors, officers, or employees; affiliates of the bank or any 
of their directors, officers, or employees; or individuals or 
organizations with whom there exists an interest that

[[Page 448]]

might affect the exercise of the best judgment of the bank.
    (2) Additional securities investments. If retention of stock or 
obligations of the bank or its affiliates in a fiduciary account is 
consistent with applicable law, the bank may:
    (i) Exercise rights to purchase additional stock (or securities 
convertible into additional stock) when offered pro rata to 
stockholders; and
    (ii) Purchase fractional shares to complement fractional shares 
acquired through the exercise of rights or the receipt of a stock 
dividend resulting in fractional share holdings.
    (b) Loans, sales, or other transfers from fiduciary accounts--(1) In 
general. A national bank may not lend, sell, or otherwise transfer 
assets of a fiduciary account for which a national bank has investment 
discretion to the bank or any of its directors, officers, or employees, 
or to affiliates of the bank or any of their directors, officers, or 
employees, or to individuals or organizations with whom there exists an 
interest that might affect the exercise of the best judgment of the 
bank, unless:
    (i) The transaction is authorized by applicable law;
    (ii) Legal counsel advises the bank in writing that the bank has 
incurred, in its fiduciary capacity, a contingent or potential 
liability, in which case the bank, upon the sale or transfer of assets, 
shall reimburse the fiduciary account in cash at the greater of book or 
market value of the assets;
    (iii) As provided in Sec.  9.18(b)(8)(iii) for defaulted 
investments; or
    (iv) Required in writing by the OCC.
    (2) Loans of funds held as trustee. Notwithstanding paragraph (b)(1) 
of this section, a national bank may not lend to any of its directors, 
officers, or employees any funds held in trust, except with respect to 
employee benefit plans in accordance with the exemptions found in 
section 408 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1108).
    (c) Loans to fiduciary accounts. A national bank may make a loan to 
a fiduciary account and may hold a security interest in assets of the 
account if the transaction is fair to the account and is not prohibited 
by applicable law.
    (d) Sales between fiduciary accounts. A national bank may sell 
assets between any of its fiduciary accounts if the transaction is fair 
to both accounts and is not prohibited by applicable law.
    (e) Loans between fiduciary accounts. A national bank may make a 
loan between any of its fiduciary accounts if the transaction is fair to 
both accounts and is not prohibited by applicable law.



Sec.  9.13  Custody of fiduciary assets.

    (a) Control of fiduciary assets. A national bank shall place assets 
of fiduciary accounts in the joint custody or control of not fewer than 
two of the fiduciary officers or employees designated for that purpose 
by the board of directors. A national bank may maintain the investments 
of a fiduciary account off-premises, if consistent with applicable law 
and if the bank maintains adequate safeguards and controls. A bank that 
is deemed a fiduciary based solely on its capacity as investment 
advisor, as that capacity is defined in Sec.  9.101(a), and has no other 
fiduciary capacity as enumerated in Sec.  9.2(e) is not required to 
serve as custodian when offering those fiduciary services.
    (b) Separation of fiduciary assets. A national bank shall keep the 
assets of fiduciary accounts separate from the assets of the bank. A 
national bank shall keep the assets of each fiduciary account separate 
from all other accounts or shall identify the investments as the 
property of a particular account, except as provided in Sec.  9.18.

[61 FR 68554, Dec. 30, 1996, as amended at 82 FR 8105, Jan. 23, 2017]



Sec.  9.14  Deposit of securities with state authorities.

    (a) In general. If state law requires corporations acting in a 
fiduciary capacity to deposit securities with state authorities for the 
protection of private or court trusts, then before a national bank acts 
as a private or court-appointed trustee in that state, it shall make a 
similar deposit with state authorities. If the state authorities refuse 
to accept the deposit, the bank shall deposit the securities with the 
Federal Reserve Bank or Federal Home Loan Bank of the district in which 
the national bank is located, to be held for

[[Page 449]]

the protection of private or court trusts to the same extent as if the 
securities had been deposited with state authorities.
    (b) Acting in a fiduciary capacity in more than one state. If a 
national bank acts in a fiduciary capacity in more than one state, the 
bank may compute the amount of securities that are required to be 
deposited for each state on the basis of the amount of assets for which 
the bank is acting in a fiduciary capacity at offices located in that 
state. If state law requires a deposit of securities on a basis other 
than assets (e.g., a requirement to deposit a fixed amount or an amount 
equal to a percentage of capital), the bank may compute the amount of 
deposit required in that state on a pro-rated basis, according to the 
proportion of fiduciary assets for which the bank is acting in a 
fiduciary capacity at offices located in that state.

[61 FR 68554, Dec. 30, 1996, as amended at 66 FR 34798, July 2, 2001; 82 
FR 8105, Jan. 23, 2017]



Sec.  9.15  Fiduciary compensation.

    (a) Compensation of bank. If the amount of a national bank's 
compensation for acting in a fiduciary capacity is not set or governed 
by applicable law, the bank may charge a reasonable fee for its 
services.
    (b) Compensation of co-fiduciary officers and employees. A national 
bank may not permit any officer or employee to retain any compensation 
for acting as a co-fiduciary with the bank in the administration of a 
fiduciary account, except with the specific approval of the bank's board 
of directors.



Sec.  9.16  Receivership or voluntary liquidation of bank.

    If the OCC appoints a receiver for an uninsured national bank, or if 
a national bank places itself in voluntary liquidation, the receiver or 
liquidating agent shall promptly close or transfer to a substitute 
fiduciary all fiduciary accounts, in accordance with OCC instructions 
and the orders of the court having jurisdiction.



Sec.  9.17  Surrender or revocation of fiduciary powers.

    (a) Surrender. In accordance with 12 U.S.C. 92a(j), a national bank 
seeking to surrender its fiduciary powers shall file with the OCC a 
certified copy of the resolution of its board of directors evidencing 
that intent. If, after appropriate investigation, the OCC is satisfied 
that the bank has been discharged from all fiduciary duties, the OCC 
will provide written notice that the bank is no longer authorized to 
exercise fiduciary powers.
    (b) Revocation. If the OCC determines that a national bank has 
unlawfully or unsoundly exercised, or has failed for a period of five 
consecutive years to exercise its fiduciary powers, the Comptroller may, 
in accordance with the provisions of 12 U.S.C. 92a(k), revoke the bank's 
fiduciary powers.



Sec.  9.18  Collective investment funds.

    (a) In general. Where consistent with applicable law, a national 
bank may invest assets that it holds as fiduciary in the following 
collective investment funds: \1\
---------------------------------------------------------------------------

    \1\ In determining whether investing fiduciary assets in a 
collective investment fund is proper, the bank may consider the fund as 
a whole and, for example, shall not be prohibited from making that 
investment because any particular asset is nonincome producing.
---------------------------------------------------------------------------

    (1) A fund maintained by the bank, or by one or more affiliated 
banks, \2\ exclusively for the collective investment and reinvestment of 
money contributed to the fund by the bank, or by one or more affiliated 
banks, in its capacity as trustee, executor, administrator, guardian, or 
custodian under a uniform gifts to minors act.
---------------------------------------------------------------------------

    \2\ A fund established pursuant to this paragraph (a)(1) that 
includes money contributed by entities that are affiliates under 12 
U.S.C. 221a(b), but are not members of the same affiliated group, as 
defined at 26 U.S.C. 1504, may fail to qualify for tax-exempt status 
under the Internal Revenue Code. See 26 U.S.C. 584.
---------------------------------------------------------------------------

    (2) A fund consisting solely of assets of retirement, pension, 
profit sharing, stock bonus or other trusts that are exempt from Federal 
income tax.
    (i) A national bank may invest assets of retirement, pension, profit 
sharing,

[[Page 450]]

stock bonus, or other trusts exempt from Federal income tax and that the 
bank holds in its capacity as trustee in a collective investment fund 
established under paragraph (a)(1) or (a)(2) of this section.
    (ii) A national bank may invest assets of retirement, pension, 
profit sharing, stock bonus, or other employee benefit trusts exempt 
from Federal income tax and that the bank holds in any capacity 
(including agent), in a collective investment fund established under 
this paragraph (a)(2) if the fund itself qualifies for exemption from 
Federal income tax.
    (b) Requirements. A national bank administering a collective 
investment fund authorized under paragraph (a) of this section shall 
comply with the following requirements:
    (1) Written plan. The bank shall establish and maintain each 
collective investment fund in accordance with a written plan (Plan) 
approved by a resolution of the bank's board of directors or by a 
committee authorized by the board. The bank shall make a copy of the 
Plan available either for public inspection at its main office during 
all banking hours or on its Web site and shall provide a written or 
electronic copy of the Plan to any person who requests it. The Plan must 
contain appropriate provisions, not inconsistent with this part, 
regarding the manner in which the bank will operate the fund, including 
provisions relating to:
    (i) Investment powers and policies with respect to the fund;
    (ii) Allocation of income, profits, and losses;
    (iii) Fees and expenses that will be charged to the fund and to 
participating accounts;
    (iv) Terms and conditions governing the admission and withdrawal of 
participating accounts;
    (v) Audits of participating accounts;
    (vi) Basis and method of valuing assets in the fund;
    (vii) Expected frequency for income distribution to participating 
accounts;
    (viii) Minimum frequency for valuation of fund assets;
    (ix) Amount of time following a valuation date during which the 
valuation must be made;
    (x) Bases upon which the bank may terminate the fund; and
    (xi) Any other matters necessary to define clearly the rights of 
participating accounts.
    (2) Fund management. A bank administering a collective investment 
fund shall have exclusive management thereof, except as a prudent person 
might delegate responsibilities to others. \3\
---------------------------------------------------------------------------

    \3\ If a fund, the assets of which consist solely of Individual 
Retirement Accounts, Keogh Accounts, or other employee benefit accounts 
that are exempt from taxation, is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the fund will not be 
deemed in violation of this paragraph (b)(2) as a result of its 
compliance with section 10(c) of the Investment Company Act of 1940 (15 
U.S.C. 80a-10(c)).
---------------------------------------------------------------------------

    (3) Proportionate interests. Each participating account in a 
collective investment fund must have a proportionate interest in all the 
fund's assets.
    (4) Valuation--(i) Frequency of valuation. A bank administering a 
collective investment fund shall determine the value of the fund's 
readily marketable assets at least once every three months. A bank shall 
determine the value of the fund's assets that are not readily marketable 
at least once a year.
    (ii) General method of valuation. Except as provided in paragraph 
(b)(4)(iii) of this section, a bank shall value each fund asset at mark-
to-market value as of the date set for valuation, unless the bank cannot 
readily ascertain mark-to-market value, in which case the bank shall use 
a fair value determined in good faith.
    (iii) Short-term investment funds (STIFs) method of valuation. A 
bank may value a STIF's assets on a cost basis, rather than mark-to-
market value as provided in paragraph (b)(4)(ii) of this section, for 
purposes of admissions and withdrawals, if the Plan includes appropriate 
provisions, consistent with this part, requiring the STIF to:
    (A) Operate with a stable net asset value of $1.00 per participating 
interest as a primary fund objective;
    (B) Maintain a dollar-weighted average portfolio maturity of 60 days 
or less and a dollar-weighted average

[[Page 451]]

portfolio life maturity of 120 days or less as determined in the same 
manner as is required by the Securities and Exchange Commission pursuant 
to Rule 2a-7 for money market mutual funds (17 CFR 270.2a-7);
    (C) Accrue on a straight-line or amortized basis the difference 
between the cost and anticipated principal receipt on maturity;
    (D) Hold the STIF's assets until maturity under usual circumstances;
    (E) Adopt portfolio and issuer qualitative standards and 
concentration restrictions;
    (F) Adopt liquidity standards that include provisions to address 
contingency funding needs;
    (G) Adopt shadow pricing procedures that:
    (1) Require the bank to calculate the extent of difference, if any, 
of the mark-to-market net asset value per participating interest using 
available market quotations (or an appropriate substitute that reflects 
current market conditions) from the STIF's amortized cost price per 
participating interest, at least on a calendar week basis and more 
frequently as determined by the bank when market conditions warrant; and
    (2) Require the bank, in the event the difference calculated 
pursuant to this subparagraph exceeds $0.005 per participating interest, 
to take action to reduce dilution of participating interests or other 
unfair results to participating accounts in the STIF;
    (H) Adopt procedures for stress testing the STIF's ability to 
maintain a stable net asset value per participating interest that shall 
provide for:
    (1) The periodic stress testing, at least on a calendar month basis 
and at such intervals as an independent risk manager or a committee 
responsible for the STIF's oversight that consists of members 
independent from the STIF's investment management determines appropriate 
and reasonable in light of current market conditions;
    (2) Stress testing based upon hypothetical events that include, but 
are not limited to, a change in short-term interest rates, an increase 
in participant account withdrawals, a downgrade of or default on 
portfolio securities, and the widening or narrowing of spreads between 
yields on an appropriate benchmark the STIF has selected for overnight 
interest rates and commercial paper and other types of securities held 
by the STIF;
    (3) A stress testing report on the results of such testing to be 
provided to the independent risk manager or the committee responsible 
for the STIF's oversight that consists of members independent from the 
STIF's investment management that shall include: the date(s) on which 
the testing was performed; the magnitude of each hypothetical event that 
would cause the difference between the STIF's mark-to-market net asset 
value calculated using available market quotations (or appropriate 
substitutes which reflect current market conditions) and its net asset 
value per participating interest calculated using amortized cost to 
exceed $0.005; and an assessment by the bank of the STIF's ability to 
withstand the events (and concurrent occurrences of those events) that 
are reasonably likely to occur within the following year; and
    (4) Reporting adverse stress testing results to the bank's senior 
risk management that is independent from the STIF's investment 
management.
    (I) Adopt procedures that require a bank to disclose to STIF 
participants and to the OCC's Asset Management Group, Credit & Market 
Risk Division, within five business days after each calendar month-end, 
the fund's total assets under management (securities and other assets 
including cash, minus liabilities); the fund's mark-to-market and 
amortized cost net asset values both with and without capital support 
agreements; the dollar-weighted average portfolio maturity; the dollar-
weighted average portfolio life maturity of the STIF as of the last 
business day of the prior calendar month; and for each security held by 
the STIF as of the last business day of the prior calendar month:
    (1) The name of the issuer;
    (2) The category of investment;
    (3) The Committee on Uniform Securities Identification Procedures 
(CUSIP) number or other standard identifier;
    (4) The principal amount;

[[Page 452]]

    (5) The maturity date for purposes of calculating dollar-weighted 
average portfolio maturity;
    (6) The final legal maturity date (taking into account any maturity 
date extensions that may be effected at the option of the issuer) if 
different from the maturity date for purposes of calculating dollar-
weighted average portfolio maturity;
    (7) The coupon or yield; and
    (8) The amortized cost value;
    (J) Adopt procedures that require a bank that administers a STIF to 
notify the OCC's Asset Management Group, Credit & Market Risk Division, 
prior to or within one business day thereafter of the following:
    (1) Any difference exceeding $0.0025 between the net asset value and 
the mark-to-market value of a STIF participating interest as calculated 
using the method set forth in paragraph (b)(4)(iii)(G)(1) of this 
section;
    (2) When a STIF has re-priced its net asset value below $0.995 per 
participating interest;
    (3) Any withdrawal distribution-in-kind of the STIF's participating 
interests or segregation of portfolio participants;
    (4) Any delays or suspensions in honoring STIF participating 
interest withdrawal requests;
    (5) Any decision to formally approve the liquidation, segregation of 
assets or portfolios, or some other liquidation of the STIF; or
    (6) In those situations when a bank, its affiliate, or any other 
entity provides a STIF financial support, including a cash infusion, a 
credit extension, a purchase of a defaulted or illiquid asset, or any 
other form of financial support in order to maintain a stable net asset 
value per participating interest;
    (K) Adopt procedures that in the event a STIF has re-priced its net 
asset value below $0.995 per participating interest, the bank 
administering the STIF shall calculate, admit, and withdraw the STIF's 
participating interests at a price based on the mark-to-market net asset 
value; and
    (L) Adopt procedures that, in the event a bank suspends or limits 
withdrawals and initiates liquidation of the STIF as a result of 
redemptions, require the bank to:
    (1) Determine that the extent of the difference between the STIF's 
amortized cost per participating interest and its mark-to-market net 
asset value per participating interest may result in material dilution 
of participating interests or other unfair results to participating 
accounts;
    (2) Formally approve the liquidation of the STIF; and
    (3) Facilitate the fair and orderly liquidation of the STIF to the 
benefit of all STIF participants.
    (iv) Reservation of authority. Notwithstanding paragraph 
(b)(4)(iii)(B) of this section, during periods of market stress 
negatively affecting, on a temporary basis, the ability of banks to 
operate STIFs in compliance with the requirements of the paragraph:
    (A) The OCC may issue an administrative order specifying, for 
purposes of paragraph (b)(4)(iii)(B) of this section, temporary 
revisions to the length of the dollar-weighted average portfolio 
maturity requirement, the length of dollar-weighted average portfolio 
life maturity, and the manner of determining such limits;
    (B) A bank seeking to comply with paragraph (b)(4)(iii)(B) will be 
deemed to be in compliance with that paragraph's requirements by 
complying with the limits or other revisions, and any applicable 
conditions, described in the administrative order; and
    (C) The OCC will publish the administrative order on www.occ.gov and 
through other methods, as appropriate.
    (5) Admission and withdrawal of accounts--(i) In general. A bank 
administering a collective investment fund shall admit an account to or 
withdraw an account from the fund only on the basis of the valuation 
described in paragraph (b)(4) of this section.
    (ii) Prior request or notice. A bank administering a collective 
investment fund may admit an account to or withdraw an account from a 
collective investment fund only if the bank has approved a request for 
or a notice of intention of taking that action on or before the 
valuation date on which the admission or withdrawal is based. No 
requests or notices may be canceled or

[[Page 453]]

countermanded after the valuation date.
    (iii) Prior notice period for withdrawals from funds with assets not 
readily marketable. (A) A bank administering a collective investment 
fund described in paragraph (a)(2) of this section that is invested 
primarily in real estate or other assets that are not readily marketable 
may require a prior notice period, not to exceed one year, for 
withdrawals.
    (B) A bank that requires a prior notice period for withdrawals must 
withdraw an account from the fund within the prior notice period or, if 
permissible under the fund's written plan, within one year after the 
date on which notice was required, except as described in paragraph 
(b)(5)(iii)(C) of this section.
    (C) A bank may withdraw an account from the fund up to one year 
after the withdrawal period described in paragraph (b)(5)(iii)(B) of 
this section, with the OCC's approval, provided that the following 
conditions are met:
    (1) The fund's written plan, including its notice and withdrawal 
policy, authorizes an extended withdrawal period and is fully disclosed 
to fund participants;
    (2) The bank's board of directors, or a committee authorized by the 
board of directors, determines that, due to unanticipated and severe 
market conditions for specific assets held by the fund, an extended 
withdrawal period is necessary in order to preserve the value of the 
fund's assets for the benefit of fund participants;
    (3) The bank's board of directors, or a committee authorized by the 
board of directors, determines that the extended withdrawal period is 
consistent with 12 CFR part 9 and applicable law;
    (4) The bank's board of directors, or a committee authorized by the 
board of directors, represents that the bank will act upon any 
withdrawal request as soon as practicable and consistent with its 
fiduciary duties; and
    (5) Any other condition imposed by the OCC, if the OCC determines 
that the condition is necessary or appropriate to protect the interests 
of fund participants.
    (D) Upon request by a bank, the OCC may approve an extension beyond 
the one-year extension period described in paragraph (b)(5)(iii)(C) of 
this section if the OCC determines that the bank has made a good faith 
effort to satisfy withdrawal requests and the bank has been unable to 
satisfy such requests without causing harm to participants due to 
ongoing severe market conditions. The bank must also continue to satisfy 
the conditions described in paragraph (b)(5)(iii)(C) of this section. 
Extensions under this paragraph must be requested and approved annually, 
for a maximum of two years after the initial one-year extension period.
    (iv) Method of distributions. A bank administering a collective 
investment fund shall make distributions to accounts withdrawing from 
the fund in cash, ratably in kind, a combination of cash and ratably in 
kind, or in any other manner consistent with applicable law in the state 
in which the bank maintains the fund.
    (v) Segregation of investments. If an investment is withdrawn in 
kind from a collective investment fund for the benefit of all 
participants in the fund at the time of the withdrawal but the 
investment is not distributed ratably in kind, the bank shall segregate 
and administer it for the benefit ratably of all participants in the 
collective investment fund at the time of withdrawal.
    (6) Audits and financial reports--(i) Annual audit. At least once 
during each 12-month period, a bank administering a collective 
investment fund shall arrange for an audit of the collective investment 
fund by auditors responsible only to the board of directors of the bank. 
\4\
---------------------------------------------------------------------------

    \4\ If a fund, the assets of which consist solely of Individual 
Retirement Accounts, Keogh Accounts, or other employee benefit accounts 
that are exempt from taxation, is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the fund will not be 
deemed in violation of this paragraph (b)(6)(i) as a result of its 
compliance with section 10(c) of the Investment Company Act of 1940 (15 
U.S.C. 80a-10(c)), if the bank has access to the audit reports of the 
fund.
---------------------------------------------------------------------------

    (ii) Financial report. At least once during each 12-month period, a 
bank administering a collective investment fund shall prepare a 
financial report of the fund based on the audit required by paragraph 
(b)(6)(i) of this section. The report must disclose the fund's fees and

[[Page 454]]

expenses in a manner consistent with applicable law in the state in 
which the bank maintains the fund. This report must contain a list of 
investments in the fund showing the cost and current market value of 
each investment, and a statement covering the period after the previous 
report showing the following (organized by type of investment):
    (A) A summary of purchases (with costs);
    (B) A summary of sales (with profit or loss and any other investment 
changes);
    (C) Income and disbursements; and
    (D) An appropriate notation of any investments in default.
    (iii) Limitation on representations. A bank may include in the 
financial report a description of the fund's value on previous dates, as 
well as its income and disbursements during previous accounting periods. 
A bank may not publish in the financial report any predictions or 
representations as to future performance. In addition, with respect to 
funds described in paragraph (a)(1) of this section, a bank may not 
publish the performance of individual funds other than those 
administered by the bank or its affiliates.
    (iv) Availability of the report. A bank administering a collective 
investment fund shall provide a copy of the financial report, or shall 
provide notice that a copy of the report is available upon request 
without charge, to each person who ordinarily would receive a regular 
periodic accounting with respect to each participating account. The bank 
may provide a copy of the financial report to prospective customers. In 
addition, the bank shall provide a copy of the report upon request to 
any person for a reasonable charge.
    (7) Advertising restriction. A bank may not advertise or publicize 
any fund authorized under paragraph (a)(1) of this section, except in 
connection with the advertisement of the general fiduciary services of 
the bank.
    (8) Self-dealing and conflicts of interest. A national bank 
administering a collective investment fund must comply with the 
following (in addition to Sec.  9.12):
    (i) Bank interests. A bank administering a collective investment 
fund may not have an interest in that fund other than in its fiduciary 
capacity. If, because of a creditor relationship or otherwise, the bank 
acquires an interest in a participating account, the participating 
account must be withdrawn on the next withdrawal date. However, a bank 
may invest assets that it holds as fiduciary for its own employees in a 
collective investment fund.
    (ii) Loans to participating accounts. A bank administering a 
collective investment fund may not make any loan on the security of a 
participant's interest in the fund. An unsecured advance to a fiduciary 
account participating in the fund until the time of the next valuation 
date does not constitute the acquisition of an interest in a 
participating account by the bank.
    (iii) Purchase of defaulted investments. A bank administering a 
collective investment fund may purchase for its own account any 
defaulted investment held by the fund (in lieu of segregating the 
investment in accordance with paragraph (b)(5)(v) of this section) if, 
in the judgment of the bank, the cost of segregating the investment is 
excessive in light of the market value of the investment. If a bank 
elects to purchase a defaulted investment, it shall do so at the greater 
of market value or the sum of cost and accrued unpaid interest.
    (9) Management fees. A bank administering a collective investment 
fund may charge a reasonable fund management fee only if:
    (i) The fee is permitted under applicable law (and complies with fee 
disclosure requirements, if any) in the state in which the bank 
maintains the fund; and
    (ii) The amount of the fee does not exceed an amount commensurate 
with the value of legitimate services of tangible benefit to the 
participating fiduciary accounts that would not have been provided to 
the accounts were they not invested in the fund.
    (10) Expenses. A bank administering a collective investment fund may 
charge reasonable expenses incurred in operating the collective 
investment fund, to the extent not prohibited by applicable law in the 
state in which the bank maintains the fund. However, a bank

[[Page 455]]

shall absorb the expenses of establishing or reorganizing a collective 
investment fund.
    (11) Prohibition against certificates. A bank administering a 
collective investment fund may not issue any certificate or other 
document representing a direct or indirect interest in the fund, except 
to provide a withdrawing account with an interest in a segregated 
investment.
    (12) Good faith mistakes. The OCC will not deem a bank's mistake 
made in good faith and in the exercise of due care in connection with 
the administration of a collective investment fund to be a violation of 
this part if, promptly after the discovery of the mistake, the bank 
takes whatever action is practicable under the circumstances to remedy 
the mistake.
    (c) Other collective investments. In addition to the collective 
investment funds authorized under paragraph (a) of this section, a 
national bank may collectively invest assets that it holds as fiduciary, 
to the extent not prohibited by applicable law, as follows:
    (1) Single loans or obligations. In the following loans or 
obligations, if the bank's only interest in the loans or obligations is 
its capacity as fiduciary:
    (i) A single real estate loan, a direct obligation of the United 
States, or an obligation fully guaranteed by the United States, or a 
single fixed amount security, obligation, or other property, either 
real, personal, or mixed, of a single issuer; or
    (ii) A variable amount note of a borrower of prime credit, if the 
bank uses the note solely for investment of funds held in its fiduciary 
accounts.
    (2) Mini-funds. In a fund maintained by the bank for the collective 
investment of cash balances received or held by a bank in its capacity 
as trustee, executor, administrator, guardian, or custodian under a 
uniform gifts to minors act, that the bank considers too small to be 
invested separately to advantage. The total assets in the fund must not 
exceed $1,500,000 and the number of participating accounts must not 
exceed 100. The OCC shall adjust this $1,500,000 threshold amount on 
January 1 of every year by the percentage increase in the Consumer Price 
Index for Urban Wage Earners and Clerical Workers (CPI-W) that was in 
effect on the preceding June 1, rounded to the nearest $100 increment, 
and make this adjusted amount available to the public.
    (3) Trust funds of corporations and closely-related settlors. In any 
investment specifically authorized by the instrument creating the 
fiduciary account or a court order, in the case of trusts created by a 
corporation, including its affiliates and subsidiaries, or by several 
individual settlors who are closely related.
    (4) Other authorized funds. In any collective investment authorized 
by applicable law, such as investments pursuant to a state pre-need 
funeral statute.
    (5) Special exemption funds. In any other manner described by the 
bank in a written plan approved by the OCC. \5\ In order to obtain a 
special exemption, a bank shall submit to the OCC a written plan that 
sets forth:
---------------------------------------------------------------------------

    \5\ Any institution that must comply with this section in order to 
receive favorable tax treatment under 26 U.S.C. 584 (namely, any 
corporate fiduciary) may seek OCC approval of special exemption funds in 
accordance with this paragraph (c)(5).
---------------------------------------------------------------------------

    (i) The reason that the proposed fund requires a special exemption;
    (ii) The provisions of the proposed fund that are inconsistent with 
paragraphs (a) and (b) of this section;
    (iii) The provisions of paragraph (b) of this section for which the 
bank seeks an exemption; and
    (iv) The manner in which the proposed fund addresses the rights and 
interests of participating accounts.

[61 FR 68554, Dec. 30, 1996, as amended at 68 FR 70131, Dec. 17, 2003; 
77 FR 61237, Oct. 9, 2012; 82 FR 8105, Jan. 23, 2017; 85 FR 16892, Mar. 
25, 2020; 85 FR 49232, Aug. 13, 2020; 86 FR 28241, May 26, 2021]



Sec.  9.20  Transfer agents.

    (a)(1) Registration. An application for registration under Section 
17A(c) of the Securities Exchange Act of 1934 of a transfer agent for 
which the OCC is the appropriate regulatory agency, as defined in 
section 3(a)(34)(B) of the Securities Exchange Act of 1934, shall be 
filed with the OCC on FFIEC Form TA-1, in accordance with the 
instructions contained therein. Registration shall become effective 30 
days after the date

[[Page 456]]

an application on Form TA-1 is filed unless the OCC accelerates, denies, 
or postpones such registration in accordance with section 17A(c) of the 
Securities Exchange Act of 1934.
    (2) Amendments to registration. Within 60 days following the date on 
which any information reported on Form TA-1 becomes inaccurate, 
misleading, or incomplete, the registrant shall file an amendment on 
FFIEC Form TA-1 correcting the inaccurate, misleading, or incomplete 
information. The filing of an amendment to an application for 
registration as a transfer agent under this section, which registration 
has not become effective, shall postpone the effective date of the 
registration for 30 days following the date on which the amendment is 
filed unless the OCC accelerates, denies, or postpones the registration 
in accordance with Section 17A(c) of the Securities Exchange Act of 
1934.
    (3) Withdrawal from registration. Any registered national bank 
transfer agent that ceases to engage in activities that require 
registration under Section 17A(c) of the Securities Exchange Act of 1934 
may file a written notice of withdrawal from registration with the OCC. 
Deregistration shall be effective 60 days after filing.
    (4) Reports. Every registration or amendment filed under this 
section shall constitute a report or application within the meaning of 
Sections 17, 17A(c), and 32(a) of the Securities Exchange Act of 1934.
    (b) Operational and reporting requirements. The rules adopted by the 
Securities and Exchange Commission pursuant to Section 17A of the 
Securities Exchange Act of 1934 prescribing operational and reporting 
requirements for transfer agents apply to the domestic activities of 
registered national bank transfer agents.

[73 FR 22242, Apr. 24, 2008]

                             Interpretations



Sec.  9.100  Acting as indenture trustee and creditor.

    With respect to a debt securities issuance, a national bank may act 
both as indenture trustee and as creditor until 90 days after default, 
if the bank maintains adequate controls to manage the potential 
conflicts of interest.



Sec.  9.101  Providing investment advice for a fee.

    (a) In general. The term ``fiduciary capacity'' at Sec.  9.2(e) is 
defined to include ``investment adviser, if the bank receives a fee for 
its investment advice.'' In other words, if a bank is providing 
investment advice for a fee, then it is acting in a fiduciary capacity. 
For purposes of that definition, ``investment adviser'' generally means 
a national bank that provides advice or recommendations concerning the 
purchase or sale of specific securities, such as a national bank engaged 
in portfolio advisory and management activities (including acting as 
investment adviser to a mutual fund). Additionally, the qualifying 
phrase ``if the bank receives a fee for its investment advice'' excludes 
those activities in which the investment advice is merely incidental to 
other services.
    (b) Specific activities--(1) Full-service brokerage. Engaging in 
full-service brokerage may entail providing investment advice for a fee, 
depending upon the commission structure and specific facts. Full-service 
brokerage involves investment advice for a fee if a non-bank broker 
engaged in that activity is considered an investment adviser under the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.).
    (2) Activities not involving investment advice for a fee. The 
following activities generally do not entail providing investment advice 
for a fee:
    (i) Financial advisory and counseling activities, including 
strategic planning of a financial nature, merger and acquisition 
advisory services, advisory and structuring services related to project 
finance transactions, and providing market economic information to 
customers in general;
    (ii) Client-directed investment activities (i.e., the bank has no 
investment discretion) where investment advice and research may be made 
available to the client, but the fee does not depend on the provision of 
investment advice;
    (iii) Investment advisory activities incidental to acting as a 
municipal securities dealer;

[[Page 457]]

    (iv) Real estate management services provided to other financial 
institutions;
    (v) Real estate consulting services, including acting as a finder in 
locating, analyzing, and making recommendations regarding the purchase 
of property, and making recommendations concerning the sale of property;
    (vi) Advisory activities concerning bridge loans;
    (vii) Advisory activities for homeowners' associations;
    (viii) Advisory activities concerning tax planning and structuring; 
and
    (ix) Investment advisory activities authorized by the OCC under 12 
U.S.C. 24(Seventh) as incidental to the business of banking.

[63 FR 6473, Feb. 9, 1998]



PART 10_MUNICIPAL SECURITIES DEALERS--Table of Contents



Sec.
10.1 Scope.
10.2 Filing requirements.

    Authority: 12 U.S.C. 93a, 481, 1462a, 1463, 1464(c), 1818, and 
5412(b)(2)(B); 15 U.S.C. 78o-4(c)(5) and 78q-78w.

    Source: 63 FR 29094, May 28, 1998, unless otherwise noted.



Sec.  10.1  Scope.

    This part applies to:
    (a) Any national bank or Federal savings association and separately 
identifiable department or division of a national bank or Federal 
savings association (collectively, a national bank or Federal savings 
association) that acts as a municipal securities dealer, as that term is 
defined in section 3(a)(30) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(30)); and
    (b) Any person who is associated or will be associated with a 
national bank or Federal savings association in the capacity of a 
municipal securities principal or a municipal securities representative, 
as those terms are defined in Rule G-3 of the Municipal Securities 
Rulemaking Board (MSRB). MSRB rules may be obtained at www.msrb.org.

[63 FR 29094, May 28, 1998, as amended at 73 FR 22242, Apr. 24, 2008; 82 
FR 8105, Jan. 23, 2017]



Sec.  10.2  Filing requirements.

    (a) A national bank or Federal savings association shall use Form 
MSD-4 (Uniform Application for Municipal Securities Principal or 
Municipal Securities Representative Associated with a Bank Municipal 
Securities Dealer) for obtaining the information required by MSRB Rule 
G-7(b) from a person identified in Sec.  10.1(b). A national bank or 
Federal savings association receiving a completed MSD-4 form from a 
person identified in Sec.  10.1(b) must submit this form to the OCC 
before permitting the person to be associated with it as a municipal 
securities principal or a municipal securities representative.
    (b) A national bank or Federal savings association shall submit Form 
MSD-5 (Uniform Termination Notice for Municipal Securities Principal or 
Municipal Securities Representative Associated with a Bank Municipal 
Securities Dealer) to the OCC within 30 days of terminating a person's 
association with the national bank or Federal savings association as a 
municipal securities principal or municipal securities representative.
    (c) Forms MSD-4 and MSD-5, with instructions, may be obtained at 
http://www.banknet.gov/.

[63 FR 29094, May 28, 1998, as amended at 63 FR 71343, Dec. 24, 1998; 79 
FR 15641, Mar. 21, 2014; 82 FR 8105, Jan. 23, 2017]



PART 11_SECURITIES EXCHANGE ACT DISCLOSURE RULES--Table of Contents



Sec.
11.1 Authority.
11.2 Reporting requirements for registered national banks and Federal 
          savings associations.
11.3 Filing requirements and inspection of documents.
11.4 Filing fees.

    Authority: 12 U.S.C. 93a, 1462a, 1463, 1464 and 5412(b)(2)(B); 15 
U.S.C. 78j-1(m), 78m, 78n, 78p, 78w, 78l, 7241, 7242, 7243, 7244, 7261, 
7262, 7264, and 7265.

    Source: 57 FR 46084, Oct. 7, 1992; 57 FR 54499, Nov. 19, 1992, 
unless otherwise noted.



Sec.  11.1  Authority.

    The Office of the Comptroller of the Currency (OCC) is vested with 
the powers, functions, and duties otherwise vested in the Securities and 
Exchange

[[Page 458]]

Commission (SEC) to administer and enforce the provisions of sections 
10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of the Securities 
Exchange Act of 1934, as amended (Exchange Act) (15 U.S.C. 78j-1(m), 
78l, 78m, 78n(a), 78n(c), 78n(d), 78n(f), and 78p), and sections 302, 
303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 
2002 (Sarbanes-Oxley Act), as amended (15 U.S.C. 7241, 7242, 7243, 7244, 
7261, 7262, 7264, and 7265), for national banks and Federal savings 
associations with one or more classes of securities subject to the 
registration provisions of sections 12(b) and (g) of the Exchange Act 
(registered national banks or registered Federal savings associations). 
Further, the OCC has general rulemaking authority under 12 U.S.C. 93a, 
1462a, 1463, and 1464, to promulgate rules and regulations concerning 
the activities of national banks and Federal savings associations.

[82 FR 8105, Jan. 23, 2017]



Sec.  11.2  Reporting requirements for registered national banks 
and Federal savings associations.

    (a) Filing, disclosure and other requirements--(1) General. Except 
as otherwise provided in this section, a national bank or Federal 
savings association whose securities are subject to registration 
pursuant to section 12(b) or section 12(g) of the Exchange Act (15 
U.S.C. 78l(b) and (g)) shall comply with the rules, regulations, and 
forms adopted by the SEC pursuant to:
    (i) Sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of 
the Exchange Act (15 U.S.C. 78j-1(m), 78l, 78m, 78n(a), (c), (d) and 
(f), and 78p); and
    (ii) Sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of the 
Sarbanes-Oxley Act (codified at 15 U.S.C. 7241, 7242, 7243, 7244, 7261, 
7262, 7264, and 7265).
    (2) [Reserved]
    (b) References to the Securities Exchange Commission, SEC, or 
Commission. Any references to the ``Securities and Exchange 
Commission,'' the ``SEC,'' or the ``Commission'' in the rules, 
regulations and forms described in paragraph (a)(1) of this section with 
respect to securities issued by registered national banks or registered 
Federal savings associations shall be deemed to refer to the OCC unless 
the context otherwise requires.
    (c) References to registration requirements. For national banks and 
Federal savings associations, any references to registration 
requirements under the Securities Act of 1933 and its accompanying rules 
in the rules, regulations, and forms described in paragraph (a)(1) of 
this section mean the registration requirements in 12 CFR part 16.
    (d) Emerging growth company eligibility--(1) General. A national 
bank or Federal savings association that meets the criteria to qualify 
as an emerging growth company under section 3(a)(80) of the Exchange Act 
(15 U.S.C. 78c(a)(80)) shall be eligible for treatment as an emerging 
growth company for purposes of any rule, regulation or form described in 
paragraph (a)(1) of this section, except as provided in paragraph (d)(3) 
of this section.
    (2) Opt-in right. With respect to an exemption provided to a 
national bank or Federal savings association that is an emerging growth 
company under this part, the bank or savings association may choose to 
forgo such exemption and instead comply with the requirements that apply 
to a bank or savings association that is not an emerging growth company.
    (3) Exclusions. A national bank or Federal savings association that 
otherwise meets the definition of emerging growth company in section 
3(a)(80) of the Exchange Act (15 U.S.C. 78c(a)(80)) shall not be 
considered an emerging growth company for purposes of this part if:
    (i) The first sale of its common equity securities pursuant to an 
effective registration statement or offering circular occurred on or 
before December 8, 2011; or
    (ii) It has reached the last day of its fiscal year following the 
fifth anniversary of the date of the first sale of its common equity 
securities pursuant to an effective registration statement or offering 
circular.

[82 FR 8105, Jan. 23, 2017]



Sec.  11.3  Filing requirements and inspection of documents.

    (a) Filing requirements--(1)(i) In general. Except as otherwise 
provided in this section, all papers required to be

[[Page 459]]

filed with the OCC pursuant to the Exchange Act or regulations 
thereunder shall be submitted to the OCC's Law Department of the OCC 
electronically at http://www.banknet.gov/. Documents may be signed 
electronically using the signature provision in SEC Rule 12b-11 (17 CFR 
240.12b-11).
    (ii) Electronic filing exception. If a national bank or Federal 
savings association experiences unanticipated technical difficulties 
preventing the timely preparation and submission of an electronic 
filing, other than the filings described in paragraph (a)(3)(ii) of this 
section, the bank may, upon notice to the OCC's Law Department, file the 
subject filing in paper format no later than one business day after the 
date on which the filing was to be made. Paper filings should be 
submitted to the OCC's Law Department, Office of the Comptroller of the 
Currency at the address provided at www.occ.gov.
    (2) Statements filed pursuant to section 16(a) of the 1934 Act. 
Statements required under section 16(a) of the 1934 Act shall be filed 
electronically, as directed by the OCC.
    (3) Date of filing--(i) General. The date of filing is the date the 
OCC receives the filing, provided the person, bank, or savings 
association submitting the filing has complied with all applicable 
requirements. An electronic filing that is submitted on a business day 
by direct transmission commencing on or before 5:30 p.m. Eastern 
Standard or Daylight Savings Time, whichever is currently in effect, 
would be deemed received by the OCC on the same business day. An 
electronic filing that is submitted by direct transmission commencing 
after 5:30 p.m. Eastern Standard or Daylight Savings Time, whichever is 
currently in effect, or on a Saturday, Sunday, or Federal holiday, would 
be deemed received by the OCC on the next business day.
    (ii) Beneficial ownership filings. An electronic filing of a 
statement required under section 16(a) of the 1934 Act that is submitted 
by direct transmission on or before 10 p.m. Eastern Standard Time or 
Eastern Daylight Savings Time, whichever is currently in effect, shall 
be deemed filed on the same business day.
    (iii) Adjustment of filing date. If an electronic filer in good 
faith attempts to file a document pursuant to this part in a timely 
manner but the filing is delayed due to technical difficulties beyond 
the electronic filer's control, the electronic filer may request that 
the OCC adjust the filing date of such document. The OCC may grant the 
request if it appears that such adjustment is appropriate and consistent 
with the public interest and the protection of investors.
    (b) Copies of registration statements, definitive proxy solicitation 
materials, reports, and annual reports to shareholders required by this 
part (exclusive of exhibits) are available from the Disclosure Officer, 
Communications Division, Office of the Comptroller of the Currency, at 
the address listed on www.occ.gov.

[60 FR 57332, Nov. 15, 1995, as amended at 68 FR 54984, Sept. 22, 2003; 
70 FR 46404, Aug. 10, 2005; 79 FR 15641, Mar. 21, 2014; 82 FR 8106, Jan. 
23, 2017; 85 FR 42640, July 14, 2020]



Sec.  11.4  Filing fees.

    (a) The OCC may require filing fees to accompany certain filings 
made under this part before it will accept the filing. The OCC provides 
an applicable fee schedule for such filings in the ``Notice of 
Comptroller of the Currency Fees'' described in 12 CFR 8.8.
    (b) Fees must be paid by check payable to the Comptroller of the 
Currency or by other means acceptable to the OCC.

[57 FR 46084, Oct. 7, 1992; 57 FR 54499, Nov. 19, 1992, as amended at 60 
FR 57332, Nov. 15, 1995; 82 FR 8106, Jan. 23, 2017]



PART 12_RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR 
SECURITIES TRANSACTIONS--Table of Contents



Sec.
12.1 Authority, purpose, and scope.
12.2 Definitions.
12.3 Recordkeeping.
12.4 Content and time of notification.
12.5 Notification by agreement; alternative forms and times of 
          notification.
12.6 Fees.
12.7 Securities trading policies and procedures.
12.8 Waivers.
12.9 Settlement of securities transactions.


[[Page 460]]


    Authority: 12 U.S.C. 24, 92a, and 93a.

    Source: 61 FR 63965, Dec. 2, 1996, unless otherwise noted.



Sec.  12.1  Authority, purpose, and scope.

    (a) Authority. This part is issued pursuant to 12 U.S.C. 24, 92a, 
and 93a.
    (b) Purpose. This part establishes rules, policies, and procedures 
applicable to recordkeeping and confirmation requirements for certain 
securities transactions effected by national banks for customers.
    (c) Scope--(1) General. Any security transaction effected for a 
customer by a national bank is subject to this part, except as provided 
by paragraph (c)(2) of this section. This part applies to a national 
bank effecting transactions in government securities. This part also 
applies to municipal securities transactions by a national bank that is 
not registered as a ``municipal securities dealer'' with the Securities 
and Exchange Commission (SEC). See 15 U.S.C. 78c(a)(30) and 78o-4. This 
part, as well as 12 CFR part 9, applies to securities transactions 
effected by a national bank as fiduciary.
    (2) Exceptions--(i) Small number of transactions. The requirements 
of Sec. Sec.  12.3(a)(2) through (4) and 12.7(a)(1) through (3) do not 
apply to a national bank having an average of fewer than 200 securities 
transactions per year for customers over the prior three calendar year 
period. The calculation of this average does not include transactions in 
government securities.
    (ii) Government securities. The recordkeeping requirements of Sec.  
12.3 do not apply to national banks effecting fewer than 500 government 
securities brokerage transactions per year. This exception does not 
apply to government securities dealer transactions by national banks. 
See 17 CFR 404.4(a).
    (iii) Municipal securities. This part does not apply to transactions 
in municipal securities conducted by a national bank registered with the 
SEC as a ``municipal securities dealer'' as defined in title 15 U.S.C. 
78c(a)(30). See 15 U.S.C. 78o-4.
    (iv) Foreign branches. This part does not apply to securities 
transactions conducted by a foreign branch of a national bank.
    (v) Transactions effected by registered broker/dealers. This part 
does not apply to securities transactions effected by a broker or dealer 
registered with the SEC where the SEC-registered broker or dealer 
directly provides the customer a confirmation; including, transactions 
effected by a national bank employee when acting as an employee of an 
SEC-registered broker/dealer.
    (3) Safe and sound operations. Notwithstanding paragraph (c)(2) of 
this section, every national bank conducting securities transactions for 
customers shall maintain effective systems of records and controls 
regarding their customer securities transactions to ensure safe and 
sound operations. The systems maintained must clearly and accurately 
reflect appropriate information and provide an adequate basis for an 
audit.

[61 FR 63965, Dec. 2, 1996, as amended at 82 FR 8106, Jan. 23, 2017]



Sec.  12.2  Definitions.

    (a) Asset-backed security means a security that is primarily 
serviced by the cashflows of a discrete pool of receivables or other 
financial assets, either fixed or revolving, that by their terms convert 
into cash within a finite time period plus any rights or other assets 
designed to assure the servicing or timely distribution of proceeds to 
the security holders.
    (b) Collective investment fund means any fund established pursuant 
to 12 CFR 9.18.
    (c) Completion of the transaction means:
    (1) In the case of a customer who purchases a security through or 
from a national bank, except as provided in paragraph (c)(2) of this 
section, the time when the customer pays the bank any part of the 
purchase price, or, if payment is made by a bookkeeping entry, the time 
when the bank makes the bookkeeping entry for any part of the purchase 
price;
    (2) In the case of a customer who purchases a security through or 
from a national bank and who makes payment for the security prior to the 
time when payment is requested or notification is given that payment is 
due, the time when the bank delivers the security to or into the account 
of the customer;

[[Page 461]]

    (3) In the case of a customer who sells a security through or to a 
national bank, except as provided in paragraph (c)(4) of this section, 
if the security is not in the custody of the bank at the time of sale, 
the time when the security is delivered to the bank, and if the security 
is in the custody of the bank at the time of sale, the time when the 
bank transfers the security from the account of the customer;
    (4) In the case of a customer who sells a security through or to a 
national bank and who delivers the security to the bank prior to the 
time when delivery is requested or notification is given that delivery 
is due, the time when the bank makes payment to or into the account of 
the customer.
    (d) Crossing of buy and sell orders means a security transaction in 
which the same bank acts as agent for both the buyer and the seller.
    (e) Customer means any person or account, including any agency, 
trust, estate, guardianship, or other fiduciary account for which a 
national bank makes or participates in making the purchase or sale of 
securities, but does not include a broker, dealer, bank acting as a 
broker or dealer, bank acting as the fiduciary of an account, bank as 
trustee acting as shareholder of record for the purchase or sale of 
securities, or issuer of securities that are the subject of the 
transaction.
    (f) Debt security means any security, such as a bond, debenture, 
note, or any other similar instrument that evidences a liability of the 
issuer (including any security of this type that is convertible into 
stock or a similar security) and fractional or participation interests 
in one or more of any of the foregoing. This definition does not include 
securities issued by an investment company registered under the 
Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq.
    (g) Government security means:
    (1) A security that is a direct obligation of, or obligation 
guaranteed as to principal and interest by, the United States;
    (2) A security that is issued or guaranteed by a corporation in 
which the United States has a direct or indirect interest and which is 
designated by the Secretary of the Treasury for exemption as necessary 
or appropriate in the public interest or for the protection of 
investors;
    (3) A security issued or guaranteed as to principal and interest by 
any corporation whose securities are designated, by statute specifically 
naming the corporation, to constitute exempt securities within the 
meaning of the laws administered by the SEC; or
    (4) Any put, call, straddle, option, or privilege on a security 
described in paragraph (g)(1), (2), or (3) of this section, other than a 
put, call, straddle, option, or privilege:
    (i) That is traded on one or more national securities exchanges; or
    (ii) For which quotations are disseminated through an automated 
quotation system operated by a registered securities association.
    (h) Investment discretion means that, with respect to an account, a 
bank directly or indirectly:
    (1) Is authorized to determine what securities or other property 
shall be purchased or sold by or for the account; or
    (2) Makes decisions as to what securities or other property shall be 
purchased or sold by or for the account even though some other person 
may have responsibility for these investment decisions.
    (i) Municipal security means:
    (1) A security that is a direct obligation of, or an obligation 
guaranteed as to principal or interest by, a State or any political 
subdivision, or any agency or instrumentality of a State or any 
political subdivision;
    (2) A security that is a direct obligation of, or an obligation 
guaranteed as to principal or interest by, any municipal corporate 
instrumentality of one or more States; or
    (3) A security that is an industrial development bond.
    (j) Periodic plan means:
    (1) A written authorization for a national bank to act as agent to 
purchase or sell for a customer a specific security or securities, in a 
specific amount (calculated in security units or dollars) or to the 
extent of dividends and funds available, at specific time intervals, and 
setting forth the commission or charges to be paid by the customer or 
the manner of calculating them. These

[[Page 462]]

plans include dividend reinvestment plans, automatic investment plans, 
and employee stock purchase plans.
    (2) Any prearranged, automatic transfer or ``sweep'' of funds from a 
deposit account to purchase a security, or any prearranged, automatic 
redemption or sale of a security with the funds being transferred into a 
deposit account (including cash management sweep services).
    (k) Security: (1) Means any note, stock, treasury stock, bond, 
debenture, certificate of interest or participation in any profit-
sharing agreement or in any oil, gas, or other mineral royalty or lease, 
any collateral-trust certificate, preorganization certificate or 
subscription, transferable share, investment contract, voting-trust 
certificate, and any put, call, straddle, option, or privilege on any 
security or group or index of securities (including any interest therein 
or based on the value thereof), or, in general, any instrument commonly 
known as a ``security''; or any certificate of interest or participation 
in, temporary or interim certificate for, receipt for, or warrant or 
right to subscribe to or purchase, any of the foregoing;
    (2) Does not mean currency; any note, draft, bill of exchange, or 
banker's acceptance which has a maturity at the time of issuance not 
exceeding nine months, exclusive of days of grace, or any renewal 
thereof, the maturity of which is likewise limited; a deposit or share 
account in a Federal or State chartered depository institution; a loan 
participation; a letter of credit or other form of bank indebtedness 
incurred in the ordinary course of business; units of a collective 
investment fund; interests in a variable amount note in accordance with 
12 CFR 9.18; U.S. Savings Bonds; or any other instrument the OCC 
determines does not constitute a security for purposes of this part.

[61 FR 63965, Dec. 2, 1996, as amended at 82 FR 8106, Jan. 23, 2017]



Sec.  12.3  Recordkeeping.

    (a) General rule. A national bank effecting securities transactions 
for customers shall maintain the following records for at least three 
years:
    (1) Chronological records. An itemized daily record of each purchase 
and sale of securities maintained in chronological order, and including:
    (i) Account or customer name for which each transaction was 
effected;
    (ii) Description of the securities;
    (iii) Unit and aggregate purchase or sale price;
    (iv) Trade date; and
    (v) Name or other designation of the broker/dealer or other person 
from whom the securities were purchased or to whom the securities were 
sold;
    (2) Account records. Account records for each customer, reflecting:
    (i) Purchases and sales of securities;
    (ii) Receipts and deliveries of securities;
    (iii) Receipts and disbursements of cash; and
    (iv) Other debits and credits pertaining to transactions in 
securities;
    (3) Memorandum order. A separate memorandum (order ticket) of each 
order to purchase or sell securities (whether executed or canceled), 
including:
    (i) Account or customer name for which the transaction was effected;
    (ii) Type of order (market order, limit order, or subject to special 
instructions);
    (iii) Time the trader or other bank employee responsible for 
effecting the transaction received the order;
    (iv) Time the trader placed the order with the broker/dealer, or if 
there was no broker/dealer, time the order was executed or canceled;
    (v) Price at which the order was executed; and
    (vi) Name of the broker/dealer utilized;
    (4) Record of broker/dealers. A record of all broker/dealers 
selected by the bank to effect securities transactions and the amount of 
commissions paid or allocated to each broker during the calendar year; 
and
    (5) Notifications. A copy of the written notification required by 
Sec. Sec.  12.4 and 12.5.
    (b) Manner of maintenance. The records required by this section must

[[Page 463]]

clearly and accurately reflect the information required and provide an 
adequate basis for the audit of the information. Record maintenance may 
include the use of automated or electronic records provided the records 
are easily retrievable, readily available for inspection, and capable of 
being reproduced in a hard copy. A national bank may contract with a 
third-party service provider to maintain the records, provided that the 
bank maintains effective oversight of the third-party service provider 
to ensure the records meet the requirements of this section.

[61 FR 63965, Dec. 2, 1996, as amended at 82 FR 8106, Jan. 23, 2017]



Sec.  12.4  Content and time of notification.

    Unless a national bank elects to provide notification by one of the 
means specified in Sec.  12.5, a national bank effecting a securities 
transaction for a customer shall give or send to the customer either of 
the following types of notifications at or before completion of the 
transaction or, if the bank uses a registered broker/dealer's 
confirmation, within one business day from the bank's receipt of the 
registered broker/dealer's confirmation:
    (a) Written notification. A written notification disclosing:
    (1) Name of the bank;
    (2) Name of the customer;
    (3) Capacity in which the bank acts (i.e., as agent for the 
customer, as agent for both the customer and some other person, as 
principal for its own account, or in any other capacity);
    (4) Date and time of execution, or a statement that the bank will 
furnish the time of execution within a reasonable time upon written 
request of the customer, and the identity, price, and number of shares 
or units (or principal amount in the case of debt securities) of the 
security purchased or sold by the customer;
    (5) Amount of any remuneration that the customer has provided or is 
to provide any broker/dealer, directly or indirectly, in connection with 
the transaction;
    (6)(i) Amount of any remuneration that the bank has received or will 
receive from the customer, and the source and amount of any other 
remuneration that the bank has received or will receive in connection 
with the transaction; unless:
    (A) The bank and its customer have determined remuneration pursuant 
to a written agreement; or
    (B) In the case of government securities and municipal securities, 
the bank received the remuneration in other than an agency transaction.
    (ii) If the bank elects not to disclose the source and amount of 
remuneration it has or will receive from a party other than the customer 
pursuant to paragraph (a)(6)(i) of this section, the written 
notification must disclose whether the bank has received or will receive 
remuneration from a party other than the customer, and that the bank 
will furnish within a reasonable time the source and amount of this 
remuneration upon written request of the customer. This election is not 
available, however, if, with respect to a purchase, the bank was 
participating in a distribution of that security; or, with respect to a 
sale, the bank was participating in a tender offer for that security;
    (7) Name of the registered broker/dealer utilized; or where there is 
no registered broker/dealer, the name of the person from whom the 
security was purchased or to whom the security was sold, or a statement 
that the bank will furnish this information within a reasonable time 
upon written request from the customer;
    (8) In the case of any transaction in a debt security subject to 
redemption before maturity, a statement to the effect that the debt 
security may be redeemed in whole or in part before maturity, that the 
redemption could affect the yield represented and that additional 
information is available upon request;
    (9) In the case of a transaction in a debt security effected 
exclusively on the basis of a dollar price:
    (i) The dollar price at which the transaction was effected; and
    (ii) The yield to maturity calculated from the dollar price, unless 
the transaction is for a debt security that either:
    (A) Has a maturity date that may be extended by the issuer thereof, 
with a variable interest payable thereon; or

[[Page 464]]

    (B) Is an asset-backed security that represents an interest in or is 
secured by a pool of receivables or other financial assets that 
continuously are subject to prepayment;
    (10) In the case of a transaction in a debt security effected on the 
basis of yield:
    (i) The yield at which the transaction was effected, including the 
percentage amount and its characterization (e.g., current yield, yield 
to maturity, or yield to call) and if effected at yield to call, the 
type of call, the call date, and call price;
    (ii) The dollar price calculated from the yield at which the 
transaction was effected; and
    (iii) If effected on a basis other than yield to maturity and the 
yield to maturity is lower than the represented yield, the yield to 
maturity as well as the represented yield, unless the transaction is for 
a debt security that either:
    (A) Has a maturity date that may be extended by the issuer thereof, 
with a variable interest rate payable thereon; or
    (B) Is an asset-backed security that represents an interest in or is 
secured by a pool of receivables or other financial assets that 
continuously are subject to prepayment;
    (11) In the case of a transaction in a debt security that is an 
asset-backed security, which represents an interest in or is secured by 
a pool of receivables or other financial assets that continuously are 
subject to prepayment, a statement indicating that the actual yield of 
the asset-backed security may vary according to the rate at which the 
underlying receivables or other financial assets are prepaid and a 
statement that information concerning the factors that affect yield 
(including at a minimum estimated yield, weighted average life, and the 
prepayment assumptions underlying yield) will be furnished upon written 
request of the customer; and
    (12) In the case of a transaction in a debt security, other than a 
government security, that the security is unrated by a nationally 
recognized statistical rating organization, if that is the case; or
    (b) Copy of the registered broker/dealer's confirmation. A copy of 
the confirmation of a registered broker/dealer relating to the 
securities transaction, which the bank may direct the registered broker/
dealer to send directly to the customer; and, if the customer or any 
other source will provide remuneration to the bank in connection with 
the transaction and a written agreement between the bank and the 
customer does not determine the remuneration, a statement of the source 
and amount of any remuneration that the customer or any other source is 
to provide the bank.

[61 FR 63965, Dec. 2, 1996, as amended at 82 FR 8106, Jan. 23, 2017]



Sec.  12.5  Notification by agreement; alternative forms and times 
of notification.

    A national bank may elect to use the following notification 
procedures as an alternative to complying with Sec.  12.4:
    (a) Notification by agreement. A national bank effecting a 
securities transaction for an account in which the bank does not 
exercise investment discretion shall give or send written notification 
at the time and in the form agreed to in writing by the bank and 
customer, provided that the agreement makes clear the customer's right 
to receive the written notification pursuant to Sec.  12.4 (a) or (b) at 
no additional cost to the customer.
    (b) Trust transactions. A national bank effecting a securities 
transaction for an account in which the bank exercises investment 
discretion other than in an agency capacity shall give or send written 
notification within a reasonable time if a person having the power to 
terminate the account, or, if there is no such person, any person 
holding a vested beneficial interest in the account, requests written 
notification pursuant to Sec.  12.4 (a) or (b). Otherwise, notification 
is not required.
    (c) Agency transactions. (1) A national bank effecting a securities 
transaction for an account in which the bank exercises investment 
discretion in an agency capacity shall give or send, not less than once 
every three months, an itemized statement to each customer that 
specifies the funds and securities in the custody or possession of the

[[Page 465]]

bank at the end of the period and all debits, credits and transactions 
in the customer's account during the period.
    (2) If requested by the customer, the bank shall give or send 
written notification to the customer pursuant to Sec.  12.4 (a) or (b) 
within a reasonable time.
    (d) Collective investment fund transactions. A national bank 
effecting a securities transaction for a collective investment fund 
shall follow 12 CFR 9.18.
    (e) Periodic plan transactions. (1) A national bank effecting a 
securities transaction for a periodic plan (except for a cash management 
sweep service) shall give or send to its customer not less than once 
every three months, a written statement showing:
    (i) The customer's funds and securities in the custody or possession 
of the bank;
    (ii) All service charges and commissions paid by the customer in 
connection with the transaction; and
    (iii) All other debits and credits of the customer's account 
involved in the transaction.
    (2) A national bank effecting a securities transaction for a cash 
management sweep service or other periodic plan as defined in Sec.  
12.2(j)(2) shall give or send its customer a written statement, in the 
same form as under paragraph (e)(1) of this section, for each month in 
which a purchase or sale of a security takes place in a deposit account 
and not less than once every three months if there are no securities 
transactions in the account, subject to any other applicable laws and 
regulations.
    (3) Upon written request of the customer, the bank shall give or 
send the information described in Sec.  12.4 (a) or (b), except that the 
bank need not provide to the customer any information relating to 
remuneration paid in connection with the transaction when the 
remuneration is paid by a source other than the customer.



Sec.  12.6  Fees.

    A national bank may charge a reasonable fee for providing 
notification pursuant to Sec.  12.5(b), (c), and (e). A national bank 
may not charge a fee for providing notification pursuant to Sec.  12.4 
or Sec.  12.5 (a) and (d).



Sec.  12.7  Securities trading policies and procedures.

    (a) Policies and procedures; reports of securities trading. A 
national bank effecting securities transactions for customers shall 
maintain and adhere to policies and procedures that:
    (1) Assign responsibility for supervision of all officers or 
employees who:
    (i) Transmit orders to or place orders with registered broker/
dealers;
    (ii) Execute transactions in securities for customers; or
    (iii) Process orders for notification or settlement purposes, or 
perform other back office functions with respect to securities 
transactions effected for customers. Policies and procedures for 
personnel described in this paragraph (a)(1)(iii) must provide for 
supervision and reporting lines that are separate from supervision and 
reporting lines for personnel described in paragraphs (a)(1) (i) and 
(ii) of this section;
    (2) Provide for the fair and equitable allocation of securities and 
prices to accounts when the bank receives orders for the same security 
at approximately the same time and places the orders for execution 
either individually or in combination;
    (3) Provide for the crossing of buy and sell orders on a fair and 
equitable basis to the parties to the transaction, where permissible 
under applicable law; and
    (4) Require bank officers and employees to report to the bank, 
within the deadline specified in SEC rule 17j-1 (17 CFR 270.17j-1) for 
quarterly transaction reports, all personal transactions in securities 
made by them or on their behalf in which they have a beneficial 
interest, if the officers and employees:
    (i) Make investment recommendations or decisions for the accounts of 
customers;
    (ii) Participate in the determination of the recommendations or 
decisions; or
    (iii) In connection with their duties, obtain information concerning 
which securities are purchased, sold, or recommended for purchase or 
sale by the bank.
    (b) Required information. The report required under paragraph (a)(4) 
of this section must contain the following information:

[[Page 466]]

    (1) The date of the transaction, the title and number of shares, and 
the principal amount of each security involved;
    (2) The nature of the transaction (i.e. purchase, sale, or other 
type of acquisition or disposition);
    (3) The price at which the transaction was effected; and
    (4) The name of the registered broker, registered dealer, or bank 
with or through whom the transaction was effected.
    (c) Report not required. This section does not require a bank 
officer or employee to report transactions if:
    (1) The officer or employee has no direct or indirect influence or 
control over the transaction;
    (2) The transaction is in mutual fund shares;
    (3) The transaction is in government securities; or
    (4) The transactions involve an aggregate amount of purchases and 
sales per officer or employee of $10,000 or less during the calendar 
quarter.
    (d) Additional reporting requirement. A national bank that acts as 
an investment adviser to an investment company is subject to the 
requirements of SEC Rule 17j-1 (17 CFR 270.17j-1) issued under the 
Investment Company Act of 1940. SEC Rule 17j-1 requires an ``access 
person'' of the investment adviser to report certain personal securities 
transactions to the investment adviser for review by the Securities and 
Exchange Commission. ``Access person'' includes directors, officers, and 
certain employees of the investment adviser. The reporting requirement 
under paragraph (a)(4) of this section is a separate requirement from 
any applicable requirements under SEC Rule 17j-1. However, an ``access 
person'' required to file a report with a national bank pursuant to SEC 
Rule 17j-1 need not file a separate report under paragraph (a)(4) of 
this section if the required information is the same.

[61 FR 63965, Dec. 2, 1996, as amended at 73 FR 22243, Apr. 24, 2008; 82 
FR 8107, Jan. 23, 2017]



Sec.  12.8  Waivers.

    A national bank may file a written request with the OCC for waiver 
of one or more of the requirements set forth in Sec. Sec.  12.2 through 
12.7, either in whole or in part. The OCC may grant a waiver from the 
requirements of this part to any national bank, or any class of national 
banks, with regard to a specific transaction or a specific class of 
transactions.



Sec.  12.9  Settlement of securities transactions.

    (a) All contracts effected or entered into by a national bank for 
the purchase or sale of a security (other than an exempted security as 
defined in 15 U.S.C. 78c(a)(12), government security, municipal 
security, commercial paper, bankers' acceptances, or commercial bills) 
shall provide for completion of the transaction within the number of 
business days in the standard settlement cycle followed by registered 
broker dealers in the United States, unless otherwise agreed to by the 
parties at the time of the transaction. The number of business days in 
the standard settlement cycle shall be determined by reference to 
paragraph (a) of SEC Rule 15c6-1, 17 CFR 240.15c6-1(a).
    (b) Paragraphs (a) and (c) of this section do not apply to 
contracts:
    (1) For the purchase or sale of limited partnership interests that 
are not listed on an exchange or for which quotations are not 
disseminated through an automated quotation system of a registered 
securities association;
    (2) For the purchase or sale of securities that the SEC may from 
time to time, taking into account then existing market practices, exempt 
by order from the requirements of paragraph (a) of SEC Rule 15c6-1, 17 
CFR 240.15c6-1(a), either unconditionally or on specified terms and 
conditions, if the SEC determines that an exemption is consistent with 
the public interest and the protection of investors.
    (c) Paragraph (a) of this section does not apply to contracts for 
the sale for cash of securities that are priced after 4:30 p.m. Eastern 
time on the date the securities are priced and that are sold by an 
issuer to an underwriter pursuant to a firm commitment underwritten 
offering registered under the Securities Act of 1933, 15 U.S.C. 77a et 
seq., or sold to an initial purchaser by

[[Page 467]]

a national bank participating in the offering. A national bank shall not 
effect or enter into a contract for the purchase or sale of the 
securities that provides for payment of funds and delivery of securities 
later than the fourth business day after the date of the contract unless 
otherwise expressly agreed to by the parties at the time of the 
transaction.
    (d) For purposes of paragraphs (a) and (c) of this section, the 
parties to a contract are deemed to have expressly agreed to an 
alternate date for payment of funds and delivery of securities at the 
time of the transaction for a contract for the sale for cash of 
securities pursuant to a firm commitment offering if the managing 
underwriter and the issuer have agreed to the date for all securities 
sold pursuant to the offering and the parties to the contract have not 
expressly agreed to another date for payment of funds and delivery of 
securities at the time of the transaction.

[61 FR 63965, Dec. 2, 1996, as amended at 82 FR 8107, Jan. 23, 2017; 83 
FR 26349, June 7, 2018]



PART 13_GOVERNMENT SECURITIES SALES PRACTICES--Table of Contents



Sec.
13.1 Scope.
13.2 Definitions.
13.3 Business conduct.
13.4 Recommendations to customers.
13.5 Customer information.

                             Interpretations

13.100 Obligations concerning institutional customers.

    Authority: 12 U.S.C. 1 et seq., and 93a; 15 U.S.C. 78o-5.

    Source: 62 FR 13283, Mar. 19, 1997, unless otherwise noted.



Sec.  13.1  Scope.

    This part applies to national banks that have filed notice as, or 
are required to file notice as, government securities brokers or dealers 
pursuant to section 15C of the Securities Exchange Act (15 U.S.C. 78o-5) 
and Department of the Treasury rules under section 15C (17 CFR 400.1(d) 
and part 401).



Sec.  13.2  Definitions.

    (a) Bank that is a government securities broker or dealer means a 
national bank that has filed notice, or is required to file notice, as a 
government securities broker or dealer pursuant to section 15C of the 
Securities Exchange Act (15 U.S.C. 78o-5) and Department of the Treasury 
rules under section 15C (17 CFR 400.1(d) and part 401).
    (b) Customer does not include a broker or dealer or a government 
securities broker or dealer.
    (c) Government security has the same meaning as this term has in 
section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(42)).
    (d) Non-institutional customer means any customer other than:
    (1) A bank, savings association, insurance company, or registered 
investment company;
    (2) An investment adviser registered under section 203 of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-3); or
    (3) Any entity (whether a natural person, corporation, partnership, 
trust, or otherwise) with total assets of at least $50 million.



Sec.  13.3  Business conduct.

    A bank that is a government securities broker or dealer shall 
observe high standards of commercial honor and just and equitable 
principles of trade in the conduct of its business as a government 
securities broker or dealer.



Sec.  13.4  Recommendations to customers.

    In recommending to a customer the purchase, sale or exchange of a 
government security, a bank that is a government securities broker or 
dealer shall have reasonable grounds for believing that the 
recommendation is suitable for the customer upon the basis of the facts, 
if any, disclosed by the customer as to the customer's other security 
holdings and as to the customer's financial situation and needs.



Sec.  13.5  Customer information.

    Prior to the execution of a transaction recommended to a non-
institutional customer, a bank that is a government securities broker or 
dealer shall make reasonable efforts to obtain information concerning:

[[Page 468]]

    (a) The customer's financial status;
    (b) The customer's tax status;
    (c) The customer's investment objectives; and
    (d) Such other information used or considered to be reasonable by 
the bank in making recommendations to the customer.

                             Interpretations



Sec.  13.100  Obligations concerning institutional customers.

    (a) As a result of broadened authority provided by the Government 
Securities Act Amendments of 1993 (15 U.S.C. 78o-3 and 78o-5), the OCC 
is adopting sales practice rules for the government securities market, a 
market with a particularly broad institutional component. Accordingly, 
the OCC believes it is appropriate to provide further guidance to banks 
on their suitability obligations when making recommendations to 
institutional customers.
    (b) The OCC's suitability rule (Sec.  13.4) is fundamental to fair 
dealing and is intended to promote ethical sales practices and high 
standards of professional conduct. Banks' responsibilities include 
having a reasonable basis for recommending a particular security or 
strategy, as well as having reasonable grounds for believing the 
recommendation is suitable for the customer to whom it is made. Banks 
are expected to meet the same high standards of competence, 
professionalism, and good faith regardless of the financial 
circumstances of the customer.
    (c) In recommending to a customer the purchase, sale, or exchange of 
any government security, the bank shall have reasonable grounds for 
believing that the recommendation is suitable for the customer upon the 
basis of the facts, if any, disclosed by the customer as to the 
customer's other security holdings and financial situation and needs.
    (d) The interpretation in this section concerns only the manner in 
which a bank determines that a recommendation is suitable for a 
particular institutional customer. The manner in which a bank fulfills 
this suitability obligation will vary, depending on the nature of the 
customer and the specific transaction. Accordingly, the interpretation 
in this section deals only with guidance regarding how a bank may 
fulfill customer-specific suitability obligations under Sec.  13.4. \1\
---------------------------------------------------------------------------

    \1\ The interpretation in this section does not address the 
obligation related to suitability that requires that a bank have ``* * * 
a `reasonable basis' to believe that the recommendation could be 
suitable for at least some customers.'' In the Matter of the Application 
of F.J. Kaufman and Company of Virginia and Frederick J. Kaufman, Jr., 
50 SEC 164 (1989).
---------------------------------------------------------------------------

    (e) While it is difficult to define in advance the scope of a bank's 
suitability obligation with respect to a specific institutional customer 
transaction recommended by a bank, the OCC has identified certain 
factors that may be relevant when considering compliance with Sec.  
13.4. These factors are not intended to be requirements or the only 
factors to be considered but are offered merely as guidance in 
determining the scope of a bank's suitability obligations.
    (f) The two most important considerations in determining the scope 
of a bank's suitability obligations in making recommendations to an 
institutional customer are the customer's capability to evaluate 
investment risk independently and the extent to which the customer is 
exercising independent judgement in evaluating a bank's recommendation. 
A bank must determine, based on the information available to it, the 
customer's capability to evaluate investment risk. In some cases, the 
bank may conclude that the customer is not capable of making independent 
investment decisions in general. In other cases, the institutional 
customer may have general capability, but may not be able to understand 
a particular type of instrument or its risk. This is more likely to 
arise with relatively new types of instruments, or those with 
significantly different risk or volatility characteristics than other 
investments generally made by the institution. If a customer is either 
generally not capable of evaluating investment risk or lacks sufficient 
capability to evaluate the particular product, the scope of a bank's 
customer-specific obligations under Sec.  13.4 would not be diminished 
by the fact that the bank was dealing with an institutional customer.

[[Page 469]]

On the other hand, the fact that a customer initially needed help 
understanding a potential investment need not necessarily imply that the 
customer did not ultimately develop an understanding and make an 
independent investment decision.
    (g) A bank may conclude that a customer is exercising independent 
judgement if the customer's investment decision will be based on its own 
independent assessment of the opportunities and risks presented by a 
potential investment, market factors and other investment 
considerations. Where the bank has reasonable grounds for concluding 
that the institutional customer is making independent investment 
decisions and is capable of independently evaluating investment risk, 
then a bank's obligations under Sec.  13.4 for a particular customer are 
fulfilled. \2\ Where a customer has delegated decision-making authority 
to an agent, such as an investment advisor or a bank trust department, 
the interpretation in this section shall be applied to the agent.
---------------------------------------------------------------------------

    \2\ See footnote 1 in paragraph (d) of this section.
---------------------------------------------------------------------------

    (h) A determination of capability to evaluate investment risk 
independently will depend on an examination of the customer's capability 
to make its own investment decisions, including the resources available 
to the customer to make informed decisions. Relevant considerations 
could include:
    (1) The use of one or more consultants, investment advisers, or bank 
trust departments;
    (2) The general level of experience of the institutional customer in 
financial markets and specific experience with the type of instruments 
under consideration;
    (3) The customer's ability to understand the economic features of 
the security involved;
    (4) The customer's ability to independently evaluate how market 
developments would affect the security; and
    (5) The complexity of the security or securities involved.
    (i) A determination that a customer is making independent investment 
decisions will depend on the nature of the relationship that exists 
between the bank and the customer.
    Relevant considerations could include:
    (1) Any written or oral understanding that exists between the bank 
and the customer regarding the nature of the relationship between the 
bank and the customer and the services to be rendered by the bank;
    (2) The presence or absence of a pattern of acceptance of the bank's 
recommendations;
    (3) The use by the customer of ideas, suggestions, market views and 
information obtained from other government securities brokers or dealers 
or market professionals, particularly those relating to the same type of 
securities; and
    (4) The extent to which the bank has received from the customer 
current comprehensive portfolio information in connection with 
discussing recommended transactions or has not been provided important 
information regarding its portfolio or investment objectives.
    (j) Banks are reminded that these factors are merely guidelines that 
will be utilized to determine whether a bank has fulfilled its 
suitability obligation with respect to a specific institutional customer 
transaction and that the inclusion or absence of any of these factors is 
not dispositive of the determination of suitability. Such a 
determination can only be made on a case-by-case basis taking into 
consideration all the facts and circumstances of a particular bank/
customer relationship, assessed in the context of a particular 
transaction.
    (k) For purposes of the interpretation in this section, an 
institutional customer shall be any entity other than a natural person. 
In determining the applicability of the interpretation in this section 
to an institutional customer, the OCC will consider the dollar value of 
the securities that the institutional customer has in its portfolio and/
or under management. While the interpretation in this section is 
potentially applicable to any institutional customer, the guidance 
contained in this section is more appropriately applied to an 
institutional customer with at least $10

[[Page 470]]

million invested in securities in the aggregate in its portfolio and/or 
under management.



PART 14_CONSUMER PROTECTION IN SALES OF INSURANCE--Table of Contents



Sec.
14.10 Purpose and scope.
14.20 Definitions.
14.30 Prohibited practices.
14.40 What a covered person must disclose.
14.50 Where insurance activities may take place.
14.60 Qualification and licensing requirements for insurance sales 
          personnel.

Appendix A to Part 14--Consumer Grievance Process

    Authority: 12 U.S.C. 1 et seq., 24(Seventh), 92, 93a, 1462a, 1463, 
1464, 1818, 1831x, and 5412(b)(2)(B).

    Source: 65 FR 75839, Dec. 4, 2000, unless otherwise noted.



Sec.  14.10  Purpose and scope.

    (a) General rule. This part establishes consumer protections in 
connection with retail sales practices, solicitations, advertising, or 
offers of any insurance product or annuity to a consumer by:
    (1) Any national bank or Federal savings association; or
    (2) Any other person that is engaged in such activities at an office 
of the national bank or Federal savings association, or on behalf of the 
national bank or Federal savings association.
    (b) Application to operating subsidiaries. For purposes of Sec.  
5.34(e)(3) of this chapter for national banks and Sec.  5.38(e)(3) of 
this chapter for Federal savings associations, an operating subsidiary 
is subject to this part only to the extent that it sells, solicits, 
advertises, or offers insurance products or annuities at an office of a 
national bank or Federal savings association, or on behalf of a national 
bank or Federal savings association.

[79 FR 28398, May 16, 2014, as amended at 80 FR 28472, May 18, 2015]



Sec.  14.20  Definitions.

    As used in this part:
    (a) Affiliate means a company that controls, is controlled by, or is 
under common control with another company.
    (b) Bank means a national bank or a Federal branch, or agency of a 
foreign bank as defined in section 1 of the International Banking Act of 
1978 (12 U.S.C. 3101, et seq.)
    (c) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined in 
section 2(o)(10) of the Bank Holding Company Act of 1956, as amended (12 
U.S.C. 1841(o)(10)).
    (d) Consumer means an individual who purchases, applies to purchase, 
or is solicited to purchase from a covered person insurance products or 
annuities primarily for personal, family, or household purposes.
    (e) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (f)(1) Covered person means:
    (i) A bank;
    (ii) A Federal savings association; or
    (iii) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of the bank or Federal savings association or on behalf of a 
bank or Federal savings association.
    (2) For purposes of this definition, activities on behalf of a bank 
or Federal savings association include activities where a person, 
whether at an office of the bank or Federal savings association or at 
another location sells, solicits, advertises, or offers an insurance 
product or annuity and at least one of the following applies:
    (i) The person represents to a consumer that the sale, solicitation, 
advertisement, or offer of any insurance product or annuity is by or on 
behalf of the bank or Federal savings association;
    (ii) The bank or Federal savings association refers a consumer to a 
seller of insurance products or annuities and

[[Page 471]]

the bank or Federal savings association has a contractual arrangement to 
receive commissions or fees derived from a sale of an insurance product 
or annuity resulting from that referral; or
    (iii) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank 
or Federal savings association.
    (g) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, or 
sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (h) Electronic media includes any means for transmitting messages 
electronically between a covered person and a consumer in a format that 
allows visual text to be displayed on equipment, for example, a personal 
computer monitor.
    (i) Office means the premises of a bank or Federal savings 
association where retail deposits are accepted from the public.
    (j) Federal savings association means a Federal savings association 
or Federal savings bank chartered under section 5 of the Home Owners' 
Loan Act (12 U.S.C. 1464).
    (k) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).

[65 FR 75839, Dec. 4, 2000, as amended at 79 FR 28398, May 16, 2014]



Sec.  14.30  Prohibited practices.

    (a) Anticoercion and antitying rules. A covered person may not 
engage in any practice that would lead a consumer to believe that an 
extension of credit, in violation of section 106(b) of the Bank Holding 
Company Act Amendments of 1970 (12 U.S.C. 1972) or section 5(q) of the 
Home Owners' Loan Act (12 U.S.C. 1464(q)), is conditional upon either:
    (1) The purchase of an insurance product or annuity from the bank, 
Federal savings association, or any of their affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. A covered person 
may not engage in any practice or use any advertisement at any office 
of, or on behalf of, the bank, Federal savings association, or a 
subsidiary of the bank or Federal savings association that could mislead 
any person or otherwise cause a reasonable person to reach an erroneous 
belief with respect to:
    (1) The fact that an insurance product or annuity sold or offered 
for sale by a covered person or any subsidiary of the bank or Federal 
savings association is not backed by the Federal government, the bank, 
or the Federal savings association, or the fact that the insurance 
product or annuity is not insured by the Federal Deposit Insurance 
Corporation (FDIC);
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank, Federal savings association, or 
subsidiary of the bank or Federal savings association at which insurance 
products or annuities are sold or offered for sale, the fact that:
    (i) The approval of an extension of credit to a consumer by the 
bank, Federal savings association, or subsidiary may not be conditioned 
on the purchase of an insurance product or annuity by the consumer from 
the bank, Federal savings association, or a subsidiary of the bank or 
Federal savings association; and

[[Page 472]]

    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. A covered 
person may not sell or offer for sale, as principal, agent, or broker, 
any life or health insurance product if the status of the applicant or 
insured as a victim of domestic violence or as a provider of services to 
victims of domestic violence is considered as a criterion in any 
decision with regard to insurance underwriting, pricing, renewal, or 
scope of coverage of such product, or with regard to the payment of 
insurance claims on such product, except as required or expressly 
permitted under State law.

[65 FR 75839, Dec. 4, 2000, as amended at 79 FR 28398, May 16, 2014]



Sec.  14.40  What a covered person must disclose.

    (a) Insurance disclosures. In connection with the initial purchase 
of an insurance product or annuity by a consumer from a covered person, 
a covered person must disclose to the consumer, except to the extent the 
disclosure would not be accurate, that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the bank, Federal savings association, 
or an affiliate of the bank or Federal savings association;
    (2) The insurance product or annuity is not insured by the FDIC or 
any other agency of the United States, the bank, Federal savings 
association, or (if applicable) an affiliate of the bank or Federal 
savings association; and
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value.
    (b) Credit disclosure. In the case of an application for credit in 
connection with which an insurance product or annuity is solicited, 
offered, or sold, a covered person must disclose that the bank or 
Federal savings association may not condition an extension of credit on 
either:
    (1) The consumer's purchase of an insurance product or annuity from 
the bank, Federal savings association, or any of their affiliates; or
    (2) The consumer's agreement not to obtain, or a prohibition on the 
consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (c) Timing and method of disclosures--(1) In general. The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer. The disclosure required by 
paragraph (b) of this section must be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which an insurance product or annuity is solicited, offered, or sold.
    (2) Exception for transactions by mail. If a sale of an insurance 
product or annuity is conducted by mail, a covered person is not 
required to make the oral disclosures required by paragraph (a) of this 
section. If a covered person takes an application for credit by mail, 
the covered person is not required to make the oral disclosure required 
by paragraph (b).
    (3) Exception for transactions by telephone. If a sale of an 
insurance product or annuity is conducted by telephone, a covered person 
may provide the written disclosures required by paragraph (a) of this 
section by mail within 3 business days beginning on the first business 
day after the sale, excluding Sundays and the legal public holidays 
specified in 5 U.S.C. 6103(a). If a covered person takes an application 
for credit by telephone, the covered person may provide the written 
disclosure required by paragraph (b) of this section by mail, provided 
the covered person mails it to the consumer within three days beginning 
the first business day after the application is taken, excluding Sundays 
and the legal public holidays specified in 5 U.S.C. 6103(a).
    (4) Electronic form of disclosures. (i) Subject to the requirements 
of section 101(c) of the Electronic Signatures in Global and National 
Commerce Act (15 U.S.C. 7001(c)), a covered person may provide the 
written disclosures required by paragraph (a) and (b) of this section 
through electronic media instead of on paper, if the consumer 
affirmatively consents to receiving the disclosures electronically and 
if the

[[Page 473]]

disclosures are provided in a format that the consumer may retain or 
obtain later, for example, by printing or storing electronically (such 
as by downloading).
    (ii) Any disclosures required by paragraphs (a) or (b) of this 
section that are provided by electronic media are not required to be 
provided orally.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, a covered person may use the 
following disclosures in visual media, such as television broadcasting, 
ATM screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs (a) 
and (b) of this section:

 NOT A DEPOSIT
 NOT FDIC-INSURED
 NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
 NOT GUARANTEED BY THE [BANK] [FEDERAL SAVINGS 
ASSOCIATION]
 MAY GO DOWN IN VALUE

    (6) Disclosures must be meaningful. (i) A covered person must 
provide the disclosures required by paragraphs (a) and (b) of this 
section in a meaningful form. Examples of the types of methods that 
could call attention to the nature and significance of the information 
provided include:
    (A) A plain-language heading to call attention to the disclosures;
    (B) A typeface and type size that are easy to read;
    (C) Wide margins and ample line spacing;
    (D) Boldface or italics for key words; and
    (E) Distinctive type style, and graphic devices, such as shading or 
sidebars, when the disclosures are combined with other information.
    (ii) A covered person has not provided the disclosures in a 
meaningful form if the covered person merely states to the consumer that 
the required disclosures are available in printed material, but does not 
provide the printed material when required and does not orally disclose 
the information to the consumer when required.
    (iii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass the 
visual text of the disclosures before purchasing an insurance product or 
annuity.
    (7) Consumer acknowledgment. A covered person must obtain from the 
consumer, at the time a consumer receives the disclosures required under 
paragraphs (a) or (b) of this section, or at the time of the initial 
purchase by the consumer of an insurance product or annuity, a written 
acknowledgment by the consumer that the consumer received the 
disclosures. A covered person may permit a consumer to acknowledge 
receipt of the disclosures electronically or in paper form. If the 
disclosures required under paragraphs (a) or (b) of this section are 
provided in connection with a transaction that is conducted by 
telephone, a covered person must:
    (i) Obtain an oral acknowledgment of receipt of the disclosures and 
maintain sufficient documentation to show that the acknowledgment was 
given; and
    (ii) Make reasonable efforts to obtain a written acknowledgment from 
the consumer.
    (d) Advertisements and other promotional material for insurance 
products or annuities. The disclosures described in paragraph (a) of 
this section are required in advertisements and promotional material for 
insurance products or annuities unless the advertisements and 
promotional materials are of a general nature describing or listing the 
services or products offered by the bank or Federal savings association.

[65 FR 75839, Dec. 4, 2000, as amended at 79 FR 28398, May 16, 2014]



Sec.  14.50  Where insurance activities may take place.

    (a) General rule. A bank or Federal savings association must, to the 
extent practicable, keep the area where the bank or Federal savings 
association conducts transactions involving insurance products or 
annuities physically segregated from areas where retail deposits are 
routinely accepted from the general public, identify the areas where

[[Page 474]]

insurance product or annuity sales activities occur, and clearly 
delineate and distinguish those areas from the areas where the bank's or 
Federal savings association's retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in an 
area where such transactions are routinely conducted in the bank or 
Federal savings association may refer a consumer who seeks to purchase 
an insurance product or annuity to a qualified person who sells that 
product only if the person making the referral receives no more than a 
one-time, nominal fee of a fixed dollar amount for each referral that 
does not depend on whether the referral results in a transaction.

[65 FR 75839, Dec. 4, 2000, as amended at 79 FR 28399, May 16, 2014]



Sec.  14.60  Qualification and licensing requirements for insurance 
sales personnel.

    A bank or Federal savings association may not permit any person to 
sell or offer for sale any insurance product or annuity in any part of 
its office or on its behalf, unless the person is at all times 
appropriately qualified and licensed under applicable State insurance 
licensing standards with regard to the specific products being sold or 
recommended.

[65 FR 75839, Dec. 4, 2000, as amended at 79 FR 28399, May 16, 2014]



         Sec. Appendix A to Part 14--Consumer Grievance Process

    Any consumer who believes that any bank, Federal savings 
association, or any other person selling, soliciting, advertising, or 
offering insurance products or annuities to the consumer at an office of 
the bank or Federal savings association, or on behalf of the bank or 
Federal savings association, has violated the requirements of this part 
should contact the Customer Assistance Group, Office of the Comptroller 
of the Currency, (800) 613-6743, P.O. Box 53570, Houston, TX 77052, or 
www.helpwithmybank.gov.

[87 FR 27483, May 9, 2022]

                           PART 15 [RESERVED]



PART 16_SECURITIES OFFERING DISCLOSURE RULES--Table of Contents



Sec.
16.1 Authority, purpose, and scope.
16.2 Definitions.
16.3 Registration statement and prospectus requirements.
16.4 Communications not deemed an offer.
16.5 Exemptions.
16.6 Sales of nonconvertible debt.
16.7 Nonpublic offerings.
16.8 Small issues.
16.9 Securities offered and sold in holding company dissolution.
16.10 Sales of securities at an office of a Federal savings association.
16.15 Form and content.
16.16 Effectiveness.
16.17 Filing requirements and inspection of documents.
16.18 Use of prospectus.
16.19 Withdrawal or abandonment.
16.30 Request for interpretive advice or no-objection letter.
16.31 Escrow requirement.
16.32 Fraudulent transactions and unsafe or unsound practices.
16.33 Filing fees.

    Authority: 12 U.S.C. 1 et seq., 93a, 1462a, 1463, 1464, and 
5412(b)(2)(B).

    Source: 59 FR 54798, Nov. 2, 1994, unless otherwise noted.



Sec.  16.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the rulemaking authority of 
the Comptroller of the Currency (OCC) for national banks in 12 U.S.C. 1 
et seq., and 93a, and for Federal savings associations in 12 U.S.C. 
1462a, 1463, 1464, and 5412(b)(2)(B).
    (b) Purpose. This part sets forth rules governing the offer and sale 
of securities issued by a national bank or Federal savings association.
    (c) Scope. This part applies to offers and sales of national bank or 
Federal savings association securities by issuers, underwriters, and 
dealers.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8107, Jan. 23, 2017]



Sec.  16.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Accredited investor means the same as in SEC Rule 501(a) (17 CFR 
230.501(a)).

[[Page 475]]

    (b) Dealer means the same as in section 2(a)(12) of the Securities 
Act (15 U.S.C. 77b(a)(12)).
    (c) Exchange Act means the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.).
    (d) Insured depository institution means the same as in section 
3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)).
    (e) Federal savings association means an existing Federal savings 
association chartered under section 5 of the Home Owners' Loan Act 
(HOLA) (12 U.S.C. 1464 et seq.) or a Federal savings association in 
organization.
    (f) Investment grade means the issuer of a security has an adequate 
capacity to meet financial commitments under the security for the 
projected life of the asset or exposure. An issuer has an adequate 
capacity to meet financial commitments if the risk of default by the 
obligor is low and the full and timely repayment of principal and 
interest is expected.
    (g) Issuer means a national bank or Federal savings association that 
issues or proposes to issue any security.
    (h) National bank means an existing national bank, a national bank 
in organization, or a Federal branch or agency of a foreign bank.
    (i) Nonconvertible debt means a general obligation of the national 
bank or Federal savings association, whether senior or subordinated, 
that is not convertible into any class of common or preferred stock or 
any derivative thereof.
    (j) Person means the same as in section 2(a)(2) of the Securities 
Act (15 U.S.C. 77b(a)(2)) and includes a national bank and a Federal 
savings association.
    (k) Prospectus means an offering document that includes the 
information required by section 10(a) of the Securities Act (15 U.S.C. 
77j(a)).
    (l) Registration statement means a filing that includes the 
prospectus and other information required by section 7 of the Securities 
Act (15 U.S.C. 77g).
    (m) Sale, sell, offer to sell, offer for sale, and offer mean the 
same as in section 2(a)(3) of the Securities Act (15 U.S.C. 77b(a)(3)).
    (n) SEC means the Securities and Exchange Commission. When used in 
the rules, regulations, or forms of the SEC referred to in this part, 
the term ``SEC'' shall be deemed to refer to the OCC.
    (o) Securities Act means the Securities Act of 1933 (15 U.S.C. 77a 
et seq.).
    (p) Security means the same as in section 2(a)(1) of the Securities 
Act (15 U.S.C. 77b(a)(1)).
    (q) Underwriter means the same as in section 2(a)(11) of the 
Securities Act (15 U.S.C. 77b(a)(11)). SEC Rules 137, 140, 141, 142, and 
144 (17 CFR 230.137, 230.140, 230.141, 230.142, and 230.144) (which 
apply to section 2(a)(11) of the Securities Act) apply to this part.

[59 FR 54798, Nov. 2, 1994, as amended at 73 FR 22243, Apr. 24, 2008; 77 
FR 35258, June 13, 2012; 82 FR 8107, Jan. 23, 2017]



Sec.  16.3  Registration statement and prospectus requirements.

    (a) No person shall offer or sell, directly or indirectly, any 
national bank or Federal savings association issued security unless:
    (1) A registration statement for the security meeting the 
requirements of Sec.  16.15 of this part has been filed with and 
declared effective by the OCC pursuant to this part, and the offer or 
sale is accompanied or preceded by a prospectus that has been filed with 
and declared effective by the OCC as a part of that registration 
statement; or
    (2) An exemption is available under Sec.  16.5 of this part.
    (b) Notwithstanding paragraph (a) of this section, securities of a 
national bank or Federal savings association may be offered through the 
use of a preliminary prospectus before a registration statement and 
prospectus for the securities have been declared effective by the OCC 
if:
    (1) A registration statement including the preliminary prospectus 
has been filed with the OCC;
    (2) The preliminary prospectus contains the information required by 
Sec.  16.15 of this part except for the omission of information with 
respect to the offering price, underwriting discounts or commissions, 
discounts or commissions to dealers, amount of proceeds, conversion 
rates, call prices, or other matters dependent upon the offering price; 
and

[[Page 476]]

    (3) A copy of the prospectus as declared effective containing the 
information specified in paragraph (b)(2) of this section is furnished 
to each purchaser prior to or simultaneously with the sale of the 
security.
    (c) SEC Rule 174 (17 CFR 230.174--Delivery of prospectus by dealers; 
Exemptions under section 4(a)(3) of the Act) applies to transactions by 
dealers in national bank and Federal savings association issued 
securities.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8107, Jan. 23, 2017]



Sec.  16.4  Communications not deemed an offer.

    (a) The OCC will not deem the following communications to be an 
offer under Sec.  16.3 of this part:
    (1) Prior to the filing of a registration statement, any notice of a 
proposed offering that satisfies the requirements of SEC Rule 135 (17 
CFR 230.135);
    (2) Subsequent to the filing of a registration statement, any 
notice, circular, advertisement, letter, or other communication 
published or transmitted to any person that satisfies the requirements 
of SEC Rule 134 (17 CFR 230.134);
    (3) Subsequent to the filing of a registration statement, any oral 
offer of securities covered by that registration statement;
    (4) Subsequent to the filing of a registration statement, any 
summary prospectus that is filed as a part of that registration 
statement and satisfies the requirements of SEC Rule 431 (17 CFR 
230.431);
    (5) Subsequent to the effective date of a registration statement, 
any written communication if it is proved that each recipient of the 
communication simultaneously or previously received a written prospectus 
meeting the requirements of section 10(a) of the Securities Act (15 
U.S.C. 77j(a)) and Sec.  16.15 of this part that was filed with and 
declared effective by the OCC;
    (6) A notice of a proposed unregistered offering that satisfies the 
requirements of SEC Rule 135c (17 CFR 230.135c); and
    (7) A communication that satisfies the requirements of SEC Rule 138 
or 139 (17 CFR 230.138 or 230.139).
    (b) The OCC may request that communications not deemed an offer 
under paragraph (a) of this section be submitted to the OCC.
    (c) The OCC may prohibit the publication or distribution of any 
communication not deemed an offer under paragraph (a) of this section if 
necessary to protect the investing public.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8107, Jan. 23, 2017]



Sec.  16.5  Exemptions.

    The registration statement and prospectus requirements of Sec.  16.3 
do not apply to an offer or sale of national bank or Federal savings 
association securities:
    (a) If the securities are exempt from registration under section 3 
of the Securities Act (15 U.S.C. 77c), but only by reason of an 
exemption other than section 3(a)(2) (exemption for bank securities), 
section 3(a)(5) (exemption for savings association securities), section 
3(a)(11) (exemption for intrastate offerings), and section 3(a)(12) 
(exemption for bank holding company formation) of the Securities Act.
    (b) In a transaction exempt from registration under section 4 of the 
Securities Act (15 U.S.C. 77d). SEC Rules 152 and 152a (17 CFR 230.152 
and 230.152a) (which apply to sections 4(a)(2) and 4(a)(1) of the 
Securities Act) apply to this part;
    (c) In a transaction that satisfies the requirements of Sec.  16.7 
of this part;
    (d) In a transaction that satisfies the requirements of Sec.  16.8 
of this part;
    (e) In a transaction that satisfies the requirements of SEC Rule 
144, 144A, or 236 (17 CFR 230.144, 230.144A, or 230.236);
    (f) In a transaction that satisfies the requirements of SEC Rule 701 
(17 CFR 230.701);
    (g) In a transaction that is an offer or sale occurring outside the 
United States under SEC Regulation S (17 CFR part 230, Regulation S--
Rules Governing Offers and Sales Made Outside the United States Without 
Registration Under the Securities Act of 1933); or
    (h) In a transaction that satisfies the requirements of Sec.  16.9 
of this part.

[59 FR 54798, Nov. 2, 1994; 59 FR 67153, Dec. 29, 1994, as amended at 73 
FR 22243, Apr. 24, 2008; 82 FR 8107, Jan. 23, 2017]

[[Page 477]]



Sec.  16.6  Sales of nonconvertible debt.

    (a) The OCC will deem offers or sales of national bank or Federal 
savings association issued nonconvertible debt to be in compliance with 
Sec. Sec.  16.3 and 16.15(a) and (b) of this part if all of the 
following requirements are met:
    (1) The national bank or Federal savings association issuing the 
debt has securities registered under the Exchange Act or is a subsidiary 
of a holding company that has securities registered under the Exchange 
Act;
    (2) The debt is offered and sold only to accredited investors;
    (3) The debt is sold in minimum denominations of $250,000 and each 
note or debenture, if issued in certificate form, is legended to provide 
that it cannot be exchanged for notes or debentures of the national bank 
or Federal savings association in smaller denominations;
    (4) The debt is investment grade.
    (5) Prior to or simultaneously with the sale of the debt, each 
purchaser receives an offering document that contains a description of 
the terms of the debt, the use of proceeds, and method of distribution, 
and incorporates the national bank's or Federal savings association's 
latest Consolidated Reports of Condition and Income (Call Report) and 
the national bank's, Federal savings association's, or the holding 
company's Forms 10-K, 10-Q, and 8-K (17 CFR part 249) filed under the 
Exchange Act; and
    (6) The offering document and any amendments are filed with the OCC 
no later than the fifth business day after they are first used.
    (b) Offers or sales of nonconvertible debt issued by a federal 
branch or agency of a foreign bank need not need comply with the 
requirements of paragraph (a)(1) of this section, if the federal branch 
or agency provides the OCC the information specified in SEC Rule 12g3-
2(b) (17 CFR 240.12g3-2(b)) and provides purchasers the information 
specified in SEC Rule 144A(d)(4)(i) (17 CFR 230.144A(d)(4)(i)). A 
federal branch or agency that provides the OCC the information specified 
in SEC Rule 12g3-2(b) need not incorporate that information by reference 
into the offering document provided to purchasers pursuant to paragraph 
(a)(5) of this section. However, the federal branch or agency must make 
that information available to the potential purchasers upon request. The 
OCC will make the information available for public inspection.

[59 FR 54798, Nov. 2, 1994, as amended at 73 FR 22243, Apr. 24, 2008; 77 
FR 35258, June 13, 2012; 82 FR 8107, Jan. 23, 2017]



Sec.  16.7  Nonpublic offerings.

    (a) The OCC will deem offers and sales of national bank or Federal 
savings association issued securities that meet all of the following 
requirements to be exempt from the registration and prospectus 
requirements of Sec.  16.3 pursuant to Sec.  16.5(c) of this part:
    (1) All the securities are offered and sold in a transaction that 
satisfies the requirements of SEC Regulation D (17 CFR part 230, 
Regulation D--Rules Governing the Limited Offer and Sale of Securities 
Without Registration Under the Securities Act of 1933); and
    (2) Each purchaser who is not an accredited investor either alone or 
with its purchaser representative(s) has the knowledge and experience in 
financial and business matters that it is capable of evaluating the 
merits and risks of the prospective investment, or the issuer reasonably 
believes immediately prior to making any sale that the purchaser comes 
within this description.
    (b) All subsequent sales of national bank or Federal savings 
association issued securities subject to the limitations on resale of 
SEC Regulation D (17 CFR part 230, Regulation D--Rules Governing the 
Limited Offer and Sale of Securities Without Registration Under the 
Securities Act of 1933) must be made pursuant to SEC Rule 144 (17 CFR 
230.144), SEC Rule 144A (17 CFR 230.144A), another exemption from 
registration under the Securities Act referenced in Sec.  16.5 of this 
part, or in accordance with the registration and prospectus requirements 
of Sec.  16.3 of this part.
    (c) No offer or sale of national bank or Federal savings association 
issued securities shall be made in reliance on SEC Regulation D (17 CFR 
part 230, Regulation D--Rules Governing the Limited Offer and Sale of 
Securities Without Registration Under the Securities Act of 1933) 
without compliance

[[Page 478]]

with paragraphs (a)(1) and (a)(2) of this section.

[59 FR 54798, Nov. 2, 1994, as amended at 73 FR 22243, Apr. 24, 2008; 82 
FR 8108, Jan. 23, 2017]



Sec.  16.8  Small issues.

    (a) The OCC will deem offers and sales of national bank or Federal 
savings association issued securities that satisfy the requirements of 
SEC Regulation A (17 CFR part 230, Regulation A--Conditional Small 
Issues Exemption) to be exempt from the registration and prospectus 
requirements of Sec.  16.3 pursuant to Sec.  16.5(d) of this part.
    (b) A filer should consult the SEC's Securities Act Industry Guide 
3--Statistical Disclosure by Bank Holding Companies (17 CFR 229.801(c) 
and 231) and requirement 7 (Loans) of Rule 9-03 of SEC Regulation S-X 
(17 CFR 230.9-03) for guidance on appropriate disclosures when preparing 
offering documents to be filed with the OCC pursuant to Regulation A.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8108, Jan. 23, 2017]



Sec.  16.9  Securities offered and sold in holding company dissolution.

    Offers and sales of national bank or Federal savings association 
issued securities in connection with the dissolution of the holding 
company of the national bank or Federal savings association are exempt 
from the registration and prospectus requirements of Sec.  16.3 pursuant 
to Sec.  16.5(h), provided all of the following requirements are met:
    (a) The offer and sale of national bank or Federal savings 
association issued securities occurs solely as part of a dissolution in 
which the security holders exchange their shares of stock in a holding 
company that had no significant assets other than securities of the bank 
or savings association, for bank or savings association stock;
    (b) The security holders receive, after the dissolution, 
substantially the same proportional share interests in the national bank 
or Federal savings association as they held in the holding company;
    (c) The rights and interests of the security holders in the national 
bank or Federal savings association are substantially the same as those 
in the holding company prior to the transaction; and
    (d) The national bank or Federal savings association has 
substantially the same assets and liabilities as the holding company had 
on a consolidated basis prior to the transaction.

[73 FR 22243, Apr. 24, 2008, as amended at 82 FR 8108, Jan. 23, 2017]



Sec.  16.10  Sales of securities at an office of a Federal savings association.

    Sales of securities of a Federal savings association or its 
affiliates at an office of a Federal savings association may be made 
only in accordance with the provisions of 12 CFR 163.76. For the purpose 
of this section, ``affiliate'' has the same meaning as in 12 CFR 161.4.

[82 FR 8108, Jan. 23, 2017]



Sec.  16.15  Form and content.

    (a) Any registration statement filed pursuant to this part must be 
on the form for registration (17 CFR part 239) that the national bank or 
Federal savings association would be eligible to use were it required to 
register the securities under the Securities Act and must meet the 
requirements of the SEC regulations referred to in the applicable form 
for registration. A filer should consult the SEC's Securities Act 
Industry Guide 3--Statistical Disclosure by Bank Holding Companies (17 
CFR 229.801(c) and 231) for guidance on appropriate disclosures when 
preparing registration statements.
    (b) Any registration statement or amendment filed pursuant to this 
part must comply with the requirements of SEC Regulation C (17 CFR part 
230, Regulation C--Registration), except to the extent those 
requirements conflict with specific requirements of this part.
    (c) In addition to the information expressly required to be included 
in the registration statement by paragraphs (a) and (b) of this section, 
the registration statement must include any additional material 
information that is necessary to make the required statements, in light 
of the circumstances under which they are made, not misleading.
    (d) Notwithstanding paragraph (a) of this section, the registration 
statement for securities issued by a national

[[Page 479]]

bank or Federal savings association that is not in compliance with the 
regulatory capital requirements set forth in 12 CFR part 3, as 
applicable must be on the Form S-1 (17 CFR part 239) registration 
statement under the Securities Act.
    (e) Notwithstanding paragraph (a) of this section, a national bank 
or Federal savings association in organization pursuant to Sec.  5.20 of 
this chapter shall not be required to include audited financial 
statements as part of its registration statement for the offer and sale 
of its securities, or as part of its offering statement for the offer 
and sale of its securities pursuant to 12 CFR 16.8, unless the OCC 
determines that factors particular to the proposal indicate that 
inclusion of such statements would be in the interest of investors or 
would further the safe and sound operation of a national bank or Federal 
savings association.

[59 FR 54798, Nov. 2, 1994, as amended at 73 FR 12010, Mar. 6, 2008; 79 
FR 11312, Feb. 28, 2014; 82 FR 8108, Jan. 23, 2017; 85 FR 42641, July 
14, 2020]



Sec.  16.16  Effectiveness.

    (a) Registration statements and amendments filed with the OCC 
pursuant to this part will become effective in accordance with sections 
8(a) and (c) of the Securities Act (15 U.S.C. 77h(a) and (c)) and SEC 
Regulation C (17 CFR part 230, Regulation C--Registration).
    (b) The OCC will deem registration statements and amendments that 
become effective pursuant to paragraph (a) of this section to be 
declared effective. If the OCC deems a registration statement to be 
declared effective, the OCC will also deem the prospectus that was filed 
as a part of that registration statement to be declared effective.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8108, Jan. 23, 2017]



Sec.  16.17  Filing requirements and inspection of documents.

    (a) Except as otherwise provided in this section, all registration 
statements, offering documents, amendments, notices, or other documents 
must be filed with the OCC's Law Department electronically at http://
www.banknet.gov/. Documents may be signed electronically using the 
signature provision in SEC Rule 402 (17 CFR 230.402).
    (b) All registration statements, offering documents, amendments, 
notices, or other documents relating to a national bank or Federal 
savings association in organization must be filed with the appropriate 
district office of the OCC at http://www.banknet.gov/. All registration 
statements, offering documents, amendments, notices, or other documents 
relating to a mutual to stock conversion pursuant to 12 CFR part 192 
must be filed with the appropriate OCC licensing office at http://
www.banknet.gov/.
    (c) Where this part refers to a section of the Securities Act or the 
Exchange Act or an SEC rule that requires the filing of a notice or 
other document with the SEC, that notice or other document must be filed 
with the OCC.
    (d) Provided the person filing the document has complied with all 
requirements regarding the filing, including the submission of any fee 
required under Sec.  16.33, the date of filing of the document is the 
date the OCC receives the filing. An electronic filing that is submitted 
on a business day by direct transmission commencing on or before 5:30 
p.m. Eastern Standard or Daylight Savings Time, whichever is currently 
in effect, would be deemed received by the OCC on the same business day. 
An electronic filing that is submitted by direct transmission commencing 
after 5:30 p.m. Eastern Standard or Daylight Savings Time, whichever is 
currently in effect, or on a Saturday, Sunday, or Federal holiday, would 
be deemed received by the OCC on the next business day. If an electronic 
filer in good faith attempts to file a document with the OCC in a timely 
manner but the filing is delayed due to technical difficulties beyond 
the electronic filer's control, the electronic filer may request that 
the OCC adjust the filing date of such document. The OCC may grant the 
request if it appears that such adjustment is appropriate and consistent 
with the public interest and the protection of investors.
    (e) Notwithstanding paragraph (d) of this section, any registration 
statement or any post-effective amendment thereto filed pursuant to SEC 
Rule

[[Page 480]]

462(b) (17 CFR 230.462(b)) shall be deemed received by the OCC on the 
same business day if its submission commenced on or before 10 p.m. 
Eastern Standard Time or Eastern Daylight Savings Time, whichever is 
currently in effect, and on the next business day if its submission 
commenced after 10 p.m. Eastern Standard or Daylight Savings Time, 
whichever is currently in effect, or any time on a Saturday, Sunday, or 
Federal holiday.
    (f) If a national bank or Federal savings association experiences 
unanticipated technical difficulties preventing the timely preparation 
and submission of an electronic filing, the bank or savings association 
may, upon notice to the OCC's Law Department or district office, as 
appropriate, file the subject filing in paper format no later than one 
business day after the date on which the filing was to be made. Paper 
filings should be submitted to the OCC's Law Department or appropriate 
district office, at the address provided at www.occ.gov.
    (g) Any filing of amendments or revisions must include two copies, 
one of which must be marked to indicate clearly and precisely, by 
underlining or in some other appropriate manner, the changes made.
    (h) The OCC will make available for public inspection copies of the 
registration statements, offering documents, amendments, exhibits, 
notices or reports filed pursuant to this part at the address identified 
in Sec.  4.14 of this chapter.

[82 FR 8108, Jan. 23, 2017, as amended at 85 FR 42641, July 14, 2020]



Sec.  16.18  Use of prospectus.

    (a) No person shall use a prospectus or amendment declared effective 
by the OCC more than nine months after the effective date unless the 
information contained in the prospectus or amendment is as of a date not 
more than 16 months prior to the date of use.
    (b) If any event arises, or change in fact occurs, after the 
effective date and that event or change in fact, individually or in the 
aggregate, results in the prospectus containing any untrue statement of 
material fact, or omitting to state a material fact necessary in order 
to make statements made in the prospectus not misleading under the 
circumstances, then no person shall use the prospectus that has been 
declared effective under this part until an amendment reflecting the 
event or change has been filed with and declared effective by the OCC.



Sec.  16.19  Withdrawal or abandonment.

    (a) Any registration statement, amendment, or exhibit may be 
withdrawn prior to the effective date. A withdrawal must be signed and 
state the grounds upon which it is made. The OCC will not remove any 
withdrawn document from its files, but will mark the document Withdrawn 
upon the request of the registrant on (date).
    (b) When a registration statement or amendment has been on file with 
the OCC for a period of nine months and has not become effective, the 
OCC may, in its discretion, determine whether the filing has been 
abandoned. Before determining that a filing has been abandoned, the OCC 
will notify the filer that the filing is out of date and must either be 
amended to comply with the applicable requirements of this part or be 
withdrawn within 30 days after the date of notice. When a filing is 
abandoned, the OCC will not remove the filing from its files but will 
mark the filing Declared abandoned by the OCC on (date).



Sec.  16.30  Request for interpretive advice or no-objection letter.

    Any person requesting interpretive advice or a no-objection letter 
from the OCC with respect to any provision of this part shall:
    (a) File a copy of the request, including any supporting 
attachments, with the OCC's Law Department at the address provided at 
www.occ.gov;
    (b) Identify or describe the provisions of this part to which the 
request relates, the participants in the proposed transaction, and the 
reasons for the request; and
    (c) Include with the request a legal opinion as to each legal issue 
raised and an accounting opinion as to each accounting issue raised.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8109, Jan. 23, 2017; 85 
FR 42641, July 14, 2020]

[[Page 481]]



Sec.  16.31  Escrow requirement.

    The OCC may require that any funds received in connection with an 
offer or sale of securities be held in an independent escrow account at 
an unrelated insured depository institution when the use of an escrow 
account is in the best interests of shareholders.



Sec.  16.32  Fraudulent transactions and unsafe or unsound practices.

    (a) No person in the offer or sale of national bank or Federal 
savings association securities shall directly or indirectly:
    (1) Employ any device, scheme or artifice to defraud;
    (2) Make any untrue statement of a material fact or omit to state a 
material fact necessary in order to make the statements made, in light 
of the circumstances under which they were made, not misleading; or
    (3) Engage in any act, practice, or course of business which 
operates as a fraud or deceit upon any person, in connection with the 
purchase or sale of any security of a national bank or Federal savings 
association.
    (b) Nothing in this section limits the applicability of section 17 
of the Securities Act (15 U.S.C. 77q) or section 10(b) of the Exchange 
Act (15 U.S.C. 78j) or Rule 10b-5 promulgated thereunder (17 CFR 
240.10b-5).
    (c) Any violation of this section also constitutes an unsafe or 
unsound practice under 12 U.S.C. 1818.
    (d) SEC Rule 175 (17 CFR 230.175--Liability for certain statements 
by issuers) applies to this part.

[59 FR 54798, Nov. 2, 1994, as amended at 82 FR 8109, Jan. 23, 2017]



Sec.  16.33  Filing fees.

    (a) The OCC may require filing fees to accompany certain filings 
made under this part before it will accept those filings. The OCC 
provides an applicable fee schedule in the Notice of Comptroller of the 
Currency Fees published pursuant to Sec.  8.8 of this chapter.
    (b) Filing fees must be paid by check payable to the Comptroller of 
the Currency or by other means acceptable to the OCC.

[82 FR 8109, Jan. 23, 2017]



PART 19_RULES OF PRACTICE AND PROCEDURE (EFF. until 04-01-24)--
Table of Contents



            Subpart A_Uniform Rules of Practice and Procedure

Sec.
19.1 Scope.
19.2 Rules of construction.
19.3 Definitions.
19.4 Authority of the Comptroller.
19.5 Authority of the administrative law judge.
19.6 Appearance and practice in adjudicatory proceedings.
19.7 Good faith certification.
19.8 Conflicts of interest.
19.9 Ex parte communications.
19.10 Filing of papers.
19.11 Service of papers.
19.12 Construction of time limits.
19.13 Change of time limits.
19.14 Witness fees and expenses.
19.15 Opportunity for informal settlement.
19.16 OCC's right to conduct examination.
19.17 Collateral attacks on adjudicatory proceeding.
19.18 Commencement of proceeding and contents of notice.
19.19 Answer.
19.20 Amended pleadings.
19.21 Failure to appear.
19.22 Consolidation and severance of actions.
19.23 Motions.
19.24 Scope of document discovery.
19.25 Request for document discovery from parties.
19.26 Document subpoenas to nonparties.
19.27 Deposition of witness unavailable for hearing.
19.28 Interlocutory review.
19.29 Summary disposition.
19.30 Partial summary disposition.
19.31 Scheduling and prehearing conferences.
19.32 Prehearing submissions.
19.33 Public hearings.
19.34 Hearing subpoenas.
19.35 Conduct of hearings.
19.36 Evidence.
19.37 Post-hearing filings.
19.38 Recommended decision and filing of record.
19.39 Exceptions to recommended decision.
19.40 Review by the Comptroller.
19.41 Stays pending judicial review.

            Subpart B_Procedural Rules for OCC Adjudications

19.100 Filing documents.

[[Page 482]]

19.101 Delegation to OFIA.

   Subpart C_Removals, Suspensions, and Prohibitions When a Crime Is 
                   Charged or a Conviction is Obtained

19.110 Scope.
19.111 Suspension, removal, or prohibition.
19.112 Informal hearing.
19.113 Recommended and final decisions.

   Subpart D_Exemption Hearings Under Section 12(h) of the Securities 
                          Exchange Act of 1934

19.120 Scope.
19.121 Application for exemption.
19.122 Newspaper notice.
19.123 Informal hearing.
19.124 Decision of the Comptroller.

Subpart E_Disciplinary Proceedings Involving the Federal Securities Laws

19.130 Scope.
19.131 Notice of charges and answer.
19.132 Disciplinary orders.
19.135 Applications for stay or review of disciplinary actions imposed 
          by registered clearing agencies.

    Subpart F_Civil Money Penalty Authority Under the Securities Laws

19.140 Scope.

     Subpart G_Cease-and-Desist Authority Under the Securities Laws

19.150 Scope.

                    Subpart H_Change in Bank Control

19.160 Scope.
19.161 Notice of disapproval and hearing initiation.

              Subpart I_Discovery Depositions and Subpoenas

19.170 Discovery depositions.
19.171 Deposition subpoenas.

                     Subpart J_Formal Investigations

19.180 Scope.
19.181 Confidentiality of formal investigations.
19.182 Order to conduct a formal investigation.
19.183 Rights of witnesses.
19.184 Service of subpoena and payment of witness expenses.

    Subpart K_Parties and Representational Practice Before the OCC; 
                          Standards of Conduct

19.190 Scope.
19.191 Definitions.
19.192 Sanctions relating to conduct in an adjudicatory proceeding.
19.193 Censure, suspension or debarment.
19.194 Eligibility of attorneys and accountants to practice.
19.195 Incompetence.
19.196 Disreputable conduct.
19.197 Initiation of disciplinary proceeding.
19.198 Conferences.
19.199 Proceedings under this subpart.
19.200 Effect of suspension, debarment or censure.
19.201 Petition for reinstatement.

                  Subpart L_Equal Access to Justice Act

19.210 Scope.

 Subpart M_Procedures for Reclassifying a Bank Based on Criteria Other 
                              Than Capital

19.220 Scope.
19.221 Reclassification of a bank based on unsafe or unsound condition 
          or practice.
19.222 Request for rescission of reclassification.

    Subpart N_Order To Dismiss a Director or Senior Executive Officer

19.230 Scope.
19.231 Order to dismiss a director or senior executive officer.

                Subpart O_Civil Money Penalty Adjustments

19.240 Inflation adjustments.

    Subpart P_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

19.241 Scope.
19.242 Definitions.
19.243 Removal, suspension, or debarment.
19.244 Automatic removal, suspension, or debarment.
19.245 Notice of removal, suspension, or debarment.
19.246 Petition for reinstatement.

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 93a, 164, 481, 
504, 1817, 1818, 1820, 1831m, 1831o, 1832, 1884, 1972, 3102, 3108(a), 
3110, 3909, and 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 
78s, 78u, 78u-2, 78u-3, 78w, and 1639e; 28 U.S.C. 2461 note; 31 U.S.C. 
330 and 5321; and 42 U.S.C. 4012a.

[[Page 483]]


    Source: 56 FR 38028, Aug. 9, 1991, unless otherwise noted.

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, part 19 was 
revised, effective Apr. 1, 2024. For the convenience of the user, the 
new part 19 follows the text of this part.



            Subpart A_Uniform Rules of Practice and Procedure



Sec.  19.1  Scope.

    This subpart prescribes Uniform Rules of practice and procedure 
applicable to adjudicatory proceedings required to be conducted on the 
record after opportunity for a hearing under the following statutory 
provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (``FDIA'') (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Office of the 
Comptroller of the Currency (``OCC'') should issue an order to approve 
or disapprove a person's proposed acquisition of an institution;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (``Exchange Act'') (15 U.S.C. 78o-5), to impose sanctions 
upon any government securities broker or dealer or upon any person 
associated or seeking to become associated with a government securities 
broker or dealer for which the OCC is the appropriate agency;
    (e) Assessment of civil money penalties by the OCC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate agency for any violation of:
    (1) Any provision of law referenced in 12 U.S.C. 93, or any 
regulation issued thereunder, and certain unsafe or unsound practices 
and breaches of fiduciary duty, pursuant to 12 U.S.C. 93;
    (2) Sections 22 and 23 of the Federal Reserve Act (``FRA''), or any 
regulation issued thereunder, and certain unsafe or unsound practices 
and breaches of fiduciary duty, pursuant to 12 U.S.C. 504 and 505;
    (3) Section 106(b) of the Bank Holding CompanyAmendments of 1970, 
pursuant to 12 U.S.C. 1972(2)(F);
    (4) Any provision of the Change in Bank Control Act of 1978 or any 
regulation or order issued thereunder, and certain unsafe or unsound 
practices and breaches of fiduciary duty, pursuant to 12 U.S.C. 
1817(j)(16);
    (5) Any provision of the International Lending Supervision Act of 
1983 (``ILSA''), or any rule, regulation or order issued thereunder, 
pursuant to 12 U.S.C. 3909;
    (6) Any provision of the International Banking Act of 1978 
(``IBA''), or any rule, regulation or order issued thereunder, pursuant 
to 12 U.S.C. 3108;
    (7) Section 5211 of the Revised Statutes (12 U.S.C. 161), pursuant 
to 12 U.S.C. 164;
    (8) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (9) Section 1120 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (10) The terms of any final or temporary order issued under section 
8 of the FDIA or any written agreement executed by the OCC, the terms of 
any condition imposed in writing by the OCC in connection with the grant 
of an application or request, certain unsafe or unsound practices, 
breaches of fiduciary duty, or any law or regulation not otherwise 
provided herein, pursuant to 12 U.S.C. 1818(i)(2);
    (11) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (12) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Removal, prohibition, and civil monetary penalty proceedings 
under section 10(k) of the FDI Act (12 U.S.C. 1820(k)) for violations of 
the post-employment restrictions imposed by that section; and
    (h) This subpart also applies to all other adjudications required by 
statute

[[Page 484]]

to be determined on the record after opportunity for an agency hearing, 
unless otherwise specifically provided for in the Local Rules.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20334, May 6, 1996; 70 
FR 69638, Nov. 17, 2005]



Sec.  19.2  Rules of construction.

    For purposes of this part:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate;
    (c) The term counsel includes a non-attorney representative; and
    (d) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.



Sec.  19.3  Definitions.

    For purposes of this part, unless explicitly stated to the contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Comptroller means the Comptroller of the Currency or a person 
delegated to perform the functions of the Comptroller of the Currency 
under this part.
    (d) Decisional employee means any member of the Comptroller's or 
administrative law judge's staff who has not engaged in an investigative 
or prosecutorial role in a proceeding and who may assist the Comptroller 
or the administrative law judge, respectively, in preparing orders, 
recommended decisions, decisions, and other documents under the Uniform 
Rules.
    (e) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the OCC in an adjudicatory 
proceeding.
    (f) Final order means an order issued by the Comptroller with or 
without the consent of the affected institution or the institution-
affiliated party, that has become final, without regard to the pendency 
of any petition for reconsideration or review.
    (g) Institution includes any national bank or Federal branch or 
agency of a foreign bank.
    (h) Institution-affiliated party means any institution- affiliated 
party as that term is defined in section 3(u) of the FDIA (12 U.S.C. 
1813(u)).
    (i) Local Rules means those rules promulgated by the OCC in the 
subparts of this part excluding subpart A.
    (j) OCC means the Office of the Comptroller of the Currency.
    (k) OFIA means the Office of Financial Institution Adjudication, the 
executive body charged with overseeing the administration of 
administrative enforcement proceedings for the OCC, the Board of 
Governors of the Federal Reserve System (``Board of Governors''), the 
Federal Deposit Insurance Corporation (``FDIC''), the Office of Thrift 
Supervision (``OTS''), and the National Credit Union Administration 
(``NCUA'').
    (l) Party means the OCC and any person named as a party in any 
notice.
    (m) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (g) of this section.
    (n) Respondent means any party other than the OCC.
    (o) Uniform Rules means those rules in subpart A of this part that 
are common to the OCC, the Board of Governors, the FDIC, the OTS, and 
the NCUA.
    (p) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.

[56 FR 38028, Aug. 9, 1991, as amended at 73 FR 22243, Apr. 24, 2008]



Sec.  19.4  Authority of the Comptroller.

    The Comptroller may, at any time during the pendency of a 
proceeding, perform, direct the performance of, or waive performance of, 
any act which could be done or ordered by the administrative law judge.

[[Page 485]]



Sec.  19.5  Authority of the administrative law judge.

    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of 
the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec.  19.31;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Comptroller shall have the power to grant any motion to dismiss the 
proceeding or to decide any other motion that results in a final 
determination of the merits of the proceeding;
    (8) To prepare and present to the Comptroller a recommended decision 
as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.

[56 FR 38028, Aug. 9, 1991; 56 FR 41726, Aug. 22, 1991]



Sec.  19.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the OCC or an administrative law judge--(1) By 
attorneys. Any member in good standing of the bar of the highest court 
of any state, commonwealth, possession, territory of the United States, 
or the District of Columbia may represent others before the OCC if such 
attorney is not currently suspended or debarred from practice before the 
OCC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer, director, 
or employee is not currently suspended or debarred from practice before 
the OCC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the Comptroller, shall file a notice of appearance 
with OFIA at or before the time that the individual submits papers or 
otherwise appears on behalf of a party in the adjudicatory proceeding. 
The notice of appearance must include a written declaration that the 
individual is currently qualified as provided in paragraph (a)(1) or 
(a)(2) of this section and is authorized to represent the particular 
party. By filing a notice of appearance on behalf of a party in an 
adjudicatory proceeding, the counsel agrees and represents that he or 
she is authorized to accept service on behalf of the represented party 
and that, in the event of withdrawal from representation, he or she 
will, if required by the administrative law judge, continue to accept 
service until new counsel has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.

[56 FR 38028, Aug. 9, 1991; 56 FR 41726, Aug. 22, 1991; 56 FR 63551, 
Dec. 4, 1991; 61 FR 20334, May 6, 1996]

[[Page 486]]



Sec.  19.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel shall sign his or her individual name and state his or her 
address and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: the counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.



Sec.  19.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec.  19.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20334, May 6, 1996]



Sec.  19.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the OCC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Comptroller, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the Comptroller until the date that the Comptroller issues 
his or her final decision pursuant to Sec.  19.40(c):
    (1) No interested person outside the OCC shall make or knowingly 
cause to be made an ex parte communication to the Comptroller, the 
administrative

[[Page 487]]

law judge, or a decisional employee; and
    (2) The Comptroller, administrative law judge, or decisional 
employee shall not make or knowingly cause to be made to any interested 
person outside the OCC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, the 
Comptroller or any other person identified in paragraph (a) of this 
section, that person shall cause all such written communications (or, if 
the communication is oral, a memorandum stating the substance of the 
communication) to be placed on the record of the proceeding and served 
on all parties. All other parties to the proceeding shall have an 
opportunity, within ten days of receipt of service of the ex parte 
communication, to file responses thereto and to recommend any sanctions, 
in accordance with paragraph (d) of this section, that they believe to 
be appropriate under the circumstances.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Comptroller or the administrative 
law judge including, but not limited to, exclusion from the proceedings 
and an adverse ruling on the issue which is the subject of the 
prohibited communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the OCC in a case may not, 
in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec.  19.40, except as witness or counsel in public 
proceedings.

[56 FR 38028, Aug. 9, 1991, as amended at 60 FR 30184, June 8, 1995]



Sec.  19.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec.  19.25 
and 19.26, shall be filed with OFIA, except as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Comptroller 
or the administrative law judge, filing may be accomplished by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the Comptroller or the 
administrative law judge. All papers filed by electronic media shall 
also concurrently be filed in accordance with paragraph (c) of this 
section.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec.  19.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the OCC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Comptroller 
or the administrative law judge, an original and one copy of all 
documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.



Sec.  19.11  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding

[[Page 488]]

so represented, and upon any party not so represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec.  19.10(c).
    (c) By the Comptroller or the administrative law judge. (1) All 
papers required to be served by the Comptroller or the administrative 
law judge upon a party who has appeared in the proceeding in accordance 
with Sec.  19.6 shall be served by any means specified in paragraph (b) 
of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec.  19.6, the Comptroller or the administrative law judge shall make 
service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) By delivery to an agent, which, in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20334, May 6, 1996]



Sec.  19.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in paragraph (c) of this section, intermediate 
Saturdays, Sundays, and Federal holidays are not included.

[[Page 489]]

    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Comptroller or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Comptroller or the administrative law judge in the case of filing, 
or by agreement among the parties in the case of service.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20335, May 6, 1996]



Sec.  19.13  Change of time limits.

    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or by any notice or order issued in the proceedings. After 
the referral of the case to the Comptroller pursuant to Sec.  19.38, the 
Comptroller may grant extensions of the time limits for good cause 
shown. Extensions may be granted at the motion of a party after notice 
and opportunity to respond is afforded all non-moving parties or on the 
Comptroller's or the administrative law judge's own motion.



Sec.  19.14  Witness fees and expenses.

    Witnesses subpoenaed for testimony or depositions shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the OCC is the 
party requesting the subpoena. The OCC shall not be required to pay any 
fees to, or expenses of, any witness not subpoenaed by the OCC.



Sec.  19.15  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any OCC representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.



Sec.  19.16  OCC's right to conduct examination.

    Nothing contained in this subpart limits in any manner the right of 
the OCC to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the OCC to 
conduct or continue any form of investigation authorized by law.



Sec.  19.17  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court

[[Page 490]]

concerning all or any part of an adjudicatory proceeding, the challenged 
adjudicatory proceeding shall continue without regard to the pendency of 
that court proceeding. No default or other failure to act as directed in 
the adjudicatory proceeding within the times prescribed in this subpart 
shall be excused based on the pendency before any court of any 
interlocutory appeal or collateral attack.

[56 FR 38028, Aug. 9, 1991; 56 FR 41726, Aug. 22, 1991]



Sec.  19.18  Commencement of proceeding and contents of notice.

    (a) Commencement of proceeding. (1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA, 12 U.S.C. 1817(j)(4), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the Comptroller.
    (ii) The notice must be served by the Comptroller upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law.
    (iii) The notice must be filed with OFIA.
    (2) Change-in control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
Comptroller.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the OCC 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) That the answer and/or request for a hearing shall be filed with 
OFIA.



Sec.  19.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding. A respondent is not required to respond to 
the portion of a notice that constitutes the prayer for relief or 
proposed order. The answer must set forth affirmative defenses, if any, 
asserted by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the 
Comptroller a recommended decision containing the findings and the 
relief sought in the notice. Any final order issued by the Comptroller 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.

[[Page 491]]



Sec.  19.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Comptroller or administrative law 
judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.

[61 FR 20335, May 6, 1996]



Sec.  19.21  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the Comptroller a recommended decision containing the findings and the 
relief sought in the notice.



Sec.  19.22  Consolidation and severance of actions.

    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the matter as 
to any respondent only if the administrative law judge finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.



Sec.  19.23  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, except that following the filing of the recommended decision, 
motions must be filed with the Comptroller.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Comptroller, any party

[[Page 492]]

may file a written response to a motion. The administrative law judge 
shall not rule on any oral or written motion before each party has had 
an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec.  19.29 and 19.30.



Sec.  19.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec.  19.25.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing, except as provided in the 
Local Rules. No exceptions to this time limit shall be permitted, unless 
the administrative law judge finds on the record that good cause exists 
for waiving the requirements of this paragraph.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20335, May 6, 1996]



Sec.  19.25  Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages is 
requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests 250 pages or 
more of copying, the requesting party shall pay

[[Page 493]]

for the copying and shipping charges. Copying charges are the current 
per-page copying rate imposed by 12 CFR part 4 implementing the Freedom 
of Information Act (5 U.S.C. 552). The party to whom the request is 
addressed may require payment in advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec.  19.23 
to strike or otherwise limit the request. If an objection is made to 
only a portion of an item or category in a request, the portion objected 
to shall be specified. Any objections not made in accordance with this 
paragraph and Sec.  19.23 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec.  19.23 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may deny or 
modify the request, and may issue appropriate protective orders, upon 
such conditions as justice may require. The pendency of a motion to 
strike or limit discovery or to compel production is not a basis for 
staying or continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative

[[Page 494]]

law judge against a party who fails to produce subpoenaed documents.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20335, May 6, 1996]



Sec.  19.26  Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec.  19.24(d). The party obtaining the document 
subpoena is responsible for serving it on the subpoenaed person and for 
serving copies on all parties. Document subpoenas may be served in any 
state, territory, or possession of the United States, the District of 
Columbia, or as otherwise provided by law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec.  19.25(d), and 
during the same time limits during which such an objection could be 
filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with so much of the document subpoena as the administrative 
law judge has not quashed or modified. A party's right to seek court 
enforcement of a document subpoena shall in no way limit the sanctions 
that may be imposed by the administrative law judge on a party who 
induces a failure to comply with subpoenas issued under this section.



Sec.  19.27  Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section, to the administrative law judge for 
the issuance of a subpoena, including a subpoena duces tecum, requiring 
the attendance of the witness at a deposition. The administrative law 
judge may issue a deposition subpoena under this section upon showing 
that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a

[[Page 495]]

brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to answer or submit any evidence the witness has refused to 
submit during the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena under paragraph (b) or 
(c)(3) of this section, the subpoenaing party or other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
portions of the subpoena that the administrative law judge has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
administrative law judge on a party who fails to comply with, or 
procures a failure to comply with, a subpoena issued under this section.



Sec.  19.28  Interlocutory review.

    (a) General rule. The Comptroller may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Comptroller only in accordance with the procedures set forth in this 
section and Sec.  19.23.
    (b) Scope of review. The Comptroller may exercise interlocutory 
review of a ruling of the administrative law judge if the Comptroller 
finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which

[[Page 496]]

substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec.  19.23. Any party may 
file a response to a request for interlocutory review in accordance with 
Sec.  19.23(d). Upon the expiration of the time for filing all 
responses, the administrative law judge shall refer the matter to the 
Comptroller for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Comptroller under 
this section suspends or stays the proceeding unless otherwise ordered 
by the administrative law judge or the Comptroller.



Sec.  19.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the Comptroller issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the administrative law judge, may 
file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits and any other evidentiary materials that the moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the contention that summary 
disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the Comptroller. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.



Sec.  19.30  Partial summary disposition.

    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge

[[Page 497]]

has determined that summary disposition is warranted will be addressed 
in the recommended decision filed at the conclusion of the hearing.



Sec.  19.31  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at his or her 
expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.



Sec.  19.32  Prehearing submissions.

    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec.  19.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Comptroller, in the Comptroller's discretion, determines that 
holding an open hearing would be contrary to the public interest. Within 
20 days of service of the notice or, in the case of change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), 
within 20 days from service of the hearing order, any respondent may 
file with the Comptroller a request for a private hearing, and any party 
may file a reply to such a request. A party must serve on the 
administrative law judge a copy of any request or reply the party files 
with the Comptroller. The form of, and procedure for, these requests and 
replies are governed by Sec.  19.23. A party's

[[Page 498]]

failure to file a request or a reply constitutes a waiver of any 
objections regarding whether the hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20336, May 6, 1996]



Sec.  19.34  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the administrative law judge may issue a subpoena or a subpoena 
duces tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at the hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek enforcement of the subpoena pursuant to Sec.  
19.26(c).

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20336, May 6, 1996]



Sec.  19.35  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation

[[Page 499]]

of their cases, but if they do not agree, the administrative law judge 
shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20336, May 6, 1996]



Sec.  19.36  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or the Comptroller shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by an appropriate Federal financial 
institutions regulatory agency or by a state regulatory agency, is 
admissible either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Comptroller.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.

[[Page 500]]

    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec.  19.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20336, May 6, 1996]



Sec.  19.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under Sec.  
19.37(b), the administrative law judge shall file with and certify to 
the Comptroller, for decision, the record of the proceeding. The record 
must include the administrative law judge's recommended decision, 
recommended findings of fact, recommended conclusions of law, and 
proposed order; all prehearing and hearing transcripts, exhibits, and 
rulings; and the motions, briefs, memoranda, and other supporting papers 
filed in connection with the hearing. The administrative law judge shall 
serve upon each party the recommended decision, findings, conclusions, 
and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Comptroller for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the Comptroller a certified index of the entire record of the 
proceeding. The certified index shall include, at a minimum, an entry 
for each paper, document or motion filed with the administrative law 
judge in the proceeding, the date of the filing, and the identity of the 
filer. The certified index shall also include an exhibit index 
containing, at a minimum,

[[Page 501]]

an entry consisting of exhibit number and title or description for: Each 
exhibit introduced and admitted into evidence at the hearing; each 
exhibit introduced but not admitted into evidence at the hearing; each 
exhibit introduced and admitted into evidence after the completion of 
the hearing; and each exhibit introduced but not admitted into evidence 
after the completion of the hearing.

[61 FR 20336, May 6, 1996]



Sec.  19.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec.  19.38, a party may file with the Comptroller written exceptions to 
the administrative law judge's recommended decision, findings, 
conclusions or proposed order, to the admission or exclusion of 
evidence, or to the failure of the administrative law judge to make a 
ruling proposed by a party. A supporting brief may be filed at the time 
the exceptions are filed, either as part of the same document or in a 
separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Comptroller if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the administrative law judge and failed to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.



Sec.  19.40  Review by the Comptroller.

    (a) Notice of submission to the Comptroller. When the Comptroller 
determines that the record in the proceeding is complete, the 
Comptroller shall serve notice upon the parties that the proceeding has 
been submitted to the Comptroller for final decision.
    (b) Oral argument before the Comptroller. Upon the initiative of the 
Comptroller or on the written request of any party filed with the 
Comptroller within the time for filing exceptions, the Comptroller may 
order and hear oral argument on the recommended findings, conclusions, 
decision, and order of the administrative law judge. A written request 
by a party must show good cause for oral argument and state reasons why 
arguments cannot be presented adequately in writing. A denial of a 
request for oral argument may be set forth in the Comptroller's final 
decision. Oral argument before the Comptroller must be on the record.
    (c) Comptroller's final decision. (1) Decisional employees may 
advise and assist the Comptroller in the consideration and disposition 
of the case. The final decision of the Comptroller will be based upon 
review of the entire record of the proceeding, except that the 
Comptroller may limit the issues to be reviewed to those findings and 
conclusions to which opposing arguments or exceptions have been filed by 
the parties.
    (2) The Comptroller shall render a final decision within 90 days 
after notification of the parties that the case has been submitted for 
final decision, or 90 days after oral argument, whichever is later, 
unless the Comptroller orders that the action or any aspect thereof be 
remanded to the administrative law judge for further proceedings. Copies 
of the final decision and order of the Comptroller shall be served upon 
each party to the proceeding, upon other persons required by statute, 
and, if directed by the Comptroller or required by statute, upon any 
appropriate state or Federal supervisory authority.



Sec.  19.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the Comptroller may not, unless specifically 
ordered by the

[[Page 502]]

Comptroller or a reviewing court, operate as a stay of any order issued 
by the Comptroller. The Comptroller may, in his or her discretion, and 
on such terms as he or she finds just, stay the effectiveness of all or 
any part of an order pending a final decision on a petition for review 
of that order.



            Subpart B_Procedural Rules for OCC Adjudications



Sec.  19.100  Filing documents.

    All materials required to be filed with or referred to the 
Comptroller or the administrative law judge in any proceeding under this 
part must be filed with the Hearing Clerk, Office of the Comptroller of 
the Currency, 400 7th Street, SW., Washington, DC 20219. Filings to be 
made with the Hearing Clerk include the notice and answer; motions and 
responses to motions; briefs; the record filed by the administrative law 
judge after the issuance of a recommended decision; the recommended 
decision filed by the administrative law judge following a motion for 
summary disposition; referrals by the administrative law judge of 
motions for interlocutory review; exceptions and requests for oral 
argument; and any other papers required to be filed with the Comptroller 
or the administrative law judge under this part.

[68 FR 48265, Aug. 13, 2002, as amended at 73 FR 22243, Apr. 24, 2008; 
79 FR 15641, Mar. 21, 2014]



Sec.  19.101  Delegation to OFIA.

    Unless otherwise ordered by the Comptroller, administrative 
adjudications subject to subpart A of this part shall be conducted by an 
administrative law judge assigned to OFIA.



   Subpart C_Removals, Suspensions, and Prohibitions When a Crime Is 
                   Charged or a Conviction is Obtained



Sec.  19.110  Scope.

    This subpart applies to informal hearings afforded to any 
institution-affiliated party who has been suspended or removed from 
office or prohibited from further participation in the affairs of any 
depository institution pursuant to 12 U.S.C. 1818(g) by a notice or 
order issued by the Comptroller.

[56 FR 38028, Aug. 9, 1991, as amended at 73 FR 22243, Apr. 24, 2008]



Sec.  19.111  Suspension, removal, or prohibition.

    The Comptroller may serve a notice of suspension or order of removal 
or prohibition pursuant to 12 U.S.C. 1818(g) on an institution-
affiliated party. A copy of such notice or order will be served on any 
depository institution that the subject of the notice or order is 
affiliated with at the time the notice or order is issued, whereupon the 
institution-affiliated party involved must immediately cease service to, 
or participation in the affairs of, that depository institution and, if 
so determined by the OCC, any other depository institution. The notice 
or order will indicate the basis for suspension, removal or prohibition 
and will inform the institution-affiliated party of the right to request 
in writing, to be received by the OCC within 30 days from the date that 
the institution-affiliated party was served with such notice or order, 
an opportunity to show at an informal hearing that continued service to 
or participation in the conduct of the affairs of any depository 
institution has not posed, does not pose, or is not likely to pose a 
threat to the interests of the depositors of, or has not threatened, 
does not threaten, or is not likely to threaten to impair public 
confidence in, any relevant depository institution. The written request 
must be sent by certified mail to, or served personally with a signed 
receipt on, the District Deputy Comptroller in the OCC district in which 
the bank in question is located; if the bank is supervised by Large Bank 
Supervision, to the Senior Deputy Comptroller for Large Bank Supervision 
for the Office of the Comptroller of the Currency; if the bank is 
supervised by Mid-Size/Community Bank Supervision, to the Senior Deputy 
Comptroller for Mid-Size/Community Bank Supervision for the Office of 
the Comptroller of the Currency; or if the institution-affiliated party 
is no longer affiliated with a

[[Page 503]]

particular national bank, to the Deputy Comptroller for Special 
Supervision, Washington, DC 20219. The request must state specifically 
the relief desired and the grounds on which that relief is based. For 
purposes of this section, the term depository institution means any 
depository institution of which the petitioner is or was an institution-
affiliated party at the time at which the notice or order was issued by 
the Comptroller.

[73 FR 22243, Apr. 24, 2008]



Sec.  19.112  Informal hearing.

    (a) Issuance of hearing order. After receipt of a request for 
hearing, the District Deputy Comptroller, the Senior Deputy Comptroller 
for Large Bank Supervision, the Senior Deputy Comptroller for Mid-Size/
Community Bank Supervision, or the Deputy Comptroller for Special 
Supervision, as appropriate, must notify the petitioner requesting the 
hearing, the OCC's Enforcement and Compliance Division, and the 
appropriate OCC District Counsel of the date, time, and place fixed for 
the hearing. The hearing must be scheduled to be held not later than 30 
days from the date when a request for hearing is received unless the 
time is extended in response to a written request of the petitioner. The 
District Deputy Comptroller, the Senior Deputy Comptroller for Large 
Bank Supervision, the Senior Deputy Comptroller for Mid-Size/Community 
Bank Supervision, or the Deputy Comptroller for Special Supervision,, as 
appropriate, may extend the hearing date only for a specific period of 
time and must take appropriate action to ensure that the hearing is not 
unduly delayed.
    (b) Appointment of presiding officer. the District Deputy 
Comptroller, the Senior Deputy Comptroller for Large Bank Supervision, 
the Senior Deputy Comptroller for Mid-Size/Community Bank Supervision, 
or the Deputy Comptroller for Special Supervision, as appropriate, must 
appoint one or more OCC employees as the presiding officer to conduct 
the hearing. The presiding officer(s) may not have been involved in the 
proceeding, a factually related proceeding, or the underlying 
enforcement action in a prosecutorial or investigative role.
    (c) Waiver of oral hearing--(1) Petitioner. When the petitioner 
requests a hearing, the petitioner may elect to have the matter 
determined by the presiding officer solely on the basis of written 
submissions by serving on the District Deputy Comptroller, the Senior 
Deputy Comptroller for Large Bank Supervision, the Senior Deputy 
Comptroller for Mid-Size/Community Bank Supervision, or the Deputy 
Comptroller for Special Supervision, as appropriate, and all parties, a 
signed document waiving the statutory right to appear and make oral 
argument. The petitioner must present the written submissions to the 
presiding officer, and serve the other parties, not later than ten days 
prior to the date fixed for the hearing, or within such shorter time 
period as the presiding officer may permit.
    (2) OCC. The OCC may respond to the petitioner's submissions by 
presenting the presiding officer with a written response, and by serving 
the other parties, not later than the date fixed for the hearing, or 
within such other time period as the presiding officer may require.
    (d) Hearing procedures--(1) Conduct of hearing. Hearings under this 
subpart are not subject to the provisions of subpart A of this part or 
the adjudicative provisions of the Administrative Procedure Act (5 
U.S.C. 554-557).
    (2) Powers of the presiding officer. The presiding officer shall 
determine all procedural issues that are governed by this subpart. The 
presiding officer may also permit or limit the number of witnesses and 
impose time limitations as he or she deems reasonable. The informal 
hearing will not be governed by the formal rules of evidence. All oral 
presentations, when permitted, and documents deemed by the presiding 
officer to be relevant and material to the proceeding and not unduly 
repetitious will be considered. The presiding officer may ask questions 
of any person participating in the hearing and may make any rulings 
reasonably necessary to facilitate the effective and efficient operation 
of the hearing.
    (3) Presentation. (i) The OCC may appear and the petitioner may 
appear personally or through counsel at the hearing to present relevant 
written

[[Page 504]]

materials and oral argument. Except as permitted in paragraph (c) of 
this section, each party, including the OCC, must file a copy of any 
affidavit, memorandum, or other written material to be presented at the 
hearing with the presiding officer and must serve the other parties not 
later than ten days prior to the hearing or within such shorter time 
period as permitted by the presiding officer.
    (ii) If the petitioner or the appointed OCC attorney desires to 
present oral testimony or witnesses at the hearing, he or she must file 
a written request with the presiding officer not later than ten days 
prior to the hearing, or within a shorter time period as permitted by 
the presiding officer. The names of proposed witnesses should be 
included, along with the general nature of the expected testimony, and 
the reasons why oral testimony is necessary. The presiding officer 
generally will not admit oral testimony or witnesses unless a specific 
and compelling need is demonstrated. Witnesses, if admitted, shall be 
sworn.
    (iii) In deciding on any suspension, the presiding officer shall not 
consider the ultimate question of the guilt or innocence of the 
individual with respect to the criminal charges which are outstanding. 
In deciding on any removal, the presiding officer shall not consider 
challenges to or efforts to impeach the validity of the conviction. The 
presiding officer may consider facts in either situation, however, which 
show the nature of the events on which the indictment or conviction was 
based.
    (4) Record. A transcript of the proceedings may be taken if the 
petitioner requests a transcript and agrees to pay all expenses or if 
the presiding officer determines that the nature of the case warrants a 
transcript. The presiding officer may order the record to be kept open 
for a reasonable period following the hearing, not to exceed five 
business days, to permit the petitioner or the appointed OCC attorney to 
submit additional documents for the record. Thereafter, no further 
submissions may be accepted except for good cause shown.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20337, May 6, 1996; 73 
FR 22244, Apr. 24, 2008]



Sec.  19.113  Recommended and final decisions.

    (a) The presiding officer must issue a recommended decision to the 
Comptroller within 20 days of the conclusion of the hearing or, when the 
petitioner has waived an oral hearing, within 20 days of the date fixed 
for the hearing. The presiding officer must serve promptly a copy of the 
recommended decision on the parties to the proceeding. The decision must 
include a summary of the facts and arguments of the parties.
    (b) Each party may, within ten days of being served with the 
presiding officer's recommended decision, submit to the Comptroller 
comments on the recommended decision.
    (c) Within 60 days of the conclusion of the hearing or, when the 
petitioner has waived an oral hearing, within 60 days from the date 
fixed for the hearing, the Comptroller must notify the petitioner by 
registered mail whether the suspension or removal from office, and 
prohibition from participation in any manner in the affairs of any 
depository institution, will be affirmed, terminated, or modified. The 
Comptroller's decision must include a statement of reasons supporting 
the decision. The Comptroller's decision is a final and unappealable 
order.
    (d) A finding of not guilty or other disposition of the charge on 
which a notice of suspension was based does not preclude the Comptroller 
from thereafter instituting removal proceedings pursuant to section 8(e) 
of the FDIA (12 U.S.C. 1818(e)) and subpart: A of this part.
    (e) A removal or prohibition by order remains in effect until 
terminated by the Comptroller. A suspension or prohibition by notice 
remains in effect until the criminal charge is disposed of or until 
terminated by the Comptroller.
    (f) A suspended or removed individual may petition the Comptroller 
to reconsider the decision any time after the expiration of a 12-month 
period from

[[Page 505]]

the date of the decision, but no petition for reconsideration may be 
made within 12 months of a previous petition. The petition must state 
specifically the relief sought and the grounds therefor, and may be 
accompanied by a supporting memorandum and any other documentation the 
petitioner wishes to have considered. No hearing need be granted on the 
petition for reconsideration.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20337, May 6, 1996; 73 
FR 22244, Apr. 24, 2008]



   Subpart D_Exemption Hearings Under Section 12(h) of the Securities 
                          Exchange Act of 1934



Sec.  19.120  Scope.

    The rules in this subpart apply to informal hearings that may be 
held by the Comptroller to determine whether, pursuant to authority in 
sections 12 (h) and (i) of the Exchange Act (15 U.S.C. 78l (h) and (i)), 
to exempt in whole or in part an issuer or a class of issuers from the 
provisions of section 12(g), or from section 13 or 14 of the Exchange 
Act (15 U.S.C. 78l(g), 78m or 78n), or whether to exempt from section 16 
of the Exchange Act (15 U.S.C. 78p) any officer, director, or beneficial 
owner of securities of an issuer. The only issuers covered by this 
subpart are banks whose securities are registered pursuant to section 
12(g) of the Exchange Act (15 U.S.C. 78l(g)). The Comptroller may deny 
an application for exemption without a hearing.



Sec.  19.121  Application for exemption.

    An issuer or an individual (officer, director or shareholder) may 
submit a written application for an exemption order to the Securities 
and Corporate Practices Division, Office of the Comptroller of the 
Currency, Washington, DC 20219. The application must specify the type of 
exemption sought and the reasons therefor, including an explanation of 
why an exemption would not be inconsistent with the public interest or 
the protection of investors. The Securities and Corporate Practices 
Division shall inform the applicant in writing whether a hearing will be 
held to consider the matter.



Sec.  19.122  Newspaper notice.

    Upon being informed that an application will be considered at a 
hearing, the applicant shall publish a notice one time in a newspaper of 
general circulation in the community where the issuer's main office is 
located. The notice must state: the name and title of any individual 
applicants; the type of exemption sought; the fact that a hearing will 
be held; and a statement that interested persons may submit to the 
Securities and Corporate Practices Division, Office of the Comptroller 
of the Currency, Washington, DC 20219, within 30 days from the date of 
the newspaper notice, written comments concerning the application and a 
written request for an opportunity to be heard. The applicant shall 
promptly furnish a copy of the notice to the Securities and Corporate 
Practices Division, and to bank shareholders.



Sec.  19.123  Informal hearing.

    (a) Conduct of proceeding. The adjudicative provisions of the 
Administrative Procedure Act, formal rules of evidence and subpart A of 
this part do not apply to hearings conducted under this subpart, except 
as provided in Sec.  19.100(b).
    (b) Notice of hearing. Following the comment period, the Comptroller 
shall send a notice which fixes a date, time and place for hearing to 
each applicant and to any person who has requested an opportunity to be 
heard.
    (c) Presiding officer. The Comptroller shall designate a presiding 
officer to conduct the hearing. The presiding officer shall determine 
all procedural questions not governed by this subpart and may limit the 
number of witnesses and impose time and presentation limitations as are 
deemed reasonable. At the conclusion of the informal hearing, the 
presiding officer shall issue a recommended decision to the Comptroller 
as to whether the exemption should issue. The decision shall include a 
summary of the facts and arguments of the parties.
    (d) Attendance. The applicant and any person who has requested an 
opportunity to be heard may attend the hearing, with or without counsel. 
The hearing shall be open to the public. In addition, the applicant and 
any other

[[Page 506]]

hearing participant may introduce oral testimony through such witnesses 
as the presiding officer shall permit.
    (e) Order of presentation. (1) The applicant may present an opening 
statement of a length decided by the presiding officer. Then each of the 
hearing participants, or one among them selected with the approval of 
the presiding officer, may present an opening statement. The opening 
statement should summarize concisely what the applicant and each 
participant intends to show.
    (2) The applicant shall have an opportunity to make an oral 
presentation of facts and materials or submit written materials for the 
record. One or more of the hearing participants may make an oral 
presentation or a written submission.
    (3) After the above presentations, the applicant, followed by one or 
more of the hearing participants, may make concise summary statements 
reviewing their position.
    (f) Witnesses. The obtaining and use of witnesses is the 
responsibility of the parties afforded the hearing. All witnesses shall 
be present on their own volition, but any person appearing as a witness 
may be questioned by each applicant, any hearing participant, and the 
presiding officer. Witnesses shall be sworn unless otherwise directed by 
the presiding officer.
    (g) Evidence. The presiding officer may exclude data or materials 
deemed to be improper or irrelevant. Formal rules of evidence do not 
apply. Documentary material must be of a size consistent with ease of 
handling and filing. The presiding officer may determine the number of 
copies that must be furnished for purposes of the hearing.
    (h) Transcript. A transcript of each proceeding will be arranged by 
the OCC, with all expenses, including the furnishing of a copy to the 
presiding officer, being borne by the applicant.



Sec.  19.124  Decision of the Comptroller.

    Following the conclusion of the hearing and the submission of the 
record and the presiding officer's recommended decision to the 
Comptroller for decision, the Comptroller shall notify the applicant and 
all persons who have so requested in writing of the final disposition of 
the application. Exemptions granted must be in the form of an order 
which specifies the type of exemption granted and its terms and 
conditions.



Subpart E_Disciplinary Proceedings Involving the Federal Securities Laws



Sec.  19.130  Scope.

    (a) Except as provided in this subpart, subpart A of this part 
applies to proceedings by the Comptroller to determine whether, pursuant 
to authority contained in sections 15B(c)(5), 15C(c)(2)(A), 17A(c)(3), 
and 17A(c)(4)(C) of the Exchange Act (15 U.S.C. 78o-4(c)(5), 78o-
5(c)(2)(A), 78q-1(c)(3)(A), and 78q-1(c)(4)(C)), to take disciplinary 
action against the following:
    (1) A bank which is a municipal securities dealer, or any person 
associated or seeking to become associated with such a municipal 
securities dealer;
    (2) A bank which is a government securities broker or dealer, or any 
person associated with such government securities broker or dealer; or
    (3) A bank which is a transfer agent, or any person associated or 
seeking to become associated with such transfer agent.
    (b) In addition to the issuance of disciplinary orders after 
opportunity for hearing, the Comptroller or the Comptroller's delegate 
may issue and serve any notices and temporary or permanent cease-and-
desist orders and take any actions that are authorized by section 8 of 
the FDIA (12 U.S.C. 1818), sections 15B(c)(5), 15C(c)(2)(B), and 
17A(d)(2) of the Exchange Act, and other subparts of this part against 
the following:
    (1) The parties listed in paragraph (a) of this section; and
    (2) A bank which is a clearing agency.
    (c) Nothing in this subpart impairs the powers conferred on the 
Comptroller by other provisions of law.



Sec.  19.131  Notice of charges and answer.

    (a) Proceedings are commenced when the Comptroller serves a notice 
of charges on a bank or associated person. The notice must indicate the 
type of

[[Page 507]]

disciplinary action being contemplated and the grounds therefor, and fix 
a date, time and place for hearing. The hearing must be set for a date 
at least 30 days after service of the notice. A party served with a 
notice of charges may file an answer as prescribed in Sec.  19.19. Any 
party who fails to appear at a hearing personally or by a duly 
authorized representative shall be deemed to have consented to the 
issuance of a disciplinary order.
    (b) All proceedings under this subpart must be commenced, and the 
notice of charges must be filed, on a public basis, unless otherwise 
ordered by the Comptroller. Pursuant to Sec.  19.33(a), a request for a 
private hearing may be filed within 20 days of service of the notice.



Sec.  19.132  Disciplinary orders.

    (a) In the event of consent, or if on the record filed by the 
administrative law judge, the Comptroller finds that any act or omission 
or violation specified in the notice of charges has been established, 
the Comptroller may serve on the bank or persons concerned a 
disciplinary order, as provided in the Exchange Act. The order may:
    (1) Censure, limit the activities, functions or operations, or 
suspend or revoke the registration of a bank which is a municipal 
securities dealer;
    (2) Censure, suspend or bar any person associated or seeking to 
become associated with a municipal securities dealer;
    (3) Censure, limit the activities, functions or operations, or 
suspend or bar a bank which is a government securities broker or dealer;
    (4) Censure, limit the activities, functions or operations, or 
suspend or bar any person associated with a government securities broker 
or dealer;
    (5) Deny registration to, limit the activities, functions, or 
operations or suspend or revoke the registration of a bank which is a 
transfer agent; or
    (6) Censure or limit the activities or functions, or suspend or bar, 
any person associated or seeking to become associated with a transfer 
agent.
    (b) A disciplinary order is effective when served on the party or 
parties involved and remains effective and enforceable until it is 
stayed, modified, terminated, or set aside by action of the Comptroller 
or a reviewing court.



Sec.  19.135  Applications for stay or review of disciplinary actions 
imposed by registered clearing agencies.

    (a) Stays. The rules adopted by the Securities and Exchange 
Commission (SEC) pursuant to section 19 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78s) regarding applications by persons for whom the 
SEC is the appropriate regulatory agency for stays of disciplinary 
sanctions or summary suspensions imposed by registered clearing agencies 
(17 CFR 240.19d-2) apply to applications by national banks. References 
to the ``Commission'' are deemed to refer to the ``OCC.''
    (b) Reviews. The regulations adopted by the SEC pursuant to section 
19 of the Securities Exchange Act of 1934 (15 U.S.C. 78s) regarding 
applications by persons for whom the SEC is the appropriate regulatory 
agency for reviews of final disciplinary sanctions, denials of 
participation, or prohibitions or limitations of access to services 
imposed by registered clearing agencies (17 CFR 240.19d-3(a)-(f)) apply 
to applications by national banks. References to the ``Commission'' are 
deemed to refer to the ``OCC.''

[61 FR 68559, Dec. 30, 1996]



    Subpart F_Civil Money Penalty Authority Under the Securities Laws



Sec.  19.140  Scope.

    (a) Except as provided in this subpart, subpart A of this part 
applies to proceedings by the Comptroller to determine whether, pursuant 
to authority contained in section 21B of the Exchange Act (15 U.S.C. 
78u-2), in proceedings commenced pursuant to sections 15B, 15C, and 17A 
of the Exchange Act (15 U.S.C. 78o-4, 78o-5, or 78q-1) for which the OCC 
is the appropriate regulatory agency under section 3(a)(34) of the 
Exchange Act (15 U.S.C. 78c(a)(34)), the Comptroller may impose a civil 
money penalty against the following:
    (1) A bank which is a municipal securities dealer, or any person 
associated

[[Page 508]]

or seeking to become associated with such a municipal securities dealer;
    (2) A bank which is a government securities broker or dealer, or any 
person associated with such government securities broker or dealer; or
    (3) A bank which is a transfer agent, or any person associated or 
seeking to become associated with such transfer agent.
    (b) All proceedings under this subpart must be commenced, and the 
notice of assessment must be filed, on a public basis, unless otherwise 
ordered by the Comptroller. Pursuant to Sec.  19.33(a), any request for 
a private hearing must be filed within 20 days of service of the notice.



     Subpart G_Cease-and-Desist Authority Under the Securities Laws



Sec.  19.150  Scope.

    (a) Except as provided in this subpart, subpart A of this part 
applies to proceedings by the Comptroller to determine whether, pursuant 
to authority contained in sections 12(i) and 21C of the Exchange Act (15 
U.S.C. 78l(i) and 78u-3), the Comptroller may initiate cease-and-desist 
proceedings against a national bank for violations of sections 12, 13, 
14(a), 14(c), 14(d), 14(f), and 16 of the Exchange Act or regulations or 
rules issued thereunder (15 U.S.C. 78l, 78m, 78n(a), 78n(c), 78n(d), 
78n(f), and 78p) .
    (b) All proceedings under this subpart must be commenced, and the 
notice of charges must be filed, on a public basis, unless otherwise 
ordered by the Comptroller. Pursuant to Sec.  19.33(a), any request for 
a private hearing must be filed within 20 days of service of the notice.



                    Subpart H_Change in Bank Control



Sec.  19.160  Scope.

    (a) Section 7(j) of the FDIA (12 U.S.C. 1817(j)) provides that no 
person may acquire control of an insured depository institution unless 
the appropriate Federal bank regulatory agency has been given prior 
written notice of the proposed acquisition. If, after investigating and 
soliciting comment on the proposed acquisition, the agency decides that 
the acquisition should be disapproved, the agency shall mail a written 
notification to the proposed acquiring person in writing within three 
days of the decision. The party can then request an agency hearing on 
the proposed acquisition. The OCC's procedures for reviewing notices of 
proposed acquisitions in change-in-control proceedings are set forth in 
Sec.  5.50 of this chapter.
    (b) Unless otherwise provided in this subpart, the rules in subpart 
A of this part set forth the procedures applicable to requests for OCC 
hearings.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20337, May 6, 1996]



Sec.  19.161  Notice of disapproval and hearing initiation.

    (a) Notice of disapproval. The OCC's written disapproval of a 
proposed acquisition of control of a national bank must:
    (1) Contain a statement of the basis for the disapproval; and
    (2) Indicate that the filer may request a hearing.
    (b) Hearing request. Following receipt of a notice of disapproval, a 
filer may request a hearing on the proposed acquisition. A hearing 
request must:
    (1) Be in writing; and
    (2) Be filed with the Hearing Clerk of the OCC within ten days after 
service on the filer of the notice of disapproval. If a filer fails to 
request a hearing with a timely written request, the notice of 
disapproval constitutes a final and unappealable order.
    (c) Hearing order. Following receipt of a hearing request, the 
Comptroller shall issue, within 20 days, an order that sets forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) The matters of fact or law upon which the disapproval is based; 
and
    (3) The requirement for filing an answer to the hearing order with 
OFIA within 20 days after service of the hearing order.
    (d) Answer. An answer to a hearing order must specifically deny 
those portions of the order that are disputed. Those portions of the 
order that the

[[Page 509]]

filer does not specifically deny are deemed admitted by the filer. Any 
hearing under this subpart is limited to those portions of the order 
that are specifically denied.
    (e) Effect of failure to answer. Failure of a filer to file an 
answer within 20 days after service of the hearing order constitutes a 
waiver of the filer's right to appear and contest the allegations in the 
hearing order. If a filer does not file a timely answer, enforcement 
counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the 
Comptroller a recommended decision containing the findings and the 
relief sought in the hearing order. Any final order issued by the 
Comptroller based upon a filer's failure to answer is deemed to be an 
order issued upon consent and is a final and unappealable order.

[61 FR 20337, May 6, 1996]



              Subpart I_Discovery Depositions and Subpoenas



Sec.  19.170  Discovery depositions.

    (a) General rule. In any proceeding instituted under or subject to 
the provisions of subpart A of this part, a party may take the 
deposition of an expert, or of a person, including another party, who 
has direct knowledge of matters that are non-privileged, relevant, and 
material to the proceeding, and where there is need for the deposition. 
The deposition of experts shall be limited to those experts who are 
expected to testify at the hearing.
    (b) Notice. A party desiring to take a deposition shall give 
reasonable notice in writing to the deponent and to every other party to 
the proceeding. The notice must state the time and place for taking the 
deposition, and the name and address of the person to be deposed.
    (c) Time limits. A party may take depositions at any time after the 
commencement of the proceeding, but no later than ten days before the 
scheduled hearing date, except with permission of the administrative law 
judge for good cause shown.
    (d) Conduct of the deposition. The witness must be duly sworn, and 
each party will have the right to examine the witness with respect to 
all non-privileged, relevant, and material matters of which the witness 
has factual, direct, and personal knowledge. Objections to questions or 
exhibits must be in short form and must state the grounds for the 
objection. Failure to object to questions or exhibits is not a waiver 
except where the grounds for the objection might have been avoided if 
the objection had been timely presented.
    (e) Recording the testimony--(1) Generally. The party taking the 
deposition must have a certified court reporter record the witness's 
testimony:
    (i) By stenotype machine or electronic sound recording device;
    (ii) Upon agreement of the parties, by any other method; or
    (iii) For good cause and with leave of the administrative law judge, 
by any other method.
    (2) Cost. The party taking the deposition must bear the cost of the 
recording and transcribing the witness's testimony.
    (3) Transcript. Unless the parties agree that a transcription is not 
necessary, the court reporter must provide a transcript of the witness's 
testimony to the party taking the deposition and must make a copy of the 
transcript available to each party upon payment by that party of the 
cost of the copy.
    (f) Protective orders. At any time after notice of a deposition has 
been given, a party may file a motion for the issuance of a protective 
order. Such protective order may prohibit, terminate, or limit the scope 
or manner of the taking of a deposition. The administrative law judge 
shall grant such protective order upon a showing of sufficient grounds, 
including that the deposition:
    (1) Is unreasonable, oppressive, excessive in scope, or unduly 
burdensome;
    (2) Involves privileged, irrelevant, or immaterial matters;
    (3) Involves unwarranted attempts to pry into a party's preparation 
for trial; or
    (4) Is being conducted in bad faith or in such manner as to 
unreasonably

[[Page 510]]

annoy, embarrass, or oppress the witness.
    (g) Fees. Deposition witnesses, including expert witnesses, shall be 
paid the same expenses in the same manner as are paid witnesses in the 
district courts of the United States in proceedings in which the United 
States is a party. Expenses in accordance with this paragraph shall be 
paid by the party seeking to take the deposition.

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20338, May 6, 1996]



Sec.  19.171  Deposition subpoenas.

    (a) Issuance. At the request of a party, the administrative law 
judge shall issue a subpoena requiring the attendance of a witness at a 
discovery deposition under paragraph (a) of this section. The attendance 
of a witness may be required from any place in any state or territory 
that is subject to the jurisdiction of the United States or as otherwise 
permitted by law.
    (b) Service--(1) Methods of service. The party requesting the 
subpoena must serve it on the person named therein, or on that person's 
counsel, by any of the methods identified in Sec.  19.11(d).
    (2) Proof of service. The party serving the subpoena must file proof 
of service with the administrative law judge.
    (c) Motion to quash. A person named in a subpoena may file a motion 
to quash or modify the subpoena. A statement of the reasons for the 
motion must accompany it and a copy of the motion must be served on the 
party which requested the subpoena. The motion must be made prior to the 
time for compliance specified in the subpoena and not more than ten days 
after the date of service of the subpoena, or if the subpoena is served 
within 15 days of the hearing, within five days after the date of 
service.
    (d) Enforcement of deposition subpoena. Enforcement of a deposition 
subpoena shall be in accordance with the procedures of Sec.  19.27(d).

[56 FR 38028, Aug. 9, 1991, as amended at 61 FR 20338, May 6, 1996]



                     Subpart J_Formal Investigations



Sec.  19.180  Scope.

    This subpart and Sec.  19.8 apply to formal investigations initiated 
by order of the Comptroller or the Comptroller's delegate and pertain to 
the exercise of powers specified in 12 U.S.C. 481, 1818(n) and 1820(c), 
and section 21 of the Exchange Act (15 U.S.C. 78u). This subpart does 
not restrict or in any way affect the authority of the Comptroller to 
conduct examinations into the affairs or ownership of banks and their 
affiliates.



Sec.  19.181  Confidentiality of formal investigations.

    Information or documents obtained in the course of a formal 
investigation are confidential and may be disclosed only in accordance 
with the provisions of part 4 of this chapter.



Sec.  19.182  Order to conduct a formal investigation.

    A formal investigation begins with the issuance of an order signed 
by the Comptroller or the Comptroller's delegate. The order must 
designate the person or persons who will conduct the investigation. Such 
persons are authorized, among other things, to issue subpoenas duces 
tecum, to administer oaths, and receive affirmations as to any matter 
under investigation by the Comptroller. Upon application and for good 
cause shown, the Comptroller may limit, modify, or withdraw the order at 
any stage of the proceedings.



Sec.  19.183  Rights of witnesses.

    (a) Any person who is compelled or requested to furnish testimony, 
documentary evidence, or other information with respect to any matter 
under formal investigation shall, on request, be shown the order 
initiating the investigation.
    (b) Any person who, in a formal investigation, is compelled to 
appear and testify, or who appears and testifies by request or 
permission of the Comptroller, may be accompanied, represented, and 
advised by counsel. The right to be accompanied, represented, and 
advised by counsel means the right

[[Page 511]]

of a person testifying to have an attorney present at all times while 
testifying and to have the attorney--
    (1) Advise the person before, during and after the conclusion of 
testimony;
    (2) Question the person briefly at the conclusion of testimony to 
clarify any of the answers given; and
    (3) Make summary notes during the testimony solely for the use of 
the person.
    (c) Any person who has given or will give testimony and counsel 
representing the person may be excluded from the proceedings during the 
taking of testimony of any other witness.
    (d) Any person who is compelled to give testimony is entitled to 
inspect any transcript that has been made of the testimony but may not 
obtain a copy if the Comptroller's representatives conducting the 
proceedings have cause to believe that the contents should not be 
disclosed pending completion of the investigation.
    (e) Any designated representative conducting an investigative 
proceeding shall report to the Comptroller any instances where a person 
has been guilty of dilatory, obstructionist or insubordinate conduct 
during the course of the proceeding or any other instance involving a 
violation of this part. The Comptroller may take such action as the 
circumstances warrant, including exclusion of the offending individual 
or individuals from participation in the proceedings.



Sec.  19.184  Service of subpoena and payment of witness expenses.

    (a) Methods of service. Service of a subpoena may be made by any of 
the methods identified in Sec.  19.11(d).
    (b) Expenses. A witness who is subpoenaed will be paid the same 
expenses in the same manner as witnesses in the district courts of the 
United States. The expenses need not be tendered at the time a subpoena 
is served.

[61 FR 20338, May 6, 1996]



    Subpart K_Parties and Representational Practice Before the OCC; 
                          Standards of Conduct



Sec.  19.190  Scope.

    This subpart contains rules relating to parties and representational 
practice before the OCC. This subpart includes the imposition of 
sanctions by the administrative law judge, any other presiding officer 
appointed pursuant to subparts C and D of this part, or the Comptroller 
against parties or their counsel in an adjudicatory proceeding under 
this part. This subpart also covers other disciplinary sanctions--
censure, suspension or debarment--against individuals who appear before 
the OCC in a representational capacity either in an adjudicatory 
proceeding under this part or in any other matters connected with 
presentations to the OCC relating to a client's rights, privileges, or 
liabilities. This representation includes, but is not limited to, the 
practice of attorneys and accountants. Employees of the OCC are not 
subject to disciplinary proceedings under this subpart.

[56 FR 38028, Aug. 9, 1991; 56 FR 41726, Aug. 22, 1991]



Sec.  19.191  Definitions.

    As used in Sec. Sec.  19.190 through 19.201, the following terms 
shall have the meaning given in this section unless the context 
otherwise requires:
    (a) Practice before the OCC includes any matters connected with 
presentations to the OCC or any of its officers or employees relating to 
a client's rights, privileges or liabilities under laws or regulations 
administered by the OCC. Such matters include, but are not limited to, 
representation of a client in an adjudicatory proceeding under this 
part; the preparation of any statement, opinion or other paper or 
document by an attorney, accountant, or other licensed professional 
which is filed with, or submitted to, the OCC, on behalf of another 
person in, or in connection with, any application, notification, report 
or document; the representation of a person at conferences, hearings and 
meetings; and the transaction of other business before the OCC on behalf 
of another person. The term

[[Page 512]]

``practice before the OCC'' does not include work prepared for a bank 
solely at its request for use in the ordinary course of its business.
    (b) Attorney means any individual who is a member in good standing 
of the bar of the highest court of any state, possession, territory, 
commonwealth, of the United States or the District of Columbia.
    (c) Accountant means any individual who is duly qualified to 
practice as a certified public accountant or a public accountant in any 
state, possession, territory, commonwealth of the United States, or the 
District of Columbia.



Sec.  19.192  Sanctions relating to conduct in an adjudicatory proceeding.

    (a) General rule. Appropriate sanctions may be imposed when any 
party or person representing a party in an adjudicatory proceeding under 
this part has failed to comply with an applicable statute, regulation, 
or order, and that failure to comply:
    (1) Constitutes contemptuous conduct;
    (2) Materially injures or prejudices another party in terms of 
substantive injury, incurring additional expenses including attorney's 
fees, prejudicial delay, or otherwise;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Unduly delays the proceeding.
    (b) Sanctions. Sanctions which may be imposed include any one or 
more of the following:
    (1) Issuing an order against the party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just; and
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Procedure for imposition of sanctions. (1) Upon the motion of 
any party, or on his or her own motion, the administrative law judge or 
other presiding officer may impose sanctions in accordance with this 
section. The administrative law judge or other presiding officer shall 
submit to the Comptroller for final ruling any sanction entering a final 
order that determines the case on the merits.
    (2) No sanction authorized by this section, other than refusal to 
accept late filings, shall be imposed without prior notice to all 
parties and an opportunity for any party against whom sanctions would be 
imposed to be heard. Such opportunity to be heard may be on such notice, 
and the response may be in such form as the administrative law judge or 
other presiding officer directs. The administrative law judge or other 
presiding officer may limit the opportunity to be heard to an 
opportunity of a party or a party's representative to respond orally 
immediately after the act or inaction covered by this section is noted 
by the administrative law judge or other presiding officer.
    (3) Requests for the imposition of sanctions by any party, and the 
imposition of sanctions, are subject to interlocutory review pursuant to 
Sec.  19.25 in the same manner as any other ruling.
    (d) Section not exclusive. Nothing in this section shall be read as 
precluding the administrative law judge or other presiding officer or 
the Comptroller from taking any other action, or imposing any 
restriction or sanction, authorized by applicable statute or regulation.



Sec.  19.193  Censure, suspension or debarment.

    The Comptroller may censure an individual or suspend or debar such 
individual from practice before the OCC if he or she is incompetent in 
representing a client's rights or interest in a significant matter 
before the OCC; or engages, or has engaged, in disreputable conduct; or 
refuses to comply with the rules and regulations in this part; or with 
intent to defraud in any

[[Page 513]]

manner, willfully and knowingly deceives, misleads, or threatens any 
client or prospective client. The suspension or debarment of an 
individual may be initiated only upon a finding by the Comptroller that 
the basis for the disciplinary action is sufficiently egregious.



Sec.  19.194  Eligibility of attorneys and accountants to practice.

    (a) Attorneys. Any attorney who is qualified to practice as an 
attorney and is not currently under suspension or debarment pursuant to 
this subpart may practice before the OCC.
    (b) Accountants. Any accountant who is qualified to practice as a 
certified public accountant or public accountant and is not currently 
under suspension or debarment by the OCC may practice before the OCC.



Sec.  19.195  Incompetence.

    Incompetence in the representation of a client's rights and 
interests in a significant matter before the OCC is grounds for 
suspension or debarment. The term ``incompetence'' encompasses conduct 
that reflects a lack of the knowledge, judgment and skill that a 
professional would ordinarily and reasonably be expected to exercise in 
adequately representing the rights and interests of a client. Such 
conduct includes, but is not limited to:
    (a) Handling a matter which the individual knows or should know that 
he or she is not competent to handle, without associating with a 
professional who is competent to handle such matter.
    (b) Handling a matter without adequate preparation under the 
circumstances.
    (c) Neglect in a matter entrusted to him or her.



Sec.  19.196  Disreputable conduct.

    Disreputable conduct for which an individual may be censured, 
debarred, or suspended from practice before the OCC includes:
    (a) Willfully or recklessly violating or willfully or recklessly 
aiding and abetting the violation of any provision of the Federal 
banking or applicable securities laws or the rules and regulations 
thereunder or conviction of any offense involving dishonesty or breach 
of trust;
    (b) Knowingly or recklessly giving false or misleading information, 
or participating in any way in the giving of false information to the 
OCC or any officer or employee thereof, or to any tribunal authorized to 
pass upon matters administered by the OCC in connection with any matter 
pending or likely to be pending before it. The term ``information'' 
includes facts or other statements contained in testimony, financial 
statements, applications for enrollment, affidavits, declarations, or 
any other document or written or oral statement;
    (c) Directly or indirectly attempting to influence, or offering or 
agreeing to attempt to influence, the official action of any officer or 
employee of the OCC by the use of threats, false accusations, duress or 
coercion, by the offer of any special inducement or promise of advantage 
or by the bestowing of any gift, favor, or thing of value.
    (d) Disbarment or suspension from practice as an attorney, or 
debarment or suspension from practice as a certified public accountant 
or public accountant, by any duly constituted authority of any state, 
possession, or commonwealth of the United States, or the District of 
Columbia for the conviction of a felony or misdemeanor involving moral 
turpitude in matters relating to the supervisory responsibilities of the 
OCC, where the conviction has not been reversed on appeal.
    (e) Knowingly aiding or abetting another individual to practice 
before the OCC during that individual's period of suspension, debarment, 
or ineligibility.
    (f) Contemptuous conduct in connection with practice before the OCC, 
and knowingly making false accusations and statements, or circulating or 
publishing malicious or libelous matter.
    (g) Suspension, debarment or removal from practice before the Board 
of Governors, the FDIC, the OTS, the Securities and Exchange Commission, 
the Commodity Futures Trading Commission, or any other Federal or state 
agency; and
    (h) Willful violation of any of the regulations contained in this 
part.

[56 FR 38028, Aug. 9, 1991, as amended at 68 FR 48265, Aug. 13, 2003]

[[Page 514]]



Sec.  19.197  Initiation of disciplinary proceeding.

    (a) Receipt of information. An individual, including any employee of 
the OCC, who has reason to believe that an individual practicing before 
the OCC in a representative capacity has engaged in any conduct that 
would serve as a basis for censure, suspension or debarment under Sec.  
19.192, may make a report thereof and forward it to the OCC or to such 
person as may be delegated responsibility for such matters by the 
Comptroller.
    (b) Censure without formal proceeding. Upon receipt of information 
regarding an individual's qualification to practice before the OCC, the 
Comptroller or the Comptroller's delegate may, after giving the 
individual notice and opportunity to respond, censure such individual.
    (c) Institution of formal disciplinary proceeding. When the 
Comptroller has reason to believe that any individual who practices 
before the OCC in a representative capacity has engaged in conduct that 
would serve as a basis for censure, suspension or debarment under Sec.  
19.192, the Comptroller may, after giving the individual notice and 
opportunity to respond, institute a formal disciplinary proceeding 
against such individual. The proceeding will be conducted pursuant to 
Sec.  19.199 and initiated by a complaint which names the individual as 
a respondent and is signed by the Comptroller or the Comptroller's 
delegate. Except in cases of willfulness, or when time, the nature of 
the proceeding, or the public interest do not permit, a proceeding under 
this section may not be commenced until the respondent has been 
informed, in writing, of the facts or conduct which warrant institution 
of a proceeding and the respondent has been accorded the opportunity to 
comply with all lawful requirements or take whatever action may be 
necessary to remedy the conduct that is the basis for the commencement 
of the proceeding.

[56 FR 38028, Aug. 9, 1991; 56 FR 46667, Sept. 13, 1991]



Sec.  19.198  Conferences.

    (a) General. The Comptroller may confer with a proposed respondent 
concerning allegations of misconduct or other grounds for censure, 
debarment or suspension, regardless of whether a proceeding for 
debarment or suspension has been commenced. If a conference results in a 
stipulation in connection with a proceeding in which the individual is 
the respondent, the stipulation may be entered in the record at the 
request of either party to the proceeding.
    (b) Resignation or voluntary suspension. In order to avoid the 
institution of, or a decision in, a debarment or suspension proceeding, 
a person who practices before the OCC may consent to suspension from 
practice. At the discretion of the Comptroller, the individual may be 
suspended or debarred in accordance with the consent offered.



Sec.  19.199  Proceedings under this subpart.

    Any hearing held under this subpart is held before an administrative 
law judge pursuant to procedures set forth in subpart A of this part. 
The Comptroller or the Comptroller's delegate shall appoint a person to 
represent the OCC in the hearing. Any person having prior involvement in 
the matter which is the basis for the suspension or debarment proceeding 
is disqualified from representing the OCC in the hearing. The hearing 
will be closed to the public unless the Comptroller on his or her own 
initiative, or on the request of a party, otherwise directs. The 
administrative law judge shall issue a recommended decision to the 
Comptroller who shall issue the final decision and order. The 
Comptroller may censure, debar or suspend an individual, or take such 
other disciplinary action as the Comptroller deems appropriate.



Sec.  19.200  Effect of suspension, debarment or censure.

    (a) Debarment. If the final order against the respondent is for 
debarment, the individual may not practice before the OCC unless 
otherwise permitted to do so by the Comptroller.
    (b) Suspension. If the final order against the respondent is for 
suspension, the individual may not practice before the OCC during the 
period of suspension.

[[Page 515]]

    (c) Censure. If the final order against the respondent is for 
censure, the individual may be permitted to practice before the OCC, but 
such individual's future representations may be subject to conditions 
designed to promote high standards of conduct. If a written letter of 
censure is issued, a copy will be maintained in the OCC's files.
    (d) Notice of debarment or suspension. Upon the issuance of a final 
order for suspension or debarment, the Comptroller shall give notice of 
the order to appropriate officers and employees of the OCC and to 
interested departments and agencies of the Federal government. The 
Comptroller or the Comptroller's delegate shall also give notice to the 
appropriate authorities of the state in which any debarred or suspended 
individual is or was licensed to practice.



Sec.  19.201  Petition for reinstatement.

    At the expiration of the period of time designated in the order of 
debarment, the Comptroller may entertain a petition for reinstatement 
from any person debarred from practice before the OCC. The Comptroller 
may grant reinstatement only if satisfied that the petitioner is likely 
to act in accordance with the regulations in this part, and that 
granting reinstatement would not be contrary to the public interest. Any 
request for reinstatement shall be limited to written submissions unless 
the Comptroller, in his or her discretion, affords the petitioner a 
hearing.



                  Subpart L_Equal Access to Justice Act



Sec.  19.210  Scope.

    The Equal Access to Justice Act regulations applicable to formal OCC 
adjudicatory proceedings under this part are set forth at 31 CFR part 6.



 Subpart M_Procedures for Reclassifying a Bank Based on Criteria Other 
                              Than Capital

    Source: 57 FR 44895, Sept. 29, 1992, unless otherwise noted.



Sec.  19.220  Scope.

    This subpart applies to the procedures afforded to any bank that has 
been reclassified to a lower capital category by a notice or order 
issued by the OCC pursuant to section 38 of the Federal Deposit 
Insurance Act and this part.



Sec.  19.221  Reclassification of a bank based on unsafe 
or unsound condition or practice.

    (a) Issuance of notice of proposed reclassification--(1) Grounds for 
reclassification. (i) Pursuant to Sec.  6.4 of this chapter, the OCC may 
reclassify a well capitalized bank as adequately capitalized or subject 
an adequately capitalized bank or undercapitalized bank to the 
supervisory actions applicable to the next lower capital category if:
    (A) The OCC determines that the bank is in an unsafe or unsound 
condition; or
    (B) The OCC deems the bank to be engaging in an unsafe or unsound 
practice and not to have corrected the deficiency.
    (ii) Any action pursuant to this paragraph (a)(1) shall hereinafter 
be referred to as ``reclassification.''
    (2) Prior notice to institution. Prior to taking action pursuant to 
Sec.  6.4 of this chapter, the OCC shall issue and serve on the bank a 
written notice of the OCC's intention to reclassify the bank.
    (b) Contents of notice. A notice of intention to reclassify a bank 
based on unsafe or unsound condition will include:
    (1) A statement of the bank's capital measures and capital levels 
and the category to which the bank would be reclassified;
    (2) The reasons for reclassification of the bank;
    (3) The date by which the bank subject to the notice of 
reclassification may file with the OCC a written appeal of the proposed 
reclassification and a request for a hearing, which shall be at least 14 
calendar days from the date of service of the notice unless the OCC 
determines that a shorter period is appropriate in light of the 
financial condition of the bank or other relevant circumstances.
    (c) Response to notice of proposed reclassification. A bank may file 
a written

[[Page 516]]

response to a notice of proposed reclassification within the time period 
set by the OCC. The response should include:
    (1) An explanation of why the bank is not in unsafe or unsound 
condition or otherwise should not be reclassified;
    (2) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
or company regarding the reclassification.
    (d) Failure to file response. Failure by a bank to file, within the 
specified time period, a written response with the OCC to a notice of 
proposed reclassification shall constitute a waiver of the opportunity 
to respond and shall constitute consent to the reclassification.
    (e) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the OCC under this section. If the bank desires to present oral 
testimony or witnesses at the hearing, the bank shall include a request 
to do so with the request for an informal hearing. A request to present 
oral testimony or witnesses shall specify the names of the witnesses and 
the general nature of their expected testimony. Failure to request a 
hearing shall constitute a waiver of any right to a hearing, and failure 
to request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (f) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the OCC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the OCC allows further time at the 
request of the bank. The hearing shall be held in Washington, DC or at 
such other place as may be designated by the OCC, before a presiding 
officer(s) designated by the OCC to conduct the hearing.
    (g) Hearing procedures. (1) The bank shall have the right to 
introduce relevant written materials and to present oral argument at the 
hearing. The bank may introduce oral testimony and present witnesses 
only if expressly authorized by the OCC or the presiding officer(s). 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules of Practice and Procedure in subpart A 
of this part apply to an informal hearing under this section unless the 
OCC orders that such procedures shall apply.
    (2) The informal hearing shall be recorded, and a transcript 
furnished to the bank upon request and payment of the cost thereof. 
Witnesses need not be sworn, unless specifically requested by a party or 
the presiding officer(s). The presiding officer(s) may ask questions of 
any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (h) Recommendation of presiding officer(s). Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
on the reclassification.
    (i) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC will decide whether to reclassify the 
bank and notify the bank of the OCC's decision.



Sec.  19.222  Request for rescission of reclassification.

    Any bank that has been reclassified under part 6 of this chapter and 
this subpart, may, upon a change in circumstances, request in writing 
that the OCC reconsider the reclassification, and may propose that the 
reclassification be rescinded and that any directives issued in 
connection with the reclassification be modified, rescinded, or removed. 
Unless otherwise ordered by the OCC, the bank shall remain subject to 
the reclassification and to any directives issued in connection with 
that reclassification while such request is pending before the OCC.

[[Page 517]]



    Subpart N_Order To Dismiss a Director or Senior Executive Officer

    Source: 57 FR 44896, Sept. 29, 1992, unless otherwise noted.



Sec.  19.230  Scope.

    This subpart applies to informal hearings afforded to any director 
or senior executive officer dismissed pursuant to an order issued under 
12 U.S.C. 1831o and part 6 of this chapter.



Sec.  19.231  Order to dismiss a director or senior executive officer.

    (a) Service of notice. When the OCC issues and serves a directive on 
a bank pursuant to subpart B of part 6 of this chapter requiring the 
bank to dismiss from office any director or senior executive officer 
under section 38(f)(2)(F)(ii) of the FDI Act, the OCC shall also serve a 
copy of the directive, or the relevant portions of the directive where 
appropriate, upon the person to be dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed within 
10 calendar days of the receipt of the directive by the Respondent, 
unless further time is allowed by the OCC at the request of the 
Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement shall include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
OCC or its designee under this section. If the Respondent desires to 
present oral testimony or witnesses at the hearing, the Respondent shall 
include a request to do so with the request for an informal hearing. The 
request to present oral testimony or witnesses shall specify the names 
of the witnesses and the general nature of their expected testimony. 
Failure to request a hearing shall constitute a waiver of any right to a 
hearing and failure to request the opportunity to present oral testimony 
or witnesses shall constitute a waiver of any right or opportunity to 
present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the OCC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a bank to dismiss from office any director or senior 
executive officer, the OCC shall issue an order directing an informal 
hearing to commence no later than 30 days after receipt of the request, 
unless the Respondent requests a later date. The hearing shall be held 
in Washington, DC, or at such other place as may be designated by the 
OCC, before a presiding officer(s) designated by the OCC to conduct the 
hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the OCC or the presiding officer(s). Neither the 
provisions of the Administrative Procedure Act governing adjudications 
required by statute to be determined on the record nor the Uniform Rules 
of Practice and Procedure in subpart A of this part apply to an informal 
hearing under this section unless the OCC orders that such procedures 
shall apply.
    (2) The informal hearing shall be recorded, and a transcript 
furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment

[[Page 518]]

by or service with the bank would materially strengthen the bank's 
ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the bank's capital level or failure 
to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the bank based on supervisory criteria other than 
capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officer. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
concerning the Respondent's request for reinstatement with the bank.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC shall grant or deny the request for 
reinstatement and notify the Respondent of the OCC's decision. If the 
OCC denies the request for reinstatement, the OCC shall set forth in the 
notification the reasons for the OCC's action.



                Subpart O_Civil Money Penalty Adjustments

    Source: 65 FR 77252, Dec. 11, 2000, unless otherwise noted.



Sec.  19.240  Inflation adjustments.

    (a) Statutory formula to calculate inflation adjustments. The OCC is 
required by statute to annually adjust for inflation the maximum amount 
of each civil money penalty within its jurisdiction to administer. The 
inflation adjustment is calculated by multiplying the maximum dollar 
amount of the civil money penalty for the previous calendar year by the 
cost-of-living inflation adjustment multiplier provided annually by the 
Office of Management and Budget and rounding the total to the nearest 
dollar.
    (b) Notice of inflation adjustments. The OCC will publish notice in 
the Federal Register of the maximum penalties which may be assessed on 
an annual basis on or before January 15 of each calendar year based on 
the formula in paragraph (a) of this section, for penalties assessed on, 
or after, the date of publication of the most recent notice related to 
conduct occurring on, or after, November 2, 2015.

[83 FR 1518, Jan. 12, 2018]



    Subpart P_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

    Source: 68 FR 48265, Aug. 13, 2003, unless otherwise noted.



Sec.  19.241  Scope.

    This subpart, which implements section 36(g)(4) of the FDIA (12 
U.S.C. 1831m(g)(4)), provides rules and procedures for the removal, 
suspension, or debarment of independent public accountants and their 
accounting firms from performing independent audit and attestation 
services required by section 36 of the FDIA (12 U.S.C. 1831m) for 
insured national banks, insured Federal savings associations, and 
insured Federal branches of foreign banks.

[73 FR 22244, Apr. 24, 2008, as amended at 85 FR 42641, July 14, 2020]



Sec.  19.242  Definitions.

    As used in this subpart, the following terms have the meaning given 
below unless the context requires otherwise:
    (a) Accounting firm means a corporation, proprietorship, 
partnership, or other business firm providing audit services.
    (b) Audit services means any service required to be performed by an 
independent public accountant by section 36 of the FDIA (12 U.S.C. 
1831m) and 12 CFR part 363, including attestation services.
    (c) Independent public accountant (accountant) means any individual 
who performs or participates in providing audit services.

[68 FR 48265, Aug. 13, 2003, as amended at 85 FR 42641, July 14, 2020]

[[Page 519]]



Sec.  19.243  Removal, suspension, or debarment.

    (a) Good cause for removal, suspension, or debarment--(1) 
Individuals. The Comptroller may remove, suspend, or debar an 
independent public accountant from performing audit services for insured 
national banks, insured Federal savings associations, or insured Federal 
branches of foreign banks that are subject to section 36 of the FDIA (12 
U.S.C. 1831m) if, after service of a notice of intention and opportunity 
for hearing in the matter, the Comptroller finds that the accountant:
    (i) Lacks the requisite qualifications to perform audit services;
    (ii) Has knowingly or recklessly engaged in conduct that results in 
a violation of applicable professional standards, including those 
standards and conflicts of interest provisions applicable to accountants 
through the Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat. 745 
(2002) (Sarbanes-Oxley Act), and developed by the Public Company 
Accounting Oversight Board and the Securities and Exchange Commission;
    (iii) Has engaged in negligent conduct in the form of:
    (A) A single instance of highly unreasonable conduct that results in 
a violation of applicable professional standards in circumstances in 
which an accountant knows, or should know, that heightened scrutiny is 
warranted; or
    (B) Repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to perform audit services;
    (iv) Has knowingly or recklessly given false or misleading 
information, or knowingly or recklessly participated in any way in the 
giving of false or misleading information, to the OCC or any officer or 
employee of the OCC;
    (v) Has engaged in, or aided and abetted, a material and knowing or 
reckless violation of any provision of the Federal banking or securities 
laws or the rules and regulations thereunder, or any other law;
    (vi) Has been removed, suspended, or debarred from practice before 
any Federal or State agency regulating the banking, insurance, or 
securities industries, other than by an action listed in Sec.  19.244, 
on grounds relevant to the provision of audit services; or
    (vii) Is suspended or debarred for cause from practice as an 
accountant by any duly constituted licensing authority of any State, 
possession, commonwealth, or the District of Columbia.
    (2) Accounting firms. If the Comptroller determines that there is 
good cause for the removal, suspension, or debarment of a member or 
employee of an accounting firm under paragraph (a)(1) of this section, 
the Comptroller also may remove, suspend, or debar such firm or one or 
more offices of such firm. In considering whether to remove, suspend, or 
debar a firm or an office thereof, and the term of any sanction against 
a firm under this section, the Comptroller may consider, for example:
    (i) The gravity, scope, or repetition of the act or failure to act 
that constitutes good cause for the removal, suspension, or debarment;
    (ii) The adequacy of, and adherence to, applicable policies, 
practices, or procedures for the accounting firm's conduct of its 
business and the performance of audit services;
    (iii) The selection, training, supervision, and conduct of members 
or employees of the accounting firm involved in the performance of audit 
services;
    (iv) The extent to which managing partners or senior officers of the 
accounting firm have participated, directly, or indirectly through 
oversight or review, in the act or failure to act; and
    (v) The extent to which the accounting firm has, since the 
occurrence of the act or failure to act, implemented corrective internal 
controls to prevent its recurrence.
    (3) Limited scope orders. An order of removal, suspension (including 
an immediate suspension), or debarment may, at the discretion of the 
Comptroller, be made applicable to a particular insured national bank, 
insured Federal savings association, or insured Federal branch of a 
foreign bank or class of insured national banks, insured Federal savings 
associations, or insured Federal branches of foreign banks.

[[Page 520]]

    (4) Remedies not exclusive. The remedies provided in this subpart 
are in addition to any other remedies the OCC may have under any other 
applicable provisions of law, rule, or regulation.
    (b) Proceedings to remove, suspend, or debar--(1) Initiation of 
formal removal, suspension, or debarment proceedings. The Comptroller 
may initiate a proceeding to remove, suspend, or debar an accountant or 
accounting firm from performing audit services by issuing a written 
notice of intention to take such action that names the individual or 
firm as a respondent and describes the nature of the conduct that 
constitutes good cause for such action.
    (2) Hearings under paragraph (b) of this section. An accountant or 
firm named as a respondent in the notice issued under paragraph (b)(1) 
of this section may request a hearing on the allegations in the notice. 
Hearings conducted under this paragraph will be conducted in the same 
manner as other hearings under the Uniform Rules of Practice and 
Procedure (12 CFR part 19, subpart A), subject to the limitations in 
Sec.  19.243(c)(4).
    (c) Immediate suspension from performing audit services--(1) In 
general. If the Comptroller serves a written notice of intention to 
remove, suspend, or debar an accountant or accounting firm from 
performing audit services, the Comptroller may, with due regard for the 
public interest and without a preliminary hearing, immediately suspend 
such accountant or firm from performing audit services for insured 
national banks, insured Federal savings associations, or insured Federal 
branches of foreign banks, if the Comptroller:
    (i) Has a reasonable basis to believe that the accountant or firm 
has engaged in conduct (specified in the notice served on the accountant 
or firm under paragraph (b) of this section) that would constitute 
grounds for removal, suspension, or debarment under paragraph (a) of 
this section;
    (ii) Determines that immediate suspension is necessary to avoid 
immediate harm to an insured depository institution or its depositors or 
to the depository system as a whole; and
    (iii) Serves such respondent with written notice of the immediate 
suspension.
    (2) Procedures. An immediate suspension notice issued under this 
paragraph will become effective upon service. Such suspension will 
remain in effect until the date the Comptroller dismisses the charges 
contained in the notice of intention, or the effective date of a final 
order of removal, suspension, or debarment issued by the Comptroller to 
the respondent.
    (3) Petition for stay. Any accountant or firm immediately suspended 
from performing audit services in accordance with paragraph (c)(1) of 
this section may, within 10 calendar days after service of the notice of 
immediate suspension, file with the Office of the Comptroller of the 
Currency, Washington, DC 20219 for a stay of such immediate suspension. 
If no petition is filed within 10 calendar days, the right to a petition 
is waived and the immediate suspension remains in effect pursuant to 
paragraph (c)(2).
    (4) Hearing on petition. Upon receipt of a stay petition, the 
Comptroller will designate a presiding officer who will fix a place and 
time (not more than 10 calendar days after receipt of the petition, 
unless further time is allowed by the presiding officer at the request 
of petitioner) at which the immediately suspended party may appear, 
personally or through counsel, to submit written materials and oral 
argument. Any OCC employee engaged in investigative or prosecuting 
functions for the OCC in a case may not, in that or a factually related 
case, serve as a presiding officer or participate or advise in the 
decision of the presiding officer or of the OCC, except as witness or 
counsel in the proceeding. In the sole discretion of the presiding 
officer, upon a specific showing of compelling need, oral testimony of 
witnesses may also be presented. In hearings held pursuant to this 
paragraph there will be no discovery and the provisions of Sec. Sec.  
19.6 through 19.12, 19.16, and 19.21 of this part apply.
    (5) Decision on petition. Within 30 calendar days after the hearing, 
the presiding officer will issue a decision. The presiding officer will 
grant a stay upon a demonstration that a substantial

[[Page 521]]

likelihood exists of the respondent's success on the issues raised by 
the notice of intention and that, absent such relief, the respondent 
will suffer immediate and irreparable injury, loss, or damage. In the 
absence of such a demonstration, the presiding officer will notify the 
parties that the immediate suspension will be continued pending the 
completion of the administrative proceedings pursuant to the notice.
    (6) Review of presiding officer's decision. The parties may seek 
review of the presiding officer's decision by filing a petition for 
review with the presiding officer within 10 calendar days after service 
of the decision. Replies must be filed within 10 calendar days after the 
petition filing date. Upon receipt of a petition for review and any 
reply, the presiding officer will promptly certify the entire record to 
the Comptroller. Within 60 calendar days of the presiding officer's 
certification, the Comptroller will issue an order notifying the 
affected party whether or not the immediate suspension should be 
continued or reinstated. The order will state the basis of the 
Comptroller's decision.

[68 FR 48265, Aug. 13, 2003, as amended at 85 FR 42641, July 14, 2020]



Sec.  19.244  Automatic removal, suspension, or debarment.

    (a) An independent public accountant or accounting firm may not 
perform audit services for insured national banks, insured Federal 
savings associations, or insured Federal branches of foreign banks if 
the accountant or firm:
    (1) Is subject to a final order of removal, suspension, or debarment 
(other than a limited scope order) issued by the Board of Governors of 
the Federal Reserve System, the Federal Deposit Insurance Corporation, 
or the former Office of Thrift Supervision under section 36 of the FDIA 
(12 U.S.C. 1831m).
    (2) Is subject to a temporary suspension or permanent revocation of 
registration or a temporary or permanent suspension or bar from further 
association with any registered public accounting firm issued by the 
Public Company Accounting Oversight Board or the Securities and Exchange 
Commission under sections 105(c)(4)(A) or (B) of the Sarbanes-Oxley Act 
(15 U.S.C. 7215(c)(4)(A) or (B)); or
    (3) Is subject to an order of suspension or denial of the privilege 
of appearing or practicing before the Securities and Exchange 
Commission.
    (b) Upon written request, the Comptroller, for good cause shown, may 
grant written permission to such accountant or firm to perform audit 
services for insured national banks, insured Federal savings 
associations, or insured Federal branches of foreign banks. The request 
must contain a concise statement of the action requested. The 
Comptroller may require the applicant to submit additional information.

[68 FR 48265, Aug. 13, 2003, as amended at 85 FR 42641, July 14, 2020]



Sec.  19.245  Notice of removal, suspension, or debarment.

    (a) Notice to the public. Upon the issuance of a final order for 
removal, suspension, or debarment of an independent public accountant or 
accounting firm from providing audit services, the Comptroller will make 
the order publicly available and provide notice of the order to the 
other Federal banking agencies.
    (b) Notice to the Comptroller by accountants and firms. An 
accountant or accounting firm that provides audit services to a insured 
national bank, insured Federal savings association, or insured Federal 
branch of a foreign bank must provide the Comptroller with written 
notice of:
    (1) Any currently effective order or other action described in Sec.  
19.243(a)(1)(vi) through (vii) or Sec.  19.244(a)(2) and (3); and
    (2) Any currently effective action by the Public Company Accounting 
Oversight Board under sections 105(c)(4)(C) or (G) of the Sarbanes-Oxley 
Act (15 U.S.C. 7215(c)(4)(C) or (G)).
    (c) Timing of notice. Written notice required by this paragraph must 
be given no later than 15 calendar days following the effective date of 
an order or action, or 15 calendar days before an accountant or firm 
accepts an engagement to provide audit services, whichever date is 
earlier.

[68 FR 48265, Aug. 13, 2003, as amended at 85 FR 42641, July 14, 2020]

[[Page 522]]



Sec.  19.246  Petition for reinstatement.

    (a) Form of petition. Unless otherwise ordered by the Comptroller, a 
petition for reinstatement by an independent public accountant, an 
accounting firm, or an office of a firm that was removed, suspended, or 
debarred under Sec.  19.243 may be made in writing at any time. The 
request must contain a concise statement of the action requested. The 
Comptroller may require the applicant to submit additional information.
    (b) Procedure. A petitioner for reinstatement under this section 
may, in the sole discretion of the Comptroller, be afforded a hearing. 
The accountant or firm bears the burden of going forward with a petition 
and proving the grounds asserted in support of the petition. In 
reinstatement proceedings, the person seeking reinstatement bears the 
burden of going forward with an application and proving the grounds 
asserted in support of the application. The Comptroller may, in his sole 
discretion, direct that any reinstatement proceeding be limited to 
written submissions. The removal, suspension, or debarment will continue 
until the Comptroller, for good cause shown, has reinstated the 
petitioner or until the suspension period has expired. The filing of a 
petition for reinstatement will not stay the effectiveness of the 
removal, suspension, or debarment of an accountant or firm.

[68 FR 48265, Aug. 13, 2003, as amended at 85 FR 42642, July 14, 2020]

    Effective Date Note: At 88 FR 89842, Dec. 28, 2023, part 19 was 
revised, effective Apr. 1, 2024. For the convenience of the user, the 
revised text is set forth as follows:



PART 19_RULES OF PRACTICE AND PROCEDURE (EFF. 04-01-24)

Sec.
19.0 Applicability date.

            Subpart A_Uniform Rules of Practice and Procedure

19.1 Scope.
19.2 Rules of construction.
19.3 Definitions.
19.4 Authority of the Comptroller.
19.5 Authority of the administrative law judge (ALJ).
19.6 Appearance and practice in adjudicatory proceedings.
19.7 Good faith certification.
19.8 Conflicts of interest.
19.9 Ex parte communications.
19.10 Filing of papers.
19.11 Service of papers.
19.12 Construction of time limits.
19.13 Change of time limits.
19.14 Witness fees and expenses.
19.15 Opportunity for informal settlement.
19.16 OCC's right to conduct examination.
19.17 Collateral attacks on adjudicatory proceeding.
19.18 Commencement of proceeding and contents of notice.
19.19 Answer.
19.21 Failure to appear.
19.22 Consolidation and severance of actions.
19.23 Motions.
19.24 Scope of document discovery.
19.25 Request for document discovery from parties.
19.26 Document subpoenas to nonparties.
19.27 Deposition of witness unavailable for hearing.
19.28 Interlocutory review.
19.29 Summary disposition.
19.30 Partial summary disposition.
19.31 Scheduling and prehearing conferences.
19.32 Prehearing submissions.
19.33 Public hearings.
19.34 Hearing subpoenas.
19.35 Conduct of hearings.
19.36 Evidence.
19.37 Post-hearing filings.
19.38 Recommended decision and filing of record.
19.39 Exceptions to recommended decision.
19.40 Review by the Comptroller.
19.41 Stays pending judicial review.

            Subpart B_Procedural Rules for OCC Adjudications

19.100 Filing documents.
19.101 Delegation to OFIA.
19.102 Civil money penalties.

  Subpart C_Removals, Suspensions, and Prohibitions of an Institution-
  Affiliated Party When a Crime Is Charged or a Conviction Is Obtained

19.110 Scope and definitions.
19.111 Suspension, removal, or prohibition of institution-affiliated 
          party.
19.112 Informal hearing.
19.113 Recommended and final decisions.

           Subpart D_Actions Under the Federal Securities Laws

19.120 Exemption hearings under section 12(h) of the Securities Exchange 
          Act of 1934.
19.121 Disciplinary proceedings.
19.122 Civil money penalty authority under Federal securities laws.
19.123 Cease-and-desist authority.

[[Page 523]]

Subpart E Through G--Reserved

                    Subpart H_Change in Bank Control

19.160 Scope.
19.161 Hearing process.

              Subpart I_Discovery Depositions and Subpoenas

19.170 Discovery depositions.
19.171 Deposition subpoenas.

                     Subpart J_Formal Investigations

19.180 Scope.
19.181 Confidentiality of formal investigations.
19.182 Order to conduct a formal investigation.
19.183 Rights of witnesses.
19.184 Service of subpoena and payment of witness expenses.
19.185 Dilatory, obstructionist, or insubordinate conduct.

    Subpart K_Parties and Representational Practice Before the OCC; 
                          Standards of Conduct

19.190 Scope.
19.191 Definitions.
19.192 Sanctions relating to conduct in an adjudicatory proceeding.
19.193 Censure, suspension, or debarment.
19.194 Eligibility of attorneys and accountants to practice.
19.195 Incompetence.
19.196 Disreputable conduct.
19.197 Initiation of disciplinary proceeding.
19.198 Conferences.
19.199 Proceedings under this subpart.
19.200 Effect of debarment, suspension, or censure.
19.201 Petition for reinstatement.

                  Subpart L_Equal Access to Justice Act

19.205 Authority and scope; waiver.
19.206 Definitions.
19.207 Application requirements.
19.208 Net worth exhibit.
19.209 Documentation of fees and expenses.
19.210 Filing and service of documents.
19.211 Answer to application.
19.212 Reply.
19.213 Settlement.
19.214 Further proceedings.
19.215 Decision.
19.216 Agency review.
19.217 Judicial review.
19.218 Stay of decision concerning award.
19.219 Payment of award.

Subpart M_Procedures for Reclassifying an Insured Depository Institution 
   Based on Criteria Other Than Capital Under Prompt Corrective Action

19.220 Scope.
19.221 Reclassification of an insured depository institution based on 
          unsafe or unsound condition or practice.
19.222 Request for rescission of reclassification.

Subpart N_Order To Dismiss a Director or Senior Executive Officer Under 
                        Prompt Corrective Action

19.230 Scope.
19.231 Order to dismiss a director or senior executive officer.

           Subpart O_Civil Money Penalty Inflation Adjustments

19.240 Inflation adjustments.

    Subpart P_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

19.241 Scope.
19.242 Definitions.
19.243 Removal, suspension, or debarment.
19.244 Automatic removal, suspension, or debarment.
19.245 Notice of removal, suspension, or debarment.
19.246 Petition for reinstatement.

     Subpart Q_Forfeiture of Franchise for Money Laundering or Cash 
                     Transaction Reporting Offenses

19.250 Scope.
19.251 Notice and hearing.
19.252 Presiding officer.
19.253 Grounds for termination.
19.254 Judicial review.

Appendix A to Part 19--Rules of Practice and Procedure

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93, 93a, 161, 164, 481, 
504, 1462a, 1463(a), 1464; 1467(d), 1467a(r), 1817(j), 1818, 1820, 
1831m, 1831o, 1832, 1884, 1972, 3102, 3108, 3110, 3349, 3909, 4717, and 
5412(b)(2)(B); 15 U.S.C. 78l, 78o-4, 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-
3, 78w, and 1639e; 28 U.S.C. 2461; 31 U.S.C. 330 and 5321; and 42 U.S.C. 
4012a.



Sec.  19.0  Applicability date.

    Subparts A through D and H, I, J, L, M, N, P, and Q of this part 
apply to adjudicatory proceedings initiated on or

[[Page 524]]

after April 1, 2024. The Rules of Practice and Procedure for national 
banks, Federal savings associations, and Federal branches and agencies 
that were in effect prior to April 1, 2024, set forth in appendix A to 
this part, continue to apply to adjudicatory proceedings initiated 
before April 1, 2024, unless the parties otherwise stipulate that the 
rules in this part, effective April 1, 2024, apply.



            Subpart A_Uniform Rules of Practice and Procedure



Sec.  19.1  Scope.

    This subpart prescribes Uniform Rules of practice and procedure 
applicable to adjudicatory proceedings required to be conducted on the 
record after opportunity for a hearing under the following statutory 
provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (``FDIA'') (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Office of the 
Comptroller of the Currency (``OCC'') should issue an order to approve 
or disapprove a person's proposed acquisition of an institution;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (``Exchange Act'') (15 U.S.C. 78o-5), to impose sanctions 
upon any government securities broker or dealer or upon any person 
associated or seeking to become associated with a government securities 
broker or dealer for which the OCC is the appropriate agency;
    (e) Assessment of civil money penalties by the OCC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate agency for any violation of:
    (1) Any provision of law referenced in 12 U.S.C. 93, or any 
regulation issued thereunder, and certain unsafe or unsound practices 
and breaches of fiduciary duty, pursuant to 12 U.S.C. 93;
    (2) Sections 22 and 23 of the Federal Reserve Act (``FRA''), or any 
regulation issued thereunder, and certain unsafe or unsound practices 
and breaches of fiduciary duty, pursuant to 12 U.S.C. 504 and 505;
    (3) Section 106(b) of the Bank Holding Company Amendments of 1970, 
pursuant to 12 U.S.C. 1972(2)(F);
    (4) Any provision of the Change in Bank Control Act of 1978 or any 
regulation or order issued thereunder, and certain unsafe or unsound 
practices and breaches of fiduciary duty, pursuant to 12 U.S.C. 
1817(j)(16);
    (5) Any provision of the International Lending Supervision Act of 
1983 (``ILSA''), or any rule, regulation or order issued thereunder, 
pursuant to 12 U.S.C. 3909;
    (6) Any provision of the International Banking Act of 1978 
(``IBA''), or any rule, regulation or order issued thereunder, pursuant 
to 12 U.S.C. 3108;
    (7) Section 5211 of the Revised Statutes (12 U.S.C. 161), pursuant 
to 12 U.S.C. 164;
    (8) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (9) Section 1120 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (10) The terms of any final or temporary order issued under section 
8 of the FDIA or any written agreement executed by the OCC or the former 
Office of Thrift Supervision (OTS), the terms of any condition imposed 
in writing by the OCC or the former OTS in connection with the grant of 
an application or request, certain unsafe or unsound practices, breaches 
of fiduciary duty, or any law or regulation not otherwise provided in 
this section, pursuant to 12 U.S.C. 1818(i)(2);
    (11) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder;
    (12) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (13) Section 5 of the Home Owners' Loan Act (HOLA) or any regulation 
or

[[Page 525]]

order issued thereunder, pursuant to 12 U.S.C. 1464(d), (s), and (v);
    (14) Section 9 of the HOLA or any regulation or order issued 
thereunder, pursuant to 12 U.S.C. 1467(d); and
    (15) Section 10 of the HOLA, pursuant to 12 U.S.C. 1467a(r);
    (f) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Removal, prohibition, and civil monetary penalty proceedings 
under section 10(k) of the FDIA (12 U.S.C. 1820(k)) for violations of 
the post-employment restrictions imposed by section 10(k); and
    (h) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules 
(see Sec.  19.3(j)).



Sec.  19.2  Rules of construction.

    For purposes of this part:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) The term counsel includes a non-attorney representative; and
    (c) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.



Sec.  19.3  Definitions.

    For purposes of this part, unless explicitly stated to the contrary:
    (a) Administrative law judge (ALJ) means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Comptroller means the Comptroller of the Currency or a person 
delegated to perform the functions of the Comptroller of the Currency.
    (d) Decisional employee means any member of the Comptroller's or 
ALJ's staff who has not engaged in an investigative or prosecutorial 
role in a proceeding and who may assist the Comptroller or the ALJ, 
respectively, in preparing orders, recommended decisions, decisions, and 
other documents under the Uniform Rules.
    (e) Electronic signature means electronically affixing the 
equivalent of a signature to an electronic document filed or transmitted 
electronically.
    (f) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the OCC in an adjudicatory 
proceeding.
    (g) Final order means an order issued by the Comptroller with or 
without the consent of the affected institution or the institution-
affiliated party, that has become final, without regard to the pendency 
of any petition for reconsideration or review.
    (h) Institution includes any national bank, Federal savings 
association, or Federal branch or agency of a foreign bank.
    (i) Institution-affiliated party means any institution-affiliated 
party as that term is defined in section 3(u) of the FDIA (12 U.S.C. 
1813(u)).
    (j) Local Rules means those rules promulgated by the OCC in the 
subparts of this part excluding this subpart.
    (k) OCC means the Office of the Comptroller of the Currency.
    (l) OFIA means the Office of Financial Institution Adjudication, the 
executive body charged with overseeing the administration of 
administrative enforcement proceedings for the OCC, the Board of 
Governors of the Federal Reserve System (``Board of Governors''), the 
Federal Deposit Insurance Corporation (``FDIC''), and the National 
Credit Union Administration (``NCUA'').
    (m) Party means the OCC and any person named as a party in any 
notice.
    (n) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency, or other entity or organization, including an 
institution as defined in paragraph (h) this section.
    (o) Respondent means any party other than the OCC.
    (p) Uniform Rules means those rules in this subpart that are common 
to the OCC, the Board of Governors, the FDIC, and the NCUA.
    (q) Violation means any violation as that term is defined in section 
3(v) of the FDIA (12 U.S.C. 1813(v)).

[[Page 526]]



Sec.  19.4  Authority of the Comptroller.

    The Comptroller may, at any time during the pendency of a 
proceeding, perform, direct the performance of, or waive performance of, 
any act which could be done or ordered by the ALJ.



Sec.  19.5  Authority of the administrative law judge (ALJ).

    (a) General rule. All proceedings governed by this part must be 
conducted in accordance with the provisions of 5 U.S.C. chapter 5. The 
ALJ has all powers necessary to conduct a proceeding in a fair and 
impartial manner and to avoid unnecessary delay.
    (b) Powers. The ALJ has all powers necessary to conduct the 
proceeding in accordance with paragraph (a) of this section, including 
the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, protective orders, 
and other orders, as authorized by this part, and to quash or modify any 
such subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec.  19.31;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Comptroller has the power to grant any motion to dismiss the proceeding 
or to decide any other motion that results in a final determination of 
the merits of the proceeding;
    (8) To prepare and present to the Comptroller a recommended decision 
as provided in this part;
    (9) To recuse oneself by motion made by a party or on the ALJ's own 
motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of an ALJ.



Sec.  19.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the OCC or an ALJ--(1) By attorneys. Any 
member in good standing of the bar of the highest court of any state, 
commonwealth, possession, territory of the United States, or the 
District of Columbia may represent others before the OCC if such 
attorney is not currently suspended or debarred from practice before the 
OCC.
    (2) By non-attorneys. An individual may appear on the individual's 
own behalf.
    (3) Notice of appearance.--(i) Any individual acting on the 
individual's own behalf or as counsel on behalf of a party, including 
the OCC, must file a notice of appearance with OFIA at or before the 
time that the individual submits papers or otherwise appears on behalf 
of a party in the adjudicatory proceeding. The notice of appearance must 
include:
    (A) A written declaration that the individual is currently qualified 
as provided in paragraphs (a)(1) or (2) of this section and is 
authorized to represent the particular party; and
    (B) A written acknowledgement that the individual has reviewed and 
will comply with the Uniform Rules and Local Rules in subpart B of this 
part.
    (ii) By filing a notice of appearance on behalf of a party in an 
adjudicatory proceeding, the counsel agrees and represents that the 
counsel is authorized to accept service on behalf of the represented 
party and that, in the event of withdrawal from representation, the 
counsel will, if required by the ALJ, continue to accept service until 
new counsel has filed a notice of appearance or until the represented 
party indicates that the party will proceed on a pro se basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous, or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.

[[Page 527]]



Sec.  19.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice must be signed by at least one 
counsel of record in the counsel's individual name and must state that 
counsel's mailing address, electronic mail address, and telephone 
number. A party who acts as the party's own counsel must sign that 
person's individual name and state that person's mailing address, 
electronic mail address, and telephone number on every filing or 
submission of record. Electronic signatures may be used to satisfy the 
signature requirements of this section.
    (b) Effect of signature.--(1) The signature of counsel or a party 
will constitute a certification that: the counsel or party has read the 
filing or submission of record; to the best of the counsel's or party's 
knowledge, information, and belief formed after reasonable inquiry, the 
filing or submission of record is well-grounded in fact and is warranted 
by existing law or a good faith argument for the extension, 
modification, or reversal of existing law; and the filing or submission 
of record is not made for any improper purpose, such as to harass or to 
cause unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the ALJ will 
strike the filing or submission of record, unless it is signed promptly 
after the omission is called to the attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of the counsel's or party's knowledge, 
information, and belief formed after reasonable inquiry, the counsel's 
or party's statements are well-grounded in fact and are warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law, and are not made for any improper purpose, 
such as to harass or to cause unnecessary delay or needless increase in 
the cost of litigation.



Sec.  19.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person may appear as 
counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The ALJ may take corrective measures at any stage of a 
proceeding to cure a conflict of interest in representation, including 
the issuance of an order limiting the scope of representation or 
disqualifying an individual from appearing in a representative capacity 
for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec.  19.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.



Sec.  19.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication. Ex parte communication 
means any material oral or written communication relevant to the merits 
of an adjudicatory proceeding that was neither on the record nor on 
reasonable prior notice to all parties that takes place between:
    (i) An interested person outside the OCC (including such person's 
counsel); and
    (ii) The ALJ handling that proceeding, the Comptroller, or a 
decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the Comptroller until the date that the Comptroller issues 
a final decision pursuant to Sec.  19.40(c):

[[Page 528]]

    (1) An interested person outside the OCC must not make or knowingly 
cause to be made an ex parte communication to the Comptroller, the ALJ, 
or a decisional employee; and
    (2) The Comptroller, ALJ, or decisional employee may not make or 
knowingly cause to be made to any interested person outside the OCC any 
ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the ALJ, the Comptroller, or any 
other person identified in paragraph (a) of this section, that person 
will cause all such written communications (or, if the communication is 
oral, a memorandum stating the substance of the communication) to be 
placed on the record of the proceeding and served on all parties. All 
other parties to the proceeding may, within ten days of service of the 
ex parte communication, file responses thereto and to recommend any 
sanctions that they believe to be appropriate under the circumstances. 
The ALJ or the Comptroller then determines whether any action should be 
taken concerning the ex parte communication in accordance with paragraph 
(d) of this section.
    (d) Sanctions. Any party or counsel to a party who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Comptroller or the ALJ including, 
but not limited to, exclusion from the proceedings and an adverse ruling 
on the issue which is the subject of the prohibited communication.
    (e) Separation of functions--(1) In general. Except to the extent 
required for the disposition of ex parte matters as authorized by law, 
the ALJ may not:
    (i) Consult a person or party on a fact in issue unless on notice 
and opportunity for all parties to participate; or
    (ii) Be responsible to or subject to the supervision or direction of 
an employee or agent engaged in the performance of investigative or 
prosecuting functions for the OCC.
    (2) Decision process. An employee or agent engaged in the 
performance of investigative or prosecuting functions for the OCC in a 
case may not, in that or a factually related case, participate or advise 
in the decision, recommended decision, or agency review of the 
recommended decision under Sec.  19.40, except as witness or counsel in 
administrative or judicial proceedings.



Sec.  19.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec.  19.25 
and 19.26, must be filed with OFIA, except as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Comptroller 
or the ALJ, filing may be accomplished by:
    (1) Electronic mail or other electronic means designated by the 
Comptroller or the ALJ;
    (2) Personal service;
    (3) Delivering the papers to a same day courier service or overnight 
delivery service; or
    (4) Mailing the papers by first class, registered, or certified 
mail.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, mailing address, electronic mail address, 
and telephone number of the counsel or party making the filing and must 
be accompanied by a certification setting forth when and how service has 
been made on all other parties. All papers filed must be double-spaced 
and printed or typewritten on an 8\1/2\ x 11 inch page and must be clear 
and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec.  19.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the OCC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.



Sec.  19.11  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers must serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party must use one of the following 
methods of service:

[[Page 529]]

    (1) Electronic mail or other electronic means;
    (2) Personal service;
    (3) Delivering the papers by same day courier service or overnight 
delivery service; or
    (4) Mailing the papers by first class, registered, or certified 
mail.
    (c) By the Comptroller or the ALJ.--(1) All papers required to be 
served by the Comptroller or the ALJ upon a party who has appeared in 
the proceeding in accordance with Sec.  19.6 will be served by 
electronic mail or other electronic means designated by the Comptroller 
or ALJ.
    (2) If a respondent has not appeared in the proceeding in accordance 
with Sec.  19.6, the Comptroller or the ALJ will serve the respondent by 
any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the respondent;
    (iv) By registered or certified mail, delivery by a same day courier 
service, or by an overnight delivery service to the respondent's last 
known mailing address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (4) By registered or certified mail, delivery by a same day courier 
service, or by an overnight delivery service to the person's last known 
mailing address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service must be made on at least one branch or 
agency so involved.



Sec.  19.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in paragraph (c) of this section, intermediate 
Saturdays, Sundays, and Federal holidays are not included.
    (b) When papers are deemed to be filed or served.--(1) Filing and 
service are deemed to be effective:
    (i) In the case of transmission by electronic mail or other 
electronic means, upon transmittal by the serving party;
    (ii) In the case of overnight delivery service or first class, 
registered, or certified mail, upon deposit in or delivery

[[Page 530]]

to an appropriate point of collection; or
    (iii) In the case of personal service or same day courier delivery, 
upon actual service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Comptroller or ALJ in the 
case of filing or by agreement of the parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by electronic mail or other electronic means 
or by same day courier delivery, add one calendar day to the prescribed 
period;
    (2) If service is made by overnight delivery service, add two 
calendar days to the prescribed period; or
    (3) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period.



Sec.  19.13  Change of time limits.

    Except as otherwise provided by law, the ALJ may, for good cause 
shown, extend the time limits prescribed by the Uniform Rules or by any 
notice or order issued in the proceedings. After the referral of the 
case to the Comptroller pursuant to Sec.  19.38, the Comptroller may 
grant extensions of the time limits for good cause shown. Extensions may 
be granted at the motion of a party after notice and opportunity to 
respond is afforded all non-moving parties or on the Comptroller's or 
the ALJ's own motion.



Sec.  19.14  Witness fees and expenses.

    (a) In general. A witness, including an expert witness, who 
testifies at a deposition or hearing will be paid the same fees for 
attendance and mileage as are paid in the United States district courts 
in proceedings in which the United States is a party, except as provided 
in paragraph (b) of this section and unless otherwise waived.
    (b) Exception for testimony by a party. In the case of testimony by 
a party, no witness fees or mileage need to be paid. The OCC will not be 
required to pay any fees to, or expenses of, any witness not subpoenaed 
by the OCC.
    (c) Timing of payment. Fees and mileage in accordance with this 
paragraph (c) must be paid in advance by the party requesting the 
subpoena, except that fees and mileage need not be tendered in advance 
where the OCC is the party requesting the subpoena.



Sec.  19.15  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
Any such offer or proposal may only be made to Enforcement Counsel. 
Submission of a written settlement offer does not provide a basis for 
adjourning or otherwise delaying all or any portion of a proceeding 
under this part. No settlement offer or proposal, or any subsequent 
negotiation or resolution, is admissible as evidence in any proceeding.



Sec.  19.16  OCC's right to conduct examination.

    Nothing contained in this subpart limits in any manner the right of 
the OCC to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the OCC to 
conduct or continue any form of investigation authorized by law.



Sec.  19.17  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding will continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart will be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.

[[Page 531]]



Sec.  19.18  Commencement of proceeding and contents of notice.

    (a) Commencement of proceeding.--(1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA, 12 U.S.C. 1817(j)(4), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the Comptroller.
    (ii) The notice must be served by Enforcement Counsel upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law. Enforcement Counsel may 
serve the notice upon counsel for the respondent, provided that 
Enforcement Counsel has confirmed that counsel represents the respondent 
in the matter and will accept service of the notice on behalf of the 
respondent.
    (iii) Enforcement Counsel must file the notice with OFIA.
    (2) Change-in control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
Comptroller.
    (b) Contents of notice. Notice pleading applies. The notice must 
provide:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) Matters of fact or law showing that the OCC is entitled to 
relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) That the answer and/or request for a hearing must be filed with 
OFIA.



Sec.  19.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent must 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent must also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the respondent lacks sufficient information to admit 
or deny each allegation of fact. A statement of lack of information has 
the effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer is deemed admitted for purposes 
of the proceeding. A respondent is not required to respond to the 
portion of a notice that constitutes the prayer for relief or proposed 
order. The answer must set forth affirmative defenses, if any, asserted 
by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of the respondent's right to appear and 
contest the allegations in the notice. If no timely answer is filed, 
Enforcement Counsel may file a motion for entry of an order of default. 
Upon a finding that no good cause has been shown for the failure to file 
a timely answer, the ALJ will file with the Comptroller a recommended 
decision containing the findings and the relief sought in the notice. 
Any final order issued by the Comptroller based upon a respondent's 
failure to answer is deemed to be an order issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order of the Comptroller without further action by the 
ALJ.



Sec.  19.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Comptroller or ALJ orders 
otherwise for good cause.

[[Page 532]]

    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the ALJ may 
admit the evidence when admission is likely to assist in adjudicating 
the merits of the action and the objecting party fails to satisfy the 
ALJ that the admission of such evidence would unfairly prejudice that 
party's action or defense upon the merits. The ALJ may grant a 
continuance to enable the objecting party to meet such evidence.



Sec.  19.21  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the ALJ will file with the Comptroller a 
recommended decision containing the findings and the relief sought in 
the notice.



Sec.  19.22  Consolidation and severance of actions.

    (a) Consolidation--(1) On the motion of any party, or on the ALJ's 
own motion, the ALJ may consolidate, for some or all purposes, any two 
or more proceedings, if each such proceeding involves or arises out of 
the same transaction, occurrence, or series of transactions or 
occurrences, or involves at least one common respondent or a material 
common question of law or fact, unless such consolidation would cause 
unreasonable delay or injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The ALJ may, upon the motion of any party, sever the 
proceeding for separate resolution of the matter as to any respondent 
only if the ALJ finds:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.



Sec.  19.23  Motions.

    (a) In writing.--(1) Except as otherwise provided in this section, 
an application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the ALJ. Written memoranda, briefs, affidavits, or 
other relevant material or documents may be filed in support of or in 
opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the ALJ directs that such motion be reduced to writing.
    (c) Filing of motions. Motions must be filed with the ALJ, except 
that following the filing of the recommended decision, motions must be 
filed with the Comptroller.
    (d) Responses.--(1) Except as otherwise provided in this section, 
within ten days after service of any written motion, or within such 
other period of time as may be established by the ALJ or the 
Comptroller, any party may file a written response to a motion. The ALJ 
will not rule on any oral or written motion before each party has had an 
opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec.  19.29 and 19.30.

[[Page 533]]



Sec.  19.24  Scope of document discovery.

    (a) Limits on discovery--(1) Subject to the limitations set out in 
paragraphs (b) through (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term documents includes writings, drawings, graphs, 
charts, photographs, recordings, electronically stored information, and 
other data or data compilations stored in any medium from which 
information can be obtained either directly or, if necessary, after 
translation by the responding party, into a reasonably usable form.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of either interrogatories or requests for 
admission is not permitted.
    (4) Any request to produce documents that calls for irrelevant 
material; or that is unreasonable, oppressive, excessive in scope, 
unduly burdensome, or repetitive of previous requests, or that seeks to 
obtain privileged documents will be denied or modified. A request is 
unreasonable, oppressive, excessive in scope, or unduly burdensome if, 
among other things, it fails to include justifiable limitations on the 
time period covered and the geographic locations to be searched, or the 
time provided to respond in the request is inadequate.
    (b) Relevance. A party may obtain document discovery regarding any 
non-privileged matter that has material relevance to the merits of the 
pending action.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, attorney work-product 
doctrine, bank examination privilege, law enforcement privilege, any 
government's or government agency's deliberative process privilege, and 
any other privileges the Constitution, any applicable act of Congress, 
or the principles of common law provide.
    (d) Time limits. All document discovery, including all responses to 
discovery requests, must be completed by the date set by the ALJ and no 
later than 30 days prior to the date scheduled for the commencement of 
the hearing, except as provided in the Local Rules. No exceptions to 
this time limit are permitted, unless the ALJ finds on the record that 
good cause exists for waiving the requirements of paragraph (d).



Sec.  19.25  Request for document discovery from parties.

    (a) Document requests.--(1) Any party may serve on any other party a 
request to produce and permit the requesting party or its representative 
to inspect or copy any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. In the case of a request for inspection, the responding party 
may produce copies of documents or of electronically stored information 
instead of permitting inspection.
    (2) The request:
    (i) Must describe with reasonable particularity each item or 
category of items to be inspected or produced; and
    (ii) Must specify a reasonable time, place, and manner for the 
inspection or production.
    (b) Production or copying--(1) General. Unless otherwise specified 
by the ALJ or agreed upon by the parties, the producing party must 
produce copies of documents as they are kept in the usual course of 
business or organized to correspond to the categories of the request, 
and electronically stored information must be produced in a form in 
which it is ordinarily maintained or in a reasonably usable form.
    (2) Costs. The producing party must pay its own costs to respond to 
a discovery request, unless otherwise agreed by the parties.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery.--(1) Any party that objects to a 
discovery request may, within 20 days of being

[[Page 534]]

served with such request, file a motion in accordance with the 
provisions of Sec.  19.23 to strike or otherwise limit the request. If 
an objection is made to only a portion of an item or category in a 
request, the portion objected to must be specified. Any objections not 
made in accordance with paragraph (d)(1) and Sec.  19.23 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within ten days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
attorney-client privilege, attorney work-product doctrine, bank 
examination privilege, law enforcement privilege, any government's or 
government agency's deliberative process privilege, or any other 
privileges of the Constitution, any applicable act of Congress, or the 
principles of common law, or are voluminous, these documents may be 
identified by category instead of by individual document. The ALJ 
retains discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production.--(1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec.  19.23 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the document request may file a written response to a motion to compel 
within ten days of service of the motion. No other party may file a 
response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the ALJ will rule promptly on all motions 
filed pursuant to this section. If the ALJ determines that a discovery 
request, or any of its terms, calls for irrelevant material, is 
unreasonable, oppressive, excessive in scope, unduly burdensome, or 
repetitive of previous requests, or seeks to obtain privileged 
documents, the ALJ may deny or modify the request, and may issue 
appropriate protective orders, upon such conditions as justice may 
require. The pendency of a motion to strike or limit discovery or to 
compel production is not a basis for staying or continuing the 
proceeding, unless otherwise ordered by the ALJ. Notwithstanding any 
other provision in this part, the ALJ may not release, or order a party 
to produce, documents withheld on grounds of privilege if the party has 
stated to the ALJ its intention to file a timely motion for 
interlocutory review of the ALJ's order to produce the documents, and 
until the motion for interlocutory review has been decided.
    (h) Enforcing discovery subpoenas. If the ALJ issues a subpoena 
compelling production of documents by a party, the subpoenaing party 
may, in the event of noncompliance and to the extent authorized by 
applicable law, apply to any appropriate United States district court 
for an order requiring compliance with the subpoena. A party's right to 
seek court enforcement of a subpoena will not in any manner limit the 
sanctions that may be imposed by the ALJ against a party who fails to 
produce subpoenaed documents.



Sec.  19.26  Document subpoenas to nonparties.

    (a) General rules.--(1) Any party may apply to the ALJ for the 
issuance of a document discovery subpoena addressed to any person who is 
not a party to the proceeding. The application must contain a proposed 
document subpoena and a brief statement showing the general relevance 
and reasonableness of the scope of documents sought. The subpoenaing 
party must specify a reasonable time, place, and manner for making 
production in response to the document subpoena.
    (2) A party may apply for a document subpoena under this section 
only within the time period during which such party could serve a 
discovery request under Sec.  19.24(d). The party obtaining the document 
subpoena is responsible

[[Page 535]]

for serving it on the subpoenaed person and for serving copies on all 
parties. Document subpoenas may be served in any state, territory, or 
possession of the United States, the District of Columbia, or as 
otherwise provided by law.
    (3) The ALJ will promptly issue any document subpoena requested 
pursuant to this section. If the ALJ determines that the application 
does not set forth a valid basis for the issuance of the subpoena, or 
that any of its terms are unreasonable, oppressive, excessive in scope, 
or unduly burdensome, the ALJ may refuse to issue the subpoena or may 
issue it in a modified form upon such conditions as may be consistent 
with the Uniform Rules.
    (b) Motion to quash or modify.--(1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena 
with the ALJ. The motion must be accompanied by a statement of the basis 
for quashing or modifying the subpoena. The movant must serve the motion 
on all parties, and any party may respond to such motion within ten days 
of service of the motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec.  19.25(d), and 
during the same time limits during which such an objection could be 
filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the ALJ, which directs compliance with all or any portion of a document 
subpoena, the subpoenaing party or any other aggrieved party may, to the 
extent authorized by applicable law, apply to an appropriate United 
States district court for an order requiring compliance with so much of 
the document subpoena as the ALJ has not quashed or modified. A party's 
right to seek court enforcement of a document subpoena will in no way 
limit the sanctions that may be imposed by the ALJ on a party who 
induces a failure to comply with subpoenas issued under this section.



Sec.  19.27  Deposition of witness unavailable for hearing.

    (a) General rules.--(1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section, to the ALJ for the issuance of a 
subpoena, including a subpoena duces tecum, requiring the attendance of 
the witness at a deposition. The ALJ may issue a deposition subpoena 
under this section upon showing:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time, manner, and place for taking the deposition. A 
deposition subpoena may require the witness to be deposed at any place 
within the country in which that witness resides or has a regular place 
of employment, by remote means, or such other convenient place or 
manner, as the ALJ fixes.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the ALJ requires a written 
response or requires attendance at a conference concerning whether the 
requested subpoena should be issued.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the ALJ orders otherwise, no deposition under this section may be taken 
on fewer than ten days' notice to the witness and all parties.
    (b) Objections to deposition subpoenas.--(1) The witness and any 
party

[[Page 536]]

who has not had an opportunity to oppose a deposition subpoena issued 
under this section may file a motion with the ALJ to quash or modify the 
subpoena prior to the time for compliance specified in the subpoena, but 
not more than ten days after service of the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition.--(1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn. By stipulation of the 
parties or by order of the ALJ, a court reporter or other person 
authorized to administer an oath may administer the oath remotely 
without being in the physical presence of the deponent. Each party must 
have the right to examine the witness. Objections to questions or 
documents must be in short form, stating the grounds for the objection. 
Failure to object to questions or documents is not deemed a waiver 
except where the ground for the objection might have been avoided if the 
objection had been timely presented. All questions, answers, and 
objections must be recorded.
    (2) Any party may move before the ALJ for an order compelling the 
witness to answer any questions the witness has refused to answer or 
submit any evidence the witness has refused to submit during the 
deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition must certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section, or fails to comply with 
any order of the ALJ, which directs compliance with all or any portion 
of a deposition subpoena under paragraphs (b) or (c)(2) of this section, 
the subpoenaing party or other aggrieved party may, to the extent 
authorized by applicable law, apply to an appropriate United States 
district court for an order requiring compliance with the portions of 
the subpoena with which the subpoenaed party has not complied. A party's 
right to seek court enforcement of a deposition subpoena in no way 
limits the sanctions that may be imposed by the ALJ on a party who fails 
to comply with, or procures a failure to comply with, a subpoena issued 
under this section.



Sec.  19.28  Interlocutory review.

    (a) General rule. The Comptroller may review a ruling of the ALJ 
prior to the certification of the record to the Comptroller only in 
accordance with the procedures set forth in this section and Sec.  
19.23.
    (b) Scope of review. The Comptroller may exercise interlocutory 
review of a ruling of the ALJ if the Comptroller finds:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review must be filed by 
a party with the ALJ within ten days of the ruling and must otherwise 
comply with Sec.  19.23. Any party may file a response to a request for 
interlocutory review in accordance with Sec.  19.23(d). Upon the 
expiration of the time for filing all responses, the ALJ will refer the 
matter to the Comptroller for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Comptroller under 
this section suspends or stays the proceeding unless otherwise ordered 
by the ALJ or the Comptroller.



Sec.  19.29  Summary disposition.

    (a) In general. The ALJ will recommend that the Comptroller issue a

[[Page 537]]

final order granting a motion for summary disposition if the undisputed 
pleaded facts, admissions, affidavits, stipulations, documentary 
evidence, matters as to which official notice may be taken, and any 
other evidentiary materials properly submitted in connection with a 
motion for summary disposition show:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses.--(1) Any party who believes 
there is no genuine issue of material fact to be determined and that the 
party is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the ALJ, may file a response to 
such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits, and any other evidentiary materials that the moving party 
contends supports the moving party's position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which the opposing party contends a genuine dispute exists. 
Such opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the contention that summary 
disposition would be inappropriate.
    (c) Hearing on motion. At the written request of any party or on the 
ALJ's own motion, the ALJ may hear oral argument on the motion for 
summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the ALJ will determine whether 
the moving party is entitled to summary disposition. If the ALJ 
determines that summary disposition is warranted, the ALJ will submit a 
recommended decision to that effect to the Comptroller. If the ALJ finds 
that no party is entitled to summary disposition, the ALJ will make a 
ruling denying the motion.



Sec.  19.30  Partial summary disposition.

    If the ALJ determines that a party is entitled to summary 
disposition as to certain claims only, the ALJ will defer submitting a 
recommended decision as to those claims. A hearing on the remaining 
issues must be ordered. Those claims for which the ALJ has determined 
that summary disposition is warranted will be addressed in the 
recommended decision filed at the conclusion of the hearing.



Sec.  19.31  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding, the ALJ will direct counsel for all 
parties to meet with the ALJ at a specified time and manner prior to the 
hearing for the purpose of scheduling the course and conduct of the 
proceeding. This meeting is called a ``scheduling conference.'' The 
schedule for the identification of potential witnesses, the time for and 
manner of discovery, and the exchange of any prehearing materials 
including witness lists, statements of issues, stipulations, exhibits, 
and any other materials may also be determined at the scheduling 
conference.
    (b) Prehearing conferences. The ALJ may, in addition to the 
scheduling conference, on the ALJ's own motion or at the request of any 
party, direct counsel for the parties to confer with the ALJ at a 
prehearing conference to address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;

[[Page 538]]

    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The ALJ may require that a scheduling or prehearing 
conference be recorded by a court reporter. A transcript of the 
conference and any materials filed, including orders, becomes part of 
the record of the proceeding. A party may obtain a copy of the 
transcript at the party's expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the ALJ will serve on each party an order setting forth any 
agreements reached and any procedural determinations made.



Sec.  19.32  Prehearing submissions.

    (a) Party prehearing submissions. Within the time set by the ALJ, 
but in no case later than 20 days before the start of the hearing, each 
party must file with the ALJ and serve on every other party:
    (1) A prehearing statement that states:
    (i) The party's position with respect to the legal issues presented;
    (ii) The statutory and case law upon which the party relies; and
    (iii) The facts that the party expects to prove at the hearing;
    (2) A final list of witnesses to be called to testify at the 
hearing, including the name, mailing address, and electronic mail 
address of each witness and a short summary of the expected testimony of 
each witness, which need not identify the exhibits to be relied upon by 
each witness at the hearing;
    (3) A list of the exhibits expected to be introduced at the hearing 
along with a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec.  19.33  Public hearings.

    (a) General rule. All hearings must be open to the public, unless 
the Comptroller in their discretion, determines that holding an open 
hearing would be contrary to the public interest. Within 20 days of 
service of the notice or, in the case of change-in-control proceedings 
under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), within 20 days 
from service of the hearing order, any respondent may file with the 
Comptroller a request for a private hearing, and any party may file a 
reply to such a request. A party must serve on the ALJ a copy of any 
request or reply the party files with the Comptroller. The form of, and 
procedure for, these requests and replies are governed by Sec.  19.23. A 
party's failure to file a request or a reply constitutes a waiver of any 
objections regarding whether the hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in Enforcement 
Counsel's discretion, may file any document or part of a document under 
seal if disclosure of the document would be contrary to the public 
interest. The ALJ will take all appropriate steps to preserve the 
confidentiality of such documents or parts thereof, including closing 
portions of the hearing to the public.



Sec.  19.34  Hearing subpoenas.

    (a) Issuance.--(1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the ALJ may issue a subpoena or a subpoena duces tecum requiring 
the attendance of a witness at the hearing or the production of 
documentary or physical evidence at the hearing. The application for a 
hearing subpoena must also contain a proposed subpoena specifying the 
attendance of a witness or the production of evidence from any state, 
territory, or possession of the United States, the District of Columbia, 
or as otherwise provided by law at any designated place where the 
hearing is being conducted. The party making the application must serve 
a copy of the

[[Page 539]]

application and the proposed subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the ALJ.
    (3) The ALJ will promptly issue any hearing subpoena requested 
pursuant to this section. If the ALJ determines that the application 
does not set forth a valid basis for the issuance of the subpoena, or 
that any of its terms are unreasonable, oppressive, excessive in scope, 
or unduly burdensome, the ALJ may refuse to issue the subpoena or may 
issue it in a modified form upon any conditions consistent with this 
subpart. Upon issuance by the ALJ, the party making the application must 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify.--(1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the ALJ 
which directs compliance with all or any portion of a document subpoena, 
the subpoenaing party or any other aggrieved party may seek enforcement 
of the subpoena pursuant to Sec.  19.26(c).



Sec.  19.35  Conduct of hearings.

    (a) General rules--(1) Conduct of hearings. Hearings must be 
conducted so as to provide a fair and expeditious presentation of the 
relevant disputed issues. Each party has the right to present its case 
or defense by oral and documentary evidence and to conduct such cross 
examination as may be required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel will present its case-in-
chief first, unless otherwise ordered by the ALJ, or unless otherwise 
expressly specified by law or regulation. Enforcement Counsel will be 
the first party to present an opening statement and a closing statement 
and may make a rebuttal statement after the respondent's closing 
statement. If there are multiple respondents, respondents may agree 
among themselves as to their order of presentation of their cases, but 
if they do not agree, the ALJ will fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the ALJ may permit more than one counsel 
for the party presenting the witness to conduct the examination. A party 
may have one counsel conduct the direct examination and another counsel 
conduct re-direct examination of a witness, or may have one counsel 
conduct the cross examination of a witness and another counsel conduct 
the re-cross examination of a witness.
    (4) Stipulations. Unless the ALJ directs otherwise, all stipulations 
of fact and law previously agreed upon by the parties, and all 
documents, the admissibility of which have been previously stipulated, 
will be admitted into evidence upon commencement of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The ALJ may 
order the record corrected, either upon motion to correct, upon 
stipulation of the parties, or following notice to the parties upon the 
ALJ's own motion.
    (c) Electronic presentation. Based on the circumstances of each 
hearing, the ALJ may direct the use of, or any party may use, an 
electronic presentation during the hearing. If the ALJ requires an 
electronic presentation during the hearing, each party will be 
responsible for their own presentation and related costs, unless the 
parties

[[Page 540]]

agree to another manner in which to allocate presentation 
responsibilities and costs.



Sec.  19.36  Evidence.

    (a) Admissibility--(1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice--(1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or State government agency.
    (2) All matters officially noticed by the ALJ or the Comptroller 
must appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, must be afforded an opportunity to 
object.
    (c) Documents--(1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection, or visitation, prepared by an appropriate Federal financial 
institutions regulatory agency or by a State regulatory agency, is 
admissible either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines, or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the ALJ's discretion, be used with or without 
being admitted into evidence.
    (d) Objections--(1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what the examining counsel expected to 
prove by the expected testimony of the witness either by representation 
of counsel or by direct questioning of the witness.
    (3) The ALJ will retain rejected exhibits, adequately marked for 
identification, for the record, and transmit such exhibits to the 
Comptroller.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses--(1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the ALJ may, on that basis, limit the 
admissibility of the deposition in any manner that justice requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec.  19.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs--(1) 
Using the same method of service for each party, the ALJ will serve 
notice upon each

[[Page 541]]

party that the certified transcript, together with all hearing exhibits 
and exhibits introduced but not admitted into evidence at the hearing, 
has been filed. Any party may file with the ALJ proposed findings of 
fact, proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the ALJ or within such longer period 
as may be ordered by the ALJ.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
ALJ any proposed finding or conclusion is deemed to have waived the 
right to raise in any subsequent filing or submission any issue not 
addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The ALJ will not order the filing 
by any party of any brief or reply brief in advance of the other party's 
filing of its brief.



Sec.  19.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under Sec.  
19.37(b), the ALJ will file with and certify to the Comptroller, for 
decision, the record of the proceeding. The record must include the 
ALJ's recommended decision, recommended findings of fact, recommended 
conclusions of law, and proposed order; all prehearing and hearing 
transcripts, exhibits, and rulings; and the motions, briefs, memoranda, 
and other supporting papers filed in connection with the hearing. The 
ALJ will serve upon each party the recommended decision, findings, 
conclusions, and proposed order.
    (b) Filing of index. At the same time the ALJ files with and 
certifies to the Comptroller for final determination the record of the 
proceeding, the ALJ will furnish to the Comptroller a certified index of 
the entire record of the proceeding. The certified index must include, 
at a minimum, an entry for each paper, document, or motion filed with 
the ALJ in the proceeding, the date of the filing, and the identity of 
the filer. The certified index must also include an exhibit index 
containing, at a minimum, an entry consisting of exhibit number and 
title or description for: each exhibit introduced and admitted into 
evidence at the hearing; each exhibit introduced but not admitted into 
evidence at the hearing; each exhibit introduced and admitted into 
evidence after the completion of the hearing; and each exhibit 
introduced but not admitted into evidence after the completion of the 
hearing.



Sec.  19.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec.  19.38, a party may file with the Comptroller written exceptions to 
the ALJ's recommended decision, findings, conclusions, or proposed 
order, to the admission or exclusion of evidence, or to the failure of 
the ALJ to make a ruling proposed by a party. A supporting brief may be 
filed at the time the exceptions are filed, either as part of the same 
document or in a separate document.
    (b) Effect of failure to file or raise exceptions--(1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Comptroller if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the ALJ and failed to do so.
    (c) Contents.--(1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the

[[Page 542]]

ALJ's recommendations to which that party takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the ALJ's 
recommendations to which exception is taken, the page or paragraph 
references to those portions of the record relied upon to support each 
exception, and the legal authority relied upon to support each 
exception.



Sec.  19.40  Review by the Comptroller.

    (a) Notice of submission to the Comptroller. When the Comptroller 
determines that the record in the proceeding is complete, the 
Comptroller will serve notice upon the parties that the proceeding has 
been submitted to the Comptroller for final decision.
    (b) Oral argument before the Comptroller. Upon the initiative of the 
Comptroller or on the written request of any party filed with the 
Comptroller within the time for filing exceptions, the Comptroller may 
order and hear oral argument on the recommended findings, conclusions, 
decision, and order of the ALJ. A written request by a party must show 
good cause for oral argument and state reasons why arguments cannot be 
presented adequately in writing. A denial of a request for oral argument 
may be set forth in the Comptroller's final decision. Oral argument 
before the Comptroller must be on the record.
    (c) Comptroller's final decision--(1) Decisional employees may 
advise and assist the Comptroller in the consideration and disposition 
of the case. The final decision of the Comptroller will be based upon 
review of the entire record of the proceeding, except that the 
Comptroller may limit the issues to be reviewed to those findings and 
conclusions to which opposing arguments or exceptions have been filed by 
the parties.
    (2) The Comptroller will render a final decision within 90 days 
after notification of the parties that the case has been submitted for 
final decision, or 90 days after oral argument, whichever is later, 
unless the Comptroller orders that the action or any aspect thereof be 
remanded to the ALJ for further proceedings. Copies of the final 
decision and order of the Comptroller will be served upon each party to 
the proceeding, upon other persons required by statute, and, if directed 
by the Comptroller or required by statute, upon any appropriate State or 
Federal supervisory authority.



Sec.  19.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the Comptroller may not, unless specifically 
ordered by the Comptroller or a reviewing court, operate as a stay of 
any order issued by the Comptroller. The Comptroller may, in its 
discretion, and on such terms as the Comptroller finds just, stay the 
effectiveness of all or any part of an order pending a final decision on 
a petition for review of that order.



            Subpart B_Procedural Rules for OCC Adjudications



Sec.  19.100  Filing documents.

    All materials required to be filed with or referred to the 
Comptroller or the ALJ in any proceeding under this part must be filed 
with the OCC Hearing Clerk in a manner prescribed by Sec.  19.10(b) and 
(c). Filings to be made with the Hearing Clerk include the notice and 
answer; motions and responses to motions; briefs; the record filed by 
the ALJ after the issuance of a recommended decision; the recommended 
decision filed by the ALJ following a motion for summary disposition; 
referrals by the ALJ of motions for interlocutory review; exceptions and 
requests for oral argument; any other papers required to be filed with 
the Comptroller or the ALJ under this part; and any attachments or 
exhibits to such documents.



Sec.  19.101  Delegation to OFIA.

    Unless otherwise ordered by the Comptroller, an ALJ assigned to OFIA 
conducts administrative adjudications subject to subpart A of this part.



Sec.  19.102  Civil money penalties.

    A respondent must pay civil money penalties assessed pursuant to 
subpart A of this part within 60 days after the issuance of the notice 
of assessment unless the OCC requires a different

[[Page 543]]

time for payment. A respondent that has made a timely request for a 
hearing to challenge the assessment of the penalty is not required to 
pay the penalty until the OCC has issued a final order of assessment. In 
these instances, the respondent must pay the penalty within 60 days of 
service of the order unless the OCC requires a different time for 
payment.



  Subpart C_Removals, Suspensions, and Prohibitions of an Institution-
  Affiliated Party When a Crime Is Charged or a Conviction Is Obtained



Sec.  19.110  Scope and definitions.

    (a) Scope. This subpart applies to informal hearings afforded to any 
institution-affiliated party who has been suspended or removed from 
office or prohibited from further participation in the affairs of any 
depository institution pursuant to section 8(g) of the FDIA (12 U.S.C. 
1818(g)) by a notice or order issued by the Comptroller.
    (b) Definitions. As used in this subpart--
    (1) The term petitioner means an individual who has filed a petition 
for an informal hearing under this subpart.
    (2) The term depository institution means any national bank, Federal 
savings association, or Federal branch or agency of a foreign bank.
    (3) The term OCC Supervisory Office means the Senior Deputy 
Comptroller or Deputy Comptroller of the OCC department or office 
responsible for supervision of the depository institution or, in the 
case of an individual no longer affiliated with a particular depository 
institution, the Deputy Comptroller for Special Supervision.



Sec.  19.111  Suspension, removal, or prohibition 
of institution-affiliated party.

    (a) Issuance of notice or order. The Comptroller may serve a notice 
of suspension or prohibition or order of removal or prohibition pursuant 
to section 8(g) of the FDIA (12 U.S.C. 1818(g)) on an institution-
affiliated party. The Comptroller will serve a copy of this notice or 
order on any depository institution that the subject of the notice or 
order is affiliated with at the time the OCC issues the notice or order. 
After service of the notice or order, the institution-affiliated party 
must immediately cease service to, or participation in the affairs of, 
that depository institution and, if so determined by the OCC, any other 
depository institution. The notice or order will indicate the basis for 
suspension, removal, or prohibition and will inform the institution-
affiliated party of the right to request in writing, within 30 days from 
the date that the institution-affiliated party was served, an 
opportunity to show at an informal hearing that continued service to or 
participation in the conduct of the affairs of any depository 
institution has not posed, does not pose, or is not likely to pose a 
threat to the interests of the depositors of, or has not threatened, 
does not threaten, or is not likely to threaten to impair public 
confidence in, any relevant depository institution. The Comptroller will 
serve the notice or order upon the institution-affiliated party and the 
related institution in the manner set forth in Sec.  19.11(c).
    (b) Request for hearing--(1) Submission. Unless instructed otherwise 
in writing by the Comptroller, an institution-affiliated party must send 
the written request for an informal hearing referenced in paragraph (a) 
of this section to the OCC Supervisory Office by certified mail, a same 
day courier service, an overnight delivery service, or by personal 
service with a signed receipt.
    (2) Content of request for a hearing. The request filed under this 
section must state specifically the relief desired and the grounds on 
which that relief is based and must admit, deny, or state that the 
institution-affiliated party lacks sufficient information to admit or 
deny each allegation in the notice or order. A statement of lack of 
information has the effect of a denial. Denials must fairly meet the 
substance of each allegation denied; general denials are not permitted. 
When the institution-affiliated party denies part of an allegation, that 
part must be denied and the remainder specifically admitted. Any 
allegation in the notice or order which is not denied is deemed admitted 
for purposes of the proceeding. The request must state with 
particularity how the institution-affiliated

[[Page 544]]

party intends to show that its continued service to or participation in 
the affairs of the institution would not pose a threat to the interests 
of the institution's depositors or impair public confidence in any 
institution.
    (c) Default. If the institution-affiliated party fails to timely 
file a petition for a hearing pursuant to paragraph (b) of this section, 
or fails to appear at a hearing, either in person or by counsel, or 
fails to submit a written argument where oral argument has been waived 
pursuant to Sec.  19.112(c), the notice will remain in effect until the 
information, indictment, or complaint is finally disposed of and the 
order will remain in effect until terminated by the OCC.



Sec.  19.112  Informal hearing.

    (a) Issuance of hearing order. After receipt of a request for 
hearing, the OCC Supervisory Office must notify the petitioner 
requesting the hearing and OCC Enforcement of the date, time, and place 
fixed for the hearing. The OCC will hold the hearing no later than 30 
days from the date when the OCC receives the request for a hearing, 
unless the time is extended in response to a written request of the 
petitioner. The OCC Supervisory Office may extend the hearing date only 
for a specific period of time and must take appropriate action to ensure 
that the hearing is not unduly delayed.
    (b) Appointment of presiding officer. The OCC Supervisory Office 
must appoint one or more OCC employees as the presiding officer to 
conduct the hearing. The presiding officer(s) may not have been involved 
in a prosecutorial or investigative role in the proceeding, a factually 
related proceeding, or the underlying enforcement action.
    (c) Waiver of oral hearing--(1) Petitioner. When the petitioner 
requests a hearing, the petitioner may elect to have the matter 
determined by the presiding officer solely on the basis of written 
submissions by serving on the OCC Supervisory Office and all parties a 
signed document waiving the statutory right to appear and make oral 
argument. The petitioner must present the written submissions to the 
presiding officer and serve the other parties not later than ten days 
prior to the date fixed for the hearing or within a shorter time period 
as the presiding officer may permit.
    (2) OCC. The OCC may respond to the petitioner's submissions by 
presenting the presiding officer with a written response and by serving 
the other parties in the manner prescribed by Sec.  19.11(c) not later 
than the date fixed for the hearing or within such other time period as 
the presiding officer may require.
    (d) Hearing procedures--(1) Conduct of hearing. Hearings under this 
subpart are not subject to the provisions of subpart A of this part or 
the adjudicative provisions of the Administrative Procedure Act (5 
U.S.C. 554-557).
    (2) Powers of the presiding officer. The presiding officer must 
determine all procedural issues that are governed by this subpart. The 
presiding officer also may permit witnesses, limit the number of 
witnesses, and impose time limitations as they deem reasonable. The 
informal hearing will not be governed by formal rules of evidence, 
including the Federal Rules of Evidence. The presiding officer must 
consider all oral presentations, when permitted, and all documents the 
presiding officer deems to be relevant and material to the proceeding 
and not unduly repetitious. The presiding officer may ask questions of 
any person participating in the hearing and may make any rulings 
reasonably necessary to facilitate the effective and efficient operation 
of the hearing.
    (3) Presentation. (i) The OCC and the petitioner may present 
relevant written materials and oral argument at the hearing. The 
petitioner may appear at the hearing personally or through counsel. 
Except as permitted in paragraph (c) of this section, each party, 
including the OCC, must file a copy of any affidavit, memorandum, or 
other written material to be presented at the hearing with the presiding 
officer and must serve the other parties not later than ten days prior 
to the hearing or within such shorter time period as permitted by the 
presiding officer.
    (ii) If the petitioner or the OCC desires to present oral testimony 
or witnesses at the hearing, they must file a written request with the 
presiding officer not later than ten days prior to the

[[Page 545]]

hearing, or within a shorter time period as required by the presiding 
officer. The written request must include the names of proposed 
witnesses, along with the general nature of the expected testimony, and 
the reasons why oral testimony is necessary. The presiding officer 
generally will not admit oral testimony or witnesses unless a specific 
and compelling need is demonstrated. Witnesses, if admitted, must be 
sworn. By stipulation of the parties or by order of the presiding 
officer, a court reporter or other person authorized to administer an 
oath may administer the oath remotely without being in the physical 
presence of the witness.
    (iii) In deciding on any suspension or prohibition based on an 
indictment, information, or complaint, the presiding officer may not 
consider the ultimate question of the guilt or innocence of the 
individual with respect to the criminal charges that are outstanding. In 
deciding on any removal or prohibition with respect to a conviction or 
pre-trial diversion program, the presiding officer may not consider 
challenges to or efforts to impeach the validity of the conviction or 
the agreement to enter a pre-trial diversion program or other similar 
program. The presiding officer may consider facts in either situation, 
however, that show the nature of the events on which the criminal 
charges, conviction, or agreement to enter a pre-trial diversion program 
or other similar program was based.
    (4) Electronic presentation. Based on the circumstances of each 
hearing, the presiding officer may direct the use of, or any party may 
elect to use, an electronic presentation during the hearing. If the 
presiding officer requires an electronic presentation during the 
hearing, each party will be responsible for their own presentation and 
related costs unless the parties agree to another manner by which to 
allocate presentation responsibilities and costs.
    (5) Record. A transcript of the proceedings may be taken if the 
petitioner requests a transcript and agrees to pay all expenses or if 
the presiding officer determines that the nature of the case warrants a 
transcript. The presiding officer may order the record to be kept open 
for a reasonable period following the hearing, not to exceed five 
business days, to permit the petitioner or the OCC to submit additional 
documents for the record. Thereafter, no further submissions may be 
accepted except for good cause shown.



Sec.  19.113  Recommended and final decisions.

    (a) Issuance of recommended decision. The presiding officer must 
issue a recommended decision to the Comptroller within 20 days of the 
conclusion of the hearing or, when the petitioner has waived an oral 
hearing, within 20 days of the date fixed for the hearing. The presiding 
officer must serve promptly a copy of the recommended decision on the 
parties to the proceeding. The decision must include a summary of the 
facts and arguments of the parties.
    (b) Comments. Each party may, within ten days of being served with 
the presiding officer's recommended decision, submit to the Comptroller 
comments on the recommended decision.
    (c) Issuance of final decision. Within 60 days of the conclusion of 
the hearing or, if the petitioner has waived an oral hearing, within 60 
days from the date fixed for the hearing, the Comptroller will notify 
the petitioner by registered mail, or electronic mail or other 
electronic means if the petitioner consents, whether the suspension or 
removal from office or prohibition from participation in any manner in 
the affairs of any depository institution will be affirmed, terminated, 
or modified. The Comptroller's decision must include a statement of 
reasons supporting the decision. The Comptroller's decision is a final 
and unappealable order.
    (d) Other actions. A finding of not guilty or other disposition of 
the charge or charges on which a notice of suspension was based does not 
preclude the Comptroller from thereafter instituting removal proceedings 
pursuant to section 8(e) of the FDIA (12 U.S.C. 1818(e)) and subpart A 
of this part.
    (e) Expiration of order. A removal or prohibition by order remains 
in effect until terminated by the Comptroller. A suspension or 
prohibition by notice remains in effect until the criminal charge is 
disposed of or until terminated by the Comptroller.

[[Page 546]]

    (f) Petition for reconsideration. A suspended or removed individual 
may petition the Comptroller to reconsider the decision any time after 
the expiration of a 12-month period from the date of the decision, but 
no petition for reconsideration may be made within 12 months of a 
previous petition. The petition must state specifically the relief 
sought and the grounds therefor, and may be accompanied by a supporting 
memorandum and any other documentation the petitioner wishes to have 
considered. The Comptroller is not required to grant a hearing on the 
petition for reconsideration.



           Subpart D_Actions Under the Federal Securities Laws



Sec.  19.120  Exemption hearings under section 12(h) of 
the Securities Exchange Act of 1934.

    (a) Scope. The rules in this section apply to informal hearings that 
may be held by the Comptroller to determine whether, pursuant to 
authority in sections 12(h) and (i) of the Securities Exchange Act of 
1934 (Exchange Act) (15 U.S.C. 78l(h) and (i)), to exempt in whole or in 
part an issuer or a class of issuers from the provisions of section 
12(g), or from section 13 or 14 of the Exchange Act (15 U.S.C. 78l(g), 
78m or 78n), or whether to exempt from section 16 of the Exchange Act 
(15 U.S.C. 78p) any officer, director, or beneficial owner of securities 
of an issuer. The only issuers covered by this section are national 
banks and Federal savings associations whose securities are registered, 
or which may be subject to registration, pursuant to section 12(g) of 
the Exchange Act (15 U.S.C. 78l(g)). The Comptroller may deny an 
application for exemption without a hearing.
    (b) Application for exemption. An issuer or an individual (officer, 
director, or shareholder) may submit a written application for an 
exemption order to Bank Advisory, Office of the Comptroller of the 
Currency, Washington, DC 20219. The application must specify the type of 
exemption sought and the reasons for the exemption, including an 
explanation of why an exemption would not be inconsistent with the 
public interest or the protection of investors. Bank Advisory will 
inform the applicant in writing whether a hearing will be held to 
consider the matter.
    (c) Newspaper notice. Upon being informed that an application will 
be considered at a hearing, the applicant must publish a notice one time 
in a newspaper of general circulation in the community where the 
issuer's main office is located. The notice must state: The name and 
title of any individual applicants; the type of exemption sought; the 
fact that a hearing will be held; and a statement that interested 
persons may submit to Bank Advisory, Office of the Comptroller of the 
Currency, Washington, DC 20219 within 30 days from the date of the 
newspaper notice, written comments concerning the application and a 
written request for an opportunity to be heard. The applicant must 
promptly provide a copy of the notice to Bank Advisory and to the 
national bank's or Federal savings association's shareholders in the 
same manner as is customary for shareholder communications.
    (d) Informal hearing--(1) Conduct of proceeding. The adjudicative 
provisions of the Administrative Procedure Act, formal rules of 
evidence, and subpart A of this part do not apply to hearings conducted 
under this section, except as provided in Sec.  19.100.
    (2) Notice of hearing. Following the comment period, the Comptroller 
will send a notice that fixes a date, time, and place for hearing to 
each applicant and to any person who has requested an opportunity to be 
heard.
    (3) Presiding officer. The Comptroller will designate a presiding 
officer to conduct the hearing. The presiding officer must determine all 
procedural questions not governed by this section and may limit the 
number of witnesses and impose time and presentation limitations as are 
deemed reasonable. At the conclusion of the informal hearing, the 
presiding officer must issue a recommended decision to the Comptroller 
as to whether the exemption should be issued. The decision must include 
a summary of the facts and arguments of the parties.
    (4) Attendance. Each applicant and any person who has requested an 
opportunity to be heard may attend the hearing with or without counsel. 
The hearing will be open to the public. In

[[Page 547]]

addition, each applicant and any other hearing participant may introduce 
oral testimony through such witnesses as the presiding officer may 
permit.
    (5) Order of presentation. (i) Each applicant may present an opening 
statement of a length decided by the presiding officer. Each of the 
hearing participants, or one among them selected with the approval of 
the presiding officer, may then present an opening statement. The 
opening statement should summarize concisely what each applicant and 
participant intends to show.
    (ii) Each applicant will have an opportunity to make an oral 
presentation of facts and materials or submit written materials for the 
record. One or more of the hearing participants may make an oral 
presentation or a written submission.
    (iii) After the above presentations, each applicant, followed by one 
or more of the hearing participants, may make concise summary statements 
reviewing their position.
    (6) Witnesses. The obtaining and use of witnesses is the 
responsibility of the parties afforded the hearing. All witnesses must 
be present on their own volition, but any person appearing as a witness 
may be questioned by each applicant, any hearing participant, and the 
presiding officer. Witnesses must be sworn unless otherwise directed by 
the presiding officer. By stipulation of the parties or by order of the 
presiding officer, a court reporter or other person authorized to 
administer an oath may administer the oath remotely without being in the 
physical presence of the witness.
    (7) Evidence. The presiding officer may exclude data or materials 
deemed to be improper or irrelevant. Formal rules of evidence do not 
apply. Documentary material must be of a size consistent with ease of 
handling and filing. The presiding officer may determine the number of 
copies that must be furnished for purposes of the hearing.
    (8) Electronic presentation. Based on the circumstances of each 
hearing, the presiding officer may direct the use of, or any party may 
elect to use, an electronic presentation during the hearing. If the 
presiding officer requires an electronic presentation during the 
hearing, each party will be responsible for their own presentation and 
related costs unless the parties agree to another manner in which to 
allocate presentation responsibilities and costs.
    (9) Transcript. The OCC will arrange a transcript of each proceeding 
with all expenses, including the furnishing of a copy to the presiding 
officer by electronic means or otherwise, paid by the applicant or 
applicants.
    (e) Decision of the Comptroller. Following the conclusion of the 
hearing and the submission of the record and the presiding officer's 
recommended decision to the Comptroller for decision, the Comptroller 
will notify each applicant and all persons who have so requested in 
writing of the final disposition of the application. Exemptions granted 
must be in the form of an order that specifies the type of exemption 
granted and its terms and conditions.



Sec.  19.121  Disciplinary proceedings.

    (a) Scope--(1) In general. Except as provided in this section, 
subpart A of this part applies to proceedings by the Comptroller to 
determine whether, pursuant to authority contained in sections 
15B(c)(5), 15C(c)(2)(A), 17A(c)(3), and 17A(c)(4)(C) of the Exchange Act 
(15 U.S.C. 78o-4(c)(5), 78o-5(c)(2)(A), 78q-1(c)(3)(A), and 78q-
1(c)(4)(C)), to take disciplinary action against the following:
    (i) A bank that is a municipal securities dealer, any person 
associated with a bank that is a municipal securities dealer, or any 
person seeking to become associated with a bank that is a municipal 
securities dealer;
    (ii) A bank that is a government securities broker or government 
securities dealer, any person associated with a bank that is a 
government securities broker or government securities dealer, or any 
person seeking to become associated with a government securities broker 
or government securities dealer; or
    (iii) A bank that is a transfer agent, any person associated with a 
bank that is a transfer agent, or any person seeking to become 
associated with a bank that is a transfer agent.

[[Page 548]]

    (2) Other actions. In addition to the issuance of disciplinary 
orders after opportunity for hearing, the Comptroller may issue and 
serve any notices and temporary or permanent cease-and-desist orders and 
take any actions that are authorized by section 8 of the FDIA (12 U.S.C. 
1818); sections 15B(c)(5), 15C(c)(2)(B), and 17A(d)(2) of the Exchange 
Act (15 U.S.C. 78o-4(c)(5), 78o-5(c)(2)(B), and 78q-1(d)(2)); and other 
sections of this part against the following:
    (i) The parties listed in paragraph (a)(1) of this section; and
    (ii) A bank that is a clearing agency.
    (3) Definitions. As used in this section:
    (i) The term bank means a national bank or Federal savings 
association, and, when referring to a government securities broker or 
government securities dealer, a Federal branch or agency of a foreign 
bank;
    (ii) The terms transfer agent, municipal securities dealer, 
government securities broker, and government securities dealer have the 
same meaning as the terms in sections 3(a)(25), 3(a)(30), 3(a)(43), and 
3(a)(44) of the Exchange Act (15 U.S.C. 78c(a)(25), 78c(a)(30), 
78c(a)(43), and 78c(a)(44)), respectively;
    (iii) The terms person associated with a bank that is a municipal 
securities dealer and person associated with a municipal securities 
dealer have the same meaning as person associated with a municipal 
securities dealer in section 3(a)(32) of the Exchange Act (15 U.S.C. 
78c(a)(32));
    (iv) The terms person associated with a bank that is a government 
securities broker or government securities dealer and person associated 
with a government securities broker or government securities dealer have 
the same meaning as person associated with a government securities 
broker or government securities dealer in section 3(a)(45) of the 
Exchange Act (15 U.S.C. 78c(a)(45)); and
    (v) The terms person associated with a bank that is a transfer agent 
and person associated with a transfer agent have the same meaning as 
person associated with a transfer agent in section 3(a)(49) of the 
Exchange Act (15 U.S.C. 78c(a)(49)).
    (4) Preservation of authority. Nothing in this section impairs the 
powers conferred on the Comptroller by other provisions of law.
    (b) Notice of charges and answer--(1) In general. Proceedings are 
commenced when the Comptroller serves a notice of charges on a bank or 
associated person. The notice must indicate the type of disciplinary 
action being contemplated and the grounds therefor and fix a date, time, 
and place for hearing. The hearing must be set for a date at least 30 
days after service of the notice. A respondent served with a notice of 
charges may file an answer as prescribed in Sec.  19.19. Any respondent 
who fails to appear at a hearing personally or by a duly authorized 
representative is deemed to have consented to the issuance of a 
disciplinary order.
    (2) Public basis of proceedings; private hearings. All proceedings 
under this section must be commenced, and the notice of charges must be 
filed, on a public basis unless otherwise ordered by the Comptroller. 
Pursuant to Sec.  19.33(a), a request for a private hearing may be filed 
within 20 days of service of the notice.
    (c) Disciplinary orders--(1) Service of order; content. In the event 
of consent, or if on the record filed by the ALJ, the Comptroller finds 
that any act or omission or violation specified in the notice of charges 
has been established, the Comptroller may serve on the bank or persons 
concerned a disciplinary order, as provided in the Exchange Act. The 
order may:
    (i) Censure; limit the activities, functions, or operations of; or 
suspend or revoke the registration of a bank that is a municipal 
securities dealer;
    (ii) Censure, suspend, or bar any person associated with a municipal 
securities dealer or seeking to become a person associated with a 
municipal securities dealer;
    (iii) Censure; limit the activities, functions, or operations of; or 
suspend or bar a bank that is a government securities broker or 
government securities dealer;
    (iv) Censure; limit the activities, functions, or operations of; or 
suspend or bar any person associated with or seeking to become a person 
associated with a government securities broker or government securities 
dealer;
    (v) Deny registration to; limit the activities, functions, or 
operations of; or

[[Page 549]]

suspend or revoke the registration of a bank that is a transfer agent; 
or
    (vi) Censure, limit the activities or functions of, or suspend or 
bar any person associated with a transfer agent or seeking to become a 
person associated with a transfer agent.
    (2) Effective date of order. A disciplinary order is effective when 
served on the respondent or respondents involved and remains effective 
and enforceable until it is stayed, modified, terminated, or set aside 
by action of the Comptroller or a reviewing court.
    (d) Applications for stay or review of disciplinary actions imposed 
by registered clearing agencies--(1) Stays. The rules adopted by the 
Securities and Exchange Commission (SEC) pursuant to section 19 of the 
Exchange Act (15 U.S.C. 78s) regarding applications by persons for whom 
the SEC is the appropriate regulatory agency for stays of disciplinary 
sanctions or summary suspensions imposed by registered clearing agencies 
(17 CFR 240.19d-2) apply to applications by banks. References to the 
``Commission'' are deemed to refer to the ``OCC.''
    (2) Reviews. The regulations adopted by the SEC pursuant to section 
19 of the Exchange Act (15 U.S.C. 78s) regarding applications by persons 
for whom the SEC is the appropriate regulatory agency for reviews of 
final disciplinary sanctions, denials of participation, or prohibitions 
or limitations of access to services imposed by registered clearing 
agencies (17 CFR 240.19d-3(a) through (f)) apply to applications by 
banks. References to the ``Commission'' are deemed to refer to the 
``OCC.''



Sec.  19.122  Civil money penalty authority under Federal securities laws.

    (a) Scope. Except as provided in this section, subpart A of this 
part applies to proceedings by the Comptroller to determine whether, 
pursuant to authority contained in section 21B of the Exchange Act (15 
U.S.C. 78u-2), in proceedings commenced pursuant to sections 15B, 15C, 
and 17A of the Exchange Act (15 U.S.C. 78o-4, 78o-5, or 78q-1) for which 
the OCC is the appropriate regulatory agency under section 3(a)(34) of 
the Exchange Act (15 U.S.C. 78c(a)(34)), the Comptroller may impose a 
civil money penalty against the following:
    (1) A bank that is a municipal securities dealer, any person 
associated with a bank that is a municipal securities dealer, or any 
person seeking to become associated with a bank that is a municipal 
securities dealer;
    (2) A bank that is a government securities broker or government 
securities dealer, any person associated with a bank that is a 
government securities broker or government securities dealer, or any 
person seeking to become associated with a government securities broker 
or government securities dealer; or
    (3) A bank that is a transfer agent, any person associated with a 
bank that is a transfer agent, or any person seeking to become 
associated with a bank that is a transfer agent.
    (b) Definitions. As used in this section:
    (1) The term bank means a national bank or Federal savings 
association, and, when referring to a government securities broker or 
government securities dealer, a Federal branch or agency of a foreign 
bank;
    (2) The terms transfer agent, municipal securities dealer, 
government securities broker, and government securities dealer have the 
same meaning as such terms in sections 3(a)(25), 3(a)(30), 3(a)(43), and 
3(a)(44) of the Exchange Act (15 U.S.C. 78c(a)(25), 78c(a)(30), 
78c(a)(43), and 78c(a)(44)), respectively;
    (3) The term person associated with a bank that is a municipal 
securities dealer has the same meaning as person associated with a 
municipal securities dealer in section 3(a)(32) of the Exchange Act (15 
U.S.C. 78c(a)(32));
    (4) The term person associated with a bank that is a government 
securities broker or government securities dealer has the same meaning 
as person associated with a government securities broker or government 
securities dealer in section 3(a)(45) of the Exchange Act (15 U.S.C. 
78c(a)(45)); and
    (5) The term person associated with a bank that is a transfer agent 
has the same meaning as person associated with a transfer agent in 
section 3(a)(49) of the Exchange Act (15 U.S.C. 78c(a)(49)).
    (c) Public basis of proceedings; private hearings. All proceedings 
under this

[[Page 550]]

section must be commenced, and the notice of assessment must be filed, 
on a public basis, unless otherwise ordered by the Comptroller. Pursuant 
to Sec.  19.33(a), any request for a private hearing may be filed within 
20 days of service of the notice.



Sec.  19.123  Cease-and-desist authority.

    (a) Scope. Except as provided in this section, subpart A of this 
part applies to proceedings by the Comptroller to determine whether, 
pursuant to authority contained in sections 12(i) and 21C of the 
Exchange Act (15 U.S.C. 78l(i) and 78u-3), the Comptroller may initiate 
cease-and-desist proceedings against a national bank or Federal savings 
association for violations of sections 10A(m), 12, 13, 14(a), 14(c), 
14(d), 14(f), and 16 of the Exchange Act (15 U.S.C. 78j-1(m), 78l, 78m, 
78n(a), 78n(c), 78n(d), 78n(f), and 78p); sections 302, 303, 304, 306, 
401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 2002 as amended 
(15 U.S.C. 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265); or 
regulations or rules issued thereunder.
    (b) Public basis of proceedings; private hearings. All proceedings 
under this section must be commenced, and the notice of charges must be 
filed, on a public basis, unless otherwise ordered by the Comptroller. 
Pursuant to Sec.  19.33(a), any request for a private hearing may be 
filed within 20 days of service of the notice.

Subparts E through G--Reserved



                    Subpart H_Change in Bank Control



Sec.  19.160  Scope.

    (a) Scope. This subpart governs the procedures for a hearing 
requested by a person who has filed a notice that has been disapproved 
by the OCC for a change in control of:
    (1) An insured national bank or Federal savings association pursuant 
to section 7(j) of the FDIA (12 U.S.C. 1817(j)) and 12 CFR 5.50; or
    (2) An uninsured national bank pursuant to 12 CFR 5.50.
    (b) Applicability of subpart A of this part. Unless otherwise 
provided in this subpart, the rules in subpart A set forth the 
procedures applicable to requests for OCC hearings under this subpart.



Sec.  19.161  Hearing process.

    (a) Hearing request. Pursuant to 12 CFR 5.50(f)(6), following 
receipt of a notice of disapproval of a proposed acquisition of control 
of a national bank or Federal savings association, a filer may request a 
hearing by the OCC on the proposed acquisition. A hearing request must:
    (1) Be in writing; and
    (2) Be filed with the Hearing Clerk of the OCC within ten days after 
service on the filer of the notice of disapproval. If a filer fails to 
request a hearing with a timely written request, the notice of 
disapproval constitutes a final and unappealable order.
    (b) Hearing order. Following receipt of a hearing request, the 
Comptroller will issue, within 20 days, an order that sets forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) The matters of fact or law upon which the disapproval is based; 
and
    (3) The requirement for filing an answer to the hearing order with 
OFIA within 20 days after service of the hearing order.
    (c) Answer. An answer to a hearing order must specifically deny 
those portions of the order that are disputed. Those portions of the 
order that the filer does not specifically deny are deemed admitted by 
the filer. Any hearing under this subpart is limited to those portions 
of the order that are specifically denied.
    (d) Effect of failure to answer. Failure of a filer to file an 
answer within 20 days after service of the hearing order constitutes a 
waiver of the filer's right to appear and contest the allegations in the 
hearing order. If a filer does not file a timely answer, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the ALJ will file with the Comptroller a recommended 
decision containing the findings and the relief sought in the hearing 
order. Any final order issued by the Comptroller based upon a filer's

[[Page 551]]

failure to answer is deemed to be an order issued upon consent and is a 
final and unappealable order.



              Subpart I_Discovery Depositions and Subpoenas



Sec.  19.170  Discovery depositions.

    (a) In general. In any proceeding instituted under or subject to the 
provisions of subpart A of this part, a party may take the deposition of 
a fact witness, an expert, or a hybrid fact-expert where there is need 
for the deposition. A fact witness is a person, including another party, 
who has direct knowledge of matters that are non-privileged and of 
material relevance to the proceeding. A hybrid fact-expert witness is a 
fact witness who will also provide relevant expert opinion testimony 
based on the witness' training and experience. The deposition of experts 
is limited to those experts who are expected to testify at the hearing.
    (1) Report. A party must produce an expert report for any testifying 
expert or hybrid fact-expert witness before the witness' deposition. 
Unless otherwise provided by the ALJ, the party must produce this report 
at least 20 days prior to any deposition of the expert or hybrid fact-
expert witness.
    (2) Limits on depositions. Respondents, collectively, are limited to 
a combined total of five depositions from fact witnesses and hybrid 
fact-expert witnesses. Enforcement Counsel are limited to a combined 
total of five depositions from fact witnesses and hybrid fact-expert 
witnesses. A party is entitled to take a deposition of each expert 
witness designated by an opposing party.
    (b) Notice. A party desiring to take a deposition must give 
reasonable notice in writing to the deponent and to every other party to 
the proceeding. The notice must state the time, manner, and place for 
taking the deposition, and the name and address of the person to be 
deposed.
    (1) Location. A deposition notice may require the witness to be 
deposed at any place within a State, territory, or possession of the 
United States or the District of Columbia in which that witness resides 
or has a regular place of employment, or such other convenient place as 
agreed by the noticing party and the witness.
    (2) Remote participation. The parties may stipulate, or the ALJ may 
order, that a deposition be taken by telephone or other remote means.
    (c) Time limits. A party may take depositions at any time after the 
commencement of the proceeding, but no later than 20 days before the 
scheduled hearing date, except with permission of the ALJ for good cause 
shown.
    (d) Conduct of the deposition. The witness must be duly sworn. By 
stipulation of the parties or by order of the ALJ, a court reporter or 
other person authorized to administer an oath may administer the oath 
remotely without being in the physical presence of the deponent. Each 
party will have the right to examine the witness with respect to all 
matters that are non-privileged and of material relevance to the 
proceeding and of which the witness has factual, direct, and personal 
knowledge. Objections to questions or exhibits must be in short form and 
must state the grounds for the objection. Failure to object to questions 
or exhibits is not a waiver except where the grounds for the objection 
might have been avoided if the objection had been timely presented.
    (e) Recording the testimony--(1) Generally. The party taking the 
deposition must have a certified court reporter record the witness' 
testimony:
    (i) By stenotype machine or electronic means, such as by sound or 
video recording device;
    (ii) Upon agreement of the parties, by any other method; or
    (iii) For good cause and with leave of the ALJ, by any other method.
    (2) Cost. The party taking the deposition must bear the cost of 
recording and transcribing the witness' testimony.
    (3) Transcript. Unless the parties agree that a transcription is not 
necessary, the court reporter must provide a transcript of the witness' 
testimony to the party taking the deposition and must make a copy of the 
transcript available to each party upon payment by that party of the 
cost of the copy.
    (f) Protective orders. At any time after notice of a deposition has 
been given, a party may file a motion for the

[[Page 552]]

issuance of a protective order. Such protective order may prohibit, 
terminate, or limit the scope or manner of the taking of a deposition. 
The ALJ may grant a protective order upon a showing of sufficient 
grounds, including that the deposition:
    (1) Is unreasonable, oppressive, excessive in scope, or unduly 
burdensome;
    (2) Involves privileged, irrelevant, or immaterial matters;
    (3) Involves unwarranted attempts to pry into a party's preparation 
for trial; or
    (4) Is being conducted in bad faith or in such manner as to 
unreasonably annoy, embarrass, or oppress the witness.
    (g) Expenses. Deposition witnesses, including expert witnesses, must 
be paid the same expenses in the same manner as are paid witnesses in 
the district courts of the United States in proceedings in which the 
United States is a party. Expenses in accordance with this paragraph (g) 
must be paid by the party seeking to take the deposition.



Sec.  19.171  Deposition subpoenas.

    (a) Issuance. At the request of a party, the ALJ may issue a 
subpoena requiring the attendance of a witness at a discovery deposition 
under Sec.  19.170. The attendance of a witness may be required from any 
place in any State, territory, or possession of the United States or the 
District of Columbia or as otherwise permitted by law.
    (b) Service--(1) Methods of service. The party requesting the 
subpoena must serve it on the person named therein, or on that person's 
counsel, by any of the methods identified in Sec.  19.11(d).
    (2) Proof of service. The party serving the subpoena must file proof 
of service with the ALJ, unless the ALJ issues an order indicating the 
filing of proof of service is not required.
    (c) Motion to quash. A person named in a subpoena, or any party, may 
file a motion to quash or modify the subpoena. A statement of the 
reasons for the motion must accompany it and a copy of the motion must 
be served on the party that requested the subpoena. The motion must be 
made prior to the time for compliance specified in the subpoena and not 
more than ten days after the date of service of the subpoena, or if the 
subpoena is served within 15 days of the hearing, within five days after 
the date of service.
    (d) Enforcement of deposition subpoena. Enforcement of a deposition 
subpoena must be in accordance with the procedures of Sec.  19.27(d).



                     Subpart J_Formal Investigations



Sec.  19.180  Scope.

    This subpart and Sec.  19.8 apply to formal investigations initiated 
by order of the Comptroller and pertain to the exercise of powers 
specified in section 5240 of the Revised Statutes of the United States 
(12 U.S.C. 481); section 5(d)(1)(B) of the Home Owners' Loan Act (12 
U.S.C. 1464(d)(1)(B)); sections 7(j)(15), 8(n), and 10(c) of the FDIA 
(12 U.S.C. 1817(j)(15), 1818(n), and 1820(c)); sections 4(b) and 13(a) 
and (b) of the International Banking Act of 1978 (12 U.S.C. 3102(b) and 
3108(a) and (b)); and section 21 of the Exchange Act (15 U.S.C. 78u). 
This subpart does not restrict or in any way affect the authority of the 
Comptroller to conduct examinations into the affairs or ownership of 
national banks, Federal savings associations, Federal branches and 
agencies, and their affiliates.



Sec.  19.181  Confidentiality of formal investigations.

    The entire record of any formal investigative proceeding, including 
the resolution or order of the Comptroller authorizing or terminating 
the proceeding; all subpoenas issued by the OCC during the 
investigation; and all information, documents, and transcripts obtained 
by the OCC in the course of a formal investigation, are confidential and 
may be disclosed only in accordance with the provisions of part 4 of 
this chapter or pursuant to OCC discovery obligations under subpart A of 
this part.



Sec.  19.182  Order to conduct a formal investigation.

    A formal investigation begins with the issuance of an order signed 
by the Comptroller. The order must designate the person or persons 
empowered by the Comptroller to conduct the investigation. These persons 
are authorized, among other things, to administer

[[Page 553]]

oaths and affirmations, to take or cause to be taken testimony under 
oath, and to issue or modify subpoenas, including subpoenas duces tecum, 
as to any matter under investigation by the Comptroller. Upon 
application and for good cause shown, the Comptroller may limit, modify, 
withdraw, or terminate the order at any stage of the proceedings.



Sec.  19.183  Rights of witnesses.

    (a) Right to be shown order. Any person who is compelled or 
requested to furnish testimony, documentary evidence, or other 
information with respect to any matter under formal investigation must, 
on request, be shown the order initiating the investigation. These 
persons may not retain copies of the order without first receiving 
written approval of the OCC.
    (b) Right to counsel. Any person who, in a formal investigation, is 
compelled to appear and testify, or who appears and testifies by request 
or permission of the OCC, may be accompanied, represented, and advised 
by counsel. The right to be accompanied, represented, and advised by 
counsel means the right of a person testifying to have an attorney 
present at all times while testifying and to have the attorney:
    (1) Advise the person before, during, and after the conclusion of 
testimony;
    (2) Question the person, on the record, briefly at the conclusion of 
testimony for the purpose of clarifying any of the answers given; and
    (3) Make summary notes during the testimony solely for use in 
representing the person.
    (c) Exclusion from proceedings. Any person who has given or will 
give testimony and counsel representing the person may be excluded from 
the proceedings during the taking of testimony of any other person at 
the discretion of the OCC or the OCC's designated representatives. 
Neither attorney(s) for the institution(s) affiliated with the 
testifying person nor attorneys for any other interested persons have 
any right to be present during the testimony of any person not 
personally represented by such attorney.
    (d) Right to inspect testimony transcript. Any person who is 
compelled to give testimony is entitled to inspect any transcript that 
has been made of the testimony but may not obtain a copy if the OCC or 
the OCC's designated representatives conducting the proceedings 
determine that the contents should not be disclosed.



Sec.  19.184  Service of subpoena and payment of witness expenses.

    (a) Methods of service. Service of a subpoena may be made by any of 
the methods identified in Sec.  19.11(d).
    (b) Expenses. The fees and expenses specified in Sec.  19.14 apply 
to a witness who is subpoenaed to testify pursuant to this subpart.
    (c) Area of service. Subpoenas issued in connection with a formal 
investigation proceeding that require the attendance and testimony of 
witnesses or the production of documents, including electronically 
stored information, may be served on any person or entity within any 
State, territory, or possession of the United States or the District of 
Columbia, or as otherwise provided by law. Foreign nationals are subject 
to such subpoenas if service is made upon a duly authorized agent 
located in the United States or in accordance with international 
requirements for service of subpoenas.



Sec.  19.185  Dilatory, obstructionist, or insubordinate conduct.

    Any OCC designated representative conducting an investigative 
proceeding will report to the Comptroller any instances where any person 
has engaged in dilatory, obstructionist, or insubordinate conduct during 
the course of the proceeding or any other instance involving a violation 
of this part. The Comptroller may take such action as the circumstances 
warrant, including exclusion of the offending individual or individuals 
from participation in the proceedings.



    Subpart K_Parties and Representational Practice Before the OCC; 
                          Standards of Conduct



Sec.  19.190  Scope.

    This subpart contains rules relating to parties and representational 
practice before the OCC. This subpart includes the imposition of 
sanctions by the ALJ, any other presiding officer

[[Page 554]]

appointed pursuant to subpart C of this part and Sec.  19.120, or the 
Comptroller against parties or their counsel in an adjudicatory 
proceeding under this part. This subpart also covers other disciplinary 
sanctions--censure, suspension, or debarment--against individuals who 
appear before the OCC in a representational capacity either in an 
adjudicatory proceeding under this part or in any other matters 
connected with presentations to the OCC relating to a client's rights, 
privileges, or liabilities. This representation includes, but is not 
limited to, the practice of attorneys and accountants. Employees of the 
OCC are not subject to disciplinary proceedings under this subpart.



Sec.  19.191  Definitions.

    As used in Sec. Sec.  19.190 through 19.201, the following terms 
have the meaning given in this section unless the context otherwise 
requires:
    (a) Accountant means any individual who is duly qualified to 
practice as a certified public accountant or a public accountant in any 
state, possession, territory, or commonwealth of the United States or 
the District of Columbia.
    (b) Attorney means any individual who is a member in good standing 
of the bar of the highest court of any state, possession, territory, or 
commonwealth of the United States or the District of Columbia.
    (c) Practice before the OCC includes any matters connected with 
written or oral presentations to the OCC or any of its officers or 
employees relating to a client's rights, privileges, or liabilities 
under laws or regulations administered by the OCC. Such matters include, 
but are not limited to, representation of a client in an adjudicatory 
proceeding under this part; the preparation of any statement, opinion or 
other paper or document by an attorney, accountant, or other licensed 
professional that is filed with, or submitted to, the OCC, on behalf of 
another person in, or in connection with, any application, notification, 
report or document; the representation of a person at conferences, 
hearings and meetings; and the transaction of other business before the 
OCC on behalf of another person. The term practice before the OCC does 
not include work prepared for a national bank, Federal savings 
association, or Federal branch or agency of a foreign bank solely at its 
request for use in the ordinary course of its business.



Sec.  19.192  Sanctions relating to conduct in an adjudicatory proceeding.

    (a) In general. Appropriate sanctions may be imposed when any party 
or person representing a party in an adjudicatory proceeding under this 
part has failed to comply with an applicable statute, regulation, or 
order, and that failure to comply:
    (1) Constitutes contemptuous conduct;
    (2) Materially injures or prejudices another party in terms of 
substantive injury, incurring additional expenses including attorney's 
fees, prejudicial delay, or otherwise;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Unduly delays the proceeding.
    (b) Sanctions. Sanctions which may be imposed include any one or 
more of the following:
    (1) Issuing an order against the party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just; and
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Procedure for imposition of sanctions. (1) Upon the motion of 
any party, or on their own motion, the ALJ or other presiding officer 
may impose sanctions in accordance with this section. The ALJ or other 
presiding officer will submit to the Comptroller for final ruling any 
sanction entering a final order that determines the case on the merits.
    (2) No sanction authorized by this section, other than refusal to 
accept

[[Page 555]]

late filings, will be imposed without prior notice to all parties and an 
opportunity for any party against whom sanctions would be imposed to be 
heard. Such opportunity to be heard may be on such notice, and the 
response may be in such form as the ALJ or other presiding officer 
directs. The ALJ or other presiding officer may limit the opportunity to 
be heard to an opportunity of a party or a party's representative to 
respond orally immediately after the act or inaction covered by this 
section is noted by the ALJ or other presiding officer.
    (3) Requests for the imposition of sanctions by any party, and the 
imposition of sanctions, are subject to interlocutory review pursuant to 
Sec.  19.25 in the same manner as any other ruling.
    (d) Section not exclusive. This section does not preclude the ALJ or 
other presiding officer or the Comptroller from taking any other action, 
or imposing any restriction or sanction, authorized by applicable 
statute or regulation.



Sec.  19.193  Censure, suspension, or debarment.

    The Comptroller may censure an individual or suspend or debar an 
individual from practice before the OCC if the individual is incompetent 
in representing a client's rights or interest in a significant matter 
before the OCC; or engages, or has engaged, in disreputable conduct; or 
refuses to comply with the rules and regulations in this part; or with 
intent to defraud in any manner, willfully and knowingly deceives, 
misleads, or threatens any client or prospective client. The suspension 
or debarment of an individual may be initiated only upon a finding by 
the Comptroller that the basis for the disciplinary action is 
sufficiently egregious.



Sec.  19.194  Eligibility of attorneys and accountants to practice.

    (a) Attorneys. Any attorney not currently under suspension or 
debarment pursuant to this subpart may practice before the OCC.
    (b) Accountants. Any accountant not currently under suspension or 
debarment by the OCC may practice before the OCC.



Sec.  19.195  Incompetence.

    Incompetence in the representation of a client's rights and 
interests in a significant matter before the OCC is grounds for 
suspension or debarment. The term ``incompetence'' encompasses conduct 
that reflects a lack of the knowledge, judgment, and skill that a 
professional would ordinarily and reasonably be expected to exercise in 
adequately representing the rights and interests of a client. Such 
conduct includes, but is not limited to:
    (a) Handling a matter that the individual knows or should know that 
they are not competent to handle, without associating with a 
professional who is competent to handle such matter;
    (b) Handling a matter without adequate preparation under the 
circumstances; or
    (c) Neglect in a matter entrusted to him or her.



Sec.  19.196  Disreputable conduct.

    Disreputable conduct for which an individual may be censured, 
debarred, or suspended from practice before the OCC includes:
    (a) Willfully or recklessly violating or willfully or recklessly 
aiding and abetting the violation of any provision of the Federal 
banking or applicable securities laws or the rules and regulations 
thereunder or conviction of any offense involving dishonesty or breach 
of trust;
    (b) Knowingly or recklessly giving false or misleading information, 
or participating in any way in the giving of false information to the 
OCC or any officer or employee thereof, or to any tribunal authorized to 
pass upon matters administered by the OCC in connection with any matter 
pending or likely to be pending before it. The term ``information'' 
includes facts or other statements contained in testimony, financial 
statements, applications for enrollment, affidavits, declarations, or 
any other document or written or oral statement;
    (c) Directly or indirectly attempting to influence, or offering or 
agreeing to attempt to influence, the official action of any officer or 
employee of the OCC by the use of threats, false accusations, duress, or 
coercion; by the offer of any special inducement or promise

[[Page 556]]

of advantage; or by the bestowing of any gift, favor, or thing of value;
    (d) Disbarment or suspension from practice as an attorney, or 
debarment or suspension from practice as a certified public accountant 
or public accountant, by any duly constituted authority of any state, 
possession, or commonwealth of the United States or the District of 
Columbia for the conviction of a felony or misdemeanor involving moral 
turpitude, where the conviction has not been reversed on appeal;
    (e) Knowingly aiding or abetting another individual to practice 
before the OCC during that individual's period of suspension, debarment, 
or ineligibility;
    (f) Contemptuous conduct in connection with practice before the OCC, 
and knowingly making false accusations and statements, or circulating or 
publishing malicious or libelous matter;
    (g) Suspension, debarment, or removal from practice before the Board 
of Governors, the FDIC, the former OTS, the Securities and Exchange 
Commission, the Commodity Futures Trading Commission, or any other 
Federal or state agency; and
    (h) Willfully violating any of the regulations contained in this 
part.



Sec.  19.197  Initiation of disciplinary proceeding.

    (a) Receipt of information. An individual, including any employee of 
the OCC, who has reason to believe that an individual practicing before 
the OCC in a representative capacity has engaged in any conduct that 
would serve as a basis for censure, suspension, or debarment under this 
subpart, may make a report thereof and forward it to the OCC or to such 
person as may be delegated responsibility for such matters by the 
Comptroller.
    (b) Censure without formal proceeding. Upon receipt of information 
regarding an individual's qualification to practice before the OCC, the 
Comptroller may, after giving the individual notice and opportunity to 
respond, censure such individual.
    (c) Institution of formal disciplinary proceeding. When the 
Comptroller has reason to believe that any individual who practices 
before the OCC in a representative capacity has engaged in conduct that 
would serve as a basis for censure, suspension, or debarment under Sec.  
19.192, the Comptroller may, after giving the individual notice and 
opportunity to respond, institute a formal disciplinary proceeding 
against such individual. The proceeding will be conducted pursuant to 
Sec.  19.199 and initiated by a complaint that names the individual as a 
respondent and is signed by the Comptroller. Except in cases of 
willfulness, or when time, the nature of the proceeding, or the public 
interest do not permit, a proceeding under this section may not be 
commenced until the respondent has been informed, in writing, of the 
facts or conduct that warrant institution of a proceeding and the 
respondent has been accorded the opportunity to comply with all lawful 
requirements or take whatever action may be necessary to remedy the 
conduct that is the basis for the commencement of the proceeding.



Sec.  19.198  Conferences.

    (a) General. The Comptroller may confer with a proposed respondent 
concerning allegations of misconduct or other grounds for censure, 
debarment, or suspension, regardless of whether a proceeding for 
censure, debarment, or suspension has been commenced. If a conference 
results in a stipulation in connection with a proceeding in which the 
individual is the respondent, the stipulation may be entered in the 
record at the request of either party to the proceeding.
    (b) Voluntary suspension or debarment. In order to avoid the 
institution of, or a decision in, a debarment or suspension proceeding, 
a person who practices before the OCC may consent to suspension or 
debarment from practice. At the discretion of the Comptroller, the 
individual may be suspended or debarred in accordance with the consent 
offered.



Sec.  19.199  Proceedings under this subpart.

    Any hearing held under this subpart is held before an ALJ pursuant 
to procedures set forth in subpart A of this part. The Comptroller will 
appoint a person to represent the OCC in the hearing. Any person having 
prior involvement in the matter that is the

[[Page 557]]

basis for the suspension or debarment proceeding is disqualified from 
representing the OCC in the hearing. The hearing will be closed to the 
public unless the Comptroller, on the Comptroller's initiative or on the 
request of a party, otherwise directs. The ALJ will issue a recommended 
decision to the Comptroller, who will issue the final decision and 
order. The Comptroller may censure, debar, or suspend an individual, or 
take such other disciplinary action as the Comptroller deems 
appropriate.



Sec.  19.200  Effect of debarment, suspension, or censure.

    (a) Debarment. If the final order against the respondent is for 
debarment, the individual may not practice before the OCC unless 
otherwise permitted to do so by the Comptroller pursuant to Sec.  
19.201.
    (b) Suspension. If the final order against the respondent is for 
suspension, the individual may not practice before the OCC during the 
period of suspension.
    (c) Censure. If the final order against the respondent is for 
censure, the individual may be permitted to practice before the OCC, but 
such individual's future representations may be subject to conditions 
designed to promote high standards of conduct. If a written letter of 
censure is issued, a copy will be maintained in the OCC's files.
    (d) Notice of debarment or suspension. Upon the issuance of a final 
order for suspension or debarment, the Comptroller will give notice of 
the order to appropriate officers and employees of the OCC and to 
interested departments and agencies of the Federal government. The 
Comptroller will also give notice to the appropriate authorities of the 
state in which any debarred or suspended individual is or was licensed 
to practice.



Sec.  19.201  Petition for reinstatement.

    At the expiration of the period of time designated in the order of 
debarment, the Comptroller may entertain a petition for reinstatement 
from any person debarred from practice before the OCC. The Comptroller 
may grant reinstatement only if satisfied that the petitioner is likely 
to act in accordance with the regulations in this part, and that 
granting reinstatement would not be contrary to the public interest. Any 
request for reinstatement is limited to written submissions unless the 
Comptroller, at the Comptroller's discretion, affords the petitioner a 
hearing.



                  Subpart L_Equal Access to Justice Act



Sec.  19.205  Authority and scope; waiver.

    (a) In general. This subpart implements section 203 of the Equal 
Access to Justice Act (EAJA) (5 U.S.C. 504). EAJA provides for the award 
of attorney fees and other expenses to eligible individuals and entities 
that are parties in certain administrative proceedings (adversary 
adjudications) before agencies of the Government of the United States. 
An eligible party may receive an award when it prevails over an agency 
unless the agency's position was substantially justified or special 
circumstances make an award unjust. However, no presumption under this 
subpart arises that the agency's position was not substantially 
justified because the agency did not prevail.
    (b) Scope. The types of adversary adjudications covered by this 
subpart are those proceedings listed in Sec. Sec.  19.1, 19.110, 19.120, 
19.190, 19.230, and 19.241.
    (c) Waiver. After reasonable notice to the parties, the presiding 
officer or the OCC may waive, for good cause shown, any provision 
contained in this subpart as long as the waiver is consistent with the 
terms and purpose of EAJA.



Sec.  19.206  Definitions.

    For purposes of this subpart:
    (a) Adversary adjudication means an adjudication under 5 U.S.C. 554 
in which the position of the OCC is represented by Enforcement Counsel.
    (b) Final disposition means the date on which a decision or order 
disposing of the merits of a proceeding or any other complete resolution 
of the proceeding, such as a settlement or voluntary dismissal, becomes 
final and unappealable both within the OCC and to the courts.
    (c) Party means a party, as defined in 5 U.S.C. 551(3), that is:

[[Page 558]]

    (1) An individual whose net worth did not exceed $2,000,000 at the 
time the adversary adjudication was initiated; or
    (2) Any owner of an unincorporated business, or any partnership, 
corporation, association, unit of local government, or organization, the 
net worth of which did not exceed $7,000,000 at the time the adversary 
adjudication was initiated, and which had not more than 500 employees at 
the time the adversary adjudication was initiated; except that an 
organization described in section 501(c)(3) of the Internal Revenue Code 
of 1986 (the Code) exempt from taxation under section 501(a) of the 
Code, or a cooperative association as defined in section 15(a) of the 
Agricultural Marketing Act, may be a party regardless of the net worth 
of the organization or cooperative association. The net worth and number 
of employees of the applicant and any of its affiliates must be 
aggregated when determining the applicability of this paragraph (c).
    (d) Position of the OCC means, in addition to the position taken by 
the OCC in the adversary adjudication, the action or failure to act by 
the OCC upon which the adversary adjudication is based, except that fees 
and other expenses may not be awarded to a party for any portion of the 
adversary adjudication in which the party has unreasonably protracted 
the proceedings.
    (e) Presiding officer means the official, whether the official is 
designated as an ALJ or otherwise, that presided over the adversary 
adjudication or the official that presides over an EAJA proceeding.



 Sec.  19.207  Application requirements.

    (a) Timing of application. A party seeking an award under this 
subpart must file an application with the OCC within 30 days after the 
OCC's final disposition of the adversary adjudication.
    (b) Contents of application. An application for an award of fees and 
expenses under this section must:
    (1) Identify the applicant and the proceeding for which an award is 
sought;
    (2) Show that the applicant has prevailed and identify the position 
of the OCC that the applicant alleges was not substantially justified;
    (3) State the basis for the applicant's belief that the OCC position 
was not substantially justified;
    (4) Unless the applicant is an individual, state the number of 
employees of the applicant and describe briefly the type and purpose of 
its organization or business;
    (5) Show that the applicant meets the definition of ``party'' in 
Sec.  19.206(c), including documentation of its net worth pursuant to 
Sec.  19.208, if applicable;
    (6) State the amount of fees and expenses for which an award is 
sought, as documented pursuant to Sec.  19.209;
    (7) Be signed by the applicant if the applicant is an individual or 
by an authorized officer or attorney of the applicant;
    (8) Any other matter the applicant wishes the OCC to consider in 
determining whether and in what amount an award should be made; and
    (9) Contain or be accompanied by a written verification under 
penalty of perjury that the information provided in the application is 
true and correct.
    (c) Referral of application. Upon receipt of an EAJA application, 
the OCC will, if feasible, refer the matter to the official who heard 
the underlying adversary adjudication.



Sec.  19.208  Net worth exhibit.

    (a) Required information. Each applicant, except a qualified tax-
exempt organization or cooperative association, must provide with its 
application a detailed exhibit showing the net worth of the applicant 
and, where appropriate, any of its affiliates at the time the adversary 
adjudication was initiated. Except as otherwise provided in this 
section, this exhibit may be in any form convenient to the applicant 
that provides full disclosure of the applicant's and its affiliates' 
assets and liabilities and is sufficient to determine whether the 
applicant qualifies under the standards in this subpart. A presiding 
officer may require an applicant to file additional information to 
determine its eligibility for an award.
    (1) An unaudited financial statement is acceptable for individual 
applicants as long as the statement provides a reliable basis for 
evaluation, unless the presiding officer or the OCC otherwise

[[Page 559]]

requires. Financial statements or reports filed with or reported to a 
Federal or State agency before the initiation of the adversary 
adjudication for other purposes and accurate as of a date not more than 
three months prior to the initiation of the proceeding are acceptable in 
establishing net worth as of the time of the initiation of the 
proceeding, unless the presiding officer or the OCC otherwise requires.
    (2) In the case of applicants or affiliates that are not banks or 
savings associations, net worth will be considered for the purposes of 
this subpart to be the excess of total assets over total liabilities as 
of the date the underlying proceeding was initiated.
    (3) If the applicant or any of its affiliates is a bank or a savings 
association, the portion of the statement of net worth that relates to 
the bank or the savings association must consist of a copy of the bank's 
or savings association's last Consolidated Report of Condition and 
Income filed before the initiation of the adversary adjudication. Net 
worth will be considered for the purposes of this subpart to be the 
total equity capital as reported, in conformity with applicable 
instructions and guidelines, on the bank's or the savings association's 
Consolidated Report of Condition and Income filed for the last reporting 
date before the initiation of the proceeding.
    (b) Confidentiality of net worth submissions. Ordinarily, the net 
worth exhibit will be included in the public record of the proceeding. 
However, an applicant that objects to public disclosure of information 
in any portion of the exhibit and believes there are legal grounds for 
withholding it from disclosure may request that the documents be filed 
under seal or otherwise be treated as confidential.



Sec.  19.209  Documentation of fees and expenses.

    The application must be accompanied by adequate documentation of the 
fees and expenses incurred after initiation of the adversary 
adjudication, including the cost of any study, analysis, report, test, 
or project. An application seeking an increase in fees to account for 
inflation pursuant to Sec.  19.215(d)(1)(i) also must include adequate 
documentation of the change in the consumer price index for the attorney 
or agent's locality. The applicant must submit a separate itemized 
statement for each professional firm or individual whose services are 
covered by the application showing the hours spent in connection with 
the proceeding by each individual, a description of the specific 
services performed, the rate at which each fee has been computed, any 
expenses for which reimbursement is sought, the total amount claimed, 
and the total amount paid or payable by the applicant or by any other 
person or entity for the services provided. The presiding officer may 
require the applicant to provide vouchers, receipts, or other 
substantiation for any fees or expenses claimed.



Sec.  19.210  Filing and service of documents.

    Any application for an award, or any accompanying documentation 
related to an application, must be filed and served on all parties to 
the proceeding in accordance with Sec.  19.11, except as provided in 
Sec.  19.208(b) for confidential financial information.



Sec.  19.211  Answer to application.

    (a) Filing of answer. Except as provided in Sec.  19.213, 
Enforcement Counsel may file an answer to an application within 30 days 
after service of the application. Unless Enforcement Counsel requests an 
extension of time for filing or files a statement of intent to negotiate 
a settlement under Sec.  19.213, failure to file an answer within the 
30-day period may be treated as a consent to the award requested.
    (b) Content of answer. The answer must explain in detail any 
objections to the award requested and identify the facts relied on in 
support of the Enforcement Counsel's position. If the answer is based on 
any alleged facts not already in the record of the proceeding, 
Enforcement Counsel must include with the answer either supporting 
affidavits or a request for further proceedings under Sec.  19.214.



Sec.  19.212  Reply.

    Within 15 days after service of an answer, the applicant may file a 
reply. If

[[Page 560]]

the reply is based on any alleged facts not already in the record of the 
proceeding, the applicant must include with the reply either supporting 
affidavits or a request for further proceedings under Sec.  19.214.



Sec.  19.213  Settlement.

    The applicant and Enforcement Counsel may agree on a proposed 
settlement of the award before final action on the application, either 
in connection with a settlement of the underlying proceeding or after 
the underlying proceeding has been concluded, in accordance with Sec.  
19.15. If a prevailing party and Enforcement Counsel agree on a proposed 
settlement of an award before an application has been filed, the 
application must be filed with the proposed settlement. If a proposed 
settlement of an underlying proceeding provides that each side must bear 
its own expenses and the settlement is accepted, no application may be 
filed. If, after an application is filed, Enforcement Counsel and the 
applicant believe that the issues in the application can be settled, 
they may jointly file a statement of their intent to negotiate a 
settlement. The filing of this statement will extend, under Sec.  
19.211, the time for filing an answer for an additional 30 days, and 
further extensions may be granted by the presiding officer upon request 
by Enforcement Counsel and the applicant.



Sec.  19.214  Further proceedings.

    (a) Process for requesting further proceedings or additional 
information. At the request of either the applicant or Enforcement 
Counsel, or on the presiding officer's own initiative, the presiding 
officer may, if necessary for a full and fair decision on the 
application, order the filing of additional written submissions; hold an 
informal conference or oral argument; or allow for discovery or hold an 
evidentiary hearing with respect to issues other than whether the OCC's 
position was substantially justified (such as those involving the 
applicant's eligibility or substantiation of fees or expenses). Any 
written submissions must be made, oral argument held, discovery 
conducted, and evidentiary hearing held as promptly as possible so as 
not to delay a decision on the application for fees.
    (b) Requirement to identify additional information sought and reason 
for requesting additional proceedings. A request for further proceedings 
under this section must specifically identify the information sought or 
the disputed issues and must explain why the additional proceedings are 
necessary to resolve the issues.



Sec.  19.215  Decision.

    (a) Basis for decision. The presiding officer must determine whether 
the position of the OCC was substantially justified on the basis of the 
administrative record as a whole of the adversary adjudication for which 
fees and other expenses are sought.
    (b) Timing of decision. The presiding officer in a proceeding under 
this subpart will issue a recommended decision, in writing, on the 
application within 90 days after the time for filing a reply or, when 
further proceedings are held, within 90 days after completion of 
proceedings.
    (c) Contents of decision. The decision on the application must 
include written findings and conclusions on the applicant's eligibility 
and status as a prevailing party, and, if applicable, an explanation of 
the reasons for any difference between the amount requested and the 
amount awarded. The decision also must include, if applicable, findings 
on whether Enforcement Counsel's or the OCC's position was substantially 
justified, whether the applicant unduly and unreasonably protracted the 
adversary adjudication, or whether special circumstances make an award 
unjust.
    (d) Awards.--(1) In general. Awards under this subpart may include 
the reasonable expenses of expert witnesses; the reasonable cost of any 
study, analysis, report, test, or project; and reasonable attorney or 
agent fees. The applicant must have incurred these expenses, costs, and 
fees after initiation of the adversary adjudication subject to the EAJA 
application. The presiding officer will base awards on prevailing market 
rates for the kind and quality of the services furnished, even if the 
services were provided without charge or at reduced rate to the 
applicant, except that:

[[Page 561]]

    (i) No award for the fee of an attorney or agent under this subpart 
may exceed the hourly rate specified in 5 U.S.C. 504(b)(1)(A) except to 
account for inflation since the last update of the statute's maximum 
award upon the request of the applicant as documented in the application 
pursuant to Sec.  19.209 or if a special factor, such as the limited 
availability of qualified attorneys or agents for the proceedings 
involved, justifies a higher fee; and
    (ii) No award to compensate an expert witness may exceed the highest 
rate at which the OCC pays expert witnesses.
    (2) Award for fees of an attorney, agent, or expert witness. In 
determining the reasonableness of the fee sought for an attorney, agent, 
or expert witness the presiding officer should consider:
    (i) If in private practice, the attorney's, agent's, or witness' 
customary fee for similar services;
    (ii) If an employee of the applicant, the fully allocated cost of 
the attorney's, agent's, or witness' services;
    (iii) The prevailing rate for similar services in the community in 
which the attorney, agent, or witness ordinarily perform services;
    (iv) The time actually spent in the representation of the applicant;
    (v) The time reasonably spent in light of the difficulty or 
complexity of the issues in the proceeding; and
    (vi) Any other factors that may bear on the value of the services 
provided.
    (3) Awards for costs of a study, analysis, report, test, project, or 
similar matter. The presiding officer may award the reasonable cost of 
any study, analysis, report, test, project, or similar matter prepared 
on behalf of the applicant to the extent that the charge for the service 
does not exceed the prevailing rate for similar services and the 
presiding officer finds that the study or other matter was necessary for 
preparation of the applicant's case.
    (4) Reduction or denial of an award. A presiding officer may reduce 
the amount to be awarded, or deny any award, to the extent that the 
party during the course of the proceedings engaged in conduct which 
unduly and unreasonably protracted the final resolution of the matter in 
controversy or if special circumstances make the award sought unjust.
    (e) Final agency decision. The Comptroller will issue a final 
decision on the application or remand the application to the presiding 
officer for further proceedings in accordance with Sec.  19.40.



Sec.  19.216  Agency review.

    Either the applicant or Enforcement Counsel may seek review of the 
presiding officer's decision on the fee application, in accordance with 
Sec.  19.39.



Sec.  19.217  Judicial review.

    An applicant may seek judicial review of final agency decisions on 
awards made under this section as provided in 5 U.S.C. 504(c)(2).



Sec.  19.218  Stay of decision concerning award.

    Any proceedings on an application for fees under this subpart will 
be automatically stayed until the OCC's final disposition of the 
decision on which the application is based and either the time period 
for seeking judicial review expires, or if review has been sought, until 
final disposition is made by a court and no further judicial review is 
available.



Sec.  19.219  Payment of award.

    (a) Requirement to submit final decision. An applicant seeking 
payment of an award must submit to the OCC's Litigation Group a copy of 
the OCC's final decision granting the award, accompanied by a 
certification that the applicant will not seek review of the decision in 
the United States courts. Applicants should send the submissions to: 
Office of the Comptroller of the Currency, Washington, DC 20219, 
Attention: Director, Litigation Group.
    (b) Time frame for award payment. The OCC will pay the amount 
awarded to the applicant within 90 days.

[[Page 562]]



Subpart M_Procedures for Reclassifying an Insured Depository Institution 
   Based on Criteria Other Than Capital Under Prompt Corrective Action



Sec.  19.220  Scope.

    This subpart applies to the procedures afforded to any insured 
depository institution that has been reclassified to a lower capital 
category by a notice or order issued by the OCC pursuant to section 38 
of the FDIA (12 U.S.C. 1831o) and 12 CFR part 6 (prompt corrective 
action). For purposes of this subpart, insured depository institution 
means an insured national bank, an insured Federal savings association, 
an insured Federal savings bank, or an insured Federal branch of a 
foreign bank.



Sec.  19.221  Reclassification of an insured depository institution 
based on unsafe or unsound condition or practice.

    (a) Issuance of notice of proposed reclassification--(1) Grounds for 
reclassification. (i) Pursuant to Sec.  6.4 of this chapter, the OCC may 
reclassify a well capitalized insured depository institution as 
adequately capitalized or subject an adequately capitalized or 
undercapitalized insured depository institution to the supervisory 
actions applicable to the next lower capital category if:
    (A) The OCC determines that the insured depository institution is in 
an unsafe or unsound condition; or
    (B) The OCC deems the insured depository institution to be engaging 
in an unsafe or unsound practice and not to have corrected the 
deficiency.
    (ii) Any action pursuant to this paragraph (a)(1) is referred to in 
this subpart as ``reclassification.''
    (2) Prior notice to institution. Prior to taking action pursuant to 
Sec.  6.4 of this chapter, the OCC will issue and serve on the insured 
depository institution a written notice of the OCC's intention to 
reclassify the insured depository institution.
    (b) Contents of notice. A notice of intention to reclassify an 
insured depository institution based on unsafe or unsound condition will 
include:
    (1) A statement of the insured depository institution's capital 
measures and capital levels and the category to which the insured 
depository institution would be reclassified;
    (2) The reasons for reclassification of the insured depository 
institution; and
    (3) The date by which the insured depository institution subject to 
the notice of reclassification may file with the OCC a written response 
to the proposed reclassification and a request for a hearing, which must 
be at least 14 calendar days from the date of service of the notice 
unless the OCC determines that a shorter period is appropriate in light 
of the financial condition of the insured depository institution or 
other relevant circumstances.
    (c) Response to notice of proposed reclassification. An insured 
depository institution may file a written response to a notice of 
proposed reclassification within the time period set by the OCC. The 
response should include:
    (1) An explanation of why the insured depository institution is not 
in unsafe or unsound condition or otherwise should not be reclassified; 
and
    (2) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
insured depository institution or company regarding the 
reclassification.
    (d) Failure to file response. Failure by an insured depository 
institution to file, within the specified time period, a written 
response with the OCC to a notice of proposed reclassification will 
constitute a waiver of the opportunity to respond and will constitute 
consent to the reclassification.
    (e) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the OCC under this section. If the insured depository institution 
desires to present oral testimony or witnesses at the hearing, the 
insured depository institution must include a request to do so with the 
request for an informal hearing. A request to present oral testimony or 
witnesses must specify the names of the witnesses and the general nature 
of their expected testimony. Failure to request a hearing will 
constitute a waiver of any right to a hearing, and

[[Page 563]]

failure to request the opportunity to present oral testimony or 
witnesses will constitute a waiver of any right to present oral 
testimony or witnesses.
    (f) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the OCC will issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the OCC allows further time at the 
request of the insured depository institution. The hearing will be held 
in Washington, DC or at such other place as may be designated by the OCC 
before a presiding officer(s) designated by the OCC to conduct the 
hearing.
    (g) Hearing procedures. (1) The insured depository institution has 
the right to introduce relevant written materials and to present oral 
argument at the hearing. The insured depository institution may 
introduce oral testimony and present witnesses only if expressly 
authorized by the OCC or the presiding officer(s). Neither the 
provisions of the Administrative Procedure Act (5 U.S.C. 554-557) 
governing adjudications required by statute to be determined on the 
record nor the Uniform Rules apply to an informal hearing under this 
section unless the OCC orders that such procedures will apply.
    (2) The informal hearing will be recorded and a transcript furnished 
to the insured depository institution upon request and payment of the 
cost thereof. Witnesses need not be sworn unless specifically requested 
by a party or the presiding officer(s). If so requested, and by 
stipulation of the parties or by order of the presiding officer, a court 
reporter or other person authorized to administer an oath may administer 
the oath remotely without being in the physical presence of the witness. 
The presiding officer(s) may ask questions of any witness.
    (3) Based on the circumstances of each hearing, the presiding 
officer may direct the use of, or any party may elect to use, an 
electronic presentation during the hearing. If the presiding officer 
requires an electronic presentation during the hearing, each party will 
be responsible for its own presentation and related costs unless the 
parties agree to another manner by which to allocate presentation 
responsibilities and costs.
    (4) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (h) Recommendation of presiding officer(s). Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) will make a recommendation to the OCC 
on the reclassification.
    (i) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC will decide whether to reclassify the 
insured depository institution and notify the insured depository 
institution of the OCC's decision.



Sec.  19.222  Request for rescission of reclassification.

    Any insured depository institution that has been reclassified under 
part 6 of this chapter and this subpart, may, upon a change in 
circumstances, request in writing that the OCC reconsider the 
reclassification, and may propose that the reclassification be rescinded 
and that any directives issued in connection with the reclassification 
be modified, rescinded, or removed. Unless otherwise ordered by the OCC, 
the insured depository institution will remain subject to the 
reclassification and to any directives issued in connection with that 
reclassification while such request is pending before the OCC.



Subpart N_Order To Dismiss a Director or Senior Executive Officer Under 
                        Prompt Corrective Action



Sec.  19.230  Scope.

    This subpart applies to informal hearings afforded to any director 
or senior executive officer dismissed pursuant to an order issued under 
section 38 of the FDIA (12 U.S.C. 1831o) and 12 CFR part 6 (prompt 
corrective action). For purposes of this subpart, insured depository 
institution means an insured

[[Page 564]]

national bank, an insured Federal savings association, an insured 
Federal savings bank, or an insured Federal branch of a foreign bank.



Sec.  19.231  Order to dismiss a director or senior executive officer.

    (a) Service of notice. When the OCC issues and serves a directive on 
an insured depository institution pursuant to subpart B of 12 CFR part 6 
requiring the insured depository institution to dismiss from office any 
director or senior executive officer under section 38(f)(2)(F)(ii) of 
the FDIA, the OCC will also serve a copy of the directive, or the 
relevant portions of the directive where appropriate, upon the person to 
be dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The Respondent must file this request for 
reinstatement within 10 calendar days of the receipt of the OCC 
directive, unless further time is allowed by the OCC at the request of 
the Respondent. Failure by the Respondent to file a written request for 
reinstatement with the OCC within the specified time period will 
constitute a waiver of the opportunity to respond and will constitute 
consent to the dismissal.
    (2) Contents of request; informal hearing. The request for 
reinstatement must include reasons why the Respondent should be 
reinstated and may include a request for an informal hearing before the 
OCC or its designee under this section. If the Respondent desires to 
present oral testimony or witnesses at the hearing, the Respondent must 
include a request to do so with the request for an informal hearing. The 
request to present oral testimony or witnesses must specify the names of 
the witnesses and the general nature of their expected testimony. 
Failure to request a hearing will constitute a waiver of any right to a 
hearing, and failure to request the opportunity to present oral 
testimony or witnesses will constitute a waiver of any right or 
opportunity to present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the OCC, the 
dismissal will remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring an insured depository institution to dismiss from 
office any director or senior executive officer, the OCC will issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the OCC allows further time at the 
request of the Respondent. The hearing will be held in Washington, DC, 
or at such other place as may be designated by the OCC, before a 
presiding officer(s) designated by the OCC to conduct the hearing.
    (d) Hearing procedures--(1) Role of respondent. A Respondent may 
appear at the hearing personally or through counsel. A Respondent has 
the right to introduce relevant written materials and to present oral 
argument at the hearing.
    (2) Application of Administrative Procedure Act and Uniform Rules. 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules apply to an informal hearing under this 
section unless the OCC orders that such procedures will apply.
    (3) Electronic presentation. Based on the circumstances of each 
hearing, the presiding officer may direct the use of, or any party may 
elect to use, an electronic presentation during the hearing. If the 
presiding officer requires an electronic presentation during the 
hearing, each party will be responsible for its own presentation and 
related costs unless the parties agree to another manner in which to 
allocate presentation responsibilities and costs.
    (4) Recordings; transcript. The informal hearing will be recorded 
and a transcript furnished to the Respondent upon request and payment of 
the cost thereof.
    (5) Witnesses. A Respondent may introduce oral testimony and present 
witnesses only if expressly authorized by the OCC or the presiding 
officer(s). Witnesses need not be sworn, unless

[[Page 565]]

specifically requested by a party or the presiding officer(s). If so 
requested, and by stipulation of the parties or by order of the 
presiding officer, a court reporter or other person authorized to 
administer an oath may administer the oath remotely without being in the 
physical presence of the witness. The presiding officer(s) may ask 
questions of any witness.
    (6) Continuance. The presiding officer(s) may order that the hearing 
be continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (e) Standard for review. A Respondent bears the burden of 
demonstrating that their continued employment by or service with the 
insured depository institution would materially strengthen the insured 
depository institution's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the insured depository institution's 
capital level or failure to submit or implement a capital restoration 
plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the insured depository institution based on 
supervisory criteria other than capital, pursuant to section 38(g) of 
the FDIA.
    (f) Recommendation of presiding officer. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) will make a recommendation to the OCC 
concerning the Respondent's request for reinstatement with the insured 
depository institution.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC will grant or deny the request for 
reinstatement and notify the Respondent of the OCC's decision. If the 
OCC denies the request for reinstatement, the OCC will set forth in the 
notification the reasons for the OCC's action.



           Subpart O_Civil Money Penalty Inflation Adjustments



Sec.  19.240  Inflation adjustments.

    (a) Statutory formula to calculate inflation adjustments. The OCC is 
required by statute to annually adjust for inflation the maximum amount 
of each civil money penalty within its jurisdiction to administer. The 
OCC calculates the inflation adjustment by multiplying the maximum 
dollar amount of the civil money penalty for the previous calendar year 
by the cost-of-living inflation adjustment multiplier provided annually 
by the Office of Management and Budget and rounding the total to the 
nearest dollar.
    (b) Notice of inflation adjustments. The OCC will publish notice in 
the Federal Register of the maximum penalties which may be assessed on 
an annual basis on or before January 15 of each calendar year based on 
the formula in paragraph (a) of this section, for penalties assessed on, 
or after, the date of publication of the most recent notice related to 
conduct occurring on, or after, November 2, 2015.



    Subpart P_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services



Sec.  19.241  Scope.

    This subpart, which implements section 36(g)(4) of the FDIA (12 
U.S.C. 1831m(g)(4)), provides rules and procedures for the removal, 
suspension, or debarment of independent public accountants and their 
accounting firms from performing independent audit and attestation 
services required by section 36 of the FDIA (12 U.S.C. 1831m) for 
insured national banks, insured Federal savings associations, and 
insured Federal branches of foreign banks.



Sec.  19.242  Definitions.

    As used in this subpart, the following terms have the meaning given 
below unless the context requires otherwise:
    (a) Accounting firm means a corporation, proprietorship, 
partnership, or other business firm providing audit services.

[[Page 566]]

    (b) Audit services means any service required to be performed by an 
independent public accountant by section 36 of the FDIA (12 U.S.C. 
1831m) and 12 CFR part 363, including attestation services.
    (c) Independent public accountant (accountant) means any individual 
who performs or participates in providing audit services.



Sec.  19.243  Removal, suspension, or debarment.

    (a) Good cause for removal, suspension, or debarment--(1) 
Individuals. The Comptroller may remove, suspend, or debar an 
independent public accountant from performing audit services for insured 
national banks, insured Federal savings associations, or insured Federal 
branches of foreign banks that are subject to section 36 of the FDIA (12 
U.S.C. 1831m) if, after service of a notice of intention and opportunity 
for hearing in the matter, the Comptroller finds that the accountant:
    (i) Lacks the requisite qualifications to perform audit services;
    (ii) Has knowingly or recklessly engaged in conduct that results in 
a violation of applicable professional standards, including those 
standards and conflicts of interest provisions applicable to accountants 
through the Sarbanes-Oxley Act of 2002, Public Law 107-204, 116 Stat. 
745 (2002) (Sarbanes-Oxley Act), and developed by the Public Company 
Accounting Oversight Board and the Securities and Exchange Commission;
    (iii) Has engaged in negligent conduct in the form of:
    (A) A single instance of highly unreasonable conduct that results in 
a violation of applicable professional standards in circumstances in 
which an accountant knows, or should know, that heightened scrutiny is 
warranted; or
    (B) Repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to perform audit services;
    (iv) Has knowingly or recklessly given false or misleading 
information, or knowingly or recklessly participated in any way in the 
giving of false or misleading information, to the OCC or any officer or 
employee of the OCC;
    (v) Has engaged in, or aided and abetted, a material and knowing or 
reckless violation of any provision of the Federal banking or securities 
laws or the rules and regulations thereunder, or any other law;
    (vi) Has been removed, suspended, or debarred from practice before 
any Federal or State agency regulating the banking, insurance, or 
securities industries, other than by an action listed in Sec.  19.244, 
on grounds relevant to the provision of audit services; or
    (vii) Is suspended or debarred for cause from practice as an 
accountant by any duly constituted licensing authority of any State, 
possession, commonwealth, or the District of Columbia.
    (2) Accounting firms. If the Comptroller determines that there is 
good cause for the removal, suspension, or debarment of a member or 
employee of an accounting firm under paragraph (a)(1) of this section, 
the Comptroller also may remove, suspend, or debar such firm or one or 
more offices of such firm. In considering whether to remove, suspend, or 
debar a firm or an office thereof, and the term of any sanction against 
a firm under this section, the Comptroller may consider, for example:
    (i) The gravity, scope, or repetition of the act or failure to act 
that constitutes good cause for the removal, suspension, or debarment;
    (ii) The adequacy of, and adherence to, applicable policies, 
practices, or procedures for the accounting firm's conduct of its 
business and the performance of audit services;
    (iii) The selection, training, supervision, and conduct of members 
or employees of the accounting firm involved in the performance of audit 
services;
    (iv) The extent to which managing partners or senior officers of the 
accounting firm have participated, directly, or indirectly through 
oversight or review, in the act or failure to act; and
    (v) The extent to which the accounting firm has, since the 
occurrence of the act or failure to act, implemented corrective internal 
controls to prevent its recurrence.

[[Page 567]]

    (3) Limited scope orders. An order of removal, suspension (including 
an immediate suspension), or debarment may, at the discretion of the 
Comptroller, be made applicable to a particular insured national bank, 
insured Federal savings association, or insured Federal branch of a 
foreign bank or class of insured national banks, insured Federal savings 
associations, or insured Federal branches of foreign banks.
    (4) Remedies not exclusive. The remedies provided in this subpart 
are in addition to any other remedies the OCC may have under any other 
applicable provisions of law, rule, or regulation.
    (b) Proceedings to remove, suspend, or debar--(1) Initiation of 
formal removal, suspension, or debarment proceedings. The Comptroller 
may initiate a proceeding to remove, suspend, or debar an accountant or 
accounting firm from performing audit services by issuing a written 
notice of intention to take such action that names the individual or 
firm as a respondent and describes the nature of the conduct that 
constitutes good cause for such action.
    (2) Hearings under paragraph (b) of this section. An accountant or 
firm named as a respondent in the notice issued under paragraph (b)(1) 
of this section may request a hearing on the allegations in the notice. 
Hearings conducted under this paragraph (b)(2) will be conducted in the 
same manner as other hearings under the Uniform Rules of Practice and 
Procedure in subpart A of this part, subject to the limitations in 
paragraph (c)(4) of this section.
    (c) Immediate suspension from performing audit services--(1) In 
general. If the Comptroller serves a written notice of intention to 
remove, suspend, or debar an accountant or accounting firm from 
performing audit services, the Comptroller may, with due regard for the 
public interest and without a preliminary hearing, immediately suspend 
such accountant or firm from performing audit services for insured 
national banks, insured Federal savings associations, or insured Federal 
branches of foreign banks, if the Comptroller:
    (i) Has a reasonable basis to believe that the accountant or firm 
has engaged in conduct (specified in the notice served on the accountant 
or firm under paragraph (b) of this section) that would constitute 
grounds for removal, suspension, or debarment under paragraph (a) of 
this section;
    (ii) Determines that immediate suspension is necessary to avoid 
immediate harm to an insured depository institution or its depositors or 
to the depository system as a whole; and
    (iii) Serves such respondent with written notice of the immediate 
suspension.
    (2) Procedures. An immediate suspension notice issued under this 
paragraph (c)(2) will become effective upon service. Such suspension 
will remain in effect until the date the Comptroller dismisses the 
charges contained in the notice of intention, or the effective date of a 
final order of removal, suspension, or debarment issued by the 
Comptroller to the respondent.
    (3) Petition for stay. Any accountant or firm immediately suspended 
from performing audit services in accordance with paragraph (c)(1) of 
this section may, within 10 calendar days after service of the notice of 
immediate suspension, file with the Office of the Comptroller of the 
Currency, Washington, DC 20219 for a stay of such immediate suspension. 
If no petition is filed within 10 calendar days, the right to a petition 
is waived and the immediate suspension remains in effect pursuant to 
paragraph (c)(2) of this section.
    (4) Hearing on petition. Upon receipt of a stay petition, the 
Comptroller will designate a presiding officer who will fix a place and 
time (not more than 10 calendar days after receipt of the petition, 
unless further time is allowed by the presiding officer at the request 
of petitioner) at which the immediately suspended party may appear, 
personally or through counsel, to submit written materials and oral 
argument. Any OCC employee engaged in investigative or prosecuting 
functions for the OCC in a case may not, in that or a factually related 
case, serve as a presiding officer or participate or advise in the 
decision of the presiding officer or of the OCC, except as witness or 
counsel in the proceeding. In the sole discretion of the presiding 
officer, upon a specific showing of compelling need,

[[Page 568]]

oral testimony of witnesses may also be presented. In hearings held 
pursuant to this paragraph (c)(4) there will be no discovery and the 
provisions of Sec. Sec.  19.6 through 19.12, 19.16, and 19.21 apply.
    (5) Decision on petition. Within 30 calendar days after the hearing, 
the presiding officer will issue a decision. The presiding officer will 
grant a stay upon a demonstration that a substantial likelihood exists 
of the respondent's success on the issues raised by the notice of 
intention and that, absent such relief, the respondent will suffer 
immediate and irreparable injury, loss, or damage. In the absence of 
such a demonstration, the presiding officer will notify the parties that 
the immediate suspension will be continued pending the completion of the 
administrative proceedings pursuant to the notice.
    (6) Review of presiding officer's decision. The parties may seek 
review of the presiding officer's decision by filing a petition for 
review with the presiding officer within 10 calendar days after service 
of the decision. Replies must be filed within 10 calendar days after the 
petition filing date. Upon receipt of a petition for review and any 
reply, the presiding officer will promptly certify the entire record to 
the Comptroller. Within 60 calendar days of the presiding officer's 
certification, the Comptroller will issue an order notifying the 
affected party whether or not the immediate suspension should be 
continued or reinstated. The order will state the basis of the 
Comptroller's decision.



Sec.  19.244  Automatic removal, suspension, or debarment.

    (a) An independent public accountant or accounting firm may not 
perform audit services for insured national banks, insured Federal 
savings associations, or insured Federal branches of foreign banks if 
the accountant or firm:
    (1) Is subject to a final order of removal, suspension, or debarment 
(other than a limited scope order) issued by the Board of Governors of 
the Federal Reserve System, the Federal Deposit Insurance Corporation, 
or the former Office of Thrift Supervision under section 36 of the FDIA 
(12 U.S.C. 1831m);
    (2) Is subject to a temporary suspension or permanent revocation of 
registration or a temporary or permanent suspension or bar from further 
association with any registered public accounting firm issued by the 
Public Company Accounting Oversight Board or the Securities and Exchange 
Commission under sections 105(c)(4)(A) or (B) of the Sarbanes-Oxley Act 
(15 U.S.C. 7215(c)(4)(A) or (B)); or
    (3) Is subject to an order of suspension or denial of the privilege 
of appearing or practicing before the Securities and Exchange 
Commission.
    (b) Upon written request, the Comptroller, for good cause shown, may 
grant written permission to such accountant or firm to perform audit 
services for insured national banks, insured Federal savings 
associations, or insured Federal branches of foreign banks. The request 
must contain a concise statement of the action requested. The 
Comptroller may require the applicant to submit additional information.



Sec.  19.245  Notice of removal, suspension, or debarment.

    (a) Notice to the public. Upon the issuance of a final order for 
removal, suspension, or debarment of an independent public accountant or 
accounting firm from providing audit services, the Comptroller will make 
the order publicly available and provide notice of the order to the 
other Federal banking agencies.
    (b) Notice to the Comptroller by accountants and firms. An 
accountant or accounting firm that provides audit services to an insured 
national bank, insured Federal savings association, or insured Federal 
branch of a foreign bank must provide the Comptroller with written 
notice of:
    (1) Any currently effective order or other action described in Sec.  
19.243(a)(1)(vi) through (vii) or Sec.  19.244(a)(2) and (3); and
    (2) Any currently effective action by the Public Company Accounting 
Oversight Board under sections 105(c)(4)(C) or (G) of the Sarbanes-Oxley 
Act (15 U.S.C. 7215(c)(4)(C) or (G)).
    (c) Timing of notice. Written notice required by this paragraph (c) 
must be given no later than 15 calendar days following the effective 
date of an order or action, or 15 calendar days before an

[[Page 569]]

accountant or firm accepts an engagement to provide audit services, 
whichever date is earlier.



Sec.  19.246  Petition for reinstatement.

    (a) Form of petition. Unless otherwise ordered by the Comptroller, a 
petition for reinstatement by an independent public accountant, an 
accounting firm, or an office of a firm that was removed, suspended, or 
debarred under Sec.  19.243 may be made in writing at any time. The 
request must contain a concise statement of the action requested. The 
Comptroller may require the applicant to submit additional information.
    (b) Procedure. A petitioner for reinstatement under this section 
may, in the sole discretion of the Comptroller, be afforded a hearing. 
The accountant or firm bears the burden of going forward with a petition 
and proving the grounds asserted in support of the petition. In 
reinstatement proceedings, the person seeking reinstatement bears the 
burden of going forward with an application and proving the grounds 
asserted in support of the application. The Comptroller may, in his sole 
discretion, direct that any reinstatement proceeding be limited to 
written submissions. The removal, suspension, or debarment will continue 
until the Comptroller, for good cause shown, has reinstated the 
petitioner or until the suspension period has expired. The filing of a 
petition for reinstatement will not stay the effectiveness of the 
removal, suspension, or debarment of an accountant or firm.



     Subpart Q_Forfeiture of Franchise for Money Laundering or Cash 
                     Transaction Reporting Offenses



Sec.  19.250  Scope.

    Except as provided in this subpart, subpart A of this part applies 
to proceedings by the Comptroller to determine whether, pursuant to 12 
U.S.C. 93(d) or 12 U.S.C. 1464(w), as applicable, to terminate all 
rights, privileges, and franchises of a national bank, Federal savings 
association, or Federal branch or agency convicted of a criminal offense 
under 18 U.S.C. 1956 or 1957 or 31 U.S.C. 5322 or 5324.



Sec.  19.251  Notice and hearing.

    (a) In general. After receiving written notification from the 
Attorney General of the United States of a conviction of a criminal 
offense under 18 U.S.C. 1956 or 1957, the Comptroller will, or under 31 
U.S.C. 5322 or 5324, the Comptroller may:
    (1) Issue to the national bank, Federal savings association, or 
Federal branch or agency a written notice of the Comptroller's intention 
to terminate all rights, privileges, and franchises of the national 
bank, Federal savings association, or Federal branch or agency pursuant 
to 12 U.S.C. 93(d) or 12 U.S.C. 1464(w); and
    (2) Schedule a pretermination hearing.
    (b) Contents of notice. The notice issued pursuant to paragraph 
(a)(1) of this section must set forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) The basis of termination pursuant to the factors listed in Sec.  
19.253;
    (3) A proposed order or prayer for an order of termination;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as established by the 
presiding officer; and
    (6) That the answer must be filed with the OCC.
    (c) Failure to file an answer. Unless the national bank, Federal 
savings association, or Federal branch or agency files an answer within 
the time specified in the notice, it will be deemed to have consented to 
termination of its rights, privileges and franchises and the Comptroller 
may order the termination of such rights, privileges, and franchises.
    (d) Service. The OCC will serve the notice upon the national bank, 
Federal savings association, or Federal branch or agency in the manner 
set forth in Sec.  19.11(c).



Sec.  19.252  Presiding officer.

    (a) Appointment. The Comptroller will designate a presiding officer 
to conduct the pretermination hearing under this subpart.

[[Page 570]]

    (b) Powers. The presiding officer has the same powers set forth in 
Sec.  19.5, including the discretion necessary to conduct the 
pretermination hearing in a manner that avoids unnecessary delay. In 
addition, the presiding officer may limit the use of discovery and limit 
opportunities to file written memoranda, briefs, affidavits, or other 
materials or documents to avoid relitigation of facts already stipulated 
to by the parties; conceded to by the national bank, Federal savings 
association, or Federal branch or Federal agency; or otherwise already 
firmly established by the underlying criminal conviction.



Sec.  19.253  Grounds for termination.

    In determining whether to terminate a franchise, the Comptroller 
will take into account the following factors:
    (a) The extent to which directors or senior executive officers of 
the national bank, Federal savings association, or Federal branch or 
agency knew of, or were involved in, the commission of the money 
laundering offense of which the national bank, Federal savings 
association, or Federal branch or agency was found guilty;
    (b) The extent to which the offense occurred despite the existence 
of policies and procedures within the national bank, Federal savings 
association, or Federal branch or Federal agency which were designed to 
prevent the occurrence of the offense;
    (c) The extent to which the national bank, Federal savings 
association, or Federal branch or agency has fully cooperated with law 
enforcement authorities with respect to the investigation of the money 
laundering offense of which the national bank, Federal savings 
association, or Federal branch or agency was found guilty;
    (d) The extent to which the national bank, Federal savings 
association, or Federal branch or agency has implemented additional 
internal controls (since the commission of the offense of which the 
national bank, Federal savings association, or Federal branch or agency 
was found guilty) to prevent the occurrence of any money laundering 
offense; and
    (e) The extent to which the interest of the local community in 
having adequate deposit and credit services available would be 
threatened by the forfeiture of the franchise.



Sec.  19.254  Judicial review.

    Any national bank, Federal savings association, or Federal branch or 
agency of a foreign bank whose rights, privileges and franchises have 
been terminated by order of the Comptroller under this part has the 
right of judicial review of such order pursuant to 12 U.S.C. 1818(h).



       Sec. Appendix A to Part 19--Rules of Practice and Procedure

    Note: The content of this appendix reproduces 12 CFR parts 19, 108, 
109, 112, and 165 as of October 1, 2023, which, pursuant to Sec.  19.0, 
are applicable to adjudicatory actions initiated before April 1, 2024, 
unless the parties otherwise stipulate that the rules in this part in 
effect after April 1, 2024 apply. Cross-references to parts 19, 108, 
109, and 112 (as well as to included sections) in this appendix are to 
those provisions as contained within this appendix.

                PART 19--RULES OF PRACTICE AND PROCEDURE

    Authority:5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 93a, 164, 481, 
504, 1817, 1818, 1820, 1831m, 1831o, 1832, 1884, 1972, 3102, 3108(a), 
3110, 3909, and 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 
78s, 78u, 78u-2, 78u-3, 78w, and 1639e; 28 U.S.C. 2461 note; 31 U.S.C. 
330 and 5321; and 42 U.S.C. 4012a.

           Subpart A--Uniform Rules of Practice and Procedure

    Sec.  19.1 Scope.
    This subpart prescribes Uniform Rules of practice and procedure 
applicable to adjudicatory proceedings required to be conducted on the 
record after opportunity for a hearing under the following statutory 
provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (``FDIA'') (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Office of the 
Comptroller of the Currency (``OCC'') should issue an order to approve 
or disapprove a person's proposed acquisition of an institution;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (``Exchange Act'') (15 U.S.C. 78o-5), to impose

[[Page 571]]

sanctions upon any government securities broker or dealer or upon any 
person associated or seeking to become associated with a government 
securities broker or dealer for which the OCC is the appropriate agency;
    (e) Assessment of civil money penalties by the OCC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate agency for any violation of:
    (1) Any provision of law referenced in 12 U.S.C. 93, or any 
regulation issued thereunder, and certain unsafe or unsound practices 
and breaches of fiduciary duty, pursuant to 12 U.S.C. 93;
    (2) Sections 22 and 23 of the Federal Reserve Act (``FRA''), or any 
regulation issued thereunder, and certain unsafe or unsound practices 
and breaches of fiduciary duty, pursuant to 12 U.S.C. 504 and 505;
    (3) Section 106(b) of the Bank Holding Company Amendments of 1970, 
pursuant to 12 U.S.C. 1972(2)(F);
    (4) Any provision of the Change in Bank Control Act of 1978 or any 
regulation or order issued thereunder, and certain unsafe or unsound 
practices and breaches of fiduciary duty, pursuant to 12 U.S.C. 
1817(j)(16);
    (5) Any provision of the International Lending Supervision Act of 
1983 (``ILSA''), or any rule, regulation or order issued thereunder, 
pursuant to 12 U.S.C. 3909;
    (6) Any provision of the International Banking Act of 1978 
(``IBA''), or any rule, regulation or order issued thereunder, pursuant 
to 12 U.S.C. 3108;
    (7) Section 5211 of the Revised Statutes (12 U.S.C. 161), pursuant 
to 12 U.S.C. 164;
    (8) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (9) Section 1120 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (10) The terms of any final or temporary order issued under section 
8 of the FDIA or any written agreement executed by the OCC, the terms of 
any condition imposed in writing by the OCC in connection with the grant 
of an application or request, certain unsafe or unsound practices, 
breaches of fiduciary duty, or any law or regulation not otherwise 
provided herein, pursuant to 12 U.S.C. 1818(i)(2);
    (11) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (12) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Removal, prohibition, and civil monetary penalty proceedings 
under section 10(k) of the FDI Act (12 U.S.C. 1820(k)) for violations of 
the post-employment restrictions imposed by that section; and
    (h) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules.

    Sec.  19.2 Rules of construction.
    For purposes of this part:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate;
    (c) The term counsel includes a non-attorney representative; and
    (d) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.

    Sec.  19.3 Definitions.
    For purposes of this part, unless explicitly stated to the contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Comptroller means the Comptroller of the Currency or a person 
delegated to perform the functions of the Comptroller of the Currency 
under this part.
    (d) Decisional employee means any member of the Comptroller's or 
administrative law judge's staff who has not engaged in an investigative 
or prosecutorial role in a proceeding and who may assist the Comptroller 
or the administrative law judge, respectively, in preparing orders, 
recommended decisions, decisions, and other documents under the Uniform 
Rules.
    (e) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the OCC in an adjudicatory 
proceeding.
    (f) Final order means an order issued by the Comptroller with or 
without the consent of the affected institution or the institution-
affiliated party, that has become final, without regard to the pendency 
of any petition for reconsideration or review.
    (g) Institution includes any national bank or Federal branch or 
agency of a foreign bank.
    (h) Institution-affiliated party means any institution-affiliated 
party as that term is defined in section 3(u) of the FDIA (12 U.S.C. 
1813(u)).
    (i) Local Rules means those rules promulgated by the OCC in the 
subparts of this part excluding subpart A.

[[Page 572]]

    (j) OCC means the Office of the Comptroller of the Currency.
    (k) OFIA means the Office of Financial Institution Adjudication, the 
executive body charged with overseeing the administration of 
administrative enforcement proceedings for the OCC, the Board of 
Governors of the Federal Reserve System (``Board of Governors''), the 
Federal Deposit Insurance Corporation (``FDIC''), the Office of Thrift 
Supervision (``OTS''), and the National Credit Union Administration 
(``NCUA'').
    (l) Party means the OCC and any person named as a party in any 
notice.
    (m) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (g) of this section.
    (n) Respondent means any party other than the OCC.
    (o) Uniform Rules means those rules in subpart A of this part that 
are common to the OCC, the Board of Governors, the FDIC, the OTS, and 
the NCUA.
    (p) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.

    Sec.  19.4 Authority of the Comptroller.
    The Comptroller may, at any time during the pendency of a 
proceeding, perform, direct the performance of, or waive performance of, 
any act which could be done or ordered by the administrative law judge.

    Sec.  19.5 Authority of the administrative law judge.
    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of 
the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec.  19.31;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Comptroller shall have the power to grant any motion to dismiss the 
proceeding or to decide any other motion that results in a final 
determination of the merits of the proceeding;
    (8) To prepare and present to the Comptroller a recommended decision 
as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.

    Sec.  19.6 Appearance and practice in adjudicatory proceedings.
    (a) Appearance before the OCC or an administrative law judge--(1) By 
attorneys. Any member in good standing of the bar of the highest court 
of any state, commonwealth, possession, territory of the United States, 
or the District of Columbia may represent others before the OCC if such 
attorney is not currently suspended or debarred from practice before the 
OCC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer, director, 
or employee is not currently suspended or debarred from practice before 
the OCC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the Comptroller, shall file a notice of appearance 
with OFIA at or before the time that the individual submits papers or 
otherwise appears on behalf of a party in the adjudicatory proceeding. 
The notice of appearance must include a written declaration that the 
individual is currently qualified as provided in paragraph (a)(1) or 
(a)(2) of this section and is authorized to represent the particular 
party. By filing a notice of appearance on behalf of a party in an 
adjudicatory proceeding, the counsel agrees and represents that he or 
she is authorized to accept service on behalf of the represented party 
and that, in the event of withdrawal from representation, he or she 
will, if required by the administrative law judge, continue to accept 
service until new counsel has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory

[[Page 573]]

proceeding may be grounds for exclusion or suspension of counsel from 
the proceeding.

    Sec.  19.7 Good faith certification.
    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel shall sign his or her individual name and state his or her 
address and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: the counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.

    Sec.  19.8 Conflicts of interest.
    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec.  19.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.

    Sec.  19.9 Ex parte communications.
    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the OCC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Comptroller, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the Comptroller until the date that the Comptroller issues 
his or her final decision pursuant to Sec.  19.40(c):
    (1) No interested person outside the OCC shall make or knowingly 
cause to be made an ex parte communication to the Comptroller, the 
administrative law judge, or a decisional employee; and
    (2) The Comptroller, administrative law judge, or decisional 
employee shall not make or knowingly cause to be made to any interested 
person outside the OCC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, the 
Comptroller or any other person identified in paragraph (a) of this 
section, that person shall cause all such written communications (or, if 
the communication is oral, a memorandum stating the substance of the 
communication) to be placed on the record of the proceeding and served 
on all parties. All other parties to the proceeding shall have an 
opportunity, within ten days of receipt of service of the ex parte 
communication, to file responses thereto and to recommend any sanctions, 
in accordance with paragraph (d) of this section, that they believe to 
be appropriate under the circumstances.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Comptroller or the administrative 
law judge including, but

[[Page 574]]

not limited to, exclusion from the proceedings and an adverse ruling on 
the issue which is the subject of the prohibited communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the OCC in a case may not, 
in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec.  19.40, except as witness or counsel in public 
proceedings.

    Sec.  19.10 Filing of papers.
    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec.  19.25 
and 19.26, shall be filed with OFIA, except as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Comptroller 
or the administrative law judge, filing may be accomplished by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the Comptroller or the 
administrative law judge. All papers filed by electronic media shall 
also concurrently be filed in accordance with paragraph (c) of this 
section.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec.  19.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the OCC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Comptroller 
or the administrative law judge, an original and one copy of all 
documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.

    Sec.  19.11 Service of papers.
    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec.  19.10(c).
    (c) By the Comptroller or the administrative law judge. (1) All 
papers required to be served by the Comptroller or the administrative 
law judge upon a party who has appeared in the proceeding in accordance 
with Sec.  19.6 shall be served by any means specified in paragraph (b) 
of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec.  19.6, the Comptroller or the administrative law judge shall make 
service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) By delivery to an agent, which, in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;

[[Page 575]]

    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.

    Sec.  19.12 Construction of time limits.
    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in paragraph (c) of this section, intermediate 
Saturdays, Sundays, and Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Comptroller or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Comptroller or the administrative law judge in the case of filing, 
or by agreement among the parties in the case of service.

    Sec.  19.13 Change of time limits.
    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or by any notice or order issued in the proceedings. After 
the referral of the case to the Comptroller pursuant to Sec.  19.38, the 
Comptroller may grant extensions of the time limits for good cause 
shown. Extensions may be granted at the motion of a party after notice 
and opportunity to respond is afforded all non-moving parties or on the 
Comptroller's or the administrative law judge's own motion.

    Sec.  19.14 Witness fees and expenses.
    Witnesses subpoenaed for testimony or depositions shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the OCC is the 
party requesting the subpoena. The OCC shall not be required to pay any 
fees to, or expenses of, any witness not subpoenaed by the OCC.

    Sec.  19.15 Opportunity for informal settlement.
    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any OCC representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.

    Sec.  19.16 OCC's right to conduct examination.
    Nothing contained in this subpart limits in any manner the right of 
the OCC to conduct

[[Page 576]]

any examination, inspection, or visitation of any institution or 
institution-affiliated party, or the right of the OCC to conduct or 
continue any form of investigation authorized by law.

    Sec.  19.17 Collateral attacks on adjudicatory proceeding.
    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.

    Sec.  19.18 Commencement of proceeding and contents of notice.
    (a) Commencement of proceeding. (1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA, 12 U.S.C. 1817(j)(4), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the Comptroller.
    (ii) The notice must be served by the Comptroller upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law.
    (iii) The notice must be filed with OFIA.
    (2) Change-in control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
Comptroller.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the OCC 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) That the answer and/or request for a hearing shall be filed with 
OFIA.

    Sec.  19.19 Answer.
    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding. A respondent is not required to respond to 
the portion of a notice that constitutes the prayer for relief or 
proposed order. The answer must set forth affirmative defenses, if any, 
asserted by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the 
Comptroller a recommended decision containing the findings and the 
relief sought in the notice. Any final order issued by the Comptroller 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.
    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Comptroller or administrative law 
judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.


[[Page 577]]


    Sec.  19.21 Failure to appear.
    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the Comptroller a recommended decision containing the findings and the 
relief sought in the notice.

    Sec.  19.22 Consolidation and severance of actions.
    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the matter as 
to any respondent only if the administrative law judge finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.

    Sec.  19.23 Motions.
    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, except that following the filing of the recommended decision, 
motions must be filed with the Comptroller.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Comptroller, any party may file a written response to a motion. The 
administrative law judge shall not rule on any oral or written motion 
before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec.  19.29 and 19.30.

    Sec.  19.24 Scope of document discovery.
    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec.  19.25.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government

[[Page 578]]

agency's deliberative process privilege, and any other privileges the 
Constitution, any applicable act of Congress, or the principles of 
common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing, except as provided in the 
Local Rules. No exceptions to this time limit shall be permitted, unless 
the administrative law judge finds on the record that good cause exists 
for waiving the requirements of this paragraph.

    Sec.  19.25 Request for document discovery from parties.
    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages is 
requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests 250 pages or 
more of copying, the requesting party shall pay for the copying and 
shipping charges. Copying charges are the current per-page copying rate 
imposed by 12 CFR part 4 implementing the Freedom of Information Act (5 
U.S.C. 552). The party to whom the request is addressed may require 
payment in advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec.  19.23 
to strike or otherwise limit the request. If an objection is made to 
only a portion of an item or category in a request, the portion objected 
to shall be specified. Any objections not made in accordance with this 
paragraph and Sec.  19.23 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec.  19.23 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may deny or 
modify the request, and may issue appropriate protective orders, upon 
such conditions as justice may require. The pendency of a motion to 
strike or limit discovery or to compel production is not a basis for 
staying or continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.

[[Page 579]]

    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative law 
judge against a party who fails to produce subpoenaed documents.

    Sec.  19.26 Document subpoenas to nonparties.
    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec.  19.24(d). The party obtaining the document 
subpoena is responsible for serving it on the subpoenaed person and for 
serving copies on all parties. Document subpoenas may be served in any 
state, territory, or possession of the United States, the District of 
Columbia, or as otherwise provided by law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec.  19.25(d), and 
during the same time limits during which such an objection could be 
filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with so much of the document subpoena as the administrative 
law judge has not quashed or modified. A party's right to seek court 
enforcement of a document subpoena shall in no way limit the sanctions 
that may be imposed by the administrative law judge on a party who 
induces a failure to comply with subpoenas issued under this section.

    Sec.  19.27 Deposition of witness unavailable for hearing.
    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section, to the administrative law judge for 
the issuance of a subpoena, including a subpoena duces tecum, requiring 
the attendance of the witness at a deposition. The administrative law 
judge may issue a deposition subpoena under this section upon showing 
that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.

[[Page 580]]

    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to answer or submit any evidence the witness has refused to 
submit during the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena under paragraph (b) or 
(c)(3) of this section, the subpoenaing party or other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
portions of the subpoena that the administrative law judge has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
administrative law judge on a party who fails to comply with, or 
procures a failure to comply with, a subpoena issued under this section.

    Sec.  19.28 Interlocutory review.
    (a) General rule. The Comptroller may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Comptroller only in accordance with the procedures set forth in this 
section and Sec.  19.23.
    (b) Scope of review. The Comptroller may exercise interlocutory 
review of a ruling of the administrative law judge if the Comptroller 
finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec.  19.23. Any party may 
file a response to a request for interlocutory review in accordance with 
Sec.  19.23(d). Upon the expiration of the time for filing all 
responses, the administrative law judge shall refer the matter to the 
Comptroller for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Comptroller under 
this section suspends or stays the proceeding unless otherwise ordered 
by the administrative law judge or the Comptroller.

    Sec.  19.29 Summary disposition.
    (a) In general. The administrative law judge shall recommend that 
the Comptroller issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time

[[Page 581]]

period as allowed by the administrative law judge, may file a response 
to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits and any other evidentiary materials that the moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the contention that summary 
disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the Comptroller. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.

    Sec.  19.30 Partial summary disposition.
    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.

    Sec.  19.31 Scheduling and prehearing conferences.
    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at his or her 
expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.

    Sec.  19.32 Prehearing submissions.
    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.


[[Page 582]]


    Sec.  19.33 Public hearings.
    (a) General rule. All hearings shall be open to the public, unless 
the Comptroller, in the Comptroller's discretion, determines that 
holding an open hearing would be contrary to the public interest. Within 
20 days of service of the notice or, in the case of change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), 
within 20 days from service of the hearing order, any respondent may 
file with the Comptroller a request for a private hearing, and any party 
may file a reply to such a request. A party must serve on the 
administrative law judge a copy of any request or reply the party files 
with the Comptroller. The form of, and procedure for, these requests and 
replies are governed by Sec.  19.23. A party's failure to file a request 
or a reply constitutes a waiver of any objections regarding whether the 
hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.

    Sec.  19.34 Hearing subpoenas.
    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the administrative law judge may issue a subpoena or a subpoena 
duces tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at the hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek enforcement of the subpoena pursuant to Sec.  
19.26(c).

    Sec.  19.35 Conduct of hearings.
    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree, the 
administrative law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.

[[Page 583]]

    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.

    Sec.  19.36 Evidence.
    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or the Comptroller shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by an appropriate Federal financial 
institutions regulatory agency or by a state regulatory agency, is 
admissible either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Comptroller.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.

    Sec.  19.37 Post-hearing filings.
    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.

[[Page 584]]

    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.

    Sec.  19.38 Recommended decision and filing of record.
    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under Sec.  
19.37(b), the administrative law judge shall file with and certify to 
the Comptroller, for decision, the record of the proceeding. The record 
must include the administrative law judge's recommended decision, 
recommended findings of fact, recommended conclusions of law, and 
proposed order; all prehearing and hearing transcripts, exhibits, and 
rulings; and the motions, briefs, memoranda, and other supporting papers 
filed in connection with the hearing. The administrative law judge shall 
serve upon each party the recommended decision, findings, conclusions, 
and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Comptroller for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the Comptroller a certified index of the entire record of the 
proceeding. The certified index shall include, at a minimum, an entry 
for each paper, document or motion filed with the administrative law 
judge in the proceeding, the date of the filing, and the identity of the 
filer. The certified index shall also include an exhibit index 
containing, at a minimum, an entry consisting of exhibit number and 
title or description for: Each exhibit introduced and admitted into 
evidence at the hearing; each exhibit introduced but not admitted into 
evidence at the hearing; each exhibit introduced and admitted into 
evidence after the completion of the hearing; and each exhibit 
introduced but not admitted into evidence after the completion of the 
hearing.

    Sec.  19.39 Exceptions to recommended decision.
    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec.  19.38, a party may file with the Comptroller written exceptions to 
the administrative law judge's recommended decision, findings, 
conclusions or proposed order, to the admission or exclusion of 
evidence, or to the failure of the administrative law judge to make a 
ruling proposed by a party. A supporting brief may be filed at the time 
the exceptions are filed, either as part of the same document or in a 
separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Comptroller if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the administrative law judge and failed to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.

    Sec.  19.40 Review by the Comptroller.
    (a) Notice of submission to the Comptroller. When the Comptroller 
determines that the record in the proceeding is complete, the 
Comptroller shall serve notice upon the parties that the proceeding has 
been submitted to the Comptroller for final decision.
    (b) Oral argument before the Comptroller. Upon the initiative of the 
Comptroller or on the written request of any party filed with the 
Comptroller within the time for filing exceptions, the Comptroller may 
order and hear oral argument on the recommended findings, conclusions, 
decision, and order of the administrative law judge. A written request 
by a party must show good cause for oral argument and state reasons why 
arguments cannot be presented adequately in writing. A denial of a 
request for oral argument may be set forth in the Comptroller's final 
decision. Oral argument before the Comptroller must be on the record.

[[Page 585]]

    (c) Comptroller's final decision. (1) Decisional employees may 
advise and assist the Comptroller in the consideration and disposition 
of the case. The final decision of the Comptroller will be based upon 
review of the entire record of the proceeding, except that the 
Comptroller may limit the issues to be reviewed to those findings and 
conclusions to which opposing arguments or exceptions have been filed by 
the parties.
    (2) The Comptroller shall render a final decision within 90 days 
after notification of the parties that the case has been submitted for 
final decision, or 90 days after oral argument, whichever is later, 
unless the Comptroller orders that the action or any aspect thereof be 
remanded to the administrative law judge for further proceedings. Copies 
of the final decision and order of the Comptroller shall be served upon 
each party to the proceeding, upon other persons required by statute, 
and, if directed by the Comptroller or required by statute, upon any 
appropriate state or Federal supervisory authority.

    Sec.  19.41 Stays pending judicial review.
    The commencement of proceedings for judicial review of a final 
decision and order of the Comptroller may not, unless specifically 
ordered by the Comptroller or a reviewing court, operate as a stay of 
any order issued by the Comptroller. The Comptroller may, in his or her 
discretion, and on such terms as he or she finds just, stay the 
effectiveness of all or any part of an order pending a final decision on 
a petition for review of that order.

            Subpart B--Procedural Rules for OCC Adjudications

    Sec.  19.100 Filing documents.
    All materials required to be filed with or referred to the 
Comptroller or the administrative law judge in any proceeding under this 
part must be filed with the Hearing Clerk, Office of the Comptroller of 
the Currency, Washington, DC 20219. Filings to be made with the Hearing 
Clerk include the notice and answer; motions and responses to motions; 
briefs; the record filed by the administrative law judge after the 
issuance of a recommended decision; the recommended decision filed by 
the administrative law judge following a motion for summary disposition; 
referrals by the administrative law judge of motions for interlocutory 
review; exceptions and requests for oral argument; and any other papers 
required to be filed with the Comptroller or the administrative law 
judge under this part.

    Sec.  19.101 Delegation to OFIA.
    Unless otherwise ordered by the Comptroller, administrative 
adjudications subject to subpart A of this part shall be conducted by an 
administrative law judge assigned to OFIA.

   Subpart C--Removals, Suspensions, and Prohibitions When a Crime Is 
                   Charged or a Conviction Is Obtained

    Sec.  19.110 Scope.
    This subpart applies to informal hearings afforded to any 
institution-affiliated party who has been suspended or removed from 
office or prohibited from further participation in the affairs of any 
depository institution pursuant to 12 U.S.C. 1818(g) by a notice or 
order issued by the Comptroller.

    Sec.  19.111 Suspension, removal, or prohibition.
    The Comptroller may serve a notice of suspension or order of removal 
or prohibition pursuant to 12 U.S.C. 1818(g) on an institution-
affiliated party. A copy of such notice or order will be served on any 
depository institution that the subject of the notice or order is 
affiliated with at the time the notice or order is issued, whereupon the 
institution-affiliated party involved must immediately cease service to, 
or participation in the affairs of, that depository institution and, if 
so determined by the OCC, any other depository institution. The notice 
or order will indicate the basis for suspension, removal or prohibition 
and will inform the institution-affiliated party of the right to request 
in writing, to be received by the OCC within 30 days from the date that 
the institution-affiliated party was served with such notice or order, 
an opportunity to show at an informal hearing that continued service to 
or participation in the conduct of the affairs of any depository 
institution has not posed, does not pose, or is not likely to pose a 
threat to the interests of the depositors of, or has not threatened, 
does not threaten, or is not likely to threaten to impair public 
confidence in, any relevant depository institution. The written request 
must be sent by certified mail to, or served personally with a signed 
receipt on, the District Deputy Comptroller in the OCC district in which 
the bank in question is located; if the bank is supervised by Large Bank 
Supervision, to the Senior Deputy Comptroller for Large Bank Supervision 
for the Office of the Comptroller of the Currency; if the bank is 
supervised by Mid-Size/Community Bank Supervision, to the Senior Deputy 
Comptroller for Mid-Size/Community Bank Supervision for the Office of 
the Comptroller of the Currency; or if the institution-affiliated party 
is no longer affiliated with a particular national bank, to the Deputy 
Comptroller for Special Supervision, Washington, DC 20219. The request 
must state specifically the relief desired and the grounds on which that 
relief is based. For purposes of this section, the term depository 
institution means any depository institution of which the petitioner is 
or was an institution-affiliated party at the time at

[[Page 586]]

which the notice or order was issued by the Comptroller.

    Sec.  19.112 Informal hearing.
    (a) Issuance of hearing order. After receipt of a request for 
hearing, the District Deputy Comptroller, the Senior Deputy Comptroller 
for Large Bank Supervision, the Senior Deputy Comptroller for Mid-Size/
Community Bank Supervision, or the Deputy Comptroller for Special 
Supervision, as appropriate, must notify the petitioner requesting the 
hearing, the OCC's Enforcement and Compliance Division, and the 
appropriate OCC District Counsel of the date, time, and place fixed for 
the hearing. The hearing must be scheduled to be held not later than 30 
days from the date when a request for hearing is received unless the 
time is extended in response to a written request of the petitioner. The 
District Deputy Comptroller, the Senior Deputy Comptroller for Large 
Bank Supervision, the Senior Deputy Comptroller for Mid-Size/Community 
Bank Supervision, or the Deputy Comptroller for Special Supervision, as 
appropriate, may extend the hearing date only for a specific period of 
time and must take appropriate action to ensure that the hearing is not 
unduly delayed.
    (b) Appointment of presiding officer. the District Deputy 
Comptroller, the Senior Deputy Comptroller for Large Bank Supervision, 
the Senior Deputy Comptroller for Mid-Size/Community Bank Supervision, 
or the Deputy Comptroller for Special Supervision, as appropriate, must 
appoint one or more OCC employees as the presiding officer to conduct 
the hearing. The presiding officer(s) may not have been involved in the 
proceeding, a factually related proceeding, or the underlying 
enforcement action in a prosecutorial or investigative role.
    (c) Waiver of oral hearing--(1) Petitioner. When the petitioner 
requests a hearing, the petitioner may elect to have the matter 
determined by the presiding officer solely on the basis of written 
submissions by serving on the District Deputy Comptroller, the Senior 
Deputy Comptroller for Large Bank Supervision, the Senior Deputy 
Comptroller for Mid-Size/Community Bank Supervision, or the Deputy 
Comptroller for Special Supervision, as appropriate, and all parties, a 
signed document waiving the statutory right to appear and make oral 
argument. The petitioner must present the written submissions to the 
presiding officer, and serve the other parties, not later than ten days 
prior to the date fixed for the hearing, or within such shorter time 
period as the presiding officer may permit.
    (2) OCC. The OCC may respond to the petitioner's submissions by 
presenting the presiding officer with a written response, and by serving 
the other parties, not later than the date fixed for the hearing, or 
within such other time period as the presiding officer may require.
    (d) Hearing procedures--(1) Conduct of hearing. Hearings under this 
subpart are not subject to the provisions of subpart A of this part or 
the adjudicative provisions of the Administrative Procedure Act (5 
U.S.C. 554-557).
    (2) Powers of the presiding officer. The presiding officer shall 
determine all procedural issues that are governed by this subpart. The 
presiding officer may also permit or limit the number of witnesses and 
impose time limitations as he or she deems reasonable. The informal 
hearing will not be governed by the formal rules of evidence. All oral 
presentations, when permitted, and documents deemed by the presiding 
officer to be relevant and material to the proceeding and not unduly 
repetitious will be considered. The presiding officer may ask questions 
of any person participating in the hearing and may make any rulings 
reasonably necessary to facilitate the effective and efficient operation 
of the hearing.
    (3) Presentation. (i) The OCC may appear and the petitioner may 
appear personally or through counsel at the hearing to present relevant 
written materials and oral argument. Except as permitted in paragraph 
(c) of this section, each party, including the OCC, must file a copy of 
any affidavit, memorandum, or other written material to be presented at 
the hearing with the presiding officer and must serve the other parties 
not later than ten days prior to the hearing or within such shorter time 
period as permitted by the presiding officer.
    (ii) If the petitioner or the appointed OCC attorney desires to 
present oral testimony or witnesses at the hearing, he or she must file 
a written request with the presiding officer not later than ten days 
prior to the hearing, or within a shorter time period as permitted by 
the presiding officer. The names of proposed witnesses should be 
included, along with the general nature of the expected testimony, and 
the reasons why oral testimony is necessary. The presiding officer 
generally will not admit oral testimony or witnesses unless a specific 
and compelling need is demonstrated. Witnesses, if admitted, shall be 
sworn.
    (iii) In deciding on any suspension, the presiding officer shall not 
consider the ultimate question of the guilt or innocence of the 
individual with respect to the criminal charges which are outstanding. 
In deciding on any removal, the presiding officer shall not consider 
challenges to or efforts to impeach the validity of the conviction. The 
presiding officer may consider facts in either situation, however, which 
show the nature of the events on which the indictment or conviction was 
based.
    (4) Record. A transcript of the proceedings may be taken if the 
petitioner requests a transcript and agrees to pay all expenses or

[[Page 587]]

if the presiding officer determines that the nature of the case warrants 
a transcript. The presiding officer may order the record to be kept open 
for a reasonable period following the hearing, not to exceed five 
business days, to permit the petitioner or the appointed OCC attorney to 
submit additional documents for the record. Thereafter, no further 
submissions may be accepted except for good cause shown.

    Sec.  19.113 Recommended and final decisions.
    (a) The presiding officer must issue a recommended decision to the 
Comptroller within 20 days of the conclusion of the hearing or, when the 
petitioner has waived an oral hearing, within 20 days of the date fixed 
for the hearing. The presiding officer must serve promptly a copy of the 
recommended decision on the parties to the proceeding. The decision must 
include a summary of the facts and arguments of the parties.
    (b) Each party may, within ten days of being served with the 
presiding officer's recommended decision, submit to the Comptroller 
comments on the recommended decision.
    (c) Within 60 days of the conclusion of the hearing or, when the 
petitioner has waived an oral hearing, within 60 days from the date 
fixed for the hearing, the Comptroller must notify the petitioner by 
registered mail whether the suspension or removal from office, and 
prohibition from participation in any manner in the affairs of any 
depository institution, will be affirmed, terminated, or modified. The 
Comptroller's decision must include a statement of reasons supporting 
the decision. The Comptroller's decision is a final and unappealable 
order.
    (d) A finding of not guilty or other disposition of the charge on 
which a notice of suspension was based does not preclude the Comptroller 
from thereafter instituting removal proceedings pursuant to section 8(e) 
of the FDIA (12 U.S.C. 1818(e)) and subpart: A of this part.
    (e) A removal or prohibition by order remains in effect until 
terminated by the Comptroller. A suspension or prohibition by notice 
remains in effect until the criminal charge is disposed of or until 
terminated by the Comptroller.
    (f) A suspended or removed individual may petition the Comptroller 
to reconsider the decision any time after the expiration of a 12-month 
period from the date of the decision, but no petition for 
reconsideration may be made within 12 months of a previous petition. The 
petition must state specifically the relief sought and the grounds 
therefor, and may be accompanied by a supporting memorandum and any 
other documentation the petitioner wishes to have considered. No hearing 
need be granted on the petition for reconsideration.

  Subpart D--Exemption Hearings Under Section 12(h) of the Securities 
                          Exchange Act of 1934

    Sec.  19.120 Scope.
    The rules in this subpart apply to informal hearings that may be 
held by the Comptroller to determine whether, pursuant to authority in 
sections 12 (h) and (i) of the Exchange Act (15 U.S.C. 78l (h) and (i)), 
to exempt in whole or in part an issuer or a class of issuers from the 
provisions of section 12(g), or from section 13 or 14 of the Exchange 
Act (15 U.S.C. 78l(g), 78m or 78n), or whether to exempt from section 16 
of the Exchange Act (15 U.S.C. 78p) any officer, director, or beneficial 
owner of securities of an issuer. The only issuers covered by this 
subpart are banks whose securities are registered pursuant to section 
12(g) of the Exchange Act (15 U.S.C. 78l(g)). The Comptroller may deny 
an application for exemption without a hearing.

    Sec.  19.121 Application for exemption.
    An issuer or an individual (officer, director or shareholder) may 
submit a written application for an exemption order to the Securities 
and Corporate Practices Division, Office of the Comptroller of the 
Currency, Washington, DC 20219. The application must specify the type of 
exemption sought and the reasons therefor, including an explanation of 
why an exemption would not be inconsistent with the public interest or 
the protection of investors. The Securities and Corporate Practices 
Division shall inform the applicant in writing whether a hearing will be 
held to consider the matter.

    Sec.  19.122 Newspaper notice.
    Upon being informed that an application will be considered at a 
hearing, the applicant shall publish a notice one time in a newspaper of 
general circulation in the community where the issuer's main office is 
located. The notice must state: the name and title of any individual 
applicants; the type of exemption sought; the fact that a hearing will 
be held; and a statement that interested persons may submit to the 
Securities and Corporate Practices Division, Office of the Comptroller 
of the Currency, Washington, DC 20219, within 30 days from the date of 
the newspaper notice, written comments concerning the application and a 
written request for an opportunity to be heard. The applicant shall 
promptly furnish a copy of the notice to the Securities and Corporate 
Practices Division, and to bank shareholders.

    Sec.  19.123 Informal hearing.
    (a) Conduct of proceeding. The adjudicative provisions of the 
Administrative Procedure Act, formal rules of evidence and subpart A of 
this part do not apply to hearings conducted under this subpart, except 
as provided in Sec.  19.100(b).

[[Page 588]]

    (b) Notice of hearing. Following the comment period, the Comptroller 
shall send a notice which fixes a date, time and place for hearing to 
each applicant and to any person who has requested an opportunity to be 
heard.
    (c) Presiding officer. The Comptroller shall designate a presiding 
officer to conduct the hearing. The presiding officer shall determine 
all procedural questions not governed by this subpart and may limit the 
number of witnesses and impose time and presentation limitations as are 
deemed reasonable. At the conclusion of the informal hearing, the 
presiding officer shall issue a recommended decision to the Comptroller 
as to whether the exemption should issue. The decision shall include a 
summary of the facts and arguments of the parties.
    (d) Attendance. The applicant and any person who has requested an 
opportunity to be heard may attend the hearing, with or without counsel. 
The hearing shall be open to the public. In addition, the applicant and 
any other hearing participant may introduce oral testimony through such 
witnesses as the presiding officer shall permit.
    (e) Order of presentation. (1) The applicant may present an opening 
statement of a length decided by the presiding officer. Then each of the 
hearing participants, or one among them selected with the approval of 
the presiding officer, may present an opening statement. The opening 
statement should summarize concisely what the applicant and each 
participant intends to show.
    (2) The applicant shall have an opportunity to make an oral 
presentation of facts and materials or submit written materials for the 
record. One or more of the hearing participants may make an oral 
presentation or a written submission.
    (3) After the above presentations, the applicant, followed by one or 
more of the hearing participants, may make concise summary statements 
reviewing their position.
    (f) Witnesses. The obtaining and use of witnesses is the 
responsibility of the parties afforded the hearing. All witnesses shall 
be present on their own volition, but any person appearing as a witness 
may be questioned by each applicant, any hearing participant, and the 
presiding officer. Witnesses shall be sworn unless otherwise directed by 
the presiding officer.
    (g) Evidence. The presiding officer may exclude data or materials 
deemed to be improper or irrelevant. Formal rules of evidence do not 
apply. Documentary material must be of a size consistent with ease of 
handling and filing. The presiding officer may determine the number of 
copies that must be furnished for purposes of the hearing.
    (h) Transcript. A transcript of each proceeding will be arranged by 
the OCC, with all expenses, including the furnishing of a copy to the 
presiding officer, being borne by the applicant.

    Sec.  19.124 Decision of the Comptroller.
    Following the conclusion of the hearing and the submission of the 
record and the presiding officer's recommended decision to the 
Comptroller for decision, the Comptroller shall notify the applicant and 
all persons who have so requested in writing of the final disposition of 
the application. Exemptions granted must be in the form of an order 
which specifies the type of exemption granted and its terms and 
conditions.

  Subpart E--Disciplinary Proceedings Involving the Federal Securities 
                                  Laws

    Sec.  19.130 Scope.
    (a) Except as provided in this subpart, subpart A of this part 
applies to proceedings by the Comptroller to determine whether, pursuant 
to authority contained in sections 15B(c)(5), 15C(c)(2)(A), 17A(c)(3), 
and 17A(c)(4)(C) of the Exchange Act (15 U.S.C. 78o-4(c)(5), 78o-
5(c)(2)(A), 78q-1(c)(3)(A), and 78q-1(c)(4)(C)), to take disciplinary 
action against the following:
    (1) A bank which is a municipal securities dealer, or any person 
associated or seeking to become associated with such a municipal 
securities dealer;
    (2) A bank which is a government securities broker or dealer, or any 
person associated with such government securities broker or dealer; or
    (3) A bank which is a transfer agent, or any person associated or 
seeking to become associated with such transfer agent.
    (b) In addition to the issuance of disciplinary orders after 
opportunity for hearing, the Comptroller or the Comptroller's delegate 
may issue and serve any notices and temporary or permanent cease-and-
desist orders and take any actions that are authorized by section 8 of 
the FDIA (12 U.S.C. 1818), sections 15B(c)(5), 15C(c)(2)(B), and 
17A(d)(2) of the Exchange Act, and other subparts of this part against 
the following:
    (1) The parties listed in paragraph (a) of this section; and
    (2) A bank which is a clearing agency.
    (c) Nothing in this subpart impairs the powers conferred on the 
Comptroller by other provisions of law.

    Sec.  19.131 Notice of charges and answer.
    (a) Proceedings are commenced when the Comptroller serves a notice 
of charges on a bank or associated person. The notice must indicate the 
type of disciplinary action being contemplated and the grounds therefor, 
and fix a date, time and place for hearing. The hearing must be set for 
a date at least 30 days after service of the notice. A party served with 
a notice of charges may file an answer as prescribed in Sec.  19.19. Any 
party who fails to appear at a hearing personally

[[Page 589]]

or by a duly authorized representative shall be deemed to have consented 
to the issuance of a disciplinary order.
    (b) All proceedings under this subpart must be commenced, and the 
notice of charges must be filed, on a public basis, unless otherwise 
ordered by the Comptroller. Pursuant to Sec.  19.33(a), a request for a 
private hearing may be filed within 20 days of service of the notice.

    Sec.  19.132 Disciplinary orders.
    (a) In the event of consent, or if on the record filed by the 
administrative law judge, the Comptroller finds that any act or omission 
or violation specified in the notice of charges has been established, 
the Comptroller may serve on the bank or persons concerned a 
disciplinary order, as provided in the Exchange Act. The order may:
    (1) Censure, limit the activities, functions or operations, or 
suspend or revoke the registration of a bank which is a municipal 
securities dealer;
    (2) Censure, suspend or bar any person associated or seeking to 
become associated with a municipal securities dealer;
    (3) Censure, limit the activities, functions or operations, or 
suspend or bar a bank which is a government securities broker or dealer;
    (4) Censure, limit the activities, functions or operations, or 
suspend or bar any person associated with a government securities broker 
or dealer;
    (5) Deny registration to, limit the activities, functions, or 
operations or suspend or revoke the registration of a bank which is a 
transfer agent; or
    (6) Censure or limit the activities or functions, or suspend or bar, 
any person associated or seeking to become associated with a transfer 
agent.
    (b) A disciplinary order is effective when served on the party or 
parties involved and remains effective and enforceable until it is 
stayed, modified, terminated, or set aside by action of the Comptroller 
or a reviewing court.

    Sec.  19.135 Applications for stay or review of disciplinary actions 
imposed by registered clearing agencies.
    (a) Stays. The rules adopted by the Securities and Exchange 
Commission (SEC) pursuant to section 19 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78s) regarding applications by persons for whom the 
SEC is the appropriate regulatory agency for stays of disciplinary 
sanctions or summary suspensions imposed by registered clearing agencies 
(17 CFR 240.19d-2) apply to applications by national banks. References 
to the ``Commission'' are deemed to refer to the ``OCC.''
    (b) Reviews. The regulations adopted by the SEC pursuant to section 
19 of the Securities Exchange Act of 1934 (15 U.S.C. 78s) regarding 
applications by persons for whom the SEC is the appropriate regulatory 
agency for reviews of final disciplinary sanctions, denials of 
participation, or prohibitions or limitations of access to services 
imposed by registered clearing agencies (17 CFR 240.19d-3(a)-(f)) apply 
to applications by national banks. References to the ``Commission'' are 
deemed to refer to the ``OCC.''

   Subpart F--Civil Money Penalty Authority Under the Securities Laws

    Sec.  19.140 Scope.
    (a) Except as provided in this subpart, subpart A of this part 
applies to proceedings by the Comptroller to determine whether, pursuant 
to authority contained in section 21B of the Exchange Act (15 U.S.C. 
78u-2), in proceedings commenced pursuant to sections 15B, 15C, and 17A 
of the Exchange Act (15 U.S.C. 78o-4, 78o-5, or 78q-1) for which the OCC 
is the appropriate regulatory agency under section 3(a)(34) of the 
Exchange Act (15 U.S.C. 78c(a)(34)), the Comptroller may impose a civil 
money penalty against the following:
    (1) A bank which is a municipal securities dealer, or any person 
associated or seeking to become associated with such a municipal 
securities dealer;
    (2) A bank which is a government securities broker or dealer, or any 
person associated with such government securities broker or dealer; or
    (3) A bank which is a transfer agent, or any person associated or 
seeking to become associated with such transfer agent.
    (b) All proceedings under this subpart must be commenced, and the 
notice of assessment must be filed, on a public basis, unless otherwise 
ordered by the Comptroller. Pursuant to Sec.  19.33(a), any request for 
a private hearing must be filed within 20 days of service of the notice.

     Subpart G--Cease-and-Desist Authority Under the Securities Laws

    Sec.  19.150 Scope.
    (a) Except as provided in this subpart, subpart A of this part 
applies to proceedings by the Comptroller to determine whether, pursuant 
to authority contained in sections 12(i) and 21C of the Exchange Act (15 
U.S.C. 78l(i) and 78u-3), the Comptroller may initiate cease-and-desist 
proceedings against a national bank for violations of sections 12, 13, 
14(a), 14(c), 14(d), 14(f), and 16 of the Exchange Act or regulations or 
rules issued thereunder (15 U.S.C. 78l, 78m, 78n(a), 78n(c), 78n(d), 
78n(f), and 78p).
    (b) All proceedings under this subpart must be commenced, and the 
notice of charges must be filed, on a public basis, unless otherwise 
ordered by the Comptroller. Pursuant to Sec.  19.33(a), any request for 
a private hearing

[[Page 590]]

must be filed within 20 days of service of the notice.

                    Subpart H--Change in Bank Control

    Sec.  19.160 Scope.
    (a) Section 7(j) of the FDIA (12 U.S.C. 1817(j)) provides that no 
person may acquire control of an insured depository institution unless 
the appropriate Federal bank regulatory agency has been given prior 
written notice of the proposed acquisition. If, after investigating and 
soliciting comment on the proposed acquisition, the agency decides that 
the acquisition should be disapproved, the agency shall mail a written 
notification to the proposed acquiring person in writing within three 
days of the decision. The party can then request an agency hearing on 
the proposed acquisition. The OCC's procedures for reviewing notices of 
proposed acquisitions in change-in-control proceedings are set forth in 
Sec.  5.50 of this chapter.
    (b) Unless otherwise provided in this subpart, the rules in subpart 
A of this part set forth the procedures applicable to requests for OCC 
hearings.

    Sec.  19.161 Notice of disapproval and hearing initiation.
    (a) Notice of disapproval. The OCC's written disapproval of a 
proposed acquisition of control of a national bank must:
    (1) Contain a statement of the basis for the disapproval; and
    (2) Indicate that the filer may request a hearing.
    (b) Hearing request. Following receipt of a notice of disapproval, a 
filer may request a hearing on the proposed acquisition. A hearing 
request must:
    (1) Be in writing; and
    (2) Be filed with the Hearing Clerk of the OCC within ten days after 
service on the filer of the notice of disapproval. If a filer fails to 
request a hearing with a timely written request, the notice of 
disapproval constitutes a final and unappealable order.
    (c) Hearing order. Following receipt of a hearing request, the 
Comptroller shall issue, within 20 days, an order that sets forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) The matters of fact or law upon which the disapproval is based; 
and
    (3) The requirement for filing an answer to the hearing order with 
OFIA within 20 days after service of the hearing order.
    (d) Answer. An answer to a hearing order must specifically deny 
those portions of the order that are disputed. Those portions of the 
order that the filer does not specifically deny are deemed admitted by 
the filer. Any hearing under this subpart is limited to those portions 
of the order that are specifically denied.
    (e) Effect of failure to answer. Failure of a filer to file an 
answer within 20 days after service of the hearing order constitutes a 
waiver of the filer's right to appear and contest the allegations in the 
hearing order. If a filer does not file a timely answer, enforcement 
counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the 
Comptroller a recommended decision containing the findings and the 
relief sought in the hearing order. Any final order issued by the 
Comptroller based upon a filer's failure to answer is deemed to be an 
order issued upon consent and is a final and unappealable order.

             Subpart I--Discovery Depositions and Subpoenas

    Sec.  19.170 Discovery depositions.
    (a) General rule. In any proceeding instituted under or subject to 
the provisions of subpart A of this part, a party may take the 
deposition of an expert, or of a person, including another party, who 
has direct knowledge of matters that are non-privileged, relevant, and 
material to the proceeding, and where there is need for the deposition. 
The deposition of experts shall be limited to those experts who are 
expected to testify at the hearing.
    (b) Notice. A party desiring to take a deposition shall give 
reasonable notice in writing to the deponent and to every other party to 
the proceeding. The notice must state the time and place for taking the 
deposition, and the name and address of the person to be deposed.
    (c) Time limits. A party may take depositions at any time after the 
commencement of the proceeding, but no later than ten days before the 
scheduled hearing date, except with permission of the administrative law 
judge for good cause shown.
    (d) Conduct of the deposition. The witness must be duly sworn, and 
each party will have the right to examine the witness with respect to 
all non-privileged, relevant, and material matters of which the witness 
has factual, direct, and personal knowledge. Objections to questions or 
exhibits must be in short form and must state the grounds for the 
objection. Failure to object to questions or exhibits is not a waiver 
except where the grounds for the objection might have been avoided if 
the objection had been timely presented.
    (e) Recording the testimony--(1) Generally. The party taking the 
deposition must have a certified court reporter record the witness's 
testimony:
    (i) By stenotype machine or electronic sound recording device;
    (ii) Upon agreement of the parties, by any other method; or

[[Page 591]]

    (iii) For good cause and with leave of the administrative law judge, 
by any other method.
    (2) Cost. The party taking the deposition must bear the cost of the 
recording and transcribing the witness's testimony.
    (3) Transcript. Unless the parties agree that a transcription is not 
necessary, the court reporter must provide a transcript of the witness's 
testimony to the party taking the deposition and must make a copy of the 
transcript available to each party upon payment by that party of the 
cost of the copy.
    (f) Protective orders. At any time after notice of a deposition has 
been given, a party may file a motion for the issuance of a protective 
order. Such protective order may prohibit, terminate, or limit the scope 
or manner of the taking of a deposition. The administrative law judge 
shall grant such protective order upon a showing of sufficient grounds, 
including that the deposition:
    (1) Is unreasonable, oppressive, excessive in scope, or unduly 
burdensome;
    (2) Involves privileged, irrelevant, or immaterial matters;
    (3) Involves unwarranted attempts to pry into a party's preparation 
for trial; or
    (4) Is being conducted in bad faith or in such manner as to 
unreasonably annoy, embarrass, or oppress the witness.
    (g) Fees. Deposition witnesses, including expert witnesses, shall be 
paid the same expenses in the same manner as are paid witnesses in the 
district courts of the United States in proceedings in which the United 
States is a party. Expenses in accordance with this paragraph shall be 
paid by the party seeking to take the deposition.

    Sec.  19.171 Deposition subpoenas.
    (a) Issuance. At the request of a party, the administrative law 
judge shall issue a subpoena requiring the attendance of a witness at a 
discovery deposition under paragraph (a) of this section. The attendance 
of a witness may be required from any place in any state or territory 
that is subject to the jurisdiction of the United States or as otherwise 
permitted by law.
    (b) Service--(1) Methods of service. The party requesting the 
subpoena must serve it on the person named therein, or on that person's 
counsel, by any of the methods identified in Sec.  19.11(d).
    (2) Proof of service. The party serving the subpoena must file proof 
of service with the administrative law judge.
    (c) Motion to quash. A person named in a subpoena may file a motion 
to quash or modify the subpoena. A statement of the reasons for the 
motion must accompany it and a copy of the motion must be served on the 
party which requested the subpoena. The motion must be made prior to the 
time for compliance specified in the subpoena and not more than ten days 
after the date of service of the subpoena, or if the subpoena is served 
within 15 days of the hearing, within five days after the date of 
service.
    (d) Enforcement of deposition subpoena. Enforcement of a deposition 
subpoena shall be in accordance with the procedures of Sec.  19.27(d).

                    Subpart J--Formal Investigations

    Sec.  19.180 Scope.
    This subpart and Sec.  19.8 apply to formal investigations initiated 
by order of the Comptroller or the Comptroller's delegate and pertain to 
the exercise of powers specified in 12 U.S.C. 481, 1818(n) and 1820(c), 
and section 21 of the Exchange Act (15 U.S.C. 78u). This subpart does 
not restrict or in any way affect the authority of the Comptroller to 
conduct examinations into the affairs or ownership of banks and their 
affiliates.

    Sec.  19.181 Confidentiality of formal investigations.
    Information or documents obtained in the course of a formal 
investigation are confidential and may be disclosed only in accordance 
with the provisions of part 4 of this chapter.

    Sec.  19.182 Order to conduct a formal investigation.
    A formal investigation begins with the issuance of an order signed 
by the Comptroller or the Comptroller's delegate. The order must 
designate the person or persons who will conduct the investigation. Such 
persons are authorized, among other things, to issue subpoenas duces 
tecum, to administer oaths, and receive affirmations as to any matter 
under investigation by the Comptroller. Upon application and for good 
cause shown, the Comptroller may limit, modify, or withdraw the order at 
any stage of the proceedings.

    Sec.  19.183 Rights of witnesses.
    (a) Any person who is compelled or requested to furnish testimony, 
documentary evidence, or other information with respect to any matter 
under formal investigation shall, on request, be shown the order 
initiating the investigation.
    (b) Any person who, in a formal investigation, is compelled to 
appear and testify, or who appears and testifies by request or 
permission of the Comptroller, may be accompanied, represented, and 
advised by counsel. The right to be accompanied, represented, and 
advised by counsel means the right of a person testifying to have an 
attorney present at all times while testifying and to have the 
attorney--
    (1) Advise the person before, during and after the conclusion of 
testimony;
    (2) Question the person briefly at the conclusion of testimony to 
clarify any of the answers given; and

[[Page 592]]

    (3) Make summary notes during the testimony solely for the use of 
the person.
    (c) Any person who has given or will give testimony and counsel 
representing the person may be excluded from the proceedings during the 
taking of testimony of any other witness.
    (d) Any person who is compelled to give testimony is entitled to 
inspect any transcript that has been made of the testimony but may not 
obtain a copy if the Comptroller's representatives conducting the 
proceedings have cause to believe that the contents should not be 
disclosed pending completion of the investigation.
    (e) Any designated representative conducting an investigative 
proceeding shall report to the Comptroller any instances where a person 
has been guilty of dilatory, obstructionist or insubordinate conduct 
during the course of the proceeding or any other instance involving a 
violation of this part. The Comptroller may take such action as the 
circumstances warrant, including exclusion of the offending individual 
or individuals from participation in the proceedings.

    Sec.  19.184 Service of subpoena and payment of witness expenses.
    (a) Methods of service. Service of a subpoena may be made by any of 
the methods identified in Sec.  19.11(d).
    (b) Expenses. A witness who is subpoenaed will be paid the same 
expenses in the same manner as witnesses in the district courts of the 
United States. The expenses need not be tendered at the time a subpoena 
is served.

    Subpart K--Parties and Representational Practice Before the OCC; 
                          Standards of Conduct

    Sec.  19.190 Scope.
    This subpart contains rules relating to parties and representational 
practice before the OCC. This subpart includes the imposition of 
sanctions by the administrative law judge, any other presiding officer 
appointed pursuant to subparts C and D of this part, or the Comptroller 
against parties or their counsel in an adjudicatory proceeding under 
this part. This subpart also covers other disciplinary sanctions--
censure, suspension or debarment--against individuals who appear before 
the OCC in a representational capacity either in an adjudicatory 
proceeding under this part or in any other matters connected with 
presentations to the OCC relating to a client's rights, privileges, or 
liabilities. This representation includes, but is not limited to, the 
practice of attorneys and accountants. Employees of the OCC are not 
subject to disciplinary proceedings under this subpart.

    Sec.  19.191 Definitions.
    As used in Sec. Sec.  19.190 through 19.201, the following terms 
shall have the meaning given in this section unless the context 
otherwise requires:
    (a) Practice before the OCC includes any matters connected with 
presentations to the OCC or any of its officers or employees relating to 
a client's rights, privileges or liabilities under laws or regulations 
administered by the OCC. Such matters include, but are not limited to, 
representation of a client in an adjudicatory proceeding under this 
part; the preparation of any statement, opinion or other paper or 
document by an attorney, accountant, or other licensed professional 
which is filed with, or submitted to, the OCC, on behalf of another 
person in, or in connection with, any application, notification, report 
or document; the representation of a person at conferences, hearings and 
meetings; and the transaction of other business before the OCC on behalf 
of another person. The term ``practice before the OCC'' does not include 
work prepared for a bank solely at its request for use in the ordinary 
course of its business.
    (b) Attorney means any individual who is a member in good standing 
of the bar of the highest court of any state, possession, territory, 
commonwealth, of the United States or the District of Columbia.
    (c) Accountant means any individual who is duly qualified to 
practice as a certified public accountant or a public accountant in any 
state, possession, territory, commonwealth of the United States, or the 
District of Columbia.

    Sec.  19.192 Sanctions relating to conduct in an adjudicatory 
proceeding.
    (a) General rule. Appropriate sanctions may be imposed when any 
party or person representing a party in an adjudicatory proceeding under 
this part has failed to comply with an applicable statute, regulation, 
or order, and that failure to comply:
    (1) Constitutes contemptuous conduct;
    (2) Materially injures or prejudices another party in terms of 
substantive injury, incurring additional expenses including attorney's 
fees, prejudicial delay, or otherwise;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Unduly delays the proceeding.
    (b) Sanctions. Sanctions which may be imposed include any one or 
more of the following:
    (1) Issuing an order against the party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;

[[Page 593]]

    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just; and
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Procedure for imposition of sanctions. (1) Upon the motion of 
any party, or on his or her own motion, the administrative law judge or 
other presiding officer may impose sanctions in accordance with this 
section. The administrative law judge or other presiding officer shall 
submit to the Comptroller for final ruling any sanction entering a final 
order that determines the case on the merits.
    (2) No sanction authorized by this section, other than refusal to 
accept late filings, shall be imposed without prior notice to all 
parties and an opportunity for any party against whom sanctions would be 
imposed to be heard. Such opportunity to be heard may be on such notice, 
and the response may be in such form as the administrative law judge or 
other presiding officer directs. The administrative law judge or other 
presiding officer may limit the opportunity to be heard to an 
opportunity of a party or a party's representative to respond orally 
immediately after the act or inaction covered by this section is noted 
by the administrative law judge or other presiding officer.
    (3) Requests for the imposition of sanctions by any party, and the 
imposition of sanctions, are subject to interlocutory review pursuant to 
Sec.  19.25 in the same manner as any other ruling.
    (d) Section not exclusive. Nothing in this section shall be read as 
precluding the administrative law judge or other presiding officer or 
the Comptroller from taking any other action, or imposing any 
restriction or sanction, authorized by applicable statute or regulation.

    Sec.  19.193 Censure, suspension or debarment.
    The Comptroller may censure an individual or suspend or debar such 
individual from practice before the OCC if he or she is incompetent in 
representing a client's rights or interest in a significant matter 
before the OCC; or engages, or has engaged, in disreputable conduct; or 
refuses to comply with the rules and regulations in this part; or with 
intent to defraud in any manner, willfully and knowingly deceives, 
misleads, or threatens any client or prospective client. The suspension 
or debarment of an individual may be initiated only upon a finding by 
the Comptroller that the basis for the disciplinary action is 
sufficiently egregious.

    Sec.  19.194 Eligibility of attorneys and accountants to practice.
    (a) Attorneys. Any attorney who is qualified to practice as an 
attorney and is not currently under suspension or debarment pursuant to 
this subpart may practice before the OCC.
    (b) Accountants. Any accountant who is qualified to practice as a 
certified public accountant or public accountant and is not currently 
under suspension or debarment by the OCC may practice before the OCC.

    Sec.  19.195 Incompetence.
    Incompetence in the representation of a client's rights and 
interests in a significant matter before the OCC is grounds for 
suspension or debarment. The term ``incompetence'' encompasses conduct 
that reflects a lack of the knowledge, judgment and skill that a 
professional would ordinarily and reasonably be expected to exercise in 
adequately representing the rights and interests of a client. Such 
conduct includes, but is not limited to:
    (a) Handling a matter which the individual knows or should know that 
he or she is not competent to handle, without associating with a 
professional who is competent to handle such matter.
    (b) Handling a matter without adequate preparation under the 
circumstances.
    (c) Neglect in a matter entrusted to him or her.

    Sec.  19.196 Disreputable conduct.
    Disreputable conduct for which an individual may be censured, 
debarred, or suspended from practice before the OCC includes:
    (a) Willfully or recklessly violating or willfully or recklessly 
aiding and abetting the violation of any provision of the Federal 
banking or applicable securities laws or the rules and regulations 
thereunder or conviction of any offense involving dishonesty or breach 
of trust;
    (b) Knowingly or recklessly giving false or misleading information, 
or participating in any way in the giving of false information to the 
OCC or any officer or employee thereof, or to any tribunal authorized to 
pass upon matters administered by the OCC in connection with any matter 
pending or likely to be pending before it. The term ``information'' 
includes facts or other statements contained in testimony, financial 
statements, applications for enrollment, affidavits, declarations, or 
any other document or written or oral statement;
    (c) Directly or indirectly attempting to influence, or offering or 
agreeing to attempt to influence, the official action of any officer or 
employee of the OCC by the use of threats, false accusations, duress or 
coercion, by the offer of any special inducement or promise of advantage 
or by the bestowing of any gift, favor, or thing of value.
    (d) Disbarment or suspension from practice as an attorney, or 
debarment or suspension

[[Page 594]]

from practice as a certified public accountant or public accountant, by 
any duly constituted authority of any state, possession, or commonwealth 
of the United States, or the District of Columbia for the conviction of 
a felony or misdemeanor involving moral turpitude in matters relating to 
the supervisory responsibilities of the OCC, where the conviction has 
not been reversed on appeal.
    (e) Knowingly aiding or abetting another individual to practice 
before the OCC during that individual's period of suspension, debarment, 
or ineligibility.
    (f) Contemptuous conduct in connection with practice before the OCC, 
and knowingly making false accusations and statements, or circulating or 
publishing malicious or libelous matter.
    (g) Suspension, debarment or removal from practice before the Board 
of Governors, the FDIC, the OTS, the Securities and Exchange Commission, 
the Commodity Futures Trading Commission, or any other Federal or state 
agency; and
    (h) Willful violation of any of the regulations contained in this 
part.

    Sec.  19.197 Initiation of disciplinary proceeding.
    (a) Receipt of information. An individual, including any employee of 
the OCC, who has reason to believe that an individual practicing before 
the OCC in a representative capacity has engaged in any conduct that 
would serve as a basis for censure, suspension or debarment under Sec.  
19.192, may make a report thereof and forward it to the OCC or to such 
person as may be delegated responsibility for such matters by the 
Comptroller.
    (b) Censure without formal proceeding. Upon receipt of information 
regarding an individual's qualification to practice before the OCC, the 
Comptroller or the Comptroller's delegate may, after giving the 
individual notice and opportunity to respond, censure such individual.
    (c) Institution of formal disciplinary proceeding. When the 
Comptroller has reason to believe that any individual who practices 
before the OCC in a representative capacity has engaged in conduct that 
would serve as a basis for censure, suspension or debarment under Sec.  
19.192, the Comptroller may, after giving the individual notice and 
opportunity to respond, institute a formal disciplinary proceeding 
against such individual. The proceeding will be conducted pursuant to 
Sec.  19.199 and initiated by a complaint which names the individual as 
a respondent and is signed by the Comptroller or the Comptroller's 
delegate. Except in cases of willfulness, or when time, the nature of 
the proceeding, or the public interest do not permit, a proceeding under 
this section may not be commenced until the respondent has been 
informed, in writing, of the facts or conduct which warrant institution 
of a proceeding and the respondent has been accorded the opportunity to 
comply with all lawful requirements or take whatever action may be 
necessary to remedy the conduct that is the basis for the commencement 
of the proceeding.

    Sec.  19.198 Conferences.
    (a) General. The Comptroller may confer with a proposed respondent 
concerning allegations of misconduct or other grounds for censure, 
debarment or suspension, regardless of whether a proceeding for 
debarment or suspension has been commenced. If a conference results in a 
stipulation in connection with a proceeding in which the individual is 
the respondent, the stipulation may be entered in the record at the 
request of either party to the proceeding.
    (b) Resignation or voluntary suspension. In order to avoid the 
institution of, or a decision in, a debarment or suspension proceeding, 
a person who practices before the OCC may consent to suspension from 
practice. At the discretion of the Comptroller, the individual may be 
suspended or debarred in accordance with the consent offered.

    Sec.  19.199 Proceedings under this subpart.
    Any hearing held under this subpart is held before an administrative 
law judge pursuant to procedures set forth in subpart A of this part. 
The Comptroller or the Comptroller's delegate shall appoint a person to 
represent the OCC in the hearing. Any person having prior involvement in 
the matter which is the basis for the suspension or debarment proceeding 
is disqualified from representing the OCC in the hearing. The hearing 
will be closed to the public unless the Comptroller on his or her own 
initiative, or on the request of a party, otherwise directs. The 
administrative law judge shall issue a recommended decision to the 
Comptroller who shall issue the final decision and order. The 
Comptroller may censure, debar or suspend an individual, or take such 
other disciplinary action as the Comptroller deems appropriate.

    Sec.  19.200 Effect of suspension, debarment or censure.
    (a) Debarment. If the final order against the respondent is for 
debarment, the individual may not practice before the OCC unless 
otherwise permitted to do so by the Comptroller.
    (b) Suspension. If the final order against the respondent is for 
suspension, the individual may not practice before the OCC during the 
period of suspension.
    (c) Censure. If the final order against the respondent is for 
censure, the individual may be permitted to practice before the OCC, but 
such individual's future representations may be subject to conditions 
designed to promote high standards of conduct. If a written letter of 
censure is issued, a copy will be maintained in the OCC's files.

[[Page 595]]

    (d) Notice of debarment or suspension. Upon the issuance of a final 
order for suspension or debarment, the Comptroller shall give notice of 
the order to appropriate officers and employees of the OCC and to 
interested departments and agencies of the Federal government. The 
Comptroller or the Comptroller's delegate shall also give notice to the 
appropriate authorities of the state in which any debarred or suspended 
individual is or was licensed to practice.

    Sec.  19.201 Petition for reinstatement.
    At the expiration of the period of time designated in the order of 
debarment, the Comptroller may entertain a petition for reinstatement 
from any person debarred from practice before the OCC. The Comptroller 
may grant reinstatement only if satisfied that the petitioner is likely 
to act in accordance with the regulations in this part, and that 
granting reinstatement would not be contrary to the public interest. Any 
request for reinstatement shall be limited to written submissions unless 
the Comptroller, in his or her discretion, affords the petitioner a 
hearing.

                 Subpart L--Equal Access to Justice Act

    Sec.  19.210 Scope.
    The Equal Access to Justice Act regulations applicable to formal OCC 
adjudicatory proceedings under this part are set forth at 31 CFR part 6.

 Subpart M--Procedures for Reclassifying a Bank Based on Criteria Other 
                              Than Capital

    Sec.  19.220 Scope.
    This subpart applies to the procedures afforded to any bank that has 
been reclassified to a lower capital category by a notice or order 
issued by the OCC pursuant to section 38 of the Federal Deposit 
Insurance Act and this part.

    Sec.  19.221 Reclassification of a bank based on unsafe or unsound 
condition or practice.
    (a) Issuance of notice of proposed reclassification--(1) Grounds for 
reclassification. (i) Pursuant to Sec.  6.4 of this chapter, the OCC may 
reclassify a well capitalized bank as adequately capitalized or subject 
an adequately capitalized bank or undercapitalized bank to the 
supervisory actions applicable to the next lower capital category if:
    (A) The OCC determines that the bank is in an unsafe or unsound 
condition; or
    (B) The OCC deems the bank to be engaging in an unsafe or unsound 
practice and not to have corrected the deficiency.
    (ii) Any action pursuant to this paragraph (a)(1) shall hereinafter 
be referred to as ``reclassification.''
    (2) Prior notice to institution. Prior to taking action pursuant to 
Sec.  6.4 of this chapter, the OCC shall issue and serve on the bank a 
written notice of the OCC's intention to reclassify the bank.
    (b) Contents of notice. A notice of intention to reclassify a bank 
based on unsafe or unsound condition will include:
    (1) A statement of the bank's capital measures and capital levels 
and the category to which the bank would be reclassified;
    (2) The reasons for reclassification of the bank;
    (3) The date by which the bank subject to the notice of 
reclassification may file with the OCC a written appeal of the proposed 
reclassification and a request for a hearing, which shall be at least 14 
calendar days from the date of service of the notice unless the OCC 
determines that a shorter period is appropriate in light of the 
financial condition of the bank or other relevant circumstances.
    (c) Response to notice of proposed reclassification. A bank may file 
a written response to a notice of proposed reclassification within the 
time period set by the OCC. The response should include:
    (1) An explanation of why the bank is not in unsafe or unsound 
condition or otherwise should not be reclassified;
    (2) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
or company regarding the reclassification.
    (d) Failure to file response. Failure by a bank to file, within the 
specified time period, a written response with the OCC to a notice of 
proposed reclassification shall constitute a waiver of the opportunity 
to respond and shall constitute consent to the reclassification.
    (e) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the OCC under this section. If the bank desires to present oral 
testimony or witnesses at the hearing, the bank shall include a request 
to do so with the request for an informal hearing. A request to present 
oral testimony or witnesses shall specify the names of the witnesses and 
the general nature of their expected testimony. Failure to request a 
hearing shall constitute a waiver of any right to a hearing, and failure 
to request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (f) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the OCC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the OCC allows further time at the 
request of the bank. The hearing shall be held in Washington, DC or at 
such other place as may be designated by the OCC, before a presiding 
officer(s) designated by the OCC to conduct the hearing.

[[Page 596]]

    (g) Hearing procedures. (1) The bank shall have the right to 
introduce relevant written materials and to present oral argument at the 
hearing. The bank may introduce oral testimony and present witnesses 
only if expressly authorized by the OCC or the presiding officer(s). 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules of Practice and Procedure in subpart A 
of this part apply to an informal hearing under this section unless the 
OCC orders that such procedures shall apply.
    (2) The informal hearing shall be recorded, and a transcript 
furnished to the bank upon request and payment of the cost thereof. 
Witnesses need not be sworn, unless specifically requested by a party or 
the presiding officer(s). The presiding officer(s) may ask questions of 
any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (h) Recommendation of presiding officer(s). Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
on the reclassification.
    (i) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC will decide whether to reclassify the 
bank and notify the bank of the OCC's decision.

    Sec.  19.222 Request for rescission of reclassification.
    Any bank that has been reclassified under part 6 of this chapter and 
this subpart, may, upon a change in circumstances, request in writing 
that the OCC reconsider the reclassification, and may propose that the 
reclassification be rescinded and that any directives issued in 
connection with the reclassification be modified, rescinded, or removed. 
Unless otherwise ordered by the OCC, the bank shall remain subject to 
the reclassification and to any directives issued in connection with 
that reclassification while such request is pending before the OCC.

   Subpart N--Order To Dismiss a Director or Senior Executive Officer

    Sec.  19.230 Scope.
    This subpart applies to informal hearings afforded to any director 
or senior executive officer dismissed pursuant to an order issued under 
12 U.S.C. 1831o and part 6 of this chapter.

    Sec.  19.231 Order to dismiss a director or senior executive 
officer.
    (a) Service of notice. When the OCC issues and serves a directive on 
a bank pursuant to subpart B of part 6 of this chapter requiring the 
bank to dismiss from office any director or senior executive officer 
under section 38(f)(2)(F)(ii) of the FDI Act, the OCC shall also serve a 
copy of the directive, or the relevant portions of the directive where 
appropriate, upon the person to be dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed within 
10 calendar days of the receipt of the directive by the Respondent, 
unless further time is allowed by the OCC at the request of the 
Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement shall include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
OCC or its designee under this section. If the Respondent desires to 
present oral testimony or witnesses at the hearing, the Respondent shall 
include a request to do so with the request for an informal hearing. The 
request to present oral testimony or witnesses shall specify the names 
of the witnesses and the general nature of their expected testimony. 
Failure to request a hearing shall constitute a waiver of any right to a 
hearing and failure to request the opportunity to present oral testimony 
or witnesses shall constitute a waiver of any right or opportunity to 
present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the OCC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a bank to dismiss from office any director or senior 
executive officer, the OCC shall issue an order directing an informal 
hearing to commence no later than 30 days after receipt of the request, 
unless the Respondent requests a later date. The hearing shall be held 
in Washington, DC, or at such other place as may be designated by the 
OCC, before a presiding officer(s) designated by the OCC to conduct the 
hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the OCC or the presiding officer(s). Neither the 
provisions of the Administrative Procedure Act governing adjudications 
required by statute to be determined on the record nor the Uniform Rules 
of Practice and

[[Page 597]]

Procedure in subpart A of this part apply to an informal hearing under 
this section unless the OCC orders that such procedures shall apply.
    (2) The informal hearing shall be recorded, and a transcript 
furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the bank would materially strengthen the bank's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the bank's capital level or failure 
to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the bank based on supervisory criteria other than 
capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officer. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
concerning the Respondent's request for reinstatement with the bank.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC shall grant or deny the request for 
reinstatement and notify the Respondent of the OCC's decision. If the 
OCC denies the request for reinstatement, the OCC shall set forth in the 
notification the reasons for the OCC's action.

               Subpart O--Civil Money Penalty Adjustments

    Sec.  19.240 Inflation adjustments.
    (a) Statutory formula to calculate inflation adjustments. The OCC is 
required by statute to annually adjust for inflation the maximum amount 
of each civil money penalty within its jurisdiction to administer. The 
inflation adjustment is calculated by multiplying the maximum dollar 
amount of the civil money penalty for the previous calendar year by the 
cost-of-living inflation adjustment multiplier provided annually by the 
Office of Management and Budget and rounding the total to the nearest 
dollar.
    (b) Notice of inflation adjustments. The OCC will publish notice in 
the Federal Register of the maximum penalties which may be assessed on 
an annual basis on or before January 15 of each calendar year based on 
the formula in paragraph (a) of this section, for penalties assessed on, 
or after, the date of publication of the most recent notice related to 
conduct occurring on, or after, November 2, 2015.

   Subpart P--Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

    Sec.  19.241 Scope.
    This subpart, which implements section 36(g)(4) of the FDIA (12 
U.S.C. 1831m(g)(4)), provides rules and procedures for the removal, 
suspension, or debarment of independent public accountants and their 
accounting firms from performing independent audit and attestation 
services required by section 36 of the FDIA (12 U.S.C. 1831m) for 
insured national banks, insured Federal savings associations, and 
insured Federal branches of foreign banks.

    Sec.  19.242 Definitions.
    As used in this subpart, the following terms have the meaning given 
below unless the context requires otherwise:
    (a) Accounting firm means a corporation, proprietorship, 
partnership, or other business firm providing audit services.
    (b) Audit services means any service required to be performed by an 
independent public accountant by section 36 of the FDIA (12 U.S.C. 
1831m) and 12 CFR part 363, including attestation services.
    (c) Independent public accountant (accountant) means any individual 
who performs or participates in providing audit services.

    Sec.  19.243 Removal, suspension, or debarment.
    (a) Good cause for removal, suspension, or debarment--(1) 
Individuals. The Comptroller may remove, suspend, or debar an 
independent public accountant from performing audit services for insured 
national banks, insured Federal savings associations, or insured Federal 
branches of foreign banks that are subject to section 36 of the FDIA (12 
U.S.C. 1831m) if, after service of a notice of intention and opportunity 
for hearing in the matter, the Comptroller finds that the accountant:
    (i) Lacks the requisite qualifications to perform audit services;
    (ii) Has knowingly or recklessly engaged in conduct that results in 
a violation of applicable professional standards, including those 
standards and conflicts of interest provisions applicable to accountants 
through the Sarbanes-Oxley Act of 2002, Public Law 107-204, 116 Stat. 
745 (2002) (Sarbanes-Oxley Act), and developed by the Public Company 
Accounting Oversight Board and the Securities and Exchange Commission;

[[Page 598]]

    (iii) Has engaged in negligent conduct in the form of:
    (A) A single instance of highly unreasonable conduct that results in 
a violation of applicable professional standards in circumstances in 
which an accountant knows, or should know, that heightened scrutiny is 
warranted; or
    (B) Repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to perform audit services;
    (iv) Has knowingly or recklessly given false or misleading 
information, or knowingly or recklessly participated in any way in the 
giving of false or misleading information, to the OCC or any officer or 
employee of the OCC;
    (v) Has engaged in, or aided and abetted, a material and knowing or 
reckless violation of any provision of the Federal banking or securities 
laws or the rules and regulations thereunder, or any other law;
    (vi) Has been removed, suspended, or debarred from practice before 
any Federal or State agency regulating the banking, insurance, or 
securities industries, other than by an action listed in Sec.  19.244, 
on grounds relevant to the provision of audit services; or
    (vii) Is suspended or debarred for cause from practice as an 
accountant by any duly constituted licensing authority of any State, 
possession, commonwealth, or the District of Columbia.
    (2) Accounting firms. If the Comptroller determines that there is 
good cause for the removal, suspension, or debarment of a member or 
employee of an accounting firm under paragraph (a)(1) of this section, 
the Comptroller also may remove, suspend, or debar such firm or one or 
more offices of such firm. In considering whether to remove, suspend, or 
debar a firm or an office thereof, and the term of any sanction against 
a firm under this section, the Comptroller may consider, for example:
    (i) The gravity, scope, or repetition of the act or failure to act 
that constitutes good cause for the removal, suspension, or debarment;
    (ii) The adequacy of, and adherence to, applicable policies, 
practices, or procedures for the accounting firm's conduct of its 
business and the performance of audit services;
    (iii) The selection, training, supervision, and conduct of members 
or employees of the accounting firm involved in the performance of audit 
services;
    (iv) The extent to which managing partners or senior officers of the 
accounting firm have participated, directly, or indirectly through 
oversight or review, in the act or failure to act; and
    (v) The extent to which the accounting firm has, since the 
occurrence of the act or failure to act, implemented corrective internal 
controls to prevent its recurrence.
    (3) Limited scope orders. An order of removal, suspension (including 
an immediate suspension), or debarment may, at the discretion of the 
Comptroller, be made applicable to a particular insured national bank, 
insured Federal savings association, or insured Federal branch of a 
foreign bank or class of insured national banks, insured Federal savings 
associations, or insured Federal branches of foreign banks.
    (4) Remedies not exclusive. The remedies provided in this subpart 
are in addition to any other remedies the OCC may have under any other 
applicable provisions of law, rule, or regulation.
    (b) Proceedings to remove, suspend, or debar--(1) Initiation of 
formal removal, suspension, or debarment proceedings. The Comptroller 
may initiate a proceeding to remove, suspend, or debar an accountant or 
accounting firm from performing audit services by issuing a written 
notice of intention to take such action that names the individual or 
firm as a respondent and describes the nature of the conduct that 
constitutes good cause for such action.
    (2) Hearings under paragraph (b) of this section. An accountant or 
firm named as a respondent in the notice issued under paragraph (b)(1) 
of this section may request a hearing on the allegations in the notice. 
Hearings conducted under this paragraph will be conducted in the same 
manner as other hearings under the Uniform Rules of Practice and 
Procedure (12 CFR part 19, subpart A), subject to the limitations in 
Sec.  19.243(c)(4).
    (c) Immediate suspension from performing audit services--(1) In 
general. If the Comptroller serves a written notice of intention to 
remove, suspend, or debar an accountant or accounting firm from 
performing audit services, the Comptroller may, with due regard for the 
public interest and without a preliminary hearing, immediately suspend 
such accountant or firm from performing audit services for insured 
national banks, insured Federal savings associations, or insured Federal 
branches of foreign banks, if the Comptroller:
    (i) Has a reasonable basis to believe that the accountant or firm 
has engaged in conduct (specified in the notice served on the accountant 
or firm under paragraph (b) of this section) that would constitute 
grounds for removal, suspension, or debarment under paragraph (a) of 
this section;
    (ii) Determines that immediate suspension is necessary to avoid 
immediate harm to an insured depository institution or its depositors or 
to the depository system as a whole; and
    (iii) Serves such respondent with written notice of the immediate 
suspension.

[[Page 599]]

    (2) Procedures. An immediate suspension notice issued under this 
paragraph will become effective upon service. Such suspension will 
remain in effect until the date the Comptroller dismisses the charges 
contained in the notice of intention, or the effective date of a final 
order of removal, suspension, or debarment issued by the Comptroller to 
the respondent.
    (3) Petition for stay. Any accountant or firm immediately suspended 
from performing audit services in accordance with paragraph (c)(1) of 
this section may, within 10 calendar days after service of the notice of 
immediate suspension, file with the Office of the Comptroller of the 
Currency, Washington, DC 20219 for a stay of such immediate suspension. 
If no petition is filed within 10 calendar days, the right to a petition 
is waived and the immediate suspension remains in effect pursuant to 
paragraph (c)(2).
    (4) Hearing on petition. Upon receipt of a stay petition, the 
Comptroller will designate a presiding officer who will fix a place and 
time (not more than 10 calendar days after receipt of the petition, 
unless further time is allowed by the presiding officer at the request 
of petitioner) at which the immediately suspended party may appear, 
personally or through counsel, to submit written materials and oral 
argument. Any OCC employee engaged in investigative or prosecuting 
functions for the OCC in a case may not, in that or a factually related 
case, serve as a presiding officer or participate or advise in the 
decision of the presiding officer or of the OCC, except as witness or 
counsel in the proceeding. In the sole discretion of the presiding 
officer, upon a specific showing of compelling need, oral testimony of 
witnesses may also be presented. In hearings held pursuant to this 
paragraph there will be no discovery and the provisions of Sec. Sec.  
19.6 through 19.12, 19.16, and 19.21 of this part apply.
    (5) Decision on petition. Within 30 calendar days after the hearing, 
the presiding officer will issue a decision. The presiding officer will 
grant a stay upon a demonstration that a substantial likelihood exists 
of the respondent's success on the issues raised by the notice of 
intention and that, absent such relief, the respondent will suffer 
immediate and irreparable injury, loss, or damage. In the absence of 
such a demonstration, the presiding officer will notify the parties that 
the immediate suspension will be continued pending the completion of the 
administrative proceedings pursuant to the notice.
    (6) Review of presiding officer's decision. The parties may seek 
review of the presiding officer's decision by filing a petition for 
review with the presiding officer within 10 calendar days after service 
of the decision. Replies must be filed within 10 calendar days after the 
petition filing date. Upon receipt of a petition for review and any 
reply, the presiding officer will promptly certify the entire record to 
the Comptroller. Within 60 calendar days of the presiding officer's 
certification, the Comptroller will issue an order notifying the 
affected party whether or not the immediate suspension should be 
continued or reinstated. The order will state the basis of the 
Comptroller's decision.

    Sec.  19.244 Automatic removal, suspension, or debarment.
    (a) An independent public accountant or accounting firm may not 
perform audit services for insured national banks, insured Federal 
savings associations, or insured Federal branches of foreign banks if 
the accountant or firm:
    (1) Is subject to a final order of removal, suspension, or debarment 
(other than a limited scope order) issued by the Board of Governors of 
the Federal Reserve System, the Federal Deposit Insurance Corporation, 
or the former Office of Thrift Supervision under section 36 of the FDIA 
(12 U.S.C. 1831m).
    (2) Is subject to a temporary suspension or permanent revocation of 
registration or a temporary or permanent suspension or bar from further 
association with any registered public accounting firm issued by the 
Public Company Accounting Oversight Board or the Securities and Exchange 
Commission under sections 105(c)(4)(A) or (B) of the Sarbanes-Oxley Act 
(15 U.S.C. 7215(c)(4)(A) or (B)); or
    (3) Is subject to an order of suspension or denial of the privilege 
of appearing or practicing before the Securities and Exchange 
Commission.
    (b) Upon written request, the Comptroller, for good cause shown, may 
grant written permission to such accountant or firm to perform audit 
services for insured national banks, insured Federal savings 
associations, or insured Federal branches of foreign banks. The request 
must contain a concise statement of the action requested. The 
Comptroller may require the applicant to submit additional information.

    Sec.  19.245 Notice of removal, suspension, or debarment.
    (a) Notice to the public. Upon the issuance of a final order for 
removal, suspension, or debarment of an independent public accountant or 
accounting firm from providing audit services, the Comptroller will make 
the order publicly available and provide notice of the order to the 
other Federal banking agencies.
    (b) Notice to the Comptroller by accountants and firms. An 
accountant or accounting firm that provides audit services to a insured 
national bank, insured Federal savings association, or insured Federal 
branch of a foreign bank must provide the Comptroller with written 
notice of:
    (1) Any currently effective order or other action described in Sec.  
19.243(a)(1)(vi) through (vii) or Sec.  19.244(a)(2) and (3); and

[[Page 600]]

    (2) Any currently effective action by the Public Company Accounting 
Oversight Board under sections 105(c)(4)(C) or (G) of the Sarbanes-Oxley 
Act (15 U.S.C. 7215(c)(4)(C) or (G)).
    (c) Timing of notice. Written notice required by this paragraph must 
be given no later than 15 calendar days following the effective date of 
an order or action, or 15 calendar days before an accountant or firm 
accepts an engagement to provide audit services, whichever date is 
earlier.

    Sec.  19.246 Petition for reinstatement.
    (a) Form of petition. Unless otherwise ordered by the Comptroller, a 
petition for reinstatement by an independent public accountant, an 
accounting firm, or an office of a firm that was removed, suspended, or 
debarred under Sec.  19.243 may be made in writing at any time. The 
request must contain a concise statement of the action requested. The 
Comptroller may require the applicant to submit additional information.
    (b) Procedure. A petitioner for reinstatement under this section 
may, in the sole discretion of the Comptroller, be afforded a hearing. 
The accountant or firm bears the burden of going forward with a petition 
and proving the grounds asserted in support of the petition. In 
reinstatement proceedings, the person seeking reinstatement bears the 
burden of going forward with an application and proving the grounds 
asserted in support of the application. The Comptroller may, in his sole 
discretion, direct that any reinstatement proceeding be limited to 
written submissions. The removal, suspension, or debarment will continue 
until the Comptroller, for good cause shown, has reinstated the 
petitioner or until the suspension period has expired. The filing of a 
petition for reinstatement will not stay the effectiveness of the 
removal, suspension, or debarment of an accountant or firm.

   PART 108--REMOVALS, SUSPENSIONS, AND PROHIBITIONS WHERE A CRIME IS 
                            CHARGED OR PROVEN

    Authority:12 U.S.C. 1464, 1818, 5412(b)(2)(B).

    Sec.  108.1 Scope.
    The rules in this part apply to hearings, which are exempt from the 
adjudicative provisions of the Administrative Procedure Act, afforded to 
any officer, director, or other person participating in the conduct of 
the affairs of a Federal savings association, Federal savings 
association subsidiary, or affiliate service corporation, where such 
person has been suspended or removed from office or prohibited from 
further participation in the conduct of the affairs of one of the 
aforementioned entities by a Notice or Order served by the OCC upon the 
grounds set forth in section 8(g) of the Federal Deposit Insurance Act, 
(12 U.S.C. 1818(g)).

    Sec.  108.2 Definitions.
    As used in this part--
    (a) The term OCC means the Office of the Comptroller of the 
Currency.
    (b) [Reserved]
    (c) The term Notice means a Notice of Suspension or Notice of 
Prohibition issued by the OCC pursuant to section 8(g) of the Federal 
Deposit Insurance Act.
    (d) The term Order means an Order of Removal or Order of Prohibition 
issued by the OCC pursuant to section 8(g) of the Federal Deposit 
Insurance Act.
    (e) The term association means a Federal savings association within 
the meaning of section 2(5) of the Home Owners' Loan Act of 1933, as 
amended, 12 U.S.C. 1462(5) (``HOLA''), Federal savings association 
subsidiary and an affiliate service corporation within the meaning of 
section 8(b)(8) of the Federal Deposit Insurance Act, as amended, 12 
U.S.C. 1818(b)(8) (``FDIA'').
    (f) The term subject individual means a person served with a Notice 
or Order.
    (g) The term petitioner means a subject individual who has filed a 
petition for informal hearing under this part.

    Sec.  108.3 Issuance of Notice or Order.
    (a) The OCC may issue and serve a Notice upon an officer, director, 
or other person participating in the conduct of the affairs of an 
association, where the individual is charged in any information, 
indictment, or complaint with the commission of or participation in a 
crime involving dishonesty or breach of trust that is punishable by 
imprisonment for a term exceeding one year under state or Federal law, 
if the OCC, upon due deliberation, determines that continued service or 
participation by the individual may pose a threat to the interests of 
the association's depositors or may threaten to impair public confidence 
in the association. The Notice shall remain in effect until the 
information, indictment, or complaint is finally disposed of or until 
terminated by the OCC.
    (b) The OCC may issue and serve an Order upon a subject individual 
against whom a judgment of conviction, or an agreement to enter a 
pretrial diversion or other similar program has been rendered, where 
such judgment is not subject to further appellate review, and the OCC, 
upon the deliberation, has determined that continued service or 
participation by the subject individual may pose a threat to the 
interests of the association's depositors or may threaten to impair 
public confidence in the association.

    Sec.  108.4 Contents and service of the Notice or Order.
    (a) The Notice or Order shall set forth the basis and facts in 
support of the OCC's issuance of such Notice or Order, and shall inform 
the subject individual of his right to a hearing, in accordance with 
this part, for

[[Page 601]]

the purpose of determining whether the Notice or Order should be 
continued, terminated, or otherwise modified.
    (b) The OCC shall serve a copy of the Notice or Order upon the 
subject individual and the related association in the manner set forth 
in Sec.  109.11 of this chapter.
    (c) Upon receipt of the Notice or Order, the subject individual 
shall immediately comply with the requirements thereof.

    Sec.  108.5 Petition for hearing.
    (a) To obtain a hearing, the subject individual must file two copies 
of a petition with the OCC within 30 days of being served with the 
Notice or Order.
    (b) The petition filed under this section shall admit or deny 
specifically each allegation in the Notice or Order, unless the 
petitioner is without knowledge or information, in which case the 
petition shall so state and the statement shall have the effect of a 
denial. Any allegation not denied shall be deemed to be admitted. When a 
petitioner intends in good faith to deny only a part of or to qualify an 
allegation, he shall specify so much of it as is true and shall deny 
only the remainder.
    (c) The petition shall state whether the petitioner is requesting 
termination or modification of the Notice or Order, and shall state with 
particularity how the petitioner intends to show that his continued 
service to or participation in the conduct of the affairs of the 
association would not, or is not likely to, pose a threat to the 
interests of the association's depositors or to impair public confidence 
in the association.

    Sec.  108.6 Initiation of hearing.
    (a) Within 10 days of the filing of a petition for hearing, the OCC 
shall notify the petitioner of the time and place fixed for hearing, and 
it shall designate one or more OCC employees to serve as presiding 
officer.
    (b) The hearing shall be scheduled to be held no later than 30 days 
from the date the petition was filed, unless the time is extended at the 
request of the petitioner.
    (c) A petitioner may appear personally or through counsel, but if 
represented by counsel, said counsel is required to comply with Sec.  
109.6 of this chapter.
    (d) A representative(s) of the OCC's Enforcement Division also may 
attend the hearing and participate therein as a party.

    Sec.  108.7 Conduct of hearings.
    (a) Hearings provided by this section are not subject to the 
adjudicative provisions of the Administrative Procedure Act (5 U.S.C. 
554-557). The presiding officer is, however, authorized to exercise all 
of the powers enumerated in Sec.  109.5 of this chapter.
    (b) Witnesses may be presented, within time limits specified by the 
presiding officer, provided that at least 10 days prior to the hearing 
date, the party presenting the witnesses furnishes the presiding officer 
and the opposing party with a list of such witnesses and a summary of 
the proposed testimony. However, the requirement for furnishing such a 
witness list and summary of testimony shall not apply to the 
presentation of rebuttal witnesses. The presiding officer may ask 
questions of any witness, and each party shall have an opportunity to 
cross-examine any witness presented by an opposing party.
    (c) Upon the request of either the petitioner or a representative of 
the Enforcement Division, the record shall remain open for a period of 5 
business days following the hearing, during which time the parties may 
make any additional submissions for the record. Thereafter, the record 
shall be closed.
    (d) Following the introduction of all evidence, the petitioner and 
the representative of the Enforcement Division shall have an opportunity 
for oral argument; however, the parties may jointly waive the right to 
oral argument, and, in lieu thereof, elect to submit written argument.
    (e) All oral testimony and oral argument shall be recorded, and 
transcripts made available to the petitioner upon payment of the cost 
thereof. A copy of the transcript shall be sent directly to the 
presiding officer, who shall have authority to correct the record sua 
sponte or upon the motion of any party.
    (f) The parties may, in writing, jointly waive an oral hearing and 
instead elect a hearing upon a written record in which all evidence and 
argument would be submitted to the presiding officer in documentary form 
and statements of individuals would be made by affidavit.

    Sec.  108.8 Default.
    If the subject individual fails to file a petition for a hearing, or 
fails to appear at a hearing, either in person or by attorney, or fails 
to submit a written argument where oral argument has been waived 
pursuant to Sec.  108.7(d) or (f) of this part, the Notice shall remain 
in effect until the information, indictment, or complaint is finally 
disposed of and the Order shall remain in effect until terminated by the 
OCC.

    Sec.  108.9 Rules of evidence.
    (a) Formal rules of evidence shall not apply to a hearing, but the 
presiding officer may limit the introduction of irrelevant, immaterial, 
or unduly repetitious evidence.
    (b) All matters officially noticed by the presiding officer shall 
appear on the record.

    Sec.  108.10 Burden of persuasion.
    The petitioner has the burden of showing, by a preponderance of the 
evidence, that his or her continued service to or participation in the 
conduct of the affairs of the association does not, or is not likely to, 
pose a threat to the interests of the association's

[[Page 602]]

depositors or threaten to impair public confidence in the association.

    Sec.  108.11 Relevant considerations.
    (a) In determining whether the petitioner has shown that his or her 
continued service to or participation in the conduct of the affairs of 
the association would not, or is not likely to, pose a threat to the 
interests of the association's depositors or threaten to impair public 
confidence in the association, in order to decide whether the Notice or 
Order should be continued, terminated, or otherwise modified, the OCC 
will consider:
    (1) The nature and extent of the petitioner's participation in the 
affairs of the association;
    (2) The nature of the offense with which the petitioner has been 
charged;
    (3) The extent of the publicity accorded the indictment and trial; 
and
    (4) Such other relevant factors as may be entered on the record.
    (b) When considering a request for the termination or modification 
of a Notice, the OCC will not consider the ultimate guilt or innocence 
of the petitioner with respect to the criminal charge that is 
outstanding.
    (c) When considering a request for the termination or modification 
of an Order which has been issued following a final judgment of 
conviction against a subject individual, the OCC will not collaterally 
review such final judgment of conviction.

    Sec.  108.12 Proposed findings and conclusions and recommended 
decision.
    (a) Within 30 days after completion of oral argument or the 
submission of written argument where oral argument has been waived, the 
presiding officer shall file with and certify to the OCC for decision 
the entire record of the hearing, which shall include a recommended 
decision, the Notice or Order, and all other documents filed in 
connection with the hearing.
    (b) The recommended decision shall contain:
    (1) A statement of the issue(s) presented,
    (2) A statement of findings and conclusions, and the reasons or 
basis therefor, on all material issues of fact, law, or discretion 
presented on the record, and
    (3) An appropriate recommendation as to whether the suspension, 
removal, or prohibition should be continued, modified, or terminated.

    Sec.  108.13 Decision of the OCC.
    (a) Within 30 days after the recommended decision has been certified 
to the OCC, the OCC shall issue a final decision.
    (b) The OCC's final decision shall contain a statement of the basis 
therefor. The OCC may satisfy this requirement where it adopts the 
recommended decision of the presiding officer upon finding that the 
recommended decision satisfies the requirements of Sec.  109.38 of this 
chapter.
    (c) The OCC shall serve upon the petitioner and the representative 
of the Enforcement Division a copy of the OCC's final decision and the 
related recommended decision.

    Sec.  108.14 Miscellaneous.
    The provisions of Sec. Sec.  109.10, 109.11, and 109.12 of this 
chapter shall apply to proceedings under this part.

  PART 109--RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY PROCEEDINGS

    Authority:5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 1468, 
1817, 1818, 1820(k), 1829(e), 1832, 1884, 1972, 3349, 4717, 
5412(b)(2)(B); 15 U.S.C. 78(l), 78o-5, 78u-2, 1639e; 28 U.S.C. 2461 
note; 31 U.S.C. 5321; and 42 U.S.C. 4012a.

           Subpart A--Uniform Rules of Practice and Procedure

    Sec.  109.1 Scope.
    This subpart prescribes Uniform Rules of practice and procedure with 
regard to Federal savings associations applicable to adjudicatory 
proceedings as to which hearings on the record are provided for by the 
following statutory provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (FDIA) (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the OCC should issue an 
order to approve or disapprove a person's proposed acquisition of an 
institution;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (Exchange Act) (15 U.S.C. 78o-5), to impose sanctions upon 
any government securities broker or dealer or upon any person associated 
or seeking to become associated with a government securities broker or 
dealer for which the OCC is the appropriate agency.
    (e) Assessment of civil money penalties by the OCC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate agency for any violation of:
    (1) Section 5 of the Home Owners' Loan Act (HOLA) or any regulation 
or order issued thereunder, pursuant to 12 U.S.C. 1464 (d), (s) and (v);
    (2) Section 9 of the HOLA or any regulation or order issued 
thereunder, pursuant to 12 U.S.C. 1467(d);
    (3) Section 10 of the HOLA, pursuant to 12 U.S.C. 1467a (i) and (r);
    (4) Any provisions of the Change in Bank Control Act, any regulation 
or order issued

[[Page 603]]

thereunder or certain unsafe or unsound practices or breaches of 
fiduciary duty, pursuant to 12 U.S.C. 1817(j)(16);
    (5) Sections 22(h) and 23 of the Federal Reserve Act, or any 
regulation issued thereunder or certain unsafe or unsound practices or 
breaches of fiduciary duty, pursuant to 12 U.S.C. 1468;
    (6) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (7) Section 1120 of Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (12 U.S.C. 3349), or any order or regulation 
issued thereunder;
    (8) The terms of any final or temporary order issued or enforceable 
pursuant to section 8 of the FDIA or of any written agreement executed 
by the OCC, the terms of any conditions imposed in writing by the OCC in 
connection with the grant of an application or request, certain unsafe 
or unsound practices or breaches of fiduciary duty, or any law or 
regulation not otherwise provided herein pursuant to 12 U.S.C. 
1818(i)(2);
    (9) Any provision of law referenced in section 102 of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (10) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102 of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k)) 
to impose penalties on senior examiners for violation of post-employment 
prohibitions; and
    (h) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules.

    Sec.  109.2 Rules of construction.
    For purposes of this subpart:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) The term counsel includes a non-attorney representative; and
    (c) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.

    Sec.  109.3 Definitions.
    For purposes of this subpart, unless explicitly stated to the 
contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Decisional employee means any member of the OCC's or 
administrative law judge's staff who has not engaged in an investigative 
or prosecutorial role in a proceeding and who may assist the OCC or the 
administrative law judge, respectively, in preparing orders, recommended 
decisions, decisions, and other documents under the Uniform Rules.
    (d) Comptroller means the Comptroller of the Currency or his or her 
designee.
    (e) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the OCC in an adjudicatory 
proceeding.
    (f) Final order means an order issued by the OCC with or without the 
consent of the affected institution or the institution-affiliated party 
that has become final, without regard to the pendency of any petition 
for reconsideration or review.
    (g) Institution includes any Federal savings association as that 
term is defined in section 3(b) of the FDIA (12 U.S.C. 1813(b)).
    (h) Institution-affiliated party means any institution-affiliated 
party as that term is defined in section 3(u) of the FDIA (12 U.S.C. 
1813(u)).
    (i) Local Rules means those rules found in subpart B of this part.
    (j) OCC means the Office of the Comptroller of the Currency.
    (k) Office of Financial Institution Adjudication (OFIA) means the 
executive body charged with overseeing the administration of 
administrative enforcement proceedings for the OCC, the Board of 
Governors of the Federal Reserve Board, the Federal Deposit Insurance 
Corporation, and the National Credit Union Administration.
    (l) Party means the OCC and any person named as a party in any 
notice.
    (m) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (g) of this section.
    (n) Respondent means any party other than the OCC.
    (o) Uniform Rules means those rules in subpart A of this part.
    (p) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.

    Sec.  109.4 Authority of the Comptroller.
    The Comptroller may, at any time during the pendency of a proceeding 
perform, direct the performance of, or waive performance of, any act 
which could be done or ordered by the administrative law judge.

    Sec.  109.5 Authority of the administrative law judge.
    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of

[[Page 604]]

the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec.  109.31 of this subpart;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Comptroller shall have the power to grant any motion to dismiss the 
proceeding or to decide any other motion that results in a final 
determination of the merits of the proceeding;
    (8) To prepare and present to the Comptroller a recommended decision 
as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.

    Sec.  109.6 Appearance and practice in adjudicatory proceedings.
    (a) Appearance before the OCC or an administrative law judge--(1) By 
attorneys. Any member in good standing of the bar of the highest court 
of any state, commonwealth, possession, territory of the United States, 
or the District of Columbia may represent others before the OCC if such 
attorney is not currently suspended or debarred from practice before the 
OCC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer, director, 
or employee is not currently suspended or debarred from practice before 
the OCC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the Comptroller, shall file a notice of appearance 
with OFIA at or before the time that individual submits papers or 
otherwise appears on behalf of a party in the adjudicatory proceeding. 
The notice of appearance must include a written declaration that the 
individual is currently qualified as provided in paragraph (a)(1) or 
(a)(2) of this section and is authorized to represent the particular 
party. By filing a notice of appearance on behalf of a party in an 
adjudicatory proceeding, the counsel agrees and represents that he or 
she is authorized to accept service on behalf of the represented party 
and that, in the event of withdrawal from representation, he or she 
will, if required by the administrative law judge, continue to accept 
service until new counsel has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.

    Sec.  109.7 Good faith certification.
    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel shall sign his or her individual name and state his or her 
address and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: the counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are

[[Page 605]]

warranted by existing law or a good faith argument for the extension, 
modification, or reversal of existing law, and are not made for any 
improper purpose, such as to harass or to cause unnecessary delay or 
needless increase in the cost of litigation.

    Sec.  109.8 Conflicts of interest.
    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec.  109.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.

    Sec.  109.9 Ex parte communications.
    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the OCC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Comptroller, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the Comptroller until the date that the Comptroller issues 
the final decision pursuant to Sec.  109.40(c) of this subpart:
    (1) No interested person outside the OCC shall make or knowingly 
cause to be made an ex parte communication to the Comptroller, the 
administrative law judge, or a decisional employee; and
    (2) The Comptroller, administrative law judge, or decisional 
employee shall not make or knowingly cause to be made to any interested 
person outside the OCC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, the 
Comptroller or other person identified in paragraph (a) of this section, 
that person shall cause all such written communications (or, if the 
communication is oral, a memorandum stating the substance of the 
communication) to be placed on the record of the proceeding and served 
on all parties. All other parties to the proceeding shall have an 
opportunity, within ten days of receipt of service of the ex parte 
communication to file responses thereto and to recommend any sanctions, 
in accordance with paragraph (d) of this section, that they believe to 
be appropriate under the circumstances.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Comptroller or the administrative 
law judge including, but not limited to, exclusion from the proceedings 
and an adverse ruling on the issue which is the subject of the 
prohibited communication.
    (e) Separation-of-functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the OCC in a case may not, 
in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec.  109.40 of this subpart, except as witness or 
counsel in public proceedings.

    Sec.  109.10 Filing of papers.
    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec.  
109.25 and 109.26 of this subpart, shall be filed with the OFIA, except 
as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Comptroller 
or the administrative law judge, filing may be accomplished by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the Comptroller or the 
administrative law judge. All papers filed by

[[Page 606]]

electronic media shall also concurrently be filed in accordance with 
paragraph (c) of this section as to form.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8 1-2 x 11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec.  109.7 of this subpart.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the OCC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Comptroller, 
or the administrative law judge, an original and one copy of all 
documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.

    Sec.  109.11 Service of papers.
    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec.  109.10(c) of this 
subpart as to form.
    (c) By the Comptroller or the administrative law judge. (1) All 
papers required to be served by the Comptroller or the administrative 
law judge upon a party who has appeared in the proceeding through a 
counsel of record, shall be served by any means specified in paragraph 
(b) of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec.  109.6 of this subpart, the Comptroller or the administrative law 
judge shall make service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) By delivery to an agent, which in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.

    Sec.  109.12 Construction of time limits.
    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed

[[Page 607]]

for in paragraph (c) of this section, intermediate Saturdays, Sundays, 
and Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection; or
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Comptroller or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Comptroller or the administrative law judge in the case of filing, 
or by agreement among the parties in the case of service.

    Sec.  109.13 Change of time limits.
    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or any notice or order issued in the proceedings. After 
the referral of the case to the Comptroller pursuant to Sec.  109.38 of 
this subpart, the Comptroller may grant extensions of the time limits 
for good cause shown. Extensions may be granted at the motion of a party 
or on the Comptroller's or the administrative law judge's own motion 
after notice and opportunity to respond is afforded all non-moving 
parties.

    Sec.  109.14 Witness fees and expenses.
    Witnesses subpoenaed for testimony or deposition shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the OCC is the 
party requesting the subpoena. The OCC shall not be required to pay any 
fees to, or expenses of, any witness not subpoenaed by the OCC.

    Sec.  109.15 Opportunity for informal settlement.
    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any OCC representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.

    Sec.  109.16 OCC's right to conduct examination.
    Nothing contained in this subpart limits in any manner the right of 
the OCC to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the OCC to 
conduct or continue any form of investigation authorized by law.

    Sec.  109.17 Collateral attacks on adjudicatory proceeding.
    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.

    Sec.  109.18 Commencement of proceeding and contents of notice.
    (a) Commencement of proceeding. (1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the Comptroller.
    (ii) The notice must be served by the Comptroller upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law.
    (iii) The notice must be filed with the OFIA.
    (2) Change-in control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
Comptroller.

[[Page 608]]

    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the OCC 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) The answer and/or request for a hearing shall be filed with 
OFIA.

    Sec.  109.19 Answer.
    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding. A respondent is not required to respond to 
the portion of a notice that constitutes the prayer for relief or 
proposed order. The answer must set forth affirmative defenses, if any, 
asserted by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the 
Comptroller a recommended decision containing the findings and the 
relief sought in the notice. Any final order issued by the Comptroller 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.
    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Comptroller or administrative law 
judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.

    Sec.  109.21 Failure to appear.
    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the Comptroller a recommended decision containing the findings and the 
relief sought in the notice.

    Sec.  109.22 Consolidation and severance of actions.
    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the

[[Page 609]]

matter as to any respondent only if the administrative law judge finds 
that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.

    Sec.  109.23 Motions.
    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, but upon the filing of the recommended decision, motions must 
be filed with the Comptroller.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Comptroller, any party may file a written response to a motion. The 
administrative law judge shall not rule on any oral or written motion 
before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec.  109.29 and 109.30 of this subpart.

    Sec.  109.24 Scope of document discovery.
    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by Sec.  109.102 of 
this part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec.  109.25 of 
this subpart.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative-process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing, except as provided in the 
Local Rules. No exceptions to this time limit shall be permitted, unless 
the administrative law judge finds on the record that good cause exists 
for waiving the requirements of this paragraph.

    Sec.  109.25 Request for document discovery from parties.
    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or

[[Page 610]]

some of the responsive documents be copied and the copies delivered to 
the requesting party. If copying of fewer than 250 pages is requested, 
the party to whom the request is addressed shall bear the cost of 
copying and shipping charges. If a party requests 250 pages or more of 
copying, the requesting party shall pay for the copying and shipping 
charges. Copying charges are the current per-page copying rate imposed 
under 12 CFR 4.17 for requests under the Freedom of Information Act (5 
U.S.C. 552). The party to whom the request is addressed may require 
payment in advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec.  109.23 
of this subpart to revoke or otherwise limit the request. If an 
objection is made to only a portion of an item or category in a request, 
the portion objected to shall be specified. Any objections not made in 
accordance with this paragraph and Sec.  109.23 of this subpart are 
waived.
    (2) The party who served the request that is the subject of a motion 
to revoke or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney-work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec.  109.23 of this subpart for the issuance of a subpoena compelling 
production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may deny or 
modify the request, and may issue appropriate protective orders, upon 
such conditions as justice may require. The pendency of a motion to 
strike or limit discovery or to compel production is not a basis for 
staying or continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative law 
judge against a party who fails to produce subpoenaed documents.

    Sec.  109.26 Document subpoenas to nonparties.
    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec.  109.24(d) of this subpart. The party 
obtaining the document subpoena is responsible for serving it on the

[[Page 611]]

subpoenaed person and for serving copies on all parties. Document 
subpoenas may be served in any state, territory, or possession of the 
United States, the District of Columbia, or as otherwise provided by 
law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec.  109.25(d) of this 
subpart, and during the same time limits during which such an objection 
could be filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with so much of the document subpoena as the administrative 
law judge has not quashed or modified. A party's right to seek court 
enforcement of a document subpoena shall in no way limit the sanctions 
that may be imposed by the administrative law judge on a party who 
induces a failure to comply with subpoenas issued under this section.

    Sec.  109.27 Deposition of witness unavailable for hearing.
    (a) General rules. (1) If a witness will not be available for the 
hearing, a party may apply in accordance with the procedures set forth 
in paragraph (a)(2) of this section, to the administrative law judge for 
the issuance of a subpoena, including a subpoena duces tecum, requiring 
the attendance of the witness at a deposition. The administrative law 
judge may issue a deposition subpoena under this section upon showing 
that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been

[[Page 612]]

timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to answer or submit any evidence the witness has refused to 
submit during the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena under paragraph (b) or 
(c)(2) of this section, the subpoenaing party or other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
portions of the subpoena that the administrative law judge has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
administrative law judge on a party who fails to comply with or procures 
a failure to comply with, a subpoena issued under this section.

    Sec.  109.28 Interlocutory review.
    (a) General rule. The Comptroller may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Comptroller only in accordance with the procedures set forth in this 
section and Sec.  109.23 of this subpart.
    (b) Scope of review. The Comptroller may exercise interlocutory 
review of a ruling of the administrative law judge if the Comptroller 
finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec.  109.23 of this subpart. 
Any party may file a response to a request for interlocutory review in 
accordance with Sec.  109.23(d) of this subpart. Upon the expiration of 
the time for filing all responses, the administrative law judge shall 
refer the matter to the Comptroller for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Comptroller under 
this section suspends or stays the proceeding unless otherwise ordered 
by the administrative law judge or the Comptroller.

    Sec.  109.29 Summary disposition.
    (a) In general. The administrative law judge shall recommend that 
the Comptroller issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes that 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the administrative law judge, may 
file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits and any other evidentiary materials that the moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the contention that summary 
disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving

[[Page 613]]

party is entitled to summary disposition. If the administrative law 
judge determines that summary disposition is warranted, the 
administrative law judge shall submit a recommended decision to that 
effect to the Comptroller. If the administrative law judge finds that no 
party is entitled to summary disposition, he or she shall make a ruling 
denying the motion.

    Sec.  109.30 Partial summary disposition.
    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.

    Sec.  109.31 Scheduling and prehearing conferences.
    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at its expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.

    Sec.  109.32 Prehearing submissions.
    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.

    Sec.  109.33 Public hearings.
    (a) General rule. All hearings shall be open to the public, unless 
the Comptroller, in the Comptroller's discretion, determines that 
holding an open hearing would be contrary to the public interest. Within 
20 days of service of the notice or, in the case of change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), 
within 20 days from service of the hearing order, any respondent may 
file with the Comptroller a request for a private hearing, and any party 
may file a reply to such a request. A party must serve on the 
administrative law judge a copy of any request or reply the party files 
with the Comptroller. The form of, and procedure for, these requests and 
replies are governed by Sec.  109.23 of this subpart. A party's failure 
to file a request or a reply constitutes a waiver of any objections 
regarding whether the hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.

    Sec.  109.34 Hearing subpoenas.

[[Page 614]]

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the administrative law judge may issue a subpoena or a subpoena 
duces tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at the hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek enforcement of the subpoena pursuant to Sec.  
109.26(c) of this subpart.

    Sec.  109.35 Conduct of hearings.
    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree the administrative 
law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.

    Sec.  109.36 Evidence.
    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the APA and 
other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a

[[Page 615]]

proceeding conducted pursuant to this subpart if such evidence is 
relevant, material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or Comptroller shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by the appropriate Federal banking 
agency, as defined in section 3(q) of the FDIA (12 U.S.C. 1813(q)), or 
state regulatory agency, is admissible either with or without a 
sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness, either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Comptroller.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing, and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.

    Sec.  109.37 Post-hearing filings.
    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party, that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.

    Sec.  109.38 Recommended decision and filing of record.
    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under

[[Page 616]]

Sec.  109.37(b) of this subpart, the administrative law judge shall file 
with and certify to the Comptroller, for decision, the record of the 
proceeding. The record must include the administrative law judge's 
recommended decision, recommended findings of fact, recommended 
conclusions of law, and proposed order; all prehearing and hearing 
transcripts, exhibits, and rulings; and the motions, briefs, memoranda, 
and other supporting papers filed in connection with the hearing. The 
administrative law judge shall serve upon each party the recommended 
decision, findings, conclusions, and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Comptroller for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the Comptroller a certified index of the entire record of the 
proceeding. The certified index shall include, at a minimum, an entry 
for each paper, document or motion filed with the administrative law 
judge in the proceeding, the date of the filing, and the identity of the 
filer. The certified index shall also include an exhibit index 
containing, at a minimum, an entry consisting of exhibit number and 
title or description for: Each exhibit introduced and admitted into 
evidence at the hearing; each exhibit introduced but not admitted into 
evidence at the hearing; each exhibit introduced and admitted into 
evidence after the completion of the hearing; and each exhibit 
introduced but not admitted into evidence after the completion of the 
hearing.

    Sec.  109.39 Exceptions to recommended decision.
    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec.  109.38 of this subpart, a party may file with the Comptroller 
written exceptions to the administrative law judge's recommended 
decision, findings, conclusions or proposed order, to the admission or 
exclusion of evidence, or to the failure of the administrative law judge 
to make a ruling proposed by a party. A supporting brief may be filed at 
the time the exceptions are filed, either as part of the same document 
or in a separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Comptroller if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the administrative law judge and failed to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.

    Sec.  109.40 Review by the Comptroller.
    (a) Notice of submission to the Comptroller. When the Comptroller 
determines that the record in the proceeding is complete, the 
Comptroller shall serve notice upon the parties that the proceeding has 
been submitted to the Comptroller for final decision.
    (b) Oral argument before the Comptroller. Upon the initiative of the 
Comptroller or on the written request of any party filed with the 
Comptroller within the time for filing exceptions, the Comptroller may 
order and hear oral argument on the recommended findings, conclusions, 
decision, and order of the administrative law judge. A written request 
by a party must show good cause for oral argument and state reasons why 
arguments cannot be presented adequately in writing. A denial of a 
request for oral argument may be set forth in the Comptroller's final 
decision. Oral argument before the Comptroller must be on the record.
    (c) Comptroller's final decision. (1) Decisional employees may 
advise and assist the Comptroller in the consideration and disposition 
of the case. The final decision of the Comptroller will be based upon 
review of the entire record of the proceeding, except that the 
Comptroller may limit the issues to be reviewed to those findings and 
conclusions to which opposing arguments or exceptions have been filed by 
the parties.
    (2) The Comptroller shall render a final decision within 90 days 
after notification of the parties that the case has been submitted for 
final decision, or 90 days after oral argument, whichever is later, 
unless the Comptroller orders that the action or any aspect thereof be 
remanded to the administrative law judge for further proceedings. Copies 
of the final decision and order of the Comptroller shall be served upon 
each party to the proceeding, upon other persons required by statute, 
and, if directed by the Comptroller or required by statute, upon any 
appropriate state or Federal supervisory authority.

    Sec.  109.41 Stays pending judicial review.
    The commencement of proceedings for judicial review of a final 
decision and order of the OCC may not, unless specifically ordered by 
the Comptroller or a reviewing court, operate as a stay of any order 
issued by the Comptroller. The Comptroller may, in its discretion, and 
on such terms as it finds just,

[[Page 617]]

stay the effectiveness of all or any part of its order pending a final 
decision on a petition for review of the order.

                         Subpart B--Local Rules

    Sec.  109.100 Scope.
    The rules and procedures in this subpart B shall apply to those 
proceedings covered by subpart A of this part. In addition, subpart A of 
this part and this subpart shall apply to adjudicatory proceedings for 
which hearings on the record are provided for by the following statutory 
provisions:
    (a) Proceedings under section 10(a)(2)(D) of the HOLA (12 U.S.C. 
1467a(a)(2)(D)) to determine whether any person directly or indirectly 
exercises a controlling influence over the management or policies of a 
savings association or any other company; and
    (b) [Reserved]
    (c) Proceedings under section 15(c)(4) of the Securities and 
Exchange Act of 1934 (15 U.S.C. 78o(c)(4)) (Exchange Act) to determine 
whether any Federal savings association or person subject to the 
jurisdiction of the OCC pursuant to section 12(i) of the Exchange Act 
(15 U.S.C. 78 l (i)) has failed to comply with the provisions of 
sections 12, 13, 14(a), 14(c), 14(d) or 14(f) of the Exchange Act.

    Sec.  109.101 Appointment of Office of Financial Institution 
Adjudication.
    Unless otherwise directed by the OCC, all hearings under subpart A 
of this part and this subpart shall be conducted by administrative law 
judges under the direction of the Office of Financial Institution 
Adjudication.

    Sec.  109.102 Discovery.
    (a) In general. A party may take the deposition of an expert, or of 
a person, including another party, who has direct knowledge of matters 
that are non-privileged, relevant and material to the proceeding and 
where there is a need for the deposition. The deposition of experts 
shall be limited to those experts who are expected to testify at the 
hearing.
    (b) Notice. A party desiring to take a deposition shall give 
reasonable notice in writing to the deponent and to every other party to 
the proceeding. The notice must state the time and place for taking the 
deposition and the name and address of the person to be deposed.
    (c) Time limits. A party may take depositions at any time after the 
commencement of the proceeding, but no later than ten days before the 
scheduled hearing date, except with permission of the administrative law 
judge for good cause shown.
    (d) Conduct of the deposition. The witness must be duly sworn, and 
each party shall have the right to examine the witness with respect to 
all non-privileged, relevant and material matters of which the witness 
has factual, direct and personal knowledge.
    Objections to questions or exhibits shall be in short form, stating 
the grounds for objection. Failure to object to questions or exhibits is 
not a waiver except where the grounds for the objection might have been 
avoided if the objection had been timely presented. The court reporter 
shall transcribe or otherwise record the witness's testimony, as agreed 
among the parties.
    (e) Protective orders. At any time after notice of a deposition has 
been given, a party may file a motion for the issuance of a protective 
order. Such protective order may prohibit, terminate, or limit the scope 
or manner of the taking of a deposition. The administrative law judge 
shall grant such protective order upon a showing of sufficient grounds, 
including that the deposition:
    (1) Is unreasonable, oppressive, excessive in scope, or unduly 
burdensome;
    (2) Involves privileged, investigative, trial preparation, 
irrelevant or immaterial matters; or
    (3) Is being conducted in bad faith or in such manner as to 
unreasonably annoy, embarrass, or oppress the deponent.
    (f) Fees. Deposition witnesses, including expert witnesses, shall be 
paid the same expenses in the same manner as are paid witnesses in the 
district courts of the United States in proceedings in which the United 
States Government is a party. Expenses in accordance with this paragraph 
shall be paid by the party seeking to take the deposition.
    (g) Deposition subpoenas--(1) Issuance. At the request of a party, 
the administrative law judge shall issue a subpoena requiring the 
attendance of a witness at a deposition. The attendance of a witness may 
be required from any place in any state or territory that is subject to 
the jurisdiction of the United States or as otherwise permitted by law.
    (2) Service. The party requesting the subpoena must serve it on the 
person named therein or upon that person's counsel, by any of the 
methods identified in Sec.  109.11(d) of this part. The party serving 
the subpoena must file proof of service with the administrative law 
judge.
    (3) Motion to quash. A person named in the subpoena or a party may 
file a motion to quash or modify the subpoena. A statement of the 
reasons for the motion must accompany it and a copy of the motion must 
be served on the party that requested the subpoena. The motion must be 
made prior to the time for compliance specified in the subpoena and not 
more than ten days after the date of service of the subpoena, or if the 
subpoena is served within 15 days of the hearing, within five days after 
the date of service.
    (4) Enforcement of deposition subpoena. Enforcement of a deposition 
subpoena shall be in accordance with the procedures of Sec.  109.27(d) 
of this part.

    Sec.  109.103 Civil money penalties.

[[Page 618]]

    (a) Assessment. In the event of consent, or if upon the record 
developed at the hearing the OCC finds that any of the grounds specified 
in the notice issued pursuant to Sec.  109.18 of this part have been 
established, the OCC may serve an order of assessment of civil money 
penalty upon the party concerned. The assessment order shall be 
effective immediately upon service or upon such other date as may be 
specified therein and shall remain effective and enforceable until it is 
stayed, modified, terminated, or set aside by the OCC or by a reviewing 
court.
    (b) Payment. (1) Civil penalties assessed pursuant to subpart A of 
this part and this subpart B are payable and to be collected within 60 
days after the issuance of the notice of assessment, unless the OCC 
fixes a different time for payment where it determines that the purpose 
of the civil money penalty would be better served thereby; however, if a 
party has made a timely request for a hearing to challenge the 
assessment of the penalty, the party may not be required to pay such 
penalty until the OCC has issued a final order of assessment following 
the hearing. In such instances, the penalty shall be paid within 60 days 
of service of such order unless the OCC fixes a different time for 
payment. Notwithstanding the foregoing, the OCC may seek to attach the 
party's assets or to have a receiver appointed to secure payment of the 
potential civil money penalty or other obligation in advance of the 
hearing in accordance with section 8(i)(4) of the FDIA (12 U.S.C. 
1818(i)(4)).
    (2) Checks in payment of civil penalties shall be made payable to 
the Treasurer of the United States and sent to the OCC. Upon receipt, 
the OCC shall forward the check to the Treasury of the United States.
    (c) Maximum amount of civil money penalties--(1) Statutory formula. 
The OCC is required by statute to annually adjust for inflation the 
maximum amount of each civil money penalty within its jurisdiction to 
administer. The inflation adjustment is calculated by multiplying the 
maximum dollar amount of the civil money penalty for the previous 
calendar year by the cost-of-living inflation adjustment multiplier 
provided annually by the Office of Management and Budget and rounding 
the total to the nearest dollar.
    (2) Notice of inflation adjustments. The OCC will publish notice in 
the Federal Register of the maximum penalties which may be assessed on 
an annual basis on, or before, January 15 of each calendar year based on 
the formula in paragraph (a) of this section, for penalties assessed on, 
or after, the date of publication of the most recent notice related to 
conduct occurring on or after November 2, 2015.

    Sec.  109.104 Additional procedures.
    (a) Replies to exceptions. Replies to written exceptions to the 
administrative law judge's recommended decision, findings, conclusions 
or proposed order pursuant to Sec.  109.39 of this part shall be filed 
within 10-days of the date such written exceptions were required to be 
filed.
    (b) Motions. All motions shall be filed with the administrative law 
judge and an additional copy shall be filed with the OCC Hearing Clerk 
who receives adjudicatory filings; provided, however, that once the 
administrative law judge has certified the record to the Comptroller 
pursuant to Sec.  109.38 of this part, all motions must be filed with 
the Comptroller to the attention of the Hearing Clerk within the 10-day 
period following the filing of exceptions allowed for the filing of 
replies to exceptions. Responses to such motions filed in a timely 
manner with the Comptroller, other than motions for oral argument before 
the Comptroller, shall be allowed pursuant to the procedures at Sec.  
109.23(d) of this part. No response is required for the Comptroller to 
make a determination on a motion for oral argument.
    (c) Authority of administrative law judge. In addition to the powers 
listed in Sec.  109.5 of this part, the administrative law judge shall 
have the authority to deny any dispositive motion and shall follow the 
procedures set forth for motions for summary disposition at Sec.  109.29 
of this part and partial summary disposition at Sec.  109.30 of this 
part in making determinations on such motions.
    (d) Notification of submission of proceeding to the Comptroller. 
Upon the expiration of the time for filing any exceptions, any replies 
to such exceptions or any motions and any ruling thereon, and after 
receipt of certified record, the OCC shall notify the parties within ten 
days of the submission of the proceeding to the Comptroller for final 
determination.
    (e) Extensions of time for final determination. The Comptroller may, 
sua sponte, extend the time for final determination by signing an order 
of extension of time within the 90-day time period and notifying the 
parties of such extension thereafter.
    (f) Service upon the OCC. Service of any document upon the OCC shall 
be made by filing with the Hearing Clerk, in addition to the individuals 
and/or offices designated by the OCC in its Notice issued pursuant to 
Sec.  109.18 of this part, or such other means reasonably suited to 
provide notice of the person and/or offices designated to receive 
filings.
    (g) Filings with the Comptroller. An additional copy of all 
materials required or permitted to be filed with or referred to the 
administrative law judge pursuant to subpart A and B of this part shall 
be filed with the Hearing Clerk. This rule shall not apply to the 
transcript of testimony and exhibits adduced at the hearing or to 
proposed exhibits

[[Page 619]]

submitted in advance of the hearing pursuant to an order of the 
administrative law judge under Sec.  109.32 of this part. Materials 
required or permitted to be filed with or referred to the Comptroller 
pursuant to subparts A and B of this part shall be filed with the 
Comptroller, to the attention of the Hearing Clerk.
    (h) Presence of cameras and other recording devices. The use of 
cameras and other recording devices, other than those used by the court 
reporter, shall be prohibited and excluded from the proceedings.

  PART 112--RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL EXAMINATION 
                               PROCEEDINGS

    Authority:12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813, 1817(j), 
1818(n), 1820(c), 5412(b)(2)(B); 15 U.S.C. 78l.

    Sec.  112.1 Scope of part.
    This part prescribes rules of practice and procedure applicable to 
the conduct of formal examination proceedings with respect to Federal 
savings associations and their affiliates under section 5(d)(1)(B) of 
the HOLA, as amended, 12 U.S.C. 1464(d)(1)(B) or section 7(j)(15) of the 
Federal Deposit Insurance Act, as amended, 12 U.S.C. 1817(j)(15) 
(``FDIA''), section 8(n) of the FDIA, 12 U.S.C. 1818(n), or section 
10(c) of the FDIA, 12 U.S.C. 1820(c). This part does not apply to 
adjudicatory proceedings as to which hearings are required by statute, 
the rules for which are contained in part 109 of this chapter.

    Sec.  112.2 Definitions.
    As used in this part:
    (a) OCC means the Office of the Comptroller of the Currency;
    (b) [Reserved]
    (c) Formal examination proceeding means the administration of oaths 
and affirmations, taking and preserving of testimony, requiring the 
production of books, papers, correspondence, memoranda, and all other 
records, the issuance of subpoenas, and all related activities in 
connection with examination of savings associations and their affiliates 
conducted pursuant to section 5(d)(1)(B) of the HOLA, section 7(j)(15) 
of the FDIA, section 8(n) of the FDIA or section 10(c) of the FDIA; and
    (d) Designated representative means the person or persons empowered 
by the OCC to conduct an investigative proceeding or a formal 
examination proceeding.

    Sec.  112.3 Confidentiality of proceedings.
    All formal examination proceedings shall be private and, unless 
otherwise ordered by the OCC, all investigative proceedings shall also 
be private. Unless otherwise ordered or permitted by the OCC, or 
required by law, and except as provided in Sec. Sec.  112.4 and 112.5, 
the entire record of any investigative proceeding or formal examination 
proceeding, including the resolution of the OCC or its delegate(s) 
authorizing the proceeding, the transcript of such proceeding, and all 
documents and information obtained by the designated representative(s) 
during the course of said proceedings shall be confidential.

    Sec.  112.4 Transcripts.
    Transcripts or other recordings, if any, of investigative 
proceedings or formal examination proceedings shall be prepared solely 
by an official reporter or by any other person or means authorized by 
the designated representative. A person who has submitted documentary 
evidence or given testimony in an investigative proceeding or formal 
examination proceeding may procure a copy of his own documentary 
evidence or transcript of his own testimony upon payment of the cost 
thereof; provided, that a person seeking a transcript of his own 
testimony must file a written request with the OCC's Director for 
Enforcement stating the reason he desires to procure such transcript, 
and said persons may for good cause deny such request. In any event, any 
witness (or his counsel) shall have the right to inspect the transcript 
of the witness' own testimony.

    Sec.  112.5 Rights of witnesses.
    (a) Any person who is compelled or requested to furnish documentary 
evidence or give testimony at an investigative proceeding or formal 
examination proceeding shall have the right to examine, upon request, 
the OCC resolution authorizing such proceeding. Copies of such 
resolution shall be furnished, for their retention, to such persons only 
with the written approval of the OCC.
    (b) Any witness at an investigative proceeding or formal examination 
proceeding may be accompanied and advised by an attorney personally 
representing that witness.
    (1) Such attorney shall be a member in good standing of the bar of 
the highest court of any state, Commonwealth, possession, territory, or 
the District of Columbia, who has not been suspended or debarred from 
practice by the bar of any such political entity or before the OCC in 
accordance with the provisions of part 19 of this chapter and has not 
been excluded from the particular investigative proceeding or formal 
examination proceeding in accordance with paragraph (b)(3) of this 
section.
    (2) Such attorney may advise the witness before, during, and after 
the taking of his testimony and may briefly question the witness, on the 
record, at the conclusion of his testimony, for the sole purpose of 
clarifying any of the answers the witness has given. During the taking 
of the testimony of a witness, such attorney may make summary notes 
solely for his use in representing his client. All witnesses shall be 
sequestered, and, unless permitted in the discretion of the

[[Page 620]]

designated representative, no witness or accompanying attorney may be 
permitted to be present during the taking of testimony of any other 
witness called in such proceeding. Neither attorney(s) for the 
association(s) that are the subjects of the investigative proceedings or 
formal examination proceedings, nor attorneys for any other interested 
persons, shall have any right to be present during the testimony of any 
witness not personally being represented by such attorney.
    (3) The OCC, for good cause, may exclude a particular attorney from 
further participation in any investigation in which the OCC has found 
the attorney to have engaged in dilatory, obstructionist, egregious, 
contemptuous or contumacious conduct. The person conducting an 
investigation may report to the OCC instances of apparently dilatory, 
obstructionist, egregious, contemptuous or contumacious conduct on the 
part of an attorney. After due notice to the attorney, the OCC may take 
such action as the circumstances warrant based upon a written record 
evidencing the conduct of the attorney in that investigation or such 
other or additional written or oral presentation as the OCC may permit 
or direct.

    Sec.  112.6 Obstruction of the proceedings.
    The designated representative shall report to the Comptroller any 
instances where any witness or counsel has engaged in dilatory, 
obstructionist, or contumacious conduct or has otherwise violated any 
provision of this part during the course of an investigative proceeding 
or formal examination proceeding; and the OCC may take such action as 
the circumstances warrant, including the exclusion of counsel from 
further participation in such proceeding.

    Sec.  112.7 Subpoenas.
    (a) Service. Service of a subpoena in connection with any 
investigative proceeding or formal examination proceeding shall be 
effected in the following manner:
    (1) Service upon a natural person. Service of a subpoena upon a 
natural person may be effected by handing it to such person; by leaving 
it at his office with the person in charge thereof, or, if there is no 
one in charge, by leaving it in a conspicuous place therein; by leaving 
it at his dwelling place or usual place of abode with some person of 
suitable age and discretion then residing therein; by mailing it to him 
by registered or certified mail or by an express delivery service at his 
last known address; or by any method whereby actual notice is given to 
him.
    (2) Service upon other persons. When the person to be served is not 
a natural person, service of the subpoena may be effected by handing the 
subpoena to a registered agent for service, or to any officer, director, 
or agent in charge of any office of such person; by mailing it to any 
such representative by registered or certified mail or by an express 
delivery service at his last known address; or by any method whereby 
actual notice is given to such person.
    (b) Motions to quash. Any person to whom a subpoena is directed may, 
prior to the time specified therein for compliance, but in no event more 
than 10 days after the date of service of such subpoena, apply to the 
Deputy Chief Counsel or his designee to quash or modify such subpoena, 
accompanying such application with a statement of the reasons therefor. 
The Deputy Chief Counsel or his designee, as appropriate, may:
    (1) Deny the application;
    (2) Quash or revoke the subpoena;
    (3) Modify the subpoena; or
    (4) Condition the granting of the application on such terms as the 
Deputy Chief Counsel or his designee determines to be just, reasonable, 
and proper.
    (c) Attendance of witnesses. Subpoenas issued in connection with an 
investigative proceeding or formal examination proceeding may require 
the attendance and/or testimony of witnesses from any state or territory 
of the United States and the production by such witnesses of documentary 
or other tangible evidence at any designated place where the proceeding 
is being (or is to be) conducted. Foreign nationals are subject to such 
subpoenas if such service is made upon a duly authorized agent located 
in the United States.
    (d) Witness fees and mileage. Witnesses summoned in any proceeding 
under this part shall be paid the same fees and mileage that are paid 
witnesses in the district courts of the United States. Such fees and 
mileage need not be tendered when the subpoena is issued on behalf of 
the OCC by any of its designated representatives.

                   PART 165--PROMPT CORRECTIVE ACTION

    Authority:12 U.S.C. 1831o, 5412(b)(2)(B).

    Sec. Sec.  165.1-165.7 [Reserved]

    Sec.  165.8 Procedures for reclassifying a Federal savings 
association based on criteria other than capital.
    (a) Reclassification based on unsafe or unsound condition or 
practice--(1) Issuance of notice of proposed reclassification--(i) 
Grounds for reclassification. (A) Pursuant to 12 CFR 6.4(d), the OCC may 
reclassify a well capitalized Federal savings association as adequately 
capitalized or subject an adequately capitalized or undercapitalized 
institution to the supervisory actions applicable to the next lower 
capital category if:
    (1) The OCC determines that the savings association is in an unsafe 
or unsound condition; or
    (2) The OCC deems the savings association to be engaged in an unsafe 
or unsound practice and not to have corrected the deficiency.

[[Page 621]]

    (B) Any action pursuant to this paragraph (a)(1)(i) shall 
hereinafter be referred to as ``reclassification.''
    (ii) Prior notice to institution. Prior to taking action pursuant to 
12 CFR 6.4(d), the OCC shall issue and serve on the Federal savings 
association a written notice of the OCC's intention to reclassify the 
savings association.
    (2) Contents of notice. A notice of intention to reclassify a 
Federal savings association based on unsafe or unsound condition shall 
include:
    (i) A statement of the savings association's capital measures and 
capital levels and the category to which the savings association would 
be reclassified;
    (ii) The reasons for reclassification of the savings association;
    (iii) The date by which the savings association subject to the 
notice of reclassification may file with the OCC a written appeal of the 
proposed reclassification and a request for a hearing, which shall be at 
least 14 calendar days from the date of service of the notice unless the 
OCC determines that a shorter period is appropriate in light of the 
financial condition of the savings association or other relevant 
circumstances.
    (3) Response to notice of proposed reclassification. A Federal 
savings association may file a written response to a notice of proposed 
reclassification within the time period set by the OCC. The response 
should include:
    (i) An explanation of why the savings association is not in unsafe 
or unsound condition or otherwise should not be reclassified; and
    (ii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
savings association or company regarding the reclassification.
    (4) Failure to file response. Failure by a Federal savings 
association to file, within the specified time period, a written 
response with the OCC to a notice of proposed reclassification shall 
constitute a waiver of the opportunity to respond and shall constitute 
consent to the reclassification.
    (5) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the OCC or its designee under this section. If the Federal 
savings association desires to present oral testimony or witnesses at 
the hearing, the savings association shall include a request to do so 
with the request for an informal hearing. A request to present oral 
testimony or witnesses shall specify the names of the witnesses and the 
general nature of their expected testimony. Failure to request a hearing 
shall constitute a waiver of any right to a hearing, and failure to 
request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (6) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the OCC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the OCC allows further time at the 
request of the Federal savings association. The hearing shall be held in 
Washington, DC or at such other place as may be designated by the OCC, 
before a presiding officer(s) designated by the OCC to conduct the 
hearing.
    (7) Hearing procedures. (i) The Federal savings association shall 
have the right to introduce relevant written materials and to present 
oral argument at the hearing. The savings association may introduce oral 
testimony and present witnesses only if expressly authorized by the OCC 
or the presiding officer(s). Neither the provisions of the 
Administrative Procedure Act (5 U.S.C. 554-557) governing adjudications 
required by statute to be determined on the record nor parts 19 or 109 
of this chapter apply to an informal hearing under this section unless 
the OCC orders that such procedures shall apply.
    (ii) The informal hearing shall be recorded and a transcript 
furnished to the savings association upon request and payment of the 
cost thereof. Witnesses need not be sworn, unless specifically requested 
by a party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (iii) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (8) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
on the reclassification.
    (9) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC will decide whether to reclassify the 
Federal savings association and notify the savings association of the 
OCC's decision.
    (b) Request for rescission of reclassification. Any Federal savings 
association that has been reclassified under this section, may, upon a 
change in circumstances, request in writing that the OCC reconsider the 
reclassification, and may propose that the reclassification be rescinded 
and that any directives issued in connection with the reclassification 
be modified, rescinded, or removed. Unless otherwise ordered by the OCC, 
the savings association shall remain subject to the reclassification and 
to any directives issued in connection with that reclassification while 
such request is pending before the OCC.


[[Page 622]]


    Sec.  165.9 Order to dismiss a director or senior executive officer.
    (a) Service of notice. When the OCC issues and serves a directive on 
a Federal savings association pursuant to subpart B of part 6 of this 
chapter requiring the savings association to dismiss any director or 
senior executive officer under section 38(f)(2)(F)(ii) of the FDI Act, 
the OCC shall also serve a copy of the directive, or the relevant 
portions of the directive where appropriate, upon the person to be 
dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed within 
10 calendar days of the receipt of the directive by the Respondent, 
unless further time is allowed by the OCC at the request of the 
Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement should include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
OCC or its designee under this section. If the Respondent desires to 
present oral testimony or witnesses at the hearing, the Respondent shall 
include a request to do so with the request for an informal hearing. The 
request to present oral testimony or witnesses shall specify the names 
of the witnesses and the general nature of their expected testimony. 
Failure to request a hearing shall constitute a waiver of any right to a 
hearing and failure to request the opportunity to present oral testimony 
or witnesses shall constitute a waiver of any right or opportunity to 
present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the OCC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a Federal savings association to dismiss from office 
any director or senior executive officer, the OCC shall issue an order 
directing an informal hearing to commence no later than 30 days after 
receipt of the request, unless the Respondent requests a later date. The 
hearing shall be held in Washington, DC, or at such other place as may 
be designated by the OCC, before a presiding officer(s) designated by 
the OCC to conduct the hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the OCC or the presiding officer(s). Neither the 
provisions of the Administrative Procedure Act governing adjudications 
required by statute to be determined on the record nor parts 19 or 109 
of this chapter apply to an informal hearing under this section unless 
the OCC orders that such procedures shall apply.
    (2) The informal hearing shall be recorded and a transcript 
furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the Federal savings association would materially strengthen the savings 
association's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the savings association's capital 
level or failure to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the savings association based on supervisory criteria 
other than capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
concerning the Respondent's request for reinstatement with the Federal 
savings association.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing has been requested, the OCC shall grant or deny the request for 
reinstatement and notify the Respondent of the OCC's decision. If the 
OCC denies the request for reinstatement, the OCC shall set forth in the 
notification the reasons for the OCC's action.

    Sec.  165.10 [Reserved]

[[Page 623]]



PART 21_MINIMUM SECURITY DEVICES AND PROCEDURES, REPORTS OF 
SUSPICIOUS ACTIVITIES, AND BANK SECRECY ACT COMPLIANCE PROGRAM--
Table of Contents



            Subpart A_Minimum Security Devices and Procedures

Sec.
21.1 Purpose and scope of subpart A of this part.
21.2 Designation of security officer.
21.3 Security program.
21.4 Report.

               Subpart B_Reports of Suspicious Activities

21.11 Suspicious Activity Report.

     Subpart C_Procedures for Monitoring Bank Secrecy Act Compliance

21.21 Procedures for monitoring Bank Secrecy Act (BSA) compliance.

    Authority: 12 U.S.C. 1, 93a, 161, 1462a, 1463, 1464, 1818, 1881-
1884, and 3401-3422; 31 U.S.C. 5318.



            Subpart A_Minimum Security Devices and Procedures

    Source: 56 FR 29564, June 28, 1991, unless otherwise noted.



Sec.  21.1  Purpose and scope of subpart A of this part.

    (a) This subpart is issued by the Comptroller of the Currency 
pursuant to section 3 of the Bank Protection Act of 1968 (12 U.S.C. 
1882) and is applicable to all national banking associations. It 
requires each bank to adopt appropriate security procedures to 
discourage robberies, burglaries, and larcenies and to assist in 
identifying and apprehending persons who commit such acts.
    (b) It is the responsibility of a bank's board of directors to 
comply with this regulation and ensure that a security program which 
equals or exceeds the standards prescribed by this part is developed and 
implemented for the bank's main office and branches (as the term 
``branch'' is used in 12 U.S.C. 36).

[56 FR 29564, June 28, 1991, as amended at 73 FR 22244, Apr. 24, 2008]



Sec.  21.2  Designation of security officer.

    Within 30 days after the opening of a new bank, the Bank's board of 
directors shall designate a security officer who shall have the 
authority, subject to the approval of the board of directors, for 
immediately developing and administering a written security program to 
protect each banking office from robberies, burglaries, and larcenies 
and to assist in identifying and apprehending persons who commit such 
acts.

(Approval by the Office of Management and Budget under control number 
1557-0180)



Sec.  21.3  Security program.

    (a) Contents of security program. The security program shall:
    (1) Establish procedures for opening and closing for business and 
for the safekeeping of all currency, negotiable securities, and similar 
valuables at all times;
    (2) Establish procedures that will assist in identifying persons 
committing crimes against the institution and that will preserve 
evidence that may aid in their identification or conviction; such 
procedures may include, but are not limited to:
    (i) Using identification devices, such as prerecorded serial-
numbered bills, or chemical and electronic devices;
    (ii) Maintaining a camera that records activity in the banking 
office; and
    (iii) Retaining a record of any robbery, burglary or larceny 
committed or attempted against a banking office;
    (3) Provide for initial and periodic training of employees in their 
responsibilities under the security program and in proper employee 
conduct during and after a robbery; and
    (4) Provide for selecting, testing, operating and maintaining 
appropriate security devices, as specified in paragraph (b) of this 
section.
    (b) Security devices. Each national bank shall have, at a minimum, 
the following security devices:
    (1) A means of protecting cash or other liquid assets, such as a 
vault, safe, or other secure space;
    (2) A lighting system for illuminating, during the hours of 
darkness, the area around the vault, if the

[[Page 624]]

vault is visible from outside the banking office;
    (3) Tamper-resistant locks on exterior doors and exterior windows 
designed to be opened;
    (4) An alarm system or other appropriate device for promptly 
notifying the nearest responsible law enforcement officers of an 
attempted or perpetrated robbery, burglary or larceny; and
    (5) Such other devices as the security officer determines to be 
appropriate, taking into consideration:
    (i) The incidence of crimes against financial institutions in the 
area;
    (ii) The amount of currency or other valuables exposed to robbery, 
burglary, or larceny;
    (iii) The distance of the banking office from the nearest 
responsible law enforcement officers and the time required for such law 
enforcement officers ordinarily to arrive at the banking office;
    (iv) The cost of the security devices;
    (v) Other security measures in effect at the banking office; and
    (vi) The physical characteristics of the banking office structure 
and its surroundings.



Sec.  21.4  Report.

    The security officer for a national bank shall report at least 
annually to the bank's board of directors on the effectiveness of the 
security program. The substance of such report shall be reflected in the 
minutes of the Board meeting in which it is given.

(Approved by the Office of Management and Budget under control number 
1557-0180)



               Subpart B_Reports of Suspicious Activities



Sec.  21.11  Suspicious Activity Report.

    (a) Purpose and scope. This section ensures that national banks file 
a Suspicious Activity Report when they detect a known or suspected 
violation of Federal law or a suspicious transaction related to a money 
laundering activity or a violation of the Bank Secrecy Act. This section 
applies to all national banks as well as any Federal branches and 
agencies of foreign banks licensed or chartered by the OCC.
    (b) Definitions. For the purposes of this section:
    (1) FinCEN means the Financial Crimes Enforcement Network of the 
Department of the Treasury.
    (2) Institution-affiliated party means any institution-affiliated 
party as that term is defined in sections 3(u) and 8(b)(5) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(5)).
    (3) SAR means a Suspicious Activity Report.
    (c) SARs required. A national bank shall file a SAR with the 
appropriate Federal law enforcement agencies and the Department of the 
Treasury on the form prescribed by the OCC and in accordance with the 
form's instructions. The bank shall send the completed SAR to FinCEN in 
the following circumstances:
    (1) Insider abuse involving any amount. Whenever the national bank 
detects any known or suspected Federal criminal violation, or pattern of 
criminal violations, committed or attempted against the bank or 
involving a transaction or transactions conducted through the bank, 
where the bank believes that it was either an actual or potential victim 
of a criminal violation, or series of criminal violations, or that the 
bank was used to facilitate a criminal transaction, and the bank has a 
substantial basis for identifying one of its directors, officers, 
employees, agents or other institution-affiliated parties as having 
committed or aided in the commission of a criminal act, regardless of 
the amount involved in the violation.
    (2) Violations aggregating $5,000 or more where a suspect can be 
identified. Whenever the national bank detects any known or suspected 
Federal criminal violation, or pattern of criminal violations, committed 
or attempted against the bank or involving a transaction or transactions 
conducted through the bank and involving or aggregating $5,000 or more 
in funds or other assets where the bank believes that it was either an 
actual or potential victim of a criminal violation, or series of 
criminal violations or that it was used to facilitate a criminal 
transaction, and the bank has a substantial basis for identifying a 
possible suspect or group of suspects. If it is determined prior to 
filing

[[Page 625]]

this report that the identified suspect or group of suspects has used an 
alias, then information regarding the true identity of the suspect or 
group of suspects, as well as alias identifiers, such as drivers' 
license or social security numbers, addresses and telephone numbers, 
must be reported.
    (3) Violations aggregating $25,000 or more regardless of potential 
suspects. Whenever the national bank detects any known or suspected 
Federal criminal violation, or pattern of criminal violations, committed 
or attempted against the bank or involving a transaction or transactions 
conducted through the bank and involving or aggregating $25,000 or more 
in funds or other assets where the bank believes that it was either an 
actual or potential victim of a criminal violation, or series of 
criminal violations, or that the bank was used to facilitate a criminal 
transaction, even though there is no substantial basis for identifying a 
possible suspect or group of suspects.
    (4) Transactions aggregating $5,000 or more that involve potential 
money laundering or violate the Bank Secrecy Act. Any transaction (which 
for purposes of this paragraph (c)(4) means a deposit, withdrawal, 
transfer between accounts, exchange of currency, loan, extension of 
credit, or purchase or sale of any stock, bond, certificate of deposit, 
or other monetary instrument or investment security, or any other 
payment, transfer, or delivery by, through, or to a financial 
institution, by whatever means effected) conducted or attempted by, at 
or through the national bank and involving or aggregating $5,000 or more 
in funds or other assets, if the bank knows, suspects, or has reason to 
suspect that:
    (i) The transaction involves funds derived from illegal activities 
or is intended or conducted in order to hide or disguise funds or assets 
derived from illegal activities (including, without limitation, the 
ownership, nature, source, location, or control of such funds or assets) 
as part of a plan to violate or evade any law or regulation or to avoid 
any transaction reporting requirement under Federal law;
    (ii) The transaction is designed to evade any regulations 
promulgated under the Bank Secrecy Act; or
    (iii) The transaction has no business or apparent lawful purpose or 
is not the sort in which the particular customer would normally be 
expected to engage, and the institution knows of no reasonable 
explanation for the transaction after examining the available facts, 
including the background and possible purpose of the transaction.
    (d) Time for reporting. A national bank is required to file a SAR no 
later than 30 calendar days after the date of the initial detection of 
facts that may constitute a basis for filing a SAR. If no suspect was 
identified on the date of detection of the incident requiring the 
filing, a national bank may delay filing a SAR for an additional 30 
calendar days to identify a suspect. In no case shall reporting be 
delayed more than 60 calendar days after the date of initial detection 
of a reportable transaction. In situations involving violations 
requiring immediate attention, such as when a reportable violation is 
ongoing, the financial institution shall immediately notify, by 
telephone, an appropriate law enforcement authority and the OCC in 
addition to filing a timely SAR.
    (e) Reports to state and local authorities. National banks are 
encouraged to file a copy of the SAR with state and local law 
enforcement agencies where appropriate.
    (f) Exceptions. (1) A national bank need not file a SAR for a 
robbery or burglary committed or attempted that is reported to 
appropriate law enforcement authorities.
    (2) A national bank need not file a SAR for lost, missing, 
counterfeit, or stolen securities if it files a report pursuant to the 
reporting requirements of 17 CFR 240.17f-1.
    (g) Retention of records. A national bank shall maintain a copy of 
any SAR filed and the original or business record equivalent of any 
supporting documentation for a period of five years from the date of the 
filing of the SAR. Supporting documentation shall be identified and 
maintained by the bank as such, and shall be deemed to have been filed 
with the SAR. A national bank shall make all supporting

[[Page 626]]

documentation available to appropriate law enforcement agencies upon 
request.
    (h) Notification to board of directors--(1) Generally. Whenever a 
national bank files a SAR pursuant to this section, the management of 
the bank shall promptly notify its board of directors, or a committee of 
directors or executive officers designated by the board of directors to 
receive notice.
    (2) Suspect is a director or executive officer. If the bank files a 
SAR pursuant to paragraph (c) of this section and the suspect is a 
director or executive officer, the bank may not notify the suspect, 
pursuant to 31 U.S.C. 5318(g)(2), but shall notify all directors who are 
not suspects.
    (i) Compliance. Failure to file a SAR in accordance with this 
section and the instructions may subject the national bank, its 
directors, officers, employees, agents, or other institution-affiliated 
parties to supervisory action.
    (j) Obtaining SARs. A national bank may obtain SARs and the 
Instructions from the appropriate OCC District Office listed in 12 CFR 
part 4.
    (k) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential, and shall not be 
disclosed except as authorized in this paragraph (k).
    (1) Prohibition on disclosure by national banks--(i) General rule. 
No national bank, and no director, officer, employee, or agent of a 
national bank, shall disclose a SAR or any information that would reveal 
the existence of a SAR. Any national bank, and any director, officer, 
employee, or agent of any national bank that is subpoenaed or otherwise 
requested to disclose a SAR, or any information that would reveal the 
existence of a SAR, shall decline to produce the SAR or such 
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and 
shall notify the following of any such request and the response thereto:
    (A) Director, Litigation Division, Office of the Comptroller of the 
Currency; and
    (B) The Financial Crimes Enforcement Network (FinCEN).
    (ii) Rules of construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (k)(1) shall not be construed as 
prohibiting:
    (A) The disclosure by a national bank, or any director, officer, 
employee or agent of a national bank of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to the OCC, FinCEN, or any Federal, State, or local law enforcement 
agency; or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including, but not limited to, disclosures:
    (i) To another financial institution, or any director, officer, 
employee or agent of a financial institution, for the preparation of a 
joint SAR; or
    (ii) In connection with certain employment references or termination 
notices, to the full extent authorized in 31 U.S.C. 5318(g)(2)(B); or
    (B) The sharing by a national bank, or any director, officer, 
employee, or agent of a national bank, of a SAR, or any information that 
would reveal the existence of a SAR, within the bank's corporate 
organizational structure for purposes consistent with title II of the 
Bank Secrecy Act as determined by regulation or in guidance.
    (2) Prohibition on disclosure by the OCC. The OCC will not, and no 
officer, employee or agent of the OCC, shall disclose a SAR, or any 
information that would reveal the existence of a SAR, except as 
necessary to fulfill official duties consistent with title II of the 
Bank Secrecy Act. For purposes of this section, official duties shall 
not include the disclosure of a SAR, or any information that would 
reveal the existence of a SAR, in response to a request for use in a 
private legal proceeding or in response to a request for disclosure of 
non-public OCC information under 12 CFR 4.33.
    (l) Limitation on liability. A national bank and any director, 
officer, employee or agent of a national bank that makes a voluntary 
disclosure of any possible violation of law or regulation to a 
government agency or makes a disclosure pursuant to this section or any 
other authority, including a disclosure made jointly with another 
financial institution, shall be protected from liability to any person 
for any

[[Page 627]]

such disclosure, or for failure to provide notice of such disclosure to 
any person identified in the disclosure, or both, to the full extent 
provided by 31 U.S.C. 5318(g)(3).
    (m) Exemptions. (1) The Office of the Comptroller of the Currency 
(OCC) may grant a national bank an exemption from the requirements of 
this section. A national bank requesting an exemption must submit a 
request in writing to the OCC. In reviewing such requests, the OCC will 
consider whether the exemption is consistent with the purposes of the 
Bank Secrecy Act (if applicable) and safe and sound banking, and may 
consider other appropriate factors. Any exemption will apply only as 
expressly stated in the exemption. (A national bank requesting an 
exemption that also requires relief from the requirements of applicable 
regulations issued by the Department of the Treasury at 31 CFR chapter X 
must submit a request in writing to both the OCC and FinCEN for 
approval.)
    (2) The OCC will respond in writing to a national bank that submits 
a request pursuant to paragraph (m)(1) of this section after considering 
whether the exemption is consistent with the factors in paragraph (m)(1) 
of this section. Any exemption granted by the OCC under paragraph (m)(1) 
of this section will continue for the time specified by the OCC.
    (3) The OCC may extend the period of time or may revoke an exemption 
granted under paragraph (m)(1) of this section. Exemptions or extensions 
may be revoked in the sole discretion of the OCC. Before revoking an 
exemption, the OCC will provide written notice to the national bank of 
the OCC's intention to revoke an exemption. Such notice will include the 
basis for the revocation and will provide an opportunity for the 
national bank to submit a response to the OCC. The OCC will consider any 
response before deciding whether or not to revoke an exemption and 
provide written notice to the national bank of the OCC's final decision 
to revoke an exemption.
    (4) With respect to requests for exemptions that will also require 
relief from the requirements of applicable regulations issued by the 
Department of the Treasury at 31 CFR chapter X, upon receiving approval 
from both the OCC and FinCEN, the requestor will be relieved of its 
obligations under this section to the extent stated in such approvals.

[61 FR 4337, Feb. 5, 1996, as amended at 75 FR 75583, Dec. 3, 2010; 87 
FR 15332, Mar. 18, 2022]



     Subpart C_Procedures for Monitoring Bank Secrecy Act Compliance



Sec.  21.21  Procedures for monitoring Bank Secrecy Act (BSA) compliance.

    (a) Purpose. This subpart is issued to assure that all national 
banks and savings associations establish and maintain procedures 
reasonably designed to assure and monitor their compliance with the 
requirements of subchapter II of chapter 53 of title 31, United States 
Code, and the implementing regulations promulgated thereunder by the 
Department of the Treasury at 31 CFR Chapter X.
    (b) Definition of savings association. For purposes of this subpart 
C, the term savings association means a savings association as defined 
in section 3 of the Federal Deposit Insurance Act (FDI Act), the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation. It includes a Federal savings association or Federal 
savings bank, chartered under section 5 of the FDI Act, or a building 
and loan, savings and loan, or homestead association, or a cooperative 
bank (other than a cooperative bank which is a state bank as defined in 
section 3(a)(2) of the FDI Act) organized and operating according to the 
laws of the state in which it is chartered or organized, or a 
corporation (other than a bank as defined in section 3(a)(1) of the FDI 
Act) that the Board of Directors of the Federal Deposit Insurance 
Corporation and the Comptroller jointly determine to be operating 
substantially in the same manner as a savings association.
    (c) Establishment of a BSA compliance program--(1) Program 
requirement. Each national bank and each savings association shall 
develop and provide for the continued administration of a program 
reasonably designed to assure and monitor compliance with the 
recordkeeping and reporting requirements

[[Page 628]]

set forth in subchapter II of chapter 53 of title 31, United States Code 
and the implementing regulations issued by the Department of the 
Treasury at 31 CFR Chapter X. The compliance program must be written, 
approved by the national bank's or savings association's board of 
directors, and reflected in the minutes of the national bank or savings 
association.
    (2) Customer identification program. Each national bank and each 
savings association is subject to the requirements of 31 U.S.C. 5318(l) 
and the implementing regulations jointly promulgated by the OCC and the 
Department of the Treasury at 31 CFR 1020.220, which require a customer 
identification program to be implemented as part of the BSA compliance 
program required under this section.
    (d) Contents of compliance program. The compliance program shall, at 
a minimum:
    (1) Provide for a system of internal controls to assure ongoing 
compliance;
    (2) Provide for independent testing for compliance to be conducted 
by national bank or savings association personnel or by an outside 
party;
    (3) Designate an individual or individuals responsible for 
coordinating and monitoring day-to-day compliance; and
    (4) Provide training for appropriate personnel.

(Approved by the Office of Management and Budget under control number 
1557-0180)

[52 FR 2859, Jan. 27, 1987, as amended at 68 FR 25111, May 9, 2003; 76 
FR 6687, Feb. 8, 2011; 79 FR 28399, May 16, 2014]



PART 22_LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS--Table of Contents



Sec.
22.1 Purpose and scope.
22.2 Definitions.
22.3 Requirement to purchase flood insurance where available.
22.4 Exemptions.
22.5 Escrow requirement.
22.6 Required use of standard flood hazard determination form.
22.7 Force placement of flood insurance.
22.8 Determination fees.
22.9 Notice of special flood hazards and availability of Federal 
          disaster relief assistance.
22.10 Notice of servicer's identity.

Appendix A to Part 22--Sample Form of Notice of Special Flood Hazards 
          and Availability of Federal Disaster Relief Assistance
Appendix B to Part 22--Sample Clause for Option to Escrow for 
          Outstanding Loans

    Authority: 12 U.S.C. 93a, 1462a, 1463, 1464, and 5412(b)(2)(B); 42 
U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

    Source: 80 FR 43240, July 21, 2015, unless otherwise noted.



Sec.  22.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to implement the 
requirements of the National Flood Insurance Act of 1968 and the Flood 
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
    (b) Scope. This part, except for Sec. Sec.  22.6 and 22.8, applies 
to loans secured by buildings or mobile homes located or to be located 
in areas determined by the Administrator of the Federal Emergency 
Management Agency to have special flood hazards. Sections 22.6 and 22.8 
apply to loans secured by buildings or mobile homes, regardless of 
location.



Sec.  22.2  Definitions.

    For purposes of this part:
    (a) Act means the National Flood Insurance Act of 1968, as amended 
(42 U.S.C. 4001-4129).
    (b) Administrator of FEMA means the Administrator of the Federal 
Emergency Management Agency.
    (c) Building means a walled and roofed structure, other than a gas 
or liquid storage tank, that is principally above ground and affixed to 
a permanent site, and a walled and roofed structure while in the course 
of construction, alteration, or repair.
    (d) Community means a State or a political subdivision of a State 
that has zoning and building code jurisdiction over a particular area 
having special flood hazards.
    (e) Designated loan means a loan secured by a building or mobile 
home that is located or to be located in a special flood hazard area in 
which flood insurance is available under the Act.
    (f) Federal savings association means, for purposes of this part, a 
Federal savings association as that term is defined

[[Page 629]]

in 12 U.S.C. 1813(b)(2) and any service corporations thereof.
    (g) Mobile home means a structure, transportable in one or more 
sections, that is built on a permanent chassis and designed for use with 
or without a permanent foundation when attached to the required 
utilities. The term mobile home does not include a recreational vehicle. 
For purposes of this part, the term mobile home means a mobile home on a 
permanent foundation. The term mobile home includes a manufactured home 
as that term is used in the NFIP.
    (h) Mutual aid society means an organization--
    (1) Whose members share a common religious, charitable, educational, 
or fraternal bond;
    (2) That covers losses caused by damage to members' property 
pursuant to an agreement, including damage caused by flooding, in 
accordance with this common bond; and
    (3) That has a demonstrated history of fulfilling the terms of 
agreements to cover losses to members' property caused by flooding.
    (i) National bank means a national bank or a Federal branch or 
agency of a foreign bank.
    (j) NFIP means the National Flood Insurance Program authorized under 
the Act.
    (k) Private flood insurance means an insurance policy that:
    (1) Is issued by an insurance company that is:
    (i) Licensed, admitted, or otherwise approved to engage in the 
business of insurance by the insurance regulator of the State or 
jurisdiction in which the property to be insured is located; or
    (ii) Recognized, or not disapproved, as a surplus lines insurer by 
the insurance regulator of the State or jurisdiction in which the 
property to be insured is located in the case of a policy of difference 
in conditions, multiple peril, all risk, or other blanket coverage 
insuring nonresidential commercial property;
    (2) Provides flood insurance coverage that is at least as broad as 
the coverage provided under an SFIP for the same type of property, 
including when considering deductibles, exclusions, and conditions 
offered by the insurer. To be at least as broad as the coverage provided 
under an SFIP, the policy must, at a minimum:
    (i) Define the term ``flood'' to include the events defined as a 
``flood'' in an SFIP;
    (ii) Contain the coverage specified in an SFIP, including that 
relating to building property coverage; personal property coverage, if 
purchased by the insured mortgagor(s); other coverages; and increased 
cost of compliance coverage;
    (iii) Contain deductibles no higher than the specified maximum, and 
include similar non-applicability provisions, as under an SFIP, for any 
total policy coverage amount up to the maximum available under the NFIP 
at the time the policy is provided to the lender;
    (iv) Provide coverage for direct physical loss caused by a flood and 
may only exclude other causes of loss that are excluded in an SFIP. Any 
exclusions other than those in an SFIP may pertain only to coverage that 
is in addition to the amount and type of coverage that could be provided 
by an SFIP or have the effect of providing broader coverage to the 
policyholder; and
    (v) Not contain conditions that narrow the coverage provided in an 
SFIP;
    (3) Includes all of the following:
    (i) A requirement for the insurer to give written notice 45 days 
before cancellation or non-renewal of flood insurance coverage to:
    (A) The insured; and
    (B) The national bank or Federal savings association that made the 
designated loan secured by the property covered by the flood insurance, 
or the servicer acting on its behalf;
    (ii) Information about the availability of flood insurance coverage 
under the NFIP;
    (iii) A mortgage interest clause similar to the clause contained in 
an SFIP; and
    (iv) A provision requiring an insured to file suit not later than 
one year after the date of a written denial of all or part of a claim 
under the policy; and
    (4) Contains cancellation provisions that are as restrictive as the 
provisions contained in an SFIP.

[[Page 630]]

    (l) Residential improved real estate means real estate upon which a 
home or other residential building is located or to be located.
    (m) Servicer means the person responsible for:
    (1) Receiving any scheduled, periodic payments from a borrower under 
the terms of a loan, including amounts for taxes, insurance premiums, 
and other charges with respect to the property securing the loan; and
    (2) Making payments of principal and interest and any other payments 
from the amounts received from the borrower as may be required under the 
terms of the loan.
    (n) SFIP means, for purposes of Sec. Sec.  22.2(k), a standard flood 
insurance policy issued under the NFIP in effect as of the date private 
flood insurance is provided to a national bank or Federal savings 
association.
    (o) Special flood hazard area means the land in the flood plain 
within a community having at least a one percent chance of flooding in 
any given year, as designated by the Administrator of FEMA.
    (p) Table funding means a settlement at which a loan is funded by a 
contemporaneous advance of loan funds and an assignment of the loan to 
the person advancing the funds.

[80 FR 43240, July 21, 2015, as amended at 84 FR 4969, Feb. 20, 2019]



Sec.  22.3  Requirement to purchase flood insurance where available.

    (a) In general. A national bank or Federal savings association shall 
not make, increase, extend, or renew any designated loan unless the 
building or mobile home and any personal property securing the loan is 
covered by flood insurance for the term of the loan. The amount of 
insurance must be at least equal to the lesser of the outstanding 
principal balance of the designated loan or the maximum limit of 
coverage available for the particular type of property under the Act. 
Flood insurance coverage under the Act is limited to the building or 
mobile home and any personal property that secures a loan and not the 
land itself.
    (b) Table funded loans. A national bank or Federal savings 
association that acquires a loan from a mortgage broker or other entity 
through table funding shall be considered to be making a loan for the 
purposes of this part.
    (c) Private flood insurance--(1) Mandatory acceptance. A national 
bank or Federal savings association must accept private flood insurance, 
as defined in Sec.  22.2(k), in satisfaction of the flood insurance 
purchase requirement in paragraph (a) of this section if the policy 
meets the requirements for coverage in paragraph (a) of this section.
    (2) Compliance aid for mandatory acceptance. A national bank or 
Federal savings association may determine that a policy meets the 
definition of private flood insurance in Sec.  22.2(k), without further 
review of the policy, if the following statement is included within the 
policy or as an endorsement to the policy: ``This policy meets the 
definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) 
and the corresponding regulation.''
    (3) Discretionary acceptance. A national bank or Federal savings 
association may accept a flood insurance policy issued by a private 
insurer that is not issued under the NFIP and that does not meet the 
definition of private flood insurance in Sec.  22.2(k) in satisfaction 
of the flood insurance purchase requirement in paragraph (a) of this 
section if the policy:
    (i) Provides coverage in the amount required by paragraph (a) of 
this section;
    (ii) Is issued by an insurer that is licensed, admitted, or 
otherwise approved to engage in the business of insurance by the 
insurance regulator of the State or jurisdiction in which the property 
to be insured is located; or in the case of a policy of difference in 
conditions, multiple peril, all risk, or other blanket coverage insuring 
nonresidential commercial property, is issued by a surplus lines insurer 
recognized, or not disapproved, by the insurance regulator of the State 
or jurisdiction where the property to be insured is located;
    (iii) Covers both the mortgagor(s) and the mortgagee(s) as loss 
payees, except in the case of a policy that is provided by a condominium 
association, cooperative, homeowners association, or other applicable 
group and for

[[Page 631]]

which the premium is paid by the condominium association, cooperative, 
homeowners association, or other applicable group as a common expense; 
and
    (iv) Provides sufficient protection of the designated loan, 
consistent with general safety and soundness principles, and the 
national bank or Federal savings association documents its conclusion 
regarding sufficiency of the protection of the loan in writing.
    (4) Mutual aid societies. Notwithstanding the requirements of 
paragraph (c)(3) of this section, a national bank or Federal savings 
association may accept a plan issued by a mutual aid society, as defined 
in Sec.  22.2(h), in satisfaction of the flood insurance purchase 
requirement in paragraph (a) of this section if:
    (i) The OCC has determined that such plans qualify as flood 
insurance for purposes of the Act;
    (ii) The plan provides coverage in the amount required by paragraph 
(a) of this section;
    (iii) The plan covers both the mortgagor(s) and the mortgagee(s) as 
loss payees; and
    (iv) The plan provides sufficient protection of the designated loan, 
consistent with general safety and soundness principles, and the 
national bank or Federal savings association documents its conclusion 
regarding sufficiency of the protection of the loan in writing.

[80 FR 43240, July 21, 2015, as amended at 84 FR 4970, Feb. 20, 2019]



Sec.  22.4  Exemptions.

    The flood insurance requirement prescribed by Sec.  22.3 does not 
apply with respect to:
    (a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Administrator of FEMA, who publishes and 
periodically revises the list of States falling within this exemption;
    (b) Property securing any loan with an original principal balance of 
$5,000 or less and a repayment term of one year or less; or
    (c) Any structure that is a part of any residential property but is 
detached from the primary residential structure of such property and 
does not serve as a residence. For purposes of this paragraph (c):
    (1) ``A structure that is a part of a residential property'' is a 
structure used primarily for personal, family, or household purposes, 
and not used primarily for agricultural, commercial, industrial, or 
other business purposes;
    (2) A structure is ``detached'' from the primary residential 
structure if it is not joined by any structural connection to that 
structure; and
    (3) ``Serve as a residence'' shall be based upon the good faith 
determination of the national bank or Federal savings association that 
the structure is intended for use or actually used as a residence, which 
generally includes sleeping, bathroom, or kitchen facilities.



Sec.  22.5  Escrow requirement.

    (a) In general--(1) Applicability. Except as provided in paragraphs 
(a)(2) or (c) of this section, a national bank or a Federal savings 
association, or a servicer acting on its behalf, shall require the 
escrow of all premiums and fees for any flood insurance required under 
Sec.  22.3(a) for any designated loan secured by residential improved 
real estate or a mobile home that is made, increased, extended, or 
renewed on or after January 1, 2016, payable with the same frequency as 
payments on the designated loan are required to be made for the duration 
of the loan.
    (2) Exceptions. Paragraph (a)(1) of this section does not apply if:
    (i) The loan is an extension of credit primarily for business, 
commercial, or agricultural purposes;
    (ii) The loan is in a subordinate position to a senior lien secured 
by the same residential improved real estate or mobile home for which 
the borrower has obtained flood insurance coverage that meets the 
requirements of Sec.  22.3(a);
    (iii) Flood insurance coverage for the residential improved real 
estate or mobile home is provided by a policy that:
    (A) Meets the requirements of Sec.  22.3(a);
    (B) Is provided by a condominium association, cooperative, 
homeowners association, or other applicable group; and

[[Page 632]]

    (C) The premium for which is paid by the condominium association, 
cooperative, homeowners association, or other applicable group as a 
common expense;
    (iv) The loan is a home equity line of credit;
    (v) The loan is a nonperforming loan, which is a loan that is 90 or 
more days past due and remains nonperforming until it is permanently 
modified or until the entire amount past due, including principal, 
accrued interest, and penalty interest incurred as the result of past 
due status, is collected or otherwise discharged in full; or
    (vi) The loan has a term of no longer than 12 months.
    (3) Duration of exception. If a national bank or Federal savings 
association, or a servicer acting its behalf, determines at any time 
during the term of a designated loan secured by residential improved 
real estate or a mobile home that is made, increased, extended, or 
renewed on or after January 1, 2016, that an exception under paragraph 
(a)(2) of this section does not apply, then the bank or savings 
association, or the servicer acting on its behalf, shall require the 
escrow of all premiums and fees for any flood insurance required under 
Sec.  22.3(a) as soon as reasonably practicable and, if applicable, 
shall provide any disclosure required under section 10 of the Real 
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA).
    (4) Escrow account. The national bank or Federal savings 
association, or a servicer acting on its behalf, shall deposit the flood 
insurance premiums and fees on behalf of the borrower in an escrow 
account. This escrow account will be subject to escrow requirements 
adopted pursuant to section 10 of RESPA, which generally limits the 
amount that may be maintained in escrow accounts for certain types of 
loans and requires escrow account statements for those accounts, only if 
the loan is otherwise subject to RESPA. Following receipt of a notice 
from the Administrator of FEMA or other provider of flood insurance that 
premiums are due, the national bank or Federal savings association, or a 
servicer acting on its behalf, shall pay the amount owed to the 
insurance provider from the escrow account by the date when such 
premiums are due.
    (b) Notice. For any loan for which a national bank or Federal 
savings association is required to escrow under paragraphs (a)(1) or 
(c)(2) of this section or may be required to escrow under paragraphs 
(a)(3) of this section during the term of the loan, the national bank or 
Federal savings association, or a servicer acting on its behalf, shall 
mail or deliver a written notice with the notice provided under Sec.  
22.9 informing the borrower that the national bank or Federal savings 
association is required to escrow all premiums and fees for required 
flood insurance, using language that is substantially similar to model 
clauses on the escrow requirement in appendix A to this part.
    (c) Small lender exception--(1) Qualification. Except as may be 
required under applicable State law, paragraphs (a), (b), and (d) of 
this section do not apply to a national bank or Federal savings 
association:
    (i) That has total assets of less than $1 billion as of December 31 
of either of the two prior calendar years; and
    (ii) On or before July 6, 2012:
    (A) Was not required under Federal or State law to deposit taxes, 
insurance premiums, fees, or any other charges in an escrow account for 
the entire term of any loan secured by residential improved real estate 
or a mobile home; and
    (B) Did not have a policy of consistently and uniformly requiring 
the deposit of taxes, insurance premiums, fees, or any other charges in 
an escrow account for any loans secured by residential improved real 
estate or a mobile home.
    (2) Change in status. If a national bank or Federal savings 
association previously qualified for the exception in paragraph (c)(1) 
of this section, but no longer qualifies for the exception because it 
had assets of $1 billion or more for two consecutive calendar year ends, 
the national bank or Federal savings association must escrow premiums 
and fees for flood insurance pursuant to paragraph (a) of this section 
for any designated loan made, increased, extended, or renewed on or 
after July 1 of the first calendar year of changed status.

[[Page 633]]

    (d) Option to escrow--(1) In general. A national bank or Federal 
savings association, or a servicer acting on its behalf, shall offer and 
make available to the borrower the option to escrow all premiums and 
fees for any flood insurance required under Sec.  22.3 for any loan 
secured by residential improved real estate or a mobile home that is 
outstanding on January 1, 2016, or July 1 of the first calendar year in 
which the national bank or Federal savings association has had a change 
in status pursuant to paragraph (c)(2) of this section, unless:
    (i) The loan or the national bank or Federal savings association 
qualifies for an exception from the escrow requirement under paragraphs 
(a)(2) or (c) of this section, respectively;
    (ii) The borrower is already escrowing all premiums and fees for 
flood insurance for the loan; or
    (iii) The national bank or Federal savings association is required 
to escrow flood insurance premiums and fees pursuant to paragraph (a) of 
this section.
    (2) Notice. For any loan subject to paragraph (d) of this section, 
the national bank or Federal savings association, or a servicer acting 
on its behalf, shall mail or deliver to the borrower no later than June 
30, 2016, or September 30 of the first calendar year in which the 
national bank or Federal savings association has had a change in status 
pursuant to paragraph (c)(2) of this section, a notice in writing, or if 
the borrower agrees, electronically, informing the borrower of the 
option to escrow all premiums and fees for any required flood insurance 
and the method(s) by which the borrower may request the escrow, using 
language similar to the model clause in appendix B.
    (3) Timing. The national bank or Federal savings association or the 
servicer acting on its behalf, must begin escrowing premiums and fees 
for flood insurance as soon as reasonably practicable after the bank or 
savings association, or servicer, receives the borrower's request to 
escrow.

[80 FR 43243, July 21, 2015]



Sec.  22.6  Required use of standard flood hazard determination form.

    (a) Use of form. A national bank or Federal savings association 
shall use the standard flood hazard determination form developed by the 
Administrator of FEMA when determining whether the building or mobile 
home offered as collateral security for a loan is or will be located in 
a special flood hazard area in which flood insurance is available under 
the Act. The standard flood hazard determination form may be used in a 
printed, computerized, or electronic manner. A national bank or Federal 
savings association may obtain the standard flood hazard determination 
form from FEMA's Web site at www.fema.gov.
    (b) Retention of form. A national bank or Federal savings 
association shall retain a copy of the completed standard flood hazard 
determination form, in either hard copy or electronic form, for the 
period of time the bank or savings association owns the loan.



Sec.  22.7  Force placement of flood insurance.

    (a) Notice and purchase of coverage. If a national bank or Federal 
savings association, or a servicer acting on behalf of the bank or 
savings association, determines at any time during the term of a 
designated loan, that the building or mobile home and any personal 
property securing the designated loan is not covered by flood insurance 
or is covered by flood insurance in an amount less than the amount 
required under Sec.  22.3, then the national bank or Federal savings 
association, or a servicer acting on its behalf, shall notify the 
borrower that the borrower should obtain flood insurance, at the 
borrower's expense, in an amount at least equal to the amount required 
under Sec.  22.3, for the remaining term of the loan. If the borrower 
fails to obtain flood insurance within 45 days after notification, then 
the national bank or Federal savings association, or its servicer, shall 
purchase insurance on the borrower's behalf. The national bank or 
Federal savings association, or its servicer, may charge the borrower 
for the cost of premiums and fees incurred in purchasing the insurance, 
including premiums or fees incurred for

[[Page 634]]

coverage beginning on the date on which flood insurance coverage lapsed 
or did not provide a sufficient coverage amount.
    (b) Termination of force-placed insurance--(1) Termination and 
refund. Within 30 days of receipt by a national bank or Federal savings 
association, or by a servicer acting on its behalf, of a confirmation of 
a borrower's existing flood insurance coverage, the national bank or 
Federal savings association, or its servicer, shall:
    (i) Notify the insurance provider to terminate any insurance 
purchased by the national bank or Federal savings association, or its 
servicer, under paragraph (a) of this section; and
    (ii) Refund to the borrower all premiums paid by the borrower for 
any insurance purchased by the national bank or Federal savings 
association, or by its servicer, under paragraph (a) of this section 
during any period during which the borrower's flood insurance coverage 
and the insurance coverage purchased by the national bank or Federal 
savings association, or its servicer, were each in effect, and any 
related fees charged to the borrower with respect to the insurance 
purchased by the national bank or Federal savings association, or its 
servicer, during such period.
    (2) Sufficiency of demonstration. For purposes of confirming a 
borrower's existing flood insurance coverage under paragraph (b) of this 
section, a national bank or Federal savings association, or a servicer 
acting on its behalf, shall accept from the borrower an insurance policy 
declarations page that includes the existing flood insurance policy 
number and the identity of, and contact information for, the insurance 
company or agent.



Sec.  22.8  Determination fees.

    (a) General. Notwithstanding any Federal or State law other than the 
Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129), 
any national bank or Federal savings association, or a servicer acting 
on behalf of the national bank or Federal savings association, may 
charge a reasonable fee for determining whether the building or mobile 
home securing the loan is located or will be located in a special flood 
hazard area. A determination fee may also include, but is not limited 
to, a fee for life-of-loan monitoring.
    (b) Borrower fee. The determination fee authorized by paragraph (a) 
of this section may be charged to the borrower if the determination:
    (1) Is made in connection with a making, increasing, extending, or 
renewing of the loan that is initiated by the borrower;
    (2) Reflects the Administrator of FEMA's revision or updating of 
flood plain areas or flood-risk zones;
    (3) Reflects the Administrator of FEMA's publication of a notice or 
compendium that:
    (i) Affects the area in which the building or mobile home securing 
the loan is located; or
    (ii) By determination of the Administrator of FEMA, may reasonably 
require a determination whether the building or mobile home securing the 
loan is located in a special flood hazard area; or
    (4) Results in the purchase of flood insurance coverage by the 
lender, or its servicer, on behalf of the borrower under Sec.  22.7.
    (c) Purchaser or transferee fee. The determination fee authorized by 
paragraph (a) of this section may be charged to the purchaser or 
transferee of a loan in the case of the sale or transfer of the loan.



Sec.  22.9  Notice of special flood hazards and availability 
of Federal disaster relief assistance.

    (a) Notice requirement. When a national bank or Federal savings 
association makes, increases, extends, or renews a loan secured by a 
building or a mobile home located or to be located in a special flood 
hazard area, the bank or savings association shall mail or deliver a 
written notice to the borrower and to the servicer in all cases whether 
or not flood insurance is available under the Act for the collateral 
securing the loan.
    (b) Contents of notice. The written notice must include the 
following information:
    (1) A warning, in a form approved by the Administrator of FEMA, that 
the building or the mobile home is or will

[[Page 635]]

be located in a special flood hazard area;
    (2) A description of the flood insurance purchase requirements set 
forth in section 102(b) of the Flood Disaster Protection Act of 1973, as 
amended (42 U.S.C. 4012a(b));
    (3) A statement, where applicable, that flood insurance coverage is 
available from private insurance companies that issue standard flood 
insurance policies on behalf of the NFIP or directly from the NFIP;
    (4) A statement that flood insurance that provides the same level of 
coverage as a standard flood insurance policy under the NFIP also may be 
available from a private insurance company that issues policies on 
behalf of the company;
    (5) A statement that the borrower is encouraged to compare the flood 
insurance coverage, deductibles, exclusions, conditions, and premiums 
associated with flood insurance policies issued on behalf of the NFIP 
and policies issued on behalf of private insurance companies and that 
the borrower should direct inquiries regarding the availability, cost, 
and comparisons of flood insurance coverage to an insurance agent; and
    (6) A statement whether Federal disaster relief assistance may be 
available in the event of damage to the building or mobile home caused 
by flooding in a Federally declared disaster.
    (c) Timing of notice. The national bank or Federal savings 
association shall provide the notice required by paragraph (a) of this 
section to the borrower within a reasonable time before the completion 
of the transaction, and to the servicer as promptly as practicable after 
the bank or savings association provides notice to the borrower and in 
any event no later than the time the bank or savings association 
provides other similar notices to the servicer concerning hazard 
insurance and taxes. Notice to the servicer may be made electronically 
or may take the form of a copy of the notice to the borrower.
    (d) Record of receipt. The national bank or Federal savings 
association shall retain a record of the receipt of the notices by the 
borrower and the servicer for the period of time it owns the loan.
    (e) Alternate method of notice. Instead of providing the notice to 
the borrower required by paragraph (a) of this section, a national bank 
or Federal savings association may obtain satisfactory written assurance 
from a seller or lessor that, within a reasonable time before the 
completion of the sale or lease transaction, the seller or lessor has 
provided such notice to the purchaser or lessee. The national bank or 
Federal savings association shall retain a record of the written 
assurance from the seller or lessor for the period of time it owns the 
loan.
    (f) Use of sample form of notice. A national bank or Federal savings 
association will be considered to be in compliance with the requirement 
for notice to the borrower of this section by providing written notice 
to the borrower containing the language presented in appendix A to this 
part within a reasonable time before the completion of the transaction. 
The notice presented in appendix A to this part satisfies the borrower 
notice requirements of the Act.

[80 FR 43240, July 21, 2015, as amended at 80 FR 43244, July 21, 2015]



Sec.  22.10  Notice of servicer's identity.

    (a) Notice requirement. When a national bank or Federal savings 
association makes, increases, extends, renews, sells, or transfers a 
loan secured by a building or mobile home located or to be located in a 
special flood hazard area, it shall notify the Administrator of FEMA (or 
the Administrator's designee) in writing of the identity of the servicer 
of the loan. The Administrator of FEMA has designated the insurance 
provider to receive the national bank's or Federal savings association's 
notice of the servicer's identity. This notice may be provided 
electronically if electronic transmission is satisfactory to the 
Administrator of FEMA's designee.
    (b) Transfer of servicing rights. The national bank or Federal 
savings association shall notify the Administrator of FEMA (or the 
Administrator's designee) of any change in the servicer of a loan 
described in paragraph (a) of this section within 60 days after the 
effective date of the change. This notice

[[Page 636]]

may be provided electronically if electronic transmission is 
satisfactory to the Administrator of FEMA's designee. Upon any change in 
the servicing of a loan described in paragraph (a) of this section, the 
duty to provide notice under this paragraph (b) shall transfer to the 
transferee servicer.



   Sec. Appendix A to Part 22--Sample Form of Notice of Special Flood 
     Hazards and Availability of Federal Disaster Relief Assistance

  Notice of Special Flood Hazards and Availability of Federal Disaster 
                            Relief Assistance

    We are giving you this notice to inform you that:
    The building or mobile home securing the loan for which you have 
applied is or will be located in an area with special flood hazards.
    The area has been identified by the Administrator of the Federal 
Emergency Management Agency (FEMA) as a special flood hazard area using 
FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary Map for the 
following community: ___. This area has a one percent (1%) chance of a 
flood equal to or exceeding the base flood elevation (a 100-year flood) 
in any given year. During the life of a 30-year mortgage loan, the risk 
of a 100-year flood in a special flood hazard area is 26 percent (26%).
    Federal law allows a lender and borrower jointly to request the 
Administrator of FEMA to review the determination of whether the 
property securing the loan is located in a special flood hazard area. If 
you would like to make such a request, please contact us for further 
information.
    __The community in which the property securing the loan is located 
participates in the National Flood Insurance Program (NFIP). Federal law 
will not allow us to make you the loan that you have applied for if you 
do not purchase flood insurance. The flood insurance must be maintained 
for the life of the loan. If you fail to purchase or renew flood 
insurance on the property, Federal law authorizes and requires us to 
purchase the flood insurance for you at your expense.
     At a minimum, flood insurance purchased must 
cover the lesser of:
    (1) the outstanding principal balance of the loan; or
    (2) the maximum amount of coverage allowed for the type of property 
under the NFIP.
    Flood insurance coverage under the NFIP is limited to the building 
or mobile home and any personal property that secures your loan and not 
the land itself.
     Federal disaster relief assistance (usually in 
the form of a low-interest loan) may be available for damages incurred 
in excess of your flood insurance if your community's participation in 
the NFIP is in accordance with NFIP requirements.
     Although you may not be required to maintain 
flood insurance on all structures, you may still wish to do so, and your 
mortgage lender may still require you to do so to protect the collateral 
securing the mortgage. If you choose not to maintain flood insurance on 
a structure and it floods, you are responsible for all flood losses 
relating to that structure.

            Availability of Private Flood Insurance Coverage

    Flood insurance coverage under the NFIP may be purchased through an 
insurance agent who will obtain the policy either directly through the 
NFIP or through an insurance company that participates in the NFIP. 
Flood insurance that provides the same level of coverage as a standard 
flood insurance policy under the NFIP may be available from private 
insurers that do not participate in the NFIP. You should compare the 
flood insurance coverage, deductibles, exclusions, conditions, and 
premiums associated with flood insurance policies issued on behalf of 
the NFIP and policies issued on behalf of private insurance companies 
and contact an insurance agent as to the availability, cost, and 
comparisons of flood insurance coverage.

                [Escrow Requirement for Residential Loans

    Federal law may require a lender or its servicer to escrow all 
premiums and fees for flood insurance that covers any residential 
building or mobile home securing a loan that is located in an area with 
special flood hazards. If your lender notifies you that an escrow 
account is required for your loan, then you must pay your flood 
insurance premiums and fees to the lender or its servicer with the same 
frequency as you make loan payments for the duration of your loan. These 
premiums and fees will be deposited in the escrow account, which will be 
used to pay the flood insurance provider.]
    __Flood insurance coverage under the NFIP is not available for the 
property securing the loan because the community in which the property 
is located does not participate in the NFIP. In addition, if the non-
participating community has been identified for at least one year as 
containing a special flood hazard area, properties located in the 
community will not be eligible for Federal disaster relief assistance in 
the event of a Federally declared flood disaster.

[80 FR 43244, July 21, 2015]

[[Page 637]]



   Sec. Appendix B to Part 22--Sample Clause for Option to Escrow for 
                            Outstanding Loans

                          Escrow Option Clause

    You have the option to escrow all premiums and fees for the payment 
on your flood insurance policy that covers any residential building or 
mobile home that is located in an area with special flood hazards and 
that secures your loan. If you choose this option:
     Your payments will be deposited in an escrow 
account to be paid to the flood insurance provider.
     The escrow amount for flood insurance will be 
added to the regular mortgage payment that you make to your lender or 
its servicer.
     The payments you make into the escrow account 
will accumulate over time and the funds will be used to pay your flood 
insurance policy when your lender or servicer receives a notice from 
your flood insurance provider that the flood insurance premium is due.
    To choose this option, follow the instructions below. If you have 
any questions about the option, contact [Insert Name of Lender or 
Servicer] at [Insert Contact Information].
    [Insert Instructions for Selecting to Escrow]

[80 FR 43244, July 21, 2015]



PART 23_LEASING--Table of Contents



                      Subpart A_General Provisions

Sec.
23.1 Authority, purpose, and scope.
23.2 Definitions.
23.3 Lease requirements.
23.4 Investment in personal property.
23.5 Requirement for separate records.
23.6 Application of lending limits; restrictions on transactions with 
          affiliates.

                          Subpart B_CEBA Leases

23.10 General rule.
23.11 Lease term.
23.12 Transition rule.

                  Subpart C_Section 24(Seventh) Leases

23.20 General rule.
23.21 Estimated residual value.
23.22 Transition rule.

    Authority: 12 U.S.C. 1 et seq., 24(Seventh), 24(Tenth), and 93a.

    Source: 61 FR 66560, Dec. 18, 1996, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  23.1  Authority, purpose, and scope.

    (a) Authority. A national bank may engage in personal property lease 
financing transactions pursuant to 12 U.S.C. 24(Seventh) or 12 U.S.C. 
24(Tenth).
    (b) Purpose. The purpose of this part is to set forth standards for 
personal property lease financing transactions authorized for national 
banks.
    (c) Scope. This part applies to the acquisition of personal property 
by a national bank for the purpose of, or in connection with, the 
leasing of that property.



Sec.  23.2  Definitions.

    (a) Affiliate means an affiliate as described in Sec.  23.6.
    (b) Capital and surplus means:
    (1) For qualifying community banking organizations that have elected 
to use the community bank leverage ratio framework, as set forth under 
the OCC's Capital Adequacy Standards at part 3 of this chapter:
    (i) A qualifying community banking organization's tier 1 capital, as 
used under Sec.  3.12 of this chapter; plus.
    (ii) A qualifying community banking organization's allowance for 
loan and lease losses or adjusted allowances for credit losses, as 
applicable, as reported in the Consolidated Reports of Condition and 
Income (Call Report); or
    (2) For all other national banks:
    (i) A bank's tier 1 and tier 2 capital calculated under the OCC's 
risk-based capital standards set forth in part 3 of this chapter, as 
applicable, as reported in the Call Report; plus
    (ii) The balance of a bank's allowance for loan and lease losses or 
adjusted allowances for credit losses, as applicable, not included in 
the bank's Tier 2 capital, for purposes of the calculation of risk-based 
capital described in paragraph (b)(2)(i) of this section, as reported in 
the Call Report.
    (c) CEBA Lease means a personal property lease authorized under 12 
U.S.C. 24(Tenth).
    (d) Conforming lease means:
    (1) A CEBA Lease that conforms with the requirements of subparts A 
and B of this part; or

[[Page 638]]

    (2) A Section 24(Seventh) Lease that conforms with the requirements 
of subparts A and C of this part.
    (e) Full-payout lease means a lease in which the national bank 
reasonably expects to realize the return of its full investment in the 
leased property, plus the estimated cost of financing the property over 
the term of the lease, from:
    (1) Rentals;
    (2) Estimated tax benefits; and
    (3) The estimated residual value of the property at the expiration 
of the lease term.
    (f) Net lease means a lease under which the national bank will not, 
directly or indirectly, provide or be obligated to provide for:
    (1) Servicing, repair, or maintenance of the leased property during 
the lease term;
    (2) Parts or accessories for the leased property;
    (3) Loan of replacement or substitute property while the leased 
property is being serviced;
    (4) Payment of insurance for the lessee, except where the lessee has 
failed in its contractual obligation to purchase or maintain required 
insurance; or
    (5) Renewal of any license or registration for the property unless 
renewal by the bank is necessary to protect its interest as owner or 
financier of the property.
    (g) Off-lease property means property that reverts to a national 
bank's possession or control upon the expiration of a lease or upon the 
default of the lessee.
    (h) Section 24(Seventh) Lease means a personal property lease 
authorized under 12 U.S.C. 24(Seventh).

[61 FR 66560, Dec. 18, 1996, as amended at 79 FR 11312, Feb. 28, 2014; 
84 FR 4240, Feb. 14, 2019; 84 FR 61794, Nov. 13, 2019; 84 FR 69297, Dec. 
18, 2019]



Sec.  23.3  Lease requirements.

    (a) General requirements. A national bank may acquire personal 
property for the purpose of, or in connection with leasing that 
property, and may engage in activities incidental thereto, if the lease 
qualifies as a full-payout lease and a net lease.
    (b) Exceptions--(1) Change in condition. If, in good faith, a 
national bank believes that there has been a change in condition that 
threatens its financial position by increasing its exposure to loss, 
then the bank may:
    (i) Take reasonable and appropriate action, including the actions 
specified in Sec.  23.2(f), to salvage or protect the value of the 
leased property or its interests arising under the lease; and
    (ii) Acquire or perfect title to the leased property pursuant to any 
existing rights.
    (2) Provisions to protect the bank's interests. A national bank may 
include any provision in a lease, or make any additional agreement, to 
protect its financial position or investment in the event of a change in 
conditions that would increase its exposure to loss.
    (3) Arranging for services by a third party. A national bank may 
arrange for a third party to provide any of the services enumerated in 
Sec.  23.2(f) to the lessee at the expense of the lessee.



Sec.  23.4  Investment in personal property.

    (a) General rule. A national bank may acquire specific property to 
be leased only after the bank has entered into:
    (1) A conforming lease;
    (2) A legally binding written agreement that indemnifies the bank 
against loss in connection with its acquisition of the property; or
    (3) A legally binding written commitment to enter into a conforming 
lease.
    (b) Exception. A national bank may acquire property to be leased 
without complying with the requirements of paragraph (a) of this 
section, if:
    (1) The acquisition of the property is consistent with the leasing 
business then conducted by the bank or is consistent with a business 
plan for expansion of the bank's existing leasing business or for entry 
into the leasing business; and
    (2) The bank's aggregate investment in property held pursuant to 
this paragraph (b) does not exceed 15 percent of the bank's capital and 
surplus.
    (c) Holding period. At the expiration of the lease (including any 
renewals or extensions with the same lessee), or in the event of a 
default on a lease agreement prior to the expiration of the lease term, 
a national bank shall either

[[Page 639]]

liquidate the off-lease property or re-lease it under a conforming lease 
as soon as practicable. Liquidation or re-lease must occur not later 
than five years from the date that the bank acquires the legal right to 
possession or control of the property, except the OCC may extend the 
period for up to an additional five years, if the bank provides a 
clearly convincing demonstration why any additional holding period is 
necessary. The bank must value off-lease property at the lower of 
current fair market value or book value promptly after the property 
becomes off-lease property.
    (d) Bridge or interim leases. During the holding period allowed by 
paragraph (c) of this section, a national bank may enter into a short-
term bridge or interim lease pending the liquidation of off-lease 
property or the re-lease of the property under a conforming lease. A 
short-term bridge or interim lease must be a net lease, but need not 
comply with any requirement of subpart B or C of this part.



Sec.  23.5  Requirement for separate records.

    If a national bank enters into both CEBA Leases and Section 
24(Seventh) Leases, the bank's records must distinguish the CEBA Leases 
from the Section 24(Seventh) Leases.



Sec.  23.6  Application of lending limits; restrictions on transactions 
with affiliates.

    All leases entered into pursuant to this part are subject to the 
lending limits prescribed by 12 U.S.C. 84, as implemented by 12 CFR part 
32, or, if the lessee is an affiliate of the bank, to the restrictions 
on transactions with affiliates prescribed by 12 U.S.C. 371c and 371c-1 
and Regulation W, 12 CFR part 223. The OCC may also determine that other 
limits or restrictions apply. The term affiliate means an affiliate as 
defined in 12 U.S.C. 371c or 371c-1, as implemented by Regulation W, 12 
CFR part 223, as applicable. For the purpose of measuring compliance 
with the lending limits prescribed by 12 U.S.C. 84 as implemented by 
part 32, a national bank records the investment in a lease net of any 
nonrecourse debt the bank has incurred to finance the acquisition of the 
leased asset.

[61 FR 66560, Dec. 18, 1996, as amended at 73 FR 22244, Apr. 24, 2008; 
85 FR 42642, July 14, 2020]



                          Subpart B_CEBA Leases



Sec.  23.10  General rule.

    Pursuant to 12 U.S.C. 24(Tenth) a national bank may invest in 
tangible personal property, including vehicles, manufactured homes, 
machinery, equipment, or furniture, for the purpose of, or in connection 
with leasing that property, if the aggregate book value of the property 
does not exceed 10 percent of the bank's consolidated assets and the 
related lease is a conforming lease. For the purpose of measuring 
compliance with the 10 percent limit prescribed by this section, a 
national bank records the investment in a lease entered into pursuant to 
this subpart net of any nonrecourse debt the bank has incurred to 
finance the acquisition of the leased asset.



Sec.  23.11  Lease term.

    A CEBA Lease must have an initial term of not less than 90 days. A 
national bank may acquire property subject to an existing lease with a 
remaining maturity of less than 90 days if, at its inception, the lease 
was a conforming lease.



Sec.  23.12  Transition rule.

    (a) General rule. A CEBA Lease entered into prior to July 22, 1991, 
may continue to be administered in accordance with the lease terms in 
effect as of that date. For purposes of applying the lending limits and 
the restrictions on transactions with affiliates described in Sec.  
23.6, however, a national bank that enters into a new extension of 
credit to a customer, including a lease, on or after July 22, 1991, 
shall include all outstanding leases regardless of the date on which 
they were made.
    (b) Renewal of non-conforming leases. A national bank may renew a 
CEBA Lease that was entered into prior to July 22, 1991, and that is not 
a conforming lease only if the following conditions are satisfied:

[[Page 640]]

    (1) The bank entered into the CEBA Lease in good faith;
    (2) The expiring lease contains a binding agreement requiring that 
the bank renew the lease at the lessee's option, and the bank cannot 
reasonably avoid its commitment to do so; and
    (3) The bank determines in good faith, and demonstrates by 
appropriate documentation, that renewal of the lease is necessary to 
avoid financial loss and to recover its investment in, and its cost of 
financing, the leased property.



                  Subpart C_Section 24(Seventh) Leases



Sec.  23.20  General rule.

    Pursuant to 12 U.S.C. 24(Seventh) a national bank may invest in 
tangible or intangible personal property, including vehicles, 
manufactured homes, machinery, equipment, furniture, patents, 
copyrights, and other intellectual property, for the purpose of, or in 
connection with leasing that property, if the related lease is a 
conforming lease representing a noncancelable obligation of the lessee 
(notwithstanding the possible early termination of that lease).



Sec.  23.21  Estimated residual value.

    (a) Recovery of investment and costs. A national bank's estimate of 
the residual value of the property that the bank relies upon to satisfy 
the requirements of a full-payout lease, for purposes of this subpart:
    (1) Must be reasonable in light of the nature of the leased property 
and all circumstances relevant to the transaction; and
    (2) Any unguaranteed amount must not exceed 25 percent of the 
original cost of the property to the bank or the percentage for a 
particular type of property specified in published OCC guidance.
    (b) Estimated residual value subject to guarantee. The amount of any 
estimated residual value guaranteed by the manufacturer, the lessee, or 
other third party may exceed 25 percent of the original cost of the 
property if the bank determines, and demonstrates by appropriate 
documentation, that the guarantor has the resources to meet the 
guarantee and the guarantor is not an affiliate of the bank.
    (c) Leases to government entities. A bank's calculations of 
estimated residual value in connection with leases of personal property 
to Federal, State, or local governmental entities may be based on future 
transactions or renewals that the bank reasonably anticipates will 
occur.

[61 FR 66560, Dec. 18, 1996, as amended at 66 FR 34792, July 2, 2001]



Sec.  23.22  Transition rule.

    (a) Exclusion. A Section 24(Seventh) Lease entered into prior to 
June 12, 1979, may continue to be administered in accordance with the 
lease terms in effect as of that date. For purposes of applying the 
lending limits and the restrictions on transactions with affiliates 
described in Sec.  23.6, however, a national bank that enters into a new 
extension of credit to a customer, including a lease, on or after June 
12, 1979, shall include all outstanding leases regardless of the date on 
which they were made.
    (b) Renewal of non-conforming leases. A national bank may renew a 
Section 24(Seventh) Lease that was entered into prior to June 12, 1979, 
and that is not a conforming lease only if the following conditions are 
satisfied:
    (1) The bank entered into the Section 24(Seventh) Lease in good 
faith;
    (2) The expiring lease contains a binding agreement requiring that 
the bank renew the lease at the lessee's option, and the bank cannot 
reasonably avoid its commitment to do so; and
    (3) The bank determines in good faith, and demonstrates by 
appropriate documentation, that renewal of the lease is necessary to 
avoid financial loss and to recover its investment in, and its cost of 
financing, the leased property.



PART 24_COMMUNITY AND ECONOMIC DEVELOPMENT ENTITIES, COMMUNITY DEVELOPMENT 
PROJECTS, AND OTHER PUBLIC WELFARE INVESTMENTS--Table of Contents



Sec.
24.1 Authority, purpose, and OMB control number.

[[Page 641]]

24.2 Definitions.
24.3 Public welfare investments.
24.4 Investment limits.
24.5 Public welfare investment after-the-fact notice and prior 
          procedures.
24.6 Examples of qualifying public welfare investments.
24.7 Examination, records, and remedial action.

Appendix 1 to Part 24--CD-1--National Bank Community Development (Part 
          24) Investments

    Authority: 12 U.S.C. 24(Eleventh), 93a, 481 and 1818.

    Source: 61 FR 49660, Sept. 23, 1996, unless otherwise noted.



Sec.  24.1  Authority, purpose, and OMB control number.

    (a) Authority. The Office of the Comptroller of the Currency (OCC) 
issues this part pursuant to its authority under 12 U.S.C. 24(Eleventh), 
93a, and 481.
    (b) Purpose. This part implements 12 U.S.C. 24 (Eleventh). It is the 
OCC's policy to encourage a national bank to make investments described 
in Sec.  24.3, consistent with safety and soundness. This part provides 
the standards and procedures that apply to these investments.
    (c) OMB control number. The collection of information requirements 
contained in this part were approved by the Office of Management and 
Budget under OMB control number 1557-0194.
    (d) A national bank that makes loans or investments that are 
authorized under both 12 U.S.C. 24 (Eleventh) and other provisions of 
the Federal banking laws may do so under such other provisions without 
regard to the provisions of 12 U.S.C. 24 (Eleventh) or this part.
    (e) Investments made, or written commitments to make investments 
made, prior to October 13, 2006, pursuant to 12 U.S.C. 24 (Eleventh) and 
this part, continue to be subject to the statutes and regulations in 
effect prior to the enactment of the Financial Services Regulatory 
Relief Act of 2006 (Pub. L. 109-351).

[61 FR 49660, Sept. 23, 1996, as amended at 64 FR 70990, Dec. 20, 1999; 
68 FR 48775, Aug. 15, 2003; 73 FR 22244, Apr. 24, 2008]



Sec.  24.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Adequately capitalized has the same meaning as adequately 
capitalized in 12 CFR 6.4.
    (b) Capital and surplus means:
    (1) For qualifying community banking organizations that have elected 
to use the community bank leverage ratio framework, as set forth under 
the OCC's Capital Adequacy Standards at part 3 of this chapter:
    (i) A qualifying community banking organization's tier 1 capital, as 
used under Sec.  3.12 of this chapter; plus
    (ii) A qualifying community banking organization's allowance for 
loan and lease losses or adjusted allowances for credit losses, as 
applicable, as reported in the Consolidated Reports of Condition and 
Income (Call Report); or
    (2) For all other national banks:
    (i) A bank's tier 1 and tier 2 capital calculated under the OCC's 
risk-based capital standards set forth in part 3 of this chapter, as 
applicable, as reported in the Call Report; plus
    (ii) The balance of a bank's allowance for loan and lease losses or 
adjusted allowances for credit losses, as applicable, not included in 
the bank's tier 2 capital, for purposes of the calculation of risk-based 
capital described in paragraph (b)(2)(i) of this section, as reported in 
the Call Report.
    (c) Community and economic development entity (CEDE) means an entity 
that makes investments or conducts activities that primarily benefit 
low- and moderate-income individuals, low- and moderate-income areas, or 
other areas targeted by a governmental entity for redevelopment, or 
would receive consideration as ``qualified investments'' under 12 CFR 
25.23. The following is a non-exclusive list of examples of the types of 
entities that may be CEDEs:
    (1) National bank community development corporation subsidiaries;
    (2) Private or nonbank community development corporations;
    (3) CDFI Fund-certified Community Development Financial Institutions 
or Community Development Entities;
    (4) Limited liability companies or limited partnerships;
    (5) Community development loan funds or lending consortia;
    (6) Community development real estate investment trusts;

[[Page 642]]

    (7) Business development companies;
    (8) Community development closed-end mutual funds;
    (9) Non-diversified closed-end investment companies; and
    (10) Community development venture or equity capital funds.
    (d) Community development Project (CD Project) means a project to 
make an investment that meets the requirements of Sec.  24.3.
    (e) Eligible bank means, for purposes of Sec.  24.5, a national bank 
that:
    (1) Is well capitalized;
    (2) Has a composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System;
    (3) Has a Community Reinvestment Act (CRA) rating of ``Outstanding'' 
or ``Satisfactory''; and
    (4) Is not subject to a cease and desist order, consent order, 
formal written agreement, or Prompt Corrective Action directive (see 12 
CFR part 6, subpart B) or, if subject to any such order, agreement or 
directive, is informed in writing by the OCC that the bank may be 
treated as an ``eligible bank'' for purposes of this part.
    (f) Low-income and moderate-income have the same meanings as ``low-
income'' and ``moderate-income'' in 12 CFR 25.12(m).
    (g) Significant risk to the deposit insurance fund means a 
substantial probability that any Federal deposit insurance fund could 
suffer a loss.
    (h) Small business means a business, including a small farm or 
minority-owned small business, that meets the qualifications for Small 
Business Administration Development Company or Small Business Investment 
Company loan programs in 13 CFR 121.301.
    (i) Well capitalized has the same meaning as well capitalized in 12 
CFR 6.4.

[61 FR 49660, Sept. 23, 1996, as amended at 68 FR 48775, Aug. 15, 2003; 
73 FR 22244, Apr. 24, 2008; 73 FR 46534, Aug. 11, 2008; 79 FR 11312, 
Feb. 28, 2014; 84 FR 4240, Feb. 14, 2019; 84 FR 61795, Nov. 13, 2019; 84 
FR 69298, Dec. 18, 2019]



Sec.  24.3  Public welfare investments.

    A national bank or national bank subsidiary may make an investment 
directly or indirectly under this part if the investment primarily 
benefits low- and moderate income individuals, low- and moderate income 
areas, or other areas targeted by a governmental entity for 
redevelopment, or the investment would receive consideration under 12 
CFR 25.23 as a ``qualified investment.''

[73 FR 46534, Aug. 11, 2008]



Sec.  24.4  Investment limits.

    (a) Limits on aggregate outstanding investments. A national bank's 
aggregate outstanding investments under this part may not exceed 5 
percent of its capital and surplus, unless the bank is at least 
adequately capitalized and the OCC determines, by written approval of a 
written request by the bank to exceed the 5 percent limit, that a higher 
amount of investments will not pose a significant risk to the deposit 
insurance fund. In no case may a bank's aggregate outstanding 
investments under this part exceed 15 percent of its capital and 
surplus. When calculating the aggregate amount of its aggregate 
outstanding investments under this part, a national bank should follow 
generally accepted accounting principles, unless otherwise directed or 
permitted in writing by the OCC for prudential or safety and soundness 
reasons.
    (b) Limited liability. A national bank may not make an investment 
under this part that would expose the bank to unlimited liability.

[61 FR 49660, Sept. 23, 1996, as amended at 64 FR 70991, Dec. 20, 1999; 
68 FR 48776, Aug. 15, 2003; 73 FR 22244, Apr. 24, 2008]



Sec.  24.5  Public welfare investment after-the-fact notice 
and prior approval procedures.

    (a) After-the-fact notice of public welfare investments. (1) Subject 
to Sec.  24.4(a), an eligible bank may make an investment authorized by 
12 U.S.C. 24 (Eleventh) and this part without prior notification to, or 
approval by, the OCC if the bank follows the after-the-fact notice 
procedures described in this section.
    (2) An eligible bank shall provide an after-the-fact notification of 
an investment, within 10 working days after it makes the investment, to 
the Community Affairs Department, Office of the Comptroller of the 
Currency, Washington, DC 20219. The after-the-fact notification may also 
be e-mailed to

[[Page 643]]

[email protected], faxed to (202) 649-5709, or provided 
electronically via National BankNet at www.occ.gov.
    (3) The bank's after-the-fact-notice must include:
    (i) A description of the bank's investment;
    (ii) The amount of the investment;
    (iii) The percentage of the bank's capital and surplus represented 
by the investment that is the subject of the notice and by the bank's 
aggregate outstanding public welfare investments and commitments, 
including the investment that is the subject of the notice; and
    (iv) A statement certifying that the investment complies with the 
requirements of Sec. Sec.  24.3 and 24.4.
    (4) A bank may satisfy the notice requirements of paragraph (3) of 
this section by completing form CD-1, attached as appendix 1 to this 
part.
    (5) A national bank that is not an eligible bank but that is at 
least adequately capitalized, and has a composite rating of at least 3 
with improving trends under the Uniform Financial Institutions Rating 
System, may submit a letter to the Community Affairs Department 
requesting authority to submit after-the-fact notices of its 
investments. The Community Affairs Department considers these requests 
on a case-by-case basis.
    (6) Notwithstanding the provisions of this section, a bank may not 
submit an after-the-fact notice of an investment if:
    (i) The investment involves properties carried on the bank's books 
as ``other real estate owned''; or
    (ii) The OCC determines, in published guidance, that the investment 
is inappropriate for after-the-fact notice.
    (b) Investments requiring prior approval. (1) If a national bank 
does not meet the requirements for after-the-fact investment 
notification set forth in this part, the bank must submit an investment 
proposal to the Community Affairs Department, Office of the Comptroller 
of the Currency, Washington, DC 20219. The investment proposal may also 
be e-mailed to [email protected], faxed to (202) 874-4652, 
or submitted electronically via National BankNet at www.occ.gov. The 
bank may use form CD-1, attached to this part as appendix 1, to satisfy 
this requirement.
    (2) The bank's investment proposal must include:
    (i) A description of the bank's investment;
    (ii) The amount of the investment;
    (iii) The percentage of the bank's capital and surplus represented 
by the proposed investment and by the bank's aggregate outstanding 
public welfare investments and commitments, including the proposed 
investment; and
    (iv) A statement certifying that the investment complies with the 
requirements of Sec. Sec.  24.3 and 24.4.
    (3) In reviewing a proposal, the OCC considers the following factors 
and other available information:
    (i) Whether the investment satisfies the requirements of Sec. Sec.  
24.3 and 24.4;
    (ii) Whether the investment is consistent with the safe and sound 
operation of the bank; and
    (iii) Whether the investment is consistent with the requirements of 
this part and the OCC's policies.
    (4) Unless otherwise notified in writing by the OCC, and subject to 
Sec.  24.4(a), the proposed investment is deemed approved after 30 
calendar days from the date on which the OCC receives the bank's 
investment proposal.
    (5) The OCC, by notifying the bank, may extend its period for 
reviewing the investment proposal. If so notified, the bank may make the 
investment only with the OCC's written approval.
    (6) The OCC may impose one or more conditions in connection with its 
approval of an investment under this part. All approvals are subject to 
the condition that a national bank must conduct the approved activity in 
a manner consistent with any published guidance issued by the OCC 
regarding the activity.

[61 FR 49660, Sept. 23, 1996, as amended at 64 FR 70991, Dec. 20, 1999; 
68 FR 48776, Aug. 15, 2003; 73 FR 22245, Apr. 24, 2008; 79 FR 15641, 
Mar. 21, 2014; 80 FR 28472, May 18, 2015]



Sec.  24.6  Examples of qualifying public welfare investments.

    Investments that primarily support the following types of activities 
are examples of investments that meet the requirements of Sec.  24.3:

[[Page 644]]

    (a) Affordable housing activities, including:
    (1) Investments in an entity that finances, acquires, develops, 
rehabilitates, manages, sells, or rents housing primarily for low- and 
moderate-income individuals;
    (2) Investments in a project that develops or operates transitional 
housing for the homeless;
    (3) Investments in a project that develops or operates special needs 
housing for disabled or elderly low- and moderate-income individuals; 
and
    (4) Investments in a project that qualifies for the Federal low-
income housing tax credit;
    (b) Economic development and job creation investments, including:
    (1) Investments that finance small businesses (including equity or 
debt financing and investments in an entity that provides loan 
guarantees) that are located in low- and moderate-income areas or other 
targeted redevelopment areas or that produce or retain permanent jobs, 
the majority of which are held by low- and moderate-income individuals;
    (2) Investments that finance small businesses or small farms, 
including minority- and women-owned small businesses or small farms, 
that, although not located in low- and moderate-income areas or targeted 
redevelopment areas, create a significant number of permanent jobs for 
low- and moderate-income individuals;
    (3) Investments in an entity that acquires, develops, rehabilitates, 
manages, sells, or rents commercial or industrial property that is 
located in a low- and moderate-income area or targeted redevelopment 
area and occupied primarily by small businesses, or that is occupied 
primarily by small businesses that produce or retain permanent jobs, the 
majority of which are held by low- and moderate-income individuals; and
    (4) Investments in low- and moderate-income areas or targeted 
redevelopment areas that produce or retain permanent jobs, the majority 
of which are held by low- and moderate-income individuals;
    (c) Investments in CEDEs, including:
    (1) Investments in a national bank that has been approved by the OCC 
as a national bank with a community development focus;
    (2) Investments in a community development financial institution, as 
defined in 12 U.S.C. 4742(5);
    (3) Investments in a CEDE that is eligible to receive New Markets 
tax credits under 26 U.S.C. 45D; and
    (d) Other public welfare investments, including:
    (1) Investments that provide credit counseling, financial literacy, 
job training, community development research, and similar technical 
assistance for non-profit community development organizations, low- and 
moderate-income individuals or areas or targeted redevelopment areas, or 
small businesses, including minority- and women-owned small businesses, 
located in low- and moderate-income areas or that produce or retain 
permanent jobs, the majority of which are held by low- and moderate-
income individuals;
    (2) Investments of a type approved by the Federal Reserve Board 
under 12 CFR 208.22 for state member banks that are consistent with the 
requirements of Sec.  24.3;
    (3) Investments of a type determined by the OCC to be permissible 
under this part; and
    (4) Investments in minority- and women-owned depository institutions 
that serve primarily low- and moderate-income individuals or low- and 
moderate-income areas or targeted redevelopment areas.

[68 FR 48776, Aug. 15, 2003, as amended at 73 FR 22245, Apr. 24, 2008; 
73 FR 46534, Aug. 11, 2008]



Sec.  24.7  Examination, records, and remedial action.

    (a) Examination. National bank investments under this part are 
subject to the examination provisions of 12 U.S.C. 481.
    (b) Records. Each national bank shall maintain in its files 
information adequate to demonstrate that its investments meet the 
standards set out in Sec.  24.3 of this part, including, where 
applicable, the criteria of 12 CFR 25.23, and that the bank is otherwise 
in compliance with the requirements of this part.
    (c) Remedial action. If the OCC finds that an investment under this 
part is

[[Page 645]]

in violation of law or regulation, is inconsistent with the safe and 
sound operation of the bank, or poses a significant risk to a Federal 
deposit insurance fund, the national bank shall take appropriate 
remedial action as determined by the OCC.

[61 FR 49660, Sept. 23, 1996, as amended at 68 FR 48777, Aug. 15, 2003]

[[Page 646]]



 Sec. Appendix 1 to Part 24--CD-1--National Bank Community Development 
                          (Part 24) Investments
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[88 FR 64360, Sept. 19, 2023]

[[Page 651]]



PART 25_COMMUNITY REINVESTMENT ACT AND INTERSTATE DEPOSIT 
PRODUCTION REGULATIONS--Table of Contents



                            Subpart A_General

Sec.
25.11 Authority, purposes, and scope.
25.12 Definitions.

              Subpart B_Standards for Assessing Performance

25.21 Performance tests, standards, and ratings, in general.
25.22 Lending test.
25.23 Investment test.
25.24 Service test.
25.25 Community development test for wholesale or limited purpose banks 
          and savings associations.
25.26 Small bank and savings association performance standards.
25.27 Strategic plan.
25.28 Assigned ratings.
25.29 Effect of CRA performance on applications.

        Subpart C_Records, Reporting, and Disclosure Requirements

25.41 Assessment area delineation.
25.42 Data collection, reporting, and disclosure.
25.43 Content and availability of public file.
25.44 Public notice by banks and savings associations.
25.45 Publication of planned examination schedule.

                     Subpart D_Transition Provisions

25.51 Consideration of Bank Activities.
25.52 Strategic Plan Retention.

 Subpart E_Prohibition Against Use of Interstate Branches Primarily for 
                           Deposit Production

25.61 Purpose and scope.
25.62 Definitions.
25.63 Loan-to-deposit ratio screen.
25.64 Credit needs determination.
25.65 Sanctions.

Appendix A to Part 25--Ratings
Appendix B to Part 25--CRA Notice

    Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 215a, 
481, 1462a, 1463, 1464, 1814, 1816, 1828(c), 1835a, 2901 through 2908, 
3101 through 3111, and 5412(b)(2)(B).

    Source: 86 FR 71339, Dec. 15, 2021, unless otherwise noted.



                            Subpart A_General



Sec.  25.11  Authority, purposes, and scope.

    (a) Authority and OMB control number--(1) Authority. The authority 
for subparts A, B, C, D, and E is 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 
161, 215, 215a, 481, 1462a, 1463, 1464, 1814, 1816, 1828(c), 1835a, 2901 
through 2908, 3101 through 3111, and 5412(b)(2)(B).
    (2) OMB control number. The information collection requirements 
contained in this part were approved by the Office of Management and 
Budget under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB control number 1557-0160.
    (b) Purposes. In enacting the Community Reinvestment Act (CRA), the 
Congress required each appropriate Federal financial supervisory agency 
to assess an institution's record of helping to meet the credit needs of 
the local communities in which the institution is chartered, consistent 
with the safe and sound operation of the institution, and to take this 
record into account in the agency's evaluation of an application for a 
deposit facility by the institution. This part is intended to carry out 
the purposes of the CRA by:
    (1) Establishing the framework and criteria by which the Office of 
the Comptroller of the Currency (OCC) or the Federal deposit Insurance 
Corporation (FDIC), as appropriate, assesses a bank's or savings 
association's record of helping to meet the credit needs of its entire 
community, including low- and moderate-income neighborhoods, consistent 
with the safe and sound operation of the bank or savings association; 
and
    (2) Providing that the OCC takes that record into account in 
considering certain applications.
    (c) Scope--(1) General. (i) Subparts A, B, C, and D, and Appendices 
A and B, apply to all banks and savings associations except as provided 
in paragraphs (c)(2) and (3) of this section. Subpart E only applies to 
banks.
    (ii) With respect to subparts A, B, C, and D, and Appendices A and 
B--
    (A) The OCC has the authority to prescribe these regulations for 
national banks, Federal savings associations, and State savings 
associations and has

[[Page 652]]

the authority to enforce these regulations for national banks and 
Federal savings associations.
    (B) The FDIC has the authority to enforce these regulations for 
State savings associations.
    (iii) With respect to subparts A, B, C, and D, and appendix A, 
references to appropriate Federal banking agency will mean the OCC when 
the institution is a national bank or Federal savings association and 
the FDIC when the institution is a State savings association.
    (2) Federal branches and agencies. (i) This part applies to all 
insured Federal branches and to any Federal branch that is uninsured 
that results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
    (ii) Except as provided in paragraph (c)(2)(i) of this section, this 
part does not apply to Federal branches that are uninsured, limited 
Federal branches, or Federal agencies, as those terms are defined in 
part 28 of this chapter.
    (3) Certain special purpose banks and savings associations. This 
part does not apply to special purpose banks or special purpose savings 
associations that do not perform commercial or retail banking services 
by granting credit to the public in the ordinary course of business, 
other than as incident to their specialized operations. These banks or 
savings associations include banker's banks, as defined in 12 U.S.C. 24 
(Seventh), and banks or savings associations that engage only in one or 
more of the following activities: Providing cash management controlled 
disbursement services or serving as correspondent banks or savings 
associations, trust companies, or clearing agents.



Sec.  25.12  Definitions.

    For purposes of subparts A, B, C, and D, and appendices A and B, of 
this part, the following definitions apply:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company. The term ``control'' has 
the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company is 
under common control with another company if both companies are directly 
or indirectly controlled by the same company.
    (b) Area median income means:
    (1) The median family income for the MSA, if a person or geography 
is located in an MSA, or for the metropolitan division, if a person or 
geography is located in an MSA that has been subdivided into 
metropolitan divisions; or
    (2) The statewide nonmetropolitan median family income, if a person 
or geography is located outside an MSA.
    (c) Assessment area means a geographic area delineated in accordance 
with Sec.  25.41.
    (d) Automated teller machine (ATM) means an automated, unstaffed 
banking facility owned or operated by, or operated exclusively for, the 
bank or savings association at which deposits are received, cash 
dispersed, or money lent.
    (e)(1) Bank or savings association means, except as provided in 
Sec.  25.11(c), a national bank (including a Federal branch as defined 
in part 28 of this chapter) with Federally insured deposits or a savings 
association;
    (2) Bank and savings association means, except as provided in Sec.  
25.11(c), a national bank (including a Federal branch as defined in part 
28 of this chapter) with Federally insured deposits and a savings 
association.
    (f) Branch means a staffed banking facility authorized as a branch, 
whether shared or unshared, including, for example, a mini-branch in a 
grocery store or a branch operated in conjunction with any other local 
business or nonprofit organization.
    (g) Community development means:
    (1) Affordable housing (including multifamily rental housing) for 
low- or moderate-income individuals;
    (2) Community services targeted to low- or moderate-income 
individuals;
    (3) Activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of the 
Small Business Administration's Development Company or Small Business 
Investment Company programs (13 CFR 121.301) or have gross annual 
revenues of $1 million or less; or
    (4) Activities that revitalize or stabilize--

[[Page 653]]

    (i) Low-or moderate-income geographies;
    (ii) Designated disaster areas; or
    (iii) Distressed or underserved nonmetropolitan middle-income 
geographies designated by the Board of Governors of the Federal Reserve 
System, FDIC, and the OCC, based on--
    (A) Rates of poverty, unemployment, and population loss; or
    (B) Population size, density, and dispersion. Activities revitalize 
and stabilize geographies designated based on population size, density, 
and dispersion if they help to meet essential community needs, including 
needs of low- and moderate-income individuals.
    (h) Community development loan means a loan that:
    (1) Has as its primary purpose community development; and
    (2) Except in the case of a wholesale or limited purpose bank or 
savings association:
    (i) Has not been reported or collected by the bank or savings 
association or an affiliate for consideration in the bank's or savings 
association's assessment as a home mortgage, small business, small farm, 
or consumer loan, unless the loan is for a multifamily dwelling (as 
defined in Sec.  1003.2(n) of this title); and
    (ii) Benefits the bank's or savings association's assessment area(s) 
or a broader statewide or regional area(s) that includes the bank's or 
savings association's assessment area(s).
    (i) Community development service means a service that:
    (1) Has as its primary purpose community development;
    (2) Is related to the provision of financial services; and
    (3) Has not been considered in the evaluation of the bank's or 
savings association's retail banking services under Sec.  25.24(d).
    (j) Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a home mortgage, small business, or small farm loan. 
Consumer loans include the following categories of loans:
    (1) Motor vehicle loan, which is a consumer loan extended for the 
purchase of and secured by a motor vehicle;
    (2) Credit card loan, which is a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as this term is defined in Sec.  1026.2 of 
this title;
    (3) Other secured consumer loan, which is a secured consumer loan 
that is not included in one of the other categories of consumer loans; 
and
    (4) Other unsecured consumer loan, which is an unsecured consumer 
loan that is not included in one of the other categories of consumer 
loans.
    (k) Geography means a census tract delineated by the United States 
Bureau of the Census in the most recent decennial census.
    (l) Home mortgage loan means a closed-end mortgage loan or an open-
end line of credit as these terms are defined under Sec.  1003.2 of this 
title, and that is not an excluded transaction under Sec.  1003.3(c)(1) 
through (10) and (13) of this title.
    (m) Income level includes:
    (1) Low-income, which means an individual income that is less than 
50 percent of the area median income, or a median family income that is 
less than 50 percent, in the case of a geography.
    (2) Moderate-income, which means an individual income that is at 
least 50 percent and less than 80 percent of the area median income, or 
a median family income that is at least 50 and less than 80 percent, in 
the case of a geography.
    (3) Middle-income, which means an individual income that is at least 
80 percent and less than 120 percent of the area median income, or a 
median family income that is at least 80 and less than 120 percent, in 
the case of a geography.
    (4) Upper-income, which means an individual income that is 120 
percent or more of the area median income, or a median family income 
that is 120 percent or more, in the case of a geography.
    (n) Limited purpose bank or savings association means a bank or 
savings association that offers only a narrow product line (such as 
credit card or motor vehicle loans) to a regional or broader market and 
for which a designation as a limited purpose bank or

[[Page 654]]

savings association is in effect, in accordance with Sec.  25.25(b).
    (o) Loan location. A loan is located as follows:
    (1) A consumer loan is located in the geography where the borrower 
resides;
    (2) A home mortgage loan is located in the geography where the 
property to which the loan relates is located; and
    (3) A small business or small farm loan is located in the geography 
where the main business facility or farm is located or where the loan 
proceeds otherwise will be applied, as indicated by the borrower.
    (p) Loan production office means a staffed facility, other than a 
branch, that is open to the public and that provides lending-related 
services, such as loan information and applications.
    (q) Metropolitan division means a metropolitan division as defined 
by the Director of the Office of Management and Budget.
    (r) MSA means a metropolitan statistical area as defined by the 
Director of the Office of Management and Budget.
    (s) Nonmetropolitan area means any area that is not located in an 
MSA.
    (t) Qualified investment means a lawful investment, deposit, 
membership share, or grant that has as its primary purpose community 
development.
    (u) Small bank or savings association--(1) Definition. Small bank or 
savings association means a bank or savings association that, as of 
December 31 of either of the prior two calendar years, had assets of 
less than $1.322 billion. Intermediate small bank or savings association 
means a small bank or savings association with assets of at least $330 
million as of December 31 of both of the prior two calendar years and 
less than $1.322 billion as of December 31 of either of the prior two 
calendar years.
    (2) Adjustment. The dollar figures in paragraph (u)(1) of this 
section shall be adjusted annually and published by the appropriate 
Federal banking agency, based on the year-to-year change in the average 
of the Consumer Price Index for Urban Wage Earners and Clerical Workers, 
not seasonally adjusted, for each twelve-month period ending in 
November, with rounding to the nearest million.
    (v) Small business loan means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
    (w) Small farm loan means a loan included in ``loans to small 
farms'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
    (x) Wholesale bank or savings association means a bank or savings 
association that is not in the business of extending home mortgage, 
small business, small farm, or consumer loans to retail customers, and 
for which a designation as a wholesale bank or savings association is in 
effect, in accordance with Sec.  25.25(b).



              Subpart B_Standards for Assessing Performance



Sec.  25.21  Performance tests, standards, and ratings, in general.

    (a) Performance tests and standards. The appropriate Federal banking 
agency assesses the CRA performance of a bank or savings association in 
an examination as follows:
    (1) Lending, investment, and service tests. The appropriate Federal 
banking agency applies the lending, investment, and service tests, as 
provided in Sec. Sec.  25.22 through 25.24, in evaluating the 
performance of a bank or savings association, except as provided in 
paragraphs (a)(2), (3), and (4) of this section.
    (2) Community development test for wholesale or limited purpose 
banks and savings associations. The appropriate Federal banking agency 
applies the community development test for a wholesale or limited 
purpose bank or savings association, as provided in Sec.  25.25, except 
as provided in paragraph (a)(4) of this section.
    (3) Small bank and savings association performance standards. The 
appropriate Federal banking agency applies the small bank or savings 
association performance standards as provided in Sec.  25.26 in 
evaluating the performance of a small bank or savings association or a 
bank or savings association that was a small bank or savings association 
during the prior calendar year, unless the bank or savings association 
elects to be assessed as provided in paragraphs (a)(1), (2), or (4) of 
this section. The bank or savings association may

[[Page 655]]

elect to be assessed as provided in paragraph (a)(1) of this section 
only if it collects and reports the data required for other banks or 
savings associations under Sec.  25.42.
    (4) Strategic plan. The appropriate Federal banking agency evaluates 
the performance of a bank or savings association under a strategic plan 
if the bank or savings association submits, and the appropriate Federal 
banking agency approves, a strategic plan as provided in Sec.  25.27.
    (b) Performance context. The appropriate Federal banking agency 
applies the tests and standards in paragraph (a) of this section and 
also considers whether to approve a proposed strategic plan in the 
context of:
    (1) Demographic data on median income levels, distribution of 
household income, nature of housing stock, housing costs, and other 
relevant data pertaining to a bank's or savings association's assessment 
area(s);
    (2) Any information about lending, investment, and service 
opportunities in the bank's or savings association's assessment area(s) 
maintained by the bank or savings association or obtained from community 
organizations, state, local, and tribal governments, economic 
development agencies, or other sources;
    (3) The bank's or savings association's product offerings and 
business strategy as determined from data provided by the bank or 
savings association;
    (4) Institutional capacity and constraints, including the size and 
financial condition of the bank or savings association, the economic 
climate (national, regional, and local), safety and soundness 
limitations, and any other factors that significantly affect the bank's 
or savings association's ability to provide lending, investments, or 
services in its assessment area(s);
    (5) The bank's or savings association's past performance and the 
performance of similarly situated lenders;
    (6) The bank's or savings association's public file, as described in 
Sec.  25.43, and any written comments about the bank's or savings 
association's CRA performance submitted to the bank or savings 
association or the appropriate Federal banking agency; and
    (7) Any other information deemed relevant by the appropriate Federal 
banking agency.
    (c) Assigned ratings. The appropriate Federal banking agency assigns 
to a bank or savings association one of the following four ratings 
pursuant to Sec.  25.28 and appendix A of this part: ``outstanding''; 
``satisfactory''; ``needs to improve''; or ``substantial noncompliance'' 
as provided in 12 U.S.C. 2906(b)(2). The rating assigned by the 
appropriate Federal banking agency reflects the bank's or savings 
association's record of helping to meet the credit needs of its entire 
community, including low- and moderate-income neighborhoods, consistent 
with the safe and sound operation of the bank or savings association.
    (d) Safe and sound operations. This part and the CRA do not require 
a bank or savings association to make loans or investments or to provide 
services that are inconsistent with safe and sound operations. To the 
contrary, the appropriate Federal banking agency anticipates banks and 
savings associations can meet the standards of this part with safe and 
sound loans, investments, and services on which the banks and savings 
associations expect to make a profit. Banks and savings associations are 
permitted and encouraged to develop and apply flexible underwriting 
standards for loans that benefit low- or moderate-income geographies or 
individuals, only if consistent with safe and sound operations.
    (e) Low-cost education loans provided to low-income borrowers. In 
assessing and taking into account the record of a bank or savings 
association under this part, the appropriate Federal banking agency 
considers, as a factor, low-cost education loans originated by the bank 
or savings association to borrowers, particularly in its assessment 
area(s), who have an individual income that is less than 50 percent of 
the area median income. For purposes of this paragraph, ``low-cost 
education loans'' means any education loan, as defined in section 
140(a)(7) of the Truth in Lending Act (15 U.S.C. 1650(a)(7)) (including 
a loan under a State or local education loan program), originated by the 
bank or savings association for a student at an ``institution of higher

[[Page 656]]

education,'' as that term is generally defined in sections 101 and 102 
of the Higher Education Act of 1965 (20 U.S.C. 1001 and 1002) and the 
implementing regulations published by the U.S. Department of Education, 
with interest rates and fees no greater than those of comparable 
education loans offered directly by the U.S. Department of Education. 
Such rates and fees are specified in section 455 of the Higher Education 
Act of 1965 (20 U.S.C. 1087e).
    (f) Activities in cooperation with minority- or women-owned 
financial institutions and low-income credit unions. In assessing and 
taking into account the record of a nonminority-owned and nonwomen-owned 
bank or savings association under this part, the appropriate Federal 
banking agency considers as a factor capital investment, loan 
participation, and other ventures undertaken by the bank or savings 
association in cooperation with minority- and women-owned financial 
institutions and low-income credit unions. Such activities must help 
meet the credit needs of local communities in which the minority- and 
women-owned financial institutions and low-income credit unions are 
chartered. To be considered, such activities need not also benefit the 
bank's or savings association's assessment area(s) or the broader 
statewide or regional area(s) that includes the bank's or savings 
association's assessment area(s).



Sec.  25.22  Lending test.

    (a) Scope of test. (1) The lending test evaluates a bank's or 
savings association's record of helping to meet the credit needs of its 
assessment area(s) through its lending activities by considering a 
bank's or savings association's home mortgage, small business, small 
farm, and community development lending. If consumer lending constitutes 
a substantial majority of a bank's or savings association's business, 
the appropriate Federal banking agency will evaluate the bank's or 
savings association's consumer lending in one or more of the following 
categories: motor vehicle, credit card, other secured, and other 
unsecured loans. In addition, at a bank's or savings association's 
option, the appropriate Federal banking agency will evaluate one or more 
categories of consumer lending, if the bank or savings association has 
collected and maintained, as required in Sec.  25.42(c)(1), the data for 
each category that the bank or savings association elects to have the 
appropriate Federal banking agency evaluate.
    (2) The appropriate Federal banking agency considers originations 
and purchases of loans. The appropriate Federal banking agency will also 
consider any other loan data the bank or savings association may choose 
to provide, including data on loans outstanding, commitments and letters 
of credit.
    (3) A bank or savings association may ask the appropriate Federal 
banking agency to consider loans originated or purchased by consortia in 
which the bank or savings association participates or by third parties 
in which the bank or savings association has invested only if the loans 
meet the definition of community development loans and only in 
accordance with paragraph (d) of this section. The appropriate Federal 
banking agency will not consider these loans under any criterion of the 
lending test except the community development lending criterion.
    (b) Performance criteria. The appropriate Federal banking agency 
evaluates a bank's or savings association's lending performance pursuant 
to the following criteria:
    (1) Lending activity. The number and amount of the bank's or savings 
association's home mortgage, small business, small farm, and consumer 
loans, if applicable, in the bank's or savings association's assessment 
area(s);
    (2) Geographic distribution. The geographic distribution of the 
bank's or savings association's home mortgage, small business, small 
farm, and consumer loans, if applicable, based on the loan location, 
including:
    (i) The proportion of the bank's or savings association's lending in 
the bank's or savings association's assessment area(s);
    (ii) The dispersion of lending in the bank's or savings 
association's assessment area(s); and
    (iii) The number and amount of loans in low-, moderate-, middle-, 
and upper-income geographies in the bank's or

[[Page 657]]

savings association's assessment area(s);
    (3) Borrower characteristics. The distribution, particularly in the 
bank's or savings association's assessment area(s), of the bank's or 
savings association's home mortgage, small business, small farm, and 
consumer loans, if applicable, based on borrower characteristics, 
including the number and amount of:
    (i) Home mortgage loans to low-, moderate-, middle-, and upper-
income individuals;
    (ii) Small business and small farm loans to businesses and farms 
with gross annual revenues of $1 million or less;
    (iii) Small business and small farm loans by loan amount at 
origination; and
    (iv) Consumer loans, if applicable, to low-, moderate-, middle-, and 
upper-income individuals;
    (4) Community development lending. The bank's or savings 
association's community development lending, including the number and 
amount of community development loans, and their complexity and 
innovativeness; and
    (5) Innovative or flexible lending practices. The bank's or savings 
association's use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-income 
individuals or geographies.
    (c) Affiliate lending. (1) At a bank's or savings association's 
option, the appropriate Federal banking agency will consider loans by an 
affiliate of the bank or savings association, if the bank or savings 
association provides data on the affiliate's loans pursuant to Sec.  
25.42.
    (2) The appropriate Federal banking agency considers affiliate 
lending subject to the following constraints:
    (i) No affiliate may claim a loan origination or loan purchase if 
another institution claims the same loan origination or purchase; and
    (ii) If a bank or savings association elects to have the appropriate 
Federal banking agency consider loans within a particular lending 
category made by one or more of the bank's or savings association's 
affiliates in a particular assessment area, the bank or savings 
association shall elect to have the appropriate Federal banking agency 
consider, in accordance with paragraph (c)(1) of this section, all the 
loans within that lending category in that particular assessment area 
made by all of the bank's or savings association's affiliates.
    (3) The appropriate Federal banking agency does not consider 
affiliate lending in assessing a bank's or savings association's 
performance under paragraph (b)(2)(i) of this section.
    (d) Lending by a consortium or a third party. Community development 
loans originated or purchased by a consortium in which the bank or 
savings association participates or by a third party in which the bank 
or savings association has invested:
    (1) Will be considered, at the bank's or savings association's 
option, if the bank or savings association reports the data pertaining 
to these loans under Sec.  25.42(b)(2); and
    (2) May be allocated among participants or investors, as they 
choose, for purposes of the lending test, except that no participant or 
investor:
    (i) May claim a loan origination or loan purchase if another 
participant or investor claims the same loan origination or purchase; or
    (ii) May claim loans accounting for more than its percentage share 
(based on the level of its participation or investment) of the total 
loans originated by the consortium or third party.
    (e) Lending performance rating. The appropriate Federal banking 
agency rates a bank's or savings association's lending performance as 
provided in appendix A of this part.



Sec.  25.23  Investment test.

    (a) Scope of test. The investment test evaluates a bank's or savings 
association's record of helping to meet the credit needs of its 
assessment area(s) through qualified investments that benefit its 
assessment area(s) or a broader statewide or regional area that includes 
the bank's or savings association's assessment area(s).
    (b) Exclusion. Activities considered under the lending or service 
tests may not be considered under the investment test.

[[Page 658]]

    (c) Affiliate investment. At a bank's or savings association's 
option, the appropriate Federal banking agency will consider, in its 
assessment of a bank's or savings association's investment performance, 
a qualified investment made by an affiliate of the bank or savings 
association, if the qualified investment is not claimed by any other 
institution.
    (d) Disposition of branch premises. Donating, selling on favorable 
terms, or making available on a rent-free basis a branch of the bank or 
savings association that is located in a predominantly minority 
neighborhood to a minority depository institution or women's depository 
institution (as these terms are defined in 12 U.S.C. 2907(b)) will be 
considered as a qualified investment.
    (e) Performance criteria. The appropriate Federal banking agency 
evaluates the investment performance of a bank or savings association 
pursuant to the following criteria:
    (1) The dollar amount of qualified investments;
    (2) The innovativeness or complexity of qualified investments;
    (3) The responsiveness of qualified investments to credit and 
community development needs; and
    (4) The degree to which the qualified investments are not routinely 
provided by private investors.
    (f) Investment performance rating. The appropriate Federal banking 
agency rates a bank's or savings association's investment performance as 
provided in appendix A of this part.



Sec.  25.24  Service test.

    (a) Scope of test. The service test evaluates a bank's or savings 
association's record of helping to meet the credit needs of its 
assessment area(s) by analyzing both the availability and effectiveness 
of a bank's or savings association's systems for delivering retail 
banking services and the extent and innovativeness of its community 
development services.
    (b) Area(s) benefitted. Community development services must benefit 
a bank's or savings association's assessment area(s) or a broader 
statewide or regional area that includes the bank's or savings 
association's assessment area(s).
    (c) Affiliate service. At a bank's or savings association's option, 
the appropriate Federal banking agency will consider, in its assessment 
of a bank's or savings association's service performance, a community 
development service provided by an affiliate of the bank or savings 
association, if the community development service is not claimed by any 
other institution.
    (d) Performance criteria--retail banking services. The appropriate 
Federal banking agency evaluates the availability and effectiveness of a 
bank's or savings association's systems for delivering retail banking 
services, pursuant to the following criteria:
    (1) The current distribution of the bank's or savings association's 
branches among low-, moderate-, middle-, and upper-income geographies;
    (2) In the context of its current distribution of the bank's or 
savings association's branches, the bank's or savings association's 
record of opening and closing branches, particularly branches located in 
low- or moderate-income geographies or primarily serving low- or 
moderate-income individuals;
    (3) The availability and effectiveness of alternative systems for 
delivering retail banking services (e.g., ATMs, ATMs not owned or 
operated by or exclusively for the bank or savings association, banking 
by telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs) in low- and moderate-income geographies and to 
low- and moderate-income individuals; and
    (4) The range of services provided in low-, moderate-, middle-, and 
upper-income geographies and the degree to which the services are 
tailored to meet the needs of those geographies.
    (e) Performance criteria--community development services. The 
appropriate Federal banking agency evaluates community development 
services pursuant to the following criteria:
    (1) The extent to which the bank or savings association provides 
community development services; and
    (2) The innovativeness and responsiveness of community development 
services.
    (f) Service performance rating. The appropriate Federal banking 
agency rates

[[Page 659]]

a bank's or savings association's service performance as provided in 
appendix A of this part.



Sec.  25.25  Community development test for wholesale or limited purpose banks 
and savings associations.

    (a) Scope of test. The appropriate Federal banking agency assesses a 
wholesale or limited purpose bank's or savings association's record of 
helping to meet the credit needs of its assessment area(s) under the 
community development test through its community development lending, 
qualified investments, or community development services.
    (b) Designation as a wholesale or limited purpose bank or savings 
association. In order to receive a designation as a wholesale or limited 
purpose bank or savings association, a bank or savings association shall 
file a request, in writing, with the appropriate Federal banking agency, 
at least three months prior to the proposed effective date of the 
designation. If the appropriate Federal banking agency approves the 
designation, it remains in effect until the bank or savings association 
requests revocation of the designation or until one year after the 
appropriate Federal banking agency notifies the bank or savings 
association that the it has revoked the designation on its own 
initiative.
    (c) Performance criteria. The appropriate Federal banking agency 
evaluates the community development performance of a wholesale or 
limited purpose bank or savings association pursuant to the following 
criteria:
    (1) The number and amount of community development loans (including 
originations and purchases of loans and other community development loan 
data provided by the bank or savings association, such as data on loans 
outstanding, commitments, and letters of credit), qualified investments, 
or community development services;
    (2) The use of innovative or complex qualified investments, 
community development loans, or community development services and the 
extent to which the investments are not routinely provided by private 
investors; and
    (3) The bank's or savings association's responsiveness to credit and 
community development needs.
    (d) Indirect activities. At a bank's or savings association's 
option, the appropriate Federal banking agency will consider in its 
community development performance assessment:
    (1) Qualified investments or community development services provided 
by an affiliate of the bank or savings association, if the investments 
or services are not claimed by any other institution; and
    (2) Community development lending by affiliates, consortia and third 
parties, subject to the requirements and limitations in Sec.  25.22(c) 
and (d).
    (e) Benefit to assessment area(s)--(1) Benefit inside assessment 
area(s). The appropriate Federal banking agency considers all qualified 
investments, community development loans, and community development 
services that benefit areas within the bank's or savings association's 
assessment area(s) or a broader statewide or regional area that includes 
the bank's or savings association's assessment area(s).
    (2) Benefit outside assessment area(s). The appropriate Federal 
banking agency considers the qualified investments, community 
development loans, and community development services that benefit areas 
outside the bank's or savings association's assessment area(s), if the 
bank or savings association has adequately addressed the needs of its 
assessment area(s).
    (f) Community development performance rating. The appropriate 
Federal banking agency rates a bank's or savings association's community 
development performance as provided in appendix A of this part.



Sec.  25.26  Small bank and savings association performance standards.

    (a) Performance criteria--(1) Small banks and savings associations 
that are not intermediate small banks or savings associations. The 
appropriate Federal banking agency evaluates the record of a small bank 
or savings association that is not, or that was not during the prior 
calendar year, an intermediate small bank or savings association, of 
helping to meet the credit needs of its

[[Page 660]]

assessment area(s) pursuant to the criteria set forth in paragraph (b) 
of this section.
    (2) Intermediate small banks and savings associations. The 
appropriate Federal banking agency evaluates the record of a small bank 
or savings association that is, or that was during the prior calendar 
year, an intermediate small bank or savings association, of helping to 
meet the credit needs of its assessment area(s) pursuant to the criteria 
set forth in paragraphs (b) and (c) of this section.
    (b) Lending test. A small bank's or savings association's lending 
performance is evaluated pursuant to the following criteria:
    (1) The bank's or savings association's loan-to-deposit ratio, 
adjusted for seasonal variation, and, as appropriate, other lending-
related activities, such as loan originations for sale to the secondary 
markets, community development loans, or qualified investments;
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's or savings association's 
assessment area(s);
    (3) The bank's or savings association's record of lending to and, as 
appropriate, engaging in other lending-related activities for borrowers 
of different income levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's or savings 
association's loans; and
    (5) The bank's or savings association's record of taking action, if 
warranted, in response to written complaints about its performance in 
helping to meet credit needs in its assessment area(s).
    (c) Community development test. An intermediate small bank's or 
savings association's community development performance also is 
evaluated pursuant to the following criteria:
    (1) The number and amount of community development loans;
    (2) The number and amount of qualified investments;
    (3) The extent to which the bank or savings association provides 
community development services; and
    (4) The bank's or savings association's responsiveness through such 
activities to community development lending, investment, and services 
needs.
    (d) Small bank or savings association performance rating. The 
appropriate Federal banking agency rates the performance of a bank or 
savings association evaluated under this section as provided in appendix 
A of this part.



Sec.  25.27  Strategic plan.

    (a) Alternative election. The appropriate Federal banking agency 
will assess a bank's or savings association's record of helping to meet 
the credit needs of its assessment area(s) under a strategic plan if:
    (1) The bank or savings association has submitted the plan to the 
appropriate Federal banking agency as provided for in this section;
    (2) The appropriate Federal banking agency has approved the plan;
    (3) The plan is in effect; and
    (4) The bank or savings association has been operating under an 
approved plan for at least one year.
    (b) Data reporting. The appropriate Federal banking agency 's 
approval of a plan does not affect the bank's or savings association's 
obligation, if any, to report data as required by Sec.  25.42.
    (c) Plans in general--(1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must include annual interim 
measurable goals under which the appropriate Federal banking agency will 
evaluate the bank's or savings association's performance.
    (2) Multiple assessment areas. A bank or savings association with 
more than one assessment area may prepare a single plan for all of its 
assessment areas or one or more plans for one or more of its assessment 
areas.
    (3) Treatment of affiliates. Affiliated institutions may prepare a 
joint plan if the plan provides measurable goals for each institution. 
Activities may be allocated among institutions at the institutions' 
option, provided that the same activities are not considered for more 
than one institution.
    (d) Public participation in plan development. Before submitting a 
plan to the appropriate Federal banking agency for approval, a bank or 
savings association shall:

[[Page 661]]

    (1) Informally seek suggestions from members of the public in its 
assessment area(s) covered by the plan while developing the plan;
    (2) Once the bank or savings association has developed a plan, 
formally solicit public comment on the plan for at least 30 days by 
publishing notice in at least one newspaper of general circulation in 
each assessment area covered by the plan; and
    (3) During the period of formal public comment, make copies of the 
plan available for review by the public at no cost at all offices of the 
bank or savings association in any assessment area covered by the plan 
and provide copies of the plan upon request for a reasonable fee to 
cover copying and mailing, if applicable.
    (e) Submission of plan. The bank or savings association shall submit 
its plan to the appropriate Federal banking agency at least three months 
prior to the proposed effective date of the plan. The bank or savings 
association shall also submit with its plan a description of its 
informal efforts to seek suggestions from members of the public, any 
written public comment received, and, if the plan was revised in light 
of the comment received, the initial plan as released for public 
comment.
    (f) Plan content--(1) Measurable goals. (i) A bank or savings 
association shall specify in its plan measurable goals for helping to 
meet the credit needs of each assessment area covered by the plan, 
particularly the needs of low- and moderate-income geographies and low- 
and moderate-income individuals, through lending, investment, and 
services, as appropriate.
    (ii) A bank or savings association shall address in its plan all 
three performance categories and, unless the bank or savings association 
has been designated as a wholesale or limited purpose bank or savings 
association, shall emphasize lending and lending-related activities. 
Nevertheless, a different emphasis, including a focus on one or more 
performance categories, may be appropriate if responsive to the 
characteristics and credit needs of its assessment area(s), considering 
public comment and the bank's or savings association's capacity and 
constraints, product offerings, and business strategy.
    (2) Confidential information. A bank or savings association may 
submit additional information to the appropriate Federal banking agency 
on a confidential basis, but the goals stated in the plan must be 
sufficiently specific to enable the public and the appropriate Federal 
banking agency to judge the merits of the plan.
    (3) Satisfactory and outstanding goals. A bank or savings 
association shall specify in its plan measurable goals that constitute 
``satisfactory'' performance. A plan may specify measurable goals that 
constitute ``outstanding'' performance. If a bank or savings association 
submits, and the appropriate Federal banking agency approves, both 
``satisfactory'' and ``outstanding'' performance goals, the appropriate 
Federal banking agency will consider the bank or savings association 
eligible for an ``outstanding'' performance rating.
    (4) Election if satisfactory goals not substantially met. A bank or 
savings association may elect in its plan that, if the bank or savings 
association fails to meet substantially its plan goals for a 
satisfactory rating, the appropriate Federal banking agency will 
evaluate the bank's or savings association's performance under the 
lending, investment, and service tests, the community development test, 
or the small bank or savings association performance standards, as 
appropriate.
    (g) Plan approval--(1) Timing. The appropriate Federal banking 
agency will act upon a plan within 60 calendar days after the 
appropriate Federal banking agency receives the complete plan and other 
material required under paragraph (e) of this section. If the 
appropriate Federal banking agency fails to act within this time period, 
the plan shall be deemed approved unless the appropriate Federal banking 
agency extends the review period for good cause.
    (2) Public participation. In evaluating the plan's goals, the 
appropriate Federal banking agency considers the public's involvement in 
formulating the plan, written public comment on the plan, and any 
response by the bank

[[Page 662]]

or savings association to public comment on the plan.
    (3) Criteria for evaluating plan. The appropriate Federal banking 
agency evaluates a plan's measurable goals using the following criteria, 
as appropriate:
    (i) The extent and breadth of lending or lending-related activities, 
including, as appropriate, the distribution of loans among different 
geographies, businesses and farms of different sizes, and individuals of 
different income levels, the extent of community development lending, 
and the use of innovative or flexible lending practices to address 
credit needs;
    (ii) The amount and innovativeness, complexity, and responsiveness 
of the bank's or savings association's qualified investments; and
    (iii) The availability and effectiveness of the bank's or savings 
association's systems for delivering retail banking services and the 
extent and innovativeness of the bank's or savings association's 
community development services.
    (h) Plan amendment. During the term of a plan, a bank or savings 
association may request the appropriate Federal banking agency to 
approve an amendment to the plan on grounds that there has been a 
material change in circumstances. The bank or savings association shall 
develop an amendment to a previously approved plan in accordance with 
the public participation requirements of paragraph (d) of this section.
    (i) Plan assessment. The appropriate Federal banking agency approves 
the goals and assesses performance under a plan as provided for in 
appendix A of this part.



Sec.  25.28  Assigned ratings.

    (a) Ratings in general. Subject to paragraphs (b) and (c) of this 
section, the appropriate Federal banking agency assigns to a bank or 
savings association a rating of ``outstanding,'' ``satisfactory,'' 
``needs to improve,'' or ``substantial noncompliance'' based on the 
bank's or savings association's performance under the lending, 
investment and service tests, the community development test, the small 
bank or savings association performance standards, or an approved 
strategic plan, as applicable.
    (b) Lending, investment, and service tests. The appropriate Federal 
banking agency assigns a rating for a bank or savings association 
assessed under the lending, investment, and service tests in accordance 
with the following principles:
    (1) A bank or savings association that receives an ``outstanding'' 
rating on the lending test receives an assigned rating of at least 
``satisfactory'';
    (2) A bank or savings association that receives an ``outstanding'' 
rating on both the service test and the investment test and a rating of 
at least ``high satisfactory'' on the lending test receives an assigned 
rating of ``outstanding''; and
    (3) No bank or savings association may receive an assigned rating of 
``satisfactory'' or higher unless it receives a rating of at least ``low 
satisfactory'' on the lending test.
    (c) Effect of evidence of discriminatory or other illegal credit 
practices. (1) The appropriate Federal banking agency 's evaluation of a 
bank's or savings association's CRA performance is adversely affected by 
evidence of discriminatory or other illegal credit practices in any 
geography by the bank or savings association or in any assessment area 
by any affiliate whose loans have been considered as part of the bank's 
or savings association's lending performance. In connection with any 
type of lending activity described in Sec.  25.22(a), evidence of 
discriminatory or other credit practices that violate an applicable law, 
rule, or regulation includes, but is not limited to:
    (i) Discrimination against applicants on a prohibited basis in 
violation, for example, of the Equal Credit Opportunity Act or the Fair 
Housing Act;
    (ii) Violations of the Home Ownership and Equity Protection Act;
    (iii) Violations of section 5 of the Federal Trade Commission Act;
    (iv) Violations of section 8 of the Real Estate Settlement 
Procedures Act; and
    (v) Violations of the Truth in Lending Act provisions regarding a 
consumer's right of rescission.

[[Page 663]]

    (2) In determining the effect of evidence of practices described in 
paragraph (c)(1) of this section on the bank's or savings association's 
assigned rating, the appropriate Federal banking agency considers the 
nature, extent, and strength of the evidence of the practices; the 
policies and procedures that the bank or savings association (or 
affiliate, as applicable) has in place to prevent the practices; any 
corrective action that the bank or savings association (or affiliate, as 
applicable) has taken or has committed to take, including voluntary 
corrective action resulting from self-assessment; and any other relevant 
information.



Sec.  25.29  Effect of CRA performance on applications.

    (a) CRA performance. Among other factors, the appropriate Federal 
banking agency takes into account the record of performance under the 
CRA of each applicant bank or savings association, and for applications 
under 10(e) of the Home Owners' Loan Act (12 U.S.C. 1467a(e)), of each 
proposed subsidiary savings association, in considering an application 
for:
    (1) The establishment of:
    (i) A domestic branch for insured national banks; or
    (ii) A domestic branch or other facility that would be authorized to 
take deposits for savings associations;
    (2) The relocation of the main office or a branch;
    (3) The merger or consolidation with or the acquisition of assets or 
assumption of liabilities of an insured depository institution requiring 
approval under the Bank Merger Act (12 U.S.C. 1828(c)); and
    (4) The conversion of an insured depository institution to a 
national bank or Federal savings association charter; and
    (5) Acquisitions subject to section 10(e) of the Home Owners' Loan 
Act (12 U.S.C. 1467a(e)).
    (b) Charter application. (1) An applicant (other than an insured 
depository institution) for a national bank charter shall submit with 
its application a description of how it will meet its CRA objectives. 
The OCC takes the description into account in considering the 
application and may deny or condition approval on that basis.
    (2) An applicant for a Federal savings association charter shall 
submit with its application a description of how it will meet its CRA 
objectives. The appropriate Federal banking agency takes the description 
into account in considering the application and may deny or condition 
approval on that basis.
    (c) Interested parties. The appropriate Federal banking agency takes 
into account any views expressed by interested parties that are 
submitted in accordance with the applicable comment procedures in 
considering CRA performance in an application listed in paragraphs (a) 
and (b) of this section.
    (d) Denial or conditional approval of application. A bank's or 
savings association's record of performance may be the basis for denying 
or conditioning approval of an application listed in paragraph (a) of 
this section.
    (e) Insured depository institution. For purposes of this section, 
the term ``insured depository institution'' has the meaning given to 
that term in 12 U.S.C. 1813.



        Subpart C_Records, Reporting, and Disclosure Requirements



Sec.  25.41  Assessment area delineation.

    (a) In general. A bank or savings association shall delineate one or 
more assessment areas within which the appropriate Federal banking 
agency evaluates the bank's or savings association's record of helping 
to meet the credit needs of its community. The appropriate Federal 
banking agency does not evaluate the bank's or savings association's 
delineation of its assessment area(s) as a separate performance 
criterion, but the appropriate Federal banking agency reviews the 
delineation for compliance with the requirements of this section.
    (b) Geographic area(s) for wholesale or limited purpose banks or 
savings associations. The assessment area(s) for a wholesale or limited 
purpose bank or savings association must consist generally of one or 
more MSAs or metropolitan divisions (using the MSA or metropolitan 
division boundaries that were in effect as of January 1 of the

[[Page 664]]

calendar year in which the delineation is made) or one or more 
contiguous political subdivisions, such as counties, cities, or towns, 
in which the bank or savings association has its main office, branches, 
and deposit-taking ATMs.
    (c) Geographic area(s) for other banks and savings association. The 
assessment area(s) for a bank or savings association other than a 
wholesale or limited purpose bank or savings association must:
    (1) Consist generally of one or more MSAs or metropolitan divisions 
(using the MSA or metropolitan division boundaries that were in effect 
as of January 1 of the calendar year in which the delineation is made) 
or one or more contiguous political subdivisions, such as counties, 
cities, or towns; and
    (2) Include the geographies in which the bank or savings association 
has its main office, its branches, and its deposit-taking ATMs, as well 
as the surrounding geographies in which the bank or savings association 
has originated or purchased a substantial portion of its loans 
(including home mortgage loans, small business and small farm loans, and 
any other loans the bank or savings association chooses, such as those 
consumer loans on which the bank or savings association elects to have 
its performance assessed).
    (d) Adjustments to geographic area(s). A bank or savings association 
may adjust the boundaries of its assessment area(s) to include only the 
portion of a political subdivision that it reasonably can be expected to 
serve. An adjustment is particularly appropriate in the case of an 
assessment area that otherwise would be extremely large, of unusual 
configuration, or divided by significant geographic barriers.
    (e) Limitations on the delineation of an assessment area. Each 
bank's or savings associations assessment area(s):
    (1) Must consist only of whole geographies;
    (2) May not reflect illegal discrimination;
    (3) May not arbitrarily exclude low- or moderate-income geographies, 
taking into account the bank's or savings association's size and 
financial condition; and
    (4) May not extend substantially beyond an MSA boundary or beyond a 
state boundary unless the assessment area is located in a multistate 
MSA. If a bank or savings association serves a geographic area that 
extends substantially beyond a state boundary, the bank or savings 
association shall delineate separate assessment areas for the areas in 
each state. If a bank or savings association serves a geographic area 
that extends substantially beyond an MSA boundary, the bank or savings 
association shall delineate separate assessment areas for the areas 
inside and outside the MSA.
    (f) Banks and savings association serving military personnel. 
Notwithstanding the requirements of this section, a bank or savings 
association whose business predominantly consists of serving the needs 
of military personnel or their dependents who are not located within a 
defined geographic area may delineate its entire deposit customer base 
as its assessment area.
    (g) Use of assessment area(s). The appropriate Federal banking 
agency uses the assessment area(s) delineated by a bank or savings 
association in its evaluation of the bank's or savings association's CRA 
performance unless the appropriate Federal banking agency determines 
that the assessment area(s) do not comply with the requirements of this 
section.



Sec.  25.42  Data collection, reporting, and disclosure.

    (a) Loan information required to be collected and maintained. A bank 
or savings association, except a small bank or savings association, 
shall collect, and maintain in machine readable form (as prescribed by 
the appropriate Federal banking agency) until the completion of its next 
CRA examination, the following data for each small business or small 
farm loan originated or purchased by the bank or savings association:
    (1) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
    (2) The loan amount at origination;
    (3) The loan location; and
    (4) An indicator whether the loan was to a business or farm with 
gross annual revenues of $1 million or less.

[[Page 665]]

    (b) Loan information required to be reported. A bank or savings 
association, except a small bank or savings association or a bank or 
savings association that was a small bank or savings association during 
the prior calendar year, shall report annually by March 1 to the 
appropriate Federal banking agency in machine readable form (as 
prescribed by the appropriate Federal banking agency) the following data 
for the prior calendar year:
    (1) Small business and small farm loan data. For each geography in 
which the bank or savings association originated or purchased a small 
business or small farm loan, the aggregate number and amount of loans:
    (i) With an amount at origination of $100,000 or less;
    (ii) With amount at origination of more than $100,000 but less than 
or equal to $250,000;
    (iii) With an amount at origination of more than $250,000; and
    (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the bank or savings association 
considered in making its credit decision);
    (2) Community development loan data. The aggregate number and 
aggregate amount of community development loans originated or purchased; 
and
    (3) Home mortgage loans. If the bank or savings association is 
subject to reporting under part 1003 of this title, the location of each 
home mortgage loan application, origination, or purchase outside the 
MSAs in which the bank or savings association has a home or branch 
office (or outside any MSA) in accordance with the requirements of part 
1003 of this title.
    (c) Optional data collection and maintenance--(1) Consumer loans. A 
bank or savings association may collect and maintain in machine readable 
form (as prescribed by the appropriate Federal banking agency) data for 
consumer loans originated or purchased by the bank or savings 
association for consideration under the lending test. A bank or savings 
association may maintain data for one or more of the following 
categories of consumer loans: Motor vehicle, credit card, other secured, 
and other unsecured. If the bank or savings association maintains data 
for loans in a certain category, it shall maintain data for all loans 
originated or purchased within that category. The bank or savings 
association shall maintain data separately for each category, including 
for each loan:
    (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
    (ii) The loan amount at origination or purchase;
    (iii) The loan location; and
    (iv) The gross annual income of the borrower that the bank or 
savings association considered in making its credit decision.
    (2) Other loan data. At its option, a bank or savings association 
may provide other information concerning its lending performance, 
including additional loan distribution data.
    (d) Data on affiliate lending. A bank or savings association that 
elects to have the appropriate Federal banking agency consider loans by 
an affiliate, for purposes of the lending or community development test 
or an approved strategic plan, shall collect, maintain, and report for 
those loans the data that the bank or savings association would have 
collected, maintained, and reported pursuant to paragraphs (a), (b), and 
(c) of this section had the loans been originated or purchased by the 
bank or savings association. For home mortgage loans, the bank or 
savings association shall also be prepared to identify the home mortgage 
loans reported under part 1003 of this title by the affiliate.
    (e) Data on lending by a consortium or a third party. A bank or 
savings association that elects to have the appropriate Federal banking 
agency consider community development loans by a consortium or third 
party, for purposes of the lending or community development tests or an 
approved strategic plan, shall report for those loans the data that the 
bank or savings association would have reported under paragraph (b)(2) 
of this section had the loans been originated or purchased by the bank 
or savings association.
    (f) Small banks and savings associations electing evaluation under 
the lending, investment, and service tests. A bank or savings 
association that qualifies for evaluation under the small bank or

[[Page 666]]

savings association performance standards but elects evaluation under 
the lending, investment, and service tests shall collect, maintain, and 
report the data required for other banks or savings association pursuant 
to paragraphs (a) and (b) of this section.
    (g) Assessment area data. A bank or savings association, except a 
small bank or savings association or a bank or savings association that 
was a small bank or savings association during the prior calendar year, 
shall collect and report to the appropriate Federal banking agency by 
March 1 of each year a list for each assessment area showing the 
geographies within the area.
    (h) CRA Disclosure Statement. The appropriate Federal banking agency 
prepares annually for each bank or savings association that reports data 
pursuant to this section a CRA Disclosure Statement that contains, on a 
state-by-state basis:
    (1) For each county (and for each assessment area smaller than a 
county) with a population of 500,000 persons or fewer in which the bank 
or savings association reported a small business or small farm loan:
    (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in low-, moderate-, middle-, 
and upper-income geographies;
    (ii) A list grouping each geography according to whether the 
geography is low-, moderate-, middle-, or upper-income;
    (iii) A list showing each geography in which the bank or savings 
association reported a small business or small farm loan; and
    (iv) The number and amount of small business and small farm loans to 
businesses and farms with gross annual revenues of $1 million or less;
    (2) For each county (and for each assessment area smaller than a 
county) with a population in excess of 500,000 persons in which the bank 
or savings association reported a small business or small farm loan:
    (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in geographies with median 
income relative to the area median income of less than 10 percent, 10 or 
more but less than 20 percent, 20 or more but less than 30 percent, 30 
or more but less than 40 percent, 40 or more but less than 50 percent, 
50 or more but less than 60 percent, 60 or more but less than 70 
percent, 70 or more but less than 80 percent, 80 or more but less than 
90 percent, 90 or more but less than 100 percent, 100 or more but less 
than 110 percent, 110 or more but less than 120 percent, and 120 percent 
or more;
    (ii) A list grouping each geography in the county or assessment area 
according to whether the median income in the geography relative to the 
area median income is less than 10 percent, 10 or more but less than 20 
percent, 20 or more but less than 30 percent, 30 or more but less than 
40 percent, 40 or more but less than 50 percent, 50 or more but less 
than 60 percent, 60 or more but less than 70 percent, 70 or more but 
less than 80 percent, 80 or more but less than 90 percent, 90 or more 
but less than 100 percent, 100 or more but less than 110 percent, 110 or 
more but less than 120 percent, and 120 percent or more;
    (iii) A list showing each geography in which the bank or savings 
association reported a small business or small farm loan; and
    (iv) The number and amount of small business and small farm loans to 
businesses and farms with gross annual revenues of $1 million or less;
    (3) The number and amount of small business and small farm loans 
located inside each assessment area reported by the bank or savings 
association and the number and amount of small business and small farm 
loans located outside the assessment area(s) reported by the bank or 
savings association; and
    (4) The number and amount of community development loans reported as 
originated or purchased.
    (i) Aggregate disclosure statements. The OCC, in conjunction with 
the Board of Governors of the Federal Reserve System and the FDIC, 
prepares annually, for each MSA or metropolitan division (including an 
MSA or metropolitan division that crosses a state boundary) and the 
nonmetropolitan portion of each state, an aggregate disclosure statement 
of small business and small farm lending by all institutions subject

[[Page 667]]

to reporting under this part or parts 228 or 345 of this title. These 
disclosure statements indicate, for each geography, the number and 
amount of all small business and small farm loans originated or 
purchased by reporting institutions, except that the appropriate Federal 
banking agency may adjust the form of the disclosure if necessary, 
because of special circumstances, to protect the privacy of a borrower 
or the competitive position of an institution.
    (j) Central data depositories. The appropriate Federal banking 
agency makes the aggregate disclosure statements, described in paragraph 
(i) of this section, and the individual bank or savings association CRA 
Disclosure Statements, described in paragraph (h) of this section, 
available to the public at central data depositories. The appropriate 
Federal banking agency publishes a list of the depositories at which the 
statements are available.



Sec.  25.43  Content and availability of public file.

    (a) Information available to the public. A bank or savings 
association shall maintain a public file that includes the following 
information:
    (1) All written comments received from the public for the current 
year and each of the prior two calendar years that specifically relate 
to the bank's or savings association's performance in helping to meet 
community credit needs, and any response to the comments by the bank or 
savings association, if neither the comments nor the responses contain 
statements that reflect adversely on the good name or reputation of any 
persons other than the bank or savings association or publication of 
which would violate specific provisions of law;
    (2) A copy of the public section of the bank's or savings 
association's most recent CRA Performance Evaluation prepared by the 
appropriate Federal banking agency. The bank or savings association 
shall place this copy in the public file within 30 business days after 
its receipt from the appropriate Federal banking agency;
    (3) A list of the bank's or savings association's branches, their 
street addresses, and geographies;
    (4) A list of branches opened or closed by the bank or savings 
association during the current year and each of the prior two calendar 
years, their street addresses, and geographies;
    (5) A list of services (including hours of operation, available loan 
and deposit products, and transaction fees) generally offered at the 
bank's or savings association's branches and descriptions of material 
differences in the availability or cost of services at particular 
branches, if any. At its option, a bank or savings association may 
include information regarding the availability of alternative systems 
for delivering retail banking services (e.g., ATMs, ATMs not owned or 
operated by or exclusively for the bank or savings association, banking 
by telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs);
    (6) A map of each assessment area showing the boundaries of the area 
and identifying the geographies contained within the area, either on the 
map or in a separate list; and
    (7) Any other information the bank or savings association chooses.
    (b) Additional information available to the public--(1) Banks and 
savings associations other than small banks or savings associations. A 
bank or savings association, except a small bank or savings association 
or a bank or savings association that was a small bank or savings 
association during the prior calendar year, shall include in its public 
file the following information pertaining to the bank or savings 
association and its affiliates, if applicable, for each of the prior two 
calendar years:
    (i) If the bank or savings association has elected to have one or 
more categories of its consumer loans considered under the lending test, 
for each of these categories, the number and amount of loans:
    (A) To low-, moderate-, middle-, and upper-income individuals;
    (B) Located in low-, moderate-, middle-, and upper-income census 
tracts; and
    (C) Located inside the bank's or savings association's assessment 
area(s) and outside the bank's or savings association's assessment 
area(s); and

[[Page 668]]

    (ii) The bank's or savings association's CRA Disclosure Statement. 
The bank or savings association shall place the statement in the public 
file within three business days of its receipt from the appropriate 
Federal banking agency.
    (2) Banks and savings associations required to report Home Mortgage 
Disclosure Act (HMDA) data. A bank or savings association required to 
report home mortgage loan data pursuant part 1003 of this title shall 
include in its public file a written notice that the institution's HMDA 
Disclosure Statement may be obtained on the Consumer Financial 
Protection Bureau's (Bureau's) website at www.consumerfinance .gov/hmda. 
In addition, a bank or savings association that elected to have the 
appropriate Federal banking agency consider the mortgage lending of an 
affiliate shall include in its public file the name of the affiliate and 
a written notice that the affiliate's HMDA Disclosure Statement may be 
obtained at the Bureau's website. The bank or savings association shall 
place the written notice(s) in the public file within three business 
days after receiving notification from the Federal Financial 
Institutions Examination Council of the availability of the disclosure 
statement(s).
    (3) Small banks and savings associations. A small bank or savings 
association or a bank or savings association that was a small bank or 
savings association during the prior calendar year shall include in its 
public file:
    (i) The bank's or savings association's loan-to-deposit ratio for 
each quarter of the prior calendar year and, at its option, additional 
data on its loan-to-deposit ratio; and
    (ii) The information required for other banks or savings 
associations by paragraph (b)(1) of this section, if the bank or savings 
association has elected to be evaluated under the lending, investment, 
and service tests.
    (4) Banks and savings associations with strategic plans. A bank or 
savings association that has been approved to be assessed under a 
strategic plan shall include in its public file a copy of that plan. A 
bank or savings association need not include information submitted to 
the appropriate Federal banking agency on a confidential basis in 
conjunction with the plan.
    (5) Banks and savings associations with less than satisfactory 
ratings. A bank or savings association that received a less than 
satisfactory rating during its most recent examination shall include in 
its public file a description of its current efforts to improve its 
performance in helping to meet the credit needs of its entire community. 
The bank or savings association shall update the description quarterly.
    (c) Location of public information. A bank or savings association 
shall make available to the public for inspection upon request and at no 
cost the information required in this section as follows:
    (1) At the main office and, if an interstate bank or savings 
association, at one branch office in each state, all information in the 
public file; and
    (2) At each branch:
    (i) A copy of the public section of the bank's or savings 
association's most recent CRA Performance Evaluation and a list of 
services provided by the branch; and
    (ii) Within five calendar days of the request, all the information 
in the public file relating to the assessment area in which the branch 
is located.
    (d) Copies. Upon request, a bank or savings association shall 
provide copies, either on paper or in another form acceptable to the 
person making the request, of the information in its public file. The 
bank or savings association may charge a reasonable fee not to exceed 
the cost of copying and mailing (if applicable).
    (e) Updating. Except as otherwise provided in this section, a bank 
or savings association shall ensure that the information required by 
this section is current as of April 1 of each year.



Sec.  25.44  Public notice by banks and savings associations.

    A bank or savings association shall provide in the public lobby of 
its main office and each of its branches the appropriate public notice 
set forth in appendix B of this part. Only a branch of a bank or savings 
association having more than one assessment area shall include the 
bracketed material in the

[[Page 669]]

notice for branch offices. Only an insured national bank that is an 
affiliate of a holding company shall include the next to the last 
sentence of the notices. An insured national bank shall include the last 
sentence of the notices only if it is an affiliate of a holding company 
that is not prevented by statute from acquiring additional banks. Only a 
savings association that is an affiliate of a holding company shall 
include the last two sentences of the notices.



Sec.  25.45  Publication of planned examination schedule.

    The appropriate Federal banking agency publishes at least 30 days in 
advance of the beginning of each calendar quarter a list of banks and 
savings associations scheduled for CRA examinations in that quarter.



                     Subpart D_Transition Provisions



Sec.  25.51  Consideration of Bank Activities.

    (a) In assessing a bank's CRA performance, the appropriate Federal 
banking agency will consider any loan, investment, or service that was 
eligible for CRA consideration at the time the bank conducted the 
activity.
    (b) Notwithstanding paragraph (a), in assessing a bank's CRA 
performance, the appropriate Federal banking agency will consider any 
loan or investment that was eligible for CRA consideration at the time 
the bank entered into a legally binding commitment to make the loan or 
investment.



Sec.  25.52  Strategic Plan Retention.

    A bank or savings association strategic plan approved by the 
appropriate Federal banking agency and in effect as of December 31, 
2021, remains in effect, except that provisions of the plan that are not 
consistent with this part in effect as of January 1, 2022, are void, 
unless amended pursuant to Sec.  25.27.



 Subpart E_Prohibition Against Use of Interstate Branches Primarily for 
                           Deposit Production



Sec.  25.61  Purpose and scope.

    (a) Purpose. The purpose of this subpart is to implement section 109 
(12 U.S.C. 1835a) of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (Interstate Act).
    (b) Scope. (1) This subpart applies to any national bank that has 
operated a covered interstate branch for a period of at least one year, 
and any foreign bank that has operated a covered interstate branch that 
is a Federal branch for a period of at least one year.
    (2) This subpart describes the requirements imposed under 12 U.S.C. 
1835a, which requires the appropriate Federal banking agencies (the OCC, 
the Board of Governors of the Federal Reserve System, and the FDIC) to 
prescribe uniform rules that prohibit a bank from using any authority to 
engage in interstate branching pursuant to the Interstate Act, or any 
amendment made by the Interstate Act to any other provision of law, 
primarily for the purpose of deposit production.



Sec.  25.62  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Bank means, unless the context indicates otherwise:
    (1) A national bank; and
    (2) A foreign bank as that term is defined in 12 U.S.C. 3101(7) and 
12 CFR 28.11(i).
    (b) Covered interstate branch means:
    (1) Any branch of a national bank, and any Federal branch of a 
foreign bank, that:
    (i) Is established or acquired outside the bank's home State 
pursuant to the interstate branching authority granted by the Interstate 
Act or by any amendment made by the Interstate Act to any other 
provision of law; or
    (ii) Could not have been established or acquired outside of the 
bank's home State but for the establishment or acquisition of a branch 
described in paragraph (b)(1)(i) of this section; and
    (2) Any bank or branch of a bank controlled by an out-of-State bank 
holding company.
    (c) Federal branch means Federal branch as that term is defined in 
12 U.S.C. 3101(6) and 12 CFR 28.11(h).
    (d) Home State means:
    (1) With respect to a State bank, the State that chartered the bank;

[[Page 670]]

    (2) With respect to a national bank, the State in which the main 
office of the bank is located;
    (3) With respect to a bank holding company, the State in which the 
total deposits of all banking subsidiaries of such company are the 
largest on the later of:
    (i) July 1, 1966; or
    (ii) The date on which the company becomes a bank holding company 
under the Bank Holding Company Act;
    (4) With respect to a foreign bank:
    (i) For purposes of determining whether a U.S. branch of a foreign 
bank is a covered interstate branch, the home State of the foreign bank 
as determined in accordance with 12 U.S.C. 3103(c) and 12 CFR 28.11(n); 
and
    (ii) For purposes of determining whether a branch of a U.S. bank 
controlled by a foreign bank is a covered interstate branch, the State 
in which the total deposits of all banking subsidiaries of such foreign 
bank are the largest on the later of:
    (A) July 1, 1966; or
    (B) The date on which the foreign bank becomes a bank holding 
company under the Bank Holding Company Act.
    (e) Host State means a State in which a covered interstate branch is 
established or acquired.
    (f) Host state loan-to-deposit ratio generally means, with respect 
to a particular host state, the ratio of total loans in the host state 
relative to total deposits from the host state for all banks (including 
institutions covered under the definition of ``bank'' in 12 U.S.C. 
1813(a)(1)) that have that state as their home state, as determined and 
updated periodically by the appropriate Federal banking agencies and 
made available to the public.
    (g) Out-of-State bank holding company means, with respect to any 
State, a bank holding company whose home State is another State.
    (h) State means state as that term is defined in 12 U.S.C. 
1813(a)(3).
    (i) Statewide loan-to-deposit ratio means, with respect to a bank, 
the ratio of the bank's loans to its deposits in a state in which the 
bank has one or more covered interstate branches, as determined by the 
OCC.



Sec.  25.63  Loan-to-deposit ratio screen.

    (a) Application of screen. Beginning no earlier than one year after 
a covered interstate branch is acquired or established, the OCC will 
consider whether the bank's statewide loan-to-deposit ratio is less than 
50 percent of the relevant host State loan-to-deposit ratio.
    (b) Results of screen. (1) If the OCC determines that the bank's 
statewide loan-to-deposit ratio is 50 percent or more of the host state 
loan-to-deposit ratio, no further consideration under this subpart is 
required.
    (2) If the OCC determines that the bank's statewide loan-to-deposit 
ratio is less than 50 percent of the host state loan-to-deposit ratio, 
or if reasonably available data are insufficient to calculate the bank's 
statewide loan-to-deposit ratio, the OCC will make a credit needs 
determination for the bank as provided in Sec.  25.64.



Sec.  25.64  Credit needs determination.

    (a) In general. The OCC will review the loan portfolio of the bank 
and determine whether the bank is reasonably helping to meet the credit 
needs of the communities in the host state that are served by the bank.
    (b) Guidelines. The OCC will use the following considerations as 
guidelines when making the determination pursuant to paragraph (a) of 
this section:
    (1) Whether covered interstate branches were formerly part of a 
failed or failing depository institution;
    (2) Whether covered interstate branches were acquired under 
circumstances where there was a low loan-to-deposit ratio because of the 
nature of the acquired institution's business or loan portfolio;
    (3) Whether covered interstate branches have a high concentration of 
commercial or credit card lending, trust services, or other specialized 
activities, including the extent to which the covered interstate 
branches accept deposits in the host state;
    (4) The CRA ratings received by the bank, if any;
    (5) Economic conditions, including the level of loan demand, within 
the communities served by the covered interstate branches;
    (6) The safe and sound operation and condition of the bank; and

[[Page 671]]

    (7) The OCC's CRA regulations (subparts A through D of this part) 
and interpretations of those regulations.



Sec.  25.65  Sanctions.

    (a) In general. If the OCC determines that a bank is not reasonably 
helping to meet the credit needs of the communities served by the bank 
in the host state, and that the bank's statewide loan-to-deposit ratio 
is less than 50 percent of the host state loan-to-deposit ratio, the 
OCC:
    (1) May order that a bank's covered interstate branch or branches be 
closed unless the bank provides reasonable assurances to the 
satisfaction of the OCC, after an opportunity for public comment, that 
the bank has an acceptable plan under which the bank will reasonably 
help to meet the credit needs of the communities served by the bank in 
the host state; and
    (2) Will not permit the bank to open a new branch in the host state 
that would be considered to be a covered interstate branch unless the 
bank provides reasonable assurances to the satisfaction of the OCC, 
after an opportunity for public comment, that the bank will reasonably 
help to meet the credit needs of the community that the new branch will 
serve.
    (b) Notice prior to closure of a covered interstate branch. Before 
exercising the OCC's authority to order the bank to close a covered 
interstate branch, the OCC will issue to the bank a notice of the OCC's 
intent to order the closure and will schedule a hearing within 60 days 
of issuing the notice.
    (c) Hearing. The OCC will conduct a hearing scheduled under 
paragraph (b) of this section in accordance with the provisions of 12 
U.S.C. 1818(h) and 12 CFR part 19.



                   Sec. Appendix A to Part 25--Ratings

    (a) Ratings in general. (1) In assigning a rating, the appropriate 
Federal banking agency evaluates a bank's or savings association's 
performance under the applicable performance criteria in this part, in 
accordance with Sec. Sec.  25.21 and 25.28. This includes consideration 
of low-cost education loans provided to low-income borrowers and 
activities in cooperation with minority- or women-owned financial 
institutions and low-income credit unions, as well as adjustments on the 
basis of evidence of discriminatory or other illegal credit practices.
    (2) A bank's or savings association's performance need not fit each 
aspect of a particular rating profile in order to receive that rating, 
and exceptionally strong performance with respect to some aspects may 
compensate for weak performance in others. The bank's or savings 
association's overall performance, however, must be consistent with safe 
and sound banking practices and generally with the appropriate rating 
profile as follows.
    (b) Banks and savings associations evaluated under the lending, 
investment, and service tests--(1) Lending performance rating. The 
appropriate Federal banking agency assigns each bank's or savings 
association's lending performance one of the five following ratings.
    (i) Outstanding. The appropriate Federal banking agency rates a 
bank's or savings association's lending performance ``outstanding'' if, 
in general, it demonstrates:
    (A) Excellent responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A substantial majority of its loans are made in its assessment 
area(s);
    (C) An excellent geographic distribution of loans in its assessment 
area(s);
    (D) An excellent distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product lines 
offered by the bank or savings association;
    (E) An excellent record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-income 
individuals, or businesses (including farms) with gross annual revenues 
of $1 million or less, consistent with safe and sound operations;
    (F) Extensive use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
    (G) It is a leader in making community development loans.
    (ii) High satisfactory. The appropriate Federal banking agency rates 
a bank's or savings association's lending performance ``high 
satisfactory'' if, in general, it demonstrates:
    (A) Good responsiveness to credit needs in its assessment area(s), 
taking into account the number and amount of home mortgage, small 
business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A high percentage of its loans are made in its assessment 
area(s);
    (C) A good geographic distribution of loans in its assessment 
area(s);

[[Page 672]]

    (D) A good distribution, particularly in its assessment area(s), of 
loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines offered by 
the bank or savings association;
    (E) A good record of serving the credit needs of highly economically 
disadvantaged areas in its assessment area(s), low-income individuals, 
or businesses (including farms) with gross annual revenues of $1 million 
or less, consistent with safe and sound operations;
    (F) Use of innovative or flexible lending practices in a safe and 
sound manner to address the credit needs of low- or moderate-income 
individuals or geographies; and
    (G) It has made a relatively high level of community development 
loans.
    (iii) Low satisfactory. The appropriate Federal banking agency rates 
a bank's or savings association's lending performance ``low 
satisfactory'' if, in general, it demonstrates:
    (A) Adequate responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) An adequate percentage of its loans are made in its assessment 
area(s);
    (C) An adequate geographic distribution of loans in its assessment 
area(s);
    (D) An adequate distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product lines 
offered by the bank or savings association;
    (E) An adequate record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-income 
individuals, or businesses (including farms) with gross annual revenues 
of $1 million or less, consistent with safe and sound operations;
    (F) Limited use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
    (G) It has made an adequate level of community development loans.
    (iv) Needs to improve. The appropriate Federal banking agency rates 
a bank's or savings association's lending performance ``needs to 
improve'' if, in general, it demonstrates:
    (A) Poor responsiveness to credit needs in its assessment area(s), 
taking into account the number and amount of home mortgage, small 
business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A small percentage of its loans are made in its assessment 
area(s);
    (C) A poor geographic distribution of loans, particularly to low- or 
moderate-income geographies, in its assessment area(s);
    (D) A poor distribution, particularly in its assessment area(s), of 
loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines offered by 
the bank or savings association;
    (E) A poor record of serving the credit needs of highly economically 
disadvantaged areas in its assessment area(s), low-income individuals, 
or businesses (including farms) with gross annual revenues of $1 million 
or less, consistent with safe and sound operations;
    (F) Little use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-income 
individuals or geographies; and
    (G) It has made a low level of community development loans.
    (v) Substantial noncompliance. The appropriate Federal banking 
agency rates a bank's or savings association's lending performance as 
being in ``substantial noncompliance'' if, in general, it demonstrates:
    (A) A very poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A very small percentage of its loans are made in its assessment 
area(s);
    (C) A very poor geographic distribution of loans, particularly to 
low- or moderate-income geographies, in its assessment area(s);
    (D) A very poor distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product lines 
offered by the bank or savings association;
    (E) A very poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-income 
individuals, or businesses (including farms) with gross annual revenues 
of $1 million or less, consistent with safe and sound operations;
    (F) No use of innovative or flexible lending practices in a safe and 
sound manner to address the credit needs of low- or moderate-income 
individuals or geographies; and
    (G) It has made few, if any, community development loans.
    (2) Investment performance rating. The appropriate Federal banking 
agency assigns each bank's or savings association's investment 
performance one of the five following ratings.
    (i) Outstanding. The appropriate Federal banking agency rates a 
bank's or savings association's investment performance ``outstanding'' 
if, in general, it demonstrates:
    (A) An excellent level of qualified investments, particularly those 
that are not routinely provided by private investors, often in a 
leadership position;

[[Page 673]]

    (B) Extensive use of innovative or complex qualified investments; 
and
    (C) Excellent responsiveness to credit and community development 
needs.
    (ii) High satisfactory. The appropriate Federal banking agency rates 
a bank's or savings association's investment performance ``high 
satisfactory'' if, in general, it demonstrates:
    (A) A significant level of qualified investments, particularly those 
that are not routinely provided by private investors, occasionally in a 
leadership position;
    (B) Significant use of innovative or complex qualified investments; 
and
    (C) Good responsiveness to credit and community development needs.
    (iii) Low satisfactory. The appropriate Federal banking agency rates 
a bank's or savings association's investment performance ``low 
satisfactory'' if, in general, it demonstrates:
    (A) An adequate level of qualified investments, particularly those 
that are not routinely provided by private investors, although rarely in 
a leadership position;
    (B) Occasional use of innovative or complex qualified investments; 
and
    (C) Adequate responsiveness to credit and community development 
needs.
    (iv) Needs to improve. The appropriate Federal banking agency rates 
a bank's or savings association's investment performance ``needs to 
improve'' if, in general, it demonstrates:
    (A) A poor level of qualified investments, particularly those that 
are not routinely provided by private investors;
    (B) Rare use of innovative or complex qualified investments; and
    (C) Poor responsiveness to credit and community development needs.
    (v) Substantial noncompliance. The appropriate Federal banking 
agency rates a bank's or savings association's investment performance as 
being in ``substantial noncompliance'' if, in general, it demonstrates:
    (A) Few, if any, qualified investments, particularly those that are 
not routinely provided by private investors;
    (B) No use of innovative or complex qualified investments; and
    (C) Very poor responsiveness to credit and community development 
needs.
    (3) Service performance rating. The appropriate Federal banking 
agency assigns each bank's or savings association's service performance 
one of the five following ratings.
    (i) Outstanding. The appropriate Federal banking agency rates a 
bank's or savings association's service performance ``outstanding'' if, 
in general, the bank or savings association demonstrates:
    (A) Its service delivery systems are readily accessible to 
geographies and individuals of different income levels in its assessment 
area(s);
    (B) To the extent changes have been made, its record of opening and 
closing branches has improved the accessibility of its delivery systems, 
particularly in low- or moderate-income geographies or to low- or 
moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) are 
tailored to the convenience and needs of its assessment area(s), 
particularly low- or moderate-income geographies or low- or moderate-
income individuals; and
    (D) It is a leader in providing community development services.
    (ii) High satisfactory. The appropriate Federal banking agency rates 
a bank's or savings association's service performance ``high 
satisfactory'' if, in general, the bank or savings association 
demonstrates:
    (A) Its service delivery systems are accessible to geographies and 
individuals of different income levels in its assessment area(s);
    (B) To the extent changes have been made, its record of opening and 
closing branches has not adversely affected the accessibility of its 
delivery systems, particularly in low- and moderate-income geographies 
and to low- and moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) do 
not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and moderate-
income individuals; and
    (D) It provides a relatively high level of community development 
services.
    (iii) Low satisfactory. The appropriate Federal banking agency rates 
a bank's or savings association's service performance ``low 
satisfactory'' if, in general, the bank or savings association 
demonstrates:
    (A) Its service delivery systems are reasonably accessible to 
geographies and individuals of different income levels in its assessment 
area(s);
    (B) To the extent changes have been made, its record of opening and 
closing branches has generally not adversely affected the accessibility 
of its delivery systems, particularly in low- and moderate-income 
geographies and to low- and moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) do 
not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and moderate-
income individuals; and
    (D) It provides an adequate level of community development services.
    (iv) Needs to improve. The appropriate Federal banking agency rates 
a bank's or savings association's service performance ``needs to 
improve'' if, in general, the bank or savings association demonstrates:

[[Page 674]]

    (A) Its service delivery systems are unreasonably inaccessible to 
portions of its assessment area(s), particularly to low- or moderate-
income geographies or to low- or moderate-income individuals;
    (B) To the extent changes have been made, its record of opening and 
closing branches has adversely affected the accessibility its delivery 
systems, particularly in low- or moderate-income geographies or to low- 
or moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) vary 
in a way that inconveniences its assessment area(s), particularly low- 
or moderate-income geographies or low- or moderate-income individuals; 
and
    (D) It provides a limited level of community development services.
    (v) Substantial noncompliance. The appropriate Federal banking 
agency rates a bank's or savings association's service performance as 
being in ``substantial noncompliance'' if, in general, the bank or 
savings association demonstrates:
    (A) Its service delivery systems are unreasonably inaccessible to 
significant portions of its assessment area(s), particularly to low- or 
moderate-income geographies or to low- or moderate-income individuals;
    (B) To the extent changes have been made, its record of opening and 
closing branches has significantly adversely affected the accessibility 
of its delivery systems, particularly in low- or moderate-income 
geographies or to low- or moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) vary 
in a way that significantly inconveniences its assessment area(s), 
particularly low- or moderate-income geographies or low- or moderate-
income individuals; and
    (D) It provides few, if any, community development services.
    (c) Wholesale or limited purpose banks. The appropriate Federal 
banking agency assigns each wholesale or limited purpose bank's or 
savings association's community development performance one of the four 
following ratings.
    (1) Outstanding. The appropriate Federal banking agency rates a 
wholesale or limited purpose bank's or savings association's community 
development performance ``outstanding'' if, in general, it demonstrates:
    (i) A high level of community development loans, community 
development services, or qualified investments, particularly investments 
that are not routinely provided by private investors;
    (ii) Extensive use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Excellent responsiveness to credit and community development 
needs in its assessment area(s).
    (2) Satisfactory. The appropriate Federal banking agency rates a 
wholesale or limited purpose bank's or savings association's community 
development performance ``satisfactory'' if, in general, it 
demonstrates:
    (i) An adequate level of community development loans, community 
development services, or qualified investments, particularly investments 
that are not routinely provided by private investors;
    (ii) Occasional use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Adequate responsiveness to credit and community development 
needs in its assessment area(s).
    (3) Needs to improve. The appropriate Federal banking agency rates a 
wholesale or limited purpose bank's or savings association's community 
development performance as ``needs to improve'' if, in general, it 
demonstrates:
    (i) A poor level of community development loans, community 
development services, or qualified investments, particularly investments 
that are not routinely provided by private investors;
    (ii) Rare use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Poor responsiveness to credit and community development needs 
in its assessment area(s).
    (4) Substantial noncompliance. The appropriate Federal banking 
agency rates a wholesale or limited purpose bank's or savings 
association's community development performance in ``substantial 
noncompliance'' if, in general, it demonstrates:
    (i) Few, if any, community development loans, community development 
services, or qualified investments, particularly investments that are 
not routinely provided by private investors;
    (ii) No use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Very poor responsiveness to credit and community development 
needs in its assessment area(s).
    (d) Banks and savings associations evaluated under the small bank 
and savings association performance standards--(1) Lending test ratings. 
(i) Eligibility for a satisfactory lending test rating. The appropriate 
Federal banking agency rates a small bank's or savings association's 
lending performance ``satisfactory'' if, in general, the bank or savings 
association demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal 
variations) given the bank's or savings association's size, financial 
condition, the credit needs of its assessment

[[Page 675]]

area(s), and taking into account, as appropriate, other lending-related 
activities such as loan originations for sale to the secondary markets 
and community development loans and qualified investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other lending-
related activities for individuals of different income levels (including 
low- and moderate-income individuals) and businesses and farms of 
different sizes that is reasonable given the demographics of the bank's 
or savings association's assessment area(s);
    (D) A record of taking appropriate action, when warranted, in 
response to written complaints, if any, about the bank's or savings 
association's performance in helping to meet the credit needs of its 
assessment area(s); and
    (E) A reasonable geographic distribution of loans given the bank's 
or savings association's assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A small 
bank or savings association that meets each of the standards for a 
``satisfactory'' rating under this paragraph and exceeds some or all of 
those standards may warrant consideration for a lending test rating of 
``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A small 
bank or savings association may also receive a lending test rating of 
``needs to improve'' or ``substantial noncompliance'' depending on the 
degree to which its performance has failed to meet the standard for a 
``satisfactory'' rating.
    (2) Community development test ratings for intermediate small banks 
and savings associations--(i) Eligibility for a satisfactory community 
development test rating. The appropriate Federal banking agency rates an 
intermediate small bank's or savings association's community development 
performance ``satisfactory'' if the bank or savings association 
demonstrates adequate responsiveness to the community development needs 
of its assessment area(s) through community development loans, qualified 
investments, and community development services. The adequacy of the 
bank's or savings association's response will depend on its capacity for 
such community development activities, its assessment area's need for 
such community development activities, and the availability of such 
opportunities for community development in the bank's or savings 
association's assessment area(s).
    (ii) Eligibility for an outstanding community development test 
rating. The appropriate Federal banking agency rates an intermediate 
small bank's or savings association's community development performance 
``outstanding'' if the bank or savings association demonstrates 
excellent responsiveness to community development needs in its 
assessment area(s) through community development loans, qualified 
investments, and community development services, as appropriate, 
considering the bank's or savings association's capacity and the need 
and availability of such opportunities for community development in the 
bank's or savings association's assessment area(s).
    (iii) Needs to improve or substantial noncompliance ratings. An 
intermediate small bank or savings association may also receive a 
community development test rating of ``needs to improve'' or 
``substantial noncompliance'' depending on the degree to which its 
performance has failed to meet the standards for a ``satisfactory'' 
rating.
    (3) Overall rating--(i) Eligibility for a satisfactory overall 
rating. No intermediate small bank or savings association may receive an 
assigned overall rating of ``satisfactory'' unless it receives a rating 
of at least ``satisfactory'' on both the lending test and the community 
development test.
    (ii) Eligibility for an outstanding overall rating. (A) An 
intermediate small bank or savings association that receives an 
``outstanding'' rating on one test and at least ``satisfactory'' on the 
other test may receive an assigned overall rating of ``outstanding.''
    (B) A small bank or savings association that is not an intermediate 
small bank or savings association that meets each of the standards for a 
``satisfactory'' rating under the lending test and exceeds some or all 
of those standards may warrant consideration for an overall rating of 
``outstanding.'' In assessing whether a bank's or savings association's 
performance is ``outstanding,'' the appropriate Federal banking agency 
considers the extent to which the bank or savings association exceeds 
each of the performance standards for a ``satisfactory'' rating and its 
performance in making qualified investments and its performance in 
providing branches and other services and delivery systems that enhance 
credit availability in its assessment area(s).
    (iii) Needs to improve or substantial noncompliance overall ratings. 
A small bank or savings association may also receive a rating of ``needs 
to improve'' or ``substantial noncompliance'' depending on the degree to 
which its performance has failed to meet the standards for a 
``satisfactory'' rating.
    (e) Strategic plan assessment and rating--(1) Satisfactory goals. 
The appropriate Federal banking agency approves as ``satisfactory'' 
measurable goals that adequately help to meet the credit needs of the 
bank's or savings association's assessment area(s).
    (2) Outstanding goals. If the plan identifies a separate group of 
measurable goals that substantially exceed the levels approved as 
``satisfactory,'' the appropriate Federal banking agency will approve 
those goals as ``outstanding.''

[[Page 676]]

    (3) Rating. The appropriate Federal banking agency assesses the 
performance of a bank or savings association operating under an approved 
plan to determine if the bank or savings association has met its plan 
goals:
    (i) If the bank or savings association substantially achieves its 
plan goals for a satisfactory rating, the appropriate Federal banking 
agency will rate the bank's or savings association's performance under 
the plan as ``satisfactory.''
    (ii) If the bank or savings association exceeds its plan goals for a 
satisfactory rating and substantially achieves its plan goals for an 
outstanding rating, the appropriate Federal banking agency will rate the 
bank's or savings association's performance under the plan as 
``outstanding.''
    (iii) If the bank or savings association fails to meet substantially 
its plan goals for a satisfactory rating, the appropriate Federal 
banking agency will rate the bank or savings association as either 
``needs to improve'' or ``substantial noncompliance,'' depending on the 
extent to which it falls short of its plan goals, unless the bank or 
savings association elected in its plan to be rated otherwise, as 
provided in Sec.  25.27(f)(4).



                 Sec. Appendix B to Part 25--CRA Notice

    (a) Notice for main offices and, if an interstate bank and savings 
association, one branch office in each state.

                    Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the [Office of 
the Comptroller of the Currency (OCC) or Federal Deposit Insurance 
Corporation (FDIC), as appropriate] evaluates our record of helping to 
meet the credit needs of this community consistent with safe and sound 
operations. The [OCC or FDIC, as appropriate] also takes this record 
into account when deciding on certain applications submitted by us.

                     Your Involvement is Encouraged

    You are entitled to certain information about our operations and our 
performance under the CRA, including, for example, information about our 
branches, such as their location and services provided at them; the 
public section of our most recent CRA Performance Evaluation, prepared 
by the [OCC or FDIC, as appropriate]; and comments received from the 
public relating to our performance in helping to meet community credit 
needs, as well as our responses to those comments. You may review this 
information today.
    At least 30 days before the beginning of each quarter, the [OCC or 
FDIC, as appropriate] publishes a nationwide list of the banks and 
savings associations that are scheduled for CRA examination in that 
quarter. This list is available from the [OCC or FDIC, as appropriate], 
at [address]. You may send written comments about our performance in 
helping to meet community credit needs to [name and address of official 
at bank or savings association] and to the [OCC or FDIC, as 
appropriate], at [address]. Your letter, together with any response by 
us, will be considered by the [OCC or FDIC, as appropriate] in 
evaluating our CRA performance and may be made public.
    You may ask to look at any comments received by the [OCC or FDIC, as 
appropriate]. You may also request from the [OCC or FDIC, as 
appropriate] an announcement of our applications covered by the CRA 
filed with the [OCC or FDIC, as appropriate]. We are an affiliate of 
[name of holding company], a [bank holding company or savings and loan 
holding company, as appropriate]. You may request from the [title of 
responsible official], Federal Reserve Bank of [__] [address] an 
announcement of applications covered by the CRA filed by [bank holding 
companies or savings and loan holding companies, as appropriate].
    (b) Notice for branch offices.

                    Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the [Comptroller 
of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC), 
as appropriate] evaluates our record of helping to meet the credit needs 
of this community consistent with safe and sound operations. The [OCC or 
FDIC, as appropriate] also takes this record into account when deciding 
on certain applications submitted by us.

                     Your Involvement is Encouraged

    You are entitled to certain information about our operations and our 
performance under the CRA. You may review today the public section of 
our most recent CRA evaluation, prepared by the [OCC or FDIC, as 
appropriate], and a list of services provided at this branch. You may 
also have access to the following additional information, which we will 
make available to you at this branch within five calendar days after you 
make a request to us: (1) A map showing the assessment area containing 
this branch, which is the area in which the [OCC or FDIC, as 
appropriate] evaluates our CRA performance in this community; (2) 
information about our branches in this assessment area; (3) a list of 
services we provide at those locations; (4) data on our lending 
performance in this assessment area; and (5) copies of all written 
comments received by us that specifically relate to our CRA performance 
in this assessment area, and any responses we have made to those 
comments. If we are operating under an approved strategic plan, you may 
also have access to a copy of the plan.

[[Page 677]]

    [If you would like to review information about our CRA performance 
in other communities served by us, the public file for our entire [bank 
or savings association, as appropriate] is available at [name of office 
located in state], located at [address].]
    At least 30 days before the beginning of each quarter, the [OCC or 
FDIC, as appropriate] publishes a nationwide list of the banks and 
savings associations that are scheduled for CRA examination in that 
quarter. This list is available from the [OCC or FDIC, as appropriate] 
at [address]. You may send written comments about our performance in 
helping to meet community credit needs to [name and address of official 
at bank or savings association, as appropriate] and to the [OCC or FDIC, 
as appropriate] at [address]. Your letter, together with any response by 
us, will be considered by the [OCC or FDIC, as appropriate] in 
evaluating our CRA performance and may be made public.
    You may ask to look at any comments received by the [OCC or FDIC, as 
appropriate]. You may also request from the [OCC or FDIC, as 
appropriate] an announcement of our applications covered by the CRA 
filed with the [OCC or FDIC, as appropriate]. We are an affiliate of 
[name of holding company], a [bank holding company or savings and loan 
holding company, as appropriate]. You may request from the [title of 
responsible official], Federal Reserve Bank of [__], [address], an 
announcement of applications covered by the CRA filed by [bank holding 
companies or savings and loan holding companies, as appropriate].



PART 26_MANAGEMENT OFFICIAL INTERLOCKS--Table of Contents



Sec.
26.1 Authority, purpose, and scope.
26.2 Definitions.
26.3 Prohibitions.
26.4 Interlocking relationships permitted by statute.
26.5 Small market share exemption.
26.6 General exemption.
26.7 Change in circumstances.
26.8 Enforcement.

    Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 3201-3208, 
5412(b)(2)(B).

    Source: 61 FR 40300, Aug. 2, 1996, unless otherwise noted.



Sec.  26.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended, and the OCC's general rulemaking 
authority for national banks in 12 U.S.C. 93a and Federal savings 
associations in 12 U.S.C. 1462a and 5412(b)(2)(B).
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster competition by generally prohibiting a management official from 
serving two nonaffiliated depository organizations in situations where 
the management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of national 
banks, Federal savings associations, and their affiliates.

[73 FR 22251, Apr. 24, 2008, as amended at 79 FR 28399, May 16, 2014]



Sec.  26.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of that 
section 202, shares held by an individual include shares held by members 
of his or her immediate family. ``Immediate family'' means spouse, 
mother, father, child, grandchild, sister, brother, or any of their 
spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving a national bank 
or Federal savings association based on common ownership does not exist 
if the OCC determines, after giving the affected persons the opportunity 
to respond, that the asserted affiliation was established in order to 
avoid the prohibitions of the Interlocks Act and does not represent a 
true commonality of interest between the depository organizations. In 
making this determination, the OCC considers, among other things, 
whether a person, including members of his or her immediate family, 
whose shares are necessary to constitute the group, owns a nominal 
percentage of the shares of one of the organizations and the percentage 
is substantially disproportionate to that person's ownership of shares 
in the other organization.
    (b) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if

[[Page 678]]

a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (c) Community means a city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (d) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The property 
line of an office located in an unincorporated city, town, or village is 
the boundary line of that city, town, or village for the purpose of this 
definition.
    (e) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (f) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, a 
cooperative bank, an industrial bank, or a credit union, chartered under 
the laws of the United States and having a principal office located in 
the United States. Additionally, a United States office, including a 
branch or agency, of a foreign commercial bank is a depository 
institution.
    (g) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (h) Depository organization means a depository institution or a 
depository holding company.
    (i) Low- and moderate-income areas means census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.
    (j) Management official. (1) The term management official means:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
5.51(c)(3);
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (j)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (k) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (l) Person means a natural person, corporation, or other business 
entity.
    (m) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (n) Representative or nominee means a natural person who serves as a 
management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The OCC will find 
that a person has an obligation to act on behalf of another person only 
if the first person has an agreement, express or implied, to act on 
behalf of the second person with respect to management responsibilities. 
The OCC will determine, after giving the affected persons an opportunity 
to respond, whether a person is a representative or nominee.
    (o) Total assets. (1) The term total assets means assets measured on 
a consolidated basis and reported in the

[[Page 679]]

most recent fiscal year-end Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (p) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.

[61 FR 40300, Aug. 2, 1996, as amended at 64 FR 51678, Sept. 24, 1999; 
72 FR 1276, Jan. 11, 2007; 73 FR 22251, Apr. 24, 2008; 79 FR 28399, May 
16, 2014]



Sec.  26.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices in 
the same community.
    (b) RMSA. A management official of a depository organization may not 
serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $50 million or 
more.
    (c) Major assets. A management official of a depository organization 
with total assets exceeding $10 billion (or any affiliate of such an 
organization) may not serve at the same time as a management official of 
an unaffiliated depository organization with total assets exceeding $10 
billion (or any affiliate of such an organization), regardless of the 
location of the two depository organizations. The OCC will adjust these 
thresholds, as necessary, based on the year-to-year change in the 
average of the Consumer Price Index for the Urban Wage Earners and 
Clerical Workers, not seasonally adjusted, with rounding to the nearest 
$100 million. The OCC will announce the revised thresholds by publishing 
a final rule without notice and comment in the Federal Register.

[61 FR 40300, Aug. 2, 1996, as amended at 64 FR 51678, Sept. 24, 1999; 
72 FR 1276, Jan. 11, 2007; 84 FR 54471, Oct. 10, 2019]



Sec.  26.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec.  26.3 do not apply in the case of any one 
or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the United 
States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan Bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository institutions 
regulatory agency and is acquired by another depository organization. 
This exemption lasts for five years, beginning on the date the 
depository organization is acquired; and

[[Page 680]]

    (h)(1) A diversified savings and loan holding company (as defined in 
section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who also is a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The OCC may disapprove a notice of proposed service if it finds 
that:
    (i) The service cannot be structured or limited so as to preclude an 
anticompetitive effect in financial services in any part of the United 
States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the OCC.
    (3) The OCC may require that any interlock permitted under this 
paragraph (h) be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the notice 
period.
    (i) Any savings association that has issued stock in connection with 
a qualified stock issuance pursuant to section 10(q) of the HOLA, as 
provided by section 205(9) of the Interlocks Act (12 U.S.C. 3204(9)).
    (j) A management official or prospective management official of a 
depository organization may enter into an otherwise prohibited 
interlocking relationship with a Federal savings association for a 
period of up to 10 years if such relationship is approved by the Federal 
Deposit Insurance Corporation pursuant to section 13(k)(1)(A)(v) of the 
Federal Deposit Insurance Act, as amended (12 U.S.C. 1823(k)(1)(A)(v)).

[61 FR 40300, Aug. 2, 1996, as amended at 79 FR 28399, May 16, 2014]



Sec.  26.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by Sec.  
26.3 is permissible, if:
    (1) The interlock is not prohibited by Sec.  26.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have offices. 
The amount of deposits shall be determined by reference to the most 
recent annual Summary of Deposits published by the FDIC for the RMSA or 
community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.

[64 FR 51678, Sept. 24, 1999]



Sec.  26.6  General exemption.

    (a) Exemption. The OCC may by order issued following receipt of an 
application, exempt an interlock from the prohibitions in Sec.  26.3 if 
the OCC finds that the interlock would not result in a monopoly or 
substantial lessening of competition and would not present safety and 
soundness concerns.
    (b) Presumptions. In reviewing an application for an exemption under 
this section, the OCC will apply a rebuttable presumption that an 
interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low-and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in 12 CFR 
5.51(c)(7).
    (c) Duration. (1) Unless a specific expiration period is provided in 
the OCC approval, an exemption permitted by

[[Page 681]]

paragraph (a) of this section may continue so long as it does not result 
in either:
    (i) A monopoly or substantial lessening of competition; or
    (ii) An unsafe or unsound condition.
    (2) If the OCC grants an interlock exemption in reliance upon a 
presumption under paragraph (b) of this section, the interlock may 
continue for three years, unless otherwise provided by the OCC in 
writing.

[64 FR 51678, Sept. 24, 1999, as amended at 79 FR 28399, May 16, 2014; 
85 FR 42642, July 14, 2020]



Sec.  26.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, an 
increase in the aggregate deposits of the depository organization, or an 
acquisition, merger, consolidation, or any reorganization of the 
ownership structure of a depository organization that causes a 
previously permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the depository organization 
involved in the interlock for 15 months following the date of the change 
in circumstances. The OCC may shorten this period under appropriate 
circumstances.

[61 FR 40300, Aug. 2, 1996, as amended at 64 FR 51678, Sept. 24, 1999]



Sec.  26.8  Enforcement.

    Except as provided in this section, the OCC administers and enforces 
the Interlocks Act with respect to national banks, Federal savings 
associations, and their affiliates, and may refer any case of a 
prohibited interlocking relationship involving these entities to the 
Attorney General of the United States to enforce compliance with the 
Interlocks Act and this part. If an affiliate of a national bank or 
Federal savings association is subject to the primary regulation of 
another Federal depository organization supervisory agency, then the OCC 
does not administer and enforce the Interlocks Act with respect to that 
affiliate.

[73 FR 22251, Apr. 24, 2008, as amended at 79 FR 28399, May 16, 2014]



PART 27_FAIR HOUSING HOME LOAN DATA SYSTEM--Table of Contents



Sec.
27.1 Scope and OMB control number.
27.2 Definitions.
27.3 Recordkeeping requirements.
27.4 Inquiry/Application Log.
27.5 Record retention period.
27.6 Substitute monitoring program.
27.7 Availability, submission and use of data.

Appendix I to Part 27--Monthly Home Loan Activity Format
Appendix II to Part 27--Information for Government Monitoring Purposes
Appendix III to Part 27--Fair Housing Lending Inquiry/Application Log 
          Sheet
Appendix IV to Part 27--Home Loan Data Submission

    Authority: 5 U.S.C. 301; 12 U.S.C. 1 et seq., 93a, 161, 481, and 
1818; 15 U.S.C. 1691 et seq.; 42 U.S.C. 3601 et seq.; 12 CFR part 202.

    Source: 44 FR 63089, Nov. 2, 1979, unless otherwise noted.



Sec.  27.1  Scope and OMB control number.

    (a) Scope. This part applies to the activities of national banks and 
their subsidiaries, which make home loans for the purpose of purchasing, 
construction-permanent financing, or refinancing of residential real 
property.
    (b) OMB control number. The collection of information requirements 
contained in this part were approved by the Office of Management and 
Budget under OMB control number 1557-0160.

[49 FR 11825, Mar. 28, 1984, as amended at 73 FR 22251, Apr. 24, 2008]



Sec.  27.2  Definitions.

    For the purpose of this part, including all forms and instructions 
issued for use under this part:
    (a) Applicant means a natural person, including a co-applicant, who 
makes an application.
    (b) Application means an oral in-person or written request for an 
extension of credit for a home loan that is made

[[Page 682]]

in accordance with procedures established by a bank for the type of 
credit requested.
    (c) Bank means a national bank and any subsidiaries of a national 
bank.
    (d) Completed application means an application in connection with 
which a bank has received all the information that it regularly obtains 
and considers in evaluating the amount and type of credit requested.
    (e) Decision center means the place where home loan applications are 
accepted or rejected.
    (f) Home loan means a real estate loan for the purchase, permanent 
financing for construction, or the refinancing of residential real 
property which the applicant intends to occupy as a principal residence.
    (g) Inquirer means a natural person who makes an inquiry.
    (h) Inquiry means a written or an oral in-person request for 
information about the terms of a home loan by a natural person on his/
her own behalf which is received on a bank's premises by any person at 
the bank who customarily receives or is authorized to receive such 
requests. Telephonic communications do not constitute an inquiry for 
purposes of this part.
    (i) Real estate loan means any loan secured by real estate where the 
bank relies upon such real estate as the primary security for the loan. 
Where the bank in its judgment relies substantially upon other factors, 
such as the general credit standing of the borrower, guaranties, or 
security other than real estate, the loan does not constitute a real 
estate loan, although as a matter of prudent banking practice it may 
also be secured by real estate.
    (1) A loan made in reliance upon the security of a mobile home will 
not be considered a real estate loan, although as a prudent banking 
practice the security interest is recorded or otherwise perfected as if 
the mobile home were real estate. For purposes of this part, a loan made 
in reliance upon the security of a mobile home and the parcel of land to 
which it is permanently affixed will be considered a real estate loan.
    (2) Where the bank relies substantially on the insurance guaranty of 
a governmental agency in making a loan, it does not constitute a real 
estate loan except for the purposes of Sec.  27.4 of this part (Inquiry/
Application Log).
    (j) Residential real property means improved real property (not 
vacant land) used or intended to be used for residential purposes, 
including single family homes, dwellings for from two to four families, 
and individual units of condominiums and cooperatives.

[44 FR 63089, Nov. 2, 1979, as amended at 73 FR 22251, Apr. 24, 2008]



Sec.  27.3  Recordkeeping requirements.

    (a) Quarterly recordkeeping requirement. (1) A bank that is required 
to collect data on home loans under part 203 of this title shall present 
the data on Federal Reserve Form FR HMDA-LAR or in an automated format 
in accordance with the instructions, except that:
    (i) A bank shall maintain the reason(s) it denied a loan 
application, using the codes provided in part 203 of this title; and
    (ii) A bank shall record all information required by this paragraph 
and part 203 of this title within 30 calendar days after the end of each 
calendar quarter.
    (2) A bank that receives 50 or more home loan applications a year, 
as measured by the previous calendar year, and that is not required to 
collect data under paragraph (a)(1) of this section, shall record and 
maintain for each decision center the following information on home loan 
activity:
    (i) Number of applications received for each of the following: 
Purchase; construction-permanent; refinance.
    (ii) Number of loans closed for each of the following: Purchase; 
construction-permanent; refinance.
    (iii) Number of loans denied for each of the following: Purchase; 
construction-permanent; refinance.
    (iv) Number of loans withdrawn by applicant, for each of the 
following: Purchase; construction-permanent; refinance.
    (3) The information required to be maintained under paragraph (a)(2) 
of this section shall be updated quarterly, within 30 calendar days 
after the end of each calendar quarter, in a format consistent with the 
bank's recordkeeping procedures.

[[Page 683]]

    (4) A bank exempted under paragraph (a)(2) of this section shall be 
covered by that requirement beginning the month following any quarter in 
which their average monthly volume of home loan applications exceeds 
four applications per month. Banks which are subject to this paragraph 
may discontinue keeping this information beginning the month following 
two consecutive quarters in which their average monthly volume of home 
loan applications drops to four or fewer applications per month. A bank 
which is otherwise exempted under this paragraph may be required upon 
notification received from the Comptroller, to record and maintain such 
information where there is cause to believe that the bank is not in 
compliance with the fair housing laws based on prior examinations and/or 
has substantive consumer complaints, among other factors.
    (5) A bank required to maintain information under paragraph (a)(2) 
or (a)(4) of this section may choose to comply with the quarterly 
recordkeeping requirement by maintaining information in accordance with 
paragraph (a)(1) of this section.
    (b) Information required on applications for home loan.s (1) Each 
bank shall attempt to obtain all of the information listed below, as 
part of completed applications for home loans:
    (i) Loan Amount requested by the applicant(s).
    (ii) Interest rate requested by the applicant(s).
    (iii) Number of months requested to maturity by the applicant(s).
    (iv) Location. Complete street address, city, county, state and zip 
code of the dwelling which will secure the loan.
    (v) Number of residential units (1-4) of the dwelling which will 
secure the loan.
    (vi) Year built. The year in which the dwelling which will secure 
the loan was built. If the exact year is unknown, approximate to the 
nearest decade.
    (vii) Purpose of the loan. Purchase; refinance; or construction-
permanent.
    (viii) Name and present address of applicant(s).
    (ix) Age of applicant(s).
    (x) Marital status of applicant(s) using the categories married, 
unmarried and separated.
    (xi) Number of years employed in present line of work or profession 
for the applicant(s).
    (xii) Years on present job. Number of continuous years employed by 
the current employer of the applicant(s). For self-employed persons, the 
number of continuous years self-employed.
    (xiii) Gross total monthly income of each applicant, comprising the 
sum of normal base salary, wages, overtime pay, bonuses, commissions, 
dividends, interest, rental income, retirement or disability income and 
income from part-time employment. For self-employed persons, include the 
average or normal monthly income. Include alimony, separate maintenance 
and child support income information only if the applicant has been 
advised that such information need not be provided and nevertheless 
elects to have it considered.
    (xiv) Proposed monthly housing payment, comprising the sum of 
principal and interest. The bank may also include insurance, real estate 
taxes and any monthly assessments for home owner dues or condominium 
fees, and/or utilities if the bank considers these factors in computing 
housing costs. However, if the bank includes any of these factors for 
computing the monthly housing payment, it must do so consistently. When 
a bank changes its regular practice, such change and its effective date 
should be identifiable with respect to the bank's new policy.
    (xv) Purchase price. Sales price or approximate current market value 
of the property which will secure the loan.
    (xvi) Applicant's or applicants' total monthly payments on all 
outstanding liabilities. Include installment debts, real estate loans 
and any alimony, child support or separate maintenance payments. Exclude 
any payments on liabilities which will be satisfied upon sale of real 
estate owned or upon refinancing of property associated with this 
application.
    (xvii) Net worth. Applicant's or applicants' total assets, including 
cash checking and savings accounts, stocks and bonds, cash value of life 
insurance,

[[Page 684]]

value of real estate owned, net worth of business owned, automobile, 
furniture and personal property and other assets, minus total 
liabilities, including installment debts, automobile loans, real estate 
loans, and any other debts, including stock pledges.
    (xviii) Date of application. The date on which a signed application 
is received by the bank.
    (xix) Sex of applicant(s).
    (xx) Race/national origin of applicant(s) using the categories: 
American Indian or Alaskan Native; Asian or Pacific Islander; Black, not 
of Hispanic origin; White, not of Hispanic origin; Hispanic; Other.
    (2) Information on race/national origin and sex.
    (i) Disclosure to applicant.
    (A) In collecting the information required under Sec.  27.3(b)(1) 
(xix) and (xx), the bank shall advise an applicant, either orally or in 
writing, that:
    (1) The information on race/national origin and sex is requested by 
the Federal Government if this loan is related to a home loan, in order 
to monitor the lender's compliance with equal credit opportunity and 
fair housing laws;
    (2) The applicant is not required to furnish the information but is 
encouraged to do so. The law provides that a lender may neither 
discriminate on the basis of this information, nor on whether the 
applicant chooses to furnish it;
    (3) However, if the applicant chooses not to furnish it, Federal 
regulations require the lender to note race and sex on the basis of 
visual observation or surname.
    (B) Banks which use the Federal Home Loan Mortgage Corporation/
Federal National Mortgage Association (FHLMC/FNMA) insert form 
(``Information for Government Monitoring Purposes'') requesting this 
information will be in compliance with paragraph (b)(2)(i) of this 
section. A copy of the insert form is set forth in appendix II.
    (ii) If the applicant does not voluntarily provide the information 
on sex and race/national origin which the bank is required to record and 
maintain under Sec.  27.3(b)(1) (xix) and (xx), the bank shall request 
the applicant to note that fact (by initials or otherwise) on the 
application, and the bank shall provide the information based on visual 
observation or surname. If the applicant does not voluntarily provide 
the information and does not initial or otherwise note that fact, the 
bank shall initial, or otherwise note that fact on the application, as 
well as provide the information based on visual observation or surname.
    (c) Additional information required in the loan file. In addition to 
the information required by Sec.  27.3(b), each bank shall maintain the 
following information in each of its home loan files:
    (1) If an appraisal is completed:
    (i) The appraised value; and
    (ii) The census tract number, where available, for those properties 
which are in a Standard Metropolitan Statistical Area (SMSA) in which 
the bank has a home office or branch office.
    (2) Disposition of loan application. The disposition of the 
completed applications using the following categories:
    (i) Withdrawn before terms were offered;
    (ii) Withdrawn after terms were offered;
    (iii) Denied;
    (iv) Terms offered and accepted by applicant(s).
    (3) If final terms are offered, whether or not accepted:
    (i) The loan amount.
    (ii) Whether private mortgage insurance is required, and if so, the 
terms of the insurance.
    (iii) Whether a deposit balance is required, and if so, the amount.
    (iv) The note (simple) interest rate.
    (v) The number of months to maturity of the loan offered.
    (vi) Points. The loan origination or discount fee(s) charged to the 
buyer, computed as a percentage of the loan amount.
    (4) Commitment date. The date final terms were offered.
    (5) The type of mortgage using the following categories: Standard 
Fixed Payment; Variable Rate; Graduated Payment; Rollover; Other.
    (6) The name or identification of the bank office where the 
application was submitted.
    (7) Whenever credit is denied, copy(s) of the Equal Credit 
Opportunity Act credit notice and statement of credit denial.

[[Page 685]]

    (8) Any additional information used by the bank in determining 
whether or not to extend credit, or in establishing the terms, 
including, but not limited to, credit reports, employment verification 
forms, Federal Income Tax Forms, availability of insurance, and the 
complete appraisal.

[44 FR 63089, Nov. 2, 1979, as amended at 59 FR 26415, May 20, 1994]



Sec.  27.4  Inquiry/Application Log.

    (a) The Comptroller, among other things, may require a bank to 
maintain a Fair Housing Inquiry/Application Log (``Log''), based upon, 
but not limited to, one or more of the following causes:
    (1) There is reason(s) to believe that the bank may be prescreening 
or otherwise engaging in discriminatory practices on a prohibited basis.
    (2) Complaints filed with the Comptroller or letters in the 
Community Reinvestment Act file are found to be substantive in nature, 
indicating that the bank's home lending practices are, or may be, 
discriminatory.
    (3) Analysis of the data compiled by the bank under the provisions 
of the Home Mortgage Disclosure Act (12 U.S.C. 2801 et seq. and 
Regulation C of the Federal Reserve Board, 12 CFR part 203) indicates a 
pattern of significant variation in the number of home loans between 
census tracts with similar incomes and home ownership levels, 
differentiated only by race or national origin (i.e., possible racial 
redlining).
    (b) The Comptroller, when requiring the maintenance of a Log, will 
specify in writing:
    (1) The location(s) where the information shall be obtained;
    (2) The length of time it shall be maintained;
    (3) The frequency with which it shall be submitted to the 
Comptroller; and
    (4) The reason(s) for imposing this requirement.
    (c) A bank which has been directed by the Comptroller to maintain a 
Log shall obtain and note all of the following information regarding 
each inquiry or application for the extension of a home loan and each 
inquiry or application for a government insured home loan (not otherwise 
included in this part):
    (1) Date of application or inquiry.
    (2) Type of loan using the categories: purchase, construction-
permanent; refinance; and government insured by type of insurance, i.e., 
FHA, VA, and FmHA (if applicable).
    (3) Indication of whether the entry refers to an application or an 
inquiry.
    (4) Case identification (either a unique number which permits the 
application file to be located, or the name(s) and address(es) of the 
applicant(s)).
    (5) Race/national origin of the inquirer(s) or applicant(s) using 
the categories: American Indian or Alaskan Native; Asian or Pacific 
Islander; Black, not of Hispanic origin; White, not of Hispanic origin; 
Hispanic; Other. In the case of inquiries, this item shall be noted on 
the basis of visual observation or surname(s) only. In the case of 
applications, the information shall be obtained pursuant to Sec.  
27.3(b)(2).
    (6) Location. Complete street address, city, county, state and zip 
code of the property which will secure the extension of credit. The 
census tract shall also be recorded when the property is located in an 
SMSA in which the bank has a home office or branch office.
    (d) The information required under Sec.  27.4(c), of this part, 
shall be recorded and maintained on the form set forth in appendix III. 
Additional information may be recorded and maintained at the bank's 
discretion.

[44 FR 63089, Nov. 2, 1979, as amended at 59 FR 26415, May 20, 1994]



Sec.  27.5  Record retention period.

    (a) Each bank shall retain the records required under Sec.  27.3 for 
25 months after the bank notifies an applicant of action taken on an 
application, or after withdrawal of an application. This requirement 
also applies to records of home loans which are originated by the bank 
and subsequently sold.
    (b) The Comptroller of the Currency may, by written notice to a 
bank, extend the retention period.



Sec.  27.6  Substitute monitoring program.

    The recordkeeping provisions of Sec.  27.3 constitute a substitute 
monitoring program as authorized under Sec.  202.13(d) of Regulation B 
of the Federal Reserve

[[Page 686]]

Board (12 CFR 202.13(d)). A bank collecting the data in compliance with 
Sec.  27.3 of this part will be in compliance with the requirements of 
Sec.  202.13 of Regulation B.



Sec.  27.7  Availability, submission and use of data.

    (a) Each bank shall make all information collected under Sec. Sec.  
27.3 and 27.4 available for review at the bank to national bank 
examiners upon request.
    (b) Prior to a scheduled bank examination, the Comptroller may 
request the information maintained under Sec.  27.3(a). A bank required 
to maintain information under Sec.  27.3(a)(2) shall submit the 
information to the Comptroller on the form prescribed in appendix I of 
this part. A bank which is exempt from maintaining the information 
required under Sec.  27.3(a) shall notify the Comptroller of this fact 
in writing within 30 calendar days of its receipt of the Comptroller's 
request.
    (c) If, upon review of the information maintained under Sec.  
27.3(a), the Comptroller determines that statistical analysis prior to 
examination is warranted, the bank will be notified.
    (1) Within 30 calendar days after receipt of notification from the 
Comptroller, the bank shall submit, for application records specified by 
the Comptroller, completed Home Loan Data Submission Forms (set forth as 
appendix IV). The Comptroller may, upon the request of a bank and for 
good reason, extend the 30-day period.
    (2) The number of Home Loan Data Submission Forms requested by the 
Comptroller will not exceed 250 per decision center, or 2,000 per bank 
with multiple decision centers, unless there is cause to believe that a 
bank is not in compliance with fair housing laws based on examination 
findings or substantiated complaints, among other factors.
    (3) A bank with fewer than 75 home loan applications in the 
preceding year will not be required to submit such forms unless:
    (i) The home loan activity is concentrated in the few months 
preceding the request for data, indicating the likelihood of increased 
activity over the subsequent year, or
    (ii) There is cause to believe that a bank is not in compliance with 
the fair housing laws based on prior examinations and/or complaints, 
among other factors.
    (d) If there is cause to believe that a bank is in noncompliance 
with fair housing laws, the Comptroller may require submission of 
additional Home Loan Data Submission Forms. The Comptroller may also 
require submission of the information maintained under Sec.  27.3(a) and 
Home Loan Data Submission Forms at more frequent intervals than 
specified in paragraphs (b) and (c) of this section.

[44 FR 63089, Nov. 2, 1979, as amended at 59 FR 26415, May 20, 1994]

[[Page 687]]



      Sec. Appendix I to Part 27--Monthly Home Loan Activity Format
[GRAPHIC] [TIFF OMITTED] TC22SE91.001


[[Page 688]]





   Sec. Appendix II to Part 27--Information for Government Monitoring 
                                Purposes

    The following language is approved by the Comptroller of the 
Currency and will satisfy the requirements of 12 CFR part 27. It may be 
inserted to complete the ``Information for Government Monitoring 
Purposes'' section of the Residential Loan Application Form (FHLMC Form 
65/FNMA 1003) or may be used separately. This information may also be 
provided orally by the applicant.
    The following information is requested by the Federal Government if 
this loan is related to a dwelling, in order to monitor the lender's 
compliance with equal credit opportunity and fair housing laws. You are 
not required to furnish this information, but are encourage to do so. 
The law provides that a lender may neither discriminate on the basis of 
this information, nor on whether you choose to furnish it. However, if 
you choose not to furnish it, under Federal regulations this lender is 
required to note race and sex on the basis of visual observation or 
surname. If you do not wish to furnish the above information, please 
initial below.

                                Borrower

    I do not wish to furnish this information (initial)____.

                          Race/National Origin

    [squ] American Indian or Alaskan Native
    [squ] Asian or Pacific Islander
    [squ] Black, not of Hispanic origin
    [squ] Hispanic
    [squ] White, not of Hispanic origin
    [squ] Other (specify)____

                                   Sex

    [squ] Female
    [squ] Male

                               Co-borrower

    I do not wish to furnish this information (initial)____.

                          Race/National Origin

    [squ] American Indian or Alaskan Native
    [squ] Asian or Pacific Islander
    [squ] Black, not of Hispanic origin
    [squ] Hispanic
    [squ] White, not of Hispanic origin
    [squ] Other (specify)____

                                   Sex

    [squ] Female
    [squ] Male

[59 FR 26415, May 20, 1994]

[[Page 689]]

 Appendix III to Part 27--Fair Housing Lending Inquiry/Application Log 
                                  Sheet
[GRAPHIC] [TIFF OMITTED] TR20MY94.003


[59 FR 26417, May 20, 1994]

[[Page 690]]



         Sec. Appendix IV to Part 27--Home Loan Data Submission
[GRAPHIC] [TIFF OMITTED] TR21JN94.003


[[Page 691]]


[GRAPHIC] [TIFF OMITTED] TR21JN94.004


[59 FR 31925, June 21, 1994]

[[Page 692]]



PART 28_INTERNATIONAL BANKING ACTIVITIES--Table of Contents



             Subpart A_Foreign Operations of National Banks

Sec.
28.1 Authority, purpose, and scope.
28.2 Definitions.
28.3 Filing requirements for foreign operations of a national bank.
28.4 Permissible activities.
28.5 Filing of notice.

        Subpart B_Federal Branches and Agencies of Foreign Banks

28.10 Authority, purpose, and scope.
28.11 Definitions.
28.12 Approval of a Federal branch or agency.
28.13 Permissible activities.
28.14 Limitations based upon capital of a foreign bank.
28.15 Capital equivalency deposits.
28.16 Deposit-taking by an uninsured Federal branch.
28.17 Notice of change in activity or operations.
28.18 Recordkeeping and reporting.
28.19 Enforcement.
28.20 Maintenance of assets.
28.21 Service of process.
28.22 Voluntary liquidation.
28.23 Procedures for closing of some of a foreign bank's Federal 
          branches and/or agencies.
28.24 Termination of a Federal branch or agency.
28.25 Change in control.
28.26 Loan production offices.

               Subpart C_International Lending Supervision

28.50 Authority, purpose, and scope.
28.51 Definitions.
28.52 Allocated transfer risk reserve.
28.53 Accounting for fees on international loans.
28.54 Reporting and disclosure of international assets.

    Authority: 12 U.S.C. 1 et seq., 24(Seventh), 93a, 161, 602, 1818, 
3101 et seq., and 3901 et seq.

    Source: 61 FR 19532, May 2, 1996, unless otherwise noted.



             Subpart A_Foreign Operations of National Banks



Sec.  28.1  Authority, purpose, and scope.

    (a) Authority. This subpart is issued pursuant to 12 U.S.C. 1 et 
seq., 24(Seventh), 93a, and 602.
    (b) Purpose. This subpart sets forth filing requirements for 
national banks that engage in international operations and clarifies 
permissible foreign activities of national banks.
    (c) Scope. This subpart applies to any national bank that engages in 
international operations through a foreign branch, or acquires an 
interest in an Edge corporation, Agreement corporation, foreign bank, or 
certain other foreign organizations.



Sec.  28.2  Definitions.

    For purposes of this subpart:
    (a) Agreement corporation means a corporation having an agreement or 
undertaking with the Board of Governors of the Federal Reserve System 
(FRB) under section 25 of the Federal Reserve Act (FRA), 12 U.S.C. 601 
through 604a.
    (b) Edge corporation means a corporation that is organized under 
section 25A of the FRA, 12 U.S.C. 611 through 631.
    (c) Foreign bank means an organization that:
    (1) Is organized under the laws of a foreign country;
    (2) Engages in the business of banking;
    (3) Is recognized as a bank by the bank supervisory or monetary 
authority of the country of its organization or principal banking 
operations;
    (4) Receives deposits to a substantial extent in the regular course 
of its business; and
    (5) Has the power to accept demand deposits.
    (d) Foreign branch means an office of a national bank (other than a 
representative office) that is located outside the United States at 
which banking or financing business is conducted.
    (e) Foreign country means one or more foreign nations, and includes 
the overseas territories, dependencies, and insular possessions of those 
nations and of the United States, and the Commonwealth of Puerto Rico.

[61 FR 19532, May 2, 1996, as amended at 61 FR 60387, Nov. 27, 1996]



Sec.  28.3  Filing requirements for foreign operations of a national bank.

    (a) Notice requirement. A national bank shall notify the OCC when 
it:

[[Page 693]]

    (1) Files an application, notice, or report with the FRB to:
    (i) Establish or open a foreign branch;
    (ii) Acquire or divest of an interest in, or close, an Edge 
corporation, Agreement corporation, foreign bank, or other foreign 
organization; or
    (2) Opens a foreign branch, and no application or notice is required 
by the FRB for such transaction.
    (b) Other applications and notices accepted. In lieu of a notice 
under paragraph (a)(1) of this section, the OCC may accept a copy of an 
application, notice, or report submitted to another Federal agency that 
covers the proposed action and contains substantially the same 
information required by the OCC.
    (c) Additional information. A national bank shall furnish the OCC 
with any additional information the OCC may require in connection with 
the national bank's foreign operations.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70699, Dec. 19, 2003]



Sec.  28.4  Permissible activities.

    (a) General. Subject to the applicable approval process, if any, a 
national bank may engage in any activity in a foreign country that is:
    (1) Permissible for a national bank in the United States; and
    (2) Usual in connection with the business of banking in the country 
where it transacts business.
    (b) Additional activities. In addition to its general banking 
powers, a national bank may engage in any activity in a foreign country 
that is permissible under the FRB's Regulation K, 12 CFR part 211.
    (c) Foreign operations guarantees. A national bank may guarantee the 
deposits and other liabilities of its Edge corporations and Agreement 
corporations and of its corporate instrumentalities in foreign 
countries.



Sec.  28.5  Filing of notice.

    (a) Where to file. A national bank shall file any notice or 
submission required under this subpart with the appropriate supervisory 
office of the OCC.
    (b) Availability of forms. Individual forms and instructions for 
filings are available from the appropriate supervisory office of the 
OCC.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70699, Dec. 19, 2003]



        Subpart B_Federal Branches and Agencies of Foreign Banks



Sec.  28.10  Authority, purpose, and scope.

    (a) Authority. This subpart is issued pursuant to the authority in 
the International Banking Act of 1978 (IBA), 12 U.S.C. 3101 et seq., and 
12 U.S.C. 93a.
    (b) Purpose--Purpose and scope. This subpart implements the IBA 
pertaining to the licensing, supervision, and operations of Federal 
branches and agencies in the United States. For corporate procedures 
pertaining to Federal branches and agencies, refer to 12 CFR part 5.
    (c) Scope. This subpart applies to all Federal branches and agencies 
of foreign banks. Nothing in the OCC's rules relieves a Federal branch 
or agency from complying with requirements that are imposed by the FRB 
under Regulation K (12 CFR part 211) or otherwise imposed in accordance 
with applicable law.

[61 FR 19532, May 2, 1996, as amended at 61 FR 60387, Nov. 27, 1996; 68 
FR 70699, Dec. 19, 2003]



Sec.  28.11  Definitions.

    For purposes of this subpart:
    (a) Affiliate means any entity that controls, is controlled by, or 
is under common control with another entity.
    (b) Agreement corporation means a corporation having an agreement or 
undertaking with the FRB under section 25 of the FRA, 12 U.S.C. 601 
through 604a.
    (c) Capital equivalency deposit means a deposit by a Federal branch 
or agency in a member bank as described in section 4 of the IBA, 12 
U.S.C. 3102(g).
    (d) Control. An entity controls another entity if the entity 
directly or indirectly controls or has the power to vote 25 percent or 
more of any class of voting securities of the other entity or controls 
in any manner the election of a majority of the directors or trustees of 
the other entity.
    (e) Edge corporation means a corporation that is organized under 
section

[[Page 694]]

25A of the FRA, 12 U.S.C. 611 through 631.
    (f) Establish a Federal branch or agency means to:
    (1) Open and conduct business through an initial or additional 
Federal branch or agency;
    (2) Acquire directly or indirectly through merger, consolidation, or 
similar transaction with another foreign bank, the operations of a 
Federal branch or agency that is open and conducting business;
    (3) Acquire a Federal branch or agency through the acquisition of a 
foreign bank subsidiary that will cease to operate in the same corporate 
form following the acquisition;
    (4) Convert a state branch or agency operated by a foreign bank, or 
a commercial lending company controlled by a foreign bank, into a 
Federal branch or agency;
    (5) Relocate a Federal branch or agency within a state or from one 
state to another; or
    (6) Convert a Federal agency or a limited Federal branch into a 
Federal branch.
    (g) Federal agency means an office or place of business, licensed by 
the OCC and operated by a foreign bank in any state, that may engage in 
the business of banking, including maintaining credit balances, cashing 
checks, and lending money, but may not accept deposits from citizens or 
residents of the United States. Obligations may not be considered credit 
balances unless they are:
    (1) Incidental to, or arise out of the exercise of, other lawful 
banking powers;
    (2) To serve a specific purpose;
    (3) Not solicited from the general public;
    (4) Not used to pay routine operating expenses in the United States 
such as salaries, rent, or taxes;
    (5) Withdrawn within a reasonable period of time after the specific 
purpose for which they were placed has been accomplished; and
    (6) Drawn upon in a manner reasonable in relation to the size and 
nature of the account.
    (h) Federal branch means an office or place of business, licensed by 
the OCC and operated by a foreign bank in any state, that may engage in 
the business of banking, including accepting deposits, that is not a 
Federal agency as defined in paragraph (h) of this section. Unless 
otherwise provided, the references in this subpart B of part 28 to a 
Federal branch include a limited Federal branch.
    (i) Foreign bank means an organization that is organized under the 
laws of a foreign country, a territory of the United States, Puerto 
Rico, Guam, American Samoa, or the Virgin Islands, and that engages 
directly in the business of banking in a foreign country.
    (j) Foreign business means any entity, including a corporation, 
partnership, sole proprietorship, association, foundation or trust that 
is organized under the laws of a foreign country, or any United States 
entity that is controlled by a foreign entity or foreign national.
    (k) Foreign country means one or more foreign nations, and includes 
the overseas territories, dependencies, and insular possessions of those 
nations and of the United States, and the Commonwealth of Puerto Rico.
    (l) Home country means the country in which the foreign bank is 
chartered or incorporated.
    (m) Home country supervisor means the governmental entity or 
entities in the foreign bank's home country responsible for supervising 
and regulating the foreign bank.
    (n) Home state of a foreign bank means the state in which the 
foreign bank has a branch, agency, subsidiary commercial lending 
company, or subsidiary bank. If a foreign bank has an office in more 
than one state, the home state of the foreign bank is the state that is 
selected to be the home state by the foreign bank or, in default of the 
foreign bank's selection, by the FRB.
    (o) Immediate family member of an individual means the spouse, 
father, mother, brother, sister, son, or daughter of that individual.
    (p) Initial deposit means the first deposit transaction between a 
depositor and the Federal branch made on or after July 1, 1996. The 
initial deposit

[[Page 695]]

may be placed into different deposit accounts or into different kinds of 
deposit accounts, such as demand, savings, or time accounts. Deposit 
accounts that are held by a depositor in the same right and capacity may 
be added together for the purpose of determining the dollar amount of 
the initial deposit. First deposit means the deposit made when there is 
no current deposit relationship between the depositor and the Federal 
branch.
    (q) International banking facility means a set of asset and 
liability accounts segregated on the books and records of a depository 
institution, a United States branch or agency of a foreign bank, or an 
Edge corporation or Agreement corporation, that includes only 
international banking facility time deposits and extensions of credit.
    (r) Large United States business means any business entity including 
a corporation, company, partnership, sole proprietorship, association, 
foundation or trust that is organized under the laws of the United 
States or any state thereof, and has:
    (1) Securities registered on a national securities exchange or 
quoted on the National Association of Securities Dealers Automated 
Quotation System; or
    (2) More than $1 million in annual gross revenues for the fiscal 
year immediately preceding the year of the initial deposit.
    (s) Limited Federal branch means a Federal branch that may receive 
only those deposits permissible for an Edge corporation to receive.
    (t) Managed or controlled by a Federal branch or agency means that a 
majority of the responsibility for business decisions, including 
decisions with regard to lending, asset management, funding, or 
liability management, or the responsibility for recordkeeping of assets 
or liabilities for a non-United States office, resides at the Federal 
branch or agency. For purposes of this definition, forwarding data or 
information of offshore operations gathered or compiled by the United 
States office in the normal course of business to the parent foreign 
bank does not constitute recordkeeping.
    (u) Manual has the same meaning as in 12 CFR 5.2(c).
    (v) Parent foreign bank senior management means individuals at the 
executive level of the parent foreign bank who are responsible for 
supervising and authorizing activities of the Federal branch or agency.
    (w) Person means an individual or a corporation, government, 
partnership, association, or any other entity.
    (x) State means any state of the United States and the District of 
Columbia.
    (y) United States bank means a bank organized under the laws of the 
United States or any state.

[61 FR 19532, May 2, 1996, as amended at 61 FR 60387, Nov. 27, 1996; 68 
FR 70699, Dec. 19, 2003; 73 FR 22251, Apr. 24, 2008]



Sec.  28.12  Approval of a Federal branch or agency.

    (a) Approval and licensing requirements--(1) General. Except as 
otherwise provided in this section, a foreign bank shall submit an 
application to, and obtain prior approval from, the OCC before it:
    (i) Establishes a Federal branch or agency; or
    (ii) Exercises fiduciary powers at a Federal branch.
    (2) Licensing. A foreign bank must receive a license from the OCC to 
open and operate its initial Federal branch or agency in the United 
States. A foreign bank that has a license to operate and is operating a 
full-service Federal branch need not obtain a new license for any 
additional Federal branches or agencies, or to upgrade or downgrade its 
operations in an existing Federal branch or agency. A foreign bank that 
only has a license to operate and is operating a limited Federal branch 
or Federal agency need not obtain a new license for any additional 
limited Federal branches or Federal agencies, or to convert a limited 
Federal branch into a Federal agency or a Federal agency into a limited 
Federal branch.
    (b) Standards for approval. Generally, in reviewing an application 
by a foreign bank to establish a Federal branch or agency, the OCC 
considers:
    (1) The financial and managerial resources and future prospects of 
the applicant foreign bank and the Federal branch or agency;

[[Page 696]]

    (2) Whether the foreign bank has furnished to the OCC the 
information the OCC requires to assess the application adequately, and 
provided the OCC with adequate assurances that information will be made 
available to the OCC on the operations or activities of the foreign bank 
or any of its affiliates that the OCC deems necessary to determine and 
enforce compliance with the IBA and other applicable Federal banking 
statutes;
    (3) Whether the foreign bank and its United States affiliates are in 
compliance with applicable United States law;
    (4) The convenience and needs of the community to be served and the 
effects of the proposal on competition in the domestic and foreign 
commerce of the United States;
    (5) With respect to an application to establish a Federal branch or 
agency outside of the foreign bank's home state, whether the foreign 
bank is subject to comprehensive supervision or regulation on a 
consolidated basis by its home country supervisor. The OCC, in its 
discretion, also may consider whether the foreign bank is subject to 
comprehensive supervision or regulation on a consolidated basis by its 
home country supervisor when reviewing any other type of application to 
establish a Federal branch or agency; and
    (6) Whether the home country supervisor has consented to the 
proposed establishment of the Federal branch or agency.
    (c) Comprehensive supervision or regulation on a consolidated basis. 
In determining whether a foreign bank is subject to comprehensive 
supervision or regulation on a consolidated basis, the OCC reviews 
various factors, including whether the foreign bank is supervised or 
regulated in a manner so that its home country supervisor receives 
sufficient information on the worldwide operations of the foreign bank 
to assess the foreign bank's overall financial condition and compliance 
with laws and regulations as specified in the FRB's Regulation K, 12 CFR 
211.24.
    (d) Conditions on approval. The OCC may impose conditions on its 
approval including a condition permitting future termination of 
activities based on the inability of the foreign bank to provide 
information on its activities, or those of its affiliate, that the OCC 
deems necessary to determine and enforce compliance with United States 
banking laws.
    (e) Expedited review. Unless the OCC concludes that the filing 
presents significant supervisory or compliance concerns, or raises 
significant legal or policy issues, the OCC generally processes the 
following filings by an eligible foreign bank, as defined in paragraph 
(f) of this section, under expedited review procedures:
    (1) Intrastate relocations. An application submitted by an eligible 
foreign bank to relocate a Federal branch or agency within a state is 
deemed approved by the OCC as of the seventh day after the close of the 
applicable public comment period in 12 CFR part 5, unless the OCC 
notifies the bank prior to that date that the filing is not eligible for 
expedited review.
    (2) Written notice for an additional intrastate Federal branch or 
agency. (i) In a case where a foreign bank seeks to establish intrastate 
an additional Federal branch or agency, the foreign bank shall provide 
written notice 30 days in advance of the establishment of the intrastate 
Federal branch or agency.
    (ii) The OCC may waive the 30-day period required under paragraph 
(e)(2)(i) of this section if immediate action is required. The OCC also 
may suspend the notice period or require an application if the 
notification raises significant policy or supervisory concerns.
    (3) Expedited approval procedures for an interstate Federal branch 
or agency. An application submitted by an eligible foreign bank to 
establish and operate a de novo Federal branch or agency in any state 
outside the home state of the foreign bank is deemed conditionally 
approved by the OCC as of the 15th day after the close of the applicable 
public comment period, or the 45th day after the filing is received by 
the OCC, whichever is later, unless the OCC notifies the foreign bank 
prior to that date that the filing is not eligible for expedited review. 
In the event that the FRB has approved the application prior to the 
expiration of the period, then the OCC's approval shall be deemed a 
final approval.
    (4) Conversions. An application submitted by an eligible foreign 
bank to

[[Page 697]]

establish a Federal branch or agency as defined in 12 CFR 28.11(f)(4) or 
(f)(6) is deemed approved by the OCC as of the 30th day after the OCC 
receives the filing, unless the OCC notifies the foreign bank prior to 
that date that the filing is not eligible for expedited review.
    (5) Fiduciary powers. An application submitted by an eligible 
foreign bank to exercise fiduciary powers at an established Federal 
branch is deemed approved by the OCC 30 days after filing with the OCC, 
unless the OCC notifies the bank prior to that date that the filing is 
not eligible for expedited review.
    (6) Other filings. Any other application submitted by an eligible 
foreign bank may be approved by the OCC on an expedited basis as 
described in the Manual.
    (f) Eligible foreign bank. For purposes of this section, a foreign 
bank is an eligible foreign bank if each Federal branch and agency of 
the foreign bank or, if the foreign bank has no Federal branches or 
agencies and is engaging in an establishment of a Federal branch or 
agency as defined in 12 CFR 28.11(f)(4), each state branch and agency:
    (1) Has a composite rating of 1 or 2 under the interagency rating 
system for United States branches and agencies of foreign banks;
    (2) Is not subject to a cease and desist order, consent order, 
formal written agreement, Prompt Corrective Action directive (see 12 CFR 
part 6) or, if subject to such order, agreement, or directive, is 
informed in writing by the OCC that the Federal branch or agency may be 
treated as an ``eligible foreign bank'' for purposes of this section; 
and
    (3) Has, if applicable, a Community Reinvestment Act (CRA), 12 
U.S.C. 2906, rating of ``Outstanding'' or ``Satisfactory''.
    (g) After-the-fact approval. Unless otherwise provided by the OCC, a 
foreign bank proposing to establish a Federal branch or agency through 
the acquisition of, or merger or consolidation with, a foreign bank that 
has an office in the United States, may proceed with the transaction 
before an application to establish the Federal branch or agency has been 
filed or acted upon, if the applicant:
    (1) Gives the OCC reasonable advance notice of the proposed 
acquisition, merger, or consolidation;
    (2) Prior to consummation of the acquisition, merger, or 
consolidation, commits in writing to comply with the OCC application 
procedures within a reasonable period of time, or has already submitted 
an application; and
    (3) Commits in writing to abide by the OCC's decision on the 
application, including a decision to terminate activities of the Federal 
branch or agency.
    (h) After-the-fact notice for an eligible foreign bank. Unless 
otherwise provided by the OCC, a foreign bank proposing to establish a 
Federal branch or agency through the acquisition of, or merger or 
consolidation with, a foreign bank that has an existing U.S. bank 
subsidiary or a Federal or state branch or agency may proceed with the 
transaction and provide after-the-fact notice to the OCC within 14 days 
of the transaction, if:
    (1) The resulting bank is an ``eligible foreign bank'' under 
paragraph (f) of this section; and
    (2) No Federal branch established by the transaction accepts 
deposits that are insured by the FDIC pursuant to the Federal Deposit 
Insurance Act (12 U.S.C. 1811 et seq.).
    (i) Contraction of operations. A foreign bank shall provide written 
notice to the OCC within 10 days after converting a Federal branch into 
a limited Federal branch or Federal agency.
    (j) Procedures for approval. A foreign bank shall file an 
application for approval pursuant to this section in accordance with 12 
CFR part 5 and the Manual. The OCC reserves the right to adopt 
materially different procedures for a particular filing, or class of 
filings, pursuant to 12 CFR 5.2(b).
    (k) Other applications accepted. As provided in 12 CFR 5.4(c), the 
OCC may accept an application or other filing submitted to another U.S. 
Government agency that covers the proposed activity or transaction and 
contains substantially the same information as required by the OCC.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70699, Dec. 19, 2003; 73 
FR 22251, Apr. 24, 2008]

[[Page 698]]



Sec.  28.13  Permissible activities.

    (a) Applicability of laws--(1) General. Except as otherwise provided 
by the IBA, other Federal laws or regulations, or otherwise determined 
by the OCC, the operations of a foreign bank at a Federal branch or 
agency shall be conducted with the same rights and privileges and 
subject to the same duties, restrictions, penalties, liabilities, 
conditions, and limitations that would apply if the Federal branch or 
agency were a national bank operating at the same location.
    (2) Parent foreign bank senior management approval. Unless otherwise 
provided by the OCC, any provision in law, regulation, policy, or 
procedure that requires a national bank to obtain the approval of its 
board of directors will be deemed to require a Federal branch or agency 
to obtain the approval of parent foreign bank senior management.
    (b) Management of shell branches--(1) Federal branches and agencies. 
A Federal branch or agency of a foreign bank shall not manage, through 
an office of the foreign bank that is located outside the United States 
and that is managed or controlled by that Federal branch or agency, any 
type of activity that a United States bank is not permitted to manage at 
any branch or subsidiary of the United States bank that is located 
outside the United States.
    (2) Activities managed in foreign branches or subsidiaries of United 
States banks. The types of activities referred to in paragraph (b)(1) of 
this section include the types of activities authorized to a United 
States bank by state or Federal charters, regulations issued by 
chartering or regulatory authorities, and other United States banking 
laws. However, United States procedural or quantitative requirements 
that may be applicable to the conduct of those activities by United 
States banks do not apply.
    (c) Additional guidance regarding permissible activities. For 
purposes of section 7(h) of the IBA, 12 U.S.C. 3105(h), the OCC may 
issue opinions, interpretations, or rulings regarding permissible 
activities of Federal branches.



Sec.  28.14  Limitations based upon capital of a foreign bank.

    (a) General. Any limitation or restriction based upon the capital of 
a national bank shall be deemed to refer, as applied to a Federal branch 
or agency, to the dollar equivalent of the capital of the foreign bank.
    (b) Calculation. Unless otherwise provided by the OCC, a foreign 
bank must calculate its capital in a manner consistent with 12 CFR part 
3, subpart C, for purposes of this section.
    (c) Aggregation. The foreign bank shall aggregate business 
transacted by all Federal branches and agencies with the business 
transacted by all state branches and state agencies controlled by the 
foreign bank in determining its compliance with limitations based upon 
the capital of the foreign bank. The foreign bank shall designate one 
Federal branch or agency office in the United States to maintain 
consolidated information so that the OCC can monitor compliance.

[61 FR 19532, May 2, 1996, as amended at 79 FR 11312, Feb. 28, 2014]



Sec.  28.15  Capital equivalency deposits.

    (a) Capital equivalency deposits--(1) General. For purposes of 
section 4(g) of the IBA, 12 U.S.C. 3102(g), unless otherwise provided by 
the OCC, a foreign bank's capital equivalency deposits (CED) must 
consist of:
    (i) Investment securities eligible for investment by national banks;
    (ii) United States dollar deposits payable in the United States or 
payable in any other Group of Ten country;
    (iii) Certificates of deposit, payable in the United States, and 
banker's acceptances, provided that, in either case, the issuer has an 
adequate capacity to meet financial commitments for the projected life 
of the asset or exposure. An issuer has an adequate capacity to meet 
financial commitments if the risk of default by the obligor is low and 
the full and timely repayment of principal and interest is expected;
    (iv) Repurchase agreements; or
    (v) Other similar assets permitted by the OCC to qualify to be 
included in the CED.
    (2) Legal requirements. The agreement with the depository bank to 
hold the

[[Page 699]]

CED and the amount of the deposit must comply with the requirements in 
section 4(g) of the IBA, 12 U.S.C. 3102(g). If a foreign bank has more 
than one Federal branch or agency in a state, it shall determine the CED 
and the amount of liabilities requiring capital equivalency coverage on 
an aggregate basis for all the foreign bank's Federal branches or 
agencies in that state.
    (3) Exceptions. In determining the amount of the CED, the OCC 
excludes liabilities of an international banking facility (IBF) to third 
parties and of a Federal branch of a foreign bank to an IBF. The OCC may 
exclude liabilities from repurchase agreements on a case-by-case basis.
    (b) Increase in capital equivalency deposits. For prudential or 
supervisory reasons, the OCC may require, in individual cases or 
otherwise, that a foreign bank increase its CED above the minimum 
amount. For example, the OCC may require an increase if a Federal branch 
or agency of the foreign bank increases its leverage through the 
establishment, acquisition, or maintenance of an operating subsidiary.
    (c) Value of assets. The obligations referred to in paragraph (a) of 
this section must be valued at principal amount or market value, 
whichever is lower.
    (d) Deposit arrangements. A foreign bank should require its 
depository bank to segregate its CED on the depository bank's books and 
records. The funds deposited and obligations referred to in paragraph 
(a) of this section that are placed in safekeeping at a depository bank 
to satisfy a foreign bank's CED requirement:
    (1) May not be reduced in value below the minimum required for that 
branch or agency without the prior approval of the OCC, but in no event 
below the statutory minimum;
    (2) Must be maintained pursuant to an agreement prescribed by the 
OCC that shall be a written agreement entered into with the OCC for 
purposes of section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 
1818; and
    (3) Must be free from any lien, charge, right of setoff, credit, or 
preference in connection with any claim of the depository bank against 
the foreign bank.
    (e)(1) Deposit and Consolidation. As provided in 12 U.S.C. 3102(g), 
a foreign bank with a Federal branch or agency shall deposit its CED 
into an account in a bank that is located in the state in which the 
Federal branch or agency is located. For this purpose, such depository 
bank is considered to be located in those states in which it has its 
main office or a branch. A foreign bank with Federal branches or 
agencies in more than one state may consolidate some or all of its CEDs 
into one such account.
    (2) Calculation. The total amount of the consolidated CED shall 
continue to be calculated on an office-by-office basis.
    (f) Maintenance of capital equivalency ledger account. Each Federal 
branch or agency shall maintain a capital equivalency account and keep 
records of the amount of liabilities requiring capital equivalency 
coverage in a manner and form prescribed by the OCC.

[61 FR 60363, Nov. 27, 1996, as amended at 66 FR 49098, Sept. 26, 2001; 
67 FR 4326, Jan. 30, 2002; 67 FR 41620, June 19, 2002; 68 FR 70700, Dec. 
19, 2003; 77 FR 35258, June 13, 2012]



Sec.  28.16  Deposit-taking by an uninsured Federal branch.

    (a) Policy. In carrying out this section, the OCC shall consider the 
importance of according foreign banks competitive opportunities equal to 
those of United States banks and the availability of credit to all 
sectors of the United States economy, including international trade 
finance.
    (b) General. An uninsured Federal branch may accept initial deposits 
of less than the standard maximum deposit insurance amount as defined in 
12 U.S.C. 1821(a)(1)(E) only from:
    (1) Individuals who are not citizens or residents of the United 
States at the time of the initial deposit;
    (2) Individuals who are not citizens of the United States, but are 
residents of the United States, and are employed by a foreign bank, 
foreign business, foreign government, or recognized international 
organization;
    (3) Persons (including immediate family members of an individual) to

[[Page 700]]

whom the branch or foreign bank (including any affiliate thereof) has 
extended credit or provided other nondeposit banking services within the 
past 12 months, or with whom the branch or foreign bank has a written 
agreement to extend credit or provide such services within 12 months 
after the date of the initial deposit;
    (4) Foreign businesses and large United States businesses;
    (5) Foreign governmental units, including political subdivisions, 
and recognized international organizations;
    (6) Federal and state governmental units, including political 
subdivisions and agencies thereof;
    (7) Persons who are depositing funds in connection with the issuance 
of a financial instrument by the branch for transmission of funds, or 
transmission of funds by any electronic means;
    (8) Persons who may deposit funds with an Edge corporation as 
provided in the FRB's Regulation K, 12 CFR 211.6, including persons 
engaged in certain international business activities; and
    (9) Any other depositor if:
    (i) The aggregate amount of deposits received from those depositors 
does not exceed, on an average daily basis, 1 percent of the average of 
the branch's deposits for the last 30 days of the most recent calendar 
quarter, excluding deposits of other offices, branches, agencies, or 
wholly owned subsidiaries of the foreign bank; and
    (ii) The branch does not solicit deposits from the general public by 
advertising, display of signs, or similar activity designed to attract 
the attention of the general public.
    (c) Application for an exemption. A foreign bank may apply to the 
OCC for an exemption to permit an uninsured Federal branch to accept or 
maintain deposit accounts that are not listed in paragraph (b) of this 
section. The request should describe:
    (1) The types, sources, and estimated amounts of such deposits and 
explain why the OCC should grant an exemption; and
    (2) How the exemption maintains and furthers the policies described 
in paragraph (a) of this section.
    (d) Aggregation of deposits. For purposes of paragraph (b)(9) of 
this section, a foreign bank that has more than one Federal branch in 
the same state may aggregate deposits in all of its Federal branches in 
that state, but exclude deposits of other branches, agencies or wholly 
owned subsidiaries of the bank. The Federal branch shall compute the 
average amount by using the sum of deposits as of the close of business 
of the last 30 calendar days ending with and including the last day of 
the calendar quarter, divided by 30. The Federal branch shall maintain 
records of the calculation until its next examination by the OCC.
    (e) Notification to depositors. A Federal branch that accepts 
deposits pursuant to this section shall provide notice to depositors 
pursuant to 12 CFR 346.207, which generally requires that the Federal 
branch conspicuously display a sign at the branch and include a 
statement on each signature card, passbook, and instrument evidencing a 
deposit that the deposit is not insured by the Federal Deposit Insurance 
Corporation (FDIC).
    (f) Transition period. (1) An uninsured Federal branch may maintain 
a deposit lawfully accepted under the exemptions existing prior to July 
1, 1996 if the deposit would qualify for an exemption under paragraph 
(b) of this section, except for the fact that the deposit was made 
before July 1, 1996.
    (2) If a deposit lawfully accepted under the exemption existing 
prior to July 1, 1996 would not qualify for an exemption under paragraph 
(b) or (c) of this section, the uninsured Federal branch must terminate 
the deposit no later than:
    (i) In the case of time deposits, the maturity of a time deposit or 
October 1, 1996, whichever is longer; or
    (ii) In the case of all other deposits, five years after July 1, 
1996.
    (g) Insured banks in United States territories. For purposes of this 
section, the term ``foreign bank'' does not include any bank organized 
under the laws of any territory of the United States, Puerto Rico, Guam, 
American Samoa, or the Virgin Islands whose deposits are insured by the 
FDIC pursuant to

[[Page 701]]

the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70131, Dec. 17, 2003; 68 
FR 70700, Dec. 19, 2003; 76 FR 43569, July 21, 2011]



Sec.  28.17  Notice of change in activity or operations.

    Notice. A Federal branch or agency shall notify the OCC if:
    (a) It changes its corporate title;
    (b) It changes its mailing address;
    (c) It converts to a state branch, state agency, or representative 
office; or
    (d) The parent foreign bank changes the designation of its home 
state.



Sec.  28.18  Recordkeeping and reporting.

    (a) General. A Federal branch or agency shall comply with applicable 
recordkeeping and reporting requirements that apply to national banks 
and with any additional requirements that may be prescribed by the OCC. 
A Federal branch or agency, and the parent foreign bank, shall furnish 
information relating to the affairs of the parent foreign bank and its 
affiliates that the OCC may from time to time request.
    (b) Regulatory reports filed with other agencies. A foreign bank 
operating a Federal branch or agency in the United States shall provide 
the OCC with a copy of reports filed with other Federal regulatory 
agencies that are designated in guidance issued by the OCC.
    (c) Maintenance of accounts, books, and records. (1) Each Federal 
branch or agency shall maintain a set of accounts and records reflecting 
its transactions that are separate from those of the foreign bank and 
any other branch or agency. The Federal branch or agency shall keep a 
set of accounts and records in English sufficient to permit the OCC to 
examine the condition of the Federal branch or agency and its compliance 
with applicable laws and regulations. The Federal branch or agency shall 
promptly provide any additional records requested by the OCC for 
examination or supervisory purposes.
    (2) A foreign bank with more than one Federal branch or agency in a 
state shall designate one of those offices to maintain consolidated 
asset, liability, and capital equivalency accounts for all Federal 
branches or agencies in that state.
    (3) A foreign bank with a Federal branch or agency in more than one 
state that consolidates its CEDs into one account in accordance with 
Sec.  28.15(e) shall designate a participating Federal branch or agency 
to maintain consolidated asset, liability, and capital equivalency 
account information for all Federal branches and agencies covered by the 
consolidated deposit. A foreign bank with a consolidated CED shall 
maintain a book entry accounting of assets designated under the 
consolidated CED for each office of that foreign bank.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70700, Dec. 19, 2003]



Sec.  28.19  Enforcement.

    As provided by section 13 of the IBA, 12 U.S.C. 3108(b), the OCC may 
enforce compliance with the requirements of the IBA, other applicable 
banking laws, and OCC regulations or orders under section 8 of the 
Federal Deposit Insurance Act, 12 U.S.C. 1818. This enforcement 
authority is in addition to any other remedies otherwise provided by the 
IBA or any other law.



Sec.  28.20  Maintenance of assets.

    (a) General rule. (1) For prudential, supervisory, or enforcement 
reasons, the OCC may require a foreign bank to hold certain assets in 
the state in which its Federal branch or agency is located. Those assets 
may only consist of currency, bonds, notes, debentures, drafts, bills of 
exchange, or other evidence of indebtedness including loan participation 
agreements or certificates, or other obligations payable in the United 
States or in United States funds or, with the approval of the OCC, funds 
freely convertible into United States funds.
    (2) If the OCC requires asset maintenance, the amount of assets held 
by a foreign bank shall be prescribed by the OCC after consideration of 
the aggregate amount of liabilities of the Federal branch or agency, 
payable at or through the Federal branch or agency. To determine the 
aggregate amount of liabilities for purposes of this section, the 
foreign bank shall include bankers' acceptances, but exclude liabilities 
to

[[Page 702]]

the head office and any other branches, offices, agencies, subsidiaries, 
and affiliates of the foreign bank.
    (b) Valuation. For the purposes of this section, marketable 
securities must be valued at principal amount or market value, whichever 
is lower.
    (c) Credits. In determining compliance with the asset maintenance 
requirements, the OCC will give the Federal branch or agency credit for:
    (1) Capital equivalency deposits maintained pursuant to Sec.  28.15;
    (2) Reserves required to be maintained by the Federal branch or 
agency pursuant to the FRB's authority under 12 U.S.C. 3105(a); and
    (3) Assets pledged, and surety bonds payable, to the FDIC to secure 
the payment of domestic deposits.
    (d) Exclusions. In determining eligible assets for purposes of this 
section, the Federal branch or agency shall exclude:
    (1) Any amount due from the head office or any other branch, office, 
agency, subsidiary, or affiliate of the foreign bank;
    (2) Any classified asset;
    (3) Any asset that, in the determination of the OCC, is not 
supported by sufficient credit information;
    (4) Any deposit with a bank in the United States, unless that bank 
has executed a valid waiver of offset agreement;
    (5) Any asset not in the Federal branch's actual possession unless 
the branch holds title to the asset and maintains records sufficient to 
enable independent verification of the branch's ownership of the asset, 
as determined at the most recent examination; and
    (6) Any other particular asset or class of assets as provided by the 
OCC, based on a case-by-case assessment of the risks associated with the 
asset.
    (e) International banking facility. Unless specifically exempted by 
the OCC, the eligible assets and liabilities of any international 
banking facility operated through the Federal branch or agency must be 
included in the computation of eligible assets and liabilities for 
purposes of this section.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70700, Dec. 19, 2003]



Sec.  28.21  Service of process.

    A foreign bank operating at any Federal branch or agency is subject 
to service of process at the location of the Federal branch or agency.



Sec.  28.22  Voluntary liquidation.

    (a) Procedures to close all Federal branches and agencies. Unless 
otherwise provided, in cases in which a foreign bank proposes to close 
all of its Federal branches or agencies, the foreign bank shall comply 
with applicable requirements in 12 CFR 5.48 and the Manual, including 
requirements that apply to an expedited liquidation of an insured 
Federal branch.
    (b) Notice to customers and creditors. A foreign bank shall publish 
notice of the impending closure of each Federal branch or agency for a 
period of two months in every issue of a local newspaper where the 
Federal branch or agency is located. If only weekly publication is 
available, the notice must be published for nine consecutive weeks.
    (c) Report of condition. The Federal branch or agency shall submit a 
Report of Assets and Liabilities of United States Branches and Agencies 
of Foreign Banks as of the close of the last business day prior to the 
start of liquidation of the Federal branch or agency. This report must 
include a certified maturity schedule of all remaining liabilities, if 
any.
    (d) Return of certificate. The Federal branch or agency shall return 
the Federal branch or agency license certificate within 30 days of 
closure to the public.
    (e) Reports of examination. The Federal branch or agency shall send 
the OCC certification that all of its Reports of Examination have been 
destroyed or return its Reports of Examination to the OCC.

[61 FR 19532, May 2, 1996, as amended at 68 FR 70700, Dec. 19, 2003]



Sec.  28.23  Procedures for closing of some of a foreign bank's 
Federal branches and/or agencies.

    In cases where Sec.  28.22 does not apply, and a foreign bank is 
closing one or more, but not all, of its Federal branches and/or 
agencies, it shall follow the procedures set forth in 12

[[Page 703]]

U.S.C. 1831r-1(a) and (b) (branch closings).

[68 FR 70700, Dec. 19, 2003]



Sec.  28.24  Termination of a Federal branch or agency.

    (a) Grounds for termination. The OCC may revoke the authority of a 
foreign bank to operate a Federal branch or agency if:
    (1) The OCC determines that there is reasonable cause to believe 
that the foreign bank has violated or failed to comply with any of the 
provisions of the IBA, other applicable Federal laws or regulations, or 
orders of the OCC;
    (2) A conservator is appointed for the foreign bank, or a similar 
proceeding is initiated in the foreign bank's home country;
    (3) One or more grounds for receivership, including insolvency, as 
specified in 12 U.S.C. 3102(j), exists;
    (4) One or more grounds for termination, including unsafe and 
unsound practices, insufficiency or dissipation of assets, concealment 
of books and records, a money laundering conviction, or other grounds as 
specified in 12 U.S.C. 191, exists; or
    (5) The OCC receives a recommendation from the FRB, pursuant to 12 
U.S.C. 3105(e)(5), that the license of a Federal branch or agency be 
terminated.
    (b) Procedures--(1) Notice and hearing. Except as otherwise provided 
in this section, the OCC may issue an order to terminate the license of 
a Federal branch or agency after providing notice to the Federal branch 
or agency and after providing an opportunity for a hearing.
    (2) Procedures for hearing. The OCC shall conduct a hearing under 
this section pursuant to the OCC's Rules of Practice and Procedure in 12 
CFR part 19.
    (3) Expedited procedure. The OCC may act without providing an 
opportunity for a hearing if it determines that expeditious action is 
necessary in order to protect the public interest. When the OCC finds 
that it is necessary to act without providing an opportunity for a 
hearing, the OCC in its sole discretion, may:
    (i) Provide the Federal branch or agency with notice of the intended 
termination order;
    (ii) Grant the Federal branch or agency an opportunity to present a 
written submission opposing issuance of the order; or
    (iii) Take any other action designed to provide the Federal branch 
or agency with notice and an opportunity to present its views concerning 
the termination order.

[61 FR 19532, May 2, 1996. Redesignated at 68 FR 70700, Dec. 19, 2003]



Sec.  28.25  Change in control.

    (a) After-the-fact notice. In cases in which no other filing is 
required under subpart B of this part, a foreign bank that operates a 
Federal branch or agency shall inform the OCC in writing of the direct 
or indirect acquisition of control of the foreign bank by any person or 
entity, or group of persons or entities acting in concert, within 14 
calendar days after the foreign bank becomes aware of a change in 
control.
    (b) Additional information. The foreign bank shall furnish the OCC 
with any additional information the OCC may require in connection with 
the acquisition of control.

[68 FR 70701, Dec. 19, 2003]



Sec.  28.26  Loan production offices.

    A Federal branch may establish lending offices, make credit 
decisions, and engage in other representational activities at a site 
other than a Federal branch office, subject to the same rights, 
privileges, requirements and limitations that apply to national banks 
under 12 CFR 7.1003, 7.1004, and 7.1005.

[68 FR 70701, Dec. 19, 2003]



               Subpart C_International Lending Supervision



Sec.  28.50  Authority, purpose, and scope.

    (a) Authority. This subpart is issued pursuant to 12 U.S.C. 1 et 
seq., 93a, 161, and 1818; and the International Lending Supervision Act 
of 1983 (Pub. L. 98-181, title IX, 97 Stat. 1153, 12 U.S.C. 3901 et 
seq.).

[[Page 704]]

    (b) Purpose. This subpart implements the requirements of the 
International Lending Supervision Act of 1983 (12 U.S.C. 3901 et seq.),
    (c) Scope. This subpart requires national banks to establish 
reserves against the risks presented in certain international assets and 
sets forth the accounting for various fees received by the banks when 
making international loans.

[61 FR 19532, May 2, 1996, as amended at 73 FR 22251, Apr. 24, 2008]



Sec.  28.51  Definitions.

    For the purposes of this subpart:
    (a) Banking institution means a national bank.
    (b) Federal banking agencies means the OCC, the FRB, and the FDIC.
    (c) International assets means those assets required to be included 
in banking institutions' Country Exposure Report forms (FFIEC 009).
    (d) International loan means a loan as defined in the instructions 
to the Report of Condition and Income for the respective banking 
institution (FFIEC 031, 032, 033 and 034) and made to a foreign 
government, or to an individual, a corporation, or other entity not a 
citizen of, resident in, or organized or incorporated in the United 
States.
    (e) Restructured international loan means a loan that meets the 
following criteria:
    (1) The borrower is unable to service the existing loan according to 
its terms and is a resident of a foreign country in which there is a 
generalized inability of public and private sector obligors to meet 
their external debt obligations on a timely basis because of a lack of, 
or restraints on the availability of, needed foreign exchange in the 
country; and
    (2) The terms of the existing loan are amended to reduce stated 
interest or extend the schedule of payments; or
    (3) A new loan is made to, or for the benefit of, the borrower, 
enabling the borrower to service or refinance the existing debt.
    (f) Transfer risk means the possibility that an asset cannot be 
serviced in the currency of payment because of a lack of, or restraints 
on the availability of, needed foreign exchange in the country of the 
obligor.

[61 FR 19532, May 2, 1996, as amended at 63 FR 57048, Oct. 26, 1998; 73 
FR 22251, Apr. 24, 2008]



Sec.  28.52  Allocated transfer risk reserve.

    (a) Establishment of allocated transfer risk reserve. A banking 
institution shall establish an allocated transfer risk reserve (ATRR) 
for specified international assets when required by the OCC in 
accordance with this section.
    (b) Procedures and standards--(1) Joint agency determination. At 
least annually, the Federal banking agencies shall determine jointly, 
based on the standards set forth in paragraph (b)(2) of this section, 
the following:
    (i) Which international assets subject to transfer risk warrant 
establishment of an ATRR;
    (ii) The amount of the ATRR for the specified assets; and
    (iii) Whether an ATRR established for specified assets may be 
reduced.
    (2) Standards for requiring ATRR--(i) Evaluation of assets. The 
Federal banking agencies shall apply the following criteria in 
determining whether an ATRR is required for particular international 
assets:
    (A) Whether the quality of a banking institution's assets has been 
impaired by a protracted inability of public or private obligors in a 
foreign country to make payments on their external indebtedness as 
indicated by such factors, among others, as whether:
    (1) Such obligors have failed to make full interest payments on 
external indebtedness;
    (2) Such obligors have failed to comply with the terms of any 
restructured indebtedness; or
    (3) A foreign country has failed to comply with any International 
Monetary Fund or other suitable adjustment program; or
    (B) Whether no definite prospects exist for the orderly restoration 
of debt service.
    (ii) Determination of amount of ATRR. (A) In determining the amount 
of the ATRR, the Federal banking agencies shall consider:
    (1) The length of time the quality of the asset has been impaired;

[[Page 705]]

    (2) Recent actions taken to restore debt service capability;
    (3) Prospects for restored asset quality; and
    (4) Such other factors as the Federal banking agencies may consider 
relevant to the quality of the asset.
    (B) The initial year's provision for the ATRR shall be 10 percent of 
the principal amount of each specified international asset, or such 
greater or lesser percentage determined by the Federal banking agencies. 
Additional provision, if any, for the ATRR in subsequent years shall be 
15 percent of the principal amount of each specified international 
asset, or such greater or lesser percentage determined by the Federal 
banking agencies.
    (3) Notification. Based on the joint agency determinations under 
paragraph (b)(1) of this section, the OCC shall notify each banking 
institution holding assets subject to an ATRR:
    (i) Of the amount of the ATRR to be established by the institution 
for specified international assets; and
    (ii) That an ATRR to be established for specified assets may be 
reduced.
    (c) Accounting treatment of ATRR--(1) Charge to current income. A 
banking institution shall establish an ATRR by a charge to current 
income and the amounts so charged shall not be included in the banking 
institution's capital or surplus.
    (2) Separate accounting. A banking institution shall account for an 
ATRR separately from the Allowance for Possible Loan Losses, and shall 
deduct the ATRR from ``gross loans and leases'' to arrive at ``net loans 
and leases.'' The ATRR must be established for each asset subject to the 
ATRR in the percentage amount specified.
    (3) Consolidation. A banking institution shall establish an ATRR, as 
required, on a consolidated basis. Consolidation should be in accordance 
with the procedures and tests of significance set forth in the 
instructions for preparation of Consolidated Reports of Condition and 
Income (FFIEC 031, 032, 033 and 034). For bank holding companies, the 
consolidation shall be in accordance with the principles set forth in 
the ``Instructions to the Bank Holding Company Financial Supplement to 
Report F.R. Y-6'' (Form F.R. Y-9). Edge corporations and Agreement 
corporations engaged in banking shall report in accordance with 
instructions for preparation of the Report of Condition for Edge 
corporations and Agreement corporations (Form F.R. 2886b).
    (4) Alternative accounting treatment. A banking institution need not 
establish an ATRR if it writes down in the period in which the ATRR is 
required, or has written down in prior periods, the value of the 
specified international assets in the requisite amount for each such 
asset. For purposes of this paragraph, international assets may be 
written down by a charge to the Allowance for Possible Loan Losses or a 
reduction in the principal amount of the asset by application of 
interest payments or other collections on the asset. However, the 
Allowance for Possible Loan Losses must be replenished in such amount 
necessary to restore it to a level which adequately provides for the 
estimated losses inherent in the banking institution's loan portfolio.
    (5) Reduction of ATRR. A banking institution may reduce an ATRR when 
notified by the OCC or, at any time, by writing down such amount of the 
international asset for which the ATRR was established.



Sec.  28.53  Accounting for fees on international loans.

    (a) Restrictions on fees for restructured international loans. No 
banking institution shall charge, in connection with the restructuring 
of an international loan, any fee exceeding the administrative costs of 
the restructuring unless it amortizes the amount of the fee exceeding 
the administrative cost over the effective life of the loan.
    (b) Accounting treatment. Subject to paragraph (a) of this section, 
a banking institution is to account for fees in accordance with 
generally accepted accounting principles.

[63 FR 57048, Oct. 26, 1998]



Sec.  28.54  Reporting and disclosure of international assets.

    (a) Requirements. (1) Pursuant to section 907(a) of the 
International Lending Supervision Act of 1983 (title IX, Pub. L. 98-181, 
97 Stat. 1153, 12 U.S.C. 3906)

[[Page 706]]

(ILSA) a banking institution shall submit to the OCC, at least 
quarterly, information regarding the amounts and composition of its 
holdings of international assets.
    (2) Pursuant to section 907(b) of ILSA (12 U.S.C. 3906), a banking 
institution shall submit to the OCC information regarding concentrations 
in its holdings of international assets that are material in relation to 
total assets and to capital of the institution, such information to be 
made publicly available by the OCC on request.
    (b) Procedures. The format, content, and reporting and filing dates 
of the reports required under paragraph (a) of this section shall be 
determined jointly by the Federal banking agencies. The requirements to 
be prescribed by the agencies may include changes to existing reporting 
forms (such as the Country Exposure Report, FFIEC 009) or such other 
requirements as the agencies deem appropriate. The agencies also may 
determine to exempt from the requirements of paragraph (a) of this 
section banking institutions that, in the agencies' judgment, have de 
minimis holdings of international assets.
    (c) Reservation of authority. Nothing contained in this part shall 
preclude the OCC from requiring from a banking institution such 
additional or more frequent information on the institution's holdings of 
international assets as the OCC may consider necessary.

                           PART 29 [RESERVED]



PART 30_SAFETY AND SOUNDNESS STANDARDS--Table of Contents



Sec.
30.1 Scope.
30.2 Purpose.
30.3 Determination and notification of failure to meet safety and 
          soundness standards and request for compliance plan.
30.4 Filing of safety and soundness compliance plan.
30.5 Issuance of orders to correct deficiencies and to take or refrain 
          from taking other actions.
30.6 Enforcement of orders.

Appendix A to Part 30--Interagency Guidelines Establishing Standards for 
          Safety and Soundness
Appendix B to Part 30--Interagency Guidelines Establishing Information 
          Security Standards
Appendix C to Part 30--OCC Guidelines Establishing Standards for 
          Residential Mortgage Lending Practices
Appendix D to Part 30--OCC Guidelines Establishing Heightened Standards 
          for Certain Large Insured National Banks, Insured Federal 
          Savings Associations, and Insured Federal Branches
Appendix E to Part 30--OCC Guidelines Establishing Standards for 
          Recovery Planning by Certain Large Insured National Banks, 
          Insured Federal Savings Associations, and Insured Federal 
          Branches

    Authority: 12 U.S.C. 1, 93a, 371, 1462a, 1463, 1464, 1467a, 1818, 
1828, 1831p-1, 1881-1884, 3102(b) and 5412(b)(2)(B); 15 U.S.C. 1681s, 
1681w, 6801, and 6805(b)(1).

    Source: 60 FR 35680, July 10, 1995, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 30 appear at 69 FR 
77616, Dec. 28, 2004.



Sec.  30.1  Scope.

    (a) The rules set forth in this part and the standards set forth in 
appendices A, B, C, D, and E to this part apply to national banks, 
Federal savings associations, and Federal branches of foreign banks that 
are subject to the provisions of section 39 of the Federal Deposit 
Insurance Act (section 39)(12 U.S.C. 1831p-1).
    (b) The standards set forth in appendix B to this part also apply to 
uninsured national banks, Federal branches and Federal agencies of 
foreign banks, and the subsidiaries of any national bank, Federal 
savings association, and Federal branch and Federal agency of a foreign 
bank (except brokers, dealers, persons providing insurance, investment 
companies, and investment advisers). Violation of these standards may be 
an unsafe and unsound practice within the meaning of 12 U.S.C. 1818.

[66 FR 8633, Feb. 1, 2001, as amended at 70 FR 6332, Feb. 7, 2005; 79 FR 
54543, Sept. 11, 2014; 81 FR 66800, Sept. 29, 2016]



Sec.  30.2  Purpose.

    Section 39 of the FDI Act, 12 U.S.C. 1831p-1, requires the Office of 
the Comptroller of the Currency (OCC) to establish safety and soundness 
standards. Pursuant to section 39, a national

[[Page 707]]

bank or Federal savings association may be required to submit a 
compliance plan if it is not in compliance with a safety and soundness 
standard prescribed by guideline under section 39(a) or (b). An 
enforceable order under section 8 of the FDI Act, 12 U.S.C. 1818(b), may 
be issued if, after being notified that it is in violation of a safety 
and soundness standard prescribed under section 39, the national bank or 
Federal savings association fails to submit an acceptable compliance 
plan or fails in any material respect to implement an accepted plan. 
This part establishes procedures for requiring submission of a 
compliance plan and issuing an enforceable order pursuant to section 39. 
The Interagency Guidelines Establishing Standards for Safety and 
Soundness are set forth in appendix A to this part, and the Interagency 
Guidelines Establishing Information Security Standards are set forth in 
appendix B to this part. The OCC Guidelines Establishing Standards for 
Residential Mortgage Lending Practices are set forth in appendix C to 
this part. The OCC Guidelines Establishing Heightened Standards for 
Certain Large Insured National Banks, Insured Federal Savings 
Associations, and Insured Federal Branches are set forth in appendix D 
to this part. The OCC Guidelines Establishing Standards for Recovery 
Planning by Certain Large Insured National Banks, Insured Federal 
Savings Associations, and Insured Federal Branches are set forth in 
appendix E to this part.

[60 FR 35680, July 10, 1995, as amended at 63 FR 55488, Oct. 15, 1998; 
64 FR 52641, Sept. 30, 1999; 66 FR 8633, Feb. 1, 2001; 70 FR 6332, Feb. 
7, 2005; 79 FR 54543, Sept. 11, 2014; 81 FR 66800, Sept. 29, 2016]



Sec.  30.3  Determination and notification of failure to meet safety 
and soundness standards and request for compliance plan.

    (a) Determination. The OCC may, based upon an examination, 
inspection, or any other information that becomes available to the OCC, 
determine that a national bank or Federal savings association has failed 
to satisfy the safety and soundness standards contained in the 
Interagency Guidelines Establishing Standards for Safety and Soundness 
set forth in appendix A to this part, the Interagency Guidelines 
Establishing Standards for Safeguarding Customer Information set forth 
in appendix B to this part, the OCC Guidelines Establishing Standards 
for Residential Mortgage Lending Practices set forth in appendix C to 
this part, the OCC Guidelines Establishing Heightened Standards for 
Certain Large Insured National Banks, Insured Federal Savings 
Associations, and Insured Federal Branches set forth in appendix D to 
this part, or the OCC Guidelines Establishing Standards for Recovery 
Planning by Certain Large Insured National Banks, Insured Federal 
Savings Associations, and Insured Federal Branches set forth in appendix 
E to this part.
    (b) Request for compliance plan. If the OCC determines that a 
national bank or Federal savings association has failed to satisfy a 
safety and soundness standard pursuant to paragraph (a) of this section, 
the OCC may request, by letter or through a report of examination, the 
submission of a compliance plan and the bank or savings association 
shall be deemed to have notice of the deficiency three days after 
mailing of the letter by the OCC or delivery of the report of 
examination.

[60 FR 35680, July 10, 1995, as amended at 63 FR 55488, Oct. 15, 1998; 
64 FR 52641, Sept. 30, 1999; 66 FR 8633, Feb. 1, 2001; 70 FR 6332, Feb. 
7, 2005; 79 FR 54543, Sept. 11, 2014; 81 FR 66800, Sept. 29, 2016]



Sec.  30.4  Filing of safety and soundness compliance plan.

    (a) Schedule for filing compliance plan--(1) In general. A national 
bank or Federal savings association shall file a written safety and 
soundness compliance plan with the OCC within 30 days of receiving a 
request for a compliance plan pursuant to Sec.  30.3(b) unless the OCC 
notifies the bank or savings association in writing that the plan is to 
be filed within a different period.
    (2) Other plans. If a national bank or Federal savings association 
is obligated to file, or is currently operating under, a capital 
restoration plan submitted pursuant to section 38 of the FDI Act (12 
U.S.C. 1831o), a cease-and-desist order entered into pursuant to section 
8 of the FDI Act (12 U.S.C.

[[Page 708]]

1818(b)), a formal or informal agreement, or a response to a report of 
examination or report of inspection, it may, with the permission of the 
OCC, submit a compliance plan under this section as part of that plan, 
order, agreement, or response, subject to the deadline provided in 
paragraph (a) of this section.
    (b) Contents of plan. The compliance plan shall include a 
description of the steps the national bank or Federal savings 
association will take to correct the deficiency and the time within 
which those steps will be taken.
    (c) Review of safety and soundness compliance plans. Within 30 days 
after receiving a safety and soundness compliance plan under this part, 
the OCC shall provide written notice to the national bank or Federal 
savings association of whether the plan has been approved or seek 
additional information from the bank or savings association regarding 
the plan. The OCC may extend the time within which notice regarding 
approval of a plan will be provided.
    (d) Failure to submit or implement a compliance plan--(1) 
Supervisory actions. If a national bank or Federal savings association 
fails to submit an acceptable plan within the time specified by the OCC 
or fails in any material respect to implement a compliance plan, then 
the OCC shall, by order, require the bank or savings association to 
correct the deficiency and may take further actions provided in section 
39(e)(2)(B). Pursuant to section 39(e)(3), the OCC may be required to 
take certain actions if the national bank or Federal savings association 
commenced operations or experienced a change in control within the 
previous 24-month period, or the bank or savings association experienced 
extraordinary growth during the previous 18-month period.
    (2) Extraordinary growth. For purposes of paragraph (d)(1) of this 
section, extraordinary growth means an increase in assets of more than 
7.5 percent during any quarter within the 18-month period preceding the 
issuance of a request for submission of a compliance plan, by a national 
bank or Federal savings association that is not well capitalized for 
purposes of section 38 of the FDI Act. For purposes of calculating an 
increase in assets, assets acquired through merger or acquisition 
approved pursuant to the Bank Merger Act (12 U.S.C. 1828(c)) will be 
excluded.
    (e) Amendment of compliance plan. A national bank or Federal savings 
association that has filed an approved compliance plan may, after prior 
written notice to and approval by the OCC, amend the plan to reflect a 
change in circumstance. Until such time as a proposed amendment has been 
approved, the bank or savings association shall implement the compliance 
plan as previously approved.

[60 FR 35680, July 10, 1995, as amended at 79 FR 54543, Sept. 11, 2014]



Sec.  30.5  Issuance of orders to correct deficiencies and to take 
or refrain from taking other actions.

    (a) Notice of intent to issue order--(1) In general. The OCC shall 
provide a national bank or Federal savings association prior written 
notice of the OCC's intention to issue an order requiring the bank or 
savings association to correct a safety and soundness deficiency or to 
take or refrain from taking other actions pursuant to section 39 of the 
FDI Act. The national bank or Federal savings association shall have 
such time to respond to a proposed order as provided by the OCC under 
paragraph (c) of this section.
    (2) Immediate issuance of final order. If the OCC finds it necessary 
in order to carry out the purposes of section 39 of the FDI Act, the OCC 
may, without providing the notice prescribed in paragraph (a)(1) of this 
section, issue an order requiring a national bank or Federal savings 
association immediately to take actions to correct a safety and 
soundness deficiency or take or refrain from taking other actions 
pursuant to section 39. A national bank or Federal savings association 
that is subject to such an immediately effective order may submit a 
written appeal of the order to the OCC. Such an appeal must be received 
by the OCC within 14 calendar days of the issuance of the order, unless 
the OCC permits a longer period. The OCC shall consider any such appeal, 
if filed in a timely manner, within 60 days of receiving the appeal. 
During such period of review, the order

[[Page 709]]

shall remain in effect unless the OCC, in its sole discretion, stays the 
effectiveness of the order.
    (b) Content of notice. A notice of intent to issue an order shall 
include:
    (1) A statement of the safety and soundness deficiency or 
deficiencies that have been identified at the national bank or Federal 
savings association;
    (2) A description of any restrictions, prohibitions, or affirmative 
actions that the OCC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of any required action; 
and
    (4) The date by which the national bank or Federal savings 
association subject to the order may file with the OCC a written 
response to the notice.
    (c) Response to notice--(1) Time for response. A national bank or 
Federal savings association may file a written response to a notice of 
intent to issue an order within the time period set by the OCC. Such a 
response must be received by the OCC within 14 calendar days from the 
date of the notice unless the OCC determines that a different period is 
appropriate in light of the safety and soundness of the national bank or 
Federal savings association or other relevant circumstances.
    (2) Content of response. The response should include:
    (i) An explanation why the action proposed by the OCC is not an 
appropriate exercise of discretion under section 39;
    (ii) Any recommended modification of the proposed order; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
national bank or Federal savings association regarding the proposed 
order.
    (d) Agency consideration of response. After considering the 
response, the OCC may:
    (1) Issue the order as proposed or in modified form;
    (2) Determine not to issue the order and so notify the national bank 
or Federal savings association; or
    (3) Seek additional information or clarification of the response 
from the national bank or Federal savings association, or any other 
relevant source.
    (e) Failure to file response. Failure by a national bank or Federal 
savings association to file with the OCC, within the specified time 
period, a written response to a proposed order shall constitute a waiver 
of the opportunity to respond and shall constitute consent to the 
issuance of the order.
    (f) Request for modification or rescission of order. Any national 
bank or Federal savings association that is subject to an order under 
this part may, upon a change in circumstances, request in writing that 
the OCC reconsider the terms of the order, and may propose that the 
order be rescinded or modified. Unless otherwise ordered by the OCC, the 
order shall continue in place while such request is pending before the 
OCC.

[60 FR 35680, July 10, 1995, as amended at 79 FR 54544, Sept. 11, 2014]



Sec.  30.6  Enforcement of orders.

    (a) Judicial remedies. Whenever a national bank or Federal savings 
association fails to comply with an order issued under section 39, the 
OCC may seek enforcement of the order in the appropriate United States 
district court pursuant to section 8(i)(1) of the FDI Act, 12 U.S.C. 
1818(i)(1).
    (b) Failure to comply with order. Pursuant to section 8(i)(2)(A) of 
the FDI Act, 12 U.S.C. 1818(i)(2)(A), the OCC may assess a civil money 
penalty against any national bank or Federal savings association that 
violates or otherwise fails to comply with any final order issued under 
section 39 and against any institution-affiliated party who participates 
in such violation or noncompliance.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the OCC may seek enforcement 
of the provisions of section 39 or this part through any other judicial 
or administrative proceeding authorized by law.

[60 FR 35680, July 10, 1995, as amended at 79 FR 54544, Sept. 11, 2014]

[[Page 710]]



    Sec. Appendix A to Part 30--Interagency Guidelines Establishing 
                   Standards for Safety and Soundness

                            Table of Contents

                             I. Introduction

    A. Preservation of existing authority.
    B. Definitions.

                II. Operational and Managerial Standards

    A. Internal controls and information systems.
    B. Internal audit system.
    C. Loan documentation.
    D. Credit underwriting.
    E. Interest rate exposure.
    F. Asset growth.
    G. Asset quality.
    H. Earnings.
    I. Compensation, fees and benefits.

III. Prohibition on Compensation That Constitutes an Unsafe and Unsound 
                                Practice

    A. Excessive compensation.
    B. Compensation leading to material financial loss.

                             I. Introduction

    i. Section 39 of the Federal Deposit Insurance Act \1\ (FDI Act) 
requires each Federal banking agency (collectively, the agencies) to 
establish certain safety and soundness standards by regulation or by 
guideline for all insured depository institutions. Under section 39, the 
agencies must establish three types of standards: (1) Operational and 
managerial standards; (2) compensation standards; and (3) such standards 
relating to asset quality, earnings, and stock valuation as they 
determine to be appropriate.
---------------------------------------------------------------------------

    \1\ Section 39 of the Federal Deposit Insurance Act (12 U.S.C. 
1831p-1) was added by section 132 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (FDICIA), Pub. L. 102-242, 105 Stat. 
2236 (1991), and amended by section 956 of the Housing and Community 
Development Act of 1992, Pub. L. 102-550, 106 Stat. 3895 (1992) and 
section 318 of the Riegle Community Development and Regulatory 
Improvement Act of 1994, Pub. L. 103-325, 108 Stat. 2160 (1994).
---------------------------------------------------------------------------

    ii. Section 39(a) requires the agencies to establish operational and 
managerial standards relating to: (1) Internal controls, information 
systems and internal audit systems, in accordance with section 36 of the 
FDI Act (12 U.S.C. 1831m); (2) loan documentation; (3) credit 
underwriting; (4) interest rate exposure; (5) asset growth; and (6) 
compensation, fees, and benefits, in accordance with subsection (c) of 
section 39. Section 39(b) requires the agencies to establish standards 
relating to asset quality, earnings, and stock valuation that the 
agencies determine to be appropriate.
    iii. Section 39(c) requires the agencies to establish standards 
prohibiting as an unsafe and unsound practice any compensatory 
arrangement that would provide any executive officer, employee, 
director, or principal shareholder of the institution with excessive 
compensation, fees or benefits and any compensatory arrangement that 
could lead to material financial loss to an institution. Section 39(c) 
also requires that the agencies establish standards that specify when 
compensation is excessive.
    iv. If an agency determines that an institution fails to meet any 
standard established by guideline under subsection (a) or (b) of section 
39, the agency may require the institution to submit to the agency an 
acceptable plan to achieve compliance with the standard. In the event 
that an institution fails to submit an acceptable plan within the time 
allowed by the agency or fails in any material respect to implement an 
accepted plan, the agency must, by order, require the institution to 
correct the deficiency. The agency may, and in some cases must, take 
other supervisory actions until the deficiency has been corrected.
    v. The agencies have adopted amendments to their rules and 
regulations to establish deadlines for submission and review of 
compliance plans. \2\
---------------------------------------------------------------------------

    \2\ For the Office of the Comptroller of the Currency, these 
regulations appear at 12 CFR part 30; for the Board of Governors of the 
Federal Reserve System, these regulations appear at 12 CFR part 263; and 
for the Federal Deposit Insurance Corporation, these regulations appear 
at 12 CFR part 308, subpart R and 12 CFR part 391, subpart B.
---------------------------------------------------------------------------

    vi. The following Guidelines set out the safety and soundness 
standards that the agencies use to identify and address problems at 
insured depository institutions before capital becomes impaired. The 
agencies believe that the standards adopted in these Guidelines serve 
this end without dictating how institutions must be managed and 
operated. These standards are designed to identify potential safety and 
soundness concerns and ensure that action is taken to address those 
concerns before they pose a risk to the deposit insurance funds.

                  A. Preservation of Existing Authority

    Neither section 39 nor these Guidelines in any way limits the 
authority of the agencies to address unsafe or unsound practices, 
violations of law, unsafe or unsound conditions, or other practices. 
Action under section 39 and these Guidelines may be taken independently 
of, in conjunction with, or in addition to any other enforcement action 
available to the agencies. Nothing in these Guidelines

[[Page 711]]

limits the authority of the FDIC pursuant to section 38(i)(2)(F) of the 
FDI Act (12 U.S.C. 1831(o)) and part 325 of title 12 of the Code of 
Federal Regulations.

                             B. Definitions

    1. In general. For purposes of these Guidelines, except as modified 
in the Guidelines or unless the context otherwise requires, the terms 
used have the same meanings as set forth in sections 3 and 39 of the FDI 
Act (12 U.S.C. 1813 and 1831p-1).
    2. Board of directors, in the case of a state-licensed insured 
branch of a foreign bank and in the case of a Federal branch of a 
foreign bank, means the managing official in charge of the insured 
foreign branch.
    3. Compensation means all direct and indirect payments or benefits, 
both cash and non-cash, granted to or for the benefit of any executive 
officer, employee, director, or principal shareholder, including but not 
limited to payments or benefits derived from an employment contract, 
compensation or benefit agreement, fee arrangement, perquisite, stock 
option plan, postemployment benefit, or other compensatory arrangement.
    4. Director shall have the meaning described in 12 CFR 215.2(c). \3\
---------------------------------------------------------------------------

    \3\ In applying these definitions for savings associations, pursuant 
to 12 U.S.C. 1464, savings associations shall use the terms ``savings 
association'' and ``insured savings association'' in place of the terms 
``member bank'' and ``insured bank''.
---------------------------------------------------------------------------

    5. Executive officer shall have the meaning described in 12 CFR 
215.2(d). \4\
---------------------------------------------------------------------------

    \4\ See footnote 3 in section I.B.4. of this appendix.
---------------------------------------------------------------------------

    6. Principal shareholder shall have the meaning described in 12 CFR 
215.2(l). \5\
---------------------------------------------------------------------------

    \5\ See footnote 3 in section I.B.4. of this appendix.
---------------------------------------------------------------------------

                II. Operational and Managerial Standards

    A. Internal controls and information systems. An institution should 
have internal controls and information systems that are appropriate to 
the size of the institution and the nature, scope and risk of its 
activities and that provide for:
    1. An organizational structure that establishes clear lines of 
authority and responsibility for monitoring adherence to established 
policies;
    2. Effective risk assessment;
    3. Timely and accurate financial, operational and regulatory 
reports;
    4. Adequate procedures to safeguard and manage assets; and
    5. Compliance with applicable laws and regulations.
    B. Internal audit system. An institution should have an internal 
audit system that is appropriate to the size of the institution and the 
nature and scope of its activities and that provides for:
    1. Adequate monitoring of the system of internal controls through an 
internal audit function. For an institution whose size, complexity or 
scope of operations does not warrant a full scale internal audit 
function, a system of independent reviews of key internal controls may 
be used;
    2. Independence and objectivity;
    3. Qualified persons;
    4. Adequate testing and review of information systems;
    5. Adequate documentation of tests and findings and any corrective 
actions;
    6. Verification and review of management actions to address material 
weaknesses; and
    7. Review by the institution's audit committee or board of directors 
of the effectiveness of the internal audit systems.
    C. Loan documentation. An institution should establish and maintain 
loan documentation practices that:
    1. Enable the institution to make an informed lending decision and 
to assess risk, as necessary, on an ongoing basis;
    2. Identify the purpose of a loan and the source of repayment, and 
assess the ability of the borrower to repay the indebtedness in a timely 
manner;
    3. Ensure that any claim against a borrower is legally enforceable;
    4. Demonstrate appropriate administration and monitoring of a loan; 
and
    5. Take account of the size and complexity of a loan.
    D. Credit underwriting. An institution should establish and maintain 
prudent credit underwriting practices that:
    1. Are commensurate with the types of loans the institution will 
make and consider the terms and conditions under which they will be 
made;
    2. Consider the nature of the markets in which loans will be made;
    3. Provide for consideration, prior to credit commitment, of the 
borrower's overall financial condition and resources, the financial 
responsibility of any guarantor, the nature and value of any underlying 
collateral, and the borrower's character and willingness to repay as 
agreed;
    4. Establish a system of independent, ongoing credit review and 
appropriate communication to management and to the board of directors;
    5. Take adequate account of concentration of credit risk; and
    6. Are appropriate to the size of the institution and the nature and 
scope of its activities.
    E. Interest rate exposure. An institution should:

[[Page 712]]

    1. Manage interest rate risk in a manner that is appropriate to the 
size of the institution and the complexity of its assets and 
liabilities; and
    2. Provide for periodic reporting to management and the board of 
directors regarding interest rate risk with adequate information for 
management and the board of directors to assess the level of risk.
    F. Asset growth. An institution's asset growth should be prudent and 
consider:
    1. The source, volatility and use of the funds that support asset 
growth;
    2. Any increase in credit risk or interest rate risk as a result of 
growth; and
    3. The effect of growth on the institution's capital.
    G. Asset quality. An insured depository institution should establish 
and maintain a system that is commensurate with the institution's size 
and the nature and scope of its operations to identify problem assets 
and prevent deterioration in those assets. The institution should:
    1. Conduct periodic assetquality reviews to identify problem assets;
    2. Estimate the inherent losses in those assets and establish 
reserves that are sufficient to absorb estimated losses;
    3. Compare problem asset totals to capital;
    4. Take appropriate corrective action to resolve problem assets;
    5. Consider the size and potential risks of material asset 
concentrations; and
    6. Provide periodic asset reports with adequate information for 
management and the board of directors to assess the level of asset risk.
    H. Earnings. An insured depository institution should establish and 
maintain a system that is commensurate with the institution's size and 
the nature and scope of its operations to evaluate and monitor earnings 
and ensure that earnings are sufficient to maintain adequate capital and 
reserves. The institution should:
    1. Compare recent earnings trends relative to equity, assets, or 
other commonly used benchmarks to the institution's historical results 
and those of its peers;
    2. Evaluate the adequacy of earnings given the size, complexity, and 
risk profile of the institution's assets and operations;
    3. Assess the source, volatility, and sustainability of earnings, 
including the effect of nonrecurring or extraordinary income or expense;
    4. Take steps to ensure that earnings are sufficient to maintain 
adequate capital and reserves after considering the institution's asset 
quality and growth rate; and
    5. Provide periodic earnings reports with adequate information for 
management and the board of directors to assess earnings performance.
    I. Compensation, fees and benefits. An institution should maintain 
safeguards to prevent the payment of compensation, fees, and benefits 
that are excessive or that could lead to material financial loss to the 
institution.

III. Prohibition on Compensation That Constitutes an Unsafe and Unsound 
                                Practice

                        A. Excessive Compensation

    Excessive compensation is prohibited as an unsafe and unsound 
practice. Compensation shall be considered excessive when amounts paid 
are unreasonable or disproportionate to the services performed by an 
executive officer, employee, director, or principal shareholder, 
considering the following:
    1. The combined value of all cash and non-cash benefits provided to 
the individual;
    2. The compensation history of the individual and other individuals 
with comparable expertise at the institution;
    3. The financial condition of the institution;
    4. Comparable compensation practices at comparable institutions, 
based upon such factors as asset size, geographic location, and the 
complexity of the loan portfolio or other assets;
    5. For postemployment benefits, the projected total cost and benefit 
to the institution;
    6. Any connection between the individual and any fraudulent act or 
omission, breach of trust or fiduciary duty, or insider abuse with 
regard to the institution; and
    7. Any other factors the agencies determines to be relevant.

           B. Compensation Leading to Material Financial Loss

    Compensation that could lead to material financial loss to an 
institution is prohibited as an unsafe and unsound practice.

[60 FR 35678, 35682, July 10, 1995, as amended at 61 FR 43950, Aug. 27, 
1996; 79 FR 54544, Sept. 11, 2014]



    Sec. Appendix B to Part 30--Interagency Guidelines Establishing 
                     Information Security Standards

                            Table of Contents

I. Introduction
    A. Scope
    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Service Provider Arrangements

[[Page 713]]

    E. Adjust the Program
    F. Report to the Board
    G. Implement the Standards
    I. Introduction
    The Interagency Guidelines Establishing Information Security 
Standards (Guidelines) set forth standards pursuant to section 39 of the 
Federal Deposit Insurance Act (section 39, codified at 12 U.S.C. 1831p-
1), and sections 501 and 505(b), codified at 15 U.S.C. 6801 and 6805(b) 
of the Gramm-Leach Bliley Act. These Guidelines address standards for 
developing and implementing administrative, technical, and physical 
safeguards to protect the security, confidentiality, and integrity of 
customer information. These Guidelines also address standards with 
respect to the proper disposal of consumer information, pursuant to 
sections 621 and 628 of the Fair Credit Reporting Act (15 U.S.C. 1681s 
and 1681w).
    A. Scope. The Guidelines apply to customer information maintained by 
or on behalf of entities over which the OCC has authority. Such 
entities, referred to as ``the national bank or Federal savings 
association,'' are national banks, Federal savings associations, Federal 
branches and Federal agencies of foreign banks, and any subsidiaries of 
such entities (except brokers, dealers, persons providing insurance, 
investment companies, and investment advisers). The Guidelines also 
apply to the proper disposal of consumer information by or on behalf of 
such entities.
    B. Preservation of Existing Authority. Neither section 39 nor these 
Guidelines in any way limit the authority of the OCC to address unsafe 
or unsound practices, violations of law, unsafe or unsound conditions, 
or other practices. The OCC may take action under section 39 and these 
Guidelines independently of, in conjunction with, or in addition to, any 
other enforcement action available to the OCC.
    C. Definitions. 1. Except as modified in the Guidelines, or unless 
the context otherwise requires, the terms used in these Guidelines have 
the same meanings as set forth in sections 3 and 39 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813 and 1831p-1).
    2. For purposes of the Guidelines, the following definitions apply:
    a. Board of directors, in the case of a branch or agency of a 
foreign bank, means the managing official in charge of the branch or 
agency.
    b. Consumer information means any record about an individual, 
whether in paper, electronic, or other form, that is a consumer report 
or is derived from a consumer report and that is maintained or otherwise 
possessed by or on behalf of the national bank or Federal savings 
association for a business purpose. Consumer information also means a 
compilation of such records. The term does not include any record that 
does not identify an individual.
    i. Examples. (1) Consumer information includes:
    (A) A consumer report that a national bank or Federal savings 
association obtains;
    (B) Information from a consumer report that the national bank or 
Federal savings association obtains from its affiliate after the 
consumer has been given a notice and has elected not to opt out of that 
sharing;
    (C) Information from a consumer report that the national bank or 
Federal savings association obtains about an individual who applies for 
but does not receive a loan, including any loan sought by an individual 
for a business purpose;
    (D) Information from a consumer report that the national bank or 
Federal savings association obtains about an individual who guarantees a 
loan (including a loan to a business entity); or
    (E) Information from a consumer report that the national bank or 
Federal savings association obtains about an employee or prospective 
employee.
    (2) Consumer information does not include:
    (A) Aggregate information, such as the mean credit score, derived 
from a group of consumer reports; or
    (B) Blind data, such as payment history on accounts that are not 
personally identifiable, that may be used for developing credit scoring 
models or for other purposes.
    c. Consumer report has the same meaning as set forth in the Fair 
Credit Reporting Act, 15 U.S.C. 1681a(d).
    d. Customer means any customer of the national bank or Federal 
savings association as defined in 12 CFR 1016.3(i).
    e. Customer information means any record containing nonpublic 
personal information, as defined in 12 CFR 1016.3(p), about a customer, 
whether in paper, electronic, or other form, that is maintained by or on 
behalf of the national bank or Federal savings association.
    f. Customer information systems means any methods used to access, 
collect, store, use, transmit, protect, or dispose of customer 
information.
    g. Service provider means any person or entity that maintains, 
processes, or otherwise is permitted access to customer information or 
consumer information through its provision of services directly to the 
national bank or Federal savings association.

                 II. Standards for Information Security

    A. Information Security Program. Each national bank or Federal 
savings association shall implement a comprehensive written information 
security program that includes administrative, technical, and physical 
safeguards appropriate to the size and complexity of the national bank 
or Federal savings association and the nature and scope of its 
activities. While all parts of the national bank or Federal savings 
association are not

[[Page 714]]

required to implement a uniform set of policies, all elements of the 
information security program must be coordinated.
    B. Objectives. A national bank's or Federal savings association's 
information security program shall be designed to:
    1. Ensure the security and confidentiality of customer information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information;
    3. Protect against unauthorized access to or use of such information 
that could result in substantial harm or inconvenience to any customer; 
and
    4. Ensure the proper disposal of customer information and consumer 
information.

   III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors. The board of directors or an 
appropriate committee of the board of each national bank or Federal 
savings association shall:
    1. Approve the national bank's or Federal savings association's 
written information security program; and
    2. Oversee the development, implementation, and maintenance of the 
national bank's or Federal savings association's information security 
program, including assigning specific responsibility for its 
implementation and reviewing reports from management.
    B. Assess Risk. Each national bank or Federal savings association 
shall:
    1. Identify reasonably foreseeable internal and external threats 
that could result in unauthorized disclosure, misuse, alteration, or 
destruction of customer information or customer information systems.
    2. Assess the likelihood and potential damage of these threats, 
taking into consideration the sensitivity of customer information.
    3. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control risks.
    C. Manage and Control Risk. Each national bank or Federal savings 
association shall:
    1. Design its information security program to control the identified 
risks, commensurate with the sensitivity of the information as well as 
the complexity and scope of the national bank's or Federal savings 
association's activities. Each national bank or Federal savings 
association must consider whether the following security measures are 
appropriate for the national bank or Federal savings association and, if 
so, adopt those measures the national bank or Federal savings 
association concludes are appropriate:
    a. Access controls on customer information systems, including 
controls to authenticate and permit access only to authorized 
individuals and controls to prevent employees from providing customer 
information to unauthorized individuals who may seek to obtain this 
information through fraudulent means.
    b. Access restrictions at physical locations containing customer 
information, such as buildings, computer facilities, and records storage 
facilities to permit access only to authorized individuals;
    c. Encryption of electronic customer information, including while in 
transit or in storage on networks or systems to which unauthorized 
individuals may have access;
    d. Procedures designed to ensure that customer information system 
modifications are consistent with the national bank's or Federal savings 
association's information security program;
    e. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access to 
customer information;
    f. Monitoring systems and procedures to detect actual and attempted 
attacks on or intrusions into customer information systems;
    g. Response programs that specify actions to be taken when the 
national bank or Federal savings association suspects or detects that 
unauthorized individuals have gained access to customer information 
systems, including appropriate reports to regulatory and law enforcement 
agencies; and
    h. Measures to protect against destruction, loss, or damage of 
customer information due to potential environmental hazards, such as 
fire and water damage or technological failures.
    2. Train staff to implement the national bank's or Federal savings 
association's information security program.
    3. Regularly test the key controls, systems and procedures of the 
information security program. The frequency and nature of such tests 
should be determined by the national bank's or Federal savings 
association's risk assessment. Tests should be conducted or reviewed by 
independent third parties or staff independent of those that develop or 
maintain the security programs.
    4. Develop, implement, and maintain, as part of its information 
security program, appropriate measures to properly dispose of customer 
information and consumer information in accordance with each of the 
requirements of this paragraph III.
    D. Oversee Service Provider Arrangements. Each national bank or 
Federal savings association shall:
    1. Exercise appropriate due diligence in selecting its service 
providers;
    2. Require its service providers by contract to implement 
appropriate measures designed to meet the objectives of these 
Guidelines; and

[[Page 715]]

    3. Where indicated by the national bank's or Federal savings 
association's risk assessment, monitor its service providers to confirm 
that they have satisfied their obligations as required by section D.2. 
As part of this monitoring, a national bank or Federal savings 
association should review audits, summaries of test results, or other 
equivalent evaluations of its service providers.
    E. Adjust the Program. Each national bank or Federal savings 
association shall monitor, evaluate, and adjust, as appropriate, the 
information security program in light of any relevant changes in 
technology, the sensitivity of its customer information, internal or 
external threats to information, and the national bank's or Federal 
savings association's own changing business arrangements, such as 
mergers and acquisitions, alliances and joint ventures, outsourcing 
arrangements, and changes to customer information systems.
    F. Report to the Board. Each national bank or Federal savings 
association shall report to its board or an appropriate committee of the 
board at least annually. This report should describe the overall status 
of the information security program and the national bank's or Federal 
savings association's compliance with these Guidelines. The reports 
should discuss material matters related to its program, addressing 
issues such as: risk assessment; risk management and control decisions; 
service provider arrangements; results of testing; security breaches or 
violations and management's responses; and recommendations for changes 
in the information security program.
    G. Implement the Standards. 1. Effective date. Each national bank or 
Federal savings association must implement an information security 
program pursuant to these Guidelines by July 1, 2001.
    2. Two-year grandfathering of agreements with service providers. 
Until July 1, 2003, a contract that a national bank or Federal savings 
association has entered into with a service provider to perform services 
for it or functions on its behalf satisfies the provisions of section 
III.D., even if the contract does not include a requirement that the 
servicer maintain the security and confidentiality of customer 
information, as long as the national bank or Federal savings association 
entered into the contract on or before March 5, 2001.
    3. Effective date for measures relating to the disposal of consumer 
information. Each national bank or Federal savings association must 
satisfy these Guidelines with respect to the proper disposal of consumer 
information by July 1, 2005.
    4. Exception for existing agreements with service providers relating 
to the disposal of consumer information. Notwithstanding the requirement 
in paragraph III.G.3., a national bank's or Federal savings 
association's contracts with its service providers that have access to 
consumer information and that may dispose of consumer information, 
entered into before July 1, 2005, must comply with the provisions of the 
Guidelines relating to the proper disposal of consumer information by 
July 1, 2006.

Supplement A to Appendix B to Part 30--Interagency Guidance on Response 
 Programs for Unauthorized Access to Customer Information and Customer 
                                 Notice

                              I. Background

    This Guidance \1\ interprets section 501(b) of the Gramm-Leach-
Bliley Act (``GLBA'') and the Interagency Guidelines Establishing 
Information Security Standards (the ``Security Guidelines'') \2\ and 
describes response programs, including customer notification procedures, 
that a financial institution should develop and implement to address 
unauthorized access to or use of customer information that could result 
in substantial harm or inconvenience to a customer. The scope of, and 
definitions of terms used in, this Guidance are identical to those of 
the Security Guidelines. For example, the term ``customer information'' 
is the same term used in the Security Guidelines, and means any record 
containing nonpublic personal information about a customer, whether in 
paper, electronic, or other form, maintained by or on behalf of the 
institution.
---------------------------------------------------------------------------

    \1\ This Guidance was jointly issued by the Board of Governors of 
the Federal Reserve System (Board), the Federal Deposit Insurance 
Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), 
and the Office of Thrift Supervision (OTS). Pursuant to 12 U.S.C. 5412, 
the OTS is no longer a party to this Guidance.
    \2\ 12 CFR part 30, app. B (OCC); 12 CFR part 208, app. D-2 and part 
225, app. F (Board); and 12 CFR part 364, app. B and 12 CFR 391.5 
(FDIC). The ``Interagency Guidelines Establishing Information Security 
Standards'' were formerly known as ``The Interagency Guidelines 
Establishing Standards for Safeguarding Customer Information.''
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                   A. Interagency Security Guidelines

    Section 501(b) of the GLBA required the Agencies to establish 
appropriate standards for financial institutions subject to their 
jurisdiction that include administrative, technical, and physical 
safeguards, to protect the security and confidentiality of customer 
information. Accordingly, the Agencies issued Security Guidelines 
requiring every financial institution to have an information security 
program designed to:
    1. Ensure the security and confidentiality of customer information;

[[Page 716]]

    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such information 
that could result in substantial harm or inconvenience to any customer.

                     B. Risk Assessment and Controls

    1. The Security Guidelines direct every financial institution to 
assess the following risks, among others, when developing its 
information security program:
    a. Reasonably foreseeable internal and external threats that could 
result in unauthorized disclosure, misuse, alteration, or destruction of 
customer information or customer information systems;
    b. The likelihood and potential damage of threats, taking into 
consideration the sensitivity of customer information; and
    c. The sufficiency of policies, procedures, customer information 
systems, and other arrangements in place to control risks. \3\
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    \3\ See Security Guidelines, III.B.
---------------------------------------------------------------------------

    2. Following the assessment of these risks, the Security Guidelines 
require a financial institution to design a program to address the 
identified risks. The particular security measures an institution should 
adopt will depend upon the risks presented by the complexity and scope 
of its business. At a minimum, the financial institution is required to 
consider the specific security measures enumerated in the Security 
Guidelines, \4\ and adopt those that are appropriate for the 
institution, including:
---------------------------------------------------------------------------

    \4\ See Security Guidelines, III.C.
---------------------------------------------------------------------------

    a. Access controls on customer information systems, including 
controls to authenticate and permit access only to authorized 
individuals and controls to prevent employees from providing customer 
information to unauthorized individuals who may seek to obtain this 
information through fraudulent means;
    b. Background checks for employees with responsibilities for access 
to customer information; and
    c. Response programs that specify actions to be taken when the 
financial institution suspects or detects that unauthorized individuals 
have gained access to customer information systems, including 
appropriate reports to regulatory and law enforcement agencies. \5\
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    \5\ See Security Guidelines, III.C.
---------------------------------------------------------------------------

                          C. Service Providers

    The Security Guidelines direct every financial institution to 
require its service providers by contract to implement appropriate 
measures designed to protect against unauthorized access to or use of 
customer information that could result in substantial harm or 
inconvenience to any customer. \6\
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    \6\ See Security Guidelines, II.B. and III.D. Further, the Agencies 
note that, in addition to contractual obligations to a financial 
institution, a service provider may be required to implement its own 
comprehensive information security program in accordance with the 
Safeguards Rule promulgated by the Federal Trade Commission (``FTC''), 
16 CFR part 314.
---------------------------------------------------------------------------

                          II. Response Program

    Millions of Americans, throughout the country, have been victims of 
identity theft. \7\ Identity thieves misuse personal information they 
obtain from a number of sources, including financial institutions, to 
perpetrate identity theft. Therefore, financial institutions should take 
preventative measures to safeguard customer information against attempts 
to gain unauthorized access to the information. For example, financial 
institutions should place access controls on customer information 
systems and conduct background checks for employees who are authorized 
to access customer information. \8\ However, every financial institution 
should also develop and implement a risk-based response program to 
address incidents of unauthorized access to customer information in 
customer information systems \9\ that occur nonetheless. A response 
program should be a key part of an institution's information security 
program. \10\ The program

[[Page 717]]

should be appropriate to the size and complexity of the institution and 
the nature and scope of its activities.
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    \7\ The FTC estimates that nearly 10 million Americans discovered 
they were victims of some form of identity theft in 2002. See The 
Federal Trade Commission, Identity Theft Survey Report, (September 
2003), available at http://www.ftc.gov/ os/2003/09/ synovatereport.pdf.
    \8\ Institutions should also conduct background checks of employees 
to ensure that the institution does not violate 12 U.S.C. 1829, which 
prohibits an institution from hiring an individual convicted of certain 
criminal offenses or who is subject to a prohibition order under 12 
U.S.C. 1818(e)(6).
    \9\ Under the Guidelines, an institution's customer information 
systems consist of all of the methods used to access, collect, store, 
use, transmit, protect, or dispose of customer information, including 
the systems maintained by its service providers. See Security 
Guidelines, I.C.2.d.
    \10\ See FFIEC Information Technology Examination Handbook, 
Information Security Booklet, Dec. 2002 available at http://
www.ffiec.gov/ ffiecinfobase/ html_pages/infosec_ book_frame.htm. 
Federal Reserve SR 97-32, Sound Practice Guidance for Information 
Security for Networks, Dec. 4, 1997; OCC Bulletin 2000-14, 
``Infrastructure Threats--Intrusion Risks'' (May 15, 2000), for 
additional guidance on preventing, detecting, and responding to 
intrusions into financial institution computer systems.
---------------------------------------------------------------------------

    In addition, each institution should be able to address incidents of 
unauthorized access to customer information in customer information 
systems maintained by its domestic and foreign service providers. 
Therefore, consistent with the obligations in the Guidelines that relate 
to these arrangements, and with existing guidance on this topic issued 
by the Agencies, \11\ an institution's contract with its service 
provider should require the service provider to take appropriate actions 
to address incidents of unauthorized access to the financial 
institution's customer information, including notification to the 
institution as soon as possible of any such incident, to enable the 
institution to expeditiously implement its response program.
---------------------------------------------------------------------------

    \11\ See Federal Reserve SR Ltr. 13-19, Guidance on Managing 
Outsourcing Risk, Dec. 5, 2013; OCC Bulletin 2013-29, ``Third-Party 
Relationships--Risk Management Guidance,'' Oct. 30, 2013; and FDIC FIL 
68-99, Risk Assessment Tools and Practices for Information System 
Security, July 7, 1999.
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                   A. Components of a Response Program

    1. At a minimum, an institution's response program should contain 
procedures for the following:
    a. Assessing the nature and scope of an incident, and identifying 
what customer information systems and types of customer information have 
been accessed or misused;
    b. Notifying its primary Federal regulator as soon as possible when 
the institution becomes aware of an incident involving unauthorized 
access to or use of sensitive customer information, as defined below;
    c. Consistent with the Agencies' Suspicious Activity Report 
(``SAR'') regulations, \12\ notifying appropriate law enforcement 
authorities, in addition to filing a timely SAR in situations involving 
Federal criminal violations requiring immediate attention, such as when 
a reportable violation is ongoing;
---------------------------------------------------------------------------

    \12\ An institution's obligation to file a SAR is set out in the 
Agencies' SAR regulations and Agency guidance. See 12 CFR 21.11 
(national banks, Federal branches and agencies); 12 CFR 163.180 (Federal 
savings associations); 12 CFR 208.62 (State member banks); 12 CFR 
211.5(k) (Edge and agreement corporations); 12 CFR 211.24(f) (uninsured 
State branches and agencies of foreign banks); 12 CFR 225.4(f) (bank 
holding companies and their nonbank subsidiaries); 12 CFR part 353 
(State non-member banks); and 12 CFR 390.355 (state savings 
associations). National banks and Federal savings associations must file 
SARs in connection with computer intrusions and other computer crimes. 
See OCC Bulletin 2000-14, ``Infrastructure Threats--Intrusion Risks'' 
(May 15, 2000); see also Federal Reserve SR 01-11, Identity Theft and 
Pretext Calling, Apr. 26, 2001.
---------------------------------------------------------------------------

    d. Taking appropriate steps to contain and control the incident to 
prevent further unauthorized access to or use of customer information, 
for example, by monitoring, freezing, or closing affected accounts, 
while preserving records and other evidence;\13\ and
---------------------------------------------------------------------------

    \13\ See FFIEC Information Technology Examination Handbook, 
Information Security Booklet, Dec. 2002, pp. 68-74.
---------------------------------------------------------------------------

    e. Notifying customers when warranted.
    2. Where an incident of unauthorized access to customer information 
involves customer information systems maintained by an institution's 
service providers, it is the responsibility of the financial institution 
to notify the institution's customers and regulator. However, an 
institution may authorize or contract with its service provider to 
notify the institution's customers or regulator on its behalf.

                          III. Customer Notice

    Financial institutions have an affirmative duty to protect their 
customers' information against unauthorized access or use. Notifying 
customers of a security incident involving the unauthorized access or 
use of the customer's information in accordance with the standard set 
forth below is a key part of that duty. Timely notification of customers 
is important to manage an institution's reputation risk. Effective 
notice also may reduce an institution's legal risk, assist in 
maintaining good customer relations, and enable the institution's 
customers to take steps to protect themselves against the consequences 
of identity theft. When customer notification is warranted, an 
institution may not forgo notifying its customers of an incident because 
the institution believes that it may be potentially embarrassed or 
inconvenienced by doing so.

                    A. Standard for Providing Notice

    When a financial institution becomes aware of an incident of 
unauthorized access to sensitive customer information, the institution 
should conduct a reasonable investigation to promptly determine the 
likelihood that the information has been or will be misused. If the 
institution determines that misuse of its information about a customer 
has occurred or is reasonably possible, it should notify the affected 
customer as soon as possible. Customer notice may be delayed if an 
appropriate law enforcement agency determines that notification will 
interfere with a criminal investigation and

[[Page 718]]

provides the institution with a written request for the delay. However, 
the institution should notify its customers as soon as notification will 
no longer interfere with the investigation.

                    1. Sensitive Customer Information

    Under the Guidelines, an institution must protect against 
unauthorized access to or use of customer information that could result 
in substantial harm or inconvenience to any customer. Substantial harm 
or inconvenience is most likely to result from improper access to 
sensitive customer information because this type of information is most 
likely to be misused, as in the commission of identity theft. For 
purposes of this Guidance, sensitive customer information means a 
customer's name, address, or telephone number, in conjunction with the 
customer's social security number, driver's license number, account 
number, credit or debit card number, or a personal identification number 
or password that would permit access to the customer's account. 
Sensitive customer information also includes any combination of 
components of customer information that would allow someone to log onto 
or access the customer's account, such as user name and password or 
password and account number.

                          2. Affected Customers

    If a financial institution, based upon its investigation, can 
determine from its logs or other data precisely which customers' 
information has been improperly accessed, it may limit notification to 
those customers with regard to whom the institution determines that 
misuse of their information has occurred or is reasonably possible. 
However, there may be situations where the institution determines that a 
group of files has been accessed improperly, but is unable to identify 
which specific customers' information has been accessed. If the 
circumstances of the unauthorized access lead the institution to 
determine that misuse of the information is reasonably possible, it 
should notify all customers in the group.

                      B. Content of Customer Notice

    1. Customer notice should be given in a clear and conspicuous 
manner. The notice should describe the incident in general terms and the 
type of customer information that was the subject of unauthorized access 
or use. It also should generally describe what the institution has done 
to protect the customers' information from further unauthorized access. 
In addition, it should include a telephone number that customers can 
call for further information and assistance. \14\ The notice also should 
remind customers of the need to remain vigilant over the next twelve to 
twenty-four months, and to promptly report incidents of suspected 
identity theft to the institution. The notice should include the 
following additional items, when appropriate:
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    \14\ The institution should, therefore, ensure that it has 
reasonable policies and procedures in place, including trained 
personnel, to respond appropriately to customer inquiries and requests 
for assistance.
---------------------------------------------------------------------------

    a. A recommendation that the customer review account statements and 
immediately report any suspicious activity to the institution;
    b. A description of fraud alerts and an explanation of how the 
customer may place a fraud alert in the customer's consumer reports to 
put the customer's creditors on notice that the customer may be a victim 
of fraud;
    c. A recommendation that the customer periodically obtain credit 
reports from each nationwide credit reporting agency and have 
information relating to fraudulent transactions deleted;
    d. An explanation of how the customer may obtain a credit report 
free of charge; and
    e. Information about the availability of the FTC's online guidance 
regarding steps a consumer can take to protect against identity theft. 
The notice should encourage the customer to report any incidents of 
identity theft to the FTC, and should provide the FTC's Web site address 
and toll-free telephone number that customers may use to obtain the 
identity theft guidance and report suspected incidents of identity 
theft. \15\
---------------------------------------------------------------------------

    \15\ Currently, the FTC Web site for the ID Theft brochure and the 
FTC Hotline phone number are http://www.consumer .gov/idtheft and 1-877-
IDTHEFT. The institution may also refer customers to any materials 
developed pursuant to section 151(b) of the FACT Act (educational 
materials developed by the FTC to teach the public how to prevent 
identity theft).
---------------------------------------------------------------------------

    2. The Agencies encourage financial institutions to notify the 
nationwide consumer reporting agencies prior to sending notices to a 
large number of customers that include contact information for the 
reporting agencies.

                     C. Delivery of Customer Notice

    Customer notice should be delivered in any manner designed to ensure 
that a customer can reasonably be expected to receive it. For example, 
the institution may choose to contact all customers affected by 
telephone or

[[Page 719]]

by mail, or by electronic mail for those customers for whom it has a 
valid e-mail address and who have agreed to receive communications 
electronically.

[66 FR 8633, Feb. 1, 2001, as amended at 69 FR 77616, Dec. 28, 2004; 70 
FR 15751, 15753, Mar. 29, 2005; 71 FR 5780, Feb. 3, 2006; 79 FR 54544, 
Sept. 11, 2014]



 Sec. Appendix C to Part 30--OCC Guidelines Establishing Standards for 
                 Residential Mortgage Lending Practices

                            Table of Contents

I. Introduction
A. Scope
B. Preservation of Existing Authority
C. Relationship to Other Legal Requirements
D. Definitions
II. Standards for Residential Mortgage Lending Practices
A. General
B. Objectives
III. Implementation of Residential Mortgage Lending Standards
A. Avoidance of Particular Loan Terms, Conditions, and Features
B. Prudent Consideration of Certain Loan Terms, Conditions and Features
C. Enhanced Care To Avoid Abusive Loan Terms, Conditions, and Features 
in Certain Mortgages
D. Avoidance of Consumer Misunderstanding
E. Purchased and Brokered Loans
F. Monitoring and Corrective Action

                             I. Introduction

    i. These OCC Guidelines for Residential Mortgage Lending Practices 
(Guidelines) set forth standards pursuant to Section 39 of the Federal 
Deposit Insurance Act, 12 U.S.C. 1831p-1 (Section 39). The Guidelines 
are designed to protect against involvement by national banks, Federal 
savings associations, Federal branches and Federal agencies of foreign 
banks, and their respective operating subsidiaries (together, ``national 
banks and Federal savings associations''), either directly or through 
loans that they purchase or make through intermediaries, in predatory or 
abusive residential mortgage lending practices that are injurious to 
their respective customers and that expose the national bank or Federal 
savings association to credit, legal, compliance, reputation, and other 
risks. The Guidelines focus on the substance of activities and 
practices, not the creation of policies. The Guidelines are enforceable 
under Section 39 in accordance with the procedures prescribed by the 
regulations in 12 CFR part 30.
    ii. As the OCC has previously indicated in guidance to national 
banks and in rulemaking proceedings (OCC Advisory Letters 2003-2 and 
2003-3 (Feb. 21, 2003)), many of the abusive practices commonly 
associated with predatory mortgage lending, such as loan flipping and 
equity stripping, will involve conduct that likely violates the Federal 
Trade Commission Act's (FTC Act) prohibition against unfair or deceptive 
acts or practices. 15 U.S.C. 45. In addition, loans that involve 
violations of the FTC Act, or mortgage loans based predominantly on the 
foreclosure or liquidation value of the borrower's collateral without 
regard to the borrower's ability to repay the loan according to its 
terms, will involve violations of OCC regulations governing real estate 
lending activities, 12 CFR 34.3 (Lending Rules).
    iii. In addition, national banks, Federal savings associations, and 
their respective operating subsidiaries must comply with the 
requirements and Guidelines affecting appraisals of residential mortgage 
loans and appraiser independence. 12 CFR part 34, subpart C, and the 
Interagency Appraisal and Evaluation Guidelines (OCC Bulletin 2010-42 
(December 10, 2010). For example, engaging in a practice of influencing 
the independent judgment of an appraiser with respect to a valuation of 
real estate that is to be security for a residential mortgage loan would 
violate applicable standards.
    iv. Targeting inappropriate credit products and unfair loan terms to 
certain borrowers also may entail conduct that violates the FTC Act, as 
well as the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act 
(FHA). 15 U.S.C. 1691 et seq. 42 U.S.C. 3601 et seq. For example, 
``steering'' a consumer to a loan with higher costs rather than to a 
comparable loan offered by the national bank or Federal savings 
association with lower costs for which the consumer could qualify, on a 
prohibited basis such as the borrower's race, national origin, age, 
gender, or marital status, would be unlawful.
    v. OCC regulations also prohibit national banks and their operating 
subsidiaries from providing lump sum, single premium fees for debt 
cancellation contracts and debt suspension agreements in connection with 
residential mortgage loans. 12 CFR 37.3(c)(2). Some lending practices 
and loan terms, including financing single premium credit insurance and 
the use of mandatory arbitration clauses, also may significantly impair 
the eligibility of a residential mortgage loan for purchase in the 
secondary market.
    vi. Finally, OCC regulations and supervisory guidance on fiduciary 
activities and asset management address the need for national banks and 
Federal savings associations to perform due diligence and exercise 
appropriate control with regard to trustee activities. See 12 CFR 9.6 
(a), in the case of national banks, and 12 CFR 150.200, in the case of 
Federal savings associations, and the

[[Page 720]]

Comptroller's Handbook on Asset Management. For example, national banks 
and Federal savings associations should exercise appropriate diligence 
to minimize potential reputation risks when they undertake to act as 
trustees in mortgage securitizations.
    A. Scope. These Guidelines apply to the residential mortgage lending 
activities of national banks, Federal savings associations, Federal 
branches and Federal agencies of foreign banks, and operating 
subsidiaries of such entities (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers).
    B. Preservation of Existing Authority. Neither Section 39 nor these 
Guidelines in any way limits the authority of the OCC to address unsafe 
or unsound practices or conditions, unfair or deceptive practices, or 
other violations of law. The OCC may take action under Section 39 and 
these Guidelines independently of, in conjunction with, or in addition 
to any other enforcement action available to the OCC.
    C. Relationship to Other Legal Requirements. Actions by a national 
bank or Federal savings association in connection with residential 
mortgage lending that are inconsistent with these Guidelines or Appendix 
A to this part 30 may also constitute unsafe or unsound practices for 
purposes of section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 
1818, unfair or deceptive practices for purposes of section 5 of the FTC 
Act, 15 U.S.C. 45, and the OCC's Lending Rules, 12 CFR 34.3 (Lending 
Rules) and Real Estate Lending Standards, 12 CFR part 34, subpart D, in 
the case of national banks, and 12 CFR 160.100 and 160.101, in the case 
of Federal savings associations, or violations of the ECOA and FHA.
    D. Definitions.
    1. Except as modified in these Guidelines, or unless the context 
otherwise requires, the terms used in these Guidelines have the same 
meanings as set forth in sections 3 and 39 of the Federal Deposit 
Insurance Act, 12 U.S.C. 1813 and 1831p-1.
    2. For purposes of these Guidelines, the following definitions 
apply:
    a. Residential mortgage loan means any loan or other extension of 
credit made to one or more individuals for personal, family, or 
household purposes secured by an owner-occupied 1-4 family residential 
dwelling, including a cooperative unit or mobile home.
    b. National bank or Federal savings association means any national 
bank, Federal savings association, Federal branch or Federal agency of a 
foreign bank, and any operating subsidiary thereof that is subject to 
these Guidelines.

        II. Standards for Residential Mortgage Lending Practices

    A. General. A national bank's or Federal savings association's 
residential mortgage lending activities should reflect standards and 
practices consistent with and appropriate to the size and complexity of 
the bank or savings association and the nature and scope of its lending 
activities.
    B. Objectives. A national bank's or Federal savings association's 
residential mortgage lending activities should reflect standards and 
practices that:
    1. Enable the national bank or Federal savings association to 
effectively manage the credit, legal, compliance, reputation, and other 
risks associated with the bank's or savings association's consumer 
residential mortgage lending activities.
    2. Effectively prevent the national bank or Federal savings 
association from becoming engaged in abusive, predatory, unfair, or 
deceptive practices, directly, indirectly through mortgage brokers or 
other intermediaries, or through purchased loans.

      III. Implementation of Residential Mortgage Lending Standards

    A. Avoidance of Particular Loan Terms, Conditions, and Features. A 
national bank or Federal savings association should not become involved, 
directly or indirectly in residential mortgage lending activities 
involving abusive, predatory, unfair or deceptive lending practices, 
including, but not limited to:
    1. Equity Stripping and Fee Packing. Repeat refinancings where a 
borrower's equity is depleted as a result of financing excessive fees 
for the loan or ancillary products.
    2. Loan Flipping. Repeat refinancings under circumstances where the 
relative terms of the new and refinanced loan and the cost of the new 
loan do not provide a tangible economic benefit to the borrower.
    3. Refinancing of Special Mortgages. Refinancing of a special 
subsidized mortgage that contains terms favorable to the borrower with a 
loan that does not provide a tangible economic benefit to the borrower 
relative to the refinanced loan.
    4. Encouragement of Default. Encouraging a borrower to breach a 
contract and default on an existing loan prior to and in connection with 
the consummation of a loan that refinances all or part of the existing 
loan.
    B. Prudent Consideration of Certain Loan Terms, Conditions and 
Features. Certain loan terms, conditions and features, may, under 
particular circumstances, be susceptible to abusive, predatory, unfair 
or deceptive practices, yet may be appropriate and acceptable risk 
mitigation measures, consistent with safe and sound lending, and benefit 
customers under other circumstances. A national bank or Federal savings 
association should prudently consider the circumstances, including the 
characteristics of a targeted market and applicable consumer and safety 
and soundness safeguards, under which the national bank or Federal 
savings association will engage directly or indirectly

[[Page 721]]

in making residential mortgage loans with the following loan terms, 
conditions and features:
    1. Financing single premium credit life, disability or unemployment 
insurance.
    2. Negative amortization, involving a payment schedule in which 
regular periodic payments cause the principal balance to increase.
    3. Balloon payments in short-term transactions.
    4. Prepayment penalties that are not limited to the early years of 
the loan, particularly in subprime loans.
    5. Interest rate increases upon default at a level not commensurate 
with risk mitigation.
    6. Call provisions permitting the national bank or Federal savings 
association to accelerate payment of the loan under circumstances other 
than the borrower's default under the credit agreement or to mitigate 
the bank's or savings association's exposure to loss.
    7. Absence of an appropriate assessment and documentation of the 
consumer's ability to repay the loan in accordance with its terms, 
commensurate with the type of loan, as required by appendix A of this 
part.
    8. Mandatory arbitration clauses or agreements, particularly if the 
eligibility of the loan for purchase in the secondary market is thereby 
impaired.
    9. Pricing terms that result in the loan's being subject to the 
provisions of the Home Ownership and Equity Protection Act. 15 U.S.C. 
1639 et seq.
    10. Original principal balance of the loan in excess of appraised 
value.
    11. Payment schedules that consolidate more than two periodic 
payments and pay them in advance from the loan proceeds.
    12. Payments to home improvement contractors under a home 
improvement contract from the proceeds of a residential mortgage loan 
other than by an instrument payable to the consumer, jointly to the 
consumer and the contractor, or through an independent third party 
escrow agent.
    C. Enhanced Care to Avoid Abusive Loan Terms, Conditions, and 
Features in Certain Mortgages. A national bank or Federal savings 
association may face heightened risks when it solicits or offers loans 
to consumers who are not financially sophisticated, have language 
barriers, or are elderly, or have limited or poor credit histories, are 
substantially indebted, or have other characteristics that limit their 
credit choices. In connection with such consumers, a national bank or 
Federal savings association should exercise enhanced care if it employs 
the residential mortgage loan terms, conditions, and features described 
in paragraph B of this section III, and should also apply appropriate 
heightened internal controls and monitoring to any line of business that 
does so.
    D. Avoidance of Consumer Misunderstanding. A national bank's or 
Federal savings association's residential mortgage lending activities 
should include provision of timely, sufficient, and accurate information 
to a consumer concerning the terms and costs, risks, and benefits of the 
loan. Consumers should be provided with information sufficient to draw 
their attention to these key terms.
    E. Purchased and Brokered Loans. With respect to consumer 
residential mortgage loans that the national bank or Federal savings 
association purchases, or makes through a mortgage broker or other 
intermediary, the national bank or Federal savings association's 
residential mortgage lending activities should reflect standards and 
practices consistent with those applied by the bank or savings 
association in its direct lending activities and include appropriate 
measures to mitigate risks, such as the following:
    1. Criteria for entering into and continuing relationships with 
intermediaries and originators, including due diligence requirements.
    2. Underwriting and appraisal requirements.
    3. Standards related to total loan compensation and total 
compensation of intermediaries, including maximum rates, points, and 
other charges, and the use of overages and yield-spread premiums, 
structured to avoid providing an incentive to originate loans with 
predatory or abusive characteristics.
    4. Requirements for agreements with intermediaries and originators, 
including with respect to risks identified in the due diligence process, 
compliance with appropriate national bank or Federal savings association 
policies, procedures and practices and with applicable law (including 
remedies for failure to comply), protection of the national bank or 
Federal savings association against risk, and termination procedures.
    5. Loan documentation procedures, management information systems, 
quality control reviews, and other methods through which the national 
bank or Federal savings association will verify compliance with 
agreements, bank or savings association policies, and applicable laws, 
and otherwise retain appropriate oversight of mortgage origination 
functions, including loan sourcing, underwriting, and loan closings.
    6. Criteria and procedures for the national bank or Federal savings 
association to take appropriate corrective action, including 
modification of loan terms and termination of the relationship with the 
intermediary or originator in question.
    F. Monitoring and Corrective Action. A national bank's or Federal 
savings association's consumer residential mortgage lending activities 
should include appropriate monitoring of compliance with applicable

[[Page 722]]

law and the bank's or savings association's lending standards and 
practices, periodic monitoring and evaluation of the nature, quantity 
and resolution of customer complaints, and appropriate evaluation of the 
effectiveness of the bank's or savings association's standards and 
practices in accomplishing the objectives set forth in these Guidelines. 
The bank's or savings association's activities also should include 
appropriate steps for taking corrective action in response to failures 
to comply with applicable law and the bank's or savings association's 
lending standards, and for making adjustments to the bank's or savings 
association's activities as may be appropriate to enhance their 
effectiveness or to reflect changes in business practices, market 
conditions, or the bank's or savings association's lines of business, 
residential mortgage loan programs, or customer base.

[70 FR 6332, Feb. 7, 2005, as amended at 79 FR 54544, Sept. 11, 2014]



   Sec. Appendix D to Part 30--OCC Guidelines Establishing Heightened 
  Standards for Certain Large Insured National Banks, Insured Federal 
           Savings Associations, and Insured Federal Branches

                            Table of Contents

I. Introduction
    A. Scope
    B. Compliance Date
    C. Reservation of Authority
    D. Preservation of Existing Authority
    E. Definitions
II. Standards For Risk Governance Framework
    A. Risk Governance Framework
    B. Scope of Risk Governance Framework
    C. Roles and Responsibilities
    1. Role and Responsibilities of Front Line Units
    2. Role and Responsibilities of Independent Risk Management
    3. Role and Responsibilities of Internal Audit
    D. Strategic Plan
    E. Risk Appetite Statement
    F. Concentration and Front Line Unit Risk Limits
    G. Risk Appetite Review, Monitoring, and Communication Processes
    H. Processes Governing Risk Limit Breaches
    I. Concentration Risk Management
    J. Risk Data Aggregation and Reporting
    K. Relationship of Risk Appetite Statement, Concentration Risk 
Limits, and Front Line Unit Risk Limits to Other Processes
    L. Talent Management Processes
    M. Compensation and Performance Management Programs
III. Standards for Board of Directors
    A. Require an Effective Risk Governance Framework
    B. Provide Active Oversight of Management
    C. Exercise Independent Judgment
    D. Include Independent Directors
    E. Provide Ongoing Training to All Directors
    F. Self-Assessments

                             I. Introduction

    1. The OCC expects a covered bank, as that term is defined in 
paragraph I.E. to establish and implement a risk governance framework to 
manage and control the covered bank's risk-taking activities.
    2. This appendix establishes minimum standards for the design and 
implementation of a covered bank's risk governance framework and minimum 
standards for the covered bank's board of directors in providing 
oversight to the framework's design and implementation (Guidelines). 
These standards are in addition to any other applicable requirements in 
law or regulation.
    3. A covered bank may use its parent company's risk governance 
framework in its entirety, without modification, if the framework meets 
these minimum standards, the risk profiles of the parent company and the 
covered bank are substantially the same as set forth in paragraph I.4. 
of these Guidelines, and the covered bank has demonstrated through a 
documented assessment that its risk profile and its parent company's 
risk profile are substantially the same. The assessment should be 
conducted at least annually, in conjunction with the review and update 
of the risk governance framework performed by independent risk 
management, as set forth in paragraph II.A. of these Guidelines.
    4. A parent company's and covered bank's risk profiles are 
substantially the same if, as reported on the covered bank's Federal 
Financial Institutions Examination Council Consolidated Reports of 
Condition and Income (Call Reports) for the four most recent consecutive 
quarters, the covered bank's average total consolidated assets, as 
calculated according to paragraph I.A. of these Guidelines, represent 95 
percent or more of the parent company's average total consolidated 
assets.\1\ A covered bank that does not satisfy this test may submit a 
written analysis to the OCC for consideration and approval that

[[Page 723]]

demonstrates that the risk profile of the parent company and the covered 
bank are substantially the same based upon other factors not specified 
in this paragraph.
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    \1\ For a parent company, average total consolidated assets means 
the average of the parent company's total consolidated assets, as 
reported on the parent company's Form FR Y-9C to the Board of Governors 
of the Federal Reserve System, or equivalent regulatory report, for the 
four most recent consecutive quarters.
---------------------------------------------------------------------------

    5. Subject to paragraph I.6. of these Guidelines, a covered bank 
should establish its own risk governance framework when the parent 
company's and covered bank's risk profiles are not substantially the 
same. The covered bank's framework should ensure that the covered bank's 
risk profile is easily distinguished and separate from that of its 
parent for risk management and supervisory reporting purposes and that 
the safety and soundness of the covered bank is not jeopardized by 
decisions made by the parent company's board of directors and 
management.
    6. When the parent company's and covered bank's risk profiles are 
not substantially the same, a covered bank may, in consultation with the 
OCC, incorporate or rely on components of its parent company's risk 
governance framework when developing its own risk governance framework 
to the extent those components are consistent with the objectives of 
these Guidelines.

                                A. Scope

    These Guidelines apply to any bank, as that term is defined in 
paragraph I.E. of these Guidelines, with average total consolidated 
assets equal to or greater than $50 billion. In addition, these 
Guidelines apply to any bank with average total consolidated assets less 
than $50 billion if that institution's parent company controls at least 
one covered bank. For a covered bank, average total consolidated assets 
means the average of the covered bank's total consolidated assets, as 
reported on the covered bank's Call Reports, for the four most recent 
consecutive quarters.

                           B. Compliance Date

    1. Initial compliance. The date on which a covered bank should 
comply with the Guidelines is set forth below:
    (a) A covered bank with average total consolidated assets, as 
calculated according to paragraph I.A. of these Guidelines, equal to or 
greater than $750 billion as of November 10, 2014 should comply with 
these Guidelines on November 10, 2014;
    (b) A covered bank with average total consolidated assets, as 
calculated according to paragraph I.A. of these Guidelines, equal to or 
greater than $100 billion but less than $750 billion as of November 10, 
2014 should comply with these Guidelines within six months from November 
10, 2014;
    (c) A covered bank with average total consolidated assets, as 
calculated according to paragraph I.A. of these Guidelines, equal to or 
greater than $50 billion but less than $100 billion as of November 10, 
2014 should comply with these Guidelines within 18 months from November 
10, 2014;
    (d) A covered bank with average total consolidated assets, as 
calculated according to paragraph I.A. of these Guidelines, less than 
$50 billion that is a covered bank because that bank's parent company 
controls at least one other covered bank as of November 10, 2014 should 
comply with these Guidelines on the date that such other covered bank 
should comply; and
    (e) A covered bank that does not come within the scope of these 
Guidelines on November 10, 2014, but subsequently becomes subject to the 
Guidelines because average total consolidated assets, as calculated 
according to paragraph I.A. of these Guidelines, are equal to or greater 
than $50 billion after November 10, 2014, should comply with these 
Guidelines within 18 months from the as-of date of the most recent Call 
Report used in the calculation of the average.

                       C. Reservation of Authority

    1. The OCC reserves the authority to apply these Guidelines, in 
whole or in part, to a bank that has average total consolidated assets 
less than $50 billion, if the OCC determines such bank's operations are 
highly complex or otherwise present a heightened risk as to warrant the 
application of these Guidelines;
    2. The OCC reserves the authority, for each covered bank, to extend 
the time for compliance with these Guidelines or modify these 
Guidelines; or
    3. The OCC reserves the authority to determine that compliance with 
these Guidelines should no longer be required for a covered bank. The 
OCC would generally make the determination under this paragraph I.C.3. 
if a covered bank's operations are no longer highly complex or no longer 
present a heightened risk. In determining whether a covered bank's 
operations are highly complex or present a heightened risk, the OCC will 
consider the following factors: Complexity of products and services, 
risk profile, and scope of operations.
    4. When exercising the authority in this paragraph I.C., the OCC 
will apply notice and response procedures, when appropriate, in the same 
manner and to the same extent as the notice and response procedures in 
12 CFR 3.404.

                  D. Preservation of Existing Authority

    Neither section 39 of the Federal Deposit Insurance Act (12 U.S.C. 
1831p-1) nor these Guidelines in any way limits the authority of the OCC 
to address unsafe or unsound practices or conditions or other violations 
of law. The OCC may take action under section 39 and these Guidelines 
independently of, in conjunction with, or in addition to any other 
enforcement action available to the OCC.

[[Page 724]]

                             E. Definitions

    1. Bank means any insured national bank, insured Federal savings 
association, or insured Federal branch of a foreign bank.
    2. Chief Audit Executive means an individual who leads internal 
audit and is one level below the Chief Executive Officer in a covered 
bank's organizational structure.
    3. Chief Risk Executive means an individual who leads an independent 
risk management unit and is one level below the Chief Executive Officer 
in a covered bank's organizational structure. A covered bank may have 
more than one Chief Risk Executive.
    4. Control. A parent company controls a covered bank if it:
    (a) Owns, controls, or holds with power to vote 25 percent or more 
of a class of voting securities of the covered bank; or
    (b) Consolidates the covered bank for financial reporting purposes.
    5. Covered bank means any bank:
    (a) With average total consolidated assets, as calculated according 
to paragraph I.A. of these Guidelines, equal to or greater than $50 
billion;
    (b) With average total consolidated assets less than $50 billion if 
that bank's parent company controls at least one covered bank; or
    (c) With average total consolidated assets less than $50 billion, if 
the OCC determines such bank's operations are highly complex or 
otherwise present a heightened risk as to warrant the application of 
these Guidelines pursuant to paragraph I.C. of these Guidelines.
    6. Front Line Unit. (a) Except as provided in paragraph (b) of this 
definition, front line unit means any organizational unit or function 
thereof in a covered bank that is accountable for a risk in paragraph 
II.B. of these Guidelines that:
    (i) Engages in activities designed to generate revenue or reduce 
expenses for the parent company or covered bank;
    (ii) Provides operational support or servicing to any organizational 
unit or function within the covered bank for the delivery of products or 
services to customers; or
    (iii) Provides technology services to any organizational unit or 
function covered by these Guidelines.
    (b) Front line unit does not ordinarily include an organizational 
unit or function thereof within a covered bank that provides legal 
services to the covered bank.
    7. Independent risk management means any organizational unit within 
a covered bank that has responsibility for identifying, measuring, 
monitoring, or controlling aggregate risks. Such units maintain 
independence from front line units through the following reporting 
structure:
    (a) The board of directors or the board's risk committee reviews and 
approves the risk governance framework;
    (b) Each Chief Risk Executive has unrestricted access to the board 
of directors and its committees to address risks and issues identified 
through independent risk management's activities;
    (c) The board of directors or its risk committee approves all 
decisions regarding the appointment or removal of the Chief Risk 
Executive(s) and approves the annual compensation and salary adjustment 
of the Chief Risk Executive(s); and
    (d) No front line unit executive oversees any independent risk 
management unit.
    8. Internal audit means the organizational unit within a covered 
bank that is designated to fulfill the role and responsibilities 
outlined in 12 CFR part 30, Appendix A, II.B. Internal audit maintains 
independence from front line units and independent risk management 
through the following reporting structure:
    (a) The Chief Audit Executive has unrestricted access to the board's 
audit committee to address risks and issues identified through internal 
audit's activities;
    (b) The audit committee reviews and approves internal audit's 
overall charter and audit plans;
    (c) The audit committee approves all decisions regarding the 
appointment or removal and annual compensation and salary adjustment of 
the Chief Audit Executive;
    (d) The audit committee or the Chief Executive Officer oversees the 
Chief Audit Executive's administrative activities; and
    (e) No front line unit executive oversees internal audit.
    9. Parent company means the top-tier legal entity in a covered 
bank's ownership structure.
    10. Risk appetite means the aggregate level and types of risk the 
board of directors and management are willing to assume to achieve a 
covered bank's strategic objectives and business plan, consistent with 
applicable capital, liquidity, and other regulatory requirements.
    11. Risk profile means a point-in-time assessment of a covered 
bank's risks, aggregated within and across each relevant risk category, 
using methodologies consistent with the risk appetite statement 
described in paragraph II.E. of these Guidelines.

               II. Standards for Risk Governance Framework

    A. Risk Governance Framework. A covered bank should establish and 
adhere to a formal, written risk governance framework that is designed 
by independent risk management and approved by the board of directors

[[Page 725]]

or the board's risk committee. The risk governance framework should 
include delegations of authority from the board of directors to 
management committees and executive officers as well as the risk limits 
established for material activities. Independent risk management should 
review and update the risk governance framework at least annually, and 
as often as needed to address improvements in industry risk management 
practices and changes in the covered bank's risk profile caused by 
emerging risks, its strategic plans, or other internal and external 
factors.
    B. Scope of Risk Governance Framework. The risk governance framework 
should cover the following risk categories that apply to the covered 
bank: Credit risk, interest rate risk, liquidity risk, price risk, 
operational risk, compliance risk, strategic risk, and reputation risk.
    C. Roles and Responsibilities. The risk governance framework should 
include well-defined risk management roles and responsibilities for 
front line units, independent risk management, and internal audit.\2\ 
The roles and responsibilities for each of these organizational units 
should be:
---------------------------------------------------------------------------

    \2\ These roles and responsibilities are in addition to any roles 
and responsibilities set forth in Appendices A, B, and C to Part 30. 
Many of the risk management practices established and maintained by a 
covered bank to meet these standards, including loan review and credit 
underwriting and administration practices, should be components of its 
risk governance framework, within the construct of the three distinct 
units identified herein. In addition, existing OCC guidance sets forth 
standards for establishing risk management programs for certain risks, 
e.g., compliance risk management. These risk-specific programs should 
also be considered components of the risk governance framework, within 
the context of the three units described in paragraph II.C. of these 
Guidelines.
---------------------------------------------------------------------------

    1. Role and Responsibilities of Front Line Units. Front line units 
should take responsibility and be held accountable by the Chief 
Executive Officer and the board of directors for appropriately assessing 
and effectively managing all of the risks associated with their 
activities. In fulfilling this responsibility, each front line unit 
should, either alone or in conjunction with another organizational unit 
that has the purpose of assisting a front line unit:
    (a) Assess, on an ongoing basis, the material risks associated with 
its activities and use such risk assessments as the basis for fulfilling 
its responsibilities under paragraphs II.C.1.(b) and (c) of these 
Guidelines and for determining if actions need to be taken to strengthen 
risk management or reduce risk given changes in the unit's risk profile 
or other conditions;
    (b) Establish and adhere to a set of written policies that include 
front line unit risk limits as discussed in paragraph II.F. of these 
Guidelines. Such policies should ensure risks associated with the front 
line unit's activities are effectively identified, measured, monitored, 
and controlled, consistent with the covered bank's risk appetite 
statement, concentration risk limits, and all policies established 
within the risk governance framework under paragraphs II.C.2.(c) and 
II.G. through K. of these Guidelines;
    (c) Establish and adhere to procedures and processes, as necessary, 
to maintain compliance with the policies described in paragraph 
II.C.1.(b) of these Guidelines;
    (d) Adhere to all applicable policies, procedures, and processes 
established by independent risk management;
    (e) Develop, attract, and retain talent and maintain staffing levels 
required to carry out the unit's role and responsibilities effectively, 
as set forth in paragraphs II.C.1.(a) through (d) of these Guidelines;
    (f) Establish and adhere to talent management processes that comply 
with paragraph II.L. of these Guidelines; and
    (g) Establish and adhere to compensation and performance management 
programs that comply with paragraph II.M. of these Guidelines.
    2. Role and Responsibilities of Independent Risk Management. 
Independent risk management should oversee the covered bank's risk-
taking activities and assess risks and issues independent of front line 
units. In fulfilling these responsibilities, independent risk management 
should:
    (a) Take primary responsibility and be held accountable by the Chief 
Executive Officer and the board of directors for designing a 
comprehensive written risk governance framework that meets these 
Guidelines and is commensurate with the size, complexity, and risk 
profile of the covered bank;
    (b) Identify and assess, on an ongoing basis, the covered bank's 
material aggregate risks and use such risk assessments as the basis for 
fulfilling its responsibilities under paragraphs II.C.2.(c) and (d) of 
these Guidelines and for determining if actions need to be taken to 
strengthen risk management or reduce risk given changes in the covered 
bank's risk profile or other conditions;
    (c) Establish and adhere to enterprise policies that include 
concentration risk limits. Such policies should state how aggregate 
risks within the covered bank are effectively identified, measured, 
monitored, and controlled, consistent with the covered bank's risk 
appetite statement and all policies and processes established within the 
risk governance framework under paragraphs II.G. through K. of these 
Guidelines;

[[Page 726]]

    (d) Establish and adhere to procedures and processes, as necessary, 
to ensure compliance with the policies described in paragraph II.C.2.(c) 
of these Guidelines;
    (e) Identify and communicate to the Chief Executive Officer and the 
board of directors or the board's risk committee:
    (i) Material risks and significant instances where independent risk 
management's assessment of risk differs from that of a front line unit; 
and
    (ii) Significant instances where a front line unit is not adhering 
to the risk governance framework, including instances when front line 
units do not meet the standards set forth in paragraph II.C.1. of these 
Guidelines;
    (f) Identify and communicate to the board of directors or the 
board's risk committee:
    (i) Material risks and significant instances where independent risk 
management's assessment of risk differs from the Chief Executive 
Officer; and
    (ii) Significant instances where the Chief Executive Officer is not 
adhering to, or holding front line units accountable for adhering to, 
the risk governance framework;
    (g) Develop, attract, and retain talent and maintain staffing levels 
required to carry out its role and responsibilities effectively, as set 
forth in paragraphs II.C.2.(a) through (f) of these Guidelines;
    (h) Establish and adhere to talent management processes that comply 
with paragraph II.L. of these Guidelines; and
    (i) Establish and adhere to compensation and performance management 
programs that comply with paragraph II.M. of these Guidelines.
    3. Role and Responsibilities of Internal Audit. In addition to 
meeting the standards set forth in appendix A of part 30, internal audit 
should ensure that the covered bank's risk governance framework complies 
with these Guidelines and is appropriate for the size, complexity, and 
risk profile of the covered bank. In carrying out its responsibilities, 
internal audit should:
    (a) Maintain a complete and current inventory of all of the covered 
bank's material processes, product lines, services, and functions, and 
assess the risks, including emerging risks, associated with each, which 
collectively provide a basis for the audit plan described in paragraph 
II.C.3.(b) of these Guidelines;
    (b) Establish and adhere to an audit plan that is periodically 
reviewed and updated that takes into account the covered bank's risk 
profile, emerging risks, and issues, and establishes the frequency with 
which activities should be audited. The audit plan should require 
internal audit to evaluate the adequacy of and compliance with policies, 
procedures, and processes established by front line units and 
independent risk management under the risk governance framework. 
Significant changes to the audit plan should be communicated to the 
board's audit committee;
    (c) Report in writing, conclusions and material issues and 
recommendations from audit work carried out under the audit plan 
described in paragraph II.C.3.(b) of these Guidelines to the board's 
audit committee. Internal audit's reports to the audit committee should 
also identify the root cause of any material issues and include:
    (i) A determination of whether the root cause creates an issue that 
has an impact on one organizational unit or multiple organizational 
units within the covered bank; and
    (ii) A determination of the effectiveness of front line units and 
independent risk management in identifying and resolving issues in a 
timely manner;
    (d) Establish and adhere to processes for independently assessing 
the design and ongoing effectiveness of the risk governance framework on 
at least an annual basis. The independent assessment should include a 
conclusion on the covered bank's compliance with the standards set forth 
in these Guidelines; \3\
---------------------------------------------------------------------------

    \3\ The annual independent assessment of the risk governance 
framework may be conducted by internal audit, an external party, or 
internal audit in conjunction with an external party.
---------------------------------------------------------------------------

    (e) Identify and communicate to the board's audit committee 
significant instances where front line units or independent risk 
management are not adhering to the risk governance framework;
    (f) Establish a quality assurance program that ensures internal 
audit's policies, procedures, and processes comply with applicable 
regulatory and industry guidance, are appropriate for the size, 
complexity, and risk profile of the covered bank, are updated to reflect 
changes to internal and external risk factors, emerging risks, and 
improvements in industry internal audit practices, and are consistently 
followed;
    (g) Develop, attract, and retain talent and maintain staffing levels 
required to effectively carry out its role and responsibilities, as set 
forth in paragraphs II.C.3.(a) through (f) of these Guidelines;
    (h) Establish and adhere to talent management processes that comply 
with paragraph II.L. of these Guidelines; and
    (i) Establish and adhere to compensation and performance management 
programs that comply with paragraph II.M. of these Guidelines.
    D. Strategic Plan. The Chief Executive Officer should be responsible 
for the development of a written strategic plan with input from front 
line units, independent risk management, and internal audit. The board 
of directors should evaluate and approve the strategic plan and monitor 
management's efforts

[[Page 727]]

to implement the strategic plan at least annually. The strategic plan 
should cover, at a minimum, a three-year period and:
    1. Contain a comprehensive assessment of risks that currently have 
an impact on the covered bank or that could have an impact on the 
covered bank during the period covered by the strategic plan;
    2. Articulate an overall mission statement and strategic objectives 
for the covered bank, and include an explanation of how the covered bank 
will achieve those objectives;
    3. Include an explanation of how the covered bank will update, as 
necessary, the risk governance framework to account for changes in the 
covered bank's risk profile projected under the strategic plan; and
    4. Be reviewed, updated, and approved, as necessary, due to changes 
in the covered bank's risk profile or operating environment that were 
not contemplated when the strategic plan was developed.
    E. Risk Appetite Statement. A covered bank should have a 
comprehensive written statement that articulates the covered bank's risk 
appetite and serves as the basis for the risk governance framework. The 
risk appetite statement should include both qualitative components and 
quantitative limits. The qualitative components should describe a safe 
and sound risk culture and how the covered bank will assess and accept 
risks, including those that are difficult to quantify. Quantitative 
limits should incorporate sound stress testing processes, as 
appropriate, and address the covered bank's earnings, capital, and 
liquidity. The covered bank should set limits at levels that take into 
account appropriate capital and liquidity buffers and prompt management 
and the board of directors to reduce risk before the covered bank's risk 
profile jeopardizes the adequacy of its earnings, liquidity, and 
capital.\4\
---------------------------------------------------------------------------

    \4\ Where possible, covered banks should establish aggregate risk 
appetite limits that can be disaggregated and applied at the front line 
unit level. However, where this is not possible, covered banks should 
establish limits that reasonably reflect the aggregate level of risk 
that the board of directors and executive management are willing to 
accept.
---------------------------------------------------------------------------

    F. Concentration and Front Line Unit Risk Limits. The risk 
governance framework should include concentration risk limits and, as 
applicable, front line unit risk limits, for the relevant risks. 
Concentration and front line unit risk limits should limit excessive 
risk taking and, when aggregated across such units, provide that these 
risks do not exceed the limits established in the covered bank's risk 
appetite statement.
    G. Risk Appetite Review, Monitoring, and Communication Processes. 
The risk governance framework should require: \5\
---------------------------------------------------------------------------

    \5\ With regard to paragraphs 3., 4., and 5. in this paragraph 
II.G., the frequency of monitoring and reporting should be performed 
more often, as necessary, based on the size and volatility of risks and 
any material change in the covered bank's business model, strategy, risk 
profile, or market conditions.
---------------------------------------------------------------------------

    1. Review and approval of the risk appetite statement by the board 
of directors or the board's risk committee at least annually or more 
frequently, as necessary, based on the size and volatility of risks and 
any material changes in the covered bank's business model, strategy, 
risk profile, or market conditions;
    2. Initial communication and ongoing reinforcement of the covered 
bank's risk appetite statement throughout the covered bank in a manner 
that causes all employees to align their risk-taking decisions with 
applicable aspects of the risk appetite statement;
    3. Monitoring by independent risk management of the covered bank's 
risk profile relative to its risk appetite and compliance with 
concentration risk limits and reporting on such monitoring to the board 
of directors or the board's risk committee at least quarterly;
    4. Monitoring by front line units of compliance with their 
respective risk limits and reporting to independent risk management at 
least quarterly; and
    5. When necessary due to the level and type of risk, monitoring by 
independent risk management of front line units' compliance with front 
line unit risk limits, ongoing communication with front line units 
regarding adherence to these limits, and reporting of any concerns to 
the Chief Executive Officer and the board of directors or the board's 
risk committee, as set forth in paragraphs II.C.2.(e) and (f) of these 
Guidelines, all at least quarterly.
    H. Processes Governing Risk Limit Breaches. A covered bank should 
establish and adhere to processes that require front line units and 
independent risk management, in conjunction with their respective 
responsibilities, to:
    1. Identify breaches of the risk appetite statement, concentration 
risk limits, and front line unit risk limits;
    2. Distinguish breaches based on the severity of their impact on the 
covered bank;
    3. Establish protocols for when and how to inform the board of 
directors, front line unit management, independent risk management, 
internal audit, and the OCC of a risk limit breach that takes into 
account the severity of the breach and its impact on the covered bank;

[[Page 728]]

    4. Include in the protocols established in paragraph II.H.3. of 
these Guidelines the requirement to provide a written description of how 
a breach will be, or has been, resolved; and
    5. Establish accountability for reporting and resolving breaches 
that include consequences for risk limit breaches that take into account 
the magnitude, frequency, and recurrence of breaches.
    I. Concentration Risk Management. The risk governance framework 
should include policies and supporting processes appropriate for the 
covered bank's size, complexity, and risk profile for effectively 
identifying, measuring, monitoring, and controlling the covered bank's 
concentrations of risk.
    J. Risk Data Aggregation and Reporting. The risk governance 
framework should include a set of policies, supported by appropriate 
procedures and processes, designed to provide risk data aggregation and 
reporting capabilities appropriate for the size, complexity, and risk 
profile of the covered bank, and to support supervisory reporting 
requirements. Collectively, these policies, procedures, and processes 
should provide for:
    1. The design, implementation, and maintenance of a data 
architecture and information technology infrastructure that support the 
covered bank's risk aggregation and reporting needs during normal times 
and during times of stress;
    2. The capturing and aggregating of risk data and reporting of 
material risks, concentrations, and emerging risks in a timely manner to 
the board of directors and the OCC; and
    3. The distribution of risk reports to all relevant parties at a 
frequency that meets their needs for decision-making purposes.
    K. Relationship of Risk Appetite Statement, Concentration Risk 
Limits, and Front Line Unit Risk Limits to Other Processes. A covered 
bank's front line units and independent risk management should 
incorporate at a minimum the risk appetite statement, concentration risk 
limits, and front line unit risk limits into the following:
    1. Strategic and annual operating plans;
    2. Capital stress testing and planning processes;
    3. Liquidity stress testing and planning processes;
    4. Product and service risk management processes, including those 
for approving new and modified products and services;
    5. Decisions regarding acquisitions and divestitures; and
    6. Compensation and performance management programs.
    L. Talent Management Processes. A covered bank should establish and 
adhere to processes for talent development, recruitment, and succession 
planning to ensure that management and employees who are responsible for 
or influence material risk decisions have the knowledge, skills, and 
abilities to effectively identify, measure, monitor, and control 
relevant risks. The board of directors or an appropriate committee of 
the board should:
    1. Appoint a Chief Executive Officer and appoint or approve the 
appointment of a Chief Audit Executive and one or more Chief Risk 
Executives with the skills and abilities to carry out their roles and 
responsibilities within the risk governance framework;
    2. Review and approve a written talent management program that 
provides for development, recruitment, and succession planning regarding 
the individuals described in paragraph II.L.1. of these Guidelines, 
their direct reports, and other potential successors; and
    3. Require management to assign individuals specific 
responsibilities within the talent management program, and hold those 
individuals accountable for the program's effectiveness.
    M. Compensation and Performance Management Programs. A covered bank 
should establish and adhere to compensation and performance management 
programs that comply with any applicable statute or regulation and are 
appropriate to:
    1. Ensure the Chief Executive Officer, front line units, independent 
risk management, and internal audit implement and adhere to an effective 
risk governance framework;
    2. Ensure front line unit compensation plans and decisions 
appropriately consider the level and severity of issues and concerns 
identified by independent risk management and internal audit, as well as 
the timeliness of corrective action to resolve such issues and concerns;
    3. Attract and retain the talent needed to design, implement, and 
maintain an effective risk governance framework; and
    4. Prohibit any incentive-based payment arrangement, or any feature 
of any such arrangement, that encourages inappropriate risks by 
providing excessive compensation or that could lead to material 
financial loss.

                  III. Standards for Board of Directors

    A. Require an Effective Risk Governance Framework. Each member of a 
covered bank's board of directors should oversee the covered bank's 
compliance with safe and sound banking practices. The board of directors 
should also require management to establish and implement an effective 
risk governance framework that meets the minimum standards described in 
these Guidelines. The board of directors or the board's risk committee 
should approve any significant changes to the risk governance framework 
and monitor compliance with such framework.
    B. Provide Active Oversight of Management. A covered bank's board of 
directors should

[[Page 729]]

actively oversee the covered bank's risk-taking activities and hold 
management accountable for adhering to the risk governance framework. In 
providing active oversight, the board of directors may rely on risk 
assessments and reports prepared by independent risk management and 
internal audit to support the board's ability to question, challenge, 
and when necessary, oppose recommendations and decisions made by 
management that could cause the covered bank's risk profile to exceed 
its risk appetite or jeopardize the safety and soundness of the covered 
bank.
    C. Exercise Independent Judgment. When providing active oversight 
under paragraph III.B. of these Guidelines, each member of the board of 
directors should exercise sound, independent judgment.
    D. Include Independent Directors. To promote effective, independent 
oversight of the covered bank's management, at least two members of the 
board of directors: \6\
---------------------------------------------------------------------------

    \6\ This provision does not supersede other regulatory requirements 
regarding the composition of the Board that apply to Federal savings 
associations. These institutions must continue to comply with such other 
requirements.
---------------------------------------------------------------------------

    1. Should not be an officer or employee of the parent company or 
covered bank and has not been an officer or employee of the parent 
company or covered bank during the previous three years;
    2. Should not be a member of the immediate family, as defined in 
Sec.  225.41(b)(3) of the Board of Governors of the Federal Reserve 
System's Regulation Y (12 CFR 225.41(b)(3)), of a person who is, or has 
been within the last three years, an executive officer of the parent 
company or covered bank, as defined in Sec.  215.2(e)(1) of Regulation O 
(12 CFR 215.2(e)(1)); and
    3. Should qualify as an independent director under the listing 
standards of a national securities exchange, as demonstrated to the 
satisfaction of the OCC.
    E. Provide Ongoing Training to All Directors. The board of directors 
should establish and adhere to a formal, ongoing training program for 
all directors. This program should consider the directors' knowledge and 
experience and the covered bank's risk profile. The program should 
include, as appropriate, training on:
    1. Complex products, services, lines of business, and risks that 
have a significant impact on the covered bank;
    2. Laws, regulations, and supervisory requirements applicable to the 
covered bank; and
    3. Other topics identified by the board of directors.
    F. Self-Assessments. A covered bank's board of directors should 
conduct an annual self-assessment that includes an evaluation of its 
effectiveness in meeting the standards in section III of these 
Guidelines.

[79 FR 54545, Sept. 11, 2014]



 Sec. Appendix E to Part 30--OCC Guidelines Establishing Standards for 
   Recovery Planning by Certain Large Insured National Banks, Insured 
       Federal Savings Associations, and Insured Federal Branches

                            Table of Contents

I. Introduction
    A. Scope
    B. Compliance date
    C. Reservation of authority
    D. Preservation of existing authority
    E. Definitions
II. Recovery Plan
    A. Recovery plan
    B. Elements of recovery plan
    1. Overview of covered bank
    2. Triggers
    3. Options for recovery
    4. Impact assessments
    5. Escalation procedures
    6. Management reports
    7. Communication procedures
    8. Other information
    C. Relationship to other processes; coordination with other plans
III. Management's and Board of Directors' Responsibilities
    A. Management
    B. Board of directors


                             I. Introduction

    A. Scope. This appendix applies to a covered bank, as defined in 
paragraph I.E.3. of this appendix.
    B. Compliance date.
    1. A covered bank with average total consolidated assets, calculated 
according to paragraph I.E.1. of this appendix, equal to or greater than 
$250 billion as of January 28, 2019 should be in compliance with this 
appendix on January 28, 2019.
    2. A bank with average total consolidated assets, calculated 
according to paragraph I.E.1. of this appendix, of less than $250 
billion as of January 28, 2019 but which subsequently becomes a covered 
bank should comply with this appendix within 12 months of becoming a 
covered bank.
    C. Reservation of authority.
    1. The OCC reserves the authority:
    a. To apply this appendix, in whole or in part, to a bank that has 
average total consolidated assets of less than $250 billion, if the OCC 
determines such bank is highly complex or otherwise presents a 
heightened

[[Page 730]]

risk that warrants the application of this appendix; or
    b. To determine that compliance with this appendix should not be 
required for a covered bank. The OCC will generally make this 
determination if a covered bank's operations are no longer highly 
complex or no longer present a heightened risk.
    2. In determining whether a bank or covered bank is highly complex 
or presents a heightened risk, the OCC will consider the bank's size, 
risk profile, scope of operations, activities, and complexity, including 
the complexity of its organizational and legal entity structure. Before 
exercising the authority reserved by paragraph I.C.1. of this appendix, 
the OCC will apply notice and response procedures in the same manner and 
to the same extent as the notice and response procedures in 12 CFR 
3.404.
    D. Preservation of existing authority. Neither section 39 of the 
Federal Deposit Insurance Act (12 U.S.C. 1831p-1) nor this appendix in 
any way limits the authority of the OCC to address unsafe or unsound 
practices or conditions or other violations of law. The OCC may take 
action under section 39 and this appendix independently of, in 
conjunction with, or in addition to any other enforcement action 
available to the OCC.
    E. Definitions.
    1. Average total consolidated assets means the average total 
consolidated assets of the bank or the covered bank, as reported on the 
bank's or the covered bank's Consolidated Reports of Condition and 
Income for the four most recent consecutive quarters.
    2. Bank means any insured national bank, insured Federal savings 
association, or insured Federal branch of a foreign bank.
    3. Covered bank means any bank:
    a. With average total consolidated assets equal to or greater than 
$250 billion;
    b. With average total consolidated assets of less than $250 billion 
if the bank was previously a covered bank, unless the OCC determines 
otherwise; or
    c. With average total consolidated assets less than $250 billion, if 
the OCC determines that such bank is highly complex or otherwise 
presents a heightened risk as to warrant the application of this 
appendix pursuant to paragraph I.C.1.a. of this appendix.
    4. Recovery means timely and appropriate action that a covered bank 
takes to remain a going concern when it is experiencing or is likely to 
experience considerable financial or operational stress. A covered bank 
in recovery has not yet deteriorated to the point where liquidation or 
resolution is imminent.
    5. Recovery plan means a plan that identifies triggers and options 
for responding to a wide range of severe internal and external stress 
scenarios to restore a covered bank that is in recovery to financial 
strength and viability in a timely manner. The options should maintain 
the confidence of market participants, and neither the plan nor the 
options may assume or rely on any extraordinary government support.
    6. Trigger means a quantitative or qualitative indicator of the risk 
or existence of severe stress, the breach of which should always be 
escalated to senior management or the board of directors (or appropriate 
committee of the board of directors), as appropriate, for purposes of 
initiating a response. The breach of any trigger should result in timely 
notice accompanied by sufficient information to enable management of the 
covered bank to take corrective action.

                            II. Recovery Plan

    A. Recovery plan. Each covered bank should develop and maintain a 
recovery plan that is specific to that covered bank and appropriate for 
its individual size, risk profile, activities, and complexity, including 
the complexity of its organizational and legal entity structure.
    B. Elements of recovery plan. A recovery plan under paragraph II.A. 
of this appendix should include the following elements:
    1. Overview of covered bank. A recovery plan should describe the 
covered bank's overall organizational and legal entity structure, 
including its material entities, critical operations, core business 
lines, and core management information systems. The plan should describe 
interconnections and interdependencies (i) across business lines within 
the covered bank, (ii) with affiliates in a bank holding company 
structure, (iii) between a covered bank and its foreign subsidiaries, 
and (iv) with critical third parties.
    2. Triggers. A recovery plan should identify triggers that 
appropriately reflect the covered bank's particular vulnerabilities.
    3. Options for recovery. A recovery plan should identify a wide 
range of credible options that a covered bank could undertake to restore 
financial strength and viability, thereby allowing the bank to continue 
to operate as a going concern and to avoid liquidation or resolution. A 
recovery plan should explain how the covered bank would carry out each 
option and describe the timing required for carrying out each option. 
The recovery plan should specifically identify the recovery options that 
require regulatory or legal approval.
    4. Impact assessments. For each recovery option, a covered bank 
should assess and describe how the option would affect the covered bank. 
This impact assessment and description should specify the procedures the 
covered bank would use to maintain the financial strength and viability 
of its material entities, critical operations, and core business lines 
for each recovery option. For each option, the recovery plan's impact 
assessment should address the following:
    a. The effect on the covered bank's capital, liquidity, funding, and 
profitability;

[[Page 731]]

    b. The effect on the covered bank's material entities, critical 
operations, and core business lines, including reputational impact; and
    c. Any legal or market impediment or regulatory requirement that 
must be addressed or satisfied in order to implement the option.
    5. Escalation procedures. A recovery plan should clearly outline the 
process for escalating decision-making to senior management or the board 
of directors (or an appropriate committee of the board of directors), as 
appropriate, in response to the breach of any trigger. The recovery plan 
should also identify the departments and persons responsible for 
executing the decisions of senior management or the board of directors 
(or an appropriate committee of the board of directors).
    6. Management reports. A recovery plan should require reports that 
provide senior management or the board of directors (or an appropriate 
committee of the board of directors) with sufficient data and 
information to make timely decisions regarding the appropriate actions 
necessary to respond to the breach of a trigger.
    7. Communication procedures. A recovery plan should provide that the 
covered bank notify the OCC of any significant breach of a trigger and 
any action taken or to be taken in response to such breach and should 
explain the process for deciding when a breach of a trigger is 
significant. A recovery plan also should address when and how the 
covered bank will notify persons within the organization and other 
external parties of its action under the recovery plan. The recovery 
plan should specifically identify how the covered bank will obtain 
required regulatory or legal approvals.
    8. Other information. A recovery plan should include any other 
information that the OCC communicates in writing directly to the covered 
bank regarding the covered bank's recovery plan.
    C. Relationship to other processes; coordination with other plans. 
The covered bank should integrate its recovery plan into its risk 
governance functions. The covered bank also should align its recovery 
plan with its other plans, such as its strategic; operational (including 
business continuity); contingency; capital (including stress testing); 
liquidity; and resolution planning. The covered bank's recovery plan 
should be specific to that covered bank. The covered bank also should 
coordinate its recovery plan with any recovery and resolution planning 
efforts by the covered bank's holding company, so that the plans are 
consistent with and do not contradict each other.

       III. Management's and Board of Directors' Responsibilities

    The recovery plan should address the following management and board 
responsibilities:
    A. Management. Management should review the recovery plan at least 
annually and in response to a material event. It should revise the plan 
as necessary to reflect material changes in the covered bank's size, 
risk profile, activities, and complexity, as well as changes in external 
threats. This review should evaluate the organizational structure and 
its effectiveness in facilitating a recovery.
    B. Board of directors. The board is responsible for overseeing the 
covered bank's recovery planning process. The board of directors (or an 
appropriate committee of the board of directors) of a covered bank 
should review and approve the recovery plan at least annually, and as 
needed to address significant changes made by management.

[81 FR 66800, Sept. 29, 2016, as amended at 83 FR 66607, Dec. 27, 2018]



PART 31_EXTENSIONS OF CREDIT TO INSIDERS AND TRANSACTIONS 
WITH AFFILIATES--Table of Contents



Sec.
31.1 Authority.
31.2 Insider lending restrictions and reporting requirements.
31.3 Affiliate transactions requirements.

Appendix A to Part 31--Interpretations: Deposits Between Affiliated 
          Banks
Appendix B to Part 31--Comparison of Selected Provisions of Parts 32 and 
          215

    Authority: 12 U.S.C. 93a, 375a(4), 375b(3), 1463, 1467a(d), 1468, 
1817(k), and 5412(b)(2)(B).

    Source: 61 FR 54536, Oct. 21, 1996, unless otherwise noted.



Sec.  31.1  Authority.

    This part is issued pursuant to 12 U.S.C. 93a, 375a(4), 375b(3), 
1463, 1467a(d), 1468, 1817(k), and 5412(b)(2)(B), as amended.

[82 FR 8109, Jan. 23, 2017]



Sec.  31.2  Insider lending restrictions and reporting requirements.

    (a) General rule. National banks, Federal savings associations, and 
their insiders shall comply with the provisions contained in 12 CFR part 
215 (Regulation O).
    (b) Enforcement. The Comptroller of the Currency administers and 
enforces

[[Page 732]]

insider lending standards and reporting requirements as they apply to 
national banks, Federal savings associations, and their insiders.

[61 FR 54536, Oct. 21, 1996, as amended at 82 FR 8109, Jan. 23, 2017]



Sec.  31.3  Affiliate transactions requirements.

    (a) General rule. National banks and Federal savings associations 
shall comply with the provisions contained in 12 CFR part 223 
(Regulation W).
    (b) Enforcement. The Comptroller of the Currency administers and 
enforces affiliate transactions requirements as they apply to national 
banks and Federal savings associations.
    (c) Standard for exemptions. The OCC may, by order, exempt 
transactions or relationships of a national bank or Federal savings 
association from the requirements of section 23A and section 11 of the 
Home Owners' Loan Act (HOLA), as applicable, and 12 CFR part 223 if:
    (1) The OCC, jointly with the Federal Reserve Board, finds the 
exemption to be in the public interest and consistent with the purposes 
of section 23A or section 11 of the HOLA, as applicable; and
    (2) The FDIC, within 60 days of receiving notice of such joint 
finding, does not object in writing to the finding based on a 
determination that the exemption presents an unacceptable risk to the 
Deposit Insurance Fund.
    (d) Procedures for exemptions. A national bank or Federal savings 
association may request an exemption from the requirements of section 
23A or section 11 of the HOLA, as applicable, and 12 CFR part 223 for a 
national bank or Federal savings association by submitting a written 
request to the Deputy Comptroller for Licensing with a copy to the 
appropriate Federal Reserve Bank. Such a request must:
    (1) Describe in detail the transaction or relationship for which the 
national bank or Federal savings association seeks exemption;
    (2) Explain why the OCC should exempt the transaction or 
relationship;
    (3) Explain how the exemption would be in the public interest and 
consistent with the purposes of section 23A or section 11 of the HOLA, 
as applicable; and
    (4) Explain why the exemption does not present an unacceptable risk 
to the Deposit Insurance Fund.

[82 FR 8109, Jan. 23, 2017]



Sec. Appendix A to Part 31--Interpretations: Deposits Between Affiliated 
                                  Banks

    a. General rule. A deposit made by a bank in an affiliated bank is 
treated as a loan or extension of credit to the affiliate bank under 12 
U.S.C. 371c, as this statute is implemented by the Federal Reserve 
Board's Regulation W, 12 CFR part 223. Thus, unless an exemption from 
Regulation W is available, these deposits must be secured in accordance 
with 12 CFR 223.14. However, a national bank may not pledge assets to 
secure private deposits unless otherwise permitted by law (see, e.g., 12 
U.S.C. 90 (permitting collateralization of deposits of public funds); 12 
U.S.C. 92a (trust funds); and 25 U.S.C. 156 and 162a (Native American 
funds)). Thus, unless one of the exceptions to 12 CFR part 223 noted in 
paragraph b. of this interpretation applies, unless another exception 
applies that enables a bank to meet the collateral requirements of Sec.  
223.14, or unless a party other than the bank in which the deposit is 
made can legally offer and does post the required collateral, a national 
bank may not:
    1. Make a deposit in an affiliated national bank;
    2. Make a deposit in an affiliated State-chartered bank unless the 
affiliated State-chartered bank can legally offer collateral for the 
deposit in conformance with applicable State law and 12 CFR 223.14; or
    3. Receive deposits from an affiliated bank.
    b. Exceptions. The restrictions of 12 CFR part 223 (other than 12 
CFR 223.13, which requires affiliate transactions to be consistent with 
safe and sound banking practices) do not apply to deposits:
    1. Made in an affiliated depository institution or affiliated 
foreign bank provided that the deposit represents an ongoing, working 
balance maintained in the ordinary course of correspondent business. See 
12 CFR 223.42(a); or
    2. Made in an affiliated, insured depository institution that meets 
the requirements of the ``sister bank'' exemption under 12 CFR 223.41(a) 
or (b).

[73 FR 22251, Apr. 24, 2008]

[[Page 733]]

Appendix B to Part 31--Comparison of Selected Provisions of Parts 32 and 
                                   215

    Note: This appendix compares certain provisions of 12 CFR part 32 
with those of 12 CFR part 215. As used in this appendix, the term 
``bank'' refers to both national banks and Federal savings associations.

              Definition of ``Loan or Extension of Credit''
 
Renewals.....................  In most cases, the two definitions of
                                ``loan or extension of credit'' are
                                equivalent. A difference exists,
                                however, in the treatment of renewals.
                                Under part 215, a renewal of a loan to
                                an ``insider'' (which, unless noted
                                otherwise, includes a bank's executive
                                officers, directors, principal
                                shareholders, and ``related interests''
                                of such persons) is considered to be an
                                extension of credit. Under part 32,
                                renewals generally are not considered to
                                be an extension of credit if the bank
                                exercises reasonable efforts, consistent
                                with safe and sound banking practices,
                                to bring the loan into conformance with
                                the lending limit. Renewals would be
                                considered an extension of credit under
                                part 32, however, if new funds are
                                advanced to the borrower, a new borrower
                                replaces the original borrower, or the
                                OCC determines that the renewal was
                                undertaken to evade the lending limits.
Commitments to extend          A binding commitment to make a loan is
 credit...                      treated as an extension of credit under
                                part 215. Under part 32, a commitment to
                                make a loan will not be treated as an
                                extension of credit if the amount of the
                                commitment exceeds the lending limit.
                                Rather, the commitment will be deemed a
                                ``nonqualifying commitment'' under part
                                32 and advances may be made thereunder
                                only if the advance, together with all
                                other outstanding loans to the borrower,
                                will not exceed the bank's lending
                                limit.
Overdrafts...................  An advance by means of an overdraft
                                (except for an intraday overdraft)
                                generally is considered to be an
                                extension of credit under both parts 32
                                and 215. However, indebtedness in
                                amounts up to $5,000 is excluded from
                                the definition of ``extension of
                                credit'' under part 215 if the
                                indebtedness arises pursuant to a
                                written, preauthorized, interest-bearing
                                plan or written, preauthorized transfer
                                of funds from another account. Under
                                part 215, if an overdraft is not made
                                pursuant to this type of plan or
                                transfer, a bank is prohibited from
                                paying an overdraft of an insider
                                (which, in this case, includes only an
                                executive officer or director of the
                                insider's bank) unless the overdraft is
                                inadvertent, in amounts not exceeding
                                $1,000, outstanding for not more than 5
                                business days, and subject to the bank's
                                standard overdraft fee. Part 32 does not
                                contain these exceptions for overdrafts,
                                and simply treats overdrafts (except for
                                intraday overdrafts) as extensions of
                                credit subject to lending limits.
Guarantees...................  Generally speaking, guarantees are
                                included in the part 215 definition of
                                ``extension of credit'' but are not
                                included in the definition of
                                ``extension of credit'' in part 32
                                unless other criteria are satisfied.
                                Part 215 applies to any transaction as a
                                result of which an insider becomes
                                obligated to pay money to a bank,
                                whether the obligation arises (i)
                                directly or indirectly, (ii) because of
                                an endorsement on an obligation or
                                otherwise, or (iii) by any means
                                whatsoever. Accordingly, a loan
                                guaranteed by an insider will be deemed
                                to have been made to that insider. In
                                contrast, part 32 does not consider a
                                loan on which someone signs as guarantor
                                as having been made to the guarantor
                                unless that person is deemed to be a
                                borrower under the ``direct benefit'' or
                                ``common enterprise'' tests (see
                                discussion of these tests in the
                                discussion of the ``General Rule'' under
                                ``Combination/Attribution Rules,''
                                below).
 
                        Exclusions to Definition
 
Funds advanced for taxes,      Both rules exclude funds advanced for
 etc., necessary to preserve    items such as taxes, insurance, or other
 collateral or that are         expenses related to existing
 incidental to indebtedness.    indebtedness. However, part 32 includes
                                these advances for the purpose of
                                determining whether subsequent loans
                                meet the lending limit, whereas part 215
                                excludes these advances for all
                                purposes. Part 215 contains no such
                                requirement.

[[Page 734]]

 
Loan participations..........  Both rules exclude loan participations if
                                the participation is without recourse.
                                However, part 32 elaborates on this
                                exclusion by requiring that the
                                participation result in a pro rata
                                sharing of credit risk proportionate to
                                the respective interests of the
                                originating and participating lenders.
                                Part 32 also requires the originating
                                bank, if funding the entire loan, to
                                receive funding from the participants
                                before the close of the next business
                                day. Otherwise, the portion funded will
                                be treated as a loan by the originating
                                bank to the underlying borrower, and may
                                be treated as a ``nonconforming'' loan
                                rather than a violation if (i) the
                                originating bank had an agreement with
                                the participating bank that reduced the
                                loan to an amount within the originating
                                bank's lending limit, (ii) the
                                participating bank reconfirmed its
                                participation and the originating bank
                                had no knowledge of information that
                                would permit the participating bank to
                                withhold its participation, and (iii)
                                the participation was to be funded by
                                close of business of the originating
                                bank's next business day.
Acquisition of debt through    Under part 215, a note or other evidence
 merger or foreclosure.         of indebtedness acquired through a
                                merger is excluded from the definition
                                of ``extension of credit.'' Under part
                                32, the indebtedness is deemed to be a
                                loan or extension of credit. However, if
                                a loan that conformed with part 32 when
                                originally made exceeds the lending
                                limits following a merger after the loan
                                is aggregated with other extensions of
                                credit to the same borrower, the loan
                                will not be deemed to be a lending
                                limits violation. Rather, the loan will
                                be treated as ``nonconforming,'' and the
                                bank will have to exercise reasonable
                                efforts to bring the loan into
                                compliance unless to do so would be
                                inconsistent with safe and sound banking
                                practices.
Credit card indebtedness.....  An insider may incur up to $15,000 in
                                debt on a credit card or similar open-
                                end credit plan offered by the insider's
                                bank without the debt counting as an
                                extension of credit under part 215. The
                                terms of the credit card or other credit
                                plan must be no more favorable than
                                those offered by the bank to the general
                                public. Part 32 does not exclude credit
                                card debt from the lending limits.
 

[[Page 735]]

 
                     Combination/ Attribution Rules
 
General rule.................  Under part 215, a loan will be attributed
                                to an insider if the loan proceeds are
                                ``transferred to,'' or used for the
                                ``tangible economic benefit of,'' the
                                insider or if the loan is made to a
                                ``related interest'' of the insider.
                                Under part 32, a loan will be attributed
                                to another person when either (i) the
                                proceeds of the loan are to be used for
                                the direct benefit of the other person
                                or (ii) a common enterprise exists
                                between the borrower and the other
                                person. The ``transfer'' test and
                                ``tangible economic benefit'' test of
                                part 215 are substantially the same as
                                the ``direct benefit'' test of part 32.
                                Under each of these tests, a loan will
                                be attributed to another person where
                                the proceeds are transferred to the
                                other person, unless the proceeds are
                                used in a bona fide arm's length
                                transaction to acquire property, goods,
                                or services. However, the ``related
                                interest'' test of part 215 and the
                                ``common enterprise'' test under part 32
                                will lead to different results in many
                                instances. Under part 215, a ``related
                                interest'' is a company or a political
                                or campaign committee that is
                                ``controlled'' by an insider. Part 215
                                defines ``control'' as meaning,
                                generally speaking, that someone owns or
                                controls at least 25 percent of a class
                                of voting securities of a company,
                                controls the election of a majority of
                                the company's directors, or can
                                ``exercise a controlling influence''
                                over the company. Part 32 uses the same
                                definition of ``control'' in the
                                ``common enterprise'' test, but a mere
                                finding of ``control'' is not, by
                                itself, a sufficient basis to find that
                                a common enterprise exists. Part 32 will
                                attribute a loan under the ``common
                                enterprise'' test if the borrowers are
                                under common control (including where
                                one of the persons in question controls
                                the other) and there is ``substantial
                                financial interdependence'' between the
                                borrowers (i.e., where at least 50
                                percent of the gross receipts or
                                expenditures of one borrower comes from
                                transactions with the other). If there
                                is not both common control and
                                substantial financial interdependence,
                                the OCC will not attribute a loan under
                                the ``common enterprise'' test unless
                                (i) the expected source of repayment for
                                a loan is the same for each borrower and
                                neither borrower has another source of
                                income from which the loan may be
                                repaid, (ii) two people borrow to
                                acquire a business of which they will
                                own a majority of the voting securities,
                                or (iii) OCC determines that a common
                                enterprise exists based on facts and
                                circumstances of a particular
                                transaction.
 


Loans to corporate groups....  Both parts 32 and 215 will consider a
                                loan that was made to a corporation to
                                have been made to a third person if the
                                tests identified in the previous
                                discussion of the ``General Rule'' are
                                satisfied. If these tests are not met,
                                parts 32 and 215 still may require
                                attribution, but the circumstances when
                                this will occur and the consequences of
                                attribution under these circumstances
                                differ under the two rules. Under part
                                215, a loan to a corporation will be
                                deemed to have been made to an insider
                                if the corporation is a ``related
                                interest'' of the insider (i.e., the
                                insider owns at least 25% percent of a
                                class of voting shares of the company,
                                controls the election of a majority of
                                the company's directors, or has the
                                power to exercise a controlling
                                influence over the company). Under part
                                32, a loan to an individual or company
                                will not be considered to have been made
                                to a corporate group unless a ``person''
                                (which includes individuals and
                                companies) owns more than 50% of the
                                voting shares of a company. If a loan is
                                found to have been made to a related
                                interest of an insider under part 215,
                                the loan must comply with all of the
                                insider lending restrictions of part
                                215. If a loan is found to have been
                                made to a corporate group under part 32,
                                the loan, when aggregated with all other
                                loans to that corporate group, generally
                                may not exceed 50% of the bank's capital
                                and surplus.
 


[61 FR 54536, Oct. 21, 1996, as amended at 73 FR 22251, Apr. 24, 2008; 
82 FR 8109, Jan. 23, 2017]



PART 32_LENDING LIMITS--Table of Contents



Sec.
32.1 Authority, purpose and scope.
32.2 Definitions.
32.3 Lending limits.
32.4 Calculation of lending limits.
32.5 Combination rules.

[[Page 736]]

32.6 Nonconforming loans and extensions of credit.
32.7 Residential real estate loans, loans to small businesses, and loans 
          or extensions of credit to small farms (``Supplemental Lending 
          Limits Program'').
32.8 Temporary funding arrangements in emergency situations.
32.9 Credit exposure arising from derivative and securities financing 
          transactions.

Appendix A To Part 32--Interpretations

    Authority: 12 U.S.C. 1 et seq., 12 U.S.C. 84, 93a, 1462a, 1463, 
1464(u), 5412(b)(2)(B), and 15 U.S.C. 1639h.

    Source: 60 FR 8532, Feb. 15, 1995, unless otherwise noted.



Sec.  32.1  Authority, purpose and scope.

    (a) Authority. This part is issued pursuant to 12 U.S.C. 1 et seq., 
12 U.S.C. 84, 93a, 1462a, 1463, 1464(u), and 5412(b)(2)(B).
    (b) Purpose. The purpose of this part is to protect the safety and 
soundness of national banks and savings associations by preventing 
excessive loans to one person, or to related persons that are 
financially dependent, and to promote diversification of loans and 
equitable access to banking services.
    (c) Scope. (1) Except as provided by paragraphs (c) and (d) of this 
section, this part applies to all loans and extensions of credit made by 
national banks and their domestic operating subsidiaries and to all 
loans and extensions of credit made by savings associations, their 
operating subsidiaries, and their service corporations that are 
consolidated under Generally Accepted Accounting Principles (GAAP). For 
purposes of this part, the term ``savings association'' includes Federal 
savings associations and state savings associations, as those terms are 
defined in 12 U.S.C. 1813(b).
    (2) This part does not apply to loans or extensions of credit made 
to the bank's or savings association's:
    (i) Affiliates, as that term is defined in 12 U.S.C. 371c(b)(1) and 
(e), as implemented by 12 CFR 223.2(a) (Regulation W);
    (ii) Operating subsidiaries;
    (iii) Edge Act or Agreement Corporation subsidiaries; or
    (iv) Any other subsidiary consolidated with the bank or savings 
association under GAAP.
    (3) The lending limits in this part are separate and independent 
from the investment limits prescribed by 12 U.S.C. 24 (Seventh) or 12 
U.S.C. 1464(c), as applicable, and 12 CFR Part 1 and 12 CFR 160.30, and 
a national bank or savings association may make loans or extensions of 
credit to one borrower up to the full amount permitted by this part and 
also hold eligible securities of the same obligor up to the full amount 
permitted under 12 U.S.C. 24 (Seventh) or 12 U.S.C. 1464(c), as 
applicable, and 12 CFR part 1 and 12 CFR 160.30.
    (4) Loans and extensions of credit to executive officers, directors 
and principal shareholders of national banks, savings associations, and 
their related interests are subject to limits prescribed by 12 U.S.C. 
375a and 375b in addition to the lending limits established by 12 U.S.C. 
84 or 12 U.S.C. 1464(u) as applicable, and this part.
    (5) In addition to the foregoing, loans and extensions of credit 
must be consistent with safe and sound banking practices.
    (d) Temporary exception. The requirements of this part shall not 
apply to the credit exposure arising from a derivative transaction or 
securities financing transaction until October 1, 2013.

[60 FR 8532, Feb. 15, 1995, as amended at 73 FR 22251, Apr. 24, 2008; 77 
FR 37275, June 21, 2012; 77 FR 76842, Dec. 31, 2012; 78 FR 37943, June 
25, 2013]



Sec.  32.2  Definitions.

    (a) Appropriate Federal banking agency has the same meaning as in 12 
U.S.C. 1813(q).
    (b) Borrower means a person who is named as a borrower or debtor in 
a loan or extension of credit; a person to whom a national bank or 
savings association has credit exposure arising from a derivative 
transaction or a securities financing transaction, entered by the bank 
or savings association; or any other person, including a drawer, 
endorser, or guarantor, who is deemed to be a borrower under the 
``direct benefit'' or the ``common enterprise'' tests set forth in Sec.  
32.5.
    (c) Capital and surplus means--
    (1) For qualifying community banking organizations that have elected 
to use the community bank leverage ratio

[[Page 737]]

framework, as set forth under the OCC's Capital Adequacy Standards at 
part 3 of this chapter:
    (i) A qualifying community banking organization's tier 1 capital, as 
used under Sec.  3.12 of this chapter; plus
    (ii) A qualifying community banking organization's allowance for 
loan and lease losses or adjusted allowances for credit losses, as 
applicable, as reported in the Consolidated Reports of Condition and 
Income (Call Report); or
    (2) For all other national banks and Federal savings associations:
    (i) A national bank's or savings association's tier 1 and tier 2 
capital calculated under the risk-based capital standards applicable to 
the institution as reported in the Call Report; plus
    (ii) The balance of a national bank's or Federal savings 
association's allowance for loan and lease losses or adjusted allowances 
for credit losses, as applicable, not included in the bank's or savings 
association's tier 2 capital, for purposes of the calculation of risk-
based capital described in paragraph (c)(2)(i) of this section, as 
reported in the national bank's or savings association's Call Report.
    (d) Close of business means the time at which a national bank or 
savings association closes its accounting records for the business day.
    (e) Consumer means the user of any products, commodities, goods, or 
services, whether leased or purchased, but does not include any person 
who purchases products or commodities for resale or fabrication into 
goods for sale.
    (f) Consumer paper means paper relating to automobiles, mobile 
homes, residences, office equipment, household items, tuition fees, 
insurance premium fees, and similar consumer items. Consumer paper also 
includes paper covering the lease (where the national bank or savings 
association is not the owner or lessor) or purchase of equipment for use 
in manufacturing, farming, construction, or excavation.
    (g) Contractual commitment to advance funds. (1) The term includes a 
national bank's or savings association's obligation to--
    (i) Make payment (directly or indirectly) to a third person 
contingent upon default by a customer of the bank or savings association 
in performing an obligation and to make such payment in keeping with the 
agreed upon terms of the customer's contract with the third person, or 
to make payments upon some other stated condition;
    (ii) Guarantee or act as surety for the benefit of a person;
    (iii) Advance funds under a qualifying commitment to lend, as 
defined in paragraph (t) of this section, and
    (iv) Advance funds under a standby letter of credit as defined in 
paragraph (ee) of this section, a put, or other similar arrangement.
    (2) The term does not include commercial letters of credit and 
similar instruments where the issuing bank or savings association 
expects the beneficiary to draw on the issuer, that do not guarantee 
payment, and that do not provide for payment in the event of a default 
by a third party.
    (h) Control is presumed to exist when a person directly or 
indirectly, or acting through or together with one or more persons--
    (1) Owns, controls, or has the power to vote 25 percent or more of 
any class of voting securities of another person;
    (2) Controls, in any manner, the election of a majority of the 
directors, trustees, or other persons exercising similar functions of 
another person; or
    (3) Has the power to exercise a controlling influence over the 
management or policies of another person.
    (i) Credit derivative has the same meaning as this term has in 12 
CFR 3.2.
    (j) Current market value means the bid or closing price listed for 
an item in a regularly published listing or an electronic reporting 
service.
    (k) Derivative transaction includes any transaction that is a 
contract, agreement, swap, warrant, note, or option that is based, in 
whole or in part, on the value of, any interest in, or any quantitative 
measure or the occurrence of any event relating to, one or more 
commodities, securities, currencies, interest or other rates, indices, 
or other assets.
    (l) Effective margining arrangement means a master legal agreement 
governing derivative transactions between a bank or savings association 
and a counterparty that requires the counterparty to post, on a daily 
basis, variation margin to fully collateralize

[[Page 738]]

that amount of the bank's or savings association's net credit exposure 
to the counterparty that exceeds $25 million created by the derivative 
transactions covered by the agreement.
    (m) Eligible credit derivative means a single-name credit derivative 
or a standard, non-tranched index credit derivative provided that:
    (1) The derivative contract meets the requirements of an eligible 
guarantee, as defined in 12 CFR 3.2, and has been confirmed by the 
protection purchaser and the protection provider;
    (2) Any assignment of the derivative contract has been confirmed by 
all relevant parties;
    (3) If the credit derivative is a credit default swap, the 
derivative contract includes the following credit events:
    (i) Failure to pay any amount due under the terms of the reference 
exposure, subject to any applicable minimal payment threshold that is 
consistent with standard market practice and with a grace period that is 
closely in line with the grace period of the reference exposure; and
    (ii) Bankruptcy, insolvency, restructuring (for obligors not subject 
to bankruptcy or insolvency), or inability of the obligor on the 
reference exposure to pay its debts, or its failure or admission in 
writing of its inability generally to pay its debts as they become due, 
and similar events;
    (4) The terms and conditions dictating the manner in which the 
derivative contract is to be settled are incorporated into the contract;
    (5) If the derivative contract allows for cash settlement, the 
contract incorporates a robust valuation process to estimate loss with 
respect to the derivative reliably and specifies a reasonable period for 
obtaining post-credit event valuations of the reference exposure;
    (6) If the derivative contract requires the protection purchaser to 
transfer an exposure to the protection provider at settlement, the terms 
of at least one of the exposures that is permitted to be transferred 
under the contract provides that any required consent to transfer may 
not be unreasonably withheld; and
    (7) If the credit derivative is a credit default swap, the 
derivative contract clearly identifies the parties responsible for 
determining whether a credit event has occurred, specifies that this 
determination is not the sole responsibility of the protection provider, 
and gives the protection purchaser the right to notify the protection 
provider of the occurrence of a credit event.
    (n) Eligible national bank or eligible savings association means a 
national bank or saving association that:
    (1) Is well capitalized as defined in the prompt corrective action 
rules applicable to the institution; and
    (2) Has a composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System in connection with the national bank's or 
savings association's most recent examination or subsequent review, with 
at least a rating of 2 for asset quality and for management.
    (o) Eligible protection provider means:
    (1) A sovereign entity (a central government, including the U.S. 
government; an agency; department; ministry; or central bank);
    (2) The Bank for International Settlements, the International 
Monetary Fund, the European Central Bank, the European Commission, or a 
multilateral development bank;
    (3) A Federal Home Loan Bank;
    (4) The Federal Agricultural Mortgage Corporation;
    (5) A depository institution, as defined in section 3 of the Federal 
Deposit Insurance Act, 12 U.S.C. 1813(c);
    (6) A bank holding company, as defined in section 2 of the Bank 
Holding Company Act, as amended, 12 U.S.C. 1841;
    (7) A savings and loan holding company, as defined in section 10 of 
the Home Owners' Loan Act, 12 U.S.C. 1467a;
    (8) A securities broker or dealer registered with the SEC under the 
Securities Exchange Act of 1934, 15 U.S.C. 78o et seq;
    (9) An insurance company that is subject to the supervision of a 
State insurance regulator;
    (10) A foreign banking organization;
    (11) A non-U.S.-based securities firm or a non-U.S.-based insurance 
company that is subject to consolidated supervision and regulation 
comparable to

[[Page 739]]

that imposed on U.S. depository institutions, securities broker-dealers, 
or insurance companies; and
    (12) A qualifying central counterparty;
    (p) Financial instrument means stocks, notes, bonds, and debentures 
traded on a national securities exchange, OTC margin stocks as defined 
in Regulation U, 12 CFR part 221, commercial paper, negotiable 
certificates of deposit, bankers' acceptances, and shares in money 
market and mutual funds of the type that issue shares in which national 
banks or savings associations may perfect a security interest. Financial 
instruments may be denominated in foreign currencies that are freely 
convertible to U.S. dollars. The term ``financial instrument'' does not 
include mortgages.
    (q) Loans and extensions of credit means a national bank's or 
savings association's direct or indirect advance of funds to or on 
behalf of a borrower based on an obligation of the borrower to repay the 
funds or repayable from specific property pledged by or on behalf of the 
borrower; and any credit exposure, as determined pursuant to Sec.  32.9, 
arising from a derivative transaction or a securities financing 
transaction.
    (1) Loans or extensions of credit for purposes of 12 U.S.C. 84 or 12 
U.S.C. 1464(u), as applicable, and this part include--
    (i) A contractual commitment to advance funds, as defined in 
paragraph (g) of this section;
    (ii) A maker or endorser's obligation arising from a national bank's 
or savings association's discount of commercial paper;
    (iii) A national bank's or savings association's purchase of third-
party paper subject to an agreement that the seller will repurchase the 
paper upon default or at the end of a stated period. The amount of the 
bank's or savings association's loan is the total unpaid balance of the 
paper owned by the bank or savings association less any applicable 
dealer reserves retained by the bank or savings association and held by 
the bank or savings association as collateral security. Where the 
seller's obligation to repurchase is limited, the bank's or savings 
association's loan is measured by the total amount of the paper the 
seller may ultimately be obligated to repurchase. A national bank's or 
savings association's purchase of third party paper without direct or 
indirect recourse to the seller is not a loan or extension of credit to 
the seller;
    (iv) An overdraft, whether or not prearranged, but not an intra-day 
overdraft for which payment is received before the close of business of 
the national bank or savings association that makes the funds available;
    (v) The sale of Federal funds with a maturity of more than one 
business day, but not Federal funds with a maturity of one day or less 
or Federal funds sold under a continuing contract; and
    (vi) Loans or extensions of credit that have been charged off on the 
books of the national bank or savings association in whole or in part, 
unless the loan or extension of credit--
    (A) Is unenforceable by reason of discharge in bankruptcy;
    (B) Is no longer legally enforceable because of expiration of the 
statute of limitations or a judicial decision;
    (C) Is no longer legally enforceable for other reasons, provided 
that the bank or savings association maintains sufficient records to 
demonstrate that the loan is unenforceable.
    (2) The following items do not constitute loans or extensions of 
credit for purposes of 12 U.S.C. 84 or 12 U.S.C. 1464(u), as applicable, 
and this part--
    (i) Additional funds advanced for the benefit of a borrower by a 
national bank or savings association for payment of taxes, insurance, 
utilities, security, and maintenance and operating expenses necessary to 
preserve the value of real property securing the loan, consistent with 
safe and sound banking practices, but only if the advance is for the 
protection of the bank's or savings association's interest in the 
collateral, and provided that such amounts must be treated as an 
extension of credit if a new loan or extension of credit is made to the 
borrower;
    (ii) Accrued and discounted interest on an existing loan or 
extension of credit, including interest that has been

[[Page 740]]

capitalized from prior notes and interest that has been advanced under 
terms and conditions of a loan agreement;
    (iii) Financed sales of a national bank's or savings association's 
own assets, including Other Real Estate Owned, if the financing does not 
put the bank or savings association in a worse position than when the 
bank or savings association held title to the assets;
    (iv) A renewal or restructuring of a loan as a new ``loan or 
extension of credit,'' following the exercise by a national bank or 
savings association of reasonable efforts, consistent with safe and 
sound banking practices, to bring the loan into conformance with the 
lending limit, unless new funds are advanced by the national bank or 
savings association to the borrower (except as permitted by Sec.  
32.3(b)(5)), or a new borrower replaces the original borrower, or unless 
the appropriate Federal banking agency determines that a renewal or 
restructuring was undertaken as a means to evade the bank's or savings 
association's lending limit;
    (v) Amounts paid against uncollected funds in the normal process of 
collection;
    (vi)(A) That portion of a loan or extension of credit sold as a 
participation by a national bank or savings association on a nonrecourse 
basis, provided that the participation results in a pro rata sharing of 
credit risk proportionate to the respective interests of the originating 
and participating lenders. Where a participation agreement provides that 
repayment must be applied first to the portions sold, a pro rata sharing 
will be deemed to exist only if the agreement also provides that, in the 
event of a default or comparable event defined in the agreement, 
participants must share in all subsequent repayments and collections in 
proportion to their percentage participation at the time of the 
occurrence of the event.
    (B) When an originating national bank or savings association funds 
the entire loan, it must receive funding from the participants before 
the close of business of its next business day. If the participating 
portions are not received within that period, then the portions funded 
will be treated as a loan by the originating bank or savings association 
to the borrower. If the portions so attributed to the borrower exceed 
the originating bank's or savings association's lending limit, the loan 
may be treated as nonconforming subject to Sec.  32.6, rather than a 
violation, if:
    (1) The originating national bank or savings association had a valid 
and unconditional participation agreement with a participant or 
participants that was sufficient to reduce the loan to within the 
originating bank's or savings association's lending limit;
    (2) The participant reconfirmed its participation and the 
originating national bank or savings association had no knowledge of any 
information that would permit the participant to withhold its 
participation; and
    (3) The participation was to be funded by close of business of the 
originating national bank's or savings association's next business day; 
and
    (vii) That portion of one or more loans or extensions of credit, not 
to exceed 10 percent of capital and surplus, with respect to which the 
national bank or savings association has purchased protection in the 
form of a single-name credit derivative that meets the requirements of 
Sec.  32.2(m)(1) through (7) from an eligible protection provider if the 
reference obligor is the same legal entity as the borrower in the loan 
or extension of credit and the maturity of the protection purchased 
equals or exceeds the maturity of the loan or extension of credit.
    (r) Person means an individual; sole proprietorship; partnership; 
joint venture; association; trust; estate; business trust; corporation; 
limited liability company; not-for-profit corporation; sovereign 
government or agency, instrumentality, or political subdivision thereof; 
or any similar entity or organization; and
    (s) Qualifying central counterparty has the same meaning as this 
term has in 12 CFR 3.2.
    (t) Qualifying commitment to lend means a legally binding written 
commitment to lend that, when combined with all other outstanding loans 
and qualifying commitments to a borrower, was within the national bank's 
or savings association's lending limit when

[[Page 741]]

entered into, and has not been disqualified.
    (1) In determining whether a commitment is within the national 
bank's or savings association's lending limit when made, the bank or 
savings association may deduct from the amount of the commitment the 
amount of any legally binding loan participation commitments that are 
issued concurrent with the bank's or savings association's commitment 
and that would be excluded from the definition of ``loan or extension of 
credit'' under paragraph (q)(2)(vi) of this section.
    (2) If the national bank or savings association subsequently chooses 
to make an additional loan and that subsequent loan, together with all 
outstanding loans and qualifying commitments to a borrower, exceeds the 
bank's or savings association's applicable lending limit at that time, 
the bank's or savings association's qualifying commitments to the 
borrower that exceed the bank's or savings association's lending limit 
at that time are deemed to be permanently disqualified, beginning with 
the most recent qualifying commitment and proceeding in reverse 
chronological order. When a commitment is disqualified, the entire 
commitment is disqualified and the disqualified commitment is no longer 
considered a ``loan or extension of credit.'' Advances of funds under a 
disqualified or non-qualifying commitment may only be made to the extent 
that the advance, together with all other outstanding loans to the 
borrower, do not exceed the bank's or savings association's lending 
limit at the time of the advance, calculated pursuant to Sec.  32.4.
    (u) Qualifying master netting agreement has the same meaning as this 
term has in 12 CFR 3.2.
    (v) Readily marketable collateral means financial instruments and 
bullion that are salable under ordinary market conditions with 
reasonable promptness at a fair market value determined by quotations 
based upon actual transactions on an auction or similarly available 
daily bid and ask price market.
    (w) Readily marketable staple means an article of commerce, 
agriculture, or industry, such as wheat and other grains, cotton, wool, 
and basic metals such as tin, copper and lead, in the form of 
standardized interchangeable units, that is easy to sell in a market 
with sufficiently frequent price quotations.
    (1) An article comes within this definition if--
    (i) The exact price is easy to determine; and
    (ii) The staple itself is easy to sell at any time at a price that 
would not be considerably less than the amount at which it is valued as 
collateral.
    (2) Whether an article qualifies as a readily marketable staple is 
determined on the basis of the conditions existing at the time the loan 
or extension of credit that is secured by the staples is made.
    (x) Residential housing units mean:
    (1) Homes (including a dwelling unit in a multi-family residential 
property such as a condominium or a cooperative);
    (2) Combinations of homes and business property (i.e., a home used 
in part for business);
    (3) Other real estate used for primarily residential purposes other 
than a home (but which may include homes);
    (4) Combinations of such real estate and business property involving 
only minor business use (i.e., where no more than 20 percent of the 
total appraised value of the real estate is attributable to the business 
use);
    (5) Farm residences and combinations of farm residences and 
commercial farm real estate;
    (6) Property to be improved by the construction of such structures; 
or
    (7) Leasehold interests in the above real estate.
    (y) Residential real estate loan means a loan or extension of credit 
that is secured by 1-4 family residential real estate.
    (z) Sale of Federal funds means any transaction between depository 
institutions involving the transfer of immediately available funds 
resulting from credits to deposit balances at Federal Reserve Banks, or 
from credits to new or existing deposit balances due from a 
correspondent depository institution.
    (aa) Securities financing transaction means a repurchase agreement, 
reverse

[[Page 742]]

repurchase agreement, securities lending transaction, or securities 
borrowing transaction.
    (bb) Security has the same meaning as in section 3(a)(10) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)).
    (cc) Loans to small businesses means loans or extensions of credit 
``secured by nonfarm nonresidential properties'' or ``commercial and 
industrial loans'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
    (dd) Loans or extensions of credit to small farms means ``loans 
secured by farmland'' or ``loans to finance agricultural production and 
other loans to farmers'' as defined in the instructions for preparation 
of the Consolidated Report of Condition and Income.
    (ee) Standby letter of credit means any letter of credit, or similar 
arrangement, that represents an obligation to the beneficiary on the 
part of the issuer:
    (1) To repay money borrowed by or advanced to or for the account of 
the account party;
    (2) To make payment on account of any indebtedness undertaken by the 
account party; or
    (3) To make payment on account of any default by the account party 
in the performance of an obligation.

[60 FR 8532, Feb. 15, 1995, as amended at 63 FR 15746, Apr. 1, 1998; 66 
FR 31120, June 11, 2001; 66 FR 55072, Nov. 1, 2001; 69 FR 51357, Aug. 
19, 2004; 77 FR 37275, June 21, 2012; 77 FR 37277, June 21, 2012; 78 FR 
37944, June 25, 2013; 79 FR 11312, Feb. 28, 2014; 80 FR 28479, May 18, 
2015; 84 FR 4240, Feb. 14, 2019; 84 FR 61795, Nov. 13, 2019; 84 FR 
69298, Dec. 18, 2019; 85 FR 42642, July 14, 2020]



Sec.  32.3  Lending limits.

    (a) Combined general limit. A national bank's or savings 
association's total outstanding loans and extensions of credit to one 
borrower may not exceed 15 percent of the bank's or savings 
association's capital and surplus, plus an additional 10 percent of the 
bank's or savings association's capital and surplus, if the amount that 
exceeds the bank's or savings association's 15 percent general limit is 
fully secured by readily marketable collateral, as defined in Sec.  
32.2(v). To qualify for the additional 10 percent limit, the bank or 
savings association must perfect a security interest in the collateral 
under applicable law and the collateral must have a current market value 
at all times of at least 100 percent of the amount of the loan or 
extension of credit that exceeds the bank's or savings association's 15 
percent general limit.
    (b) Loans subject to special lending limits. The following loans or 
extensions of credit are subject to the lending limits set forth below. 
When loans and extensions of credit qualify for more than one special 
lending limit, the special limits are cumulative.
    (1) Loans secured by bills of lading or warehouse receipts covering 
readily marketable staples. (i) A national bank's or savings 
association's loans or extensions of credit to one borrower secured by 
bills of lading, warehouse receipts, or similar documents transferring 
or securing title to readily marketable staples, as defined in Sec.  
32.2(w), may not exceed 35 percent of the bank's or savings 
association's capital and surplus in addition to the amount allowed 
under the bank's or savings association's combined general limit. The 
market value of the staples securing the loan must at all times equal at 
least 115 percent of the amount of the outstanding loan that exceeds the 
bank's or savings association's combined general limit.
    (ii) Staples that qualify for this special limit must be 
nonperishable, may be refrigerated or frozen, and must be fully covered 
by insurance if such insurance is customary. Whether a staple is non-
perishable must be determined on a case-by-case basis because of 
differences in handling and storing commodities.
    (iii) This special limit applies to a loan or extension of credit 
arising from a single transaction or secured by the same staples, 
provided that the duration of the loan or extension of credit is:
    (A) Not more than ten months if secured by nonperishable staples; or
    (B) Not more than six months if secured by refrigerated or frozen 
staples.
    (iv) The holder of the warehouse receipts, order bills of lading, 
documents qualifying as documents of title under the Uniform Commercial 
Code, or other similar documents, must have

[[Page 743]]

control and be able to obtain immediate possession of the staple so that 
the bank or savings association is able to sell the underlying staples 
and promptly transfer title and possession to a purchaser if default 
should occur on a loan secured by such documents. The existence of a 
brief notice period, or similar procedural requirements under applicable 
law, for the disposal of the collateral will not affect the eligibility 
of the instruments for this special limit.
    (A) Field warehouse receipts are an acceptable form of collateral 
when issued by a duly bonded and licensed grain elevator or warehouse 
having exclusive possession and control of the staples even though the 
grain elevator or warehouse is maintained on the premises of the owner 
of the staples.
    (B) Warehouse receipts issued by the borrower-owner that is a grain 
elevator or warehouse company, duly-bonded and licensed and regularly 
inspected by state or Federal authorities, may be considered eligible 
collateral under this provision only when the receipts are registered 
with an independent registrar whose consent is required before the 
staples may be withdrawn from the warehouse.
    (2) Discount of installment consumer paper. (i) A national bank's or 
savings association's loans and extensions of credit to one borrower 
that arise from the discount of negotiable or nonnegotiable installment 
consumer paper, as defined at Sec.  32.2(f), that carries a full 
recourse endorsement or unconditional guarantee by the person selling 
the paper, may not exceed 10 percent of the bank's or savings 
association's capital and surplus in addition to the amount allowed 
under the bank's or savings association's combined general limit. An 
unconditional guarantee may be in the form of a repurchase agreement or 
separate guarantee agreement. A condition reasonably within the power of 
the bank or savings association to perform, such as the repossession of 
collateral, will not make conditional an otherwise unconditional 
guarantee.
    (ii) Where the seller of the paper offers only partial recourse to 
the bank or savings association, the lending limits of this section 
apply to the obligation of the seller to the bank or savings 
association, which is measured by the total amount of paper the seller 
may be obligated to repurchase or has guaranteed.
    (iii) Where the bank or savings association is relying primarily 
upon the maker of the paper for payment of the loans or extensions of 
credit and not upon any full or partial recourse endorsement or 
guarantee by the seller of the paper, the lending limits of this section 
apply only to the maker. The bank or savings association must 
substantiate its reliance on the maker with--
    (A) Records supporting the bank's or savings association's 
independent credit analysis of the maker's ability to repay the loan or 
extension of credit, maintained by the bank or savings association or by 
a third party that is contractually obligated to make those records 
available for examination purposes; and
    (B) A written certification by an officer of the bank or savings 
association authorized by the bank's or savings association's board of 
directors or any designee of that officer, that the bank or savings 
association is relying primarily upon the maker to repay the loan or 
extension of credit.
    (iv) Where paper is purchased in substantial quantities, the 
records, evaluation, and certification must be in a form appropriate for 
the class and quantity of paper involved. The bank or savings 
association may use sampling techniques, or other appropriate methods, 
to independently verify the reliability of the credit information 
supplied by the seller.
    (3) Loans secured by documents covering livestock. (i) A national 
bank's or savings association's loans or extensions of credit to one 
borrower secured by shipping documents or instruments that transfer or 
secure title to or give a first lien on livestock may not exceed 10 
percent of the bank's or savings association's capital and surplus in 
addition to the amount allowed under the bank's or savings association's 
combined general limit. The market value of the livestock securing the 
loan must at all times equal at least 115 percent of the amount of the 
outstanding loan that exceeds the bank's or savings association's 
combined general limit. For

[[Page 744]]

purposes of this subsection, the term ``livestock'' includes dairy and 
beef cattle, hogs, sheep, goats, horses, mules, poultry and fish, 
whether or not held for resale.
    (ii) The bank or savings association must maintain in its files an 
inspection and valuation for the livestock pledged that is reasonably 
current, taking into account the nature and frequency of turnover of the 
livestock to which the documents relate, but in any case not more than 
12 months old.
    (iii) Under the laws of certain states, persons furnishing pasturage 
under a grazing contract may have a lien on the livestock for the amount 
due for pasturage. If a lien that is based on pasturage furnished by the 
lienor prior to the bank's or savings association's loan or extension of 
credit is assigned to the bank or savings association by a recordable 
instrument and protected against being defeated by some other lien or 
claim, by payment to a person other than the bank or savings 
association, or otherwise, it will qualify under this exception provided 
the amount of the perfected lien is at least equal to the amount of the 
loan and the value of the livestock is at no time less than 115 percent 
of the portion of the loan or extension of credit that exceeds the 
bank's or savings association's combined general limit. When the amount 
due under the grazing contract is dependent upon future performance, the 
resulting lien does not meet the requirements of the exception.
    (4) Loans secured by dairy cattle. A national bank's or savings 
association's loans and extensions of credit to one borrower that arise 
from the discount by dealers in dairy cattle of paper given in payment 
for the cattle may not exceed 10 percent of the bank's or savings 
association's capital and surplus in addition to the amount allowed 
under the bank's or savings association's combined general limit. To 
qualify, the paper--
    (i) Must carry the full recourse endorsement or unconditional 
guarantee of the seller; and
    (ii) Must be secured by the cattle being sold, pursuant to liens 
that allow the bank or savings association to maintain a perfected 
security interest in the cattle under applicable law.
    (5) Additional advances to complete project financing pursuant to 
renewal of a qualifying commitment to lend. A national bank or savings 
association may renew a qualifying commitment to lend, as defined by 
Sec.  32.2(t), and complete funding under that commitment if all of the 
following criteria are met--
    (i) The completion of funding is consistent with safe and sound 
banking practices and is made to protect the position of the bank or 
savings association;
    (ii) The completion of funding will enable the borrower to complete 
the project for which the qualifying commitment to lend was made; and
    (iii) The amount of the additional funding does not exceed the 
unfunded portion of the bank's or savings association's qualifying 
commitment to lend.
    (c) Loans not subject to the lending limits. The following loans or 
extensions of credit are not subject to the lending limits of 12 U.S.C. 
84, or 12 U.S.C. 1464(u), as applicable, of this part.
    (1) Loans arising from the discount of commercial or business paper. 
(i) Loans or extensions of credit arising from the discount of 
negotiable commercial or business paper that evidences an obligation to 
the person negotiating the paper. The paper--
    (A) Must be given in payment of the purchase price of commodities 
purchased for resale, fabrication of a product, or any other business 
purpose that may reasonably be expected to provide funds for payment of 
the paper; and
    (B) Must bear the full recourse endorsement of the owner of the 
paper, except that paper discounted in connection with export 
transactions, that is transferred without recourse, or with limited 
recourse, must be supported by an assignment of appropriate insurance 
covering the political, credit, and transfer risks applicable to the 
paper, such as insurance provided by the Export-Import Bank.
    (ii) A failure to pay principal or interest on commercial or 
business paper when due does not result in a loan or extension of credit 
to the maker or endorser of the paper; however, the amount of such paper 
thereafter must be counted in determining whether additional loans or 
extensions of credit to

[[Page 745]]

the same borrower may be made within the limits of 12 U.S.C. 84 or 12 
U.S.C. 1464(u), as applicable, and this part.
    (2) Bankers' acceptances. A national bank's or savings association's 
acceptance of drafts eligible for rediscount under 12 U.S.C. 372 and 373 
or 12 U.S.C. 1464(c)(1)(M), as applicable, or a national bank's or 
savings association's purchase of acceptances created by other banks or 
savings associations that are eligible for rediscount under those 
sections; but not including--
    (i) A national bank's or savings association's acceptance of drafts 
ineligible for rediscount (which constitutes a loan by the bank or 
savings association to the customer for whom the acceptance was made, in 
the amount of the draft);
    (ii) A national bank's or savings association's purchase of 
ineligible acceptances created by other banks or savings associations 
(which constitutes a loan from the purchasing bank or savings 
association to the accepting bank or savings association, in the amount 
of the purchase price); and
    (iii) A national bank's or savings association's purchase of its own 
acceptances (which constitutes a loan to the bank's or savings 
association's customer for whom the acceptance was made, in the amount 
of the purchase price).
    (3)(i) Loans secured by U.S. obligations. Loans or extensions of 
credit, or portions thereof, to the extent fully secured by the current 
market value of:
    (A) Bonds, notes, certificates of indebtedness, or Treasury bills of 
the United States or by similar obligations fully guaranteed as to 
principal and interest by the United States;
    (B) Loans to the extent guaranteed as to repayment of principal by 
the full faith and credit of the U.S. government, as set forth in 
paragraph (c)(4)(ii) of this section.
    (ii) To qualify a loan or extension of credit under paragraph 
(c)(3)(i) of this section, the national bank or savings association must 
perfect a security interest in the collateral under applicable law.
    (4) Loans to or guaranteed by a Federal agency. (i) Loans or 
extensions of credit to any department, agency, bureau, board, 
commission, or establishment of the United States or any corporation 
wholly owned directly or indirectly by the United States.
    (ii) Loans or extensions of credit, including portions thereof, to 
the extent secured by unconditional takeout commitments or guarantees of 
any of the foregoing governmental entities. The commitment or 
guarantee--
    (A) Must be payable in cash or its equivalent within 60 days after 
demand for payment is made;
    (B) Is considered unconditional if the protection afforded the 
national bank or savings association is not substantially diminished or 
impaired if loss should result from factors beyond the bank's or savings 
association's control. Protection against loss is not materially 
diminished or impaired by procedural requirements, such as an agreement 
to pay on the obligation only in the event of default, including default 
over a specific period of time, a requirement that notification of 
default be given within a specific period after its occurrence, or a 
requirement of good faith on the part of the bank or savings 
association.
    (5) Loans to or guaranteed by general obligations of a State or 
political subdivision. (i) A loan or extension of credit to a State or 
political subdivision that constitutes a general obligation of the State 
or political subdivision, as defined in part 1 of this chapter, and for 
which the lending national bank or savings association has an opinion of 
counsel or the opinion of that State Attorney General, or other State 
legal official with authority to opine on the obligation in question, 
that the loan or extension of credit is a valid and enforceable general 
obligation of the borrower; and
    (ii) A loan or extension of credit, including portions thereof, to 
the extent guaranteed or secured by a general obligation of a State or 
political subdivision and for which the lending bank or savings 
association has an opinion of counsel or the opinion of that State 
Attorney General, or other State legal official with authority to opine 
on the guarantee or collateral in question, that the guarantee or 
collateral is a valid and enforceable general obligation of that public 
body.

[[Page 746]]

    (6) Loans secured by segregated deposit accounts. Loans or 
extensions of credit, including portions thereof, to the extent secured 
by a segregated deposit account in the lending national bank or savings 
association, provided a security interest in the deposit has been 
perfected under applicable law.
    (i) Where the deposit is eligible for withdrawal before the secured 
loan matures, the bank or savings association must establish internal 
procedures to prevent release of the security without the lending bank's 
or savings association's prior consent.
    (ii) A deposit that is denominated and payable in a currency other 
than that of the loan or extension of credit that it secures may be 
eligible for this exception if the currency is freely convertible to 
U.S. dollars.
    (A) This exception applies to only that portion of the loan or 
extension of credit that is covered by the U.S. dollar value of the 
deposit.
    (B) The lending bank or savings association must establish 
procedures to periodically revalue foreign currency deposits to ensure 
that the loan or extension of credit remains fully secured at all times.
    (7) Loans to financial institutions with the approval of the 
appropriate Federal banking agency. Loans or extensions of credit to any 
financial institution or to any receiver, conservator, superintendent of 
banks, or other agent in charge of the business and property of a 
financial institution when an emergency situation exists and a national 
bank or savings association is asked to provide assistance to another 
financial institution, and the loan is approved by the appropriate 
Federal banking agency. For purposes of this paragraph, financial 
institution means a commercial bank, savings bank, trust company, 
savings association, or credit union.
    (8) Loans to the Student Loan Marketing Association. Loans or 
extensions of credit to the Student Loan Marketing Association.
    (9) Loans to industrial development authorities. A loan or extension 
of credit to an industrial development authority or similar public 
entity created to construct and lease a plant facility, including a 
health care facility, to an industrial occupant will be deemed a loan to 
the lessee, provided that--
    (i) The national bank or savings association evaluates the 
creditworthiness of the industrial occupant before the loan is extended 
to the authority;
    (ii) The authority's liability on the loan is limited solely to 
whatever interest it has in the particular facility;
    (iii) The authority's interest is assigned to the bank or savings 
association as security for the loan or the industrial occupant issues a 
promissory note to the bank or savings association that provides a 
higher order of security than the assignment of a lease; and
    (iv) The industrial occupant's lease rentals are assigned and paid 
directly to the bank or savings association.
    (10) Loans to leasing companies. A loan or extension of credit to a 
leasing company for the purpose of purchasing equipment for lease will 
be deemed a loan to the lessee, provided that--
    (i) The national bank or savings association evaluates the 
creditworthiness of the lessee before the loan is extended to the 
leasing corporation;
    (ii) The loan is without recourse to the leasing corporation;
    (iii) The bank or savings association is given a security interest 
in the equipment and in the event of default, may proceed directly 
against the equipment and the lessee for any deficiency resulting from 
the sale of the equipment;
    (iv) The leasing corporation assigns all of its rights under the 
lease to the bank or savings association;
    (v) The lessee's lease payments are assigned and paid to the bank or 
savings association; and
    (vi) The lease terms are subject to the same limitations that would 
apply to a national bank or savings association acting as a lessor.
    (11) Credit Exposures arising from transactions financing certain 
government securities. Credit exposures arising from securities 
financing transactions in which the securities financed are Type I 
securities, as defined in 12 CFR 1.2(j), in the case of national banks, 
or securities listed in section 5(c)(1)(C), (D), (E), and (F) of HOLA 
and general obligations of a state or subdivision as listed in section 
5(c)(1)(H) of HOLA, 12 U.S.C.

[[Page 747]]

1464(c)(1)(C), (D), (E), (F), and (H), in the case of savings 
associations.
    (12) Intraday credit exposures. Intraday credit exposures arising 
from a derivative transaction or securities financing transaction.
    (d) Special lending limits for savings associations--(1) $500,000 
exception for savings associations. If a savings association's aggregate 
lending limitation calculated under paragraph (a) of this section is 
less than $500,000, notwithstanding this limitation in paragraph (a) of 
this section, such savings association may have total loans and 
extensions of credit, for any purpose, to one borrower outstanding at 
one time not to exceed $500,000.
    (2) Loans by savings associations to develop domestic residential 
housing units. (i) Subject to paragraph (d)(2)(ii) of this section, a 
savings association may make loans to one borrower to develop domestic 
residential housing units, not to exceed the lesser of $30,000,000 or 30 
percent of the savings association's unimpaired capital and unimpaired 
surplus, including all loans and extensions of credit subject to 
paragraph (a) of this section, provided that:
    (A) The savings association is, and continues to be, in compliance 
with 12 CFR part 3, part 390, subpart Z, or part 324, as applicable;
    (B) Upon application by a savings association under paragraph 
(d)(2)(iv) of this section, the appropriate Federal banking agency 
permits, subject to conditions it may impose, the savings association to 
use the higher limit set forth under this paragraph (d)(2)(i);
    (C) The loans and extensions of credit made under this paragraph 
(d)(2)(i) to all borrowers do not, in aggregate, exceed 150 percent of 
the savings association's unimpaired capital and unimpaired surplus; and
    (D) The loans and extensions of credit made under this paragraph 
(d)(2)(i) comply with the applicable loan-to-value requirements.
    (ii) The authority of a savings association to make a loan or 
extension of credit under the exception in paragraph (d)(2)(i) of this 
section ceases immediately upon the association's failure to comply with 
any one of the requirements set forth in paragraph (d)(2)(i) of this 
section or any condition(s) set forth in an order issued by the 
appropriate Federal banking agency under paragraphs (d)(2)(i)(B) and 
(d)(2)(iv) of this section.
    (iii) As used in this section, the term ``to develop'' includes each 
of the various phases necessary to produce housing units as an end 
product, such as acquisition, development and construction; development 
and construction; construction; rehabilitation; and conversion; and the 
term ``domestic'' includes units within the fifty states, the District 
of Columbia, Puerto Rico, the Virgin Islands, Guam, and the Pacific 
Islands;
    (iv) Procedures--(A) Federal savings associations--(1) Application. 
A Federal savings association must submit an application to, and receive 
approval from, the appropriate OCC supervisory office before using the 
higher limit set forth under paragraph (d)(2)(i) of this section. The 
supervisory office may approve a completed application if it finds that 
approval is consistent with safety and soundness. To be deemed complete, 
the application must include:
    (i) If applicable, certification that the savings association is an 
``eligible savings association'';
    (ii) A demonstration that the savings association meets the 
requirements of paragraphs (d)(2)(i)(A), (C), and (D) of this section;
    (iii) A copy of a written resolution by a majority of the savings 
association's board of directors approving the use of the limits 
provided in paragraphs (d)(2)(i) of this section, and confirming the 
terms and conditions for use of this lending authority; and
    (iv) A description of how the board will exercise its continuing 
responsibility to oversee the use of this lending authority.
    (2) Expedited review. An application by an eligible savings 
association is deemed approved as of the 30th day after the application 
is received by the OCC, unless before that date the OCC informs the 
savings association it must obtain prior written approval from the OCC.
    (B) State savings associations. A state savings association shall 
seek approval to use the higher limit set forth under paragraph 
(d)(2)(i) of this section from

[[Page 748]]

its appropriate Federal banking agency, under the rules and procedures 
established by the appropriate Federal banking agency.
    (3) Commercial paper and corporate debt securities. In addition to 
the amount allowed under the savings association's combined general 
limit, a savings association may invest up to 10 percent of unimpaired 
capital and unimpaired surplus in the obligations of one issuer 
evidenced by commercial paper or corporate debt securities that are, as 
of the date of purchase, investment grade.

[60 FR 8532, Feb. 15, 1995, as amended at 63 FR 15746, Apr. 1, 1998; 66 
FR 31120, June 11, 2001; 66 FR 35072, Nov. 1, 2001; 77 FR 37277, June 
21, 2012; 79 FR 11312, Feb. 28, 2014; 80 FR 28479, May 18, 2015]



Sec.  32.4  Calculation of lending limits.

    (a) Calculation date. For purposes of determining compliance with 12 
U.S.C. 84, and 12 U.S.C. 1464(u), as applicable, and this part, a 
national bank or savings association shall determine its lending limit 
as of the most recent of the following dates:
    (1) The last day of the preceding calendar quarter; or
    (2) The date on which there is a change in the bank's or savings 
association's capital category for purposes of 12 U.S.C. 1831o and 12 
CFR 6.3 or 12 CFR 324.402, as applicable.
    (b) Effective date. (1) A national bank's or savings association's 
lending limit calculated in accordance with paragraph (a)(1) of this 
section will be effective as of the earlier of the following dates:
    (i) The date on which the bank's or savings association's Call 
Report is submitted; or
    (ii) The date on which the bank's or savings association's Call 
Report is required to be submitted.
    (2) A national bank's or savings association's lending limit 
calculated in accordance with paragraph (a)(2) of this section will be 
effective on the date that the limit is to be calculated.
    (c) More frequent calculations. If the appropriate Federal banking 
agency determines for safety and soundness reasons that a national bank 
or savings association should calculate its lending limit more 
frequently than required by paragraph (a) of this section, the 
appropriate Federal banking agency may provide written notice to the 
national bank or savings association directing it to calculate its 
lending limit at a more frequent interval, and the national bank or 
savings association shall thereafter calculate its lending limit at that 
interval until further notice.

[63 FR 15746, Apr. 1, 1998, as amended at 77 FR 37278, June 21, 2012; 79 
FR 11312, Feb. 28, 2014]



Sec.  32.5  Combination rules.

    (a) General rule. Loans or extensions of credit to one borrower will 
be attributed to another person and each person will be deemed a 
borrower--
    (1) When proceeds of a loan or extension of credit are to be used 
for the direct benefit of the other person, to the extent of the 
proceeds so used; or
    (2) When a common enterprise is deemed to exist between the persons.
    (b) Direct benefit. The proceeds of a loan or extension of credit to 
a borrower will be deemed to be used for the direct benefit of another 
person and will be attributed to the other person when the proceeds, or 
assets purchased with the proceeds, are transferred to another person, 
other than in a bona fide arm's length transaction where the proceeds 
are used to acquire property, goods, or services.
    (c) Common enterprise. A common enterprise will be deemed to exist 
and loans to separate borrowers will be aggregated:
    (1) When the expected source of repayment for each loan or extension 
of credit is the same for each borrower and neither borrower has another 
source of income from which the loan (together with the borrower's other 
obligations) may be fully repaid. An employer will not be treated as a 
source of repayment under this paragraph because of wages and salaries 
paid to an employee, unless the standards of paragraph (c)(2) of this 
section are met;
    (2) When loans or extensions of credit are made--
    (i) To borrowers who are related directly or indirectly through 
common control, including where one borrower is directly or indirectly 
controlled by another borrower; and

[[Page 749]]

    (ii) Substantial financial interdependence exists between or among 
the borrowers. Substantial financial interdependence is deemed to exist 
when 50 percent or more of one borrower's gross receipts or gross 
expenditures (on an annual basis) are derived from transactions with the 
other borrower. Gross receipts and expenditures include gross revenues/
expenses, intercompany loans, dividends, capital contributions, and 
similar receipts or payments;
    (3) When separate persons borrow from a national bank or savings 
association to acquire a business enterprise of which those borrowers 
will own more than 50 percent of the voting securities or voting 
interests, in which case a common enterprise is deemed to exist between 
the borrowers for purposes of combining the acquisition loans; or
    (4) When the appropriate Federal banking agency determines, based 
upon an evaluation of the facts and circumstances of particular 
transactions, that a common enterprise exists.
    (d) Special rule for loans to a corporate group. (1) Loans or 
extensions of credit by a national bank or savings association to a 
corporate group may not exceed 50 percent of the bank's or savings 
association's capital and surplus. This limitation applies only to loans 
subject to the combined general limit. A corporate group includes a 
person and all of its subsidiaries. For purposes of this paragraph, a 
corporation or a limited liability company is a subsidiary of a person 
if the person owns or beneficially owns directly or indirectly more than 
50 percent of the voting securities or voting interests of the 
corporation or company.
    (2) Except as provided in paragraph (d)(1) of this section, loans or 
extensions of credit to a person and its subsidiary, or to different 
subsidiaries of a person, are not combined unless either the direct 
benefit or the common enterprise test is met.
    (e) Special rules for loans to partnerships, joint ventures, and 
associations--(1) Partnership loans. Loans or extensions of credit to a 
partnership, joint venture, or association are deemed to be loans or 
extensions of credit to each member of the partnership, joint venture, 
or association. This rule does not apply to limited partners in limited 
partnerships or to members of joint ventures or associations if the 
partners or members, by the terms of the partnership or membership 
agreement, are not held generally liable for the debts or actions of the 
partnership, joint venture, or association, and those provisions are 
valid under applicable law.
    (2) Loans to partners. (i) Loans or extensions of credit to members 
of a partnership, joint venture, or association are not attributed to 
the partnership, joint venture, or association unless either the direct 
benefit or the common enterprise tests are met. Both the direct benefit 
and common enterprise tests are met between a member of a partnership, 
joint venture or association and such partnership, joint venture or 
association, when loans or extensions of credit are made to the member 
to purchase an interest in the partnership, joint venture or 
association.
    (ii) Loans or extensions of credit to members of a partnership, 
joint venture, or association are not attributed to other members of the 
partnership, joint venture, or association unless either the direct 
benefit or common enterprise test is met.
    (f) Loans to foreign governments, their agencies, and 
instrumentalities--(1) Aggregation. Loans and extensions of credit to 
foreign governments, their agencies, and instrumentalities will be 
aggregated with one another only if the loans or extensions of credit 
fail to meet either the means test or the purpose test at the time the 
loan or extension of credit is made.
    (i) The means test is satisfied if the borrower has resources or 
revenue of its own sufficient to service its debt obligations. If the 
government's support (excluding guarantees by a central government of 
the borrower's debt) exceeds the borrower's annual revenues from other 
sources, it will be presumed that the means test has not been satisfied.
    (ii) The purpose test is satisfied if the purpose of the loan or 
extension of credit is consistent with the purposes of the borrower's 
general business.
    (2) Documentation. In order to show that the means and purpose tests 
have

[[Page 750]]

been satisfied, a national bank or savings association must, at a 
minimum, retain in its files the following items:
    (i) A statement (accompanied by supporting documentation) describing 
the legal status and the degree of financial and operational autonomy of 
the borrowing entity;
    (ii) Financial statements for the borrowing entity for a minimum of 
three years prior to the date the loan or extension of credit was made 
or for each year that the borrowing entity has been in existence, if 
less than three;
    (iii) Financial statements for each year the loan or extension of 
credit is outstanding;
    (iv) The national bank's or savings association's assessment of the 
borrower's means of servicing the loan or extension of credit, including 
specific reasons in support of that assessment. The assessment shall 
include an analysis of the borrower's financial history, its present and 
projected economic and financial performance, and the significance of 
any financial support provided to the borrower by third parties, 
including the borrower's central government; and
    (v) A loan agreement or other written statement from the borrower 
which clearly describes the purpose of the loan or extension of credit. 
The written representation will ordinarily constitute sufficient 
evidence that the purpose test has been satisfied. However, when, at the 
time the funds are disbursed, the bank or savings association knows or 
has reason to know of other information suggesting that the borrower 
will use the proceeds in a manner inconsistent with the written 
representation, it may not, without further inquiry, accept the 
representation.
    (3) Restructured loans--(i) Non-combination rule. Notwithstanding 
paragraphs (a) through (e) of this section, when previously outstanding 
loans and other extensions of credit to a foreign government, its 
agencies, and instrumentalities (i.e., public-sector obligors) that 
qualified for a separate lending limit under paragraph (f)(1) of this 
section are consolidated under a central obligor in a qualifying 
restructuring, such loans will not be aggregated and attributed to the 
central obligor. This includes any substitution in named obligors, 
solely because of the restructuring. Such loans (other than loans 
originally attributed to the central obligor in their own right) will 
not be considered obligations of the central obligor and will continue 
to be attributed to the original public-sector obligor for purposes of 
the lending limit.
    (ii) Qualifying restructuring. Loans and other extensions of credit 
to a foreign government, its agencies, and instrumentalities will 
qualify for the non-combination process under paragraph (f)(3)(i) of 
this section only if they are restructured in a sovereign debt 
restructuring approved by the appropriate Federal banking agency, upon 
request by a national bank or savings association for application of the 
non combination rule. The factors that the appropriate Federal banking 
agency will use in making this determination include, but are not 
limited to, the following:
    (A) Whether the restructuring involves a substantial portion of the 
total commercial bank loans outstanding to the foreign government, its 
agencies, and instrumentalities;
    (B) Whether the restructuring involves a substantial number of the 
foreign country's external commercial bank creditors;
    (C) Whether the restructuring and consolidation under a central 
obligor is being done primarily to facilitate external debt management; 
and
    (D) Whether the restructuring includes features of debt or debt-
service reduction.
    (iii) 50 percent aggregate limit. With respect to any case in which 
the non-combination process under paragraph (f)(3)(i) of this section 
applies, a national bank's or savings association's loans and other 
extensions of credit to a foreign government, its agencies and 
instrumentalities, (including restructured debt) shall not exceed, in 
the aggregate, 50 percent of the bank's or savings association's capital 
and surplus.

[60 FR 8532, Feb. 15, 1995, as amended at 77 FR 37279, June 21, 2012]

[[Page 751]]



Sec.  32.6  Nonconforming loans and extensions of credit.

    (a) A loan or extension of credit, within a national bank's or 
savings association's legal lending limit when made, will not be deemed 
a violation but will be treated as nonconforming if the loan or 
extension of credit is no longer in conformity with the bank's or 
savings association's lending limit because--
    (1) The bank's or savings association's capital has declined, 
borrowers have subsequently merged or formed a common enterprise, 
lenders have merged, or the lending limit or capital rules have changed;
    (2) Collateral securing the loan to satisfy the requirements of a 
lending limit exception has declined in value; or
    (3) In the case of a credit exposure arising from a transaction 
identified in Sec.  32.9(a) and measured by the Model Method specified 
in Sec.  32.9(b)(1)(i) or Sec.  32.9 (c)(1)(i), the Current Exposure 
Method specified in Sec.  32.9(b)(1)(iii), or the Basel Collateral 
Haircut Method specified in Sec.  32.9(c)(1)(iii), the credit exposure 
subject to the lending limits of 12 U.S.C. 84 or 12 U.S.C. 1464(u), as 
applicable, or this part increases after execution of the transaction.
    (b) A national bank or savings association must use reasonable 
efforts to bring a loan or extension of credit that is nonconforming as 
a result of paragraph (a)(1) or (a)(3) of this section into conformity 
with the bank's or savings association's lending limit unless to do so 
would be inconsistent with safe and sound banking practices.
    (c) A national bank or savings association must bring a loan that is 
nonconforming as a result of circumstances described in paragraph (a)(2) 
of this section into conformity with the bank's or savings association's 
lending limit within 30 calendar days, except when judicial proceedings, 
regulatory actions or other extraordinary circumstances beyond the 
bank's or savings association's control prevent it from taking action.

[77 FR 37279, June 21, 2012, as amended at 78 FR 37944, June 25, 2013]



Sec.  32.7  Residential real estate loans, loans to small businesses, 
and loans or extensions of credit to small farms (``Supplemental 
Lending Limits Program'').

    (a) Residential real estate, loans to small businesses, and loans or 
extensions of credit to small farms. (1) In addition to the amount that 
a national bank or savings association may lend to one borrower under 
Sec.  32.3, an eligible national bank or eligible savings association 
may make residential real estate loans or extensions of credit to one 
borrower in the lesser of the following two amounts: 10 percent of its 
capital and surplus; or the percent of its capital and surplus, in 
excess of 15 percent, that a State bank or savings association is 
permitted to lend under the State lending limit that is available for 
residential real estate loans or unsecured loans in the State where the 
main office of the national bank or savings association is located. Any 
such loan or extension of credit must be secured by a perfected first-
lien security interest in 1-4 family real estate in an amount that does 
not exceed 80 percent of the appraised value of the collateral at the 
time the loan or extension of credit is made.
    (2) In addition to the amount that a national bank or savings 
association may lend to one borrower under Sec.  32.3, an eligible 
national bank or eligible savings association may make loans to small 
businesses to one borrower in the lesser of the following two amounts: 
10 percent of its capital and surplus; or the percent of its capital and 
surplus, in excess of 15 percent, that a State bank is permitted to lend 
under the state lending limit that is available for loans to small 
businesses or unsecured loans in the state where the main office of the 
national bank or home office of the savings association is located.
    (3) In addition to the amount that a national bank or savings 
association may lend to one borrower under Sec.  32.3, an eligible 
national bank or eligible savings association may make loans or 
extensions of credit to small farms to one borrower in the lesser of the 
following two amounts: 10 percent of its capital and surplus; or the 
percent of its capital and surplus, in excess of 15 percent, that a 
State bank or savings

[[Page 752]]

association is permitted to lend under the State lending limit that is 
available for loans or extensions of credit to small farms or unsecured 
loans in the State where the main office of the national bank or savings 
association is located.
    (4) The total outstanding amount of a national bank's or savings 
association's loans and extensions of credit to one borrower made under 
Sec.  32.3(a) and (b), together with loans and extensions of credit to 
the borrower made pursuant to paragraphs (a)(1), (2), and (3) of this 
section, shall not exceed 25 percent of the bank's or savings 
association's capital and surplus.
    (5) The total outstanding amount of a national bank's or savings 
association's loans and extensions of credit to all of its borrowers 
made pursuant to the supplemental lending limits provided in paragraphs 
(a)(1), (2), and (3) of this section may not exceed 100 percent of the 
bank's or saving association's capital and surplus.
    (b) Application process. An eligible national bank or eligible 
savings association must submit an application to, and receive approval 
from, its supervisory office before using the supplemental lending 
limits in paragraphs (a)(1), (2), and (3) of this section. The 
supervisory office may approve a completed application if it finds that 
approval is consistent with safety and soundness. To be deemed complete, 
the application must include:
    (1) Certification that the bank or savings association is an 
``eligible bank'' or ``eligible savings association'';
    (2) Citations to relevant State laws or regulations;
    (3) A copy of a written resolution by a majority of the bank's or 
savings association's board of directors approving the use of the limits 
provided in paragraphs (a)(1), (2), and (3) of this section, and 
confirming the terms and conditions for use of this lending authority; 
and
    (4) A description of how the board will exercise its continuing 
responsibility to oversee the use of this lending authority.
    (c) Duration of approval. Except as provided in paragraph (d) of 
this section, a bank or savings association that has received 
appropriate Federal banking agency approval may continue to make loans 
and extensions of credit under the supplemental lending limits in 
paragraphs (a)(1), (2), and (3) of this section, provided the bank or 
savings association remains an ``eligible bank'' or ``eligible savings 
association.''
    (d) Discretionary termination of authority. The appropriate 
supervisory office may rescind a bank's or savings association's 
authority to use the supplemental lending limits in paragraphs (a)(1), 
(2), and (3) of this section based upon concerns about credit quality, 
undue concentrations in the bank's or savings association's portfolio of 
residential real estate, loans to small businesses, or loans or 
extensions of credit to small farms, or concerns about the bank's or 
savings association's overall credit risk management systems and 
controls. The bank or savings association must cease making new loans or 
extensions of credit in reliance on the supplemental lending limits upon 
receipt of written notice from the appropriate supervisory office that 
its authority has been rescinded.
    (e) Existing loans. Any loans or extensions of credit made by a bank 
or savings association under the supplemental lending limits in 
paragraphs (a)(1), (2), and (3) of this section, that were in compliance 
with this section when made, will not be deemed a lending limit 
violation and will not be treated as nonconforming under Sec.  32.6.

[66 FR 31120, June 11, 2001, as amended at 69 FR 32436, June 10, 2004; 
69 FR 51357, Aug. 19, 2004; 72 FR 31444, June 7, 2007; 77 FR 37279, June 
21, 2012; 80 FR 28479, May 18, 2015; 85 FR 42642, July 14, 2020; 85 FR 
61810, Oct. 1, 2020]



Sec.  32.8  Temporary funding arrangements in emergency situations.

    In addition to the amount that a national bank or savings 
association may lend to one borrower under Sec.  32.3 of this part, an 
eligible bank or eligible savings association with the written approval 
of the appropriate Federal banking agency may make loans and extensions 
of credit to one borrower subject to a special temporary lending limit 
established by the appropriate Federal banking agency, where the 
appropriate Federal banking agency determines

[[Page 753]]

that such loans and extensions of credit are essential to address an 
emergency situation, such as critical financial markets stability, will 
be of short duration, will be reduced in amount in a timeframe and 
manner acceptable to the appropriate Federal banking agency, and do not 
present unacceptable risk. In granting approval for such a special 
temporary lending limit, the appropriate Federal banking agency will 
impose supervisory oversight and reporting measures that it determines 
are appropriate to monitor compliance with the foregoing standards as 
set forth in this paragraph.

[73 FR 14924, Mar. 20, 2008, as amended at 77 FR 37280, June 21, 2012]



Sec.  32.9  Credit exposure arising from derivative and securities 
financing transactions.

    (a) Scope. This section sets forth the rules for calculating the 
credit exposure arising from a derivative transaction or a securities 
financing transaction entered into by a national bank or savings 
association for purposes of determining the bank's or savings 
association's lending limit pursuant to 12 U.S.C. 84 or 12 U.S.C. 
1464(u), as applicable, and this part.
    (b) Derivative transactions--(1) Non-credit derivatives. Subject to 
paragraphs (b)(2), (b)(3) and (b)(4) of this section, a national bank or 
savings association shall calculate the credit exposure to a 
counterparty arising from a derivative transaction by one of the 
following methods. Subject to paragraph (b)(4) of this section, a 
national bank or savings association shall use the same method for 
calculating counterparty credit exposure arising from all of its 
derivative transactions.
    (i) Model Method--(A) Credit exposure. The credit exposure of a 
derivative transaction under the Internal Model Method shall equal the 
sum of the current credit exposure of the derivative transaction and the 
potential future credit exposure of the derivative transaction.
    (B) Calculation of current credit exposure. A bank or savings 
association shall determine its current credit exposure by the mark-to-
market value of the derivative contract. If the mark-to-market value is 
positive, then the current credit exposure equals that mark-to-market 
value. If the mark to market value is zero or negative, than the current 
credit exposure is zero.
    (C) Calculation of potential future credit exposure. (1) A bank or 
savings association shall calculate its potential future credit exposure 
by using either:
    (i) An internal model the use of which has been approved in writing 
for purposes of 12 CFR 3.132(d) or 324.132(d), as appropriate, provided 
that the bank or savings association provides prior written notice to 
the appropriate Federal banking agency of its use for purposes of this 
section; or
    (ii) Any other appropriate model the use of which has been approved 
in writing for purposes of this section by the appropriate Federal 
banking agency.
    (2) Any substantive revisions to a model made after the bank or 
savings association has provided notice of the use of the model to the 
appropriate Federal banking agency pursuant to paragraph 
(b)(1)(i)(C)(1)(i) of this section or after the appropriate Federal 
banking agency has approved the use of the model pursuant to paragraph 
(b)(1)(i)(C)(1)(ii) of this section must be approved by the agency 
before a bank or savings association may use the revised model for 
purposes of this part.
    (D) Net credit exposure. A bank or savings association that 
calculates its credit exposure by using the Internal Model Method 
pursuant to this paragraph (b)(1)(i) may net credit exposures of 
derivative transactions arising under the same qualifying master netting 
agreement.
    (ii) Conversion Factor Matrix Method. The credit exposure arising 
from a derivative transaction under the Conversion Factor Matrix Method 
shall equal and remain fixed at the potential future credit exposure of 
the derivative transaction which shall equal the product of the notional 
amount of the derivative transaction and a fixed multiplicative factor 
determined by reference to Table 1 of this section.

[[Page 754]]



             Table 1--Conversion Factor Matrix for Calculating Potential Future Credit Exposure \1\
----------------------------------------------------------------------------------------------------------------
                                                                                                   Other \3\
                                                                                                   (includes
      Original maturity \2\           Interest rate     Foreign exchange         Equity         commodities and
                                                          rate and gold                         precious metals
                                                                                                 except gold)
----------------------------------------------------------------------------------------------------------------
1 year or less...................                .015                .015                .20                 .06
Over 1 to 3 years................                .03                 .03                 .20                 .18
Over 3 to 5 years................                .06                 .06                 .20                 .30
Over 5 to 10 years...............                .12                 .12                 .20                 .60
Over ten years...................                .30                 .30                 .20                1.0
----------------------------------------------------------------------------------------------------------------
\1\ For an OTC derivative contract with multiple exchanges of principal, the conversion factor is multiplied by
  the number of remaining payments in the derivative contract.
\2\ For an OTC derivative contract that is structured such that on specified dates any outstanding exposure is
  settled and the terms are reset so that the market value of the contract is zero, the remaining maturity
  equals the time until the next reset date. For an interest rate derivative contract with a remaining maturity
  of greater than one year that meets these criteria, the minimum conversion factor is 0.005.
\3\ Transactions not explicitly covered by any other column in the Table are to be treated as ``Other.''

    (iii) Current Exposure Method. The credit exposure arising from a 
derivative transaction (other than a credit derivative transaction) 
under the Current Exposure Method shall be calculated pursuant to 12 CFR 
3.34(b)(1) and (2) and (c) or 324.34(b)(1) and (2) and (c), as 
appropriate.
    (iv) Standardized Approach for Counterparty Credit Risk Method. The 
credit exposure arising from a derivative transaction (other than a 
credit derivative transaction) under the Standardized Approach for 
Counterparty Credit Risk Method shall be calculated pursuant to 12 CFR 
3.132(c)(5) or 324.132(c)(5), as appropriate.
    (2) Credit Derivatives--(i) Counterparty exposure--(A) In general. 
Notwithstanding paragraph (b)(1) of this section and subject to 
paragraph (b)(2)(i)(B) of this section, a national bank or savings 
association that uses the Conversion Factor Matrix Method or the Current 
Exposure Method, or that uses the Model Method without entering an 
effective margining arrangement as defined in Sec.  32.2(l), shall 
calculate the counterparty credit exposure arising from credit 
derivatives entered by the bank or savings association by adding the net 
notional value of all protection purchased from the counterparty on each 
reference entity.
    (B) Special rule for certain effective margining arrangements. A 
bank or savings association must add the EMA threshold amount to the 
counterparty credit exposure arising from credit derivatives calculated 
under the Model Method. The EMA threshold is the amount under an 
effective margining arrangement with respect to which the counterparty 
is not required to post variation margin to fully collateralize the 
amount of the bank's or savings association's net credit exposure to the 
counterparty.
    (ii) Reference entity exposure. A national bank or savings 
association shall calculate the credit exposure to a reference entity 
arising from credit derivatives entered into by the bank or savings 
association by adding the net notional value of all protection sold on 
the reference entity. A bank or savings association may reduce its 
exposure to a reference entity by the amount of any eligible credit 
derivative purchased on that reference entity from an eligible 
protection provider.
    (3) Special rule for central counterparties. (i) In addition to 
amounts calculated under Sec.  32.9(b)(1) and (2), the measure of 
counterparty exposure to a central counterparty shall also include the 
sum of the initial margin posted by the bank or savings association, 
plus any contributions made by it to a guaranty fund at the time such 
contribution is made.
    (ii) Paragraph (b)(3)(i) of this section does not apply to a 
national bank or saving association that uses an internal model pursuant 
to paragraph (b)(1)(i) of this section if such model reflects the 
initial margin and any contributions to a guaranty fund.
    (4) Mandatory or alternative method. The appropriate Federal banking 
agency may in its discretion require or permit a national bank or 
savings association to use a specific method or methods set forth in 
paragraph (b)(1) of this section to calculate the credit exposure

[[Page 755]]

arising from all derivative transactions or any specific, or category 
of, derivative transactions if it finds, in its discretion, that such 
method is consistent with the safety and soundness of the bank or 
savings association.
    (c) Securities financing transactions--(1) In general. Except as 
provided by paragraph (c)(2) of this section, a national bank or savings 
association shall calculate the credit exposure arising from a 
securities financing transaction by one of the following methods. A 
national bank or savings association shall use the same method for 
calculating credit exposure arising from all of its securities financing 
transactions.
    (i) Model Method. (A) A national bank or savings association may 
calculate the credit exposure of a securities financing transaction by 
using either:
    (1) An internal model the use of which has been approved in writing 
by the appropriate Federal banking agency for purposes of 12 CFR 
3.132(b) or 324.132(b), as appropriate, provided the bank or savings 
association provides prior written notice to the appropriate Federal 
banking agency of its use for purposes of this section; or
    (2) Any other appropriate model the use of which has been approved 
in writing for purposes of this section by the appropriate Federal 
banking agency.
    (B) Any substantive revisions to a model made after the bank or 
savings association has provided notice of the use of the model to the 
appropriate Federal banking agency pursuant to paragraph (c)(1)(i)(A)(1) 
of this section or after the appropriate Federal banking agency has 
approved the use of the model pursuant to paragraph (c)(1)(i)(A)(2) of 
this section must be approved by the agency before a bank or savings 
association may use the revised model for purposes of part 32.
    (ii) Basic Method. A national bank or savings association may 
calculate the credit exposure of a securities financing transaction as 
follows:
    (A) Repurchase agreement. The credit exposure arising from a 
repurchase agreement shall equal and remain fixed at the market value at 
execution of the transaction of the securities transferred to the other 
party less cash received.
    (B) Securities lending-- (1) Cash collateral transactions. The 
credit exposure arising from a securities lending transaction where the 
collateral is cash shall equal and remain fixed at the market value at 
execution of the transaction of securities transferred less cash 
received.
    (2) Non-cash collateral transactions. The credit exposure arising 
from a securities lending transaction where the collateral is other 
securities shall equal and remain fixed as the product of the higher of 
the two haircuts associated with the two securities, as determined in 
Table 2 of this section, and the higher of the two par values of the 
securities. Where more than one security is provided as collateral, the 
applicable haircut is the higher of the haircut associated with the 
security lent and the notional-weighted average of the haircuts 
associated with the securities provided as collateral.
    (C) Reverse repurchase agreements. The credit exposure arising from 
a reverse repurchase agreement shall equal and remain fixed as the 
product of the haircut associated with the collateral received, as 
determined in Table 2 of this section, and the amount of cash 
transferred.
    (D) Securities borrowing--(1) Cash collateral transactions. The 
credit exposure arising from a securities borrowed transaction where the 
collateral is cash shall equal and remain fixed as the product of the 
haircut on the collateral received, as determined in Table 2 of this 
section, and the amount of cash transferred to the other party.
    (2) Non-cash collateral transactions. The credit exposure arising 
from a securities borrowed transaction where the collateral is other 
securities shall equal and remain fixed as the product of the higher of 
the two haircuts associated with the two securities, as determined in 
Table 2 of this section, and the higher of the two par values of the 
securities. Where more than one security is provided as collateral, the 
applicable haircut is the higher of the haircut associated with the 
security borrowed and the notional-weighted average of the haircuts 
associated with the securities provided as collateral.

[[Page 756]]



                      TABLE 2--Collateral Haircuts
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                           SOVEREIGN ENTITIES
------------------------------------------------------------------------
                                  Residual maturity     Haircut without
                                                       currency mismatch
                                                              \1\
------------------------------------------------------------------------
OECD Country Risk               <=1 year.............             0.005.
 Classification \2\ 0-1.
                                1 year,                 0.02.
                                 <=5 years.
                                5 years...              0.04.
OECD Country Risk               <=1 year.............              0.01.
 Classification 2-3.
                                1 year,                 0.03.
                                 <=5 years.
                                5 years...              0.06.
------------------------------------------------------------------------
    CORPORATE AND MUNICIPAL BONDS THAT ARE BANK-ELIGIBLE INVESTMENTS
------------------------------------------------------------------------
                                Residual maturity for   Haircut without
                                    debt securities    currency mismatch
------------------------------------------------------------------------
All...........................  <=1 year.............              0.02.
All...........................  1 year,                 0.06.
                                 <=5 years.
All...........................  5 years...              0.12.
------------------------------------------------------------------------
                        OTHER ELIGIBLE COLLATERAL
------------------------------------------------------------------------
Main index \3\ equities (including convertible bonds)              0.15.
Other publicly-traded equities (including convertible              0.25.
 bonds).
Mutual funds.........................................    Highest haircut
                                                       applicable to any
                                                       security in which
                                                            the fund can
                                                                 invest.
Cash collateral held.................................                 0.
------------------------------------------------------------------------
\1\ In cases where the currency denomination of the collateral differs
  from the currency denomination of the credit transaction, an
  additional 8 percent haircut will apply.
\2\ OECD Country Risk Classification means the country risk
  classification as defined in Article 25 of the OECD's February 2011
  Arrangement on Officially Supported Export Credits Arrangement.
\3\ Main index means the Standard & Poor's 500 Index, the FTSE All-World
  Index, and any other index for which the covered company can
  demonstrate to the satisfaction of the Federal Reserve that the
  equities represented in the index have comparable liquidity, depth of
  market, and size of bid-ask spreads as equities in the Standard &
  Poor's 500 Index and FTSE All-World Index.

    (iii) Basel Collateral Haircut Method. A national bank or savings 
association may calculate the credit exposure of a securities financing 
transaction pursuant to 12 CFR 3.132(b)(2)(i) and (ii) or 
324.132(b)(2)(i) and (ii), as appropriate.
    (2) Mandatory or alternative method. The appropriate Federal banking 
agency may in its discretion require or permit a national bank or 
savings association to use a specific method or methods set forth in 
paragraph (c)(1) of this section to calculate the credit exposure 
arising from all securities financing transactions or any specific, or 
category of, securities financing transactions if the appropriate 
Federal banking agency finds, in its discretion, that such method is 
consistent with the safety and soundness of the bank or savings 
association.

[77 FR 37280, June 21, 2012, as amended at 78 FR 37944, June 25, 2013; 
79 FR 11312, Feb. 28, 2014; 85 FR 4414, Jan. 24, 2020]



               Sec. Appendix A to Part 32--Interpretations

Section 1. Interrelation of General Limitation With Exception for Loans 
              To Develop Domestic Residential Housing Units

    1. The Sec.  32.3(d)(2) exception for loans to one borrower to 
develop domestic residential housing units is characterized in the 
regulation as an ``alternative'' limit. This exceptional $30,000,000 or 
30 percent limitation does not operate in addition to the 15 percent 
General Limitation or the 10 percent additional amount a savings 
association may

[[Page 757]]

loan to one borrower secured by readily marketable collateral, but 
serves as the uppermost limitation on a savings association's lending to 
any one person once a savings association employs this exception.

    Example: Savings Association A's lending limitation as calculated 
under the 15 percent General Limitation is $800, 000. If Savings 
Association A lends Y $800,000 for commercial purposes, Savings 
Association A cannot lend Y an additional $1,600,000, or 30 percent of 
capital and surplus, to develop residential housing units under the 
paragraph Sec.  32.3(d)(2) exception. The Sec.  32.3(d)(2) exception 
operates as the uppermost limitation on all lending to one borrower (for 
savings associations that may employ this exception) and includes any 
amounts loaned to the same borrower under the General Limitation. 
Savings Association A, therefore, may lend only an additional $800,000 
to Y, provided Sec.  32.3(d)(2) prerequisites have been met. The amount 
loaned under the authority of the General Limitation ($800,000), when 
added to the amount loaned under the exception ($800,000), yields a sum 
that does not exceed the 30 percent uppermost limitation ($1,600,000).

    2. a. This result does not change even if the facts are altered to 
assume that some or all of the $800,000 amount of lending permissible 
under the General Limitation's 15 percent basket is not used, or is 
devoted to the development of domestic residential housing units.
    b. In other words, using the above example, if Savings Association A 
lends Y $400,000 for commercial purposes and $300,000 for residential 
purposes--both of which would be permitted under its $800,000 General 
Limitation--Savings Association A's remaining permissible lending to Y 
would be: first, an additional $100,000 under the General Limitation, 
and then another $800,000 to develop domestic residential housing units 
if the savings association meets the paragraph Sec.  32.3(d)(2) 
prerequisites. (The latter is $800,000 because in no event may the total 
lending to Y exceed 30 percent of unimpaired capital and unimpaired 
surplus). If Savings Association A did not lend Y the remaining $100,000 
permissible under the General Limitation, its permissible loans to 
develop domestic residential housing units under Sec.  32.3(d)(2) would 
be $900,000 instead of $800,000 (the total loans to Y would still equal 
$1,600,000).
    3. In short, under the Sec.  32.3(d)(2) exception, the 30 percent or 
$30,000,000 limit will always operate as the uppermost limitation, 
unless the savings association does not avail itself of the exception 
and merely relies upon its General Limitation.

Section 2. Interrelationship Between the General Limitation and the 150 
 Percent Aggregate Limit on Loans to All Borrowers To Develop Domestic 
                        Residential Housing Units

    Numerous questions have been received regarding the allocation of 
loans between the different lending limit ``baskets,'' i.e., the 15 
percent General Limitation basket and the 30 percent Residential 
Development basket. In general, the inquiries concern the manner in 
which a savings association may ``move'' a loan from the General 
Limitation basket to the Residential Development basket. The following 
example is intended to provide guidance:
    Example: Savings Association A's General Limitation under Sec.  
32.3(a) is $15 million. In January, Savings Association A makes a $10 
million loan to Borrower to develop domestic residential housing units. 
At the time the loan was made, Savings Association A had not received 
approval under an order issued by the appropriate Federal banking agency 
to avail itself of the residential development exception to lending 
limits. Therefore, the $10 million loan is made under Savings 
Association A's General Limitation.

    2. In June, Savings Association A receives authorization to lend 
under the Residential Development exception. In July, Savings 
Association A lends $3 million to Borrower to develop domestic 
residential housing units. In August, Borrower seeks an additional $12 
million commercial loan from Savings Association A. Savings Association 
A cannot make the loan to Borrower, however, because it already has an 
outstanding $10 million loan to Borrower that counts against Savings 
Association A's General Limitation of $15 million. Thus, Savings 
Association A may lend only up to an additional $5 million to Borrower 
under the General Limitation.
    3. However, Savings Association A may be able to reallocate the $10 
million loan it made to Borrower in January to its Residential 
Development basket provided that: (1) Savings Association A has obtained 
authority under an order issued by the appropriate Federal banking 
agency to avail itself of the additional lending authority for 
residential development and maintains compliance with all prerequisites 
to such lending authority; (2) the original $10 million loan made in 
January constitutes a loan to develop domestic residential housing units 
as defined; and (3) the housing unit(s) constructed with the funds from 
the January loan remain in a stage of ``development'' at the time 
Savings Association A reallocates the loan to the domestic residential 
housing basket. The project must be in a stage of acquisition, 
development, construction, rehabilitation, or conversion in order for 
the loan to be reallocated.

[[Page 758]]

    4. If Savings Association A is able to reallocate the $10 million 
loan made to Borrower in January to its Residential Development basket, 
it may make the $12 million commercial loan requested by Borrower in 
August. Once the January loan is reallocated to the Residential 
Development basket, however, the $10 million loan counts towards Savings 
Association A's 150 percent aggregate limitation on loans to all 
borrowers under the residential development basket (Sec.  32.3(d)(2)).
    5. If Savings Association A reallocates the January loan to its 
domestic residential housing basket and makes an additional $12 million 
commercial loan to Borrower, Savings Association A's totals under the 
respective limitations would be: $12 million under the General 
Limitation; and $13 million under the Residential Development 
limitation. The full $13 million residential development loan counts 
toward Savings Association A's aggregate 150 percent limitation.

[77 FR 37282, June 21, 2012]

                           PART 33 [RESERVED]



PART 34_REAL ESTATE LENDING AND APPRAISALS--Table of Contents



                            Subpart A_General

Sec.
34.1 Purpose and scope.
34.2 Definitions.
34.3 General rule.
34.4 Applicability of state law.
34.5 Due-on-sale clauses.
34.6 Applicability of state law to Federal savings associations and 
          subsidiaries.

                   Subpart B_Adjustable-Rate Mortgages

34.20 Definitions.
34.21 General rule.
34.22 Index.
34.23 Prepayment fees.
34.24 Nonfederally chartered commercial banks.
34.25 Transition rule.

                          Subpart C_Appraisals

34.41 Authority, purpose, and scope.
34.42 Definitions.
34.43 Appraisals required; transactions requiring a State certified or 
          licensed appraiser.
34.44 Minimum appraisal standards.
34.45 Appraiser independence.
34.46 Professional association membership; competency.
34.47 Enforcement.

                 Subpart D_Real Estate Lending Standards

34.61 Purpose and scope.
34.62 Real estate lending standards.

Appendix A to Subpart D of Part 34--Interagency Guidelines for Real 
          Estate Lending

                    Subpart E_Other Real Estate Owned

34.81 Definitions.
34.82 Holding period.
34.83 Disposition of OREO.
34.84 [Reserved]
34.85 Appraisal requirements.
34.86 OREO expenditures and notification.

Subpart F [Reserved]

          Subpart G_Appraisals for Higher-Priced Mortgage Loans

34.201 Authority, purpose, and scope.
34.202 Definitions applicable to higher-priced mortgage loans.
34.203 Appraisals for higher-priced mortgage loans.

Appendix A to Subpart G of Part 34--Higher-Priced Mortgage Loan 
          Appraisal Safe Harbor Review
Appendix B to Subpart G of Part 34--Illustrative Written Source 
          Documents for Higher-priced Mortgage Loan Appraisal Rules
Appendix C to Subpart G of Part 34--OCC Interpretations

       Subpart H_Appraisal Management Company Minimum Requirements

34.210 Authority, purpose, and scope.
34.211 Definitions.
34.212 Appraiser panel--annual size calculation.
34.213 Appraisal management company registration.
34.214 Ownership limitations for State-registered appraisal management 
          companies.
34.215 Requirements for Federally regulated appraisal management 
          companies.
34.216 Information to be presented to the Appraisal Subcommittee by 
          participating States.

    Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1462a, 1463, 
1464, 1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., and 
5412(b)(2)(B) and 15 U.S.C. 1639h.



                            Subpart A_General

    Source: 61 FR 11300, Mar. 20, 1996, unless otherwise noted.

[[Page 759]]



Sec.  34.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to set forth standards for 
real estate-related lending and associated activities by national banks.
    (b) Scope. This part applies to national banks and their operating 
subsidiaries as provided in 12 CFR 5.34. For the purposes of 12 U.S.C. 
371 and subparts A and B of this part, loans secured by liens on 
interests in real estate include loans made upon the security of 
condominiums, leaseholds, cooperatives, forest tracts, land sales 
contracts, and construction project loans. Construction project loans 
are not subject to subparts A and B of this part, however, if they have 
a maturity not exceeding 60 months and are made to finance the 
construction of either:
    (1) A building where there is a valid and binding agreement entered 
into by a financially responsible lender or other party to advance the 
full amount of the bank's loan upon completion of the building; or
    (2) A residential or farm building.



Sec.  34.2  Definitions.

    (a) Due-on-sale clause means any clause that gives the lender or any 
assignee or transferee of the lender the power to declare the entire 
debt payable if all or part of the legal or equitable title or an 
equivalent contractual interest in the property securing the loan is 
transferred to another person, whether by deed, contract, or otherwise.
    (b) State means any State of the United States of America, the 
District of Columbia, Puerto Rico, the Virgin Islands, the Northern 
Mariana Islands, American Samoa, and Guam.
    (c) State law limitations means any State statute, regulation, or 
order of any State agency, or judicial decision interpreting State law.



Sec.  34.3  General rule.

    (a) A national bank may make, arrange, purchase, or sell loans or 
extensions of credit, or interests therein, that are secured by liens 
on, or interests in, real estate (real estate loans), subject to 12 
U.S.C. 1828(o) and such restrictions and requirements as the Comptroller 
of the Currency may prescribe by regulation or order.
    (b) A national bank shall not make a consumer loan subject to this 
subpart based predominantly on the bank's realization of the foreclosure 
or liquidation value of the borrower's collateral, without regard to the 
borrower's ability to repay the loan according to its terms. A bank may 
use any reasonable method to determine a borrower's ability to repay, 
including, for example, the borrower's current and expected income, 
current and expected cash flows, net worth, other relevant financial 
resources, current financial obligations, employment status, credit 
history, or other relevant factors.
    (c) A national bank shall not engage in unfair or deceptive 
practices within the meaning of section 5 of the Federal Trade 
Commission Act, 15 U.S.C. 45(a)(1), and regulations promulgated 
thereunder in connection with loans made under this part.

[68 FR 70131, Dec. 17, 2003, as amended at 69 FR 1917, Jan. 13, 2004]



Sec.  34.4  Applicability of state law.

    (a) A national bank may make real estate loans under 12 U.S.C. 371 
and Sec.  34.3, without regard to state law limitations concerning:
    (1) Licensing, registration (except for purposes of service of 
process), filings, or reports by creditors;
    (2) The ability of a creditor to require or obtain private mortgage 
insurance, insurance for other collateral, or other credit enhancements 
or risk mitigants, in furtherance of safe and sound banking practices;
    (3) Loan-to-value ratios;
    (4) The terms of credit, including schedule for repayment of 
principal and interest, amortization of loans, balance, payments due, 
minimum payments, or term to maturity of the loan, including the 
circumstances under which a loan may be called due and payable upon the 
passage of time or a specified event external to the loan;
    (5) The aggregate amount of funds that may be loaned upon the 
security of real estate;
    (6) Escrow accounts, impound accounts, and similar accounts;
    (7) Security property, including leaseholds;
    (8) Access to, and use of, credit reports;

[[Page 760]]

    (9) Disclosure and advertising, including laws requiring specific 
statements, information, or other content to be included in credit 
application forms, credit solicitations, billing statements, credit 
contracts, or other credit-related documents;
    (10) Processing, origination, servicing, sale or purchase of, or 
investment or participation in, mortgages;
    (11) Disbursements and repayments;
    (12) Rates of interest on loans;\1\
---------------------------------------------------------------------------

    \1\ The limitations on charges that comprise rates of interest on 
loans by national banks are determined under Federal law. See 12 U.S.C. 
85 and 1735f-7a; 12 CFR 7.4001. State laws purporting to regulate 
national bank fees and charges that do not constitute interest are 
addressed in 12 CFR 7.4002.
---------------------------------------------------------------------------

    (13) Due-on-sale clauses except to the extent provided in 12 U.S.C. 
1701j-3 and 12 CFR part 591; and
    (14) Covenants and restrictions that must be contained in a lease to 
qualify the leasehold as acceptable security for a real estate loan.
    (b) State laws on the following subjects are not inconsistent with 
the real estate lending powers of national banks and apply to national 
banks to the extent consistent with the decision of the Supreme Court in 
Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance 
Commissioner, et al., 517 U.S. 25 (1996):
    (1) Contracts;
    (2) Torts;
    (3) Criminal law; \2\
---------------------------------------------------------------------------

    \2\ But see the distinction drawn by the Supreme Court in Easton v. 
Iowa, 188 U.S. 220, 238 (1903), where the Court stated that 
``[u]ndoubtedly a state has the legitimate power to define and punish 
crimes by general laws applicable to all persons within its jurisdiction 
* * *. But it is without lawful power to make such special laws 
applicable to banks organized and operating under the laws of the United 
States.'' Id. at 239 (holding that Federal law governing the operations 
of national banks preempted a state criminal law prohibiting insolvent 
banks from accepting deposits).
---------------------------------------------------------------------------

    (4) Homestead laws specified in 12 U.S.C. 1462a(f);
    (5) Rights to collect debts;
    (6) Acquisition and transfer of real property;
    (7) Taxation;
    (8) Zoning; and
    (9) Any other law that the OCC determines to be applicable to 
national banks in accordance with the decision of the Supreme Court in 
Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance 
Commissioner, et al., 517 U.S. 25 (1996), or that is made applicable by 
Federal law.

[69 FR 1917, Jan. 13, 2004, as amended at 76 FR 43569, July 21, 2011]



Sec.  34.5  Due-on-sale clauses.

    A national bank may make or acquire a loan or interest therein, 
secured by a lien on real property, that includes a due-on-sale clause. 
Except as set forth in 12 U.S.C. 1701j-3(d) (which contains a list of 
transactions in which due-on-sale clauses may not be enforced), due-on-
sale clauses in loans, whenever originated, will be valid and 
enforceable, notwithstanding any State law limitations to the contrary. 
For the purposes of this section, the term real property includes 
residential dwellings such as condominium units, cooperative housing 
units, and residential manufactured homes.



Sec.  34.6  Applicability of state law to Federal savings associations 
and subsidiaries.

    In accordance with section 1046 of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (12 U.S.C. 25b), Federal savings 
associations and their subsidiaries shall be subject to the same laws 
and legal standards, including regulations of the OCC, as are applicable 
to national banks and their subsidiaries, regarding the preemption of 
state law.

[76 FR 43569, July 21, 2011]



                   Subpart B_Adjustable-Rate Mortgages

    Source: 61 FR 11301, Mar. 20, 1996, unless otherwise noted.



Sec.  34.20  Definitions.

    Adjustable-rate mortgage (ARM) loan means an extension of credit 
made to finance or refinance the purchase of, and secured by a lien on, 
a one-to-four family dwelling, including a condominium unit, cooperative 
housing unit, or residential manufactured home, where the lender, 
pursuant to an agreement with the borrower, may adjust

[[Page 761]]

the rate of interest from time to time. An ARM loan does not include 
fixed-rate extensions of credit that are payable at the end of a term 
that, when added to any terms for which the bank has promised to renew 
the loan, is shorter than the term of the amortization schedule.



Sec.  34.21  General rule.

    (a) Authorization. A national bank and its subsidiaries may make, 
sell, purchase, participate in, or otherwise deal in ARM loans and 
interests therein without regard to any State law limitations on those 
activities.
    (b) Purchase of loans not in compliance. Except as provided in 
paragraph (c) of this section, a national bank may purchase or 
participate in ARM loans that were not made in accordance with this 
part, provided such purchases are consistent with safe and sound banking 
practices as described in published OCC guidance, including appropriate 
diligence regarding the quality and characteristics of the loans, and 
other applicable regulations.
    (c) Purchase of loans from a subsidiary or affiliate. ARM loans 
purchased, in whole or in part, from a subsidiary or affiliate must 
comply with this part and with other applicable regulations, and be 
consistent with safe and sound banking practices as described in 
published OCC guidance, including appropriate diligence regarding the 
quality and characteristics of the loans. For purposes of this 
paragraph, the terms affiliate and subsidiary have the same meaning as 
in 12 U.S.C. 371c.

[61 FR 11300, Mar. 20, 1996, as amended at 73 FR 22251, Apr. 24, 2008]



Sec.  34.22  Index.

    (a) In general. If a national bank makes an ARM loan to which 12 CFR 
226.19(b) applies (i.e., the annual percentage rate of a loan may 
increase after consummation, the term exceeds one year, and the 
consumer's principal dwelling secures the indebtedness), the loan 
documents must specify an index or combination of indices to which 
changes in the interest rate will be linked. This index must be readily 
available to, and verifiable by, the borrower and beyond the control of 
the bank. A national bank may use as an index any measure of rates of 
interest that meets these requirements. The index may be either single 
values of the chosen measure or a moving average of the chosen measure 
calculated over a specified period. A national bank also may increase 
the interest rate in accordance with applicable loan documents 
specifying the amount of the increase and the times at which, or 
circumstances under which, it may be made. A national bank may decrease 
the interest rate at any time.
    (b) Exception. Thirty days after filing a notice with the OCC, a 
national bank may use an index other than one described in paragraph (a) 
of this section unless, within that 30-day period, the OCC has notified 
the bank that the notice presents supervisory concerns or raises 
significant issues of law or policy. If the OCC provides such notice to 
the bank, the bank may not use that index unless it applies for and 
receives the OCC's prior written approval.

[61 FR 11300, Mar. 20, 1996, as amended at 73 FR 22251, Apr. 24, 2008]



Sec.  34.23  Prepayment fees.

    A national bank offering or purchasing ARM loans may impose fees for 
prepayments notwithstanding any State law limitations to the contrary. 
For purposes of this section, prepayments do not include:
    (a) Payments that exceed the required payment amount to avoid or 
reduce negative amortization; or
    (b) Principal payments, in excess of those necessary to retire the 
outstanding debt over the remaining loan term at the then-current 
interest rate, that are made in accordance with rules governing the 
determination of monthly payments contained in the loan documents.



Sec.  34.24  Nonfederally chartered commercial banks.

    Pursuant to 12 U.S.C. 3803(a), a State chartered commercial bank may 
make ARM loans in accordance with the provisions of this subpart. For 
purposes of this section, the term ``State'' shall have the same meaning 
as set forth in Sec.  34.2(b).

[[Page 762]]



Sec.  34.25  Transition rule.

    If, on October 1, 1988, a national bank had made a loan or binding 
commitment to lend under an ARM loan program that complied with the 
requirements of 12 CFR part 29 in effect prior to October 1, 1988 (see 
12 CFR Parts 1 to 199, revised as of January 1, 1988) but would have 
violated any of the provisions of this subpart, the national bank may 
continue to administer the loan or binding commitment to lend in 
accordance with that loan program. All ARM loans or binding commitments 
to make ARM loans that a national bank entered into after October 1, 
1988, must comply with all provisions of this subpart.



                          Subpart C_Appraisals

    Source: 55 FR 34696, Aug. 24, 1990, unless otherwise noted.



Sec.  34.41  Authority, purpose, and scope.

    (a) Authority. This subpart is issued by the Office of the 
Comptroller of the Currency (the OCC) under 12 U.S.C. 1, 93a, 1462a, 
1463, 1464, 1828(m), 5412(b)(2)(B), and title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) 
(Pub. L. 101-73, 103 Stat. 183 (1989)), 12 U.S.C. 3331 et seq.
    (b) Purpose and scope. (1) Title XI of FIRREA provides protection 
for federal financial and public policy interests in real estate-related 
transactions by requiring real estate appraisals used in connection with 
federally related transactions to be performed in writing, in accordance 
with uniform standards, by appraisers whose competency has been 
demonstrated and whose professional conduct will be subject to effective 
supervision. This subpart implements the requirements of title XI, and 
applies to all federally related transactions entered into by the OCC or 
by institutions regulated by the OCC (regulated institutions).
    (2) This subpart:
    (i) Identifies which real estate-related financial transactions 
require the services of an appraiser;
    (ii) Prescribes which categories of federally related transactions 
shall be appraised by a State certified appraiser and which by a State 
licensed appraiser; and
    (iii) Prescribes minimum standards for the performance of real 
estate appraisals in connection with federally related transactions 
under the jurisdiction of the OCC.

[55 FR 34696, Aug. 24, 1990, as amended at 79 FR 28400, May 16, 2014]



Sec.  34.42  Definitions.

    (a) Appraisal means a written statement independently and 
impartially prepared by a qualified appraiser setting forth an opinion 
as to the market value of an adequately described property as of a 
specific date(s), supported by the presentation and analysis of relevant 
market information.
    (b) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, as a not-for-profit corporation under the laws of 
Illinois.
    (c) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (d) Business loan means a loan or extension of credit to any 
corporation, general or limited partnership, business trust, joint 
venture, pool, syndicate, sole proprietorship, or other business entity.
    (e) Commercial real estate transaction means a real estate-related 
financial transaction that is not secured by a single 1-to-4 family 
residential property.
    (f) Complex appraisal for a residential real estate transaction 
means one in which the property to be appraised, the form of ownership, 
or market conditions are atypical.
    (g) Federally related transaction means any real estate-related 
financial transaction entered into on or after August 9, 1990, that:
    (1) The OCC or any of its regulated institutions engages in or 
contracts for; and
    (2) Requires the services of an appraiser.
    (h) Market value means the most probable price which a property 
should bring in a competitive and open market under all conditions 
requisite to a fair sale, the buyer and seller each acting prudently and 
knowledgeably, and assuming the price is not affected by

[[Page 763]]

undue stimulus. Implicit in this definition is the consummation of a 
sale as of a specified date and the passing of title from seller to 
buyer under conditions whereby:
    (1) Buyer and seller are typically motivated;
    (2) Both parties are well informed or well advised, and acting in 
what they consider their own best interests;
    (3) A reasonable time is allowed for exposure in the open market;
    (4) Payment is made in terms of cash in U.S. dollars or in terms of 
financial arrangements comparable thereto; and
    (5) The price represents the normal consideration for the property 
sold unaffected by special or creative financing or sales concessions 
granted by anyone associated with the sale.
    (i) Real estate or real property means an identified parcel or tract 
of land, with improvements, and includes easements, rights of way, 
undivided or future interests, or similar rights in a tract of land, but 
does not include mineral rights, timber rights, growing crops, water 
rights, or similar interests severable from the land when the 
transaction does not involve the associated parcel or tract of land.
    (j) Real estate-related financial transaction means any transaction 
involving:
    (1) The sale, lease, purchase, investment in or exchange of real 
property, including interests in property, or the financing thereof; or
    (2) The refinancing of real property or interests in real property; 
or
    (3) The use of real property or interests in property as security 
for a loan or investment, including mortgage-backed securities.
    (k) Residential real estate transaction means a real estate-related 
financial transaction that is secured by a single 1-to-4 family 
residential property.
    (l) State certified appraiser means any individual who has satisfied 
the requirements for certification in a State or territory whose 
criteria for certification as a real estate appraiser currently meet the 
minimum criteria for certification issued by the Appraiser 
Qualifications Board of the Appraisal Foundation. No individual shall be 
a State certified appraiser unless such individual has achieved a 
passing grade upon a suitable examination administered by a State or 
territory that is consistent with and equivalent to the Uniform State 
Certification Examination issued or endorsed by the Appraiser 
Qualifications Board of the Appraisal Foundation. In addition, the 
Appraisal Subcommittee must not have issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI of FIRREA. The OCC may, from time to time, impose additional 
qualification criteria for certified appraisers performing appraisals in 
connection with federally related transactions within its jurisdiction.
    (m) State licensed appraiser means any individual who has satisfied 
the requirements for licensing in a State or territory where the 
licensing procedures comply with title XI of FIRREA and where the 
Appraisal Subcommittee has not issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI. The OCC may, from time to time, impose additional 
qualification criteria for licensed appraisers performing appraisals in 
connection with federally related transactions within its jurisdiction.
    (n) Tract development means a project of five units or more that is 
constructed or is to be constructed as a single development.
    (o) Transaction value means:
    (1) For loans or other extensions of credit, the amount of the loan 
or extension of credit;
    (2) For sales, leases, purchases, and investments in or exchanges of 
real property, the market value of the real property interest involved; 
and
    (3) For the pooling of loans or interests in real property for 
resale or purchase, the amount of the loan or market value of the real 
property calculated with respect to each such loan or interest in real 
property.

[55 FR 34696, Aug. 24, 1990, as amended at 57 FR 12202, Apr. 9, 1992; 59 
FR 29499, June 7, 1994; 79 FR 28400, May 16, 2014; 83 FR 15035, Apr. 9, 
2018; 84 FR 53597, Oct. 8, 2019]

[[Page 764]]



Sec.  34.43  Appraisals required; transactions requiring a State certified 
or licensed appraiser.

    (a) Appraisals required. An appraisal performed by a State certified 
or licensed appraiser is required for all real estate-related financial 
transactions except those in which:
    (1) The transaction is a residential real estate transaction that 
has a transaction value of $400,000 or less;
    (2) A lien on real estate has been taken as collateral in an 
abundance of caution;
    (3) The transaction is not secured by real estate;
    (4) A lien on real estate has been taken for purposes other than the 
real estate's value;
    (5) The transaction is a business loan that:
    (i) Has a transaction value of $1 million or less; and
    (ii) Is not dependent on the sale of, or rental income derived from, 
real estate as the primary source of repayment;
    (6) A lease of real estate is entered into, unless the lease is the 
economic equivalent of a purchase or sale of the leased real estate;
    (7) The transaction involves an existing extension of credit at the 
lending institution, provided that:
    (i) There has been no obvious and material change in market 
conditions or physical aspects of the property that threatens the 
adequacy of the institution's real estate collateral protection after 
the transaction, even with the advancement of new monies; or
    (ii) There is no advancement of new monies, other than funds 
necessary to cover reasonable closing costs;
    (8) The transaction involves the purchase, sale, investment in, 
exchange of, or extension of credit secured by, a loan or interest in a 
loan, pooled loans, or interests in real property, including mortgaged-
backed securities, and each loan or interest in a loan, pooled loan, or 
real property interest met OCC regulatory requirements for appraisals at 
the time of origination;
    (9) The transaction is wholly or partially insured or guaranteed by 
a United States government agency or United States government sponsored 
agency;
    (10) The transaction either:
    (i) Qualifies for sale to a United States government agency or 
United States government sponsored agency; or
    (ii) Involves a residential real estate transaction in which the 
appraisal conforms to the Federal National Mortgage Association or 
Federal Home Loan Mortgage Corporation appraisal standards applicable to 
that category of real estate;
    (11) The regulated institution is acting in a fiduciary capacity and 
is not required to obtain an appraisal under other law;
    (12) The OCC determines that the services of an appraiser are not 
necessary in order to protect Federal financial and public policy 
interests in real estate-related financial transactions or to protect 
the safety and soundness of the institution;
    (13) The transaction is a commercial real estate transaction that 
has a transaction value of $500,000 or less; or
    (14) The transaction is exempted from the appraisal requirement 
pursuant to the rural residential exemption under 12 U.S.C. 3356.
    (b) Evaluations required. For a transaction that does not require 
the services of a State certified or licensed appraiser under paragraphs 
(a)(1), (5), (7), (13), or (14) of this section, the institution shall 
obtain an appropriate evaluation of real property collateral that is 
consistent with safe and sound banking practices.
    (c) Appraisals to address safety and soundness concerns. The OCC 
reserves the right to require an appraisal under this subpart whenever 
the agency believes it is necessary to address safety and soundness 
concerns.
    (d) Transactions requiring a State certified appraiser--(1) All 
transactions of $1,000,000 or more. All federally related transactions 
having a transaction value of $1,000,000 or more shall require an 
appraisal prepared by a State certified appraiser.
    (2) Commercial real estate transactions of more than $500,000. All 
federally related transactions that are commercial real estate 
transactions having a transaction value of more than $500,000 shall 
require an appraisal prepared by a State certified appraiser.

[[Page 765]]

    (3) Complex appraisals for residential real estate transactions of 
more than $400,000. All complex appraisals for residential real estate 
transactions rendered in connection with federally related transactions 
shall require a State certified appraiser if the transaction value is 
more than $400,000. A regulated institution may presume that appraisals 
for residential real estate transactions are not complex, unless the 
institution has readily available information that a given appraisal 
will be complex. The regulated institution shall be responsible for 
making the final determination of whether the appraisal is complex. If 
during the course of the appraisal a licensed appraiser identifies 
factors that would result in the property, form of ownership, or market 
conditions being considered atypical, then either:
    (i) The regulated institution may ask the licensed appraiser to 
complete the appraisal and have a certified appraiser approve and co-
sign the appraisal; or
    (ii) The institution may engage a certified appraiser to complete 
the appraisal.
    (e) Transactions requiring either a State certified or licensed 
appraiser. All appraisals for federally related transactions not 
requiring the services of a State certified appraiser shall be prepared 
by either a State certified appraiser or a State licensed appraiser.

[55 FR 34696, Aug. 24, 1990, as amended at 57 FR 12202, Apr. 9, 1992; 59 
FR 29499, June 7, 1994; 79 FR 28400, May 16, 2014; 83 FR 15035, Apr. 9, 
2018; 84 FR 53597, Oct. 8, 2019; 84 FR 53597, Oct. 8, 2019]



Sec.  34.44  Minimum appraisal standards.

    For federally related transactions, all appraisals shall, at a 
minimum:
    (a) Conform to generally accepted appraisal standards as evidenced 
by the Uniform Standards of Professional Appraisal Practice (USPAP) 
promulgated by the Appraisal Standards Board of the Appraisal 
Foundation, (www.appraisalfoundation.org), unless principles of safe and 
sound banking require compliance with stricter standards;
    (b) Be written and contain sufficient information and analysis to 
support the institution's decision to engage in the transaction;
    (c) Be subject to appropriate review for compliance with the Uniform 
Standards of Professional Appraisal Practice;
    (d) Analyze and report appropriate deductions and discounts for 
proposed construction or renovation, partially leased buildings, non-
market lease terms, and tract developments with unsold units;
    (e) Be based upon the definition of market value as set forth in 
this subpart; and
    (f) Be performed by State licensed or certified appraisers in 
accordance with requirements set forth in this subpart.

[59 FR 29500, June 7, 1994, as amended at 79 FR 28400, May 16, 2014; 84 
FR 53597, Oct. 8, 2019]



Sec.  34.45  Appraiser independence.

    (a) Staff appraisers. If an appraisal is prepared by a staff 
appraiser, that appraiser must be independent of the lending, 
investment, and collection functions and not involved, except as an 
appraiser, in the federally related transaction, and have no direct or 
indirect interest, financial or otherwise, in the property. If the only 
qualified persons available to perform an appraisal are involved in the 
lending, investment, or collection functions of the regulated 
institution, the regulated institution shall take appropriate steps to 
ensure that the appraisers exercise independent judgment. Such steps 
include, but are not limited to, prohibiting an individual from 
performing an appraisal in connection with federally related 
transactions in which the appraiser is otherwise involved and 
prohibiting directors and officers from participating in any vote or 
approval involving assets on which they performed an appraisal.
    (b) Fee appraisers. (1) If an appraisal is prepared by a fee 
appraiser, the appraiser shall be engaged directly by the regulated 
institution or its agent, and have no direct or indirect interest, 
financial or otherwise, in the property or the transaction.
    (2) A regulated institution also may accept an appraisal that was 
prepared by an appraiser engaged directly by another financial services 
institution, if:

[[Page 766]]

    (i) The appraiser has no direct or indirect interest, financial or 
otherwise, in the property or the transaction; and
    (ii) The regulated institution determines that the appraisal 
conforms to the requirements of this subpart and is otherwise 
acceptable.

[55 FR 34696, Aug. 24, 1990, as amended at 59 FR 29500, June 7, 1994]



Sec.  34.46  Professional association membership; competency.

    (a) Membership in appraisal organizations. A State certified 
appraiser or a State licensed appraiser may not be excluded from 
consideration for an assignment for a federally related transaction 
solely by virtue of membership or lack of membership in any particular 
appraisal organization.
    (b) Competency. All staff and fee appraisers performing appraisals 
in connection with federally related transactions must be State 
certified or licensed, as appropriate. However, a State certified or 
licensed appraiser may not be considered competent solely by virtue of 
being certified or licensed. Any determination of competency shall be 
based upon the individual's experience and educational background as 
they relate to the particular appraisal assignment for which he or she 
is being considered.



Sec.  34.47  Enforcement.

    Institutions and institution-affiliated parties, including staff 
appraisers and fee appraisers, may be subject to removal and/or 
prohibition orders, cease and desist orders, and the imposition of civil 
money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 
1811 et seq., as amended, or other applicable law.



                 Subpart D_Real Estate Lending Standards

    Source: 57 FR 62889, Dec. 31, 1992, unless otherwise noted.



Sec.  34.61  Purpose and scope.

    This subpart, issued pursuant to section 304 of the Federal Deposit 
Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o), 
prescribes standards for real estate lending to be used by national 
banks in adopting internal real estate lending policies.



Sec.  34.62  Real estate lending standards.

    (a) Each national bank shall adopt and maintain written policies 
that establish appropriate limits and standards for extensions of credit 
that are secured by liens on or interests in real estate, or that are 
made for the purpose of financing permanent improvements to real estate.
    (b)(1) Real estate lending policies adopted pursuant to this section 
must:
    (i) Be consistent with safe and sound banking practices;
    (ii) Be appropriate to the size of the institution and the nature 
and scope of its operations; and
    (iii) Be reviewed and approved by the bank's board of directors at 
least annually.
    (2) The lending policies must establish:
    (i) Loan portfolio diversification standards;
    (ii) Prudent underwriting standards, including loan-to-value limits, 
that are clear and measurable;
    (iii) Loan administration procedures for the bank's real estate 
portfolio; and
    (iv) Documentation, approval, and reporting requirements to monitor 
compliance with the bank's real estate lending policies.
    (c) Each national bank must monitor conditions in the real estate 
market in its lending area to ensure that its real estate lending 
policies continue to be appropriate for current market conditions.
    (d) The real estate lending policies adopted pursuant to this 
section should reflect consideration of the Interagency Guidelines for 
Real Estate Lending Policies established by the Federal bank and thrift 
supervisory agencies.



Sec. Appendix A to Subpart D of Part 34--Interagency Guidelines for Real 
                             Estate Lending

    The agencies' regulations require that each insured depository 
institution adopt and maintain a written policy that establishes 
appropriate limits and standards for all extensions of credit that are 
secured by liens on or interests in real estate or made for the purpose 
of financing the construction of a

[[Page 767]]

building or other improvements. \1\ These guidelines are intended to 
assist institutions in the formulation and maintenance of a real estate 
lending policy that is appropriate to the size of the institution and 
the nature and scope of its individual operations, as well as satisfies 
the requirements of the regulation.
---------------------------------------------------------------------------

    \1\ The agencies have adopted a uniform rule on real estate lending. 
See 12 CFR part 365 (FDIC); 12 CFR part 208, subpart C (FRB); 12 CFR 
part 34, subpart D (OCC); and 12 CFR 563.100-101 (OTS).
---------------------------------------------------------------------------

    Each institution's policies must be comprehensive, and consistent 
with safe and sound lending practices, and must ensure that the 
institution operates within limits and according to standards that are 
reviewed and approved at least annually by the board of directors. Real 
estate lending is an integral part of many institutions' business plans 
and, when undertaken in a prudent manner, will not be subject to 
examiner criticism.

                Loan Portfolio Management Considerations

    The lending policy should contain a general outline of the scope and 
distribution of the institution's credit facilities and the manner in 
which real estate loans are made, serviced, and collected. In 
particular, the institution's policies on real estate lending should:
     Identify the geographic areas in which the 
institution will consider lending.
     Establish a loan portfolio diversification policy 
and set limits for real estate loans by type and geographic market 
(e.g., limits on higher risk loans).
     Identify appropriate terms and conditions by type 
of real estate loan.
     Establish loan origination and approval 
procedures, both generally and by size and type of loan.
     Establish prudent underwriting standards that are 
clear and measurable, including loan-to-value limits, that are 
consistent with these supervisory guidelines.
     Establish review and approval procedures for 
exception loans, including loans with loan-to-value percentages in 
excess of supervisory limits.
     Establish loan administration procedures, 
including documentation, disbursement, collateral inspection, 
collection, and loan review.
     Establish real estate appraisal and evaluation 
programs.
     Require that management monitor the loan 
portfolio and provide timely and adequate reports to the board of 
directors.

    The institution should consider both internal and external factors 
in the formulation of its loan policies and strategic plan. Factors that 
should be considered include:
     The size and financial condition of the 
institution.
     The expertise and size of the lending staff.
     The need to avoid undue concentrations of risk.
     Compliance with all real estate related laws and 
regulations, including the Community Reinvestment Act, anti-
discrimination laws, and for savings associations, the Qualified Thrift 
Lender test.
     Market conditions.

    The institution should monitor conditions in the real estate markets 
in its lending area so that it can react quickly to changes in market 
conditions that are relevant to its lending decisions. Market supply and 
demand factors that should be considered include:
     Demographic indicators, including population and 
employment trends.
     Zoning requirements.
     Current and projected vacancy, construction, and 
absorption rates.
     Current and projected lease terms, rental rates, 
and sales prices, including concessions.
     Current and projected operating expenses for 
different types of projects.
     Economic indicators, including trends and 
diversification of the lending area.
     Valuation trends, including discount and direct 
capitalization rates.

                         Underwriting Standards

    Prudently underwritten real estate loans should reflect all relevant 
credit factors, including:
     The capacity of the borrower, or income from the 
underlying property, to adequately service the debt.
     The value of the mortgaged property.
     The overall creditworthiness of the borrower.
     The level of equity invested in the property.
     Any secondary sources of repayment.
     Any additional collateral or credit enhancements 
(such as guarantees, mortgage insurance or takeout commitments).

    The lending policies should reflect the level of risk that is 
acceptable to the board of directors and provide clear and measurable 
underwriting standards that enable the institution's lending staff to 
evaluate these credit factors. The underwriting standards should 
address:
     The maximum loan amount by type of property.
     Maximum loan maturities by type of property.
     Amortization schedules.
     Pricing structure for different types of real 
estate loans.
     Loan-to-value limits by type of property.


[[Page 768]]


    For development and construction projects, and completed commercial 
properties, the policy should also establish, commensurate with the size 
and type of the project or property:
     Requirements for feasibility studies and 
sensitivity and risk analyses (e.g., sensitivity of income projections 
to changes in economic variables such as interest rates, vacancy rates, 
or operating expenses).
     Minimum requirements for initial investment and 
maintenance of hard equity by the borrower (e.g., cash or unencumbered 
investment in the underlying property).
     Minimum standards for net worth, cash flow, and 
debt service coverage of the borrower or underlying property.
     Standards for the acceptability of and limits on 
non-amortizing loans.
     Standards for the acceptability of and limits on 
the use of interest reserves.
     Pre-leasing and pre-sale requirements for income-
producing property.
     Pre-sale and minimum unit release requirements 
for non-income-producing property loans.
     Limits on partial recourse or nonrecourse loans 
and requirements for guarantor support.
     Requirements for takeout commitments.
     Minimum covenants for loan agreements.

                           Loan Administration

    The institution should also establish loan administration procedures 
for its real estate portfolio that address:
     Documentation, including:
    Type and frequency of financial statements, including requirements 
for verification of information provided by the borrower;
    Type and frequency of collateral evaluations (appraisals and other 
estimates of value).
     Loan closing and disbursement.
     Payment processing.
     Escrow administration.
     Collateral administration.
     Loan payoffs.
     Collections and foreclosure, including:
    Delinquency follow-up procedures;
    Foreclosure timing;
    Extensions and other forms of forbearance;
    Acceptance of deeds in lieu of foreclosure.
     Claims processing (e.g., seeking recovery on a 
defaulted loan covered by a government guaranty or insurance program).
     Servicing and participation agreements.

                    Supervisory Loan-to-Value Limits

    Institutions should establish their own internal loan-to-value 
limits for real estate loans. These internal limits should not exceed 
the following supervisory limits:

------------------------------------------------------------------------
                                                               Loan-to-
                                                                 value
                        Loan category                            limit
                                                               (percent)
------------------------------------------------------------------------
Raw land....................................................          65
Land development............................................          75
Construction:
    Commercial, multifamily, \1\ and other nonresidential...          80
    1- to 4-family residential..............................          85
Improved property...........................................          85
Owner-occupied 1- to 4-family and home equity...............       (\2\)
------------------------------------------------------------------------
\1\ Multifamily construction includes condominiums and cooperatives.
\2\ A loan-to-value limit has not been established for permanent
  mortgage or home equity loans on owner-occupied, 1- to 4-family
  residential property. However, for any such loan with a loan-to-value
  ratio that equals or exceeds 90 percent at origination, an institution
  should require appropriate credit enhancement in the form of either
  mortgage insurance or readily marketable collateral.

    The supervisory loan-to-value limits should be applied to the 
underlying property that collateralizes the loan. For loans that fund 
multiple phases of the same real estate project (e.g., a loan for both 
land development and construction of an office building), the 
appropriate loan-to-value limit is the limit applicable to the final 
phase of the project funded by the loan; however, loan disbursements 
should not exceed actual development or construction outlays. In 
situations where a loan is fully cross-collateralized by two or more 
properties or is secured by a collateral pool of two or more properties, 
the appropriate maximum loan amount under supervisory loan-to-value 
limits is the sum of the value of each property, less senior liens, 
multiplied by the appropriate loan-to-value limit for each property. To 
ensure that collateral margins remain within the supervisory limits, 
lenders should redetermine conformity whenever collateral substitutions 
are made to the collateral pool.
    In establishing internal loan-to-value limits, each lender is 
expected to carefully consider the institution-specific and market 
factors listed under ``Loan Portfolio Management Considerations,'' as 
well as any other relevant factors, such as the particular subcategory 
or type of loan. For any subcategory of loans that exhibits greater 
credit risk than the overall category, a lender should consider the 
establishment of an internal loan-to-value limit for that subcategory 
that is lower than the limit for the overall category.
    The loan-to-value ratio is only one of several pertinent credit 
factors to be considered when underwriting a real estate loan. Other 
credit factors to be taken into account are highlighted in the 
``Underwriting Standards'' section above. Because of these other 
factors, the establishment of these supervisory limits should not be 
interpreted to mean that loans at these levels will automatically be 
considered sound.

[[Page 769]]

         Loans in Excess of the Supervisory Loan-to-Value Limits

    The agencies recognize that appropriate loan-to-value limits vary 
not only among categories of real estate loans but also among individual 
loans. Therefore, it may be appropriate in individual cases to originate 
or purchase loans with loan-to-value ratios in excess of the supervisory 
loan-to-value limits, based on the support provided by other credit 
factors. Such loans should be identified in the institutions's records, 
and their aggregate amount reported at least quarterly to the 
institution's board of directors. (See additional reporting requirements 
described under ``Exceptions to the General Policy.'')
    The aggregate amount of all loans in excess of the supervisory loan-
to-value limits should not exceed 100 percent of total capital. \2\ 
Moreover, within the aggregate limit, total loans for all commercial, 
agricultural, multifamily or other non-1-to-4 family residential 
properties should not exceed 30 percent of total capital. An institution 
will come under increased supervisory scrutiny as the total of such 
loans approaches these levels.
---------------------------------------------------------------------------

    \2\ For the state member banks, the term ``total capital'' means 
``total risk-based capital'' as defined in Appendix A to 12 CFR part 
208. For insured state non-member banks, ``total capital'' refers to 
that term described in table I of Appendix A to 12 CFR part 325. For 
national banks and Federal savings associations, the term ``total 
capital'' is defined at 12 CFR 3.2.
---------------------------------------------------------------------------

    In determining the aggregate amount of such loans, institutions 
should: (a) Include all loans secured by the same property if any one of 
those loans exceeds the supervisory loan-to-value limits; and (b) 
include the recourse obligation of any such loan sold with recourse. 
Conversely, a loan should no longer be reported to the directors as part 
of aggregate totals when reduction in principal or senior liens, or 
additional contribution of collateral or equity (e.g., improvements to 
the real property securing the loan), bring the loan-to-value ratio into 
compliance with supervisory limits.

                          Excluded Transactions

    The agencies also recognize that there are a number of lending 
situations in which other factors significantly outweigh the need to 
apply the supervisory loan-to-value limits. These include:
     Loans guaranteed or insured by the U.S. 
government or its agencies, provided that the amount of the guaranty or 
insurance is at least equal to the portion of the loan that exceeds the 
supervisory loan-to-value limit.
     Loans backed by the full faith and credit of a 
State government, provided that the amount of the assurance is at least 
equal to the portion of the loan that exceeds the supervisory loan-to-
value limit.
     Loans guaranteed or insured by a State, municipal 
or local government, or an agency thereof, provided that the amount of 
the guaranty or insurance is at least equal to the portion of the loan 
that exceeds the supervisory loan-to-value limit, and provided that the 
lender has determined that the guarantor or insurer has the financial 
capacity and willingness to perform under the terms of the guaranty or 
insurance agreement.
     Loans that are to be sold promptly after 
origination, without recourse, to a financially responsible third party.
     Loans that are renewed, refinanced, or 
restructured without the advancement of new funds or an increase in the 
line of credit (except for reasonable closing costs), or loans that are 
renewed, refinanced, or restructured in connection with a workout 
situation, either with or without the advancement of new funds, where 
consistent with safe and sound banking practices and part of a clearly 
defined and well-documented program to achieve orderly liquidation of 
the debt, reduce risk of loss, or maximize recovery on the loan.
     Loans that facilitate the sale of real estate 
acquired by the lender in the ordinary course of collecting a debt 
previously contracted in good faith.
     Loans for which a lien on or interest in real 
property is taken as additional collateral through an abundance of 
caution by the lender (e.g., the institution takes a blanket lien on all 
or substantially all of the assets of the borrower, and the value of the 
real property is low relative to the aggregate value of all other 
collateral).
     Loans, such as working capital loans, where the 
lender does not rely principally on real estate as security and the 
extension of credit is not used to acquire, develop, or construct 
permanent improvements on real property.
     Loans for the purpose of financing permanent 
improvements to real property, but not secured by the property, if such 
security interest is not required by prudent underwriting practice.

                Exceptions to the General Lending Policy

    Some provision should be made for the consideration of loan requests 
from creditworthy borrowers whose credit needs do not fit within the 
institution's general lending policy. An institution may provide for 
prudently underwritten exceptions to its lending policies, including 
loan-to-value limits, on a loan-by-loan basis. However, any exceptions 
from the supervisory loan-to-value limits should conform to the 
aggregate limits on such loans discussed above.

[[Page 770]]

    The board of directors is responsible for establishing standards for 
the review and approval of exception loans. Each institution should 
establish an appropriate internal process for the review and approval of 
loans that do not conform to its own internal policy standards. The 
approval of any such loan should be supported by a written justification 
that clearly sets forth all of the relevant credit factors that support 
the underwriting decision. The justification and approval documents for 
such loans should be maintained as a part of the permanent loan file. 
Each institution should monitor compliance with its real estate lending 
policy and individually report exception loans of a significant size to 
its board of directors.

    Supervisory Review of Real Estate Lending Policies and Practices

    The real estate lending policies of institutions will be evaluated 
by examiners during the course of their examinations to determine if the 
policies are consistent with safe and sound lending practices, these 
guidelines, and the requirements of the regulation. In evaluating the 
adequacy of the institution's real estate lending policies and 
practices, examiners will take into consideration the following factors:
     The nature and scope of the institution's real 
estate lending activities.
     The size and financial condition of the 
institution.
     The quality of the institution's management and 
internal controls.
     The expertise and size of the lending and loan 
administration staff.
     Market conditions.
    Lending policy exception reports will also be reviewed by examiners 
during the course of their examinations to determine whether the 
institutions' exceptions are adequately documented and appropriate in 
light of all of the relevant credit considerations. An excessive volume 
of exceptions to an institution's real estate lending policy may signal 
a weakening of its underwriting practices, or may suggest a need to 
revise the loan policy.

                               Definitions

    For the purposes of these Guidelines:
    Construction loan means an extension of credit for the purpose of 
erecting or rehabilitating buildings or other structures, including any 
infrastructure necessary for development.
    Extension of credit or loan means:
    (1) The total amount of any loan, line of credit, or other legally 
binding lending commitment with respect to real property; and
    (2) The total amount, based on the amount of consideration paid, of 
any loan, line of credit, or other legally binding lending commitment 
acquired by a lender by purchase, assignment, or otherwise.
    Improved property loan means an extension of credit secured by one 
of the following types of real property:
    (1) Farmland, ranchland or timberland committed to ongoing 
management and agricultural production;
    (2) 1- to 4-family residential property that is not owner-occupied;
    (3) Residential property containing five or more individual dwelling 
units;
    (4) Completed commercial property; or
    (5) Other income-producing property that has been completed and is 
available for occupancy and use, except income-producing owner-occupied 
1- to 4-family residential property.
    Land development loan means an extension of credit for the purpose 
of improving unimproved real property prior to the erection of 
structures. The improvement of unimproved real property may include the 
laying or placement of sewers, water pipes, utility cables, streets, and 
other infrastructure necessary for future development.
    Loan origination means the time of inception of the obligation to 
extend credit (i.e., when the last event or prerequisite, controllable 
by the lender, occurs causing the lender to become legally bound to fund 
an extension of credit).
    Loan-to-value or loan-to-value ratio means the percentage or ratio 
that is derived at the time of loan origination by dividing an extension 
of credit by the total value of the property(ies) securing or being 
improved by the extension of credit plus the amount of any readily 
marketable collateral and other acceptable collateral that secures the 
extension of credit. The total amount of all senior liens on or 
interests in such property(ies) should be included in determining the 
loan-to-value ratio. When mortgage insurance or collateral is used in 
the calculation of the loan-to-value ratio, and such credit enhancement 
is later released or replaced, the loan-to-value ratio should be 
recalculated.
    Other acceptable collateral means any collateral in which the lender 
has a perfected security interest, that has a quantifiable value, and is 
accepted by the lender in accordance with safe and sound lending 
practices. Other acceptable collateral should be appropriately 
discounted by the lender consistent with the lender's usual practices 
for making loans secured by such collateral. Other acceptable collateral 
includes, among other items, unconditional irrevocable standby letters 
of credit for the benefit of the lender.
    Owner-occupied, when used in conjunction with the term 1- to 4-
family residential property means that the owner of the underlying real 
property occupies at least one unit of the real property as a principal 
residence of the owner.
    Readily marketable collateral means insured deposits, financial 
instruments, and bullion

[[Page 771]]

in which the lender has a perfected interest. Financial instruments and 
bullion must be salable under ordinary circumstances with reasonable 
promptness at a fair market value determined by quotations based on 
actual transactions, on an auction or similarly available daily bid and 
ask price market. Readily marketable collateral should be appropriately 
discounted by the lender consistent with the lender's usual practices 
for making loans secured by such collateral.
    Value means an opinion or estimate, set forth in an appraisal or 
evaluation, whichever may be appropriate, of the market value of real 
property, prepared in accordance with the agency's appraisal regulations 
and guidance. For loans to purchase an existing property, the term 
``value'' means the lesser of the actual acquisition cost or the 
estimate of value.
    1- to 4-family residential property means property containing fewer 
than five individual dwelling units, including manufactured homes 
permanently affixed to the underlying property (when deemed to be real 
property under State law).

[57 FR 62896, Dec. 31, 1992; 58 FR 4460, Jan. 14, 1993, as amended at 79 
FR 11312, Feb. 28, 2014; 84 FR 56374, Oct. 22, 2019]



                    Subpart E_Other Real Estate Owned

    Source: 61 FR 11301, Mar. 20, 1996, unless otherwise noted.



Sec.  34.81  Definitions.

    Debts previously contracted (DPC) real estate means real estate 
(including leases) acquired by a national bank or Federal savings 
association through any means in full or partial satisfaction of a debt 
previously contracted.
    Former banking premises means real estate permissible under Sec.  
7.1000(a)(1) of this chapter that is no longer used or contemplated to 
be used for the purposes permitted under that section.
    Market value means the value determined in accordance with subpart C 
of this part.
    Other real estate owned (OREO) means:
    (1) DPC real estate; and
    (2) Former banking premises.
    Recorded investment amount means:
    (1) For loans, the recorded loan balance, as determined by generally 
accepted accounting principles; and
    (2) For former banking premises, the net book value.

[61 FR 11301, Mar. 20, 1996, as amended at 79 FR 11313, Feb. 28, 2014; 
84 FR 56374, Oct. 22, 2019]



Sec.  34.82  Holding period.

    (a) Holding period for OREO--(1) National bank. A national bank 
shall dispose of OREO at the earliest time that prudent judgment 
dictates, but not later than the end of the holding period (or an 
extension thereof) permitted by 12 U.S.C. 29.
    (2) Federal savings association. A Federal savings association may 
hold OREO for not more than five years after commencement of the holding 
period. On the request of a Federal savings association, the OCC may 
extend the holding period for not more than an additional five years.
    (b) Commencement of holding period. The holding period begins on the 
date that:
    (1) Ownership of the property is originally transferred to a 
national bank or Federal savings association, including as a result of a 
merger with or acquisition of another organization holding OREO;
    (2) A national bank or Federal savings association completes 
relocation from former banking premises to new banking premises or 
ceases to use the former banking premises without relocating;
    (3) A national bank or Federal savings association decides not to 
use real estate acquired for future banking expansion;
    (4) An institution converts to a national bank or Federal savings 
association, unless the institution was a national bank or Federal 
savings association immediately prior to the conversion; or
    (5) Is January 1, 2020, for OREO obtained by a Federal savings 
association prior to that date.
    (c) Effect of statutory redemption period. For DPC real estate that 
is subject to a redemption period imposed under State law, the holding 
period begins at the expiration of that redemption period.

[[Page 772]]

    (d) Effect of failed disposition. If a national bank or Federal 
savings association disposes of OREO, but the real estate subsequently 
is conveyed back to the institution within five years as a result of a 
valid rescission or invalidation of the original disposition, then the 
holding period will be tolled for the period during which the real 
estate was not in possession of the national bank or Federal savings 
association.
    (e) Re-acquisition of former OREO. If a national bank or Federal 
savings association reacquires a property that had been OREO and was 
disposed of consistent with Sec.  34.83, the holding period will reset.

[61 FR 11301, Mar. 20, 1996, as amended at 84 FR 56375, Oct. 22, 2019; 
84 FR 64193, Nov. 21, 2019]



Sec.  34.83  Disposition of OREO.

    (a) Disposition. A national bank or Federal savings association may 
dispose of OREO in the following ways:
    (1) With respect to OREO in general:
    (i) By entering into a transaction that is a sale under generally 
accepted accounting principles;
    (ii) By entering into a transaction that involves a loan guaranteed 
or insured by the United States government or by an agency of the United 
States government or a loan eligible for purchase by a Federally-
sponsored instrumentality that purchases loans; or
    (iii) By selling the property pursuant to a land contract or a 
contract for deed;
    (2) With respect to DPC real estate, by retaining the property for 
its own use as bank premises or by transferring it to a subsidiary or 
affiliate for use in the business of the subsidiary or affiliate;
    (3) With respect to a lease:
    (i) By obtaining an assignment or a coterminous sublease. If a 
national bank or Federal savings association enters into a sublease that 
is not coterminous, the period during which the master lease must be 
divested will be suspended for the duration of the sublease, and will 
begin running again upon termination of the sublease. A national bank or 
Federal savings association holding a lease as OREO may enter into an 
extension of the lease that would exceed the holding period referred to 
in Sec.  34.82 if the extension meets the following criteria:
    (A) The extension is necessary in order to sublease the master 
lease;
    (B) The national bank or Federal savings association, prior to 
entering into the extension, has a firm commitment from a prospective 
subtenant to sublease the property; and
    (C) The term of the extension is reasonable and does not materially 
exceed the term of the sublease;
    (ii) Should the OCC determine that a national bank or Federal 
savings association has entered into a lease, extension of a lease, or a 
sublease for the purpose of real estate speculation, the OCC will take 
appropriate measures to address the violation, which may include 
requiring the bank or savings association to take immediate steps to 
divest the lease or sublease; and
    (4) With respect to a transaction that does not qualify as a 
disposition under paragraphs (a)(1) through (3) of this section, by 
receiving or accumulating from the purchaser an amount in a down 
payment, principal and interest payments, and private mortgage insurance 
totalling at least 10 percent of the sales price, as measured in 
accordance with generally accepted accounting principles; or
    (5) By any other method approved by the OCC.
    (b) Additional method for Federal savings associations. A Federal 
savings association also may transfer OREO to a service corporation. A 
service corporation may hold real property transferred to it:
    (1) As OREO, subject to the requirements otherwise applicable to the 
Federal savings association under this subpart E; or
    (2) As an investment in real estate under Sec.  5.59.
    (c) Disposition efforts and documentation. A national bank or 
Federal savings association shall make diligent and ongoing efforts to 
dispose of each parcel of OREO, and shall maintain documentation 
adequate to reflect those efforts.

[61 FR 11301, Mar. 20, 1996, as amended at 84 FR 56375, Oct. 22, 2019; 
85 FR 43422, July 17, 2020]

[[Page 773]]



Sec.  34.84  [Reserved]



Sec.  34.85  Appraisal requirements.

    (a) General. (1) Upon transfer to OREO, a national bank or Federal 
savings association shall substantiate the parcel's market value by 
obtaining either:
    (i) An appraisal in accordance with subpart C of this part; or
    (ii) An appropriate evaluation when the recorded investment amount 
is equal to or less than the threshold amount in subpart C of this part.
    (2) A national bank or Federal savings association shall develop a 
prudent real estate collateral evaluation policy that allows the bank or 
savings association to monitor the value of each parcel of OREO in a 
manner consistent with prudent banking practice.
    (b) Exception. If a national bank or Federal savings association has 
a valid appraisal or an appropriate evaluation obtained in connection 
with a real estate loan and in accordance with subpart C of this part, 
then the bank or savings association need not obtain another appraisal 
or evaluation when it acquires ownership of the property.
    (c) Sales of OREO. A national bank or Federal savings association 
need not obtain a new appraisal or evaluation when selling OREO if the 
sale is consummated based on a valid appraisal or an appropriate 
evaluation.

[61 FR 11301, Mar. 20, 1996, as amended at 84 FR 56375, Oct. 22, 2019]



Sec.  34.86  OREO expenditures and notification.

    (a) Operating expenditures. A national bank or Federal savings 
association may pay operating expenses on OREO, including taxes, 
insurance, utilities, and maintenance, that are reasonable and 
consistent with safe and sound banking practices.
    (b) Business expenditures. A national bank or Federal savings 
association may pay expenses for OREO that includes the operation of a 
business, provided the expenses are:
    (1) Reasonably calculated to reduce any shortfall between the 
property's market value and the recorded investment amount; and
    (2) Consistent with safe and sound banking practices.
    (c) Additional expenditures. For OREO that is a development or 
improvement project, a national bank or Federal savings association may 
make advances to complete the project if the advances are:
    (1) Reasonably calculated to reduce any shortfall between the 
property's market value and the recorded investment amount;
    (2) Not made for the purpose of speculation in real estate; and
    (3) Consistent with safe and sound banking practices.
    (d) Notification procedures for additional expenditures. (1) A 
national bank or Federal savings association shall notify the 
appropriate supervisory office at least 30 days before implementing a 
development or improvement plan for OREO when the sum of the plan's 
estimated cost and the bank's or savings association's current recorded 
investment amount (including any unpaid prior liens on the property) 
exceeds 10 percent of the bank's or savings association's total equity 
capital on its most recent report of condition. A national bank or 
Federal savings association need notify the OCC under this paragraph 
(d)(1) only once.
    (2) The required notification must demonstrate that the additional 
expenditure is consistent with the conditions and limitations in 
paragraph (c) of this section.
    (3) Unless informed otherwise, the national bank or Federal savings 
association may implement the proposed plan on the thirty-first day (or 
sooner, if notified by the OCC) following receipt by the OCC of the 
notification, subject to any conditions imposed by the OCC.

[84 FR 56375, Oct. 22, 2019]

Subpart F [Reserved]



          Subpart G_Appraisals for Higher-Priced Mortgage Loans

    Source: 78 FR 10432, Feb. 13, 2013, unless otherwise noted.



Sec.  34.201  Authority, purpose and scope.

    (a) Authority. This subpart is issued by the Office of the 
Comptroller of the

[[Page 774]]

Currency under 12 U.S.C. 93a, 12 U.S.C. 1463, 1464 and 15 U.S.C. 1639h.
    (b) Purpose. The OCC adopts this subpart pursuant to the 
requirements of section 129H of the Truth in Lending Act (15 U.S.C. 
1639h) which provides that a creditor, including a national bank or 
operating subsidiary, a Federal branch or agency or a Federal savings 
association or operating subsidiary, may not extend credit in the form 
of a higher-risk mortgage without complying with the requirements of 
section 129H of the Truth in Lending Act (15 U.S.C. 1639h) and this 
subpart G. The definition of a higher-risk mortgage in section 129H is 
consistent with the definition of a higher-priced mortgage loan under 
Regulation Z, 12 CFR part 1026. Specifically, 12 CFR 1026.35 defines a 
higher-priced mortgage loan as a closed-end consumer credit transaction 
secured by the consumer's principal dwelling with an annual percentage 
rate that exceeds the average prime offer rate for a comparable 
transaction as of the date the interest rate is set:
    (1) By 1.5 or more percentage points, for a loan secured by a first 
lien with a principal obligation at consummation that does not exceed 
the limit in effect as of the date the transaction's interest rate is 
set for the maximum principal obligation eligible for purchase by 
Freddie Mac;
    (2) By 2.5 or more percentage points, for a loan secured by a first 
lien with a principal obligation at consummation that exceeds the limit 
in effect as of the date the transaction's interest rate is set for the 
maximum principal obligation eligible for purchase by Freddie Mac; or
    (3) By 3.5 or more percentage points, for a loan secured by a 
subordinate lien.
    (c) Scope. This subpart applies to higher-priced mortgage loan 
transactions entered into by national banks and their operating 
subsidiaries, Federal branches and agencies and Federal savings 
associations and operating subsidiaries of savings associations.
    (d) Official Interpretations. Appendix C to this subpart sets out 
OCC Interpretations of the requirements imposed by the OCC pursuant to 
this subpart.



Sec.  34.202  Definitions applicable to higher-priced mortgage loans.

    (a) Consummation has the same meaning as in 12 CFR 1026.2(a)(13).
    (b) Creditor has the same meaning as in 12 CFR 1026.2(a)(17).
    (c) Higher-priced mortgage loan has the same meaning as in 12 CFR 
1026.35(a)(1).
    (d) Reverse mortgage has the same meaning as in 12 CFR 1026.33(a).

[78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78579, Dec. 26, 2013]



Sec.  34.203  Appraisals for higher-priced mortgage loans.

    (a) Definitions. For purposes of this section:
    (1) Certified or licensed appraiser means a person who is certified 
or licensed by the State agency in the State in which the property that 
secures the transaction is located, and who performs the appraisal in 
conformity with the Uniform Standards of Professional Appraisal Practice 
and the requirements applicable to appraisers in title XI of the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as 
amended (12 U.S.C. 3331 et seq.), and any implementing regulations, in 
effect at the time the appraiser signs the appraiser's certification.
    (2) Credit risk means the financial risk that a consumer will 
default on a loan.
    (3) Manufactured home has the same meaning as in 24 CFR 3280.2.
    (4) Manufacturer's invoice means a document issued by a manufacturer 
and provided with a manufactured home to a retail dealer that separately 
details the wholesale (base) prices at the factory for specific models 
or series of manufactured homes and itemized options (large appliances, 
built-in items and equipment), plus actual itemized charges for freight 
from the factory to the dealer's lot or the homesite (including any 
rental of wheels and axles) and for any sales taxes to be paid by the 
dealer. The invoice may recite such prices and charges on an itemized 
basis or by stating an aggregate price or charge, as appropriate, for 
each category.

[[Page 775]]

    (5) National Registry means the database of information about State 
certified and licensed appraisers maintained by the Appraisal 
Subcommittee of the Federal Financial Institutions Examination Council.
    (6) New manufactured home means a manufactured home that has not 
been previously occupied.
    (7) State agency means a ``State appraiser certifying and licensing 
agency'' recognized in accordance with section 1118(b) of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3347(b)) and any implementing regulations.
    (b) Exemptions. Unless otherwise specified, the requirements in 
paragraph (c) through (f) of this section do not apply to the following 
types of transactions:
    (1) A loan that satisfies the criteria of a qualified mortgage as 
defined pursuant to 15 U.S.C. 1639c.
    (2) An extension of credit for which the amount of credit extended 
is equal to or less than the applicable threshold amount, which is 
adjusted every year to reflect increases in the Consumer Price Index for 
Urban Wage Earners and Clerical Workers, as applicable, and published in 
the OCC official interpretations to this paragraph (b)(2).
    (3) A transaction secured by a mobile home, boat, or trailer.
    (4) A transaction to finance the initial construction of a dwelling.
    (5) A loan with a maturity of 12 months or less, if the purpose of 
the loan is a ``bridge'' loan connected with the acquisition of a 
dwelling intended to become the consumer's principal dwelling.
    (6) A reverse-mortgage transaction subject to 12 CFR 1026.33(a).
    (7) An extension of credit that is a refinancing secured by a first 
lien, with refinancing defined as in 12 CFR 1026.20(a) (except that the 
creditor need not be the original creditor or a holder or servicer of 
the original obligation), provided that the refinancing meets the 
following criteria:
    (i) Either--
    (A) The credit risk of the refinancing is retained by the person 
that held the credit risk of the existing obligation and there is no 
commitment, at consummation, to transfer the credit risk to another 
person; or
    (B) The refinancing is insured or guaranteed by the same Federal 
government agency that insured or guaranteed the existing obligation;
    (ii) The regular periodic payments under the refinance loan do not--
    (A) Cause the principal balance to increase;
    (B) Allow the consumer to defer repayment of principal; or
    (C) Result in a balloon payment, as defined in 12 CFR 
1026.18(s)(5)(i); and
    (iii) The proceeds from the refinancing are used solely to satisfy 
the existing obligation and to pay amounts attributed solely to the 
costs of the refinancing; and
    (8) A transaction secured by:
    (i) A new manufactured home and land, but the exemption shall only 
apply to the requirement in paragraph (c)(1) of this section that the 
appraiser conduct a physical visit of the interior of the new 
manufactured home; or
    (ii) A manufactured home and not land, for which the creditor 
obtains one of the following and provides a copy to the consumer no 
later than three business days prior to consummation of the 
transaction--
    (A) For a new manufactured home, the manufacturer's invoice for the 
manufactured home securing the transaction, provided that the date of 
manufacture is no earlier than 18 months prior to the creditor's receipt 
of the consumer's application for credit;
    (B) A cost estimate of the value of the manufactured home securing 
the transaction obtained from an independent cost service provider; or
    (C) A valuation, as defined in 12 CFR 1026.42(b)(3), of the 
manufactured home performed by a person who has no direct or indirect 
interest, financial or otherwise, in the property or transaction for 
which the valuation is performed and has training in valuing 
manufactured homes.
    (c) Appraisals required--(1) In general. Except as provided in 
paragraph (b) of this section, a creditor shall not extend a higher-
priced mortgage loan to a consumer without obtaining, prior to 
consummation, a written appraisal of the property to be mortgaged. The 
appraisal must be performed by a certified or licensed appraiser who 
conducts a physical visit of the interior of

[[Page 776]]

the property that will secure the transaction.
    (2) Safe harbor. A creditor obtains a written appraisal that meets 
the requirements for an appraisal required under paragraph (c)(1) of 
this section if the creditor:
    (i) Orders that the appraiser perform the appraisal in conformity 
with the Uniform Standards of Professional Appraisal Practice and title 
XI of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989, as amended (12 U.S.C. 3331 et seq.), and any implementing 
regulations in effect at the time the appraiser signs the appraiser's 
certification;
    (ii) Verifies through the National Registry that the appraiser who 
signed the appraiser's certification was a certified or licensed 
appraiser in the State in which the appraised property is located as of 
the date the appraiser signed the appraiser's certification;
    (iii) Confirms that the elements set forth in appendix A to this 
subpart are addressed in the written appraisal; and
    (iv) Has no actual knowledge contrary to the facts or certifications 
contained in the written appraisal.
    (d) Additional appraisal for certain higher-priced mortgage loans--
(1) In general. Except as provided in paragraphs (b) and (d)(7) of this 
section, a creditor shall not extend a higher-priced mortgage loan to a 
consumer to finance the acquisition of the consumer's principal dwelling 
without obtaining, prior to consummation, two written appraisals, if:
    (i) The seller acquired the property 90 or fewer days prior to the 
date of the consumer's agreement to acquire the property and the price 
in the consumer's agreement to acquire the property exceeds the seller's 
acquisition price by more than 10 percent; or
    (ii) The seller acquired the property 91 to 180 days prior to the 
date of the consumer's agreement to acquire the property and the price 
in the consumer's agreement to acquire the property exceeds the seller's 
acquisition price by more than 20 percent.
    (2) Different certified or licensed appraisers. The two appraisals 
required under paragraph (d)(1) of this section may not be performed by 
the same certified or licensed appraiser.
    (3) Relationship to general appraisal requirements. If two 
appraisals must be obtained under paragraph (d)(1) of this section, each 
appraisal shall meet the requirements of paragraph (c)(1) of this 
section.
    (4) Required analysis in the additional appraisal. One of the two 
required appraisals must include an analysis of:
    (i) The difference between the price at which the seller acquired 
the property and the price that the consumer is obligated to pay to 
acquire the property, as specified in the consumer's agreement to 
acquire the property from the seller;
    (ii) Changes in market conditions between the date the seller 
acquired the property and the date of the consumer's agreement to 
acquire the property; and
    (iii) Any improvements made to the property between the date the 
seller acquired the property and the date of the consumer's agreement to 
acquire the property.
    (5) No charge for the additional appraisal. If the creditor must 
obtain two appraisals under paragraph (d)(1) of this section, the 
creditor may charge the consumer for only one of the appraisals.
    (6) Creditor's determination of prior sale date and price--(i) 
Reasonable diligence. A creditor must obtain two written appraisals 
under paragraph (d)(1) of this section unless the creditor can 
demonstrate by exercising reasonable diligence that the requirement to 
obtain two appraisals does not apply. A creditor acts with reasonable 
diligence if the creditor bases its determination on information 
contained in written source documents, such as the documents listed in 
appendix B to this subpart.
    (ii) Inability to determine prior sale date or price--modified 
requirements for additional appraisal. If, after exercising reasonable 
diligence, a creditor cannot determine whether the conditions in 
paragraphs (d)(1)(i) and (d)(1)(ii) are present and therefore must 
obtain two written appraisals in accordance with paragraphs (d)(1) 
through (d)(5) of this section, one of the two appraisals shall include 
an analysis of the factors in paragraph (d)(4) of this section only to

[[Page 777]]

the extent that the information necessary for the appraiser to perform 
the analysis can be determined.
    (7) Exemptions from the additional appraisal requirement. The 
additional appraisal required under paragraph (d)(1) of this section 
shall not apply to extensions of credit that finance a consumer's 
acquisition of property:
    (i) From a local, State or Federal government agency;
    (ii) From a person who acquired title to the property through 
foreclosure, deed-in-lieu of foreclosure, or other similar judicial or 
non-judicial procedure as a result of the person's exercise of rights as 
the holder of a defaulted mortgage loan;
    (iii) From a non-profit entity as part of a local, State, or Federal 
government program under which the non-profit entity is permitted to 
acquire title to single-family properties for resale from a seller who 
acquired title to the property through the process of foreclosure, deed-
in-lieu of foreclosure, or other similar judicial or non-judicial 
procedure;
    (iv) From a person who acquired title to the property by inheritance 
or pursuant to a court order of dissolution of marriage, civil union, or 
domestic partnership, or of partition of joint or marital assets to 
which the seller was a party;
    (v) From an employer or relocation agency in connection with the 
relocation of an employee;
    (vi) From a servicemember, as defined in 50 U.S.C. App. 511(1), who 
received a deployment or permanent change of station order after the 
servicemember purchased the property;
    (vii) Located in an area designated by the President as a federal 
disaster area, if and for as long as the Federal financial institutions 
regulatory agencies, as defined in 12 U.S.C. 3350(6), waive the 
requirements in title XI of the Financial Institutions Reform, Recovery, 
and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq.), and 
any implementing regulations in that area; or
    (viii) Located in a rural county, as defined in 12 CFR 
1026.35(b)(2)(iv)(A).
    (e) Required disclosure--(1) In general. Except as provided in 
paragraph (b) of this section, a creditor shall disclose the following 
statement, in writing, to a consumer who applies for a higher-priced 
mortgage loan: ``We may order an appraisal to determine the property's 
value and charge you for this appraisal. We will give you a copy of any 
appraisal, even if your loan does not close. You can pay for an 
additional appraisal for your own use at your own cost.'' Compliance 
with the disclosure requirement in Regulation B, 12 CFR 1002.14(a)(2), 
satisfies the requirements of this paragraph.
    (2) Timing of disclosure. The disclosure required by paragraph 
(e)(1) of this section shall be delivered or placed in the mail no later 
than the third business day after the creditor receives the consumer's 
application for a higher-priced mortgage loan subject to this section. 
In the case of a loan that is not a higher-priced mortgage loan subject 
to this section at the time of application, but becomes a higher-priced 
mortgage loan subject to this section after application, the disclosure 
shall be delivered or placed in the mail not later than the third 
business day after the creditor determines that the loan is a higher-
priced mortgage loan subject to this section.
    (f) Copy of appraisals--(1) In general. Except as provided in 
paragraph (b) of this section, a creditor shall provide to the consumer 
a copy of any written appraisal performed in connection with a higher-
priced mortgage loan pursuant to paragraphs (c) and (d) of this section.
    (2) Timing. A creditor shall provide to the consumer a copy of each 
written appraisal pursuant to paragraph (f)(1) of this section:
    (i) No later than three business days prior to consummation of the 
loan; or
    (ii) In the case of a loan that is not consummated, no later than 30 
days after the creditor determines that the loan will not be 
consummated.
    (3) Form of copy. Any copy of a written appraisal required by 
paragraph (f)(1) of this section may be provided to the applicant in 
electronic form, subject to compliance with the consumer consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (4) No charge for copy of appraisal. A creditor shall not charge the 
consumer

[[Page 778]]

for a copy of a written appraisal required to be provided to the 
consumer pursuant to paragraph (f)(1) of this section.
    (g) Relation to other rules. The rules in this section 34.203 were 
adopted jointly by the Board of Governors of the Federal Reserve System 
(the Board), the OCC, the Federal Deposit Insurance Corporation, the 
National Credit Union Administration, the Federal Housing Finance 
Agency, and the Consumer Financial Protection Bureau (Bureau). These 
rules are substantively identical to the Board's and the Bureau's 
higher-priced mortgage loan appraisal rules published separately in 12 
CFR 226.43 (for the Board) and 12 CFR 1026.35(a) and (c) (for the 
Bureau).

[78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78579, 78580, Dec. 26, 
2013]



  Sec. Appendix A to Subpart G of Part 34--Higher-Priced Mortgage Loan 
                      Appraisal Safe Harbor Review

    To qualify for the safe harbor provided in Sec.  34.203(c)(2), a 
creditor must confirm that the written appraisal:
    1. Identifies the creditor who ordered the appraisal and the 
property and the interest being appraised.
    2. Indicates whether the contract price was analyzed.
    3. Addresses conditions in the property's neighborhood.
    4. Addresses the condition of the property and any improvements to 
the property.
    5. Indicates which valuation approaches were used, and includes a 
reconciliation if more than one valuation approach was used.
    6. Provides an opinion of the property's market value and an 
effective date for the opinion.
    7. Indicates that a physical property visit of the interior of the 
property was performed, as applicable..
    8. Includes a certification signed by the appraiser that the 
appraisal was prepared in accordance with the requirements of the 
Uniform Standards of Professional Appraisal Practice.
    9. Includes a certification signed by the appraiser that the 
appraisal was prepared in accordance with the requirements of title XI 
of the Financial Institutions Reform, Recovery and Enforcement Act of 
1989, as amended (12 U.S.C. 3331 et seq.), and any implementing 
regulations.

[78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78580, Dec. 26, 2013]



  Sec. Appendix B to Subpart G of Part 34--Illustrative Written Source 
        Documents for Higher-Priced Mortgage Loan Appraisal Rules

    A creditor acts with reasonable diligence under Sec.  
34.203(d)(6)(i) if the creditor bases its determination on information 
contained in written source documents, such as:
    1. A copy of the recorded deed from the seller.
    2. A copy of a property tax bill.
    3. A copy of any owner's title insurance policy obtained by the 
seller.
    4. A copy of the RESPA settlement statement from the seller's 
acquisition (i.e., the HUD-1 or any successor form).
    5. A property sales history report or title report from a third-
party reporting service.
    6. Sales price data recorded in multiple listing services.
    7. Tax assessment records or transfer tax records obtained from 
local governments.
    8. A written appraisal performed in compliance with Sec.  
34.203(c)(1) for the same transaction.
    9. A copy of a title commitment report detailing the seller's 
ownership of the property, the date it was acquired, or the price at 
which the seller acquired the property.
    10. A property abstract.



      Sec. Appendix C to Subpart G of Part 34--OCC Interpretations

 Section 34.202--Definitions applicable to higher-priced mortgage loans

    1. Staff Interpretations. Section 34.202 incorporates definitions 
from Regulation Z, 12 CFR part 1026. These OCC Interpretations of 12 CFR 
part 34, subpart G, incorporate the Official Staff Interpretations to 
the Bureau's Regulation Z associated with those definitions, at 12 CFR 
part 1026, Supplement I.

       Section 34.203--Appraisals for higher-priced mortgage loans

    34.203(a) Definitions.
    34.203(a)(1) Certified or licensed appraiser.
    1. USPAP. The Uniform Standards of Professional Appraisal Practice 
(USPAP) are established by the Appraisal Standards Board of the 
Appraisal Foundation (as defined in 12 U.S.C. 3350(9)). Under Sec.  
34.203(a)(1), the relevant USPAP standards are those found in the 
edition of USPAP in effect at the time the appraiser signs the 
appraiser's certification.
    2. Appraiser's certification. The appraiser's certification refers 
to the certification that must be signed by the appraiser for each 
appraisal assignment. This requirement is specified in USPAP Standards 
Rule 2-3.
    3. FIRREA title XI and implementing regulations. The relevant 
regulations are those prescribed under section 1110 of the Financial

[[Page 779]]

Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), as 
amended (12 U.S.C. 3339), that relate to an appraiser's development and 
reporting of the appraisal in effect at the time the appraiser signs the 
appraiser's certification. Paragraph (3) of FIRREA section 1110 (12 
U.S.C. 3339(3)), which relates to the review of appraisals, is not 
relevant for determining whether an appraiser is a certified or licensed 
appraiser under Sec.  34.203(a)(1).
    34.203(b) Exemptions.
    1. Compliance with title XI of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (FIRREA). Section 34.203(b) 
provides exemptions solely from the requirements of Sec.  34.203(c) 
through (f). Institutions subject to the requirements of FIRREA and its 
implementing regulations that make a loan qualifying for an exemption 
under Sec.  34.203(b) must still comply with appraisal and evaluation 
requirements under FIRREA and its implementing regulations.

                         34.203(b)(1) Exemptions

                         Paragraph 34.203(b)(1)

    1. Qualified mortgage criteria. Under Sec.  34.203(b)(1), a loan is 
exempt from the appraisal requirements of Sec.  34.203 if either:
    i. The loan is--(1) subject to the ability-to-repay requirements of 
the Consumer Financial Protection Bureau (Bureau) in 12 CFR 1026.43 as a 
``covered transaction'' (defined in 12 CFR 1026.43(b)(1)) and (2) a 
qualified mortgage pursuant to the Bureau's rules or, for loans insured, 
guaranteed, or administered by the U.S. Department of Housing and Urban 
Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. 
Department of Agriculture (USDA), or Rural Housing Service (RHS), a 
qualified mortgage pursuant to applicable rules prescribed by those 
agencies (but only once such rules are in effect; otherwise, the 
Bureau's definition of a qualified mortgage applies to those loans); or
    ii. The loan is--(1) not subject to the Bureau's ability-to-repay 
requirements in 12 CFR 1026.43 as a ``covered transaction'' (defined in 
12 CFR 1026.43(b)(1)), but (2) meets the criteria for a qualified 
mortgage in the Bureau's rules or, for loans insured, guaranteed, or 
administered by HUD, VA, USDA, or RHS, meets the criteria for a 
qualified mortgage in the applicable rules prescribed by those agencies 
(but only once such rules are in effect; otherwise, the Bureau's 
criteria for a qualified mortgage applies to those loans). To explain 
further, loans enumerated in 12 CFR 1026.43(a) are not ``covered 
transactions'' under the Bureau's ability-to-repay requirements in 12 
CFR 1026.43, and thus cannot be qualified mortgages (entitled to a 
rebuttable presumption or safe harbor of compliance with the ability-to-
repay requirements of 12 CFR 1026.43, see, e.g., 12 CFR 1026.43(e)(1)). 
These include an extension of credit made pursuant to a program 
administered by a Housing Finance Agency, as defined under 24 CFR 266.5, 
or pursuant to a program authorized by sections 101 and 109 of the 
Emergency Economic Stabilization Act of 2008. See 12 CFR 
1026.43(a)(3)(iv) and (vi). They also include extensions of credit made 
by a creditor identified in 12 CFR 1026.43(a)(3)(v). However, these 
loans are eligible for the exemption in Sec.  34.203(b)(1) if they meet 
the Bureau's qualified mortgage criteria in 12 CFR 1026.43(e)(2), (4), 
(5), or (6) or 12 CFR 1026.43(f) (including limits on when loans must be 
consummated) or, for loans that are insured, guaranteed, or administered 
by HUD, VA, USDA, or RHS, in applicable rules prescribed by those 
agencies (but only once such rules are in effect; otherwise, the 
Bureau's criteria for a qualified mortgage applies to those loans). For 
example, assume that HUD has prescribed rules to define loans insured 
under its programs that are qualified mortgages and those rules are in 
effect. Assume further that a creditor designated as a Community 
Development Financial Institution, as defined under 12 CFR 1805.104(h), 
originates a loan insured by the Federal Housing Administration, which 
is a part of HUD. The loan is not a ``covered transaction'' and thus is 
not a qualified mortgage. See 12 CFR 1026.43(a)(3)(v)(A) and (b)(1). 
Nonetheless, the transaction is eligible for an exemption from the 
appraisal requirements of Sec.  34.203(b)(1) if it meets the qualified 
mortgage criteria in HUD's rules. Nothing in Sec.  34.203(b)(1) alters 
the definition of a qualified mortgage under regulations of the Bureau, 
HUD, VA, USDA, or RHS.

                         Paragraph 34.203(b)(2)

    1. Threshold amount. For purposes of Sec.  34.203(b)(2), the 
threshold amount in effect during a particular period is the amount 
stated in comment 203(b)(2)-3 for that period. The threshold amount is 
adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and Clerical 
Workers (CPI-W) that was in effect on the preceding June 1. Comment 
203(b)(2)-3 will be amended to provide the threshold amount for the 
upcoming year after the annual percentage change in the CPI-W that was 
in effect on June 1 becomes available. Any increase in the threshold 
amount will be rounded to the nearest $100 increment. For example, if 
the annual percentage increase in the CPI-W would result in a $950 
increase in the threshold amount, the threshold amount will be increased 
by $1,000. However, if the annual percentage increase in the CPI-W would 
result in a $949 increase in the threshold amount, the threshold amount 
will be increased by $900.
    2. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the

[[Page 780]]

CPI-W in effect on June 1 of the previous year, the threshold amount 
effective the following January 1 through December 31 will not change 
from the previous year. When this occurs, for the years that follow, the 
threshold is calculated based on the annual percentage change in the 
CPI-W applied to the dollar amount that would have resulted, after 
rounding, if decreases and any subsequent increases in the CPI-W had 
been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, is greater than the current threshold, then the threshold 
effective January 1 the following year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated, after 
rounding, is equal to or less than the current threshold, then the 
threshold effective January 1 the following year will not change, but 
future increases will be calculated based on the amount that would have 
resulted.
    3. Threshold. For purposes of Sec.  34.203(b)(2), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    i. From January 18, 2014, through December 31, 2014, the threshold 
amount is $25,000.
    ii. From January 1, 2015, through December 31, 2015, the threshold 
amount is $25,500.
    iii. From January 1, 2016, through December 31, 2016, the threshold 
amount is $25,500.
    iv. From January 1, 2017, through December 31, 2017, the threshold 
amount is $25,500.
    v. From January 1, 2018, through December 31, 2018, the threshold 
amount is $26,000.
    vi. From January 1, 2019, through December 31, 2019, the threshold 
amount is $26,700.
    vii. From January 1, 2020, through December 31, 2020, the threshold 
amount is $27,200.
    viii. From January 1, 2021, through December 31, 2021, the threshold 
amount is $27,200.
    ix. From January 1, 2022, through December 31, 2022, the threshold 
amount is $28,500.
    x. From January 1, 2023, through December 31, 2023, the threshold 
amount is $31,000.
    xi. From January 1, 2024, through December 31, 2024, the threshold 
amount is $32,400.
    4. Qualifying for exemption--in general. A transaction is exempt 
under Sec.  34.203(b)(2) if the creditor makes an extension of credit at 
consummation that is equal to or below the threshold amount in effect at 
the time of consummation.
    5. Qualifying for exemption--subsequent changes. A transaction does 
not meet the condition for an exemption under Sec.  34.203(b)(2) merely 
because it is used to satisfy and replace an existing exempt loan unless 
the amount of the new extension of credit is equal to or less than the 
applicable threshold amount. For example, assume a closed-end loan that 
qualified for a Sec.  34.203(b)(2) exemption at consummation in year one 
is refinanced in year ten and that the new loan amount is greater than 
the threshold amount in effect in year ten. In these circumstances, the 
creditor must comply with all of the applicable requirements of Sec.  
34.203 with respect to the year ten transaction if the original loan is 
satisfied and replaced by the new loan unless another exemption from the 
requirements of Sec.  34.203 applies. See Sec.  34.203(b) and (d)(7).

                         Paragraph 34.203(b)(3).

    1. Secured by a mobile home. For purposes of the exemption in Sec.  
34.203(b)(3), a mobile home does not include a manufactured home, as 
defined in Sec.  34.203(a)(2).
    Paragraph 34.203(b)(4).
    1. Construction-to-permanent loans. Section 34.203 does not apply to 
a transaction to finance the initial construction of a dwelling. This 
exclusion applies to a construction-only loan as well as to the 
construction phase of a construction-to-permanent loan. Section 34.203 
does apply, however, to permanent financing that replaces a construction 
loan, whether the permanent financing is extended by the same or a 
different creditor, unless the permanent financing is otherwise exempt 
from the requirements of Sec.  34.203. See Sec.  34.203(b). When a 
construction loan may be permanently financed by the same creditor, the 
general disclosure requirements for closed-end credit pursuant to 
Regulation Z (12 CFR 1026.17) provide that the creditor may give either 
one combined disclosure for both the construction financing and the 
permanent financing, or a separate set of disclosures for each of the 
two phases as though they were two separate transactions. See 12 CFR 
1026.17(c)(6)(ii) and the Official Staff Interpretations to the Bureau's 
Regulation Z, comment 17(c)(6)-2. Which disclosure option a creditor 
elects under Sec.  1026.17(c)(6)(ii) does not affect the determination 
of whether the permanent phase of the transaction is subject to Sec.  
34.203. When the creditor discloses the two phases as separate 
transactions, the annual percentage rate for the permanent phase must be 
compared to the average prime offer rate for a transaction that is 
comparable to the permanent financing to determine coverage under Sec.  
34.203. When the creditor discloses the two phases as a single 
transaction, a single annual percentage rate, reflecting the appropriate 
charges from both phases, must be calculated for the transaction in 
accordance with 12 CFR 1026.35(a)(1) (incorporated into 12 CFR part 34, 
subpart G by Sec.  34.202) and appendix D to 12 CFR part 1026. The 
annual percentage rate must be compared to the average prime offer rate 
for a transaction that is comparable to the permanent financing to 
determine coverage under Sec.  34.203. If the transaction is determined 
to be a higher-priced mortgage loan not otherwise exempt under Sec.  
34.203(b), only the permanent phase is subject to the requirements of 
Sec.  34.203.

[[Page 781]]

    2. Financing initial construction. The exemption for construction 
loans in Sec.  34.203(b)(4) applies to temporary financing of the 
construction of a dwelling that will be replaced by permanent financing 
once construction is complete. The exemption does not apply, for 
example, to loans to finance the purchase of manufactured homes that 
have not been or are in the process of being built when the financing 
obtained by the consumer at that time is permanent. See Sec.  
34.203(b)(8).

                         Paragraph 34.203(b)(7)

                      Paragraph 34.203(b)(7)(i)(A)

    1. Same credit risk holder. The requirement that the holder of the 
credit risk on the existing obligation and the refinancing be the same 
applies to situations in which an entity bears the financial 
responsibility for the default of a loan by either holding the loan in 
its portfolio or guaranteeing payments of principal and any interest to 
investors in a mortgage-backed security in which the loan is pooled. See 
Sec.  34.203(a)(2) (defining ``credit risk''). For example, a credit 
risk holder could be a bank that bears the credit risk on the existing 
obligation by holding the loan in the bank's portfolio. Another example 
of a credit risk holder would be a government-sponsored enterprise that 
bears the risk of default on a loan by guaranteeing the payment of 
principal and any interest on a loan to investors in a mortgage-backed 
security. The holder of credit risk under Sec.  34.203(b)(7)(i)(A) does 
not mean individual investors in a mortgage-backed security or providers 
of private mortgage insurance.
    2. Same credit risk holder--illustrations.
    Illustrations of the credit risk holder of the existing obligation 
continuing to be the credit risk holder of the refinancing include, but 
are not limited to, the following:
    i. The existing obligation is held in the portfolio of a bank, thus 
the bank holds the credit risk. The bank arranges to refinance the loan 
and also will hold the refinancing in its portfolio. If the refinancing 
otherwise meets the requirements for an exemption under Sec.  
34.203(b)(7), the transaction will qualify for the exemption because the 
credit risk holder is the same for the existing obligation and the 
refinance transaction. In this case, the exemption would apply 
regardless of whether the bank arranged to refinance the loan directly 
or indirectly, such as through the servicer or subservicer on the 
existing obligation.
    ii. The existing obligation is held in the portfolio of a 
government-sponsored enterprise (GSE), thus the GSE holds the credit 
risk. The existing obligation is then refinanced by the servicer of the 
loan and immediately transferred to the GSE. The GSE pools the 
refinancing in a mortgage-backed security guaranteed by the GSE, thus 
the GSE holds the credit risk on the refinance loan. If the refinance 
transaction otherwise meets the requirements for an exemption under 
Sec.  34.203(b)(7), the transaction will qualify for the exemption 
because the credit risk holder is the same for the existing obligation 
and the refinance transaction. In this case, the exemption would apply 
regardless of whether the existing obligation was refinanced by the 
servicer or subservicer on the existing obligation (acting as a 
``creditor'' under 12 CFR 1026.2(a)(17)) or by a different creditor.
    3. Forward commitments. A creditor may make a mortgage loan that 
will be sold or otherwise transferred pursuant to an agreement that has 
been entered into at or before the time the transaction is consummated. 
Such an agreement is sometimes known as a ``forward commitment.'' A 
refinance loan does not satisfy the requirement of Sec.  
34.203(b)(7)(i)(A) if the loan will be acquired pursuant to a forward 
commitment, such that the credit risk on the refinance loan will 
transfer to a person who did not hold the credit risk on the existing 
obligation.

                       Paragraph 34.203(b)(7)(ii)

    1. Regular periodic payments. Under Sec.  34.203(b)(7)(ii), the 
regular periodic payments on the refinance loan must not: Result in an 
increase of the principal balance (negative amortization); allow the 
consumer to defer repayment of principal (see 12 CFR 1026.43, and the 
Official Staff Interpretations to the Bureau's Regulation Z, comment 
43(e)(2)(i)-2); or result in a balloon payment. Thus, the terms of the 
legal obligation must require the consumer to make payments of principal 
and interest on a monthly or other periodic basis that will repay the 
loan amount over the loan term. Except for payments resulting from any 
interest rate changes after consummation in an adjustable-rate or step-
rate mortgage, the periodic payments must be substantially equal. For an 
explanation of the term ``substantially equal,'' see 12 CFR 1026.43, the 
Official Staff Interpretations to the Bureau's Regulation Z, comment 
43(c)(5)(i)-4. In addition, a single-payment transaction is not a 
refinancing meeting the requirements of Sec.  34.203(b)(7) because it 
does not require ``regular periodic payments.''

                       Paragraph 34.203(b)(7)(iii)

    1. Permissible use of proceeds. The exemption for a refinancing 
under Sec.  34.203(b)(7) is available only if the proceeds from the 
refinancing are used exclusively for the existing obligation and amounts 
attributed solely to the costs of the refinancing. The existing 
obligation includes the unpaid principal balance of the existing first 
lien loan, any earned unpaid finance charges, and any other lawful 
charges related to the existing loan. For guidance on the meaning of 
refinancing

[[Page 782]]

costs, see 12 CFR 1026.23, the Official Staff Interpretations to the 
Bureau's Regulations Z, comment 23(f)-4. If the proceeds of a 
refinancing are used for other purposes, such as to pay off other liens 
or to provide additional cash to the consumer for discretionary 
spending, the transaction does not qualify for the exemption for a 
refinancing under Sec.  34.203(b)(7) from the appraisal requirements in 
Sec.  34.203.

           For applications received on or after July 18, 2015

                         Paragraph 34.203(b)(8)

    Paragraph 34.203(b)(8)(i)
    1. Secured by new manufactured home and land--physical visit of the 
interior. A transaction secured by a new manufactured home and land is 
subject to the requirements of Sec.  34.203(c) through (f) except for 
the requirement in Sec.  34.203(c)(1) that the appraiser conduct a 
physical inspection of the interior of the property. Thus, for example, 
a creditor of a loan secured by a new manufactured home and land could 
comply with Sec.  34.203(c)(1) by obtaining an appraisal conducted by a 
state-certified or -licensed appraiser based on plans and specifications 
for the new manufactured home and an inspection of the land on which the 
property will be sited, as well as any other information necessary for 
the appraiser to complete the appraisal assignment in conformity with 
the Uniform Standards of Professional Appraisal Practice and the 
requirements of FIRREA and any implementing regulations.
    Paragraph 34.203(b)(8)(ii)
    1. Secured by a manufactured home and not land. Section 
34.203(b)(8)(ii) applies to a higher-priced mortgage loan secured by a 
manufactured home and not land, regardless of whether the home is titled 
as realty by operation of state law.
    Paragraph 34.203(b)(8)(ii)(B)
    1. Independent. A cost service provider from which the creditor 
obtains a manufactured home unit cost estimate under Sec.  
34.203(b)(8)(ii)(B) is ``independent'' if that person is not affiliated 
with the creditor in the transaction, such as by common corporate 
ownership, and receives no direct or indirect financial benefits based 
on whether the transaction is consummated.
    2. Adjustments. The requirement that the cost estimate be from an 
independent cost service provider does not prohibit a creditor from 
providing a cost estimate that reflects adjustments to account for 
factors such as special features, condition or location. However, the 
requirement that the estimate be obtained from an independent cost 
service provider means that any adjustments to the estimate must be 
based on adjustment factors available as part of the independent cost 
service used, with associated values that are determined by the 
independent cost service.
    Paragraph 34.203(b)(8)(ii)(C)
    1. Interest in the property. A person has a direct or indirect in 
the property if, for example, the person has any ownership or reasonably 
foreseeable ownership interest in the manufactured home. To illustrate, 
a person who seeks a loan to purchase the manufactured home to be valued 
has a reasonably foreseeable ownership interest in the property.
    2. Interest in the transaction. A person has a direct or indirect 
interest in the transaction if, for example, the person or an affiliate 
of that person also serves as a loan officer of the creditor or 
otherwise arranges the credit transaction, or is the retail dealer of 
the manufactured home. A person also has a prohibited interest in the 
transaction if the person is compensated or otherwise receives financial 
or other benefits based on whether the transaction is consummated.
    3. Training in valuing manufactured homes. Training in valuing 
manufactured homes includes, for example, successfully completing a 
course in valuing manufactured homes offered by a state or national 
appraiser association or receiving job training from an employer in the 
business of valuing manufactured homes.
    4. Manufactured home valuation--example. A valuation in compliance 
with Sec.  34.203(b)(8)(ii)(C) would include, for example, an appraisal 
of the manufactured home in accordance with the appraisal requirements 
for a manufactured home classified as personal property under the Title 
I Manufactured Home Loan Insurance Program of the U.S. Department of 
Housing and Urban Development, pursuant to section 2(b)(10) of the 
National Housing Act, 12 U.S.C. 1703(b)(10).
    34.203(c)(1) In general.
    1. Written appraisal--electronic transmission. To satisfy the 
requirement that the appraisal be ``written,'' a creditor may obtain the 
appraisal in paper form or via electronic transmission.
    34.203(c)(2) Safe harbor.
    1. Safe harbor. A creditor that satisfies the safe harbor conditions 
in Sec.  34.203(c)(2)(i) through (iv) complies with the appraisal 
requirements of Sec.  34.203(c)(1). A creditor that does not satisfy the 
safe harbor conditions in Sec.  34.203(c)(2)(i) through (iv) does not 
necessarily violate the appraisal requirements of Sec.  34.203(c)(1).
    2. Appraiser's certification. For purposes of Sec.  34.203(c)(2), 
the appraiser's certification refers to the certification specified in 
item 9 of appendix A to this subpart. See also comment 34.203(a)(1)-2.
    Paragraph 34.203(c)(2)(iii).
    1. Confirming elements in the appraisal. To confirm that the 
elements in appendix A to this subpart are included in the written 
appraisal, a creditor need not look beyond the face of the written 
appraisal and the appraiser's certification.

[[Page 783]]

    34.203(d) Additional appraisal for certain higher-priced mortgage 
loans.
    1. Acquisition. For purposes of Sec.  34.203(d), the terms 
``acquisition'' and ``acquire'' refer to the acquisition of legal title 
to the property pursuant to applicable State law, including by purchase.
    34.203(d)(1) In general.
    1. Appraisal from a previous transaction. An appraisal that was 
previously obtained in connection with the seller's acquisition or the 
financing of the seller's acquisition of the property does not satisfy 
the requirements to obtain two written appraisals under Sec.  
34.203(d)(1).
    2. 90-day, 180-day calculation. The time periods described in Sec.  
34.203(d)(1)(i) and (ii) are calculated by counting the day after the 
date on which the seller acquired the property, up to and including the 
date of the consumer's agreement to acquire the property that secures 
the transaction. For example, assume that the creditor determines that 
date of the consumer's acquisition agreement is October 15, 2012, and 
that the seller acquired the property on April 17, 2012. The first day 
to be counted in the 180-day calculation would be April 18, 2012, and 
the last day would be October 15, 2012. In this case, the number of days 
from April 17 would be 181, so an additional appraisal is not required.
    3. Date seller acquired the property. For purposes of Sec.  
34.203(d)(1)(i) and (ii), the date on which the seller acquired the 
property is the date on which the seller became the legal owner of the 
property pursuant to applicable State law.
    4. Date of the consumer's agreement to acquire the property. For the 
date of the consumer's agreement to acquire the property under Sec.  
34.203(d)(1)(i) and (ii), the creditor should use the date on which the 
consumer and the seller signed the agreement provided to the creditor by 
the consumer. The date on which the consumer and the seller signed the 
agreement might not be the date on which the consumer became 
contractually obligated under State law to acquire the property. For 
purposes of Sec.  34.203(d)(1)(i) and (ii), a creditor is not obligated 
to determine whether and to what extent the agreement is legally binding 
on both parties. If the dates on which the consumer and the seller 
signed the agreement differ, the creditor should use the later of the 
two dates.
    5. Price at which the seller acquired the property. The price at 
which the seller acquired the property refers to the amount paid by the 
seller to acquire the property. The price at which the seller acquired 
the property does not include the cost of financing the property.
    6. Price the consumer is obligated to pay to acquire the property. 
The price the consumer is obligated to pay to acquire the property is 
the price indicated on the consumer's agreement with the seller to 
acquire the property. The price the consumer is obligated to pay to 
acquire the property from the seller does not include the cost of 
financing the property. For purposes of Sec.  34.203(d)(1)(i) and (ii), 
a creditor is not obligated to determine whether and to what extent the 
agreement is legally binding on both parties. See also comment 
34.203(d)(1)-4.
    34.203(d)(2) Different certified or licensed appraisers.
    1. Independent appraisers. The requirements that a creditor obtain 
two separate appraisals under Sec.  34.203(d)(1), and that each 
appraisal be conducted by a different licensed or certified appraiser 
under Sec.  34.203(d)(2), indicate that the two appraisals must be 
conducted independently of each other. If the two certified or licensed 
appraisers are affiliated, such as by being employed by the same 
appraisal firm, then whether they have conducted the appraisal 
independently of each other must be determined based on the facts and 
circumstances of the particular case known to the creditor.
    34.203(d)(3) Relationship to general appraisal requirements.
    1. Safe harbor. When a creditor is required to obtain an additional 
appraisal under Sec.  34.203(d)(1), the creditor must comply with the 
requirements of both Sec.  34.203(c)(1) and Sec.  34.203(d)(2) through 
(5) for that appraisal. The creditor complies with the requirements of 
Sec.  34.203(c)(1) for the additional appraisal if the creditor meets 
the safe harbor conditions in Sec.  34.203(c)(2) for that appraisal.
    34.203(d)(4) Required analysis in the additional appraisal.
    1. Determining acquisition dates and prices used in the analysis of 
the additional appraisal. For guidance on identifying the date on which 
the seller acquired the property, see comment 34.203(d)(1)-3. For 
guidance on identifying the date of the consumer's agreement to acquire 
the property, see comment 34.203(d)(1)-4. For guidance on identifying 
the price at which the seller acquired the property, see comment 
34.203(d)(1)-5. For guidance on identifying the price the consumer is 
obligated to pay to acquire the property, see comment 34.203(d)(1)-6.
    34.203(d)(5) No charge for additional appraisal.
    1. Fees and mark-ups. The creditor is prohibited from charging the 
consumer for the performance of one of the two appraisals required under 
Sec.  34.203(d)(1), including by imposing a fee specifically for that 
appraisal or by marking up the interest rate or any other fees payable 
by the consumer in connection with the higher-priced mortgage loan.
    34.203(d)(6) Creditor's determination of prior sale date and price.
    34.203(d)(6)(i) In general.
    1. Estimated sales price. If a written source document describes the 
seller's acquisition price in a manner that indicates that the price 
described is an estimated or assumed

[[Page 784]]

amount and not the actual price, the creditor should look at an 
alternative document to satisfy the reasonable diligence standard in 
determining the price at which the seller acquired the property.
    2. Reasonable diligence--oral statements insufficient. Reliance on 
oral statements of interested parties, such as the consumer, seller, or 
mortgage broker, does not constitute reasonable diligence under Sec.  
34.203(d)(6)(i).
    3. Lack of information and conflicting information--two appraisals 
required. If a creditor is unable to demonstrate that the requirement to 
obtain two appraisals under Sec.  34.203(d)(1) does not apply, the 
creditor must obtain two written appraisals before extending a higher-
priced mortgage loan subject to the requirements of Sec.  34.203 See 
also comment 34.203(d)(6)(ii)-1. For example:
    i. Assume a creditor orders and reviews the results of a title 
search, which shows that a prior sale occurred between 91 and 180 days 
ago, but not the price paid in that sale. Thus, based on the title 
search, the creditor would not be able to determine whether the price 
the consumer is obligated to pay under the consumer's acquisition 
agreement is more than 20 percent higher than the seller's acquisition 
price, pursuant to Sec.  34.203(d)(1)(ii). Before extending a higher-
priced mortgage loan subject to the appraisal requirements of Sec.  
34.203, the creditor must either: perform additional diligence to 
ascertain the seller's acquisition price and, based on this information, 
determine whether two written appraisals are required; or obtain two 
written appraisals in compliance with Sec.  34.203(d)(6). See also 
comment 34.203(d)(6)(ii)-1.
    ii. Assume a creditor reviews the results of a title search 
indicating that the last recorded purchase was more than 180 days before 
the consumer's agreement to acquire the property. Assume also that the 
creditor subsequently receives a written appraisal indicating that the 
seller acquired the property between 91 and 180 days before the 
consumer's agreement to acquire the property. In this case, unless one 
of these sources is clearly wrong on its face, the creditor would not be 
able to determine whether the seller acquired the property within 180 
days of the date of the consumer's agreement to acquire the property 
from the seller, pursuant to Sec.  34.203(d)(1)(ii). Before extending a 
higher-priced mortgage loan subject to the appraisal requirements of 
Sec.  34.203, the creditor must either: perform additional diligence to 
ascertain the seller's acquisition date and, based on this information, 
determine whether two written appraisals are required; or obtain two 
written appraisals in compliance with Sec.  34.203(d)(6). See also 
comment 34.203(d)(6)(ii)-1.
    34.203(d)(6)(ii) Inability to determine prior sales date or price--
modified requirements for additional appraisal.
    1. Required analysis. In general, the additional appraisal required 
under Sec.  34.203(d)(1) should include an analysis of the factors 
listed in Sec.  34.203(d)(4)(i) through (iii). However, if, following 
reasonable diligence, a creditor cannot determine whether the conditions 
in Sec.  34.203(d)(1)(i) or (ii) are present due to a lack of 
information or conflicting information, the required additional 
appraisal must include the analyses required under Sec.  34.203(d)(4)(i) 
through (iii) only to the extent that the information necessary to 
perform the analyses is known. For example, assume that a creditor is 
able, following reasonable diligence, to determine that the date on 
which the seller acquired the property occurred between 91 and 180 days 
prior to the date of the consumer's agreement to acquire the property. 
However, the creditor is unable, following reasonable diligence, to 
determine the price at which the seller acquired the property. In this 
case, the creditor is required to obtain an additional written appraisal 
that includes an analysis under Sec.  34.203(d)(4)(ii) and (iii) of the 
changes in market conditions and any improvements made to the property 
between the date the seller acquired the property and the date of the 
consumer's agreement to acquire the property. However, the creditor is 
not required to obtain an additional written appraisal that includes 
analysis under Sec.  34.203(d)(4)(i) of the difference between the price 
at which the seller acquired the property and the price that the 
consumer is obligated to pay to acquire the property.
    34.203(d)(7) Exemptions from the additional appraisal requirement.
    Paragraph 34.203(d)(7)(iii).
    1. Non-profit entity. For purposes of Sec.  34.203(d)(7)(iii), a 
``non-profit entity'' is a person with a tax exemption ruling or 
determination letter from the Internal Revenue Service under section 
501(c)(3) of the Internal Revenue Code of 1986 (12 U.S.C. 501(c)(3)).
    Paragraph 34.203(d)(7)(viii).
    1. Bureau table of rural counties. The Bureau publishes on its Web 
site a table of rural counties under 12 CFR 1026.35(b)(2)(iv)(A) for 
each calendar year by the end of that calendar year. See Official Staff 
Interpretations to the Bureau's Regulation Z, comment 35(b)(2)(iv)-1. A 
property securing an HPML subject to Sec.  34.203 is in a rural county 
under Sec.  34.203(d)(7)(viii) if the county in which the property is 
located is on the table of rural counties most recently published by the 
Bureau. For example, for a transaction occurring in 2015, assume that 
the Bureau most recently published a table of rural counties at the end 
of 2014. The property securing the transaction would be located in a 
rural county for purposes of Sec.  34.203(d)(7)(viii) if the county is 
on the table of rural counties published by the Bureau at the end of 
2014.
    34.203(e) Required disclosure.
    34.203(e)(1) In general.

[[Page 785]]

    1. Multiple applicants. When two or more consumers apply for a loan 
subject to this section, the creditor is required to give the disclosure 
to only one of the consumers.
    2. Appraisal independence requirements not affected. Nothing in the 
text of the consumer notice required by Sec.  34.203(e)(1) should be 
construed to affect, modify, limit, or supersede the operation of any 
legal, regulatory, or other requirements or standards relating to 
independence in the conduct of appraisals or restrictions on the use of 
borrower-ordered appraisals by creditors.
    34.203(f) Copy of appraisals.
    34.203(f)(1) In general.
    1. Multiple applicants. When two or more consumers apply for a loan 
subject to this section, the creditor is required to give the copy of 
each required appraisal to only one of the consumers.
    34.203(f)(2) Timing.
    1. ``Provide.'' For purposes of the requirement to provide a copy of 
the appraisal within a specified time under Sec.  34.203(f)(2), 
``provide'' means ``deliver.'' Delivery occurs three business days after 
mailing or delivering the copies to the last-known address of the 
applicant, or when evidence indicates actual receipt by the applicant 
(which, in the case of electronic receipt, must be based upon consent 
that complies with the E-Sign Act), whichever is earlier.
    2. No waiver. Regulation B, 12 CFR 1002.14(a)(1), allowing the 
consumer to waive the requirement that the appraisal copy be provided 
three business days before consummation, does not apply to higher-priced 
mortgage loans subject to Sec.  34.203. A consumer of a higher-priced 
mortgage loan subject to Sec.  34.203 may not waive the timing 
requirement to receive a copy of the appraisal under Sec.  34.203(f)(2).
    34.203(f)(4) No charge for copy of appraisal.
    1. Fees and mark-ups. The creditor is prohibited from charging the 
consumer for any copy of an appraisal required to be provided under 
Sec.  34.203(f)(1), including by imposing a fee specifically for a 
required copy of an appraisal or by marking up the interest rate or any 
other fees payable by the consumer in connection with the higher-priced 
mortgage loan.

  Appendix B--Illustrative Written Source Documents for Higher-Priced 
                      Mortgage Loan Appraisal Rules

    1. Title commitment report. The ``title commitment report'' is a 
document from a title insurance company describing the property interest 
and status of its title, parties with interests in the title and the 
nature of their claims, issues with the title that must be resolved 
prior to closing of the transaction between the parties to the transfer, 
amount and disposition of the premiums, and endorsements on the title 
policy. This document is issued by the title insurance company prior to 
the company's issuance of an actual title insurance policy to the 
property's transferee and/or creditor financing the transaction. In 
different jurisdictions, this instrument may be referred to by different 
terms, such as a title commitment, title binder, title opinion, or title 
report.

[78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78580, Dec. 26, 2013; 
79 FR 78298, Dec. 30, 2014; 80 FR 73945, Nov. 27, 2015; 81 FR 86254, 
Nov. 30, 2016; 82 FR 51974, Nov. 9, 2017; 83 FR 59274, Nov. 23, 2018; 84 
FR 58015, Oct. 30, 2019; 85 FR 79387, Dec. 10, 2020; 86 FR 67845, Nov. 
30, 2021; 87 FR 63665, Oct. 20, 2022; 88 FR 83313, Nov. 29, 2023]



       Subpart H_Appraisal Management Company Minimum Requirements

    Source: 80 FR 32679, June 9, 2015, unless otherwise noted.



Sec.  34.210  Authority, purpose, and scope.

    (a) Authority. This subpart is issued by the Office of the 
Comptroller of the Currency under 12 U.S.C. 93a and Title XI of the 
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), 
as amended by the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (the Dodd-Frank Act) (Pub. L. 111-203, 124 Stat. 1376 (2010)), 12 
U.S.C. 3331 et seq.
    (b) Purpose. The purpose of this subpart is to implement sections 
1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 
3350, and 3353.
    (c) Scope. This subpart applies to States and to appraisal 
management companies (AMCs) providing appraisal management services in 
connection with consumer credit transactions secured by a consumer's 
principal dwelling or securitizations of those transactions.
    (d) Rule of construction. Nothing in this subpart should be 
construed to prevent a State from establishing requirements in addition 
to those in this subpart. In addition, nothing in this subpart should be 
construed to alter guidance in, and applicability of, the Interagency 
Appraisal and Evaluation Guidelines \3\ or other relevant agency 
guidance that cautions banks, bank

[[Page 786]]

holding companies, Federal savings associations, state savings 
associations, and credit unions, as applicable, that each such entity is 
accountable for overseeing the activities of third-party service 
providers and ensuring that any services provided by a third party 
comply with applicable laws, regulations, and supervisory guidance 
applicable directly to the financial institution.
---------------------------------------------------------------------------

    \3\ See http://www.occ.gov/ news-issuances/bulletins/ 2010/bulletin-
2010-42.html.
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Sec.  34.211  Definitions.

    For purposes of this subpart:
    (a) Affiliate has the meaning provided in 12 U.S.C. 1841.
    (b) AMC National Registry means the registry of State-registered 
AMCs and Federally regulated AMCs maintained by the Appraisal 
Subcommittee.
    (c)(1) Appraisal management company (AMC) means a person that:
    (i) Provides appraisal management services to creditors or to 
secondary mortgage market participants, including affiliates;
    (ii) Provides such services in connection with valuing a consumer's 
principal dwelling as security for a consumer credit transaction or 
incorporating such transactions into securitizations; and
    (iii) Within a given 12-month period, as defined in Sec.  34.212(d), 
oversees an appraiser panel of more than 15 State-certified or State-
licensed appraisers in a State or 25 or more State-certified or State-
licensed appraisers in two or more States, as described in Sec.  34.212;
    (2) An AMC does not include a department or division of an entity 
that provides appraisal management services only to that entity.
    (d) Appraisal management services means one or more of the 
following:
    (1) Recruiting, selecting, and retaining appraisers;
    (2) Contracting with State-certified or State-licensed appraisers to 
perform appraisal assignments;
    (3) Managing the process of having an appraisal performed, including 
providing administrative services such as receiving appraisal orders and 
appraisal reports, submitting completed appraisal reports to creditors 
and secondary market participants, collecting fees from creditors and 
secondary market participants for services provided, and paying 
appraisers for services performed; and
    (4) Reviewing and verifying the work of appraisers.
    (e) Appraiser panel means a network, list or roster of licensed or 
certified appraisers approved by an AMC to perform appraisals as 
independent contractors for the AMC. Appraisers on an AMC's ``appraiser 
panel'' under this part include both appraisers accepted by the AMC for 
consideration for future appraisal assignments in covered transactions 
or for secondary mortgage market participants in connection with covered 
transactions and appraisers engaged by the AMC to perform one or more 
appraisals in covered transactions or for secondary mortgage market 
participants in connection with covered transactions. An appraiser is an 
independent contractor for purposes of this subpart if the appraiser is 
treated as an independent contractor by the AMC for purposes of Federal 
income taxation.
    (f) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (g) Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    (h) Covered transaction means any consumer credit transaction 
secured by the consumer's principal dwelling.
    (i) Creditor means:
    (1) A person who regularly extends consumer credit that is subject 
to a finance charge or is payable by written agreement in more than four 
installments (not including a down payment), and to whom the obligation 
is initially payable, either on the face of the note or contract, or by 
agreement when there is no note or contract.
    (2) A person regularly extends consumer credit if the person 
extended credit (other than credit subject to the requirements of 12 CFR 
1026.32) more than 5 times for transactions secured by a dwelling in the 
preceding calendar year. If a person did not meet these numerical 
standards in the preceding calendar year, the numerical standards shall 
be applied to the current calendar year. A person regularly extends 
consumer credit if, in any 12-month period,

[[Page 787]]

the person originates more than one credit extension that is subject to 
the requirements of 12 CFR 1026.32 or one or more such credit extensions 
through a mortgage broker.
    (j) Dwelling means:
    (1) A residential structure that contains one to four units, whether 
or not that structure is attached to real property. The term includes an 
individual condominium unit, cooperative unit, mobile home, and trailer, 
if it is used as a residence.
    (2) A consumer can have only one ``principal'' dwelling at a time. 
Thus, a vacation or other second home would not be a principal dwelling. 
However, if a consumer buys or builds a new dwelling that will become 
the consumer's principal dwelling within a year or upon the completion 
of construction, the new dwelling is considered the principal dwelling 
for purposes of this section.
    (k) Federally regulated AMC means an AMC that is owned and 
controlled by an insured depository institution, as defined in 12 U.S.C. 
1813 and regulated by the Office of the Comptroller of the Currency, the 
Board of Governors of the Federal Reserve System, or the Federal Deposit 
Insurance Corporation.
    (l) Federally related transaction regulations means regulations 
established by the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, or the National Credit Union Administration, 
pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 
3341-3343.
    (m) Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    (n) Secondary mortgage market participant means a guarantor or 
insurer of mortgage-backed securities, or an underwriter or issuer of 
mortgage-backed securities. Secondary mortgage market participant only 
includes an individual investor in a mortgage-backed security if that 
investor also serves in the capacity of a guarantor, insurer, 
underwriter, or issuer for the mortgage-backed security.
    (o) States mean the 50 States and the District of Columbia and the 
territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin 
Islands.
    (p) Uniform Standards of Professional Appraisal Practice (USPAP) 
means the appraisal standards promulgated by the Appraisal Standards 
Board of the Appraisal Foundation.



Sec.  34.212  Appraiser panel--annual size calculation.

    For purposes of determining whether, within a 12-month period, an 
AMC oversees an appraiser panel of more than 15 State-certified or 
State-licensed appraisers in a State or 25 or more State-certified or 
State-licensed appraisers in two or more States pursuant to Sec.  
34.211(c)(1)(iii)--
    (a) An appraiser is deemed part of the AMC's appraiser panel as of 
the earliest date on which the AMC:
    (1) Accepts the appraiser for the AMC's consideration for future 
appraisal assignments in covered transactions or for secondary mortgage 
market participants in connection with covered transactions; or
    (2) Engages the appraiser to perform one or more appraisals on 
behalf of a creditor for a covered transaction or secondary mortgage 
market participant in connection with covered transactions.
    (b) An appraiser who is deemed part of the AMC's appraiser panel 
pursuant to paragraph (a) of this section is deemed to remain on the 
panel until the date on which the AMC:
    (1) Sends written notice to the appraiser removing the appraiser 
from the appraiser panel, with an explanation of its action; or
    (2) Receives written notice from the appraiser asking to be removed 
from the appraiser panel or notice of the death or incapacity of the 
appraiser.
    (c) If an appraiser is removed from an AMC's appraiser panel 
pursuant to paragraph (b) of this section, but the AMC subsequently 
accepts the appraiser for consideration for future assignments or 
engages the appraiser at any time during the twelve months after the 
AMC's removal, the removal will be deemed not to have occurred, and the 
appraiser will be deemed to

[[Page 788]]

have been part of the AMC's appraiser panel without interruption.
    (d) The period for purposes of counting appraisers on an AMC's 
appraiser panel may be the calendar year or a 12-month period 
established by law or rule of each State with which the AMC is required 
to register.



Sec.  34.213  Appraisal management company registration.

    Each State electing to register AMCs pursuant to paragraph (b)(1) of 
this section must:
    (a) Establish and maintain within the State appraiser certifying and 
licensing agency a licensing program that is subject to the limitations 
set forth in Sec.  34.214 and with the legal authority and mechanisms 
to:
    (1) Review and approve or deny an AMC's application for initial 
registration;
    (2) Review and renew or review and deny an AMC's registration 
periodically;
    (3) Examine the books and records of an AMC operating in the State 
and require the AMC to submit reports, information, and documents;
    (4) Verify that the appraisers on the AMC's appraiser panel hold 
valid State certifications or licenses, as applicable;
    (5) Conduct investigations of AMCs to assess potential violations of 
applicable appraisal-related laws, regulations, or orders;
    (6) Discipline, suspend, terminate, or deny renewal of the 
registration of an AMC that violates applicable appraisal-related laws, 
regulations, or orders; and
    (7) Report an AMC's violation of applicable appraisal-related laws, 
regulations, or orders, as well as disciplinary and enforcement actions 
and other relevant information about an AMC's operations, to the 
Appraisal Subcommittee.
    (b) Impose requirements on AMCs that are not owned and controlled by 
an insured depository institution and not regulated by a Federal 
financial institutions regulatory agency to:
    (1) Register with and be subject to supervision by the State 
appraiser certifying and licensing agency;
    (2) Engage only State-certified or State-licensed appraisers for 
Federally related transactions in conformity with any Federally related 
transaction regulations;
    (3) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC, in engaging an appraiser, selects an 
appraiser who is independent of the transaction and who has the 
requisite education, expertise, and experience necessary to competently 
complete the appraisal assignment for the particular market and property 
type;
    (4) Direct the appraiser to perform the assignment in accordance 
with USPAP; and
    (5) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC conducts its appraisal management 
services in accordance with the requirements of section 129E(a) through 
(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a) through (i), and 
regulations thereunder.



Sec.  34.214  Ownership limitations for State-registered appraisal 
management companies.

    (a) Appraiser certification or licensing of owners. (1) An AMC 
subject to State registration pursuant to Sec.  34.213 shall not be 
registered by a State or included on the AMC National Registry if such 
AMC, in whole or in part, directly or indirectly, is owned by any person 
who has had an appraiser license or certificate refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked in any State 
for a substantive cause, as determined by the appropriate State 
appraiser certifying and licensing agency.
    (2) An AMC subject to State registration pursuant to Sec.  34.213 is 
not barred by paragraph (a)(1) of this section from being registered by 
a State or included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (b) Good moral character of owners. An AMC shall not be registered 
by a State if any person that owns more than 10 percent of the AMC--

[[Page 789]]

    (1) Is determined by the State appraiser certifying and licensing 
agency not to have good moral character; or
    (2) Fails to submit to a background investigation carried out by the 
State appraiser certifying and licensing agency.



Sec.  34.215  Requirements for Federally regulated appraisal 
management companies.

    (a) Requirements in providing services. To provide appraisal 
management services for a creditor or secondary mortgage market 
participant relating to a covered transaction, a Federally regulated AMC 
must comply with the requirements in Sec.  34.213(b)(2) through (5).
    (b) Ownership limitations. (1) A Federally regulated AMC shall not 
be included on the AMC National Registry if such AMC, in whole or in 
part, directly or indirectly, is owned by any person who has had an 
appraiser license or certificate refused, denied, cancelled, surrendered 
in lieu of revocation, or revoked in any State for a substantive cause, 
as determined by the Appraisal Subcommittee.
    (2) A Federally regulated AMC is not barred by this paragraph (b) 
from being included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (c) Reporting information for the AMC National Registry. A Federally 
regulated AMC must report to the State or States in which it operates 
the information required to be submitted by the State to the Appraisal 
Subcommittee, pursuant to the Appraisal Subcommittee's policies 
regarding the determination of the AMC National Registry fee, including 
but not necessarily limited to the collection of information related to 
the limitations set forth in this section, as applicable.



Sec.  34.216  Information to be presented to the Appraisal Subcommittee 
by participating States.

    Each State electing to register AMCs for purposes of permitting AMCs 
to provide appraisal management services relating to covered 
transactions in the State must submit to the Appraisal Subcommittee the 
information required to be submitted by Appraisal Subcommittee 
regulations or guidance concerning AMCs that operate in the State.



PART 35_DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS--Table of Contents



Sec.
35.1 Purpose and scope of this part.
35.2 Definition of covered agreement.
35.3 CRA communications.
35.4 Fulfillment of the CRA.
35.5 Related agreements considered a single agreement.
35.6 Disclosure of covered agreements.
35.7 Annual reports.
35.8 Release of information under FOIA.
35.9 Compliance provisions.
35.10 Transition provisions.
35.11 Other definitions and rules of construction used in this part.

    Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 1831y, and 
5412(b)(2)(B).

    Source: 66 FR 2084, Jan. 10, 2001, unless otherwise noted.



Sec.  35.1  Purpose and scope of this part.

    (a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental 
entity or person, insured depository institution, or affiliate of an 
insured depository institution that enters into a covered agreement to--
    (1) Make the covered agreement available to the public and the 
appropriate Federal banking agency; and
    (2) File an annual report with the appropriate Federal banking 
agency concerning the covered agreement.
    (b) Scope of this part. The provisions of this part apply to--
    (1) A national bank and its subsidiaries;
    (2) A Federal savings association and its subsidiaries; and
    (3) Nongovernmental entities or persons (NGEPs) that enter into 
covered agreements with any entity listed in paragraphs (b)(1) or (b)(2) 
of this section.
    (c) Relation to Community Reinvestment Act. This part does not 
affect in any way the Community Reinvestment Act of 1977 (CRA) (12 
U.S.C. 2901 et seq.),

[[Page 790]]

part 25 (Community Reinvestment Act and Interstate Deposit Production 
Regulations) or part 195 (Community Reinvestment) of this chapter, or 
the OCC's interpretations or administration of that Act or these 
regulations.
    (d) Examples. (1) The examples in this part are not exclusive. 
Compliance with an example, to the extent applicable, constitutes 
compliance with this part.
    (2) Examples in a paragraph illustrate only the issue described in 
the paragraph and do not illustrate any other issues that may arise in 
this part.

[66 FR 2084, Jan. 10, 2001, as amended at 79 FR 28400, May 16, 2014]



Sec.  35.2  Definition of covered agreement.

    (a) General definition of covered agreement. A covered agreement is 
any contract, arrangement, or understanding that meets all of the 
following criteria--
    (1) The agreement is in writing.
    (2) The parties to the agreement include--
    (i) One or more insured depository institutions or affiliates of an 
insured depository institution; and
    (ii) One or more NGEPs.
    (3) The agreement provides for the insured depository institution or 
any affiliate to--
    (i) Provide to one or more individuals or entities (whether or not 
parties to the agreement) cash payments, grants, or other consideration 
(except loans) that have an aggregate value of more than $10,000 in any 
calendar year; or
    (ii) Make to one or more individuals or entities (whether or not 
parties to the agreement) loans that have an aggregate principal amount 
of more than $50,000 in any calendar year.
    (4) The agreement is made pursuant to, or in connection with, the 
fulfillment of the CRA, as defined in Sec.  35.4.
    (5) The agreement is with a NGEP that has had a CRA communication as 
described in Sec.  35.3 prior to entering into the agreement.
    (b) Examples concerning written arrangements or understandings--(1) 
Example 1. A NGEP meets with an insured depository institution and 
states that the institution needs to make more community development 
investments in the NGEP's community. The NGEP and insured depository 
institution do not reach an agreement concerning the community 
development investments the institution should make in the community, 
and the parties do not reach any mutual arrangement or understanding. 
Two weeks later, the institution unilaterally issues a press release 
announcing that it has established a general goal of making $100 million 
of community development grants in low- and moderate-income 
neighborhoods served by the insured depository institution over the next 
5 years. The NGEP is not identified in the press release. The press 
release is not a written arrangement or understanding.
    (2) Example 2. A NGEP meets with an insured depository institution 
and states that the institution needs to offer new loan programs in the 
NGEP's community. The NGEP and the insured depository institution reach 
a mutual arrangement or understanding that the institution will provide 
additional loans in the NGEP's community. The institution tells the NGEP 
that it will issue a press release announcing the program. Later, the 
insured depository institution issues a press release announcing the 
loan program. The press release incorporates the key terms of the 
understanding reached between the NGEP and the insured depository 
institution. The written press release reflects the mutual arrangement 
or understanding of the NGEP and the insured depository institution and 
is, therefore, a written arrangement or understanding.
    (3) Example 3. An NGEP sends a letter to an insured depository 
institution requesting that the institution provide a $15,000 grant to 
the NGEP. The insured depository institution responds in writing and 
agrees to provide the grant in connection with its annual grant program. 
The exchange of letters constitutes a written arrangement or 
understanding.
    (c) Loan agreements that are not covered agreements. A covered 
agreement does not include--
    (1) Any individual loan that is secured by real estate; or
    (2) Any specific contract or commitment for a loan or extension of 
credit

[[Page 791]]

to an individual, business, farm, or other entity, or group of such 
individuals or entities, if--
    (i) The funds are loaned at rates that are not substantially below 
market rates; and
    (ii) The loan application or other loan documentation does not 
indicate that the borrower intends or is authorized to use the borrowed 
funds to make a loan or extension of credit to one or more third 
parties.
    (d) Examples concerning loan agreements--(1) Example 1. An insured 
depository institution provides an organization with a $1 million loan 
that is documented in writing and is secured by real estate owned or to-
be-acquired by the organization. The agreement is an individual mortgage 
loan and is exempt from coverage under paragraph (c)(1) of this section, 
regardless of the interest rate on the loan or whether the organization 
intends or is authorized to re-loan the funds to a third party.
    (2) Example 2. An insured depository institution commits to provide 
a $500,000 line of credit to a small business that is documented by a 
written agreement. The loan is made at rates that are within the range 
of rates offered by the institution to similarly situated small 
businesses in the market and the loan documentation does not indicate 
that the small business intends or is authorized to re-lend the borrowed 
funds. The agreement is exempt from coverage under paragraph (c)(2) of 
this section.
    (3) Example 3. An insured depository institution offers small 
business loans that are guaranteed by the Small Business Administration 
(SBA). A small business obtains a $75,000 loan, documented in writing, 
from the institution under the institution's SBA loan program. The loan 
documentation does not indicate that the borrower intends or is 
authorized to re-lend the funds. Although the rate charged on the loan 
is well below that charged by the institution on commercial loans, the 
rate is within the range of rates that the institution would charge a 
similarly situated small business for a similar loan under the SBA loan 
program. Accordingly, the loan is not made at substantially below market 
rates and is exempt from coverage under paragraph (c)(2) of this 
section.
    (4) Example 4. A bank holding company enters into a written 
agreement with a community development organization that provides that 
insured depository institutions owned by the bank holding company will 
make $250 million in small business loans in the community over the next 
5 years. The written agreement is not a specific contract or commitment 
for a loan or an extension of credit and, thus, is not exempt from 
coverage under paragraph (c)(2) of this section. Each small business 
loan made by the insured depository institution pursuant to this general 
commitment would, however, be exempt from coverage if the loan is made 
at rates that are not substantially below market rates and the loan 
documentation does not indicate that the borrower intended or was 
authorized to re-lend the funds.
    (e) Agreements that include exempt loan agreements. If an agreement 
includes a loan, extension of credit or loan commitment that, if 
documented separately, would be exempt under paragraph (c) of this 
section, the exempt loan, extension of credit or loan commitment may be 
excluded for purposes of determining whether the agreement is a covered 
agreement.
    (f) Determining annual value of agreements that lack schedule of 
disbursements. For purposes of paragraph (a)(3) of this section, a 
multi-year agreement that does not include a schedule for the 
disbursement of payments, grants, loans or other consideration by the 
insured depository institution or affiliate, is considered to have a 
value in the first year of the agreement equal to all payments, grants, 
loans and other consideration to be provided at any time under the 
agreement.

[66 FR 2084, Jan. 10, 2001, as amended at 79 FR 28400, May 16, 2014]



Sec.  35.3  CRA communications.

    (a) Definition of CRA communication. A CRA communication is any of 
the following--
    (1) Any written or oral comment or testimony provided to a Federal 
banking agency concerning the adequacy of the performance under the CRA 
of the

[[Page 792]]

insured depository institution, any affiliated insured depository 
institution, or any CRA affiliate.
    (2) Any written comment submitted to the insured depository 
institution that discusses the adequacy of the performance under the CRA 
of the institution and must be included in the institution's CRA public 
file.
    (3) Any discussion or other contact with the insured depository 
institution or any affiliate about--
    (i) Providing (or refraining from providing) written or oral 
comments or testimony to any Federal banking agency concerning the 
adequacy of the performance under the CRA of the insured depository 
institution, any affiliated insured depository institution, or any CRA 
affiliate;
    (ii) Providing (or refraining from providing) written comments to 
the insured depository institution that concern the adequacy of the 
institution's performance under the CRA and must be included in the 
institution's CRA public file; or
    (iii) The adequacy of the performance under the CRA of the insured 
depository institution, any affiliated insured depository institution, 
or any CRA affiliate.
    (b) Discussions or contacts that are not CRA communications--(1) 
Timing of contacts with a Federal banking agency. An oral or written 
communication with a Federal banking agency is not a CRA communication 
if it occurred more than 3 years before the parties entered into the 
agreement.
    (2) Timing of contacts with insured depository institutions and 
affiliates. A communication with an insured depository institution or 
affiliate is not a CRA communication if the communication occurred--
    (i) More than 3 years before the parties entered into the agreement, 
in the case of any written communication;
    (ii) More than 3 years before the parties entered into the 
agreement, in the case of any oral communication in which the NGEP 
discusses providing (or refraining from providing) comments or testimony 
to a Federal banking agency or written comments that must be included in 
the institution's CRA public file in connection with a request to, or 
agreement by, the institution or affiliate to take (or refrain from 
taking) any action that is in fulfillment of the CRA; or
    (iii) More than 1 year before the parties entered into the 
agreement, in the case of any other oral communication not described in 
paragraph (b)(2)(ii).
    (3) Knowledge of communication by insured depository institution or 
affiliate. (i) A communication is only a CRA communication under 
paragraph (a) of this section if the insured depository institution or 
its affiliate has knowledge of the communication under this paragraph 
(b)(3)(ii) or (b)(3)(iii) of this section.
    (ii) Communication with insured depository institution or affiliate. 
An insured depository institution or affiliate has knowledge of a 
communication by the NGEP to the institution or its affiliate under this 
paragraph only if one of the following representatives of the insured 
depository institution or any affiliate has knowledge of the 
communication--
    (A) An employee who approves, directs, authorizes, or negotiates the 
agreement with the NGEP; or
    (B) An employee designated with responsibility for compliance with 
the CRA or executive officer if the employee or executive officer knows 
that the institution or affiliate is negotiating, intends to negotiate, 
or has been informed by the NGEP that it expects to request that the 
institution or affiliate negotiate an agreement with the NGEP.
    (iii) Other communications. An insured depository institution or 
affiliate is deemed to have knowledge of--
    (A) Any testimony provided to a Federal banking agency at a public 
meeting or hearing;
    (B) Any comment submitted to a Federal banking agency that is 
conveyed in writing by the agency to the insured depository institution 
or affiliate; and
    (C) Any written comment submitted to the insured depository 
institution that must be and is included in the institution's CRA public 
file.
    (4) Communication where NGEP has knowledge. A NGEP has a CRA 
communication with an insured depository institution or affiliate only 
if any of the

[[Page 793]]

following individuals has knowledge of the communication--
    (i) A director, employee, or member of the NGEP who approves, 
directs, authorizes, or negotiates the agreement with the insured 
depository institution or affiliate;
    (ii) A person who functions as an executive officer of the NGEP and 
who knows that the NGEP is negotiating or intends to negotiate an 
agreement with the insured depository institution or affiliate; or
    (iii) Where the NGEP is an individual, the NGEP.
    (c) Examples of CRA communications--(1) Examples of actions that are 
CRA communications. The following are examples of CRA communications. 
These examples are not exclusive and assume that the communication 
occurs within the relevant time period as described in paragraph (b)(1) 
or (b)(2) of this section and the appropriate representatives have 
knowledge of the communication as specified in paragraphs (b)(3) and 
(b)(4) of this section.
    (i) Example 1. A NGEP files a written comment with a Federal banking 
agency that states than an insured depository institution successfully 
addresses the credit needs of its community. The written comment is in 
response to a general request from the agency for comments on an 
application of the insured depository institution to open a new branch 
and a copy of the comment is provided to the institution.
    (ii) Example 2. A NGEP meets with an executive officer of an insured 
depository institution and states that the institution must improve its 
CRA performance.
    (iii) Example 3. A NGEP meets with an executive officer of an 
insured depository institution and states that the institution needs to 
make more mortgage loans in low- and moderate-income neighborhoods in 
its community.
    (iv) Example 4. A bank holding company files an application with a 
Federal banking agency to acquire an insured depository institution. Two 
weeks later, the NGEP meets with an executive officer of the bank 
holding company to discuss the adequacy of the performance under the CRA 
of the target insured depository institution. The insured depository 
institution was an affiliate of the bank holding company at the time the 
NGEP met with the target institution. (See Sec.  35.11(a).) Accordingly, 
the NGEP had a CRA communication with an affiliate of the bank holding 
company.
    (2) Examples of actions that are not CRA communications. The 
following are examples of actions that are not by themselves CRA 
communications. These examples are not exclusive.
    (i) Example 1. A NGEP provides to a Federal banking agency comments 
or testimony concerning an insured depository institution or affiliate 
in response to a direct request by the agency for comments or testimony 
from that NGEP. Direct requests for comments or testimony do not include 
a general invitation by a Federal banking agency for comments or 
testimony from the public in connection with a CRA performance 
evaluation of, or application for a deposit facility (as defined in 
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository 
institution or an application by a company to acquire an insured 
depository institution.
    (ii) Example 2. A NGEP makes a statement concerning an insured 
depository institution or affiliate at a widely attended conference or 
seminar regarding a general topic. A public or private meeting, public 
hearing, or other meeting regarding one or more specific institutions, 
affiliates or transactions involving an application for a deposit 
facility is not considered a widely attended conference or seminar.
    (iii) Example 3. A NGEP, such as a civil rights group, community 
group providing housing and other services in low- and moderate-income 
neighborhoods, veterans organization, community theater group, or youth 
organization, sends a fundraising letter to insured depository 
institutions and to other businesses in its community. The letter 
encourages all businesses in the community to meet their obligation to 
assist in making the local community a better place to live and work by 
supporting the fundraising efforts of the NGEP.
    (iv) Example 4. A NGEP discusses with an insured depository 
institution or affiliate whether particular loans,

[[Page 794]]

services, investments, community development activities, or other 
activities are generally eligible for consideration by a Federal banking 
agency under the CRA. The NGEP and insured depository institution or 
affiliate do not discuss the adequacy of the CRA performance of the 
insured depository institution or affiliate.
    (v) Example 5. A NGEP engaged in the sale or purchase of loans in 
the secondary market sends a general offering circular to financial 
institutions offering to sell or purchase a portfolio of loans. An 
insured depository institution that receives the offering circular 
discusses with the NGEP the types of loans included in the loan pool, 
whether such loans are generally eligible for consideration under the 
CRA, and which loans are made to borrowers in the institution's local 
community. The NGEP and insured depository institution do not discuss 
the adequacy of the institution's CRA performance.
    (d) Multiparty covered agreements--(1) A NGEP that is a party to a 
covered agreement that involves multiple NGEPs is not required to comply 
with the requirements of this part if--
    (i) The NGEP has not had a CRA communication; and
    (ii) No representative of the NGEP identified in paragraph (b)(4) of 
this section has knowledge at the time of the agreement that another 
NGEP that is a party to the agreement has had a CRA communication.
    (2) An insured depository institution or affiliate that is a party 
to a covered agreement that involves multiple insured depository 
institutions or affiliates is not required to comply with the disclosure 
and annual reporting requirements in Sec. Sec.  35.6 and 35.7 if--
    (i) No NGEP that is a party to the agreement has had a CRA 
communication concerning the insured depository institution or any 
affiliate; and
    (ii) No representative of the insured depository institution or any 
affiliate identified in paragraph (b)(3) of this section has knowledge 
at the time of the agreement that an NGEP that is a party to the 
agreement has had a CRA communication concerning any other insured 
depository institution or affiliate that is a party to the agreement.



Sec.  35.4  Fulfillment of the CRA.

    (a) List of factors that are in fulfillment of the CRA. Fulfillment 
of the CRA, for purposes of this part, means the following list of 
factors--
    (1) Comments to a Federal banking agency or included in CRA public 
file. Providing or refraining from providing written or oral comments or 
testimony to any Federal banking agency concerning the performance under 
the CRA of an insured depository institution or CRA affiliate that is a 
party to the agreement or an affiliate of a party to the agreement or 
written comments that are required to be included in the CRA public file 
of any such insured depository institution; or
    (2) Activities given favorable CRA consideration. Performing any of 
the following activities if the activity is of the type that is likely 
to receive favorable consideration by a Federal banking agency in 
evaluating the performance under the CRA of the insured depository 
institution that is a party to the agreement or an affiliate of a party 
to the agreement--
    (i) Home-purchase, home-improvement, small business, small farm, 
community development, and consumer lending, as described in Sec.  25.22 
(12 CFR 25.22), including loan purchases, loan commitments, and letters 
of credit;
    (ii) Making investments, deposits, or grants, or acquiring 
membership shares, that have as their primary purpose community 
development, as described in Sec.  25.23 (12 CFR 25.23);
    (iii) Delivering retail banking services, as described in Sec.  
25.24(d) (12 CFR 25.24(d));
    (iv) Providing community development services, as described in Sec.  
25.24(e) (12 CFR 25.24(e));
    (v) In the case of a wholesale or limited-purpose insured depository 
institution, community development lending, including originating and 
purchasing loans and making loan commitments and letters of credit, 
making qualified investments, or providing community development 
services, as described in Sec.  25.25(c) (12 CFR 25.25(c));
    (vi) In the case of a small insured depository institution, any 
lending or other activity described in Sec.  25.26(a) (12 CFR 25.26(a)); 
or

[[Page 795]]

    (vii) In the case of an insured depository institution that is 
evaluated on the basis of a strategic plan, any element of the strategic 
plan, as described in Sec.  25.27(f) (12 CFR 25.27(f)).
    (b) Agreements relating to activities of CRA affiliates. An insured 
depository institution or affiliate that is a party to a covered 
agreement that concerns any activity described in paragraph (a) of this 
section of a CRA affiliate must, prior to the time the agreement is 
entered into, notify each NGEP that is a party to the agreement that the 
agreement concerns a CRA affiliate.



Sec.  35.5  Related agreements considered a single agreement.

    The following rules must be applied in determining whether an 
agreement is a covered agreement under Sec.  35.2.
    (a) Agreements entered into by same parties. All written agreements 
to which an insured depository institution or an affiliate of the 
insured depository institution is a party shall be considered to be a 
single agreement if the agreements--
    (1) Are entered into with the same NGEP;
    (2) Were entered into within the same 12-month period; and
    (3) Are each in fulfillment of the CRA.
    (b) Substantively related contracts. All written contracts to which 
an insured depository institution or an affiliate of the insured 
depository institution is a party shall be considered to be a single 
agreement, without regard to whether the other parties to the contracts 
are the same or whether each such contract is in fulfillment of the CRA, 
if the contracts were negotiated in a coordinated fashion and a NGEP is 
a party to each contract.



Sec.  35.6  Disclosure of covered agreements.

    (a) Applicability date. This section applies only to covered 
agreements entered into after November 12, 1999.
    (b) Disclosure of covered agreements to the public--(1) Disclosure 
required. Each NGEP and each insured depository institution or affiliate 
that enters into a covered agreement must promptly make a copy of the 
covered agreement available to any individual or entity upon request.
    (2) Nondisclosure of confidential and proprietary information 
permitted. In responding to a request for a covered agreement from any 
individual or entity under paragraph (b)(1) of this section, a NGEP, 
insured depository institution, or affiliate may withhold from public 
disclosure confidential or proprietary information that the party 
believes the relevant supervisory agency could withhold from disclosure 
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
    (3) Information that must be disclosed. Notwithstanding paragraph 
(b)(2) of this section, a party must disclose any of the following 
information that is contained in a covered agreement--
    (i) The names and addresses of the parties to the agreement;
    (ii) The amount of any payments, fees, loans, or other consideration 
to be made or provided by any party to the agreement;
    (iii) Any description of how the funds or other resources provided 
under the agreement are to be used;
    (iv) The term of the agreement (if the agreement establishes a 
term); and
    (v) Any other information that the relevant supervisory agency 
determines is not properly exempt from public disclosure.
    (4) Request for review of withheld information. Any individual or 
entity may request that the relevant supervisory agency review whether 
any information in a covered agreement withheld by a party must be 
disclosed. Any requests for agency review of withheld information must 
be filed, and will be processed in accordance with, the relevant 
supervisory agency's rules concerning the availability of information 
(see subpart B of part 4 of the OCC's rules regarding the availability 
of information under the Freedom of Information Act (12 CFR part 4, 
subpart B).
    (5) Duration of obligation. The obligation to disclose a covered 
agreement to the public terminates 12 months after the end of the term 
of the agreement.
    (6) Reasonable copy and mailing fees. Each NGEP and each insured 
depository institution or affiliate may charge an individual or entity 
that requests a

[[Page 796]]

copy of a covered agreement a reasonable fee not to exceed the cost of 
copying and mailing the agreement.
    (7) Use of CRA public file by insured depository institution or 
affiliate. An insured depository institution and any affiliate of an 
insured depository institution may fulfill its obligation under this 
paragraph (b) by placing a copy of the covered agreement in the insured 
depository institution's CRA public file if the institution makes the 
agreement available in accordance with the procedures set forth in Sec.  
25.43 (12 CFR 25.43);
    (c) Disclosure by NGEPs of covered agreements to the relevant 
supervisory agency. (1) Each NGEP that is a party to a covered agreement 
must provide the following within 30 days of receiving a request from 
the relevant supervisory agency--
    (i) A complete copy of the agreement; and
    (ii) In the event the NGEP proposes the withholding of any 
information contained in the agreement in accordance with paragraph 
(b)(2) of this section, a public version of the agreement that excludes 
such information and an explanation justifying the exclusions. Any 
public version must include the information described in paragraph 
(b)(3) of this section.
    (2) The obligation of a NGEP to provide a covered agreement to the 
relevant supervisory agency terminates 12 months after the end of the 
term of the covered agreement.
    (d) Disclosure by insured depository institution or affiliate of 
covered agreements to the relevant supervisory agency--(1) In general. 
Within 60 days of the end of each calendar quarter, each insured 
depository institution and affiliate must provide each relevant 
supervisory agency with--
    (i)(A) A complete copy of each covered agreement entered into by the 
insured depository institution or affiliate during the calendar quarter; 
and
    (B) In the event the institution or affiliate proposes the 
withholding of any information contained in the agreement in accordance 
with paragraph (b)(2) of this section, a public version of the agreement 
that excludes such information (other than any information described in 
paragraph (b)(3) of this section) and an explanation justifying the 
exclusions; or
    (ii) A list of all covered agreements entered into by the insured 
depository institution or affiliate during the calendar quarter that 
contains--
    (A) The name and address of each insured depository institution or 
affiliate that is a party to the agreement;
    (B) The name and address of each NGEP that is a party to the 
agreement;
    (C) The date the agreement was entered into;
    (D) The estimated total value of all payments, fees, loans and other 
consideration to be provided by the institution or any affiliate of the 
institution under the agreement; and
    (E) The date the agreement terminates.
    (2) Prompt filing of covered agreements contained in list required. 
(i) If an insured depository institution or affiliate files a list of 
the covered agreements entered into by the institution or affiliate 
pursuant to paragraph (d)(1)(ii) of this section, the institution or 
affiliate must provide any relevant supervisory agency a complete copy 
and public version of any covered agreement referenced in the list 
within 7 calendar days of receiving a request from the agency for a copy 
of the agreement.
    (ii) The obligation of an insured depository institution or 
affiliate to provide a covered agreement to the relevant supervisory 
agency under this paragraph (d)(2) terminates 36 months after the end of 
the term of the agreement.
    (3) Joint filings. In the event that 2 or more insured depository 
institutions or affiliates are parties to a covered agreement, the 
insured depository institution(s) and affiliate(s) may jointly file the 
documents required by this paragraph (d). Any joint filing must identify 
the insured depository institution(s) and affiliate(s) for whom the 
filings are being made.



Sec.  35.7  Annual reports.

    (a) Applicability date. This section applies only to covered 
agreements entered into on or after May 12, 2000.
    (b) Annual report required. Each NGEP and each insured depository 
institution or affiliate that is a party to

[[Page 797]]

a covered agreement must file an annual report with each relevant 
supervisory agency concerning the disbursement, receipt, and uses of 
funds or other resources under the covered agreement.
    (c) Duration of reporting requirement--(1) NGEPs. A NGEP must file 
an annual report for a covered agreement for any fiscal year in which 
the NGEP receives or uses funds or other resources under the agreement.
    (2) Insured depository institutions and affiliates. An insured 
depository institution or affiliate must file an annual report for a 
covered agreement for any fiscal year in which the institution or 
affiliate--
    (i) Provides or receives any payments, fees, or loans under the 
covered agreement that must be reported under paragraphs (e)(1)(iii) and 
(iv) of this section; or
    (ii) Has data to report on loans, investments, and services provided 
by a party to the covered agreement under the covered agreement under 
paragraph (e)(1)(vi) of this section.
    (d) Annual reports filed by NGEP--(1) Contents of report. The annual 
report filed by a NGEP under this section must include the following--
    (i) The name and mailing address of the NGEP filing the report;
    (ii) Information sufficient to identify the covered agreement for 
which the annual report is being filed, such as by providing the names 
of the parties to the agreement and the date the agreement was entered 
into or by providing a copy of the agreement;
    (iii) The amount of funds or resources received under the covered 
agreement during the fiscal year; and
    (iv) A detailed, itemized list of how any funds or resources 
received by the NGEP under the covered agreement were used during the 
fiscal year, including the total amount used for--
    (A) Compensation of officers, directors, and employees;
    (B) Administrative expenses;
    (C) Travel expenses;
    (D) Entertainment expenses;
    (E) Payment of consulting and professional fees; and
    (F) Other expenses and uses (specify expense or use).
    (2) More detailed reporting of uses of funds or resources 
permitted--(i) In general. If a NGEP allocated and used funds received 
under a covered agreement for a specific purpose, the NGEP may fulfill 
the requirements of paragraph (d)(1)(iv) of this section with respect to 
such funds by providing--
    (A) A brief description of each specific purpose for which the funds 
or other resources were used; and
    (B) The amount of funds or resources used during the fiscal year for 
each specific purpose.
    (ii) Specific purpose defined. A NGEP allocates and uses funds for a 
specific purpose if the NGEP receives and uses the funds for a purpose 
that is more specific and limited than the categories listed in 
paragraph (d)(1)(iv) of this section.
    (3) Use of other reports. The annual report filed by a NGEP may 
consist of or incorporate a report prepared for any other purpose, such 
as the Internal Revenue Service Return of Organization Exempt From 
Income Tax on Form 990, or any other Internal Revenue Service form, 
state tax form, report to members or shareholders, audited or unaudited 
financial statements, audit report, or other report, so long as the 
annual report filed by the NGEP contains all of the information required 
by this paragraph (d).
    (4) Consolidated reports permitted. A NGEP that is a party to 2 or 
more covered agreements may file with each relevant supervisory agency a 
single consolidated annual report covering all the covered agreements. 
Any consolidated report must contain all the information required by 
this paragraph (d). The information reported under paragraphs (d)(1)(iv) 
and (d)(2) of this section may be reported on an aggregate basis for all 
covered agreements.
    (5) Examples of annual report requirements for NGEPs--(i) Example 1. 
A NGEP receives an unrestricted grant of $15,000 under a covered 
agreement, includes the funds in its general operating budget and uses 
the funds during its fiscal year. The NGEP's annual report for the 
fiscal year must provide the name and mailing address of the NGEP, 
information sufficient to identify the covered agreement, and state that 
the NGEP received $15,000 during the fiscal year.

[[Page 798]]

The report must also indicate the total expenditures made by the NGEP 
during the fiscal year for compensation, administrative expenses, travel 
expenses, entertainment expenses, consulting and professional fees, and 
other expenses and uses. The NGEP's annual report may provide this 
information by submitting an Internal Revenue Service Form 990 that 
includes the required information. If the Internal Revenue Service Form 
does not include information for all of the required categories listed 
in this part, the NGEP must report the total expenditures in the 
remaining categories either by providing that information directly or by 
providing another form or report that includes the required information.
    (ii) Example 2. An organization receives $15,000 from an insured 
depository institution under a covered agreement and allocates and uses 
the $15,000 during the fiscal year to purchase computer equipment to 
support its functions. The organization's annual report must include the 
name and address of the organization, information sufficient to identify 
the agreement, and a statement that the organization received $15,000 
during the year. In addition, since the organization allocated and used 
the funds for a specific purpose that is more narrow and limited than 
the categories of expenses included in the detailed, itemized list of 
expenses, the organization would have the option of providing either the 
total amount it used during the year for each category of expenses 
included in paragraph (d)(1)(iv) of this section, or a statement that it 
used the $15,000 to purchase computer equipment and a brief description 
of the equipment purchased.
    (iii) Example 3. A community group receives $50,000 from an insured 
depository institution under a covered agreement. During its fiscal 
year, the community group specifically allocates and uses $5,000 of the 
funds to pay for a particular business trip and uses the remaining 
$45,000 for general operating expenses. The group's annual report for 
the fiscal year must include the name and address of the group, 
information sufficient to identify the agreement, and a statement that 
the group received $50,000. Because the group did not allocate and use 
all of the funds for a specific purpose, the group's annual report must 
provide the total amount of funds it used during the year for each 
category of expenses included in paragraph (d)(1)(iv) of this section. 
The group's annual report also could state that it used $5,000 for a 
particular business trip and include a brief description of the trip.
    (iv) Example 4. A community development organization is a party to 
two separate covered agreements with two unaffiliated insured depository 
institutions. Under each agreement, the organization receives $15,000 
during its fiscal year and uses the funds to support its activities 
during that year. If the organization elects to file a consolidated 
annual report, the consolidated report must identify the organization 
and the two covered agreements, state that the organization received 
$15,000 during the fiscal year under each agreement, and provide the 
total amount that the organization used during the year for each 
category of expenses included in paragraph (d)(1)(iv) of this section.
    (e) Annual report filed by insured depository institution or 
affiliate--(1) General. The annual report filed by an insured depository 
institution or affiliate must include the following--
    (i) The name and principal place of business of the insured 
depository institution or affiliate filing the report;
    (ii) Information sufficient to identify the covered agreement for 
which the annual report is being filed, such as by providing the names 
of the parties to the agreement and the date the agreement was entered 
into or by providing a copy of the agreement;
    (iii) The aggregate amount of payments, aggregate amount of fees, 
and aggregate amount of loans provided by the insured depository 
institution or affiliate under the covered agreement to any other party 
to the agreement during the fiscal year;
    (iv) The aggregate amount of payments, aggregate amount of fees, and 
aggregate amount of loans received by the insured depository institution 
or affiliate under the covered agreement from any other party to the 
agreement during the fiscal year;

[[Page 799]]

    (v) A general description of the terms and conditions of any 
payments, fees, or loans reported under paragraphs (e)(1)(iii) and (iv) 
of this section, or, in the event such terms and conditions are set 
forth--
    (A) In the covered agreement, a statement identifying the covered 
agreement and the date the agreement (or a list identifying the 
agreement) was filed with the relevant supervisory agency; or
    (B) In a previous annual report filed by the insured depository 
institution or affiliate, a statement identifying the date the report 
was filed with the relevant supervisory agency; and
    (vi) The aggregate amount and number of loans, aggregate amount and 
number of investments, and aggregate amount of services provided under 
the covered agreement to any individual or entity not a party to the 
agreement--
    (A) By the insured depository institution or affiliate during its 
fiscal year; and
    (B) By any other party to the agreement, unless such information is 
not known to the insured depository institution or affiliate filing the 
report or such information is or will be contained in the annual report 
filed by another party under this section.
    (2) Consolidated reports permitted--(i) Party to multiple 
agreements. An insured depository institution or affiliate that is a 
party to 2 or more covered agreements may file a single consolidated 
annual report with each relevant supervisory agency concerning all the 
covered agreements.
    (ii) Affiliated entities party to the same agreement. An insured 
depository institution and its affiliates that are parties to the same 
covered agreement may file a single consolidated annual report relating 
to the agreement with each relevant supervisory agency for the covered 
agreement.
    (iii) Content of report. Any consolidated annual report must contain 
all the information required by this paragraph (e). The amounts and data 
required to be reported under paragraphs (e)(1)(iv) and (vi) of this 
section may be reported on an aggregate basis for all covered 
agreements.
    (f) Time and place of filing--(1) General. Each party must file its 
annual report with each relevant supervisory agency for the covered 
agreement no later than six months following the end of the fiscal year 
covered by the report.
    (2) Alternative method of fulfilling annual reporting requirement 
for a NGEP. (i) A NGEP may fulfill the filing requirements of this 
section by providing the following materials to an insured depository 
institution or affiliate that is a party to the agreement no later than 
six months following the end of the NGEP's fiscal year--
    (A) A copy of the NGEP's annual report required under paragraph (d) 
of this section for the fiscal year; and
    (B) Written instructions that the insured depository institution or 
affiliate promptly forward the annual report to the relevant supervisory 
agency or agencies on behalf of the NGEP.
    (ii) An insured depository institution or affiliate that receives an 
annual report from a NGEP pursuant to paragraph (f)(2)(i) of this 
section must file the report with the relevant supervisory agency or 
agencies on behalf of the NGEP within 30 days.



Sec.  35.8  Release of information under FOIA.

    The OCC will make covered agreements and annual reports available to 
the public in accordance with the Freedom of Information Act (5 U.S.C. 
552 et seq.) and the OCC's rules regarding the availability of 
information under the Freedom of Information Act (12 CFR part 4, subpart 
B). A party to a covered agreement may request confidential treatment of 
proprietary and confidential information in a covered agreement or an 
annual report under those procedures.



Sec.  35.9  Compliance provisions.

    (a) Willful failure to comply with disclosure and reporting 
obligations. (1) If the OCC determines that a NGEP has willfully failed 
to comply in a material way with Sec.  35.6 or Sec.  35.7, the OCC will 
notify the NGEP in writing of that determination and provide the NGEP a 
period of 90 days (or such longer period as the OCC finds to be 
reasonable under the circumstances) to comply.
    (2) If the NGEP does not comply within the time period established 
by

[[Page 800]]

the OCC, the agreement shall thereafter be unenforceable by that NGEP by 
operation of section 48 of the Federal Deposit Insurance Act (12 U.S.C. 
1831y).
    (3) The OCC may assist any insured depository institution or 
affiliate that is a party to a covered agreement that is unenforceable 
by a NGEP by operation of section 48 of the Federal Deposit Insurance 
Act (12 U.S.C. 1831y) in identifying a successor to assume the NGEP's 
responsibilities under the agreement.
    (b) Diversion of funds. If a court or other body of competent 
jurisdiction determines that funds or resources received under a covered 
agreement have been diverted contrary to the purposes of the covered 
agreement for an individual's personal financial gain, the OCC may take 
either or both of the following actions--
    (1) Order the individual to disgorge the diverted funds or resources 
received under the agreement;
    (2) Prohibit the individual from being a party to any covered 
agreement for a period not to exceed 10 years.
    (c) Notice and opportunity to respond. Before making a determination 
under paragraph (a)(1) of this section, or taking any action under 
paragraph (b) of this section, the OCC will provide written notice and 
an opportunity to present information to the OCC concerning any relevant 
facts or circumstances relating to the matter.
    (d) Inadvertent or de minimis errors. Inadvertent or de minimis 
errors in annual reports or other documents filed with the OCC under 
Sec. Sec.  35.6 or 35.7 will not subject the reporting party to any 
penalty.
    (e) Enforcement of provisions in covered agreements. No provision of 
this part shall be construed as authorizing the OCC to enforce the 
provisions of any covered agreement.



Sec.  35.10  Transition provisions.

    (a) Disclosure of covered agreements entered into before the 
effective date of this part. The following disclosure requirements apply 
to covered agreements that were entered into after November 12, 1999, 
and that terminated before April 1, 2001.
    (1) Disclosure to the public. Each NGEP and each insured depository 
institution or affiliate that was a party to the agreement must make the 
agreement available to the public under Sec.  35.6 until at least April 
1, 2002.
    (2) Disclosure to the relevant supervisory agency. (i) Each NGEP 
that was a party to the agreement must make the agreement available to 
the relevant supervisory agency under Sec.  35.6 until at least April 1, 
2002.
    (ii) Each insured depository institution or affiliate that was a 
party to the agreement must, by June 30, 2001, provide each relevant 
supervisory agency either--
    (A) A copy of the agreement under Sec.  35.6(d)(1)(i); or
    (B) The information described in Sec.  35.6(d)(1)(ii) for each 
agreement.
    (b) Filing of annual reports that relate to fiscal years ending on 
or before December 31, 2000. In the event that a NGEP, insured 
depository institution or affiliate has any information to report under 
Sec.  35.7 for a fiscal year that ends on or before December 31, 2000, 
and that concerns a covered agreement entered into between May 12, 2000, 
and December 31, 2000, the annual report for that fiscal year must be 
provided no later than June 30, 2001, to--
    (1) Each relevant supervisory agency; or
    (2) In the case of a NGEP, to an insured depository institution or 
affiliate that is a party to the agreement in accordance with Sec.  
35.7(f)(2).



Sec.  35.11  Other definitions and rules of construction used in this part.

    (a) Affiliate. ``Affiliate'' means--
    (1) Any company that controls, is controlled by, or is under common 
control with another company; and
    (2) For the purpose of determining whether an agreement is a covered 
agreement under Sec.  35.2, an ``affiliate'' includes any company that 
would be under common control or merged with another company on 
consummation of any transaction pending before a Federal banking agency 
at the time--
    (i) The parties enter into the agreement; and
    (ii) The NGEP that is a party to the agreement makes a CRA 
communication, as described in Sec.  35.3.

[[Page 801]]

    (b) Control. ``Control'' is defined in section 2(a) of the Bank 
Holding Company Act (12 U.S.C. 1841(a)).
    (c) CRA affiliate. A ``CRA affiliate'' of an insured depository 
institution is any company that is an affiliate of an insured depository 
institution to the extent, and only to the extent, that the activities 
of the affiliate were considered by the appropriate Federal banking 
agency when evaluating the CRA performance of the institution at its 
most recent CRA examination prior to the agreement. An insured 
depository institution or affiliate also may designate any company as a 
CRA affiliate at any time prior to the time a covered agreement is 
entered into by informing the NGEP that is a party to the agreement of 
such designation.
    (d) CRA public file. ``CRA public file'' means the public file 
maintained by an insured depository institution and described in Sec.  
25.43 (12 CFR 25.43).
    (e) Executive officer. The term ``executive officer'' has the same 
meaning as in Sec.  215.2(e)(1) of Regulation O issued by the Board of 
Governors of the Federal Reserve System (12 CFR 215.2(e)(1)). In 
applying this definition under this part to a Federal savings 
association, the phrase ``Federal savings association'' shall be used in 
place of the term ``bank.''
    (f) Federal banking agency; appropriate Federal banking agency. The 
terms ``Federal banking agency'' and ``appropriate Federal banking 
agency'' have the same meanings as in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813).
    (g) Fiscal year. (1) The fiscal year for a NGEP that does not have a 
fiscal year shall be the calendar year.
    (2) Any NGEP, insured depository institution, or affiliate that has 
a fiscal year may elect to have the calendar year be its fiscal year for 
purposes of this part.
    (h) Insured depository institution. ``Insured depository 
institution'' has the same meaning as in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813).
    (i) NGEP. ``NGEP'' means a nongovernmental entity or person.
    (j) Nongovernmental entity or person--(1) General. A 
``nongovernmental entity or person'' is any partnership, association, 
trust, joint venture, joint stock company, corporation, limited 
liability corporation, company, firm, society, other organization, or 
individual.
    (2) Exclusions. A nongovernmental entity or person does not 
include--
    (i) The United States government, a state government, a unit of 
local government (including a county, city, town, township, parish, 
village, or other general-purpose subdivision of a state) or an Indian 
tribe or tribal organization established under Federal, state or Indian 
tribal law (including the Department of Hawaiian Home Lands), or a 
department, agency, or instrumentality of any such entity;
    (ii) A federally-chartered public corporation that receives Federal 
funds appropriated specifically for that corporation;
    (iii) An insured depository institution or affiliate of an insured 
depository institution; or
    (iv) An officer, director, employee, or representative (acting in 
his or her capacity as an officer, director, employee, or 
representative) of an entity listed in paragraphs (j)(2)(i) through 
(iii) of this section.
    (k) Party. The term ``party'' with respect to a covered agreement 
means each NGEP and each insured depository institution or affiliate 
that entered into the agreement.
    (l) Relevant supervisory agency. The ``relevant supervisory agency'' 
for a covered agreement means the appropriate Federal banking agency 
for--
    (1) Each insured depository institution (or subsidiary thereof) that 
is a party to the covered agreement;
    (2) Each insured depository institution (or subsidiary thereof) or 
CRA affiliate that makes payments or loans or provides services that are 
subject to the covered agreement; and
    (3) Any company (other than an insured depository institution or 
subsidiary thereof) that is a party to the covered agreement.
    (m) Term of agreement. An agreement that does not have a fixed 
termination date is considered to terminate on the last date on which 
any party to the agreement makes any payment or provides any loan or 
other resources under the agreement, unless the relevant supervisory 
agency for the agreement

[[Page 802]]

otherwise notifies each party in writing.

[66 FR 2084, Jan. 10, 2001, as amended at 79 FR 28400, May 16, 2014]

                           PART 36 [RESERVED]



PART 37_DEBT CANCELLATION CONTRACTS AND DEBT SUSPENSION AGREEMENTS--
Table of Contents



Sec.
37.1 Authority, purpose, and scope.
37.2 Definitions.
37.3 Prohibited practices.
37.4 Refunds of fees in the event of termination or prepayment of the 
          covered loan.
37.5 Method of payment of fees.
37.6 Disclosures.
37.7 Affirmative election to purchase and acknowledgment of receipt of 
          disclosures required.
37.8 Safety and soundness requirement.

Appendix A to Part 37--Short Form Disclosures
Appendix B to Part 37--Long Form Disclosures

    Authority: 12 U.S.C. 1 et seq., 24(Seventh), 93a, 1818.

    Source: 67 FR 58976, Sept. 19, 2002, unless otherwise noted.



Sec.  37.1  Authority, purpose, and scope.

    (a) Authority. A national bank is authorized to enter into debt 
cancellation contracts and debt suspension agreements and charge a fee 
therefor, in connection with extensions of credit that it makes, 
pursuant to 12 U.S.C. 24(Seventh).
    (b) Purpose. This part sets forth the standards that apply to debt 
cancellation contracts and debt suspension agreements entered into by 
national banks. The purpose of these standards is to ensure that 
national banks offer and implement such contracts and agreements 
consistent with safe and sound banking practices, and subject to 
appropriate consumer protections.
    (c) Scope. This part applies to debt cancellation contracts and debt 
suspension agreements entered into by national banks in connection with 
extensions of credit they make. National banks' debt cancellation 
contracts and debt suspension agreements are governed by this part and 
applicable Federal law and regulations, and not by part 14 of this 
chapter or by State law.



Sec.  37.2  Definitions.

    For purposes of this part:
    (a) Actuarial method means the method of allocating payments made on 
a debt between the amount financed and the finance charge pursuant to 
which a payment is applied first to the accumulated finance charge and 
any remainder is subtracted from, or any deficiency is added to, the 
unpaid balance of the amount financed.
    (b) Bank means a national bank and a Federal branch or Federal 
agency of a foreign bank as those terms are defined in part 28 of this 
chapter.
    (c) Closed-end credit means consumer credit other than open-end 
credit as defined in this section.
    (d) Contract means a debt] cancellation contract or a debt 
suspension agreement.
    (e) Customer means an individual who obtains an extension of credit 
from a bank primarily for personal, family or household purposes.
    (f) Debt cancellation contract means a loan term or contractual 
arrangement modifying loan terms under which a bank agrees to cancel all 
or part of a customer's obligation to repay an extension of credit from 
that bank upon the occurrence of a specified event. The agreement may be 
separate from or a part of other loan documents.
    (g) Debt suspension agreement means a loan term or contractual 
arrangement modifying loan terms under which a bank agrees to suspend 
all or part of a customer's obligation to repay an extension of credit 
from that bank upon the occurrence of a specified event. The agreement 
may be separate from or a part of other loan documents. The term debt 
suspension agreement does not include loan payment deferral arrangements 
in which the triggering event is the borrower's unilateral election to 
defer repayment, or the bank's unilateral decision to allow a deferral 
of repayment.
    (h) Open-end credit means consumer credit extended by a bank under a 
plan in which:
    (1) The bank reasonably contemplates repeated transactions;

[[Page 803]]

    (2) The bank may impose a finance charge from time to time on an 
outstanding unpaid balance; and
    (3) The amount of credit that may be extended to the customer during 
the term of the plan (up to any limit set by the bank) is generally made 
available to the extent that any outstanding balance is repaid.
    (i) Residential mortgage loan means a loan secured by 1-4 family, 
residential real property.



Sec.  37.3  Prohibited practices.

    (a) Anti-tying. A national bank may not extend credit nor alter the 
terms or conditions of an extension of credit conditioned upon the 
customer entering into a debt cancellation contract or debt suspension 
agreement with the bank.
    (b) Misrepresentations generally. A national bank may not engage in 
any practice or use any advertisement that could mislead or otherwise 
cause a reasonable person to reach an erroneous belief with respect to 
information that must be disclosed under this part.
    (c) Prohibited contract terms. A national bank may not offer debt 
cancellation contracts or debt suspension agreements that contain terms:
    (1) Giving the bank the right unilaterally to modify the contract 
unless:
    (i) The modification is favorable to the customer and is made 
without additional charge to the customer; or
    (ii) The customer is notified of any proposed change and is provided 
a reasonable opportunity to cancel the contract without penalty before 
the change goes into effect; or
    (2) Requiring a lump sum, single payment for the contract payable at 
the outset of the contract, where the debt subject to the contract is a 
residential mortgage loan.



Sec.  37.4  Refunds of fees in the event of termination or prepayment 
of the covered loan.

    (a) Refunds. If a debt cancellation contract or debt suspension 
agreement is terminated (including, for example, when the customer 
prepays the covered loan), the bank shall refund to the customer any 
unearned fees paid for the contract unless the contract provides 
otherwise. A bank may offer a customer a contract that does not provide 
for a refund only if the bank also offers that customer a bona fide 
option to purchase a comparable contract that provides for a refund.
    (b) Method of calculating refund. The bank shall calculate the 
amount of a refund using a method at least as favorable to the customer 
as the actuarial method.



Sec.  37.5  Method of payment of fees.

    Except as provided in Sec.  37.3(c)(2), a bank may offer a customer 
the option of paying the fee for a contract in a single payment, 
provided the bank also offers the customer a bona fide option of paying 
the fee for that contract in monthly or other periodic payments. If the 
bank offers the customer the option to finance the single payment by 
adding it to the amount the customer is borrowing, the bank must also 
disclose to the customer, in accordance with Sec.  37.6, whether and, if 
so, the time period during which, the customer may cancel the agreement 
and receive a refund.



Sec.  37.6  Disclosures.

    (a) Content of short form of disclosures. The short form of 
disclosures required by this part must include the information described 
in appendix A to this part that is appropriate to the product offered. 
Short form disclosures made in a form that is substantially similar to 
the disclosures in appendix A to this part will satisfy the short form 
disclosure requirements of this section.
    (b) Content of long form of disclosures. The long form of 
disclosures required by this part must include the information described 
in appendix B to this part that is appropriate to the product offered. 
Long form disclosures made in a form that is substantially similar to 
the disclosures in appendix B to this part will satisfy the long form 
disclosure requirements of this section.
    (c) Disclosure requirements; timing and method of disclosures--(1) 
Short form disclosures. The bank shall make the short form disclosures 
orally at the time the bank first solicits the purchase of a contract.
    (2) Long form disclosures. The bank shall make the long form 
disclosures in writing before the customer completes

[[Page 804]]

the purchase of the contract. If the initial solicitation occurs in 
person, then the bank shall provide the long form disclosures in writing 
at that time.
    (3) Special rule for transactions by telephone. If the contract is 
solicited by telephone, the bank shall provide the short form 
disclosures orally and shall mail the long form disclosures, and, if 
appropriate, a copy of the contract to the customer within 3 business 
days, beginning on the first business day after the telephone 
solicitation.
    (4) Special rule for solicitations using written mail inserts or 
``take one'' applications. If the contract is solicited through written 
materials such as mail inserts or ``take one'' applications, the bank 
may provide only the short form disclosures in the written materials if 
the bank mails the long form disclosures to the customer within 3 
business days, beginning on the first business day after the customer 
contacts the bank to respond to the solicitation, subject to the 
requirements of Sec.  37.7(c).
    (5) Special rule for electronic transactions. The disclosures 
described in this section may be provided through electronic media in a 
manner consistent with the requirements of the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001 et seq.
    (d) Form of disclosures--(1) Disclosures must be readily 
understandable. The disclosures required by this section must be 
conspicuous, simple, direct, readily understandable, and designed to 
call attention to the nature and significance of the information 
provided.
    (2) Disclosures must be meaningful. The disclosures required by this 
section must be in a meaningful form. Examples of methods that could 
call attention to the nature and significance of the information 
provided include:
    (i) A plain-language heading to call attention to the disclosures;
    (ii) A typeface and type size that are easy to read;
    (iii) Wide margins and ample line spacing;
    (iv) Boldface or italics for key words; and
    (v) Distinctive type style, and graphic devices, such as shading or 
sidebars, when the disclosures are combined with other information.
    (e) Advertisements and other promotional material for debt 
cancellation contracts and debt suspension agreements. The short form 
disclosures are required in advertisements and promotional material for 
contracts unless the advertisements and promotional materials are of a 
general nature describing or listing the services or products offered by 
the bank.



Sec.  37.7  Affirmative election to purchase and acknowledgment of receipt 
of disclosures required.

    (a) Affirmative election and acknowledgment of receipt of 
disclosures. Before entering into a contract the bank must obtain a 
customer's written affirmative election to purchase a contract and 
written acknowledgment of receipt of the disclosures required by Sec.  
37.6(b). The election and acknowledgment information must be 
conspicuous, simple, direct, readily understandable, and designed to 
call attention to their significance. The election and acknowledgment 
satisfy these standards if they conform with the requirements in Sec.  
37.6(d) of this part.
    (b) Special rule for telephone solicitations. If the sale of a 
contract occurs by telephone, the customer's affirmative election to 
purchase may be made orally, provided the bank:
    (1) Maintains sufficient documentation to show that the customer 
received the short form disclosures and then affirmatively elected to 
purchase the contract;
    (2) Mails the affirmative written election and written 
acknowledgment, together with the long form disclosures required by 
Sec.  37.6 of this part, to the customer within 3 business days after 
the telephone solicitation, and maintains sufficient documentation to 
show it made reasonable efforts to obtain the documents from the 
customer; and
    (3) Permits the customer to cancel the purchase of the contract 
without penalty within 30 days after the bank has mailed the long form 
disclosures to the customer.
    (c) Special rule for solicitations using written mail inserts or 
``take one'' applications. If the contract is solicited through written 
materials such as mail inserts or ``take one'' applications and the bank 
provides only the short form

[[Page 805]]

disclosures in the written materials, then the bank shall mail the 
acknowledgment of receipt of disclosures, together with the long form 
disclosures required by Sec.  37.6 of this part, to the customer within 
3 business days, beginning on the first business day after the customer 
contacts the bank or otherwise responds to the solicitation. The bank 
may not obligate the customer to pay for the contract until after the 
bank has received the customer's written acknowledgment of receipt of 
disclosures unless the bank:
    (1) Maintains sufficient documentation to show that the bank 
provided the acknowledgment of receipt of disclosures to the customer as 
required by this section;
    (2) Maintains sufficient documentation to show that the bank made 
reasonable efforts to obtain from the customer a written acknowledgment 
of receipt of the long form disclosures; and
    (3) Permits the customer to cancel the purchase of the contract 
without penalty within 30 days after the bank has mailed the long form 
disclosures to the customer.
    (d) Special rule for electronic election. The affirmative election 
and acknowledgment may be made electronically in a manner consistent 
with the requirements of the Electronic Signatures in Global and 
National Commerce Act, 15 U.S.C. 7001 et seq.

[67 FR 58976, Sept. 19, 2002, as amended at 73 FR 22252, Apr. 24, 2008]



Sec.  37.8  Safety and soundness requirements.

    A national bank must manage the risks associated with debt 
cancellation contracts and debt suspension agreements in accordance with 
safe and sound banking principles. Accordingly, a national bank must 
establish and maintain effective risk management and control processes 
over its debt cancellation contracts and debt suspension agreements. 
Such processes include appropriate recognition and financial reporting 
of income, expenses, assets and liabilities, and appropriate treatment 
of all expected and unexpected losses associated with the products. A 
bank also should assess the adequacy of its internal control and risk 
mitigation activities in view of the nature and scope of its debt 
cancellation contract and debt suspension agreement programs.



           Sec. Appendix A to Part 37--Short Form Disclosures

 This product is optional

    Your purchase of [PRODUCT NAME] is optional. Whether or not you 
purchase [PRODUCT NAME] will not affect your application for credit or 
the terms of any existing credit agreement you have with the bank.

 Lump sum payment of fee

[Applicable if a bank offers the option to pay the fee in a single 
payment]
[Prohibited where the debt subject to the contract is a residential 
mortgage loan]

    You may choose to pay the fee in a single lump sum or in [monthly/
quarterly] payments. Adding the lump sum of the fee to the amount you 
borrow will increase the cost of [PRODUCT NAME].

 Lump sum payment of fee with no refund

[Applicable if a bank offers the option to pay the fee in a single 
payment for a no-refund DCC]
[Prohibited where the debt subject to the contract is a residential 
mortgage loan]

    You may choose [PRODUCT NAME] with a refund provision or without a 
refund provision. Prices of refund and no-refund products are likely to 
differ.

 Refund of fee paid in lump sum

[Applicable where the customer pays the fee in a single payment and the 
fee is added to the amount borrowed]
[Prohibited where the debt subject to the contract is a residential 
mortgage loan]

    [Either:] (1) You may cancel [PRODUCT NAME] at any time and receive 
a refund; or (2) You may cancel [PRODUCT NAME] within __ days and 
receive a full refund; or (3) If you cancel [PRODUCT NAME] you will not 
receive a refund.

 Additional disclosures

    We will give you additional information before you are required to 
pay for [PRODUCT NAME]. [If applicable]: This information will include a 
copy of the contract containing the terms of [PRODUCT NAME].

 Eligibility requirements, conditions, and exclusions

    There are eligibility requirements, conditions, and exclusions that 
could prevent you from receiving benefits under [PRODUCT NAME].
    [Either:] You should carefully read our additional information for a 
full explanation of the terms of [PRODUCT NAME] or You should carefully 
read the contract for a full explanation of the terms of [PRODUCT NAME].

[[Page 806]]





            Sec. Appendix B to Part 37--Long Form Disclosures

 This product is optional

    Your purchase of [PRODUCT NAME] is optional. Whether or not you 
purchase [PRODUCT NAME] will not affect your application for credit or 
the terms of any existing credit agreement you have with the bank.

 Explanation of debt suspension agreement

[Applicable if the contract has a debt suspension feature]

    If [PRODUCT NAME] is activated, your duty to pay the loan principal 
and interest to the bank is only suspended. You must fully repay the 
loan after the period of suspension has expired. [If applicable]: This 
includes interest accumulated during the period of suspension.

 Amount of fee

    [For closed-end credit]: The total fee for [PRODUCT NAME] is __.
    [For open-end credit, either:] (1) The monthly fee for [PRODUCT 
NAME] is based on your account balance each month multiplied by the 
unit-cost, which is ___; or (2) The formula used to compute the fee is 
_____].

 Lump sum payment of fee

[Applicable if a bank offers the option to pay the fee in a single 
payment]
[Prohibited where the debt subject to the contract is a residential 
mortgage loan]

    You may choose to pay the fee in a single lump sum or in [monthly/
quarterly] payments. Adding the lump sum of the fee to the amount you 
borrow will increase the cost of [PRODUCT NAME].

 Lump sum payment of fee with no refund

[Applicable if a bank offers the option to pay the fee in a single 
payment for a no-refund DCC]
[Prohibited where the debt subject to the contract is a residential 
mortgage loan]

    You have the option to purchase [PRODUCT NAME] that includes a 
refund of the unearned portion of the fee if you terminate the contract 
or prepay the loan in full prior to the scheduled termination date. 
Prices of refund and no-refund products may differ.

 Refund of fee paid in lump sum

[Applicable where the customer pays the fee in a single payment and the 
fee is added to the amount borrowed]
[Prohibited where the debt subject to the contract is a residential 
mortgage loan]

    [Either:] (1) You may cancel [PRODUCT NAME] at any time and receive 
a refund; or (2) You may cancel [PRODUCT NAME] within __ days and 
receive a full refund; or (3) If you cancel [PRODUCT NAME] you will not 
receive a refund.

 Use of card or credit line restricted

[Applicable if the contract restricts use of card or credit line when 
customer activates protection]

    If [PRODUCT NAME] is activated, you will be unable to incur 
additional charges on the credit card or use the credit line.

 Termination of [PRODUCT NAME]

    [Either]: (1) You have no right to cancel [PRODUCT NAME]; or (2) You 
have the right to cancel [PRODUCT NAME] in the following circumstances: 
_____.
    [And either]: (1) The bank has no right to cancel [PRODUCT NAME]; or 
(2)The bank has the right to cancel [PRODUCT NAME] in the following 
circumstances: _____.

 Eligibility requirements, conditions, and exclusions

    There are eligibility requirements, conditions, and exclusions that 
could prevent you from receiving benefits under [PRODUCT NAME].
    [Either]: (1) The following is a summary of the eligibility 
requirements, conditions, and exclusions. [The bank provides a summary 
of any eligibility requirements, conditions, and exclusions]; or (2) You 
may find a complete explanation of the eligibility requirements, 
conditions, and exclusions in paragraphs ___ of the [PRODUCT NAME] 
agreement.

                         PARTS 38	40 [RESERVED]



PART 41_FAIR CREDIT REPORTING--Table of Contents



Subparts A-H [Reserved]

  Subpart I_Proper Disposal of Records Containing Consumer Information

Sec.
41.80-41.82 [Reserved]
41.83 Proper disposal of records containing consumer information.

                   Subpart J_Identity Theft Red Flags

41.90 Duties regarding the detection, prevention, and mitigation of 
          identity theft.
41.91 Duties of card issuers regarding changes of address.
41.92 Examples.

Appendixes A-I to Part 41 [Reserved]
Appendix J to Part 41--Interagency Guidelines on Identity Theft 
          Detection, Prevention, and Mitigation

    Authority: 12 U.S.C. 1 et seq., 24(Seventh), 93a, 1462a, 1463, 1464, 
1818, 1828, 1831p-1, 1881-1884, and 5412(b)(2)(B); 15 U.S.C. 1681m, 
1681s, 1681t, and 1681w.

    Source: 69 FR 77616, Dec. 28, 2004, unless otherwise noted.

[[Page 807]]

Subparts A-H [Reserved]



  Subpart I_Proper Disposal of Records Containing Consumer Information



Sec. Sec.  41.80-41.82  [Reserved]



Sec.  41.83  Proper disposal of records containing consumer information.

    (a) Definitions as used in this section. (1) Consumer means an 
individual.
    (2) Federal savings association means a Federal savings association 
or an operating subsidiary of a Federal savings association.
    (3) National bank means a national bank, an operating subsidiary of 
a national bank, or a Federal branch or agency of a foreign bank.
    (b) In general. Each national bank or Federal savings association 
must properly dispose of any consumer information that it maintains or 
otherwise possesses in accordance with the Interagency Guidelines 
Establishing Information Security Standards, as set forth in appendix B 
to 12 CFR part 30, to the extent that the bank or savings association is 
covered by the scope of the Guidelines.
    (c) Rule of construction. Nothing in this section shall be construed 
to:
    (1) Require a national bank or Federal savings association to 
maintain or destroy any record pertaining to a consumer that is not 
imposed under any other law; or
    (2) Alter or affect any requirement imposed under any other 
provision of law to maintain or destroy such a record.

[79 FR 28400, May 16, 2014]



                   Subpart J_Identity Theft Red Flags

    Source: 72 FR 63753, Nov. 9, 2007, unless otherwise noted.



Sec.  41.90  Duties regarding the detection, prevention, and mitigation 
of identity theft.

    (a) Scope. This section applies to a financial institution or 
creditor that is a national bank; a Federal savings association; a 
Federal branch or agency of a foreign bank; or an operating subsidiary 
of any of these institutions that is not a functionally regulated 
subsidiary within the meaning of section 5(c)(5) of the Bank Holding 
Company Act of 1956, as amended (12 U.S.C. 1844(c)(5)).
    (b) Definitions. For purposes of this section and appendix J, the 
following definitions apply:
    (1) Account means a continuing relationship established by a person 
with a financial institution or creditor to obtain a product or service 
for personal, family, household or business purposes. Account includes:
    (i) An extension of credit, such as the purchase of property or 
services involving a deferred payment; and
    (ii) A deposit account.
    (2) The term board of directors includes:
    (i) In the case of a branch or agency of a foreign bank, the 
managing official in charge of the branch or agency; and
    (ii) In the case of any other creditor that does not have a board of 
directors, a designated employee at the level of senior management.
    (3) Covered account means:
    (i) An account that a financial institution or creditor offers or 
maintains, primarily for personal, family, or household purposes, that 
involves or is designed to permit multiple payments or transactions, 
such as a credit card account, mortgage loan, automobile loan, margin 
account, cell phone account, utility account, checking account, or 
savings account; and
    (ii) Any other account that the financial institution or creditor 
offers or maintains for which there is a reasonably foreseeable risk to 
customers or to the safety and soundness of the financial institution or 
creditor from identity theft, including financial, operational, 
compliance, reputation, or litigation risks.
    (4) Credit has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (5) Creditor has the same meaning as in 15 U.S.C. 1681m(e)(4).
    (6) Customer means a person that has a covered account with a 
financial institution or creditor.
    (7) Financial institution has the same meaning as in 15 U.S.C. 
1681a(t).
    (8) Identity theft has the same meaning as in 12 CFR 1022.3(h).

[[Page 808]]

    (9) Person means any individual, partnership, corporation, trust, 
estate, cooperative, association, government, or governmental 
subdivision or agency, or other entity.
    (10) Red Flag means a pattern, practice, or specific activity that 
indicates the possible existence of identity theft.
    (11) Service provider means a person that provides a service 
directly to the financial institution or creditor.
    (c) Periodic Identification of Covered Accounts. Each financial 
institution or creditor must periodically determine whether it offers or 
maintains covered accounts. As a part of this determination, a financial 
institution or creditor must conduct a risk assessment to determine 
whether it offers or maintains covered accounts described in paragraph 
(b)(3)(ii) of this section, taking into consideration:
    (1) The methods it provides to open its accounts;
    (2) The methods it provides to access its accounts; and
    (3) Its previous experiences with identity theft.
    (d) Establishment of an Identity Theft Prevention Program--(1) 
Program requirement. Each financial institution or creditor that offers 
or maintains one or more covered accounts must develop and implement a 
written Identity Theft Prevention Program (Program) that is designed to 
detect, prevent, and mitigate identity theft in connection with the 
opening of a covered account or any existing covered account. The 
Program must be appropriate to the size and complexity of the financial 
institution or creditor and the nature and scope of its activities.
    (2) Elements of the Program. The Program must include reasonable 
policies and procedures to:
    (i) Identify relevant Red Flags for the covered accounts that the 
financial institution or creditor offers or maintains, and incorporate 
those Red Flags into its Program;
    (ii) Detect Red Flags that have been incorporated into the Program 
of the financial institution or creditor;
    (iii) Respond appropriately to any Red Flags that are detected 
pursuant to paragraph (d)(2)(ii) of this section to prevent and mitigate 
identity theft; and
    (iv) Ensure the Program (including the Red Flags determined to be 
relevant) is updated periodically, to reflect changes in risks to 
customers and to the safety and soundness of the financial institution 
or creditor from identity theft.
    (e) Administration of the Program. Each financial institution or 
creditor that is required to implement a Program must provide for the 
continued administration of the Program and must:
    (1) Obtain approval of the initial written Program from either its 
board of directors or an appropriate committee of the board of 
directors;
    (2) Involve the board of directors, an appropriate committee 
thereof, or a designated employee at the level of senior management in 
the oversight, development, implementation and administration of the 
Program;
    (3) Train staff, as necessary, to effectively implement the Program; 
and
    (4) Exercise appropriate and effective oversight of service provider 
arrangements.
    (f) Guidelines. Each financial institution or creditor that is 
required to implement a Program must consider the guidelines in appendix 
J of this part and include in its Program those guidelines that are 
appropriate.

[72 FR 63753, Nov. 9, 2007, as amended at 79 FR 28400, May 16, 2014]



Sec.  41.91  Duties of card issuers regarding changes of address.

    (a) Scope. This section applies to an issuer of a debit or credit 
card (card issuer) that is a national bank; a Federal savings 
association; a Federal branch or agency of a foreign bank; or an 
operating subsidiary of any of these institutions that is not a 
functionally regulated subsidiary within the meaning of section 5(c)(5) 
of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 
1844(c)(5)).
    (b) Definitions. For purposes of this section:
    (1) Cardholder means a consumer who has been issued a credit or 
debit card.
    (2) Clear and conspicuous means reasonably understandable and 
designed to call attention to the nature and significance of the 
information presented.
    (3) Consumer means an individual.

[[Page 809]]

    (c) Address validation requirements. A card issuer must establish 
and implement reasonable policies and procedures to assess the validity 
of a change of address if it receives notification of a change of 
address for a consumer's debit or credit card account and, within a 
short period of time afterwards (during at least the first 30 days after 
it receives such notification), the card issuer receives a request for 
an additional or replacement card for the same account. Under these 
circumstances, the card issuer may not issue an additional or 
replacement card, until, in accordance with its reasonable policies and 
procedures and for the purpose of assessing the validity of the change 
of address, the card issuer:
    (1)(i) Notifies the cardholder of the request:
    (A) At the cardholder's former address; or
    (B) By any other means of communication that the card issuer and the 
cardholder have previously agreed to use; and
    (ii) Provides to the cardholder a reasonable means of promptly 
reporting incorrect address changes; or
    (2) Otherwise assesses the validity of the change of address in 
accordance with the policies and procedures the card issuer has 
established pursuant to Sec.  41.90 of this part.
    (d) Alternative timing of address validation. A card issuer may 
satisfy the requirements of paragraph (c) of this section if it 
validates an address pursuant to the methods in paragraph (c)(1) or 
(c)(2) of this section when it receives an address change notification, 
before it receives a request for an additional or replacement card.
    (e) Form of notice. Any written or electronic notice that the card 
issuer provides under this paragraph must be clear and conspicuous and 
provided separately from its regular correspondence with the cardholder.

[72 FR 63753, Nov. 9, 2007, as amended at 79 FR 28401, May 16, 2014]



Sec.  41.92  Examples.

    The examples in appendix J and supplement A to appendix J are not 
exclusive. Compliance with an example, to the extent applicable, 
constitutes compliance with this subpart. Examples in a paragraph 
illustrate only the issue described in the paragraph and do not 
illustrate any other issue that may arise in this subpart.

[79 FR 28401, May 16, 2014]



                Sec. Appendixes A-I to Part 41 [Reserved]



  Sec. Appendix J to Part 41--Interagency Guidelines on Identity Theft 
                  Detection, Prevention, and Mitigation

    Section 41.90 of this part requires each financial institution and 
creditor that offers or maintains one or more covered accounts, as 
defined in Sec.  41.90(b)(3) of this part, to develop and provide for 
the continued administration of a written Program to detect, prevent, 
and mitigate identity theft in connection with the opening of a covered 
account or any existing covered account. These guidelines are intended 
to assist financial institutions and creditors in the formulation and 
maintenance of a Program that satisfies the requirements of Sec.  41.90 
of this part.

                             I. The Program

    In designing its Program, a financial institution or creditor may 
incorporate, as appropriate, its existing policies, procedures, and 
other arrangements that control reasonably foreseeable risks to 
customers or to the safety and soundness of the financial institution or 
creditor from identity theft.

                   II. Identifying Relevant Red Flags

    (a) Risk Factors. A financial institution or creditor should 
consider the following factors in identifying relevant Red Flags for 
covered accounts, as appropriate:
    (1) The types of covered accounts it offers or maintains;
    (2) The methods it provides to open its covered accounts;
    (3) The methods it provides to access its covered accounts; and
    (4) Its previous experiences with identity theft.
    (b) Sources of Red Flags. Financial institutions and creditors 
should incorporate relevant Red Flags from sources such as:
    (1) Incidents of identity theft that the financial institution or 
creditor has experienced;
    (2) Methods of identity theft that the financial institution or 
creditor has identified that reflect changes in identity theft risks; 
and
    (3) Applicable supervisory guidance.
    (c) Categories of Red Flags. The Program should include relevant Red 
Flags from the

[[Page 810]]

following categories, as appropriate. Examples of Red Flags from each of 
these categories are appended as supplement A to this appendix J.
    (1) Alerts, notifications, or other warnings received from consumer 
reporting agencies or service providers, such as fraud detection 
services;
    (2) The presentation of suspicious documents;
    (3) The presentation of suspicious personal identifying information, 
such as a suspicious address change;
    (4) The unusual use of, or other suspicious activity related to, a 
covered account; and
    (5) Notice from customers, victims of identity theft, law 
enforcement authorities, or other persons regarding possible identity 
theft in connection with covered accounts held by the financial 
institution or creditor.

                        III. Detecting Red Flags

    The Program's policies and procedures should address the detection 
of Red Flags in connection with the opening of covered accounts and 
existing covered accounts, such as by:
    (a) Obtaining identifying information about, and verifying the 
identity of, a person opening a covered account, for example, using the 
policies and procedures regarding identification and verification set 
forth in the Customer Identification Program rules implementing 31 
U.S.C. 5318(l); and
    (b) Authenticating customers, monitoring transactions, and verifying 
the validity of change of address requests, in the case of existing 
covered accounts.

              IV. Preventing and Mitigating Identity Theft

    The Program's policies and procedures should provide for appropriate 
responses to the Red Flags the financial institution or creditor has 
detected that are commensurate with the degree of risk posed. In 
determining an appropriate response, a financial institution or creditor 
should consider aggravating factors that may heighten the risk of 
identity theft, such as a data security incident that results in 
unauthorized access to a customer's account records held by the 
financial institution, creditor, or third party, or notice that a 
customer has provided information related to a covered account held by 
the financial institution or creditor to someone fraudulently claiming 
to represent the financial institution or creditor or to a fraudulent 
website. Appropriate responses may include the following:
    (a) Monitoring a covered account for evidence of identity theft;
    (b) Contacting the customer;
    (c) Changing any passwords, security codes, or other security 
devices that permit access to a covered account;
    (d) Reopening a covered account with a new account number;
    (e) Not opening a new covered account;
    (f) Closing an existing covered account;
    (g) Not attempting to collect on a covered account or not selling a 
covered account to a debt collector;
    (h) Notifying law enforcement; or
    (i) Determining that no response is warranted under the particular 
circumstances.

                         V. Updating the Program

    Financial institutions and creditors should update the Program 
(including the Red Flags determined to be relevant) periodically, to 
reflect changes in risks to customers or to the safety and soundness of 
the financial institution or creditor from identity theft, based on 
factors such as:
    (a) The experiences of the financial institution or creditor with 
identity theft;
    (b) Changes in methods of identity theft;
    (c) Changes in methods to detect, prevent, and mitigate identity 
theft;
    (d) Changes in the types of accounts that the financial institution 
or creditor offers or maintains; and
    (e) Changes in the business arrangements of the financial 
institution or creditor, including mergers, acquisitions, alliances, 
joint ventures, and service provider arrangements.

                VI. Methods for Administering the Program

    (a) Oversight of Program. Oversight by the board of directors, an 
appropriate committee of the board, or a designated employee at the 
level of senior management should include:
    (1) Assigning specific responsibility for the Program's 
implementation;
    (2) Reviewing reports prepared by staff regarding compliance by the 
financial institution or creditor with Sec.  41.90 of this part; and
    (3) Approving material changes to the Program as necessary to 
address changing identity theft risks.
    (b) Reports. (1) In general. Staff of the financial institution or 
creditor responsible for development, implementation, and administration 
of its Program should report to the board of directors, an appropriate 
committee of the board, or a designated employee at the level of senior 
management, at least annually, on compliance by the financial 
institution or creditor with Sec.  41.90 of this part.
    (2) Contents of report. The report should address material matters 
related to the Program and evaluate issues such as: the effectiveness of 
the policies and procedures of the financial institution or creditor in 
addressing the risk of identity theft in connection with the opening of 
covered accounts and with respect to existing covered accounts; service 
provider arrangements; significant

[[Page 811]]

incidents involving identity theft and management's response; and 
recommendations for material changes to the Program.
    (c) Oversight of service provider arrangements. Whenever a financial 
institution or creditor engages a service provider to perform an 
activity in connection with one or more covered accounts the financial 
institution or creditor should take steps to ensure that the activity of 
the service provider is conducted in accordance with reasonable policies 
and procedures designed to detect, prevent, and mitigate the risk of 
identity theft. For example, a financial institution or creditor could 
require the service provider by contract to have policies and procedures 
to detect relevant Red Flags that may arise in the performance of the 
service provider's activities, and either report the Red Flags to the 
financial institution or creditor, or to take appropriate steps to 
prevent or mitigate identity theft.

                VII. Other Applicable Legal Requirements

    Financial institutions and creditors should be mindful of other 
related legal requirements that may be applicable, such as:
    (a) For financial institutions and creditors that are subject to 31 
U.S.C. 5318(g), filing a Suspicious Activity Report in accordance with 
applicable law and regulation;
    (b) Implementing any requirements under 15 U.S.C. 1681c-1(h) 
regarding the circumstances under which credit may be extended when the 
financial institution or creditor detects a fraud or active duty alert;
    (c) Implementing any requirements for furnishers of information to 
consumer reporting agencies under 15 U.S.C. 1681s-2, for example, to 
correct or update inaccurate or incomplete information, and to not 
report information that the furnisher has reasonable cause to believe is 
inaccurate; and
    (d) Complying with the prohibitions in 15 U.S.C. 1681m on the sale, 
transfer, and placement for collection of certain debts resulting from 
identity theft.

                       Supplement A to Appendix J

    In addition to incorporating Red Flags from the sources recommended 
in section II.b. of the Guidelines in appendix J of this part, each 
financial institution or creditor may consider incorporating into its 
Program, whether singly or in combination, Red Flags from the following 
illustrative examples in connection with covered accounts:

   Alerts, Notifications or Warnings from a Consumer Reporting Agency

    1. A fraud or active duty alert is included with a consumer report.
    2. A consumer reporting agency provides a notice of credit freeze in 
response to a request for a consumer report.
    3. A consumer reporting agency provides a notice of address 
discrepancy, as defined in 12 CFR 1022.82(b) of this part.
    4. A consumer report indicates a pattern of activity that is 
inconsistent with the history and usual pattern of activity of an 
applicant or customer, such as:
    a. A recent and significant increase in the volume of inquiries;
    b. An unusual number of recently established credit relationships;
    c. A material change in the use of credit, especially with respect 
to recently established credit relationships; or
    d. An account that was closed for cause or identified for abuse of 
account privileges by a financial institution or creditor.

                          Suspicious Documents

    5. Documents provided for identification appear to have been altered 
or forged.
    6. The photograph or physical description on the identification is 
not consistent with the appearance of the applicant or customer 
presenting the identification.
    7. Other information on the identification is not consistent with 
information provided by the person opening a new covered account or 
customer presenting the identification.
    8. Other information on the identification is not consistent with 
readily accessible information that is on file with the financial 
institution or creditor, such as a signature card or a recent check.
    9. An application appears to have been altered or forged, or gives 
the appearance of having been destroyed and reassembled.

               Suspicious Personal Identifying Information

    10. Personal identifying information provided is inconsistent when 
compared against external information sources used by the financial 
institution or creditor. For example:
    a. The address does not match any address in the consumer report; or
    b. The Social Security Number (SSN) has not been issued, or is 
listed on the Social Security Administration's Death Master File.
    11. Personal identifying information provided by the customer is not 
consistent with other personal identifying information provided by the 
customer. For example, there is a lack of correlation between the SSN 
range and date of birth.
    12. Personal identifying information provided is associated with 
known fraudulent activity as indicated by internal or third-party 
sources used by the financial institution or creditor. For example:
    a. The address on an application is the same as the address provided 
on a fraudulent application; or
    b. The phone number on an application is the same as the number 
provided on a fraudulent application.

[[Page 812]]

    13. Personal identifying information provided is of a type commonly 
associated with fraudulent activity as indicated by internal or third-
party sources used by the financial institution or creditor. For 
example:
    a. The address on an application is fictitious, a mail drop, or a 
prison; or
    b. The phone number is invalid, or is associated with a pager or 
answering service.
    14. The SSN provided is the same as that submitted by other persons 
opening an account or other customers.
    15. The address or telephone number provided is the same as or 
similar to the address or telephone number submitted by an unusually 
large number of other persons opening accounts or by other customers.
    16. The person opening the covered account or the customer fails to 
provide all required personal identifying information on an application 
or in response to notification that the application is incomplete.
    17. Personal identifying information provided is not consistent with 
personal identifying information that is on file with the financial 
institution or creditor.
    18. For financial institutions and creditors that use challenge 
questions, the person opening the covered account or the customer cannot 
provide authenticating information beyond that which generally would be 
available from a wallet or consumer report.

 Unusual Use of, or Suspicious Activity Related to, the Covered Account

    19. Shortly following the notice of a change of address for a 
covered account, the institution or creditor receives a request for a 
new, additional, or replacement card or a cell phone, or for the 
addition of authorized users on the account.
    20. A new revolving credit account is used in a manner commonly 
associated with known patterns of fraud. For example:
    a. The majority of available credit is used for cash advances or 
merchandise that is easily convertible to cash (e.g., electronics 
equipment or jewelry); or
    b. The customer fails to make the first payment or makes an initial 
payment but no subsequent payments.
    21. A covered account is used in a manner that is not consistent 
with established patterns of activity on the account. There is, for 
example:
    a. Nonpayment when there is no history of late or missed payments;
    b. A material increase in the use of available credit;
    c. A material change in purchasing or spending patterns;
    d. A material change in electronic fund transfer patterns in 
connection with a deposit account; or
    e. A material change in telephone call patterns in connection with a 
cellular phone account.
    22. A covered account that has been inactive for a reasonably 
lengthy period of time is used (taking into consideration the type of 
account, the expected pattern of usage and other relevant factors).
    23. Mail sent to the customer is returned repeatedly as 
undeliverable although transactions continue to be conducted in 
connection with the customer's covered account.
    24. The financial institution or creditor is notified that the 
customer is not receiving paper account statements.
    25. The financial institution or creditor is notified of 
unauthorized charges or transactions in connection with a customer's 
covered account.

   Notice From Customers, Victims of Identity Theft, Law Enforcement 
   Authorities, or Other Persons Regarding Possible Identity Theft in 
 Connection With Covered Accounts Held by the Financial Institution or 
                                Creditor

    26. The financial institution or creditor is notified by a customer, 
a victim of identity theft, a law enforcement authority, or any other 
person that it has opened a fraudulent account for a person engaged in 
identity theft.

[72 FR 63754, Nov. 9, 2007, as amended at 74 FR 22642, May 14, 2009; 76 
FR 6688, Feb. 8, 2011; 79 FR 28401, May 16, 2014]

                           PART 42 [RESERVED]



PART 43_CREDIT RISK RETENTION--Table of Contents



           Subpart A_Authority, Purpose, Scope and Definitions

Sec.
43.1 Authority, purpose, scope, and reservation of authority.
43.2 Definitions.

                     Subpart B_Credit Risk Retention

43.3 Base risk retention requirement.
43.4 Standard risk retention.
43.5 Revolving pool securitizations.
43.6 Eligible ABCP conduits.
43.7 Commercial mortgage-backed securities.
43.8 Federal National Mortgage Association and Federal Home Loan 
          Mortgage Corporation ABS.
43.9 Open market CLOs.
43.10 Qualified tender option bonds.

                  Subpart C_Transfer of Risk Retention

43.11 Allocation of risk retention to an originator.
43.12 Hedging, transfer and financing prohibitions.

[[Page 813]]

                   Subpart D_Exceptions and Exemptions

43.13 Exemption for qualified residential mortgages.
43.14 Definitions applicable to qualifying commercial loans, qualifying 
          commercial real estate loans, and qualifying automobile loans.
43.15 Qualifying commercial loans, commercial real estate loans, and 
          automobile loans.
43.16 Underwriting standards for qualifying commercial loans.
43.17 Underwriting standards for qualifying CRE loans.
43.18 Underwriting standards for qualifying automobile loans.
43.19 General exemptions.
43.20 Safe harbor for certain foreign-related transactions.
43.21 Additional exemptions.
43.22 Periodic review of the QRM definition, exempted three-to-four unit 
          residential mortgage loans, and community-focused residential 
          mortgage exemption.

    Authority: 12 U.S.C. 1 et seq., 93a, 161, 1464, 1818, 5412(b)(2)(B), 
and 15 U.S.C. 78o-11.

    Source: 79 FR 77740, 77764, Dec. 24, 2014, unless otherwise noted.



           Subpart A_Authority, Purpose, Scope and Definitions



Sec.  43.1  Authority, purpose, scope, and reservation of authority.

    (a) Authority. This part is issued under the authority of 12 U.S.C. 
1 et seq., 93a, 161, 1464, 1818, 5412(b)(2)(B), and 15 U.S.C. 78o-11.
    (b) Purpose. (1) This part requires securitizers to retain an 
economic interest in a portion of the credit risk for any asset that the 
securitizer, through the issuance of an asset-backed security, 
transfers, sells, or conveys to a third party. This part specifies the 
permissible types, forms, and amounts of credit risk retention, and it 
establishes certain exemptions for securitizations collateralized by 
assets that meet specified underwriting standards.
    (2) Nothing in this part shall be read to limit the authority of the 
OCC to take supervisory or enforcement action, including action to 
address unsafe or unsound practices or conditions, or violations of law.
    (c) Scope. This part applies to any securitizer that is a national 
bank, a Federal savings association, a Federal branch or agency of a 
foreign bank, or a subsidiary thereof.
    (d) Compliance dates. Compliance with this part is required:
    (1) With respect to any securitization transaction collateralized by 
residential mortgages, on and after December 24, 2015; and
    (2) With respect to any other securitization transaction, on and 
after December 24, 2016.

[79 FR 77764, Dec. 24, 2014]



Sec.  43.2  Definitions.

    For purposes of this part, the following definitions apply:
    ABS interest means:
    (1) Any type of interest or obligation issued by an issuing entity, 
whether or not in certificated form, including a security, obligation, 
beneficial interest or residual interest (other than an uncertificated 
regular interest in a REMIC that is held by another REMIC, where both 
REMICs are part of the same structure and a single REMIC in that 
structure issues ABS interests to investors, or a non-economic residual 
interest issued by a REMIC), payments on which are primarily dependent 
on the cash flows of the collateral owned or held by the issuing entity; 
and
    (2) Does not include common or preferred stock, limited liability 
interests, partnership interests, trust certificates, or similar 
interests that:
    (i) Are issued primarily to evidence ownership of the issuing 
entity; and
    (ii) The payments, if any, on which are not primarily dependent on 
the cash flows of the collateral held by the issuing entity; and
    (3) Does not include the right to receive payments for services 
provided by the holder of such right, including servicing, trustee 
services and custodial services.
    Affiliate of, or a person affiliated with, a specified person means 
a person that directly, or indirectly through one or more 
intermediaries, controls, or is controlled by, or is under common 
control with, the person specified.
    Appropriate Federal banking agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).

[[Page 814]]

    Asset means a self-liquidating financial asset (including but not 
limited to a loan, lease, mortgage, or receivable).
    Asset-backed security has the same meaning as in section 3(a)(79) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(79)).
    Collateral means, with respect to any issuance of ABS interests, the 
assets that provide the cash flow and the servicing assets that support 
such cash flow for the ABS interests irrespective of the legal structure 
of issuance, including security interests in assets or other property of 
the issuing entity, fractional undivided property interests in the 
assets or other property of the issuing entity, or any other property 
interest in or rights to cash flow from such assets and related 
servicing assets. Assets or other property collateralize an issuance of 
ABS interests if the assets or property serve as collateral for such 
issuance.
    Commercial real estate loan has the same meaning as in Sec.  43.14.
    Commission means the Securities and Exchange Commission.
    Control including the terms ``controlling,'' ``controlled by'' and 
``under common control with'':
    (1) Means the possession, direct or indirect, of the power to direct 
or cause the direction of the management and policies of a person, 
whether through the ownership of voting securities, by contract, or 
otherwise.
    (2) Without limiting the foregoing, a person shall be considered to 
control another person if the first person:
    (i) Owns, controls or holds with power to vote 25 percent or more of 
any class of voting securities of the other person; or
    (ii) Controls in any manner the election of a majority of the 
directors, trustees or persons performing similar functions of the other 
person.
    Credit risk means:
    (1) The risk of loss that could result from the failure of the 
borrower in the case of a securitized asset, or the issuing entity in 
the case of an ABS interest in the issuing entity, to make required 
payments of principal or interest on the asset or ABS interest on a 
timely basis;
    (2) The risk of loss that could result from bankruptcy, insolvency, 
or a similar proceeding with respect to the borrower or issuing entity, 
as appropriate; or
    (3) The effect that significant changes in the underlying credit 
quality of the asset or ABS interest may have on the market value of the 
asset or ABS interest.
    Creditor has the same meaning as in 15 U.S.C. 1602(g).
    Depositor means:
    (1) The person that receives or purchases and transfers or sells the 
securitized assets to the issuing entity;
    (2) The sponsor, in the case of a securitization transaction where 
there is not an intermediate transfer of the assets from the sponsor to 
the issuing entity; or
    (3) The person that receives or purchases and transfers or sells the 
securitized assets to the issuing entity in the case of a securitization 
transaction where the person transferring or selling the securitized 
assets directly to the issuing entity is itself a trust.
    Eligible horizontal residual interest means, with respect to any 
securitization transaction, an ABS interest in the issuing entity:
    (1) That is an interest in a single class or multiple classes in the 
issuing entity, provided that each interest meets, individually or in 
the aggregate, all of the requirements of this definition;
    (2) With respect to which, on any payment date or allocation date on 
which the issuing entity has insufficient funds to satisfy its 
obligation to pay all contractual interest or principal due, any 
resulting shortfall will reduce amounts payable to the eligible 
horizontal residual interest prior to any reduction in the amounts 
payable to any other ABS interest, whether through loss allocation, 
operation of the priority of payments, or any other governing 
contractual provision (until the amount of such ABS interest is reduced 
to zero); and
    (3) That, with the exception of any non-economic REMIC residual 
interest, has the most subordinated claim to payments of both principal 
and interest by the issuing entity.
    Eligible horizontal cash reserve account means an account meeting 
the requirements of Sec.  43.4(b).

[[Page 815]]

    Eligible vertical interest means, with respect to any securitization 
transaction, a single vertical security or an interest in each class of 
ABS interests in the issuing entity issued as part of the securitization 
transaction that constitutes the same proportion of each such class.
    Federal banking agencies means the Office of the Comptroller of the 
Currency, the Board of Governors of the Federal Reserve System, and the 
Federal Deposit Insurance Corporation.
    GAAP means generally accepted accounting principles as used in the 
United States.
    Issuing entity means, with respect to a securitization transaction, 
the trust or other entity:
    (1) That owns or holds the pool of assets to be securitized; and
    (2) In whose name the asset-backed securities are issued.
    Majority-owned affiliate of a person means an entity (other than the 
issuing entity) that, directly or indirectly, majority controls, is 
majority controlled by or is under common majority control with, such 
person. For purposes of this definition, majority control means 
ownership of more than 50 percent of the equity of an entity, or 
ownership of any other controlling financial interest in the entity, as 
determined under GAAP.
    Originator means a person who:
    (1) Through an extension of credit or otherwise, creates an asset 
that collateralizes an asset-backed security; and
    (2) Sells the asset directly or indirectly to a securitizer or 
issuing entity.
    REMIC has the same meaning as in 26 U.S.C. 860D.
    Residential mortgage means:
    (1) A transaction that is a covered transaction as defined in Sec.  
1026.43(b) of Regulation Z (12 CFR 1026.43(b)(1));
    (2) Any transaction that is exempt from the definition of ``covered 
transaction'' under Sec.  1026.43(a) of Regulation Z (12 CFR 
1026.43(a)); and
    (3) Any other loan secured by a residential structure that contains 
one to four units, whether or not that structure is attached to real 
property, including an individual condominium or cooperative unit and, 
if used as a residence, a mobile home or trailer.
    Retaining sponsor means, with respect to a securitization 
transaction, the sponsor that has retained or caused to be retained an 
economic interest in the credit risk of the securitized assets pursuant 
to subpart B of this part.
    Securitization transaction means a transaction involving the offer 
and sale of asset-backed securities by an issuing entity.
    Securitized asset means an asset that:
    (1) Is transferred, sold, or conveyed to an issuing entity; and
    (2) Collateralizes the ABS interests issued by the issuing entity.
    Securitizer means, with respect to a securitization transaction, 
either:
    (1) The depositor of the asset-backed securities (if the depositor 
is not the sponsor); or
    (2) The sponsor of the asset-backed securities.
    Servicer means any person responsible for the management or 
collection of the securitized assets or making allocations or 
distributions to holders of the ABS interests, but does not include a 
trustee for the issuing entity or the asset-backed securities that makes 
allocations or distributions to holders of the ABS interests if the 
trustee receives such allocations or distributions from a servicer and 
the trustee does not otherwise perform the functions of a servicer.
    Servicing assets means rights or other assets designed to assure the 
servicing or timely distribution of proceeds to ABS interest holders and 
rights or other assets that are related or incidental to purchasing or 
otherwise acquiring and holding the issuing entity's securitized assets. 
Servicing assets include amounts received by the issuing entity as 
proceeds of securitized assets, including proceeds of rights or other 
assets, whether as remittances by obligors or as other recoveries.
    Single vertical security means, with respect to any securitization 
transaction, an ABS interest entitling the sponsor to a specified 
percentage of the amounts paid on each class of ABS interests in the 
issuing entity (other than such single vertical security).
    Sponsor means a person who organizes and initiates a securitization

[[Page 816]]

transaction by selling or transferring assets, either directly or 
indirectly, including through an affiliate, to the issuing entity.
    State has the same meaning as in Section 3(a)(16) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(16)).
    United States or U.S. means the United States of America, including 
its territories and possessions, any State of the United States, and the 
District of Columbia.
    Wholly-owned affiliate means a person (other than an issuing entity) 
that, directly or indirectly, wholly controls, is wholly controlled by, 
or is wholly under common control with, another person. For purposes of 
this definition, ``wholly controls'' means ownership of 100 percent of 
the equity of an entity.



                     Subpart B_Credit Risk Retention



Sec.  43.3  Base risk retention requirement.

    (a) Base risk retention requirement. Except as otherwise provided in 
this part, the sponsor of a securitization transaction (or majority-
owned affiliate of the sponsor) shall retain an economic interest in the 
credit risk of the securitized assets in accordance with any one of 
Sec. Sec.  43.4 through 43.10. Credit risk in securitized assets 
required to be retained and held by any person for purposes of 
compliance with this part, whether a sponsor, an originator, an 
originator-seller, or a third-party purchaser, except as otherwise 
provided in this part, may be acquired and held by any of such person's 
majority-owned affiliates (other than an issuing entity).
    (b) Multiple sponsors. If there is more than one sponsor of a 
securitization transaction, it shall be the responsibility of each 
sponsor to ensure that at least one of the sponsors of the 
securitization transaction (or at least one of their majority-owned or 
wholly-owned affiliates, as applicable) retains an economic interest in 
the credit risk of the securitized assets in accordance with any one of 
Sec.  43.4, Sec.  43.5, Sec.  43.8, Sec.  43.9, or Sec.  43.10.



Sec.  43.4  Standard risk retention.

    (a) General requirement. Except as provided in Sec. Sec.  43.5 
through 43.10, the sponsor of a securitization transaction must retain 
an eligible vertical interest or eligible horizontal residual interest, 
or any combination thereof, in accordance with the requirements of this 
section.
    (1) If the sponsor retains only an eligible vertical interest as its 
required risk retention, the sponsor must retain an eligible vertical 
interest in a percentage of not less than 5 percent.
    (2) If the sponsor retains only an eligible horizontal residual 
interest as its required risk retention, the amount of the interest must 
equal at least 5 percent of the fair value of all ABS interests in the 
issuing entity issued as a part of the securitization transaction, 
determined using a fair value measurement framework under GAAP.
    (3) If the sponsor retains both an eligible vertical interest and an 
eligible horizontal residual interest as its required risk retention, 
the percentage of the fair value of the eligible horizontal residual 
interest and the percentage of the eligible vertical interest must equal 
at least five.
    (4) The percentage of the eligible vertical interest, eligible 
horizontal residual interest, or combination thereof retained by the 
sponsor must be determined as of the closing date of the securitization 
transaction.
    (b) Option to hold base amount in eligible horizontal cash reserve 
account. In lieu of retaining all or any part of an eligible horizontal 
residual interest under paragraph (a) of this section, the sponsor may, 
at closing of the securitization transaction, cause to be established 
and funded, in cash, an eligible horizontal cash reserve account in the 
amount equal to the fair value of such eligible horizontal residual 
interest or part thereof, provided that the account meets all of the 
following conditions:
    (1) The account is held by the trustee (or person performing similar 
functions) in the name and for the benefit of the issuing entity;
    (2) Amounts in the account are invested only in cash and cash 
equivalents; and
    (3) Until all ABS interests in the issuing entity are paid in full, 
or the issuing entity is dissolved:
    (i) Amounts in the account shall be released only to:

[[Page 817]]

    (A) Satisfy payments on ABS interests in the issuing entity on any 
payment date on which the issuing entity has insufficient funds from any 
source to satisfy an amount due on any ABS interest; or
    (B) Pay critical expenses of the trust unrelated to credit risk on 
any payment date on which the issuing entity has insufficient funds from 
any source to pay such expenses and:
    (1) Such expenses, in the absence of available funds in the eligible 
horizontal cash reserve account, would be paid prior to any payments to 
holders of ABS interests; and
    (2) Such payments are made to parties that are not affiliated with 
the sponsor; and
    (ii) Interest (or other earnings) on investments made in accordance 
with paragraph (b)(2) of this section may be released once received by 
the account.
    (c) Disclosures. A sponsor relying on this section shall provide, or 
cause to be provided, to potential investors, under the caption ``Credit 
Risk Retention'', a reasonable period of time prior to the sale of the 
asset-backed securities in the securitization transaction the following 
disclosures in written form and within the time frames set forth in this 
paragraph (c):
    (1) Horizontal interest. With respect to any eligible horizontal 
residual interest held under paragraph (a) of this section, a sponsor 
must disclose:
    (i) A reasonable period of time prior to the sale of an asset-backed 
security issued in the same offering of ABS interests,
    (A) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS interests are issued, as applicable)) of the eligible horizontal 
residual interest that the sponsor expects to retain at the closing of 
the securitization transaction. If the specific prices, sizes, or rates 
of interest of each tranche of the securitization are not available, the 
sponsor must disclose a range of fair values (expressed as a percentage 
of the fair value of all of the ABS interests issued in the 
securitization transaction and dollar amount (or corresponding amount in 
the foreign currency in which the ABS interests are issued, as 
applicable)) of the eligible horizontal residual interest that the 
sponsor expects to retain at the close of the securitization transaction 
based on a range of bona fide estimates or specified prices, sizes, or 
rates of interest of each tranche of the securitization. A sponsor 
disclosing a range of fair values based on a range of bona fide 
estimates or specified prices, sizes or rates of interest of each 
tranche of the securitization must also disclose the method by which it 
determined any range of prices, tranche sizes, or rates of interest.
    (B) A description of the material terms of the eligible horizontal 
residual interest to be retained by the sponsor;
    (C) A description of the valuation methodology used to calculate the 
fair values or range of fair values of all classes of ABS interests, 
including any portion of the eligible horizontal residual interest 
retained by the sponsor;
    (D) All key inputs and assumptions or a comprehensive description of 
such key inputs and assumptions that were used in measuring the 
estimated total fair value or range of fair values of all classes of ABS 
interests, including the eligible horizontal residual interest to be 
retained by the sponsor.
    (E) To the extent applicable to the valuation methodology used, the 
disclosure required in paragraph (c)(1)(i)(D) of this section shall 
include, but should not be limited to, quantitative information about 
each of the following:
    (1) Discount rates;
    (2) Loss given default (recovery);
    (3) Prepayment rates;
    (4) Default rates;
    (5) Lag time between default and recovery; and
    (6) The basis of forward interest rates used.
    (F) The disclosure required in paragraphs (c)(1)(i)(C) and (D) of 
this section shall include, at a minimum, descriptions of all inputs and 
assumptions that either could have a material impact on the fair value 
calculation or

[[Page 818]]

would be material to a prospective investor's ability to evaluate the 
sponsor's fair value calculations. To the extent the disclosure required 
in this paragraph (c)(1) includes a description of a curve or curves, 
the description shall include a description of the methodology that was 
used to derive each curve and a description of any aspects or features 
of each curve that could materially impact the fair value calculation or 
the ability of a prospective investor to evaluate the sponsor's fair 
value calculation. To the extent a sponsor uses information about the 
securitized assets in its calculation of fair value, such information 
shall not be as of a date more than 60 days prior to the date of first 
use with investors; provided that for a subsequent issuance of ABS 
interests by the same issuing entity with the same sponsor for which the 
securitization transaction distributes amounts to investors on a 
quarterly or less frequent basis, such information shall not be as of a 
date more than 135 days prior to the date of first use with investors; 
provided further, that the balance or value (in accordance with the 
transaction documents) of the securitized assets may be increased or 
decreased to reflect anticipated additions or removals of assets the 
sponsor makes or expects to make between the cut-off date or similar 
date for establishing the composition of the asset pool collateralizing 
such asset-backed security and the closing date of the securitization.
    (G) A summary description of the reference data set or other 
historical information used to develop the key inputs and assumptions 
referenced in paragraph (c)(1)(i)(D) of this section, including loss 
given default and default rates;
    (ii) A reasonable time after the closing of the securitization 
transaction:
    (A) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS are issued, as applicable)) of the eligible horizontal residual 
interest the sponsor retained at the closing of the securitization 
transaction, based on actual sale prices and finalized tranche sizes;
    (B) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS are issued, as applicable)) of the eligible horizontal residual 
interest that the sponsor is required to retain under this section; and
    (C) To the extent the valuation methodology or any of the key inputs 
and assumptions that were used in calculating the fair value or range of 
fair values disclosed prior to sale and required under paragraph 
(c)(1)(i) of this section materially differs from the methodology or key 
inputs and assumptions used to calculate the fair value at the time of 
closing, descriptions of those material differences.
    (iii) If the sponsor retains risk through the funding of an eligible 
horizontal cash reserve account:
    (A) The amount to be placed (or that is placed) by the sponsor in 
the eligible horizontal cash reserve account at closing, and the fair 
value (expressed as a percentage of the fair value of all of the ABS 
interests issued in the securitization transaction and dollar amount (or 
corresponding amount in the foreign currency in which the ABS interests 
are issued, as applicable)) of the eligible horizontal residual interest 
that the sponsor is required to fund through the eligible horizontal 
cash reserve account in order for such account, together with other 
retained interests, to satisfy the sponsor's risk retention requirement;
    (B) A description of the material terms of the eligible horizontal 
cash reserve account; and
    (C) The disclosures required in paragraphs (c)(1)(i) and (ii) of 
this section.
    (2) Vertical interest. With respect to any eligible vertical 
interest retained under paragraph (a) of this section, the sponsor must 
disclose:
    (i) A reasonable period of time prior to the sale of an asset-backed 
security issued in the same offering of ABS interests,
    (A) The form of the eligible vertical interest;

[[Page 819]]

    (B) The percentage that the sponsor is required to retain as a 
vertical interest under this section; and
    (C) A description of the material terms of the vertical interest and 
the amount that the sponsor expects to retain at the closing of the 
securitization transaction.
    (ii) A reasonable time after the closing of the securitization 
transaction, the amount of the vertical interest the sponsor retained at 
closing, if that amount is materially different from the amount 
disclosed under paragraph (c)(2)(i) of this section.
    (d) Record maintenance. A sponsor must retain the certifications and 
disclosures required in paragraphs (a) and (c) of this section in its 
records and must provide the disclosure upon request to the Commission 
and its appropriate Federal banking agency, if any, until three years 
after all ABS interests are no longer outstanding.



Sec.  43.5  Revolving pool securitizations.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    Revolving pool securitization means an issuing entity that is 
established to issue on multiple issuance dates more than one series, 
class, subclass, or tranche of asset-backed securities that are 
collateralized by a common pool of securitized assets that will change 
in composition over time, and that does not monetize excess interest and 
fees from its securitized assets.
    Seller's interest means an ABS interest or ABS interests:
    (1) Collateralized by the securitized assets and servicing assets 
owned or held by the issuing entity, other than the following that are 
not considered a component of seller's interest:
    (i) Servicing assets that have been allocated as collateral only for 
a specific series in connection with administering the revolving pool 
securitization, such as a principal accumulation or interest reserve 
account; and
    (ii) Assets that are not eligible under the terms of the 
securitization transaction to be included when determining whether the 
revolving pool securitization holds aggregate securitized assets in 
specified proportions to aggregate outstanding investor ABS interests 
issued; and
    (2) That is pari passu with each series of investor ABS interests 
issued, or partially or fully subordinated to one or more series in 
identical or varying amounts, with respect to the allocation of all 
distributions and losses with respect to the securitized assets prior to 
early amortization of the revolving securitization (as specified in the 
securitization transaction documents); and
    (3) That adjusts for fluctuations in the outstanding principal 
balance of the securitized assets in the pool.
    (b) General requirement. A sponsor satisfies the risk retention 
requirements of Sec.  43.3 with respect to a securitization transaction 
for which the issuing entity is a revolving pool securitization if the 
sponsor maintains a seller's interest of not less than 5 percent of the 
aggregate unpaid principal balance of all outstanding investor ABS 
interests in the issuing entity.
    (c) Measuring the seller's interest. In measuring the seller's 
interest for purposes of meeting the requirements of paragraph (b) of 
this section:
    (1) The unpaid principal balance of the securitized assets for the 
numerator of the 5 percent ratio shall not include assets of the types 
excluded from the definition of seller's interest in paragraph (a) of 
this section;
    (2) The aggregate unpaid principal balance of outstanding investor 
ABS interests in the denominator of the 5 percent ratio may be reduced 
by the amount of funds held in a segregated principal accumulation 
account for the repayment of outstanding investor ABS interests, if:
    (i) The terms of the securitization transaction documents prevent 
funds in the principal accumulation account from being applied for any 
purpose other than the repayment of the unpaid principal of outstanding 
investor ABS interests; and
    (ii) Funds in that account are invested only in the types of assets 
in which funds held in an eligible horizontal cash reserve account 
pursuant to Sec.  43.4 are permitted to be invested;
    (3) If the terms of the securitization transaction documents set 
minimum

[[Page 820]]

required seller's interest as a proportion of the unpaid principal 
balance of outstanding investor ABS interests for one or more series 
issued, rather than as a proportion of the aggregate outstanding 
investor ABS interests in all outstanding series combined, the 
percentage of the seller's interest for each such series must, when 
combined with the percentage of any minimum seller's interest set by 
reference to the aggregate outstanding investor ABS interests, equal at 
least 5 percent;
    (4) The 5 percent test must be determined and satisfied at the 
closing of each issuance of ABS interests to investors by the issuing 
entity, and
    (i) At least monthly at a seller's interest measurement date 
specified under the securitization transaction documents, until no ABS 
interest in the issuing entity is held by any person not a wholly-owned 
affiliate of the sponsor; or
    (ii) If the revolving pool securitization fails to meet the 5 
percent test as of any date described in paragraph (c)(4)(i) of this 
section, and the securitization transaction documents specify a cure 
period, the 5 percent test must be determined and satisfied within the 
earlier of the cure period, or one month after the date described in 
paragraph (c)(4)(i).
    (d) Measuring outstanding investor ABS interests. In measuring the 
amount of outstanding investor ABS interests for purposes of this 
section, ABS interests held for the life of such ABS interests by the 
sponsor or its wholly-owned affiliates may be excluded.
    (e) Holding and retention of the seller's interest; legacy trusts. 
(1) Notwithstanding Sec.  43.12(a), the seller's interest, and any 
offsetting horizontal retention interest retained pursuant to paragraph 
(g) of this section, must be retained by the sponsor or by one or more 
wholly-owned affiliates of the sponsor, including one or more depositors 
of the revolving pool securitization.
    (2) If one revolving pool securitization issues collateral 
certificates representing a beneficial interest in all or a portion of 
the securitized assets held by that securitization to another revolving 
pool securitization, which in turn issues ABS interests for which the 
collateral certificates are all or a portion of the securitized assets, 
a sponsor may satisfy the requirements of paragraphs (b) and (c) of this 
section by retaining the seller's interest for the assets represented by 
the collateral certificates through either of the revolving pool 
securitizations, so long as both revolving pool securitizations are 
retained at the direction of the same sponsor or its wholly-owned 
affiliates.
    (3) If the sponsor retains the seller's interest associated with the 
collateral certificates at the level of the revolving pool 
securitization that issues those collateral certificates, the proportion 
of the seller's interest required by paragraph (b) of this section 
retained at that level must equal the proportion that the principal 
balance of the securitized assets represented by the collateral 
certificates bears to the principal balance of the securitized assets in 
the revolving pool securitization that issues the ABS interests, as of 
each measurement date required by paragraph (c) of this section.
    (f) Offset for pool-level excess funding account. The 5 percent 
seller's interest required on each measurement date by paragraph (c) of 
this section may be reduced on a dollar-for-dollar basis by the balance, 
as of such date, of an excess funding account in the form of a 
segregated account that:
    (1) Is funded in the event of a failure to meet the minimum seller's 
interest requirements or other requirement to maintain a minimum balance 
of securitized assets under the securitization transaction documents by 
distributions otherwise payable to the holder of the seller's interest;
    (2) Is invested only in the types of assets in which funds held in a 
horizontal cash reserve account pursuant to Sec.  43.4 are permitted to 
be invested; and
    (3) In the event of an early amortization, makes payments of amounts 
held in the account to holders of investor ABS interests in the same 
manner as payments to holders of investor ABS interests of amounts 
received on securitized assets.
    (g) Combined seller's interests and horizontal interest retention. 
The 5 percent seller's interest required on each measurement date by 
paragraph (c) of this

[[Page 821]]

section may be reduced to a percentage lower than 5 percent to the 
extent that, for all series of investor ABS interests issued after the 
applicable effective date of this Sec.  43.5, the sponsor, or 
notwithstanding Sec.  43.12(a) a wholly-owned affiliate of the sponsor, 
retains, at a minimum, a corresponding percentage of the fair value of 
ABS interests issued in each series, in the form of one or more of the 
horizontal residual interests meeting the requirements of paragraphs (h) 
or (i).
    (h) Residual ABS interests in excess interest and fees. The sponsor 
may take the offset described in paragraph (g) of this section for a 
residual ABS interest in excess interest and fees, whether certificated 
or uncertificated, in a single or multiple classes, subclasses, or 
tranches, that meets, individually or in the aggregate, the requirements 
of this paragraph (h);
    (1) Each series of the revolving pool securitization distinguishes 
between the series' share of the interest and fee cash flows and the 
series' share of the principal repayment cash flows from the securitized 
assets collateralizing the revolving pool securitization, which may 
according to the terms of the securitization transaction documents, 
include not only the series' ratable share of such cash flows but also 
excess cash flows available from other series;
    (2) The residual ABS interest's claim to any part of the series' 
share of the interest and fee cash flows for any interest payment period 
is subordinated to all accrued and payable interest due on the payment 
date to more senior ABS interests in the series for that period, and 
further reduced by the series' share of losses, including defaults on 
principal of the securitized assets collateralizing the revolving pool 
securitization (whether incurred in that period or carried over from 
prior periods) to the extent that such payments would have been included 
in amounts payable to more senior interests in the series;
    (3) The revolving pool securitization continues to revolve, with one 
or more series, classes, subclasses, or tranches of asset-backed 
securities that are collateralized by a common pool of assets that 
change in composition over time; and
    (4) For purposes of taking the offset described in paragraph (g) of 
this section, the sponsor determines the fair value of the residual ABS 
interest in excess interest and fees, and the fair value of the series 
of outstanding investor ABS interests to which it is subordinated and 
supports using the fair value measurement framework under GAAP, as of:
    (i) The closing of the securitization transaction issuing the 
supported ABS interests; and
    (ii) The seller's interest measurement dates described in paragraph 
(c)(4) of this section, except that for these periodic determinations 
the sponsor must update the fair value of the residual ABS interest in 
excess interest and fees for the numerator of the percentage ratio, but 
may at the sponsor's option continue to use the fair values determined 
in (h)(4)(i) for the outstanding investor ABS interests in the 
denominator.
    (i) Offsetting eligible horizontal residual interest. The sponsor 
may take the offset described in paragraph (g) of this section for ABS 
interests that would meet the definition of eligible horizontal residual 
interests in Sec.  43.2 but for the sponsor's simultaneous holding of 
subordinated seller's interests, residual ABS interests in excess 
interests and fees, or a combination of the two, if:
    (1) The sponsor complies with all requirements of paragraphs (b) 
through (e) of this section for its holdings of subordinated seller's 
interest, and paragraph (h) for its holdings of residual ABS interests 
in excess interests and fees, as applicable;
    (2) For purposes of taking the offset described in paragraph (g) of 
this section, the sponsor determines the fair value of the eligible 
horizontal residual interest as a percentage of the fair value of the 
outstanding investor ABS interests in the series supported by the 
eligible horizontal residual interest, determined using the fair value 
measurement framework under GAAP:
    (i) As of the closing of the securitization transaction issuing the 
supported ABS interests; and

[[Page 822]]

    (ii) Without including in the numerator of the percentage ratio any 
fair value based on:
    (A) The subordinated seller's interest or residual ABS interest in 
excess interest and fees;
    (B) the interest payable to the sponsor on the eligible horizontal 
residual interest, if the sponsor is including the value of residual ABS 
interest in excess interest and fees pursuant to paragraph (h) of this 
section in taking the offset in paragraph (g) of this section; and,
    (C) the principal payable to the sponsor on the eligible horizontal 
residual interest, if the sponsor is including the value of the seller's 
interest pursuant to paragraphs (b) through (f) of this section and 
distributions on that seller's interest are available to reduce charge-
offs that would otherwise be allocated to reduce principal payable to 
the offset eligible horizontal residual interest.
    (j) Specified dates. A sponsor using data about the revolving pool 
securitization's collateral, or ABS interests previously issued, to 
determine the closing-date percentage of a seller's interest, residual 
ABS interest in excess interest and fees, or eligible horizontal 
residual interest pursuant to this Sec.  43.5 may use such data prepared 
as of specified dates if:
    (1) The sponsor describes the specified dates in the disclosures 
required by paragraph (k) of this section; and
    (2) The dates are no more than 60 days prior to the date of first 
use with investors of disclosures required for the interest by paragraph 
(k) of this section, or for revolving pool securitizations that make 
distributions to investors on a quarterly or less frequent basis, no 
more than 135 days prior to the date of first use with investors of such 
disclosures.
    (k) Disclosure and record maintenance--(1) Disclosure. A sponsor 
relying on this section shall provide, or cause to be provided, to 
potential investors, under the caption ``Credit Risk Retention'' the 
following disclosure in written form and within the time frames set 
forth in this paragraph (k):
    (i) A reasonable period of time prior to the sale of an asset-backed 
security, a description of the material terms of the seller's interest, 
and the percentage of the seller's interest that the sponsor expects to 
retain at the closing of the securitization transaction, measured in 
accordance with the requirements of this Sec.  43.5, as a percentage of 
the aggregate unpaid principal balance of all outstanding investor ABS 
interests issued, or as a percentage of the aggregate unpaid principal 
balance of outstanding investor ABS interests for one or more series 
issued, as required by the terms of the securitization transaction;
    (ii) A reasonable time after the closing of the securitization 
transaction, the amount of seller's interest the sponsor retained at 
closing, if that amount is materially different from the amount 
disclosed under paragraph (k)(1)(i) of this section; and
    (iii) A description of the material terms of any horizontal residual 
interests offsetting the seller's interest in accordance with paragraphs 
(g), (h), and (i) of this section; and
    (iv) Disclosure of the fair value of those horizontal residual 
interests retained by the sponsor for the series being offered to 
investors and described in the disclosures, as a percentage of the fair 
value of the outstanding investor ABS interests issued, described in the 
same manner and within the same timeframes required for disclosure of 
the fair values of eligible horizontal residual interests specified in 
Sec.  43.4(c).
    (2) Adjusted data. Disclosures required by this paragraph (k) to be 
made a reasonable period of time prior to the sale of an asset-backed 
security of the amount of seller's interest, residual ABS interest in 
excess interest and fees, or eligible horizontal residual interest may 
include adjustments to the amount of securitized assets for additions or 
removals the sponsor expects to make before the closing date and 
adjustments to the amount of outstanding investor ABS interests for 
expected increases and decreases of those interests under the control of 
the sponsor.
    (3) Record maintenance. A sponsor must retain the disclosures 
required in paragraph (k)(1) of this section in its records and must 
provide the disclosure upon request to the Commission and its 
appropriate Federal banking agency, if any, until three years after

[[Page 823]]

all ABS interests are no longer outstanding.
    (l) Early amortization of all outstanding series. A sponsor that 
organizes a revolving pool securitization that relies on this Sec.  43.5 
to satisfy the risk retention requirements of Sec.  43.3, does not 
violate the requirements of this part if its seller's interest falls 
below the level required by Sec.  43. 5 after the revolving pool 
securitization commences early amortization, pursuant to the terms of 
the securitization transaction documents, of all series of outstanding 
investor ABS interests, if:
    (1) The sponsor was in full compliance with the requirements of this 
section on all measurement dates specified in paragraph (c) of this 
section prior to the commencement of early amortization;
    (2) The terms of the seller's interest continue to make it pari 
passu with or subordinate in identical or varying amounts to each series 
of outstanding investor ABS interests issued with respect to the 
allocation of all distributions and losses with respect to the 
securitized assets;
    (3) The terms of any horizontal interest relied upon by the sponsor 
pursuant to paragraph (g) to offset the minimum seller's interest amount 
continue to require the interests to absorb losses in accordance with 
the terms of paragraph (h) or (i) of this section, as applicable; and
    (4) The revolving pool securitization issues no additional ABS 
interests after early amortization is initiated to any person not a 
wholly-owned affiliate of the sponsor, either at the time of issuance or 
during the amortization period.



Sec.  43.6  Eligible ABCP conduits.

    (a) Definitions. For purposes of this section, the following 
additional definitions apply:
    100 percent liquidity coverage means an amount equal to the 
outstanding balance of all ABCP issued by the conduit plus any accrued 
and unpaid interest without regard to the performance of the ABS 
interests held by the ABCP conduit and without regard to any credit 
enhancement.
    ABCP means asset-backed commercial paper that has a maturity at the 
time of issuance not exceeding 397 days, exclusive of days of grace, or 
any renewal thereof the maturity of which is likewise limited.
    ABCP conduit means an issuing entity with respect to ABCP.
    Eligible ABCP conduit means an ABCP conduit, provided that:
    (1) The ABCP conduit is bankruptcy remote or otherwise isolated for 
insolvency purposes from the sponsor of the ABCP conduit and from any 
intermediate SPV;
    (2) The ABS interests acquired by the ABCP conduit are:
    (i) ABS interests collateralized solely by assets originated by an 
originator-seller and by servicing assets;
    (ii) Special units of beneficial interest (or similar ABS interests) 
in a trust or special purpose vehicle that retains legal title to leased 
property underlying leases originated by an originator-seller that were 
transferred to an intermediate SPV in connection with a securitization 
collateralized solely by such leases and by servicing assets;
    (iii) ABS interests in a revolving pool securitization 
collateralized solely by assets originated by an originator-seller and 
by servicing assets; or
    (iv) ABS interests described in paragraph (2)(i), (ii), or (iii) of 
this definition that are collateralized, in whole or in part, by assets 
acquired by an originator-seller in a business combination that 
qualifies for business combination accounting under GAAP, and, if 
collateralized in part, the remainder of such assets are assets 
described in paragraph (2)(i), (ii), or (iii) of this definition; and
    (v) Acquired by the ABCP conduit in an initial issuance by or on 
behalf of an intermediate SPV:
    (A) Directly from the intermediate SPV,
    (B) From an underwriter of the ABS interests issued by the 
intermediate SPV, or
    (C) From another person who acquired the ABS interests directly from 
the intermediate SPV;
    (3) The ABCP conduit is collateralized solely by ABS interests 
acquired from intermediate SPVs as described in paragraph (2) of this 
definition and servicing assets; and

[[Page 824]]

    (4) A regulated liquidity provider has entered into a legally 
binding commitment to provide 100 percent liquidity coverage (in the 
form of a lending facility, an asset purchase agreement, a repurchase 
agreement, or other similar arrangement) to all the ABCP issued by the 
ABCP conduit by lending to, purchasing ABCP issued by, or purchasing 
assets from, the ABCP conduit in the event that funds are required to 
repay maturing ABCP issued by the ABCP conduit. With respect to the 100 
percent liquidity coverage, in the event that the ABCP conduit is unable 
for any reason to repay maturing ABCP issued by the issuing entity, the 
liquidity provider shall be obligated to pay an amount equal to any 
shortfall, and the total amount that may be due pursuant to the 100 
percent liquidity coverage shall be equal to 100 percent of the amount 
of the ABCP outstanding at any time plus accrued and unpaid interest 
(amounts due pursuant to the required liquidity coverage may not be 
subject to credit performance of the ABS interests held by the ABCP 
conduit or reduced by the amount of credit support provided to the ABCP 
conduit and liquidity support that only funds performing loans or 
receivables or performing ABS interests does not meet the requirements 
of this section).
    Intermediate SPV means a special purpose vehicle that:
    (1)(i) Is a direct or indirect wholly-owned affiliate of the 
originator-seller; or
    (ii) Has nominal equity owned by a trust or corporate service 
provider that specializes in providing independent ownership of special 
purpose vehicles, and such trust or corporate service provider is not 
affiliated with any other transaction parties;
    (2) Is bankruptcy remote or otherwise isolated for insolvency 
purposes from the eligible ABCP conduit and from each originator-seller 
and each majority-owned affiliate in each case that, directly or 
indirectly, sells or transfers assets to such intermediate SPV;
    (3) Acquires assets from the originator-seller that are originated 
by the originator-seller or acquired by the originator-seller in the 
acquisition of a business that qualifies for business combination 
accounting under GAAP or acquires ABS interests issued by another 
intermediate SPV of the originator-seller that are collateralized solely 
by such assets; and
    (4) Issues ABS interests collateralized solely by such assets, as 
applicable.
    Originator-seller means an entity that originates assets and sells 
or transfers those assets, directly or through a majority-owned 
affiliate, to an intermediate SPV, and includes (except for the purposes 
of identifying the sponsorship and affiliation of an intermediate SPV 
pursuant to this Sec.  43.6) any affiliate of the originator-seller 
that, directly or indirectly, majority controls, is majority controlled 
by or is under common majority control with, the originator-seller. For 
purposes of this definition, majority control means ownership of more 
than 50 percent of the equity of an entity, or ownership of any other 
controlling financial interest in the entity, as determined under GAAP.
    Regulated liquidity provider means:
    (1) A depository institution (as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813));
    (2) A bank holding company (as defined in 12 U.S.C. 1841), or a 
subsidiary thereof;
    (3) A savings and loan holding company (as defined in 12 U.S.C. 
1467a), provided all or substantially all of the holding company's 
activities are permissible for a financial holding company under 12 
U.S.C. 1843(k), or a subsidiary thereof; or
    (4) A foreign bank whose home country supervisor (as defined in 
Sec.  211.21 of the Federal Reserve Board's Regulation K (12 CFR 
211.21)) has adopted capital standards consistent with the Capital 
Accord of the Basel Committee on Banking Supervision, as amended, and 
that is subject to such standards, or a subsidiary thereof.
    (b) In general. An ABCP conduit sponsor satisfies the risk retention 
requirement of Sec.  43.3 with respect to the issuance of ABCP by an 
eligible ABCP conduit in a securitization transaction if, for each ABS 
interest the ABCP conduit acquires from an intermediate SPV:

[[Page 825]]

    (1) An originator-seller of the intermediate SPV retains an economic 
interest in the credit risk of the assets collateralizing the ABS 
interest acquired by the eligible ABCP conduit in the amount and manner 
required under Sec.  43.4 or Sec.  43.5; and
    (2) The ABCP conduit sponsor:
    (i) Approves each originator-seller permitted to sell or transfer 
assets, directly or indirectly, to an intermediate SPV from which an 
eligible ABCP conduit acquires ABS interests;
    (ii) Approves each intermediate SPV from which an eligible ABCP 
conduit is permitted to acquire ABS interests;
    (iii) Establishes criteria governing the ABS interests, and the 
securitized assets underlying the ABS interests, acquired by the ABCP 
conduit;
    (iv) Administers the ABCP conduit by monitoring the ABS interests 
acquired by the ABCP conduit and the assets supporting those ABS 
interests, arranging for debt placement, compiling monthly reports, and 
ensuring compliance with the ABCP conduit documents and with the ABCP 
conduit's credit and investment policy; and
    (v) Maintains and adheres to policies and procedures for ensuring 
that the requirements in this paragraph (b) of this section have been 
met.
    (c) Originator-seller compliance with risk retention. The use of the 
risk retention option provided in this section by an ABCP conduit 
sponsor does not relieve the originator-seller that sponsors ABS 
interests acquired by an eligible ABCP conduit from such originator-
seller's obligation to comply with its own risk retention obligations 
under this part.
    (d) Disclosures--(1) Periodic disclosures to investors. An ABCP 
conduit sponsor relying upon this section shall provide, or cause to be 
provided, to each purchaser of ABCP, before or contemporaneously with 
the first sale of ABCP to such purchaser and at least monthly 
thereafter, to each holder of commercial paper issued by the ABCP 
conduit, in writing, each of the following items of information, which 
shall be as of a date not more than 60 days prior to date of first use 
with investors:
    (i) The name and form of organization of the regulated liquidity 
provider that provides liquidity coverage to the eligible ABCP conduit, 
including a description of the material terms of such liquidity 
coverage, and notice of any failure to fund.
    (ii) With respect to each ABS interest held by the ABCP conduit:
    (A) The asset class or brief description of the underlying 
securitized assets;
    (B) The standard industrial category code (SIC Code) for the 
originator-seller that will retain (or has retained) pursuant to this 
section an interest in the securitization transaction; and
    (C) A description of the percentage amount of risk retention 
pursuant to the rule by the originator-seller, and whether it is in the 
form of an eligible horizontal residual interest, vertical interest, or 
revolving pool securitization seller's interest, as applicable.
    (2) Disclosures to regulators regarding originator-sellers. An ABCP 
conduit sponsor relying upon this section shall provide, or cause to be 
provided, upon request, to the Commission and its appropriate Federal 
banking agency, if any, in writing, all of the information required to 
be provided to investors in paragraph (d)(1) of this section, and the 
name and form of organization of each originator-seller that will retain 
(or has retained) pursuant to this section an interest in the 
securitization transaction.
    (e) Sale or transfer of ABS interests between eligible ABCP 
conduits. At any time, an eligible ABCP conduit that acquired an ABS 
interest in accordance with the requirements set forth in this section 
may transfer, and another eligible ABCP conduit may acquire, such ABS 
interest, if the following conditions are satisfied:
    (1) The sponsors of both eligible ABCP conduits are in compliance 
with this section; and
    (2) The same regulated liquidity provider has entered into one or 
more legally binding commitments to provide 100 percent liquidity 
coverage to all the ABCP issued by both eligible ABCP conduits.
    (f) Duty to comply. (1) The ABCP conduit sponsor shall be 
responsible for compliance with this section.

[[Page 826]]

    (2) An ABCP conduit sponsor relying on this section:
    (i) Shall maintain and adhere to policies and procedures that are 
reasonably designed to monitor compliance by each originator-seller 
which is satisfying a risk retention obligation in respect of ABS 
interests acquired by an eligible ABCP conduit with the requirements of 
paragraph (b)(1) of this section; and
    (ii) In the event that the ABCP conduit sponsor determines that an 
originator-seller no longer complies with the requirements of paragraph 
(b)(1) of this section, shall:
    (A) Promptly notify the holders of the ABCP, and upon request, the 
Commission and its appropriate Federal banking agency, if any, in 
writing of:
    (1) The name and form of organization of any originator-seller that 
fails to retain risk in accordance with paragraph (b)(1) of this section 
and the amount of ABS interests issued by an intermediate SPV of such 
originator-seller and held by the ABCP conduit;
    (2) The name and form of organization of any originator-seller that 
hedges, directly or indirectly through an intermediate SPV, its risk 
retention in violation of paragraph (b)(1) of this section and the 
amount of ABS interests issued by an intermediate SPV of such 
originator-seller and held by the ABCP conduit; and
    (3) Any remedial actions taken by the ABCP conduit sponsor or other 
party with respect to such ABS interests; and
    (B) Take other appropriate steps pursuant to the requirements of 
paragraphs (b)(2)(iv) and (v) of this section which may include, as 
appropriate, curing any breach of the requirements in this section, or 
removing from the eligible ABCP conduit any ABS interest that does not 
comply with the requirements in this section.



Sec.  43.7  Commercial mortgage-backed securities.

    (a) Definitions. For purposes of this section, the following 
definition shall apply:
    Special servicer means, with respect to any securitization of 
commercial real estate loans, any servicer that, upon the occurrence of 
one or more specified conditions in the servicing agreement, has the 
right to service one or more assets in the transaction.
    (b) Third-party purchaser. A sponsor may satisfy some or all of its 
risk retention requirements under Sec.  43.3 with respect to a 
securitization transaction if a third party (or any majority-owned 
affiliate thereof) purchases and holds for its own account an eligible 
horizontal residual interest in the issuing entity in the same form, 
amount, and manner as would be held by the sponsor under Sec.  43.4 and 
all of the following conditions are met:
    (1) Number of third-party purchasers. At any time, there are no more 
than two third-party purchasers of an eligible horizontal residual 
interest. If there are two third-party purchasers, each third-party 
purchaser's interest must be pari passu with the other third-party 
purchaser's interest.
    (2) Composition of collateral. The securitization transaction is 
collateralized solely by commercial real estate loans and servicing 
assets.
    (3) Source of funds. (i) Each third-party purchaser pays for the 
eligible horizontal residual interest in cash at the closing of the 
securitization transaction.
    (ii) No third-party purchaser obtains financing, directly or 
indirectly, for the purchase of such interest from any other person that 
is a party to, or an affiliate of a party to, the securitization 
transaction (including, but not limited to, the sponsor, depositor, or 
servicer other than a special servicer affiliated with the third-party 
purchaser), other than a person that is a party to the transaction 
solely by reason of being an investor.
    (4) Third-party review. Each third-party purchaser conducts an 
independent review of the credit risk of each securitized asset prior to 
the sale of the asset-backed securities in the securitization 
transaction that includes, at a minimum, a review of the underwriting 
standards, collateral, and expected cash flows of each commercial real 
estate loan that is collateral for the asset-backed securities.
    (5) Affiliation and control rights. (i) Except as provided in 
paragraph (b)(5)(ii) of this section, no third-party purchaser is 
affiliated with any party to

[[Page 827]]

the securitization transaction (including, but not limited to, the 
sponsor, depositor, or servicer) other than investors in the 
securitization transaction.
    (ii) Notwithstanding paragraph (b)(5)(i) of this section, a third-
party purchaser may be affiliated with:
    (A) The special servicer for the securitization transaction; or
    (B) One or more originators of the securitized assets, as long as 
the assets originated by the affiliated originator or originators 
collectively comprise less than 10 percent of the unpaid principal 
balance of the securitized assets included in the securitization 
transaction at the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction.
    (6) Operating Advisor. The underlying securitization transaction 
documents shall provide for the following:
    (i) The appointment of an operating advisor (the Operating Advisor) 
that:
    (A) Is not affiliated with other parties to the securitization 
transaction;
    (B) Does not directly or indirectly have any financial interest in 
the securitization transaction other than in fees from its role as 
Operating Advisor; and
    (C) Is required to act in the best interest of, and for the benefit 
of, investors as a collective whole;
    (ii) Standards with respect to the Operating Advisor's experience, 
expertise and financial strength to fulfill its duties and 
responsibilities under the applicable transaction documents over the 
life of the securitization transaction;
    (iii) The terms of the Operating Advisor's compensation with respect 
to the securitization transaction;
    (iv) When the eligible horizontal residual interest has been reduced 
by principal payments, realized losses, and appraisal reduction amounts 
(which reduction amounts are determined in accordance with the 
applicable transaction documents) to a principal balance of 25 percent 
or less of its initial principal balance, the special servicer for the 
securitized assets must consult with the Operating Advisor in connection 
with, and prior to, any material decision in connection with its 
servicing of the securitized assets, including, without limitation:
    (A) Any material modification of, or waiver with respect to, any 
provision of a loan agreement (including a mortgage, deed of trust, or 
other security agreement);
    (B) Foreclosure upon or comparable conversion of the ownership of a 
property; or
    (C) Any acquisition of a property.
    (v) The Operating Advisor shall have adequate and timely access to 
information and reports necessary to fulfill its duties under the 
transaction documents, including all reports made available to holders 
of ABS interests and third-party purchasers, and shall be responsible 
for:
    (A) Reviewing the actions of the special servicer;
    (B) Reviewing all reports provided by the special servicer to the 
issuing entity or any holder of ABS interests;
    (C) Reviewing for accuracy and consistency with the transaction 
documents calculations made by the special servicer; and
    (D) Issuing a report to investors (including any third-party 
purchasers) and the issuing entity on a periodic basis concerning:
    (1) Whether the Operating Advisor believes, in its sole discretion 
exercised in good faith, that the special servicer is operating in 
compliance with any standard required of the special servicer in the 
applicable transaction documents; and
    (2) Which, if any, standards the Operating Advisor believes, in its 
sole discretion exercised in good faith, the special servicer has failed 
to comply.
    (vi)(A) The Operating Advisor shall have the authority to recommend 
that the special servicer be replaced by a successor special servicer if 
the Operating Advisor determines, in its sole discretion exercised in 
good faith, that:
    (1) The special servicer has failed to comply with a standard 
required of the special servicer in the applicable transaction 
documents; and
    (2) Such replacement would be in the best interest of the investors 
as a collective whole; and
    (B) If a recommendation described in paragraph (b)(6)(vi)(A) of this 
section is

[[Page 828]]

made, the special servicer shall be replaced upon the affirmative vote 
of a majority of the outstanding principal balance of all ABS interests 
voting on the matter, with a minimum of a quorum of ABS interests voting 
on the matter. For purposes of such vote, the applicable transaction 
documents shall specify the quorum and may not specify a quorum of more 
than the holders of 20 percent of the outstanding principal balance of 
all ABS interests in the issuing entity, with such quorum including at 
least three ABS interest holders that are not affiliated with each 
other.
    (7) Disclosures. The sponsor provides, or causes to be provided, to 
potential investors a reasonable period of time prior to the sale of the 
asset-backed securities as part of the securitization transaction and, 
upon request, to the Commission and its appropriate Federal banking 
agency, if any, the following disclosure in written form under the 
caption ``Credit Risk Retention'':
    (i) The name and form of organization of each initial third-party 
purchaser that acquired an eligible horizontal residual interest at the 
closing of a securitization transaction;
    (ii) A description of each initial third-party purchaser's 
experience in investing in commercial mortgage-backed securities;
    (iii) Any other information regarding each initial third-party 
purchaser or each initial third-party purchaser's retention of the 
eligible horizontal residual interest that is material to investors in 
light of the circumstances of the particular securitization transaction;
    (iv) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS interests are issued, as applicable)) of the eligible horizontal 
residual interest that will be retained (or was retained) by each 
initial third-party purchaser, as well as the amount of the purchase 
price paid by each initial third-party purchaser for such interest;
    (v) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS interests are issued, as applicable)) of the eligible horizontal 
residual interest in the securitization transaction that the sponsor 
would have retained pursuant to Sec.  43.4 if the sponsor had relied on 
retaining an eligible horizontal residual interest in that section to 
meet the requirements of Sec.  43.3 with respect to the transaction;
    (vi) A description of the material terms of the eligible horizontal 
residual interest retained by each initial third-party purchaser, 
including the same information as is required to be disclosed by 
sponsors retaining horizontal interests pursuant to Sec.  43.4;
    (vii) The material terms of the applicable transaction documents 
with respect to the Operating Advisor, including without limitation:
    (A) The name and form of organization of the Operating Advisor;
    (B) A description of any material conflict of interest or material 
potential conflict of interest between the Operating Advisor and any 
other party to the transaction;
    (C) The standards required by paragraph (b)(6)(ii) of this section 
and a description of how the Operating Advisor satisfies each of the 
standards; and
    (D) The terms of the Operating Advisor's compensation under 
paragraph (b)(6)(iii) of this section; and
    (viii) The representations and warranties concerning the securitized 
assets, a schedule of any securitized assets that are determined not to 
comply with such representations and warranties, and what factors were 
used to make the determination that such securitized assets should be 
included in the pool notwithstanding that the securitized assets did not 
comply with such representations and warranties, such as compensating 
factors or a determination that the exceptions were not material.
    (8) Hedging, transfer and pledging--(i) General rule. Except as set 
forth in paragraph (b)(8)(ii) of this section, each third-party 
purchaser and its affiliates must comply with the hedging and other 
restrictions in Sec.  43.12 as if it were the retaining sponsor with 
respect to

[[Page 829]]

the securitization transaction and had acquired the eligible horizontal 
residual interest pursuant to Sec.  43.4; provided that, the hedging and 
other restrictions in Sec.  43.12 shall not apply on or after the date 
that each CRE loan (as defined in Sec.  43.14) that serves as collateral 
for outstanding ABS interests has been defeased. For purposes of this 
section, a loan is deemed to be defeased if:
    (A) cash or cash equivalents of the types permitted for an eligible 
horizontal cash reserve account pursuant to Sec.  43.4 whose maturity 
corresponds to the remaining debt service obligations, have been pledged 
to the issuing entity as collateral for the loan and are in such amounts 
and payable at such times as necessary to timely generate cash 
sufficient to make all remaining debt service payments due on such loan; 
and
    (B) the issuing entity has an obligation to release its lien on the 
loan.
    (ii) Exceptions--(A) Transfer by initial third-party purchaser or 
sponsor. An initial third-party purchaser that acquired an eligible 
horizontal residual interest at the closing of a securitization 
transaction in accordance with this section, or a sponsor that acquired 
an eligible horizontal residual interest at the closing of a 
securitization transaction in accordance with this section, may, on or 
after the date that is five years after the date of the closing of the 
securitization transaction, transfer that interest to a subsequent 
third-party purchaser that complies with paragraph (b)(8)(ii)(C) of this 
section. The initial third-party purchaser shall provide the sponsor 
with complete identifying information for the subsequent third-party 
purchaser.
    (B) Transfer by subsequent third-party purchaser. At any time, a 
subsequent third-party purchaser that acquired an eligible horizontal 
residual interest pursuant to this section may transfer its interest to 
a different third-party purchaser that complies with paragraph 
(b)(8)(ii)(C) of this section. The transferring third-party purchaser 
shall provide the sponsor with complete identifying information for the 
acquiring third-party purchaser.
    (C) Requirements applicable to subsequent third-party purchasers. A 
subsequent third-party purchaser is subject to all of the requirements 
of paragraphs (b)(1), (b)(3) through (5), and (b)(8) of this section 
applicable to third-party purchasers, provided that obligations under 
paragraphs (b)(1), (b)(3) through (5), and (b)(8) of this section that 
apply to initial third-party purchasers at or before the time of closing 
of the securitization transaction shall apply to successor third-party 
purchasers at or before the time of the transfer of the eligible 
horizontal residual interest to the successor third-party purchaser.
    (c) Duty to comply. (1) The retaining sponsor shall be responsible 
for compliance with this section by itself and for compliance by each 
initial or subsequent third-party purchaser that acquired an eligible 
horizontal residual interest in the securitization transaction.
    (2) A sponsor relying on this section:
    (i) Shall maintain and adhere to policies and procedures to monitor 
each third-party purchaser's compliance with the requirements of 
paragraphs (b)(1), (b)(3) through (5), and (b)(8) of this section; and
    (ii) In the event that the sponsor determines that a third-party 
purchaser no longer complies with one or more of the requirements of 
paragraphs (b)(1), (b)(3) through (5), or (b)(8) of this section, shall 
promptly notify, or cause to be notified, the holders of the ABS 
interests issued in the securitization transaction of such noncompliance 
by such third-party purchaser.



Sec.  43.8  Federal National Mortgage Association and Federal Home Loan 
Mortgage Corporation ABS.

    (a) In general. A sponsor satisfies its risk retention requirement 
under this part if the sponsor fully guarantees the timely payment of 
principal and interest on all ABS interests issued by the issuing entity 
in the securitization transaction and is:
    (1) The Federal National Mortgage Association or the Federal Home 
Loan Mortgage Corporation operating under the conservatorship or 
receivership of the Federal Housing Finance Agency pursuant to section 
1367 of the Federal Housing Enterprises Financial Safety and Soundness 
Act of 1992 (12 U.S.C.

[[Page 830]]

4617) with capital support from the United States; or
    (2) Any limited-life regulated entity succeeding to the charter of 
either the Federal National Mortgage Association or the Federal Home 
Loan Mortgage Corporation pursuant to section 1367(i) of the Federal 
Housing Enterprises Financial Safety and Soundness Act of 1992 (12 
U.S.C. 4617(i)), provided that the entity is operating with capital 
support from the United States.
    (b) Certain provisions not applicable. The provisions of Sec.  
43.12(b), (c), and (d) shall not apply to a sponsor described in 
paragraph (a)(1) or (2) of this section, its affiliates, or the issuing 
entity with respect to a securitization transaction for which the 
sponsor has retained credit risk in accordance with the requirements of 
this section.
    (c) Disclosure. A sponsor relying on this section shall provide to 
investors, in written form under the caption ``Credit Risk Retention'' 
and, upon request, to the Federal Housing Finance Agency and the 
Commission, a description of the manner in which it has met the credit 
risk retention requirements of this part.



Sec.  43.9  Open market CLOs.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    CLO means a special purpose entity that:
    (i) Issues debt and equity interests, and
    (ii) Whose assets consist primarily of loans that are securitized 
assets and servicing assets.
    CLO-eligible loan tranche means a term loan of a syndicated facility 
that meets the criteria set forth in paragraph (c) of this section.
    CLO manager means an entity that manages a CLO, which entity is 
registered as an investment adviser under the Investment Advisers Act of 
1940, as amended (15 U.S.C. 80b-1 et seq.), or is an affiliate of such a 
registered investment adviser and itself is managed by such registered 
investment adviser.
    Commercial borrower means an obligor under a corporate credit 
obligation (including a loan).
    Initial loan syndication transaction means a transaction in which a 
loan is syndicated to a group of lenders.
    Lead arranger means, with respect to a CLO-eligible loan tranche, an 
institution that:
    (i) Is active in the origination, structuring and syndication of 
commercial loan transactions (as defined in Sec.  43.14) and has played 
a primary role in the structuring, underwriting and distribution on the 
primary market of the CLO-eligible loan tranche.
    (ii) Has taken an allocation of the funded portion of the syndicated 
credit facility under the terms of the transaction that includes the 
CLO-eligible loan tranche of at least 20 percent of the aggregate 
principal balance at origination, and no other member (or members 
affiliated with each other) of the syndication group that funded at 
origination has taken a greater allocation; and
    (iii) Is identified in the applicable agreement governing the CLO-
eligible loan tranche; represents therein to the holders of the CLO-
eligible loan tranche and to any holders of participation interests in 
such CLO-eligible loan tranche that such lead arranger satisfies the 
requirements of paragraph (i) of this definition and, at the time of 
initial funding of the CLO-eligible tranche, will satisfy the 
requirements of paragraph (ii) of this definition; further represents 
therein (solely for the purpose of assisting such holders to determine 
the eligibility of such CLO-eligible loan tranche to be held by an open 
market CLO) that in the reasonable judgment of such lead arranger, the 
terms of such CLO-eligible loan tranche are consistent with the 
requirements of paragraphs (c)(2) and (3) of this section; and covenants 
therein to such holders that such lead arranger will fulfill the 
requirements of paragraph (c)(1) of this section.
    Open market CLO means a CLO:
    (i) Whose assets consist of senior, secured syndicated loans 
acquired by such CLO directly from the sellers thereof in open market 
transactions and of servicing assets,
    (ii) That is managed by a CLO manager, and
    (iii) That holds less than 50 percent of its assets, by aggregate 
outstanding

[[Page 831]]

principal amount, in loans syndicated by lead arrangers that are 
affiliates of the CLO or the CLO manager or originated by originators 
that are affiliates of the CLO or the CLO manager.
    Open market transaction means:
    (i) Either an initial loan syndication transaction or a secondary 
market transaction in which a seller offers senior, secured syndicated 
loans to prospective purchasers in the loan market on market terms on an 
arm's length basis, which prospective purchasers include, but are not 
limited to, entities that are not affiliated with the seller, or
    (ii) A reverse inquiry from a prospective purchaser of a senior, 
secured syndicated loan through a dealer in the loan market to purchase 
a senior, secured syndicated loan to be sourced by the dealer in the 
loan market.
    Secondary market transaction means a purchase of a senior, secured 
syndicated loan not in connection with an initial loan syndication 
transaction but in the secondary market.
    Senior, secured syndicated loan means a loan made to a commercial 
borrower that:
    (i) Is not subordinate in right of payment to any other obligation 
for borrowed money of the commercial borrower,
    (ii) Is secured by a valid first priority security interest or lien 
in or on specified collateral securing the commercial borrower's 
obligations under the loan, and
    (iii) The value of the collateral subject to such first priority 
security interest or lien, together with other attributes of the obligor 
(including, without limitation, its general financial condition, ability 
to generate cash flow available for debt service and other demands for 
that cash flow), is adequate (in the commercially reasonable judgment of 
the CLO manager exercised at the time of investment) to repay the loan 
and to repay all other indebtedness of equal seniority secured by such 
first priority security interest or lien in or on the same collateral, 
and the CLO manager certifies, on or prior to each date that it acquires 
a loan constituting part of a new CLO-eligible tranche, that it has 
policies and procedures to evaluate the likelihood of repayment of loans 
acquired by the CLO and it has followed such policies and procedures in 
evaluating each CLO-eligible loan tranche.
    (b) In general. A sponsor satisfies the risk retention requirements 
of Sec.  43.3 with respect to an open market CLO transaction if:
    (1) The open market CLO does not acquire or hold any assets other 
than CLO-eligible loan tranches that meet the requirements of paragraph 
(c) of this section and servicing assets;
    (2) The governing documents of such open market CLO require that, at 
all times, the assets of the open market CLO consist of senior, secured 
syndicated loans that are CLO-eligible loan tranches and servicing 
assets;
    (3) The open market CLO does not invest in ABS interests or in 
credit derivatives other than hedging transactions that are servicing 
assets to hedge risks of the open market CLO;
    (4) All purchases of CLO-eligible loan tranches and other assets by 
the open market CLO issuing entity or through a warehouse facility used 
to accumulate the loans prior to the issuance of the CLO's ABS interests 
are made in open market transactions on an arms-length basis;
    (5) The CLO manager of the open market CLO is not entitled to 
receive any management fee or gain on sale at the time the open market 
CLO issues its ABS interests.
    (c) CLO-eligible loan tranche. To qualify as a CLO-eligible loan 
tranche, a term loan of a syndicated credit facility to a commercial 
borrower must have the following features:
    (1) A minimum of 5 percent of the face amount of the CLO-eligible 
loan tranche is retained by the lead arranger thereof until the earliest 
of the repayment, maturity, involuntary and unscheduled acceleration, 
payment default, or bankruptcy default of such CLO-eligible loan 
tranche, provided that such lead arranger complies with limitations on 
hedging, transferring and pledging in Sec.  43.12 with respect to the 
interest retained by the lead arranger.
    (2) Lender voting rights within the credit agreement and any 
intercreditor or other applicable agreements governing such CLO-eligible 
loan tranche

[[Page 832]]

are defined so as to give holders of the CLO-eligible loan tranche 
consent rights with respect to, at minimum, any material waivers and 
amendments of such applicable documents, including but not limited to, 
adverse changes to the calculation or payments of amounts due to the 
holders of the CLO-eligible tranche, alterations to pro rata provisions, 
changes to voting provisions, and waivers of conditions precedent; and
    (3) The pro rata provisions, voting provisions, and similar 
provisions applicable to the security associated with such CLO-eligible 
loan tranches under the CLO credit agreement and any intercreditor or 
other applicable agreements governing such CLO-eligible loan tranches 
are not materially less advantageous to the holder(s) of such CLO-
eligible tranche than the terms of other tranches of comparable 
seniority in the broader syndicated credit facility.
    (d) Disclosures. A sponsor relying on this section shall provide, or 
cause to be provided, to potential investors a reasonable period of time 
prior to the sale of the asset-backed securities in the securitization 
transaction and at least annually with respect to the information 
required by paragraph (d)(1) of this section and, upon request, to the 
Commission and its appropriate Federal banking agency, if any, the 
following disclosure in written form under the caption ``Credit Risk 
Retention'':
    (1) Open market CLOs. A complete list of every asset held by an open 
market CLO (or before the CLO's closing, in a warehouse facility in 
anticipation of transfer into the CLO at closing), including the 
following information:
    (i) The full legal name, Standard Industrial Classification (SIC) 
category code, and legal entity identifier (LEI) issued by a utility 
endorsed or otherwise governed by the Global LEI Regulatory Oversight 
Committee or the Global LEI Foundation (if an LEI has been obtained by 
the obligor) of the obligor of the loan or asset;
    (ii) The full name of the specific loan tranche held by the CLO;
    (iii) The face amount of the entire loan tranche held by the CLO, 
and the face amount of the portion thereof held by the CLO;
    (iv) The price at which the loan tranche was acquired by the CLO; 
and
    (v) For each loan tranche, the full legal name of the lead arranger 
subject to the sales and hedging restrictions of Sec.  43.12; and
    (2) CLO manager. The full legal name and form of organization of the 
CLO manager.



Sec.  43.10  Qualified tender option bonds.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    Municipal security or municipal securities shall have the same 
meaning as the term ``municipal securities'' in Section 3(a)(29) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(29)) and any rules 
promulgated pursuant to such section.
    Qualified tender option bond entity means an issuing entity with 
respect to tender option bonds for which each of the following applies:
    (i) Such entity is collateralized solely by servicing assets and by 
municipal securities that have the same municipal issuer and the same 
underlying obligor or source of payment (determined without regard to 
any third-party credit enhancement), and such municipal securities are 
not subject to substitution.
    (ii) Such entity issues no securities other than:
    (A) A single class of tender option bonds with a preferred variable 
return payable out of capital that meets the requirements of paragraph 
(b) of this section, and
    (B) One or more residual equity interests that, in the aggregate, 
are entitled to all remaining income of the issuing entity.
    (C) The types of securities referred to in paragraphs (ii)(A) and 
(B) of this definition must constitute asset-backed securities.
    (iii) The municipal securities held as assets by such entity are 
issued in compliance with Section 103 of the Internal Revenue Code of 
1986, as amended (the ``IRS Code'', 26 U.S.C. 103), such that the 
interest payments made on those securities are excludable from

[[Page 833]]

the gross income of the owners under Section 103 of the IRS Code.
    (iv) The terms of all of the securities issued by the entity are 
structured so that all holders of such securities who are eligible to 
exclude interest received on such securities will be able to exclude 
that interest from gross income pursuant to Section 103 of the IRS Code 
or as ``exempt-interest dividends'' pursuant to Section 852(b)(5) of the 
IRS Code (26 U.S.C. 852(b)(5)) in the case of regulated investment 
companies under the Investment Company Act of 1940, as amended.
    (v) Such entity has a legally binding commitment from a regulated 
liquidity provider as defined in Sec.  43.6(a), to provide a 100 percent 
guarantee or liquidity coverage with respect to all of the issuing 
entity's outstanding tender option bonds.
    (vi) Such entity qualifies for monthly closing elections pursuant to 
IRS Revenue Procedure 2003-84, as amended or supplemented from time to 
time.
    Tender option bond means a security which has features which entitle 
the holders to tender such bonds to the issuing entity for purchase at 
any time upon no more than 397 days' notice, for a purchase price equal 
to the approximate amortized cost of the security, plus accrued 
interest, if any, at the time of tender.
    (b) Risk retention options. Notwithstanding anything in this 
section, the sponsor with respect to an issuance of tender option bonds 
may retain an eligible vertical interest or eligible horizontal residual 
interest, or any combination thereof, in accordance with the 
requirements of Sec.  43.4. In order to satisfy its risk retention 
requirements under this section, the sponsor with respect to an issuance 
of tender option bonds by a qualified tender option bond entity may 
retain:
    (1) An eligible vertical interest or an eligible horizontal residual 
interest, or any combination thereof, in accordance with the 
requirements of Sec.  43.4; or
    (2) An interest that meets the requirements set forth in paragraph 
(c) of this section; or
    (3) A municipal security that meets the requirements set forth in 
paragraph (d) of this section; or
    (4) Any combination of interests and securities described in 
paragraphs (b)(1) through (b)(3) of this section such that the sum of 
the percentages held in each form equals at least five.
    (c) Tender option termination event. The sponsor with respect to an 
issuance of tender option bonds by a qualified tender option bond entity 
may retain an interest that upon issuance meets the requirements of an 
eligible horizontal residual interest but that upon the occurrence of a 
``tender option termination event'' as defined in Section 4.01(5) of IRS 
Revenue Procedure 2003-84, as amended or supplemented from time to time 
will meet the requirements of an eligible vertical interest.
    (d) Retention of a municipal security outside of the qualified 
tender option bond entity. The sponsor with respect to an issuance of 
tender option bonds by a qualified tender option bond entity may satisfy 
its risk retention requirements under this Section by holding municipal 
securities from the same issuance of municipal securities deposited in 
the qualified tender option bond entity, the face value of which 
retained municipal securities is equal to 5 percent of the face value of 
the municipal securities deposited in the qualified tender option bond 
entity.
    (e) Disclosures. The sponsor shall provide, or cause to be provided, 
to potential investors a reasonable period of time prior to the sale of 
the asset-backed securities as part of the securitization transaction 
and, upon request, to the Commission and its appropriate Federal banking 
agency, if any, the following disclosure in written form under the 
caption ``Credit Risk Retention'':
    (1) The name and form of organization of the qualified tender option 
bond entity;
    (2) A description of the form and subordination features of such 
retained interest in accordance with the disclosure obligations in Sec.  
43.4(c);
    (3) To the extent any portion of the retained interest is claimed by 
the sponsor as an eligible horizontal residual interest (including any 
interest held in compliance with Sec.  43.10(c)), the fair value of that 
interest (expressed as a percentage of the fair value of all of

[[Page 834]]

the ABS interests issued in the securitization transaction and as a 
dollar amount);
    (4) To the extent any portion of the retained interest is claimed by 
the sponsor as an eligible vertical interest (including any interest 
held in compliance with Sec.  43.10(c)), the percentage of ABS interests 
issued represented by the eligible vertical interest; and
    (5) To the extent any portion of the retained interest claimed by 
the sponsor is a municipal security held outside of the qualified tender 
option bond entity, the name and form of organization of the qualified 
tender option bond entity, the identity of the issuer of the municipal 
securities, the face value of the municipal securities deposited into 
the qualified tender option bond entity, and the face value of the 
municipal securities retained by the sponsor or its majority-owned 
affiliates and subject to the transfer and hedging prohibition.
    (f) Prohibitions on Hedging and Transfer. The prohibitions on 
transfer and hedging set forth in Sec.  43.12, apply to any interests or 
municipal securities retained by the sponsor with respect to an issuance 
of tender option bonds by a qualified tender option bond entity pursuant 
to of this section.



                  Subpart C_Transfer of Risk Retention



Sec.  43.11  Allocation of risk retention to an originator.

    (a) In general. A sponsor choosing to retain an eligible vertical 
interest or an eligible horizontal residual interest (including an 
eligible horizontal cash reserve account), or combination thereof under 
Sec.  43.4, with respect to a securitization transaction may offset the 
amount of its risk retention requirements under Sec.  43.4 by the amount 
of the eligible interests, respectively, acquired by an originator of 
one or more of the securitized assets if:
    (1) At the closing of the securitization transaction:
    (i) The originator acquires the eligible interest from the sponsor 
and retains such interest in the same manner and proportion (as between 
horizontal and vertical interests) as the sponsor under Sec.  43.4, as 
such interest was held prior to the acquisition by the originator;
    (ii) The ratio of the percentage of eligible interests acquired and 
retained by the originator to the percentage of eligible interests 
otherwise required to be retained by the sponsor pursuant to Sec.  43.4, 
does not exceed the ratio of:
    (A) The unpaid principal balance of all the securitized assets 
originated by the originator; to
    (B) The unpaid principal balance of all the securitized assets in 
the securitization transaction;
    (iii) The originator acquires and retains at least 20 percent of the 
aggregate risk retention amount otherwise required to be retained by the 
sponsor pursuant to Sec.  43.4; and
    (iv) The originator purchases the eligible interests from the 
sponsor at a price that is equal, on a dollar-for-dollar basis, to the 
amount by which the sponsor's required risk retention is reduced in 
accordance with this section, by payment to the sponsor in the form of:
    (A) Cash; or
    (B) A reduction in the price received by the originator from the 
sponsor or depositor for the assets sold by the originator to the 
sponsor or depositor for inclusion in the pool of securitized assets.
    (2) Disclosures. In addition to the disclosures required pursuant to 
Sec.  43.4(c), the sponsor provides, or causes to be provided, to 
potential investors a reasonable period of time prior to the sale of the 
asset-backed securities as part of the securitization transaction and, 
upon request, to the Commission and its appropriate Federal banking 
agency, if any, in written form under the caption ``Credit Risk 
Retention'', the name and form of organization of any originator that 
will acquire and retain (or has acquired and retained) an interest in 
the transaction pursuant to this section, including a description of the 
form and amount (expressed as a percentage and dollar amount (or 
corresponding amount in the foreign currency in which the ABS interests 
are issued, as applicable)) and nature (e.g., senior or subordinated) of 
the interest, as well as the method of payment for such interest under 
paragraph (a)(1)(iv) of this section.

[[Page 835]]

    (3) Hedging, transferring and pledging. The originator and each of 
its affiliates complies with the hedging and other restrictions in Sec.  
43.12 with respect to the interests retained by the originator pursuant 
to this section as if it were the retaining sponsor and was required to 
retain the interest under subpart B of this part.
    (b) Duty to comply. (1) The retaining sponsor shall be responsible 
for compliance with this section.
    (2) A retaining sponsor relying on this section:
    (i) Shall maintain and adhere to policies and procedures that are 
reasonably designed to monitor the compliance by each originator that is 
allocated a portion of the sponsor's risk retention obligations with the 
requirements in paragraphs (a)(1) and (3) of this section; and
    (ii) In the event the sponsor determines that any such originator no 
longer complies with any of the requirements in paragraphs (a)(1) and 
(3) of this section, shall promptly notify, or cause to be notified, the 
holders of the ABS interests issued in the securitization transaction of 
such noncompliance by such originator.



Sec.  43.12  Hedging, transfer and financing prohibitions.

    (a) Transfer. Except as permitted by Sec.  43.7(b)(8), and subject 
to Sec.  43.5, a retaining sponsor may not sell or otherwise transfer 
any interest or assets that the sponsor is required to retain pursuant 
to subpart B of this part to any person other than an entity that is and 
remains a majority-owned affiliate of the sponsor and each such 
majority-owned affiliate shall be subject to the same restrictions.
    (b) Prohibited hedging by sponsor and affiliates. A retaining 
sponsor and its affiliates may not purchase or sell a security, or other 
financial instrument, or enter into an agreement, derivative or other 
position, with any other person if:
    (1) Payments on the security or other financial instrument or under 
the agreement, derivative, or position are materially related to the 
credit risk of one or more particular ABS interests that the retaining 
sponsor (or any of its majority-owned affiliates) is required to retain 
with respect to a securitization transaction pursuant to subpart B of 
this part or one or more of the particular securitized assets that 
collateralize the asset-backed securities issued in the securitization 
transaction; and
    (2) The security, instrument, agreement, derivative, or position in 
any way reduces or limits the financial exposure of the sponsor (or any 
of its majority-owned affiliates) to the credit risk of one or more of 
the particular ABS interests that the retaining sponsor (or any of its 
majority-owned affiliates) is required to retain with respect to a 
securitization transaction pursuant to subpart B of this part or one or 
more of the particular securitized assets that collateralize the asset-
backed securities issued in the securitization transaction.
    (c) Prohibited hedging by issuing entity. The issuing entity in a 
securitization transaction may not purchase or sell a security or other 
financial instrument, or enter into an agreement, derivative or 
position, with any other person if:
    (1) Payments on the security or other financial instrument or under 
the agreement, derivative or position are materially related to the 
credit risk of one or more particular ABS interests that the retaining 
sponsor for the transaction (or any of its majority-owned affiliates) is 
required to retain with respect to the securitization transaction 
pursuant to subpart B of this part; and
    (2) The security, instrument, agreement, derivative, or position in 
any way reduces or limits the financial exposure of the retaining 
sponsor (or any of its majority-owned affiliates) to the credit risk of 
one or more of the particular ABS interests that the sponsor (or any of 
its majority-owned affiliates) is required to retain pursuant to subpart 
B of this part.
    (d) Permitted hedging activities. The following activities shall not 
be considered prohibited hedging activities under paragraph (b) or (c) 
of this section:
    (1) Hedging the interest rate risk (which does not include the 
specific interest rate risk, known as spread risk, associated with the 
ABS interest that is otherwise considered part of the

[[Page 836]]

credit risk) or foreign exchange risk arising from one or more of the 
particular ABS interests required to be retained by the sponsor (or any 
of its majority-owned affiliates) under subpart B of this part or one or 
more of the particular securitized assets that underlie the asset-backed 
securities issued in the securitization transaction; or
    (2) Purchasing or selling a security or other financial instrument 
or entering into an agreement, derivative, or other position with any 
third party where payments on the security or other financial instrument 
or under the agreement, derivative, or position are based, directly or 
indirectly, on an index of instruments that includes asset-backed 
securities if:
    (i) Any class of ABS interests in the issuing entity that were 
issued in connection with the securitization transaction and that are 
included in the index represents no more than 10 percent of the dollar-
weighted average (or corresponding weighted average in the currency in 
which the ABS interests are issued, as applicable) of all instruments 
included in the index; and
    (ii) All classes of ABS interests in all issuing entities that were 
issued in connection with any securitization transaction in which the 
sponsor (or any of its majority-owned affiliates) is required to retain 
an interest pursuant to subpart B of this part and that are included in 
the index represent, in the aggregate, no more than 20 percent of the 
dollar-weighted average (or corresponding weighted average in the 
currency in which the ABS interests are issued, as applicable) of all 
instruments included in the index.
    (e) Prohibited non-recourse financing. Neither a retaining sponsor 
nor any of its affiliates may pledge as collateral for any obligation 
(including a loan, repurchase agreement, or other financing transaction) 
any ABS interest that the sponsor is required to retain with respect to 
a securitization transaction pursuant to subpart B of this part unless 
such obligation is with full recourse to the sponsor or affiliate, 
respectively.
    (f) Duration of the hedging and transfer restrictions--(1) General 
rule. Except as provided in paragraph (f)(2) of this section, the 
prohibitions on sale and hedging pursuant to paragraphs (a) and (b) of 
this section shall expire on or after the date that is the latest of:
    (i) The date on which the total unpaid principal balance (if 
applicable) of the securitized assets that collateralize the 
securitization transaction has been reduced to 33 percent of the total 
unpaid principal balance of the securitized assets as of the cut-off 
date or similar date for establishing the composition of the securitized 
assets collateralizing the asset-backed securities issued pursuant to 
the securitization transaction;
    (ii) The date on which the total unpaid principal obligations under 
the ABS interests issued in the securitization transaction has been 
reduced to 33 percent of the total unpaid principal obligations of the 
ABS interests at closing of the securitization transaction; or
    (iii) Two years after the date of the closing of the securitization 
transaction.
    (2) Securitizations of residential mortgages. (i) If all of the 
assets that collateralize a securitization transaction subject to risk 
retention under this part are residential mortgages, the prohibitions on 
sale and hedging pursuant to paragraphs (a) and (b) of this section 
shall expire on or after the date that is the later of:
    (A) Five years after the date of the closing of the securitization 
transaction; or
    (B) The date on which the total unpaid principal balance of the 
residential mortgages that collateralize the securitization transaction 
has been reduced to 25 percent of the total unpaid principal balance of 
such residential mortgages at the cut-off date or similar date for 
establishing the composition of the securitized assets collateralizing 
the asset-backed securities issued pursuant to the securitization 
transaction.
    (ii) Notwithstanding paragraph (f)(2)(i) of this section, the 
prohibitions on sale and hedging pursuant to paragraphs (a) and (b) of 
this section shall expire with respect to the sponsor of a 
securitization transaction described in paragraph (f)(2)(i) of this 
section on or after the date that is seven years after

[[Page 837]]

the date of the closing of the securitization transaction.
    (3) Conservatorship or receivership of sponsor. A conservator or 
receiver of the sponsor (or any other person holding risk retention 
pursuant to this part) of a securitization transaction is permitted to 
sell or hedge any economic interest in the securitization transaction if 
the conservator or receiver has been appointed pursuant to any provision 
of federal or State law (or regulation promulgated thereunder) that 
provides for the appointment of the Federal Deposit Insurance 
Corporation, or an agency or instrumentality of the United States or of 
a State as conservator or receiver, including without limitation any of 
the following authorities:
    (i) 12 U.S.C. 1811;
    (ii) 12 U.S.C. 1787;
    (iii) 12 U.S.C. 4617; or
    (iv) 12 U.S.C. 5382.
    (4) Revolving pool securitizations. The provisions of paragraphs 
(f)(1) and (2) are not available to sponsors of revolving pool 
securitizations with respect to the forms of risk retention specified in 
Sec.  43.5.



                   Subpart D_Exceptions and Exemptions



Sec.  43.13  Exemption for qualified residential mortgages.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    Currently performing means the borrower in the mortgage transaction 
is not currently thirty (30) days or more past due, in whole or in part, 
on the mortgage transaction.
    Qualified residential mortgage means a ``qualified mortgage'' as 
defined in section 129C of the Truth in Lending Act (15 U.S.C.1639c) and 
regulations issued thereunder, as amended from time to time.
    (b) Exemption. A sponsor shall be exempt from the risk retention 
requirements in subpart B of this part with respect to any 
securitization transaction, if:
    (1) All of the assets that collateralize the asset-backed securities 
are qualified residential mortgages or servicing assets;
    (2) None of the assets that collateralize the asset-backed 
securities are asset-backed securities;
    (3) As of the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, each 
qualified residential mortgage collateralizing the asset-backed 
securities is currently performing; and
    (4)(i) The depositor with respect to the securitization transaction 
certifies that it has evaluated the effectiveness of its internal 
supervisory controls with respect to the process for ensuring that all 
assets that collateralize the asset-backed security are qualified 
residential mortgages or servicing assets and has concluded that its 
internal supervisory controls are effective; and
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls must be performed, for each issuance of an asset-
backed security in reliance on this section, as of a date within 60 days 
of the cut-off date or similar date for establishing the composition of 
the asset pool collateralizing such asset-backed security; and
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (b)(4)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to the 
Commission and its appropriate Federal banking agency, if any.
    (c) Repurchase of loans subsequently determined to be non-qualified 
after closing. A sponsor that has relied on the exemption provided in 
paragraph (b) of this section with respect to a securitization 
transaction shall not lose such exemption with respect to such 
transaction if, after closing of the securitization transaction, it is 
determined that one or more of the residential mortgage loans 
collateralizing the asset-backed securities does not meet all of the 
criteria to be a qualified residential mortgage provided that:
    (1) The depositor complied with the certification requirement set 
forth in paragraph (b)(4) of this section;
    (2) The sponsor repurchases the loan(s) from the issuing entity at a

[[Page 838]]

price at least equal to the remaining aggregate unpaid principal balance 
and accrued interest on the loan(s) no later than 90 days after the 
determination that the loans do not satisfy the requirements to be a 
qualified residential mortgage; and
    (3) The sponsor promptly notifies, or causes to be notified, the 
holders of the asset-backed securities issued in the securitization 
transaction of any loan(s) included in such securitization transaction 
that is (or are) required to be repurchased by the sponsor pursuant to 
paragraph (c)(2) of this section, including the amount of such 
repurchased loan(s) and the cause for such repurchase.



Sec.  43.14  Definitions applicable to qualifying commercial loans, 
qualifying commercial real estate loans, and qualifying automobile loans.

    The following definitions apply for purposes of Sec. Sec.  43.15 
through 43.18:
    Appraisal Standards Board means the board of the Appraisal 
Foundation that develops, interprets, and amends the Uniform Standards 
of Professional Appraisal Practice (USPAP), establishing generally 
accepted standards for the appraisal profession.
    Automobile loan:
    (1) Means any loan to an individual to finance the purchase of, and 
that is secured by a first lien on, a passenger car or other passenger 
vehicle, such as a minivan, van, sport-utility vehicle, pickup truck, or 
similar light truck for personal, family, or household use; and
    (2) Does not include any:
    (i) Loan to finance fleet sales;
    (ii) Personal cash loan secured by a previously purchased 
automobile;
    (iii) Loan to finance the purchase of a commercial vehicle or farm 
equipment that is not used for personal, family, or household purposes;
    (iv) Lease financing;
    (v) Loan to finance the purchase of a vehicle with a salvage title; 
or
    (vi) Loan to finance the purchase of a vehicle intended to be used 
for scrap or parts.
    Combined loan-to-value (CLTV) ratio means, at the time of 
origination, the sum of the principal balance of a first-lien mortgage 
loan on the property, plus the principal balance of any junior-lien 
mortgage loan that, to the creditor's knowledge, would exist at the 
closing of the transaction and that is secured by the same property, 
divided by:
    (1) For acquisition funding, the lesser of the purchase price or the 
estimated market value of the real property based on an appraisal that 
meets the requirements set forth in Sec.  43.17(a)(2)(ii); or
    (2) For refinancing, the estimated market value of the real property 
based on an appraisal that meets the requirements set forth in Sec.  
43.17(a)(2)(ii).
    Commercial loan means a secured or unsecured loan to a company or an 
individual for business purposes, other than any:
    (1) Loan to purchase or refinance a one-to-four family residential 
property;
    (2) Commercial real estate loan.
    Commercial real estate (CRE) loan means:
    (1) A loan secured by a property with five or more single family 
units, or by nonfarm nonresidential real property, the primary source 
(50 percent or more) of repayment for which is expected to be:
    (i) The proceeds of the sale, refinancing, or permanent financing of 
the property; or
    (ii) Rental income associated with the property;
    (2) Loans secured by improved land if the obligor owns the fee 
interest in the land and the land is leased to a third party who owns 
all improvements on the land, and the improvements are nonresidential or 
residential with five or more single family units; and
    (3) Does not include:
    (i) A land development and construction loan (including 1- to 4-
family residential or commercial construction loans);
    (ii) Any other land loan; or
    (iii) An unsecured loan to a developer.
    Debt service coverage (DSC) ratio means:
    (1) For qualifying leased CRE loans, qualifying multi-family loans, 
and other CRE loans:
    (i) The annual NOI less the annual replacement reserve of the CRE 
property

[[Page 839]]

at the time of origination of the CRE loan(s) divided by
    (ii) The sum of the borrower's annual payments for principal and 
interest (calculated at the fully-indexed rate) on any debt obligation.
    (2) For commercial loans:
    (i) The borrower's EBITDA as of the most recently completed fiscal 
year divided by
    (ii) The sum of the borrower's annual payments for principal and 
interest on all debt obligations.
    Debt to income (DTI) ratio means the borrower's total debt, 
including the monthly amount due on the automobile loan, divided by the 
borrower's monthly income.
    Earnings before interest, taxes, depreciation, and amortization 
(EBITDA) means the annual income of a business before expenses for 
interest, taxes, depreciation and amortization are deducted, as 
determined in accordance with GAAP.
    Environmental risk assessment means a process for determining 
whether a property is contaminated or exposed to any condition or 
substance that could result in contamination that has an adverse effect 
on the market value of the property or the realization of the collateral 
value.
    First lien means a lien or encumbrance on property that has priority 
over all other liens or encumbrances on the property.
    Junior lien means a lien or encumbrance on property that is lower in 
priority relative to other liens or encumbrances on the property.
    Leverage ratio means the borrower's total debt divided by the 
borrower's EBITDA.
    Loan-to-value (LTV) ratio means, at the time of origination, the 
principal balance of a first-lien mortgage loan on the property divided 
by:
    (1) For acquisition funding, the lesser of the purchase price or the 
estimated market value of the real property based on an appraisal that 
meets the requirements set forth in Sec.  43.17(a)(2)(ii); or
    (2) For refinancing, the estimated market value of the real property 
based on an appraisal that meets the requirements set forth in Sec.  
43.17(a)(2)(ii).
    Model year means the year determined by the manufacturer and 
reflected on the vehicle's Motor Vehicle Title as part of the vehicle 
description.
    Net operating income (NOI) refers to the income a CRE property 
generates for the owner after all expenses have been deducted for 
federal income tax purposes, except for depreciation, debt service 
expenses, and federal and state income taxes, and excluding any unusual 
and nonrecurring items of income.
    Operating affiliate means an affiliate of a borrower that is a 
lessor or similar party with respect to the commercial real estate 
securing the loan.
    Payments-in-kind means payments of accrued interest that are not 
paid in cash when due, and instead are paid by increasing the principal 
balance of the loan or by providing equity in the borrowing company.
    Purchase money security interest means a security interest in 
property that secures the obligation of the obligor incurred as all or 
part of the price of the property.
    Purchase price means the amount paid by the borrower for the vehicle 
net of any incentive payments or manufacturer cash rebates.
    Qualified tenant means:
    (1) A tenant with a lease who has satisfied all obligations with 
respect to the property in a timely manner; or
    (2) A tenant who originally had a lease that subsequently expired 
and currently is leasing the property on a month-to-month basis, has 
occupied the property for at least three years prior to the date of 
origination, and has satisfied all obligations with respect to the 
property in a timely manner.
    Qualifying leased CRE loan means a CRE loan secured by commercial 
nonfarm real property, other than a multi-family property or a hotel, 
inn, or similar property:
    (1) That is occupied by one or more qualified tenants pursuant to a 
lease agreement with a term of no less than one (1) month; and
    (2) Where no more than 20 percent of the aggregate gross revenue of 
the property is payable from one or more tenants who:

[[Page 840]]

    (i) Are subject to a lease that will terminate within six months 
following the date of origination; or
    (ii) Are not qualified tenants.
    Qualifying multi-family loan means a CRE loan secured by any 
residential property (excluding a hotel, motel, inn, hospital, nursing 
home, or other similar facility where dwellings are not leased to 
residents):
    (1) That consists of five or more dwelling units (including 
apartment buildings, condominiums, cooperatives and other similar 
structures) primarily for residential use; and
    (2) Where at least 75 percent of the NOI is derived from residential 
rents and tenant amenities (including income from parking garages, 
health or swim clubs, and dry cleaning), and not from other commercial 
uses.
    Rental income means:
    (1) Income derived from a lease or other occupancy agreement between 
the borrower or an operating affiliate of the borrower and a party which 
is not an affiliate of the borrower for the use of real property or 
improvements serving as collateral for the applicable loan; and
    (2) Other income derived from hotel, motel, dormitory, nursing home, 
assisted living, mini-storage warehouse or similar properties that are 
used primarily by parties that are not affiliates or employees of the 
borrower or its affiliates.
    Replacement reserve means the monthly capital replacement or 
maintenance amount based on the property type, age, construction and 
condition of the property that is adequate to maintain the physical 
condition and NOI of the property.
    Salvage title means a form of vehicle title branding, which notes 
that the vehicle has been severely damaged and/or deemed a total loss 
and uneconomical to repair by an insurance company that paid a claim on 
the vehicle.
    Total debt, with respect to a borrower, means:
    (1) In the case of an automobile loan, the sum of:
    (i) All monthly housing payments (rent- or mortgage-related, 
including property taxes, insurance and home owners association fees); 
and
    (ii) Any of the following that is dependent upon the borrower's 
income for payment:
    (A) Monthly payments on other debt and lease obligations, such as 
credit card loans or installment loans, including the monthly amount due 
on the automobile loan;
    (B) Estimated monthly amortizing payments for any term debt, debts 
with other than monthly payments and debts not in repayment (such as 
deferred student loans, interest-only loans); and
    (C) Any required monthly alimony, child support or court-ordered 
payments; and
    (2) In the case of a commercial loan, the outstanding balance of all 
long-term debt (obligations that have a remaining maturity of more than 
one year) and the current portion of all debt that matures in one year 
or less.
    Total liabilities ratio means the borrower's total liabilities 
divided by the sum of the borrower's total liabilities and equity, less 
the borrower's intangible assets, with each component determined in 
accordance with GAAP.
    Trade-in allowance means the amount a vehicle purchaser is given as 
a credit at the purchase of a vehicle for the fair exchange of the 
borrower's existing vehicle to compensate the dealer for some portion of 
the vehicle purchase price, not to exceed the highest trade-in value of 
the existing vehicle, as determined by a nationally recognized 
automobile pricing agency and based on the manufacturer, year, model, 
features, mileage, and condition of the vehicle, less the payoff balance 
of any outstanding debt collateralized by the existing vehicle.
    Uniform Standards of Professional Appraisal Practice (USPAP) means 
generally accepted standards for professional appraisal practice issued 
by the Appraisal Standards Board of the Appraisal Foundation.



Sec.  43.15  Qualifying commercial loans, commercial real estate loans, 
and automobile loans.

    (a) General exception for qualifying assets. Commercial loans, 
commercial real estate loans, and automobile loans that are securitized 
through a

[[Page 841]]

securitization transaction shall be subject to a 0 percent risk 
retention requirement under subpart B, provided that the following 
conditions are met:
    (1) The assets meet the underwriting standards set forth in Sec.  
43.16 (qualifying commercial loans), Sec.  43.17 (qualifying CRE loans), 
or Sec.  43.18 (qualifying automobile loans) of this part, as 
applicable;
    (2) The securitization transaction is collateralized solely by loans 
of the same asset class and by servicing assets;
    (3) The securitization transaction does not permit reinvestment 
periods; and
    (4) The sponsor provides, or causes to be provided, to potential 
investors a reasonable period of time prior to the sale of asset-backed 
securities of the issuing entity, and, upon request, to the Commission, 
and to its appropriate Federal banking agency, if any, in written form 
under the caption ``Credit Risk Retention'', a description of the manner 
in which the sponsor determined the aggregate risk retention requirement 
for the securitization transaction after including qualifying commercial 
loans, qualifying CRE loans, or qualifying automobile loans with 0 
percent risk retention.
    (b) Risk retention requirement. For any securitization transaction 
described in paragraph (a) of this section, the percentage of risk 
retention required under Sec.  43.3(a) is reduced by the percentage 
evidenced by the ratio of the unpaid principal balance of the qualifying 
commercial loans, qualifying CRE loans, or qualifying automobile loans 
(as applicable) to the total unpaid principal balance of commercial 
loans, CRE loans, or automobile loans (as applicable) that are included 
in the pool of assets collateralizing the asset-backed securities issued 
pursuant to the securitization transaction (the qualifying asset ratio); 
provided that:
    (1) The qualifying asset ratio is measured as of the cut-off date or 
similar date for establishing the composition of the securitized assets 
collateralizing the asset-backed securities issued pursuant to the 
securitization transaction;
    (2) If the qualifying asset ratio would exceed 50 percent, the 
qualifying asset ratio shall be deemed to be 50 percent; and
    (3) The disclosure required by paragraph (a)(4) of this section also 
includes descriptions of the qualifying commercial loans, qualifying CRE 
loans, and qualifying automobile loans (qualifying assets) and 
descriptions of the assets that are not qualifying assets, and the 
material differences between the group of qualifying assets and the 
group of assets that are not qualifying assets with respect to the 
composition of each group's loan balances, loan terms, interest rates, 
borrower credit information, and characteristics of any loan collateral.
    (c) Exception for securitizations of qualifying assets only. 
Notwithstanding other provisions of this section, the risk retention 
requirements of subpart B of this part shall not apply to securitization 
transactions where the transaction is collateralized solely by servicing 
assets and either qualifying commercial loans, qualifying CRE loans, or 
qualifying automobile loans.
    (d) Record maintenance. A sponsor must retain the disclosures 
required in paragraphs (a) and (b) of this section and the 
certifications required in Sec. Sec.  43.16(a)(8), 43.17(a)(10), and 
43.18(a)(8), as applicable, in its records until three years after all 
ABS interests issued in the securitization are no longer outstanding. 
The sponsor must provide the disclosures and certifications upon request 
to the Commission and the sponsor's appropriate Federal banking agency, 
if any.



Sec.  43.16  Underwriting standards for qualifying commercial loans.

    (a) Underwriting, product and other standards. (1) Prior to 
origination of the commercial loan, the originator:
    (i) Verified and documented the financial condition of the borrower:
    (A) As of the end of the borrower's two most recently completed 
fiscal years; and
    (B) During the period, if any, since the end of its most recently 
completed fiscal year;
    (ii) Conducted an analysis of the borrower's ability to service its 
overall debt obligations during the next two years, based on reasonable 
projections;

[[Page 842]]

    (iii) Determined that, based on the previous two years' actual 
performance, the borrower had:
    (A) A total liabilities ratio of 50 percent or less;
    (B) A leverage ratio of 3.0 or less; and
    (C) A DSC ratio of 1.5 or greater;
    (iv) Determined that, based on the two years of projections, which 
include the new debt obligation, following the closing date of the loan, 
the borrower will have:
    (A) A total liabilities ratio of 50 percent or less;
    (B) A leverage ratio of 3.0 or less; and
    (C) A DSC ratio of 1.5 or greater.
    (2) Prior to, upon or promptly following the inception of the loan, 
the originator:
    (i) If the loan is originated on a secured basis, obtains a 
perfected security interest (by filing, title notation or otherwise) or, 
in the case of real property, a recorded lien, on all of the property 
pledged to collateralize the loan; and
    (ii) If the loan documents indicate the purpose of the loan is to 
finance the purchase of tangible or intangible property, or to refinance 
such a loan, obtains a first lien on the property.
    (3) The loan documentation for the commercial loan includes 
covenants that:
    (i) Require the borrower to provide to the servicer of the 
commercial loan the borrower's financial statements and supporting 
schedules on an ongoing basis, but not less frequently than quarterly;
    (ii) Prohibit the borrower from retaining or entering into a debt 
arrangement that permits payments-in-kind;
    (iii) Impose limits on:
    (A) The creation or existence of any other security interest or lien 
with respect to any of the borrower's property that serves as collateral 
for the loan;
    (B) The transfer of any of the borrower's assets that serve as 
collateral for the loan; and
    (C) Any change to the name, location or organizational structure of 
the borrower, or any other party that pledges collateral for the loan;
    (iv) Require the borrower and any other party that pledges 
collateral for the loan to:
    (A) Maintain insurance that protects against loss on the collateral 
for the commercial loan at least up to the amount of the loan, and that 
names the originator or any subsequent holder of the loan as an 
additional insured or loss payee;
    (B) Pay taxes, charges, fees, and claims, where non-payment might 
give rise to a lien on any collateral;
    (C) Take any action required to perfect or protect the security 
interest and first lien (as applicable) of the originator or any 
subsequent holder of the loan in any collateral for the commercial loan 
or the priority thereof, and to defend any collateral against claims 
adverse to the lender's interest;
    (D) Permit the originator or any subsequent holder of the loan, and 
the servicer of the loan, to inspect any collateral for the commercial 
loan and the books and records of the borrower; and
    (E) Maintain the physical condition of any collateral for the 
commercial loan.
    (4) Loan payments required under the loan agreement are:
    (i) Based on level monthly payments of principal and interest (at 
the fully indexed rate) that fully amortize the debt over a term that 
does not exceed five years from the date of origination; and
    (ii) To be made no less frequently than quarterly over a term that 
does not exceed five years.
    (5) The primary source of repayment for the loan is revenue from the 
business operations of the borrower.
    (6) The loan was funded within the six (6) months prior to the cut-
off date or similar date for establishing the composition of the 
securitized assets collateralizing the asset-backed securities issued 
pursuant to the securitization transaction.
    (7) At the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, all 
payments due on the loan are contractually current.
    (8)(i) The depositor of the asset-backed security certifies that it 
has evaluated the effectiveness of its internal supervisory controls 
with respect to the process for ensuring that all

[[Page 843]]

qualifying commercial loans that collateralize the asset-backed security 
and that reduce the sponsor's risk retention requirement under Sec.  
43.15 meet all of the requirements set forth in paragraphs (a)(1) 
through (7) of this section and has concluded that its internal 
supervisory controls are effective;
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls referenced in paragraph (a)(8)(i) of this section 
shall be performed, for each issuance of an asset-backed security, as of 
a date within 60 days of the cut-off date or similar date for 
establishing the composition of the asset pool collateralizing such 
asset-backed security; and
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (a)(8)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to its 
appropriate Federal banking agency, if any.
    (b) Cure or buy-back requirement. If a sponsor has relied on the 
exception provided in Sec.  43.15 with respect to a qualifying 
commercial loan and it is subsequently determined that the loan did not 
meet all of the requirements set forth in paragraphs (a)(1) through (7) 
of this section, the sponsor shall not lose the benefit of the exception 
with respect to the commercial loan if the depositor complied with the 
certification requirement set forth in paragraph (a)(8) of this section 
and:
    (1) The failure of the loan to meet any of the requirements set 
forth in paragraphs (a)(1) through (7) of this section is not material; 
or
    (2) No later than 90 days after the determination that the loan does 
not meet one or more of the requirements of paragraphs (a)(1) through 
(7) of this section, the sponsor:
    (i) Effectuates cure, establishing conformity of the loan to the 
unmet requirements as of the date of cure; or
    (ii) Repurchases the loan(s) from the issuing entity at a price at 
least equal to the remaining principal balance and accrued interest on 
the loan(s) as of the date of repurchase.
    (3) If the sponsor cures or repurchases pursuant to paragraph (b)(2) 
of this section, the sponsor must promptly notify, or cause to be 
notified, the holders of the asset-backed securities issued in the 
securitization transaction of any loan(s) included in such 
securitization transaction that is required to be cured or repurchased 
by the sponsor pursuant to paragraph (b)(2) of this section, including 
the principal amount of such loan(s) and the cause for such cure or 
repurchase.



Sec.  43.17  Underwriting standards for qualifying CRE loans.

    (a) Underwriting, product and other standards. (1) The CRE loan must 
be secured by the following:
    (i) An enforceable first lien, documented and recorded appropriately 
pursuant to applicable law, on the commercial real estate and 
improvements;
    (ii)(A) An assignment of:
    (1) Leases and rents and other occupancy agreements related to the 
commercial real estate or improvements or the operation thereof for 
which the borrower or an operating affiliate is a lessor or similar 
party and all payments under such leases and occupancy agreements; and
    (2) All franchise, license and concession agreements related to the 
commercial real estate or improvements or the operation thereof for 
which the borrower or an operating affiliate is a lessor, licensor, 
concession granter or similar party and all payments under such other 
agreements, whether the assignments described in this paragraph 
(a)(1)(ii)(A)(2) are absolute or are stated to be made to the extent 
permitted by the agreements governing the applicable franchise, license 
or concession agreements;
    (B) An assignment of all other payments due to the borrower or due 
to any operating affiliate in connection with the operation of the 
property described in paragraph (a)(1)(i) of this section; and
    (C) The right to enforce the agreements described in paragraph 
(a)(1)(ii)(A) of this section and the agreements under which payments 
under paragraph (a)(1)(ii)(B) of this section are due against, and 
collect

[[Page 844]]

amounts due from, each lessee, occupant or other obligor whose payments 
were assigned pursuant to paragraphs (a)(1)(ii)(A) or (B) of this 
section upon a breach by the borrower of any of the terms of, or the 
occurrence of any other event of default (however denominated) under, 
the loan documents relating to such CRE loan; and
    (iii) A security interest:
    (A) In all interests of the borrower and any applicable operating 
affiliate in all tangible and intangible personal property of any kind, 
in or used in the operation of or in connection with, pertaining to, 
arising from, or constituting, any of the collateral described in 
paragraphs (a)(1)(i) or (ii) of this section; and
    (B) In the form of a perfected security interest if the security 
interest in such property can be perfected by the filing of a financing 
statement, fixture filing, or similar document pursuant to the law 
governing the perfection of such security interest;
    (2) Prior to origination of the CRE loan, the originator:
    (i) Verified and documented the current financial condition of the 
borrower and each operating affiliate;
    (ii) Obtained a written appraisal of the real property securing the 
loan that:
    (A) Had an effective date not more than six months prior to the 
origination date of the loan by a competent and appropriately State-
certified or State-licensed appraiser;
    (B) Conforms to generally accepted appraisal standards as evidenced 
by the USPAP and the appraisal requirements \1\ of the Federal banking 
agencies; and
---------------------------------------------------------------------------

    \1\ 12 CFR part 34, subpart C (OCC); 12 CFR part 208, subpart E, and 
12 CFR part 225, subpart G (Board); and 12 CFR part 323 (FDIC).
---------------------------------------------------------------------------

    (C) Provides an ``as is'' opinion of the market value of the real 
property, which includes an income approach; \2\
---------------------------------------------------------------------------

    \2\ See USPAP, Standard 1.
---------------------------------------------------------------------------

    (iii) Qualified the borrower for the CRE loan based on a monthly 
payment amount derived from level monthly payments consisting of both 
principal and interest (at the fully-indexed rate) over the term of the 
loan, not exceeding 25 years, or 30 years for a qualifying multi-family 
property;
    (iv) Conducted an environmental risk assessment to gain 
environmental information about the property securing the loan and took 
appropriate steps to mitigate any environmental liability determined to 
exist based on this assessment;
    (v) Conducted an analysis of the borrower's ability to service its 
overall debt obligations during the next two years, based on reasonable 
projections (including operating income projections for the property);
    (vi)(A) Determined that based on the two years' actual performance 
immediately preceding the origination of the loan, the borrower would 
have had:
    (1) A DSC ratio of 1.5 or greater, if the loan is a qualifying 
leased CRE loan, net of any income derived from a tenant(s) who is not a 
qualified tenant(s);
    (2) A DSC ratio of 1.25 or greater, if the loan is a qualifying 
multi-family property loan; or
    (3) A DSC ratio of 1.7 or greater, if the loan is any other type of 
CRE loan;
    (B) If the borrower did not own the property for any part of the 
last two years prior to origination, the calculation of the DSC ratio, 
for purposes of paragraph (a)(2)(vi)(A) of this section, shall include 
the property's operating income for any portion of the two-year period 
during which the borrower did not own the property;
    (vii) Determined that, based on two years of projections, which 
include the new debt obligation, following the origination date of the 
loan, the borrower will have:
    (A) A DSC ratio of 1.5 or greater, if the loan is a qualifying 
leased CRE loan, net of any income derived from a tenant(s) who is not a 
qualified tenant(s);
    (B) A DSC ratio of 1.25 or greater, if the loan is a qualifying 
multi-family property loan; or
    (C) A DSC ratio of 1.7 or greater, if the loan is any other type of 
CRE loan.
    (3) The loan documentation for the CRE loan includes covenants that:
    (i) Require the borrower to provide the borrower's financial 
statements and supporting schedules to the servicer on an ongoing basis, 
but not less frequently than quarterly, including information on 
existing, maturing

[[Page 845]]

and new leasing or rent-roll activity for the property securing the 
loan, as appropriate; and
    (ii) Impose prohibitions on:
    (A) The creation or existence of any other security interest with 
respect to the collateral for the CRE loan described in paragraphs 
(a)(1)(i) and (a)(1)(ii)(A) of this section, except as provided in 
paragraph (a)(4) of this section;
    (B) The transfer of any collateral for the CRE loan described in 
paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section or of any other 
collateral consisting of fixtures, furniture, furnishings, machinery or 
equipment other than any such fixture, furniture, furnishings, machinery 
or equipment that is obsolete or surplus; and
    (C) Any change to the name, location or organizational structure of 
any borrower, operating affiliate or other pledgor unless such borrower, 
operating affiliate or other pledgor shall have given the holder of the 
loan at least 30 days advance notice and, pursuant to applicable law 
governing perfection and priority, the holder of the loan is able to 
take all steps necessary to continue its perfection and priority during 
such 30-day period.
    (iii) Require each borrower and each operating affiliate to:
    (A) Maintain insurance that protects against loss on collateral for 
the CRE loan described in paragraph (a)(1)(i) of this section for an 
amount no less than the replacement cost of the property improvements, 
and names the originator or any subsequent holder of the loan as an 
additional insured or lender loss payee;
    (B) Pay taxes, charges, fees, and claims, where non-payment might 
give rise to a lien on collateral for the CRE loan described in 
paragraphs (a)(1)(i) and (ii) of this section;
    (C) Take any action required to:
    (1) Protect the security interest and the enforceability and 
priority thereof in the collateral described in paragraphs (a)(1)(i) and 
(a)(1)(ii)(A) of this section and defend such collateral against claims 
adverse to the originator's or any subsequent holder's interest; and
    (2) Perfect the security interest of the originator or any 
subsequent holder of the loan in any other collateral for the CRE loan 
to the extent that such security interest is required by this section to 
be perfected;
    (D) Permit the originator or any subsequent holder of the loan, and 
the servicer, to inspect any collateral for the CRE loan and the books 
and records of the borrower or other party relating to any collateral 
for the CRE loan;
    (E) Maintain the physical condition of collateral for the CRE loan 
described in paragraph (a)(1)(i) of this section;
    (F) Comply with all environmental, zoning, building code, licensing 
and other laws, regulations, agreements, covenants, use restrictions, 
and proffers applicable to collateral for the CRE loan described in 
paragraph (a)(1)(i) of this section;
    (G) Comply with leases, franchise agreements, condominium 
declarations, and other documents and agreements relating to the 
operation of collateral for the CRE loan described in paragraph 
(a)(1)(i) of this section, and to not modify any material terms and 
conditions of such agreements over the term of the loan without the 
consent of the originator or any subsequent holder of the loan, or the 
servicer; and
    (H) Not materially alter collateral for the CRE loan described in 
paragraph (a)(1)(i) of this section without the consent of the 
originator or any subsequent holder of the loan, or the servicer.
    (4) The loan documentation for the CRE loan prohibits the borrower 
and each operating affiliate from obtaining a loan secured by a junior 
lien on collateral for the CRE loan described in paragraph (a)(1)(i) or 
(a)(1)(ii)(A) of this section, unless:
    (i) The sum of the principal amount of such junior lien loan, plus 
the principal amount of all other loans secured by collateral described 
in paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section, does not exceed 
the applicable CLTV ratio in paragraph (a)(5) of this section, based on 
the appraisal at origination of such junior lien loan; or
    (ii) Such loan is a purchase money obligation that financed the 
acquisition of machinery or equipment and the borrower or operating 
affiliate (as applicable) pledges such machinery and

[[Page 846]]

equipment as additional collateral for the CRE loan.
    (5) At origination, the applicable loan-to-value ratios for the loan 
are:
    (i) LTV less than or equal to 65 percent and CLTV less than or equal 
to 70 percent; or
    (ii) LTV less than or equal to 60 percent and CLTV less than or 
equal to 65 percent, if an appraisal used to meet the requirements set 
forth in paragraph (a)(2)(ii) of this section used a direct 
capitalization rate, and that rate is less than or equal to the sum of:
    (A) The 10-year swap rate, as reported in the Federal Reserve's H.15 
Report (or any successor report) as of the date concurrent with the 
effective date of such appraisal; and
    (B) 300 basis points.
    (iii) If the appraisal required under paragraph (a)(2)(ii) of this 
section included a direct capitalization method using an overall 
capitalization rate, that rate must be disclosed to potential investors 
in the securitization.
    (6) All loan payments required to be made under the loan agreement 
are:
    (i) Based on level monthly payments of principal and interest (at 
the fully indexed rate) to fully amortize the debt over a term that does 
not exceed 25 years, or 30 years for a qualifying multifamily loan; and
    (ii) To be made no less frequently than monthly over a term of at 
least ten years.
    (7) Under the terms of the loan agreement:
    (i) Any maturity of the note occurs no earlier than ten years 
following the date of origination;
    (ii) The borrower is not permitted to defer repayment of principal 
or payment of interest; and
    (iii) The interest rate on the loan is:
    (A) A fixed interest rate;
    (B) An adjustable interest rate and the borrower, prior to or 
concurrently with origination of the CRE loan, obtained a derivative 
that effectively results in a fixed interest rate; or
    (C) An adjustable interest rate and the borrower, prior to or 
concurrently with origination of the CRE loan, obtained a derivative 
that established a cap on the interest rate for the term of the loan, 
and the loan meets the underwriting criteria in paragraphs (a)(2)(vi) 
and (vii) of this section using the maximum interest rate allowable 
under the interest rate cap.
    (8) The originator does not establish an interest reserve at 
origination to fund all or part of a payment on the loan.
    (9) At the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, all 
payments due on the loan are contractually current.
    (10)(i) The depositor of the asset-backed security certifies that it 
has evaluated the effectiveness of its internal supervisory controls 
with respect to the process for ensuring that all qualifying CRE loans 
that collateralize the asset-backed security and that reduce the 
sponsor's risk retention requirement under Sec.  43.15 meet all of the 
requirements set forth in paragraphs (a)(1) through (9) of this section 
and has concluded that its internal supervisory controls are effective;
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls referenced in paragraph (a)(10)(i) of this section 
shall be performed, for each issuance of an asset-backed security, as of 
a date within 60 days of the cut-off date or similar date for 
establishing the composition of the asset pool collateralizing such 
asset-backed security;
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (a)(10)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to its 
appropriate Federal banking agency, if any; and
    (11) Within two weeks of the closing of the CRE loan by its 
originator or, if sooner, prior to the transfer of such CRE loan to the 
issuing entity, the originator shall have obtained a UCC lien search 
from the jurisdiction of organization of the borrower and each operating 
affiliate, that does not report, as of the time that the security 
interest of the originator in the property described in paragraph 
(a)(1)(iii) of this section was perfected, other higher priority liens 
of record on any property

[[Page 847]]

described in paragraph (a)(1)(iii) of this section, other than purchase 
money security interests.
    (b) Cure or buy-back requirement. If a sponsor has relied on the 
exception provided in Sec.  43.15 with respect to a qualifying CRE loan 
and it is subsequently determined that the CRE loan did not meet all of 
the requirements set forth in paragraphs (a)(1) through (9) and (a)(11) 
of this section, the sponsor shall not lose the benefit of the exception 
with respect to the CRE loan if the depositor complied with the 
certification requirement set forth in paragraph (a)(10) of this 
section, and:
    (1) The failure of the loan to meet any of the requirements set 
forth in paragraphs (a)(1) through (9) and (a)(11) of this section is 
not material; or;
    (2) No later than 90 days after the determination that the loan does 
not meet one or more of the requirements of paragraphs (a)(1) through 
(9) or (a)(11) of this section, the sponsor:
    (i) Effectuates cure, restoring conformity of the loan to the unmet 
requirements as of the date of cure; or
    (ii) Repurchases the loan(s) from the issuing entity at a price at 
least equal to the remaining principal balance and accrued interest on 
the loan(s) as of the date of repurchase.
    (3) If the sponsor cures or repurchases pursuant to paragraph (b)(2) 
of this section, the sponsor must promptly notify, or cause to be 
notified, the holders of the asset-backed securities issued in the 
securitization transaction of any loan(s) included in such 
securitization transaction that is required to be cured or repurchased 
by the sponsor pursuant to paragraph (b)(2) of this section, including 
the principal amount of such repurchased loan(s) and the cause for such 
cure or repurchase.



Sec.  43.18  Underwriting standards for qualifying automobile loans.

    (a) Underwriting, product and other standards. (1) Prior to 
origination of the automobile loan, the originator:
    (i) Verified and documented that within 30 days of the date of 
origination:
    (A) The borrower was not currently 30 days or more past due, in 
whole or in part, on any debt obligation;
    (B) Within the previous 24 months, the borrower has not been 60 days 
or more past due, in whole or in part, on any debt obligation;
    (C) Within the previous 36 months, the borrower has not:
    (1) Been a debtor in a proceeding commenced under Chapter 7 
(Liquidation), Chapter 11 (Reorganization), Chapter 12 (Family Farmer or 
Family Fisherman plan), or Chapter 13 (Individual Debt Adjustment) of 
the U.S. Bankruptcy Code; or
    (2) Been the subject of any federal or State judicial judgment for 
the collection of any unpaid debt;
    (D) Within the previous 36 months, no one-to-four family property 
owned by the borrower has been the subject of any foreclosure, deed in 
lieu of foreclosure, or short sale; or
    (E) Within the previous 36 months, the borrower has not had any 
personal property repossessed;
    (ii) Determined and documented that the borrower has at least 24 
months of credit history; and
    (iii) Determined and documented that, upon the origination of the 
loan, the borrower's DTI ratio is less than or equal to 36 percent.
    (A) For the purpose of making the determination under paragraph 
(a)(1)(iii) of this section, the originator must:
    (1) Verify and document all income of the borrower that the 
originator includes in the borrower's effective monthly income (using 
payroll stubs, tax returns, profit and loss statements, or other similar 
documentation); and
    (2) On or after the date of the borrower's written application and 
prior to origination, obtain a credit report regarding the borrower from 
a consumer reporting agency that compiles and maintain files on 
consumers on a nationwide basis (within the meaning of 15 U.S.C. 
1681a(p)) and verify that all outstanding debts reported in the 
borrower's credit report are incorporated into the calculation of the 
borrower's DTI ratio under paragraph (a)(1)(iii) of this section;
    (2) An originator will be deemed to have met the requirements of 
paragraph (a)(1)(i) of this section if:

[[Page 848]]

    (i) The originator, no more than 30 days before the closing of the 
loan, obtains a credit report regarding the borrower from a consumer 
reporting agency that compiles and maintains files on consumers on a 
nationwide basis (within the meaning of 15 U.S.C. 1681a(p));
    (ii) Based on the information in such credit report, the borrower 
meets all of the requirements of paragraph (a)(1)(i) of this section, 
and no information in a credit report subsequently obtained by the 
originator before the closing of the loan contains contrary information; 
and
    (iii) The originator obtains electronic or hard copies of the credit 
report.
    (3) At closing of the automobile loan, the borrower makes a down 
payment from the borrower's personal funds and trade-in allowance, if 
any, that is at least equal to the sum of:
    (i) The full cost of the vehicle title, tax, and registration fees;
    (ii) Any dealer-imposed fees;
    (iii) The full cost of any additional warranties, insurance or other 
products purchased in connection with the purchase of the vehicle; and
    (iv) 10 percent of the vehicle purchase price.
    (4) The originator records a first lien securing the loan on the 
purchased vehicle in accordance with State law.
    (5) The terms of the loan agreement provide a maturity date for the 
loan that does not exceed the lesser of:
    (i) Six years from the date of origination; or
    (ii) 10 years minus the difference between the current model year 
and the vehicle's model year.
    (6) The terms of the loan agreement:
    (i) Specify a fixed rate of interest for the life of the loan;
    (ii) Provide for a level monthly payment amount that fully amortizes 
the amount financed over the loan term;
    (iii) Do not permit the borrower to defer repayment of principal or 
payment of interest; and
    (iv) Require the borrower to make the first payment on the 
automobile loan within 45 days of the loan's contract date.
    (7) At the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, all 
payments due on the loan are contractually current; and
    (8)(i) The depositor of the asset-backed security certifies that it 
has evaluated the effectiveness of its internal supervisory controls 
with respect to the process for ensuring that all qualifying automobile 
loans that collateralize the asset-backed security and that reduce the 
sponsor's risk retention requirement under Sec.  43.15 meet all of the 
requirements set forth in paragraphs (a)(1) through (7) of this section 
and has concluded that its internal supervisory controls are effective;
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls referenced in paragraph (a)(8)(i) of this section 
shall be performed, for each issuance of an asset-backed security, as of 
a date within 60 days of the cut-off date or similar date for 
establishing the composition of the asset pool collateralizing such 
asset-backed security; and
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (a)(8)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to its 
appropriate Federal banking agency, if any.
    (b) Cure or buy-back requirement. If a sponsor has relied on the 
exception provided in Sec.  43.15 with respect to a qualifying 
automobile loan and it is subsequently determined that the loan did not 
meet all of the requirements set forth in paragraphs (a)(1) through (7) 
of this section, the sponsor shall not lose the benefit of the exception 
with respect to the automobile loan if the depositor complied with the 
certification requirement set forth in paragraph (a)(8) of this section, 
and:
    (1) The failure of the loan to meet any of the requirements set 
forth in paragraphs (a)(1) through (7) of this section is not material; 
or
    (2) No later than ninety (90) days after the determination that the 
loan does not meet one or more of the requirements of paragraphs (a)(1) 
through (7) of this section, the sponsor:

[[Page 849]]

    (i) Effectuates cure, establishing conformity of the loan to the 
unmet requirements as of the date of cure; or
    (ii) Repurchases the loan(s) from the issuing entity at a price at 
least equal to the remaining principal balance and accrued interest on 
the loan(s) as of the date of repurchase.
    (3) If the sponsor cures or repurchases pursuant to paragraph (b)(2) 
of this section, the sponsor must promptly notify, or cause to be 
notified, the holders of the asset-backed securities issued in the 
securitization transaction of any loan(s) included in such 
securitization transaction that is required to be cured or repurchased 
by the sponsor pursuant to paragraph (b)(2) of this section, including 
the principal amount of such loan(s) and the cause for such cure or 
repurchase.



Sec.  43.19  General exemptions.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    Community-focused residential mortgage means a residential mortgage 
exempt from the definition of ``covered transaction'' under Sec.  
1026.43(a)(3)(iv) and (v) of the CFPB's Regulation Z (12 CFR 
1026.43(a)).
    First pay class means a class of ABS interests for which all 
interests in the class are entitled to the same priority of payment and 
that, at the time of closing of the transaction, is entitled to 
repayments of principal and payments of interest prior to or pro-rata 
with all other classes of securities collateralized by the same pool of 
first-lien residential mortgages, until such class has no principal or 
notional balance remaining.
    Inverse floater means an ABS interest issued as part of a 
securitization transaction for which interest or other income is payable 
to the holder based on a rate or formula that varies inversely to a 
reference rate of interest.
    Qualifying three-to-four unit residential mortgage loan means a 
mortgage loan that is:
    (i) Secured by a dwelling (as defined in 12 CFR 1026.2(a)(19)) that 
is owner occupied and contains three-to-four housing units;
    (ii) Is deemed to be for business purposes for purposes of 
Regulation Z under 12 CFR part 1026, supplement I, paragraph 3(a)(5)(i); 
and
    (iii) Otherwise meets all of the requirements to qualify as a 
qualified mortgage under Sec.  1026.43(e) and (f) of Regulation Z (12 
CFR 1026.43(e) and (f)) as if the loan were a covered transaction under 
that section.
    (b) This part shall not apply to:
    (1) U.S. Government-backed securitizations. Any securitization 
transaction that:
    (i) Is collateralized solely by residential, multifamily, or health 
care facility mortgage loan assets that are insured or guaranteed (in 
whole or in part) as to the payment of principal and interest by the 
United States or an agency of the United States, and servicing assets; 
or
    (ii) Involves the issuance of asset-backed securities that:
    (A) Are insured or guaranteed as to the payment of principal and 
interest by the United States or an agency of the United States; and
    (B) Are collateralized solely by residential, multifamily, or health 
care facility mortgage loan assets or interests in such assets, and 
servicing assets.
    (2) Certain agricultural loan securitizations. Any securitization 
transaction that is collateralized solely by loans or other assets made, 
insured, guaranteed, or purchased by any institution that is subject to 
the supervision of the Farm Credit Administration, including the Federal 
Agricultural Mortgage Corporation, and servicing assets;
    (3) State and municipal securitizations. Any asset-backed security 
that is a security issued or guaranteed by any State, or by any 
political subdivision of a State, or by any public instrumentality of a 
State that is exempt from the registration requirements of the 
Securities Act of 1933 by reason of section 3(a)(2) of that Act (15 
U.S.C. 77c(a)(2)); and
    (4) Qualified scholarship funding bonds. Any asset-backed security 
that meets the definition of a qualified scholarship funding bond, as 
set forth in section 150(d)(2) of the Internal Revenue Code of 1986 (26 
U.S.C. 150(d)(2)).
    (5) Pass-through resecuritizations. Any securitization transaction 
that:

[[Page 850]]

    (i) Is collateralized solely by servicing assets, and by asset-
backed securities:
    (A) For which credit risk was retained as required under subpart B 
of this part; or
    (B) That were exempted from the credit risk retention requirements 
of this part pursuant to subpart D of this part;
    (ii) Is structured so that it involves the issuance of only a single 
class of ABS interests; and
    (iii) Provides for the pass-through of all principal and interest 
payments received on the underlying asset-backed securities (net of 
expenses of the issuing entity) to the holders of such class.
    (6) First-pay-class securitizations. Any securitization transaction 
that:
    (i) Is collateralized solely by servicing assets, and by first-pay 
classes of asset-backed securities collateralized by first-lien 
residential mortgages on properties located in any state:
    (A) For which credit risk was retained as required under subpart B 
of this part; or
    (B) That were exempted from the credit risk retention requirements 
of this part pursuant to subpart D of this part;
    (ii) Does not provide for any ABS interest issued in the 
securitization transaction to share in realized principal losses other 
than pro rata with all other ABS interests issued in the securitization 
transaction based on the current unpaid principal balance of such ABS 
interests at the time the loss is realized;
    (iii) Is structured to reallocate prepayment risk;
    (iv) Does not reallocate credit risk (other than as a consequence of 
reallocation of prepayment risk); and
    (v) Does not include any inverse floater or similarly structured ABS 
interest.
    (7) Seasoned loans. (i) Any securitization transaction that is 
collateralized solely by servicing assets, and by seasoned loans that 
meet the following requirements:
    (A) The loans have not been modified since origination; and
    (B) None of the loans have been delinquent for 30 days or more.
    (ii) For purposes of this paragraph, a seasoned loan means:
    (A) With respect to asset-backed securities collateralized by 
residential mortgages, a loan that has been outstanding and performing 
for the longer of:
    (1) A period of five years; or
    (2) Until the outstanding principal balance of the loan has been 
reduced to 25 percent of the original principal balance.
    (3) Notwithstanding paragraphs (b)(7)(ii)(A)(1) and (2) of this 
section, any residential mortgage loan that has been outstanding and 
performing for a period of at least seven years shall be deemed a 
seasoned loan.
    (B) With respect to all other classes of asset-backed securities, a 
loan that has been outstanding and performing for the longer of:
    (1) A period of at least two years; or
    (2) Until the outstanding principal balance of the loan has been 
reduced to 33 percent of the original principal balance.
    (8) Certain public utility securitizations. (i) Any securitization 
transaction where the asset-back securities issued in the transaction 
are secured by the intangible property right to collect charges for the 
recovery of specified costs and such other assets, if any, of an issuing 
entity that is wholly owned, directly or indirectly, by an investor 
owned utility company that is subject to the regulatory authority of a 
State public utility commission or other appropriate State agency.
    (ii) For purposes of this paragraph:
    (A) Specified cost means any cost identified by a State legislature 
as appropriate for recovery through securitization pursuant to specified 
cost recovery legislation; and
    (B) Specified cost recovery legislation means legislation enacted by 
a State that:
    (1) Authorizes the investor owned utility company to apply for, and 
authorizes the public utility commission or other appropriate State 
agency to issue, a financing order determining the amount of specified 
costs the utility will be allowed to recover;
    (2) Provides that pursuant to a financing order, the utility 
acquires an intangible property right to charge,

[[Page 851]]

collect, and receive amounts necessary to provide for the full recovery 
of the specified costs determined to be recoverable, and assures that 
the charges are non-bypassable and will be paid by customers within the 
utility's historic service territory who receive utility goods or 
services through the utility's transmission and distribution system, 
even if those customers elect to purchase these goods or services from a 
third party; and
    (3) Guarantees that neither the State nor any of its agencies has 
the authority to rescind or amend the financing order, to revise the 
amount of specified costs, or in any way to reduce or impair the value 
of the intangible property right, except as may be contemplated by 
periodic adjustments authorized by the specified cost recovery 
legislation.
    (c) Exemption for securitizations of assets issued, insured or 
guaranteed by the United States. This part shall not apply to any 
securitization transaction if the asset-backed securities issued in the 
transaction are:
    (1) Collateralized solely by obligations issued by the United States 
or an agency of the United States and servicing assets;
    (2) Collateralized solely by assets that are fully insured or 
guaranteed as to the payment of principal and interest by the United 
States or an agency of the United States (other than those referred to 
in paragraph (b)(1)(i) of this section) and servicing assets; or
    (3) Fully guaranteed as to the timely payment of principal and 
interest by the United States or any agency of the United States;
    (d) Federal Deposit Insurance Corporation securitizations. This part 
shall not apply to any securitization transaction that is sponsored by 
the Federal Deposit Insurance Corporation acting as conservator or 
receiver under any provision of the Federal Deposit Insurance Act or of 
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act.
    (e) Reduced requirement for certain student loan securitizations. 
The 5 percent risk retention requirement set forth in Sec.  43.4 shall 
be modified as follows:
    (1) With respect to a securitization transaction that is 
collateralized solely by student loans made under the Federal Family 
Education Loan Program (``FFELP loans'') that are guaranteed as to 100 
percent of defaulted principal and accrued interest, and servicing 
assets, the risk retention requirement shall be 0 percent;
    (2) With respect to a securitization transaction that is 
collateralized solely by FFELP loans that are guaranteed as to at least 
98 percent but less than 100 percent of defaulted principal and accrued 
interest, and servicing assets, the risk retention requirement shall be 
2 percent; and
    (3) With respect to any other securitization transaction that is 
collateralized solely by FFELP loans, and servicing assets, the risk 
retention requirement shall be 3 percent.
    (f) Community-focused lending securitizations. (1) This part shall 
not apply to any securitization transaction if the asset-backed 
securities issued in the transaction are collateralized solely by 
community-focused residential mortgages and servicing assets.
    (2) For any securitization transaction that includes both community-
focused residential mortgages and residential mortgages that are not 
exempt from risk retention under this part, the percent of risk 
retention required under Sec.  43.4(a) is reduced by the ratio of the 
unpaid principal balance of the community-focused residential mortgages 
to the total unpaid principal balance of residential mortgages that are 
included in the pool of assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction (the 
community-focused residential mortgage asset ratio); provided that:
    (i) The community-focused residential mortgage asset ratio is 
measured as of the cut-off date or similar date for establishing the 
composition of the pool assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction; and
    (ii) If the community-focused residential mortgage asset ratio would 
exceed 50 percent, the community-focused residential mortgage asset 
ratio shall be deemed to be 50 percent.
    (g) Exemptions for securitizations of certain three-to-four unit 
mortgage loans. A sponsor shall be exempt from the risk retention 
requirements in subpart

[[Page 852]]

B of this part with respect to any securitization transaction if:
    (1)(i) The asset-backed securities issued in the transaction are 
collateralized solely by qualifying three-to-four unit residential 
mortgage loans and servicing assets; or
    (ii) The asset-backed securities issued in the transaction are 
collateralized solely by qualifying three-to-four unit residential 
mortgage loans, qualified residential mortgages as defined in Sec.  
43.13, and servicing assets.
    (2) The depositor with respect to the securitization provides the 
certifications set forth in Sec.  43.13(b)(4) with respect to the 
process for ensuring that all assets that collateralize the asset-backed 
securities issued in the transaction are qualifying three-to-four unit 
residential mortgage loans, qualified residential mortgages, or 
servicing assets; and
    (3) The sponsor of the securitization complies with the repurchase 
requirements in Sec.  43.13(c) with respect to a loan if, after closing, 
it is determined that the loan does not meet all of the criteria to be 
either a qualified residential mortgage or a qualifying three-to-four 
unit residential mortgage loan, as appropriate.
    (h) Rule of construction. Securitization transactions involving the 
issuance of asset-backed securities that are either issued, insured, or 
guaranteed by, or are collateralized by obligations issued by, or loans 
that are issued, insured, or guaranteed by, the Federal National 
Mortgage Association, the Federal Home Loan Mortgage Corporation, or a 
Federal home loan bank shall not on that basis qualify for exemption 
under this part.



Sec.  43.20  Safe harbor for certain foreign-related transactions.

    (a) Definitions. For purposes of this section, the following 
definition shall apply:
    U.S. person means:
    (i) Any of the following:
    (A) Any natural person resident in the United States;
    (B) Any partnership, corporation, limited liability company, or 
other organization or entity organized or incorporated under the laws of 
any State or of the United States;
    (C) Any estate of which any executor or administrator is a U.S. 
person (as defined under any other clause of this definition);
    (D) Any trust of which any trustee is a U.S. person (as defined 
under any other clause of this definition);
    (E) Any agency or branch of a foreign entity located in the United 
States;
    (F) Any non-discretionary account or similar account (other than an 
estate or trust) held by a dealer or other fiduciary for the benefit or 
account of a U.S. person (as defined under any other clause of this 
definition);
    (G) Any discretionary account or similar account (other than an 
estate or trust) held by a dealer or other fiduciary organized, 
incorporated, or (if an individual) resident in the United States; and
    (H) Any partnership, corporation, limited liability company, or 
other organization or entity if:
    (1) Organized or incorporated under the laws of any foreign 
jurisdiction; and
    (2) Formed by a U.S. person (as defined under any other clause of 
this definition) principally for the purpose of investing in securities 
not registered under the Act; and
    (ii) ``U.S. person(s)'' does not include:
    (A) Any discretionary account or similar account (other than an 
estate or trust) held for the benefit or account of a person not 
constituting a U.S. person (as defined in paragraph (i) of this section) 
by a dealer or other professional fiduciary organized, incorporated, or 
(if an individual) resident in the United States;
    (B) Any estate of which any professional fiduciary acting as 
executor or administrator is a U.S. person (as defined in paragraph (i) 
of this section) if:
    (1) An executor or administrator of the estate who is not a U.S. 
person (as defined in paragraph (i) of this section) has sole or shared 
investment discretion with respect to the assets of the estate; and
    (2) The estate is governed by foreign law;
    (C) Any trust of which any professional fiduciary acting as trustee 
is a U.S. person (as defined in paragraph (i)

[[Page 853]]

of this section), if a trustee who is not a U.S. person (as defined in 
paragraph (i) of this section) has sole or shared investment discretion 
with respect to the trust assets, and no beneficiary of the trust (and 
no settlor if the trust is revocable) is a U.S. person (as defined in 
paragraph (i) of this section);
    (D) An employee benefit plan established and administered in 
accordance with the law of a country other than the United States and 
customary practices and documentation of such country;
    (E) Any agency or branch of a U.S. person (as defined in paragraph 
(i) of this section) located outside the United States if:
    (1) The agency or branch operates for valid business reasons; and
    (2) The agency or branch is engaged in the business of insurance or 
banking and is subject to substantive insurance or banking regulation, 
respectively, in the jurisdiction where located;
    (F) The International Monetary Fund, the International Bank for 
Reconstruction and Development, the Inter-American Development Bank, the 
Asian Development Bank, the African Development Bank, the United 
Nations, and their agencies, affiliates and pension plans, and any other 
similar international organizations, their agencies, affiliates and 
pension plans.
    (b) In general. This part shall not apply to a securitization 
transaction if all the following conditions are met:
    (1) The securitization transaction is not required to be and is not 
registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.);
    (2) No more than 10 percent of the dollar value (or equivalent 
amount in the currency in which the ABS interests are issued, as 
applicable) of all classes of ABS interests in the securitization 
transaction are sold or transferred to U.S. persons or for the account 
or benefit of U.S. persons;
    (3) Neither the sponsor of the securitization transaction nor the 
issuing entity is:
    (i) Chartered, incorporated, or organized under the laws of the 
United States or any State;
    (ii) An unincorporated branch or office (wherever located) of an 
entity chartered, incorporated, or organized under the laws of the 
United States or any State; or
    (iii) An unincorporated branch or office located in the United 
States or any State of an entity that is chartered, incorporated, or 
organized under the laws of a jurisdiction other than the United States 
or any State; and
    (4) If the sponsor or issuing entity is chartered, incorporated, or 
organized under the laws of a jurisdiction other than the United States 
or any State, no more than 25 percent (as determined based on unpaid 
principal balance) of the assets that collateralize the ABS interests 
sold in the securitization transaction were acquired by the sponsor or 
issuing entity, directly or indirectly, from:
    (i) A majority-owned affiliate of the sponsor or issuing entity that 
is chartered, incorporated, or organized under the laws of the United 
States or any State; or
    (ii) An unincorporated branch or office of the sponsor or issuing 
entity that is located in the United States or any State.
    (c) Evasions prohibited. In view of the objective of these rules and 
the policies underlying Section 15G of the Exchange Act, the safe harbor 
described in paragraph (b) of this section is not available with respect 
to any transaction or series of transactions that, although in technical 
compliance with paragraphs (a) and (b) of this section, is part of a 
plan or scheme to evade the requirements of section 15G and this part. 
In such cases, compliance with section 15G and this part is required.



Sec.  43.21  Additional exemptions.

    (a) Securitization transactions. The federal agencies with 
rulewriting authority under section 15G(b) of the Exchange Act (15 
U.S.C. 78o-11(b)) with respect to the type of assets involved may 
jointly provide a total or partial exemption of any securitization 
transaction as such agencies determine may be appropriate in the public 
interest and for the protection of investors.
    (b) Exceptions, exemptions, and adjustments. The Federal banking 
agencies and the Commission, in consultation with the Federal Housing 
Finance Agency and the Department of Housing and Urban Development, may 
jointly

[[Page 854]]

adopt or issue exemptions, exceptions or adjustments to the requirements 
of this part, including exemptions, exceptions or adjustments for 
classes of institutions or assets in accordance with section 15G(e) of 
the Exchange Act (15 U.S.C. 78o-11(e)).



Sec.  43.22  Periodic review of the QRM definition, exempted three-to-four 
unit residential mortgage loans, and community-focused residential 
mortgage exemption.

    (a) The Federal banking agencies and the Commission, in consultation 
with the Federal Housing Finance Agency and the Department of Housing 
and Urban Development, shall commence a review of the definition of 
qualified residential mortgage in Sec.  43.13, a review of the 
community-focused residential mortgage exemption in Sec.  43.19(f), and 
a review of the exemption for qualifying three-to-four unit residential 
mortgage loans in Sec.  43.19(g):
    (1) No later than four years after the effective date of the rule 
(as it relates to securitizers and originators of asset-backed 
securities collateralized by residential mortgages), five years 
following the completion of such initial review, and every five years 
thereafter; and
    (2) At any time, upon the request of any Federal banking agency, the 
Commission, the Federal Housing Finance Agency or the Department of 
Housing and Urban Development, specifying the reason for such request, 
including as a result of any amendment to the definition of qualified 
mortgage or changes in the residential housing market.
    (b) The Federal banking agencies, the Commission, the Federal 
Housing Finance Agency and the Department of Housing and Urban 
Development shall publish in the Federal Register notice of the 
commencement of a review and, in the case of a review commenced under 
paragraph (a)(2) of this section, the reason an agency is requesting 
such review. After completion of any review, but no later than six 
months after the publication of the notice announcing the review, unless 
extended by the agencies, the agencies shall jointly publish a notice 
disclosing the determination of their review. If the agencies determine 
to amend the definition of qualified residential mortgage, the agencies 
shall complete any required rulemaking within 12 months of publication 
in the Federal Register of such notice disclosing the determination of 
their review, unless extended by the agencies.



PART 44_PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND RELATIONSHIPS 
WITH COVERED FUNDS--Table of Contents



                   Subpart A_Authority and Definitions

Sec.
44.1 Authority, purpose, scope, and relationship to other authorities.
44.2 Definitions.

                      Subpart B_Proprietary Trading

44.3 Prohibition on proprietary trading.
44.4 Permitted underwriting and market making-related activities.
44.5 Permitted risk-mitigating hedging activities.
44.6 Other permitted proprietary trading activities.
44.7 Limitations on permitted proprietary trading activities.
44.8-44.9 [Reserved]

            Subpart C_Covered Fund Activities and Investments

44.10 Prohibition on acquiring or retaining an ownership interest in and 
          having certain relationships with a covered fund.
44.11 Permitted organizing and offering, underwriting, and market making 
          with respect to a covered fund.
44.12 Permitted investment in a covered fund.
44.13 Other permitted covered fund activities and investments.
44.14 Limitations on relationships with a covered fund.
44.15 Other limitations on permitted covered fund activities and 
          investments.
44.16 Ownership of interests in and sponsorship of issuers of certain 
          collateralized debt obligations backed by trust-preferred 
          securities.
44.17-44.19 [Reserved]

          Subpart D_Compliance Program Requirement; Violations

44.20 Program for compliance; reporting.
44.21 Termination of activities or investments; penalties for 
          violations.

Appendix A to Part 44--Reporting and Recordkeeping Requirements for 
          Covered Trading Activities


[[Page 855]]


    Authority: 7 U.S.C. 27 et seq., 12 U.S.C. 1, 24, 92a, 93a, 161, 
1461, 1462a, 1463, 1464, 1467a, 1813(q), 1818, 1851, 3101 3102, 3108, 
5412.

    Source: 79 FR 5779, 5804, Jan. 31, 2014, unless otherwise noted.



                   Subpart A_Authority and Definitions



Sec.  44.1  Authority, purpose, scope, and relationship to other authorities.

    (a) Authority. This part is issued by the OCC under section 13 of 
the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1851).
    (b) Purpose. Section 13 of the Bank Holding Company Act establishes 
prohibitions and restrictions on proprietary trading and on investments 
in or relationships with covered funds by certain banking entities, 
including national banks, Federal branches and agencies of foreign 
banks, Federal savings associations, and certain subsidiaries thereof. 
This part implements section 13 of the Bank Holding Company Act by 
defining terms used in the statute and related terms, establishing 
prohibitions and restrictions on proprietary trading and on investments 
in or relationships with covered funds, and explaining the statute's 
requirements.
    (c) Scope. This part implements section 13 of the Bank Holding 
Company Act with respect to banking entities for which the OCC is 
authorized to issue regulations under section 13(b)(2) of the Bank 
Holding Company Act (12 U.S.C. 1851(b)(2)) and take actions under 
section 13(e) of that Act (12 U.S.C. 1851(e)). These include national 
banks, Federal branches and Federal agencies of foreign banks, Federal 
savings associations, Federal savings banks, and any of their respective 
subsidiaries (except a subsidiary for which there is a different primary 
financial regulatory agency, as that term is defined in this part), but 
do not include such entities to the extent they are not within the 
definition of banking entity in Sec.  44.2(c).
    (d) Relationship to other authorities. Except as otherwise provided 
under section 13 of the Bank Holding Company Act or this part, and 
notwithstanding any other provision of law, the prohibitions and 
restrictions under section 13 of the Bank Holding Company Act and this 
part shall apply to the activities and investments of a banking entity 
identified in paragraph (c) of this section, even if such activities and 
investments are authorized for the banking entity under other applicable 
provisions of law.
    (e) Preservation of authority. Nothing in this part limits in any 
way the authority of the OCC to impose on a banking entity identified in 
paragraph (c) of this section additional requirements or restrictions 
with respect to any activity, investment, or relationship covered under 
section 13 of the Bank Holding Company Act or this part, or additional 
penalties for violation of this part provided under any other applicable 
provision of law.

[79 FR 5804, Jan. 31, 2014, as amended at 84 FR 35019, July 22, 2019]



Sec.  44.2  Definitions.

    Unless otherwise specified, for purposes of this part:
    (a) Affiliate has the same meaning as in section 2(k) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(k)).
    (b) Bank holding company has the same meaning as in section 2 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1841).
    (c) Banking entity. (1) Except as provided in paragraph (c)(2) of 
this section, banking entity means:
    (i) Any insured depository institution;
    (ii) Any company that controls an insured depository institution;
    (iii) Any company that is treated as a bank holding company for 
purposes of section 8 of the International Banking Act of 1978 (12 
U.S.C. 3106); and
    (iv) Any affiliate or subsidiary of any entity described in 
paragraph (c)(1)(i), (ii), or (iii) of this section.
    (2) Banking entity does not include:
    (i) A covered fund that is not itself a banking entity under 
paragraph (c)(1)(i), (ii), or (iii) of this section;
    (ii) A portfolio company held under the authority contained in 
section 4(k)(4)(H) or (I) of the BHC Act (12 U.S.C. 1843(k)(4)(H), (I)), 
or any portfolio concern, as defined under 13 CFR 107.50, that is 
controlled by a small business investment company, as defined in section 
103(3) of the Small Business Investment Act of 1958 (15

[[Page 856]]

U.S.C. 662), so long as the portfolio company or portfolio concern is 
not itself a banking entity under paragraph (c)(1)(i), (ii), or (iii) of 
this section; or
    (iii) The FDIC acting in its corporate capacity or as conservator or 
receiver under the Federal Deposit Insurance Act or Title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act.
    (d) Board means the Board of Governors of the Federal Reserve 
System.
    (e) CFTC means the Commodity Futures Trading Commission.
    (f) Dealer has the same meaning as in section 3(a)(5) of the 
Exchange Act (15 U.S.C. 78c(a)(5)).
    (g) Depository institution has the same meaning as in section 3(c) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
    (h) Derivative. (1) Except as provided in paragraph (h)(2) of this 
section, derivative means:
    (i) Any swap, as that term is defined in section 1a(47) of the 
Commodity Exchange Act (7 U.S.C. 1a(47)), or security-based swap, as 
that term is defined in section 3(a)(68) of the Exchange Act (15 U.S.C. 
78c(a)(68));
    (ii) Any purchase or sale of a commodity, that is not an excluded 
commodity, for deferred shipment or delivery that is intended to be 
physically settled;
    (iii) Any foreign exchange forward (as that term is defined in 
section 1a(24) of the Commodity Exchange Act (7 U.S.C. 1a(24)) or 
foreign exchange swap (as that term is defined in section 1a(25) of the 
Commodity Exchange Act (7 U.S.C. 1a(25));
    (iv) Any agreement, contract, or transaction in foreign currency 
described in section 2(c)(2)(C)(i) of the Commodity Exchange Act (7 
U.S.C. 2(c)(2)(C)(i));
    (v) Any agreement, contract, or transaction in a commodity other 
than foreign currency described in section 2(c)(2)(D)(i) of the 
Commodity Exchange Act (7 U.S.C. 2(c)(2)(D)(i)); and
    (vi) Any transaction authorized under section 19 of the Commodity 
Exchange Act (7 U.S.C. 23(a) or (b));
    (2) A derivative does not include:
    (i) Any consumer, commercial, or other agreement, contract, or 
transaction that the CFTC and SEC have further defined by joint 
regulation, interpretation, or other action as not within the definition 
of swap, as that term is defined in section 1a(47) of the Commodity 
Exchange Act (7 U.S.C. 1a(47)), or security-based swap, as that term is 
defined in section 3(a)(68) of the Exchange Act (15 U.S.C. 78c(a)(68)); 
or
    (ii) Any identified banking product, as defined in section 402(b) of 
the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(b)), that 
is subject to section 403(a) of that Act (7 U.S.C. 27a(a)).
    (i) Employee includes a member of the immediate family of the 
employee.
    (j) Exchange Act means the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.).
    (k) Excluded commodity has the same meaning as in section 1a(19) of 
the Commodity Exchange Act (7 U.S.C. 1a(19)).
    (l) FDIC means the Federal Deposit Insurance Corporation.
    (m) Federal banking agencies means the Board, the Office of the 
Comptroller of the Currency, and the FDIC.
    (n) Foreign banking organization has the same meaning as in Sec.  
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)), but does not 
include a foreign bank, as defined in section 1(b)(7) of the 
International Banking Act of 1978 (12 U.S.C. 3101(7)), that is organized 
under the laws of the Commonwealth of Puerto Rico, Guam, American Samoa, 
the United States Virgin Islands, or the Commonwealth of the Northern 
Mariana Islands.
    (o) Foreign insurance regulator means the insurance commissioner, or 
a similar official or agency, of any country other than the United 
States that is engaged in the supervision of insurance companies under 
foreign insurance law.
    (p) General account means all of the assets of an insurance company 
except those allocated to one or more separate accounts.
    (q) Insurance company means a company that is organized as an 
insurance company, primarily and predominantly engaged in writing 
insurance or reinsuring risks underwritten by insurance companies, 
subject to supervision as such by a state insurance regulator or a 
foreign insurance regulator, and not operated for the purpose of evading 
the

[[Page 857]]

provisions of section 13 of the BHC Act (12 U.S.C. 1851).
    (r) Insured depository institution has the same meaning as in 
section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)), 
but does not include:
    (1) An insured depository institution that is described in section 
2(c)(2)(D) of the BHC Act (12 U.S.C. 1841(c)(2)(D)); or
    (2) An insured depository institution if it has, and if every 
company that controls it has, total consolidated assets of $10 billion 
or less and total trading assets and trading liabilities, on a 
consolidated basis, that are 5 percent or less of total consolidated 
assets.
    (s) Limited trading assets and liabilities means with respect to a 
banking entity that:
    (1)(i) The banking entity has, together with its affiliates and 
subsidiaries, trading assets and liabilities (excluding trading assets 
and liabilities attributable to trading activities permitted pursuant to 
Sec.  44.6(a)(1) and (2) of subpart B) the average gross sum of which 
over the previous consecutive four quarters, as measured as of the last 
day of each of the four previous calendar quarters, is less than $1 
billion; and
    (ii) The OCC has not determined pursuant to Sec.  44.20(g) or (h) of 
this part that the banking entity should not be treated as having 
limited trading assets and liabilities.
    (2) With respect to a banking entity other than a banking entity 
described in paragraph (s)(3) of this section, trading assets and 
liabilities for purposes of this paragraph (s) means trading assets and 
liabilities (excluding trading assets and liabilities attributable to 
trading activities permitted pursuant to Sec.  44.6(a)(1) and (2) of 
subpart B) on a worldwide consolidated basis.
    (3)(i) With respect to a banking entity that is a foreign banking 
organization or a subsidiary of a foreign banking organization, trading 
assets and liabilities for purposes of this paragraph (s) means the 
trading assets and liabilities (excluding trading assets and liabilities 
attributable to trading activities permitted pursuant to Sec.  
44.6(a)(1) and (2) of subpart B) of the combined U.S. operations of the 
top-tier foreign banking organization (including all subsidiaries, 
affiliates, branches, and agencies of the foreign banking organization 
operating, located, or organized in the United States).
    (ii) For purposes of paragraph (s)(3)(i) of this section, a U.S. 
branch, agency, or subsidiary of a banking entity is located in the 
United States; however, the foreign bank that operates or controls that 
branch, agency, or subsidiary is not considered to be located in the 
United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary. For purposes of paragraph (s)(3)(i) of 
this section, all foreign operations of a U.S. agency, branch, or 
subsidiary of a foreign banking organization are considered to be 
located in the United States, including branches outside the United 
States that are managed or controlled by a U.S. branch or agency of the 
foreign banking organization, for purposes of calculating the banking 
entity's U.S. trading assets and liabilities.
    (t) Loan means any loan, lease, extension of credit, or secured or 
unsecured receivable that is not a security or derivative.
    (u) Moderate trading assets and liabilities means, with respect to a 
banking entity, that the banking entity does not have significant 
trading assets and liabilities or limited trading assets and 
liabilities.
    (v) Primary financial regulatory agency has the same meaning as in 
section 2(12) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5301(12)).
    (w) Purchase includes any contract to buy, purchase, or otherwise 
acquire. For security futures products, purchase includes any contract, 
agreement, or transaction for future delivery. With respect to a 
commodity future, purchase includes any contract, agreement, or 
transaction for future delivery. With respect to a derivative, purchase 
includes the execution, termination (prior to its scheduled maturity 
date), assignment, exchange, or similar transfer or conveyance of, or 
extinguishing of rights or obligations under, a derivative, as the 
context may require.
    (x) Qualifying foreign banking organization means a foreign banking 
organization that qualifies as such under

[[Page 858]]

Sec.  211.23(a), (c), or (e) of the Board's Regulation K (12 CFR 
211.23(a), (c), or (e)).
    (y) SEC means the Securities and Exchange Commission.
    (z) Sale and sell each include any contract to sell or otherwise 
dispose of. For security futures products, such terms include any 
contract, agreement, or transaction for future delivery. With respect to 
a commodity future, such terms include any contract, agreement, or 
transaction for future delivery. With respect to a derivative, such 
terms include the execution, termination (prior to its scheduled 
maturity date), assignment, exchange, or similar transfer or conveyance 
of, or extinguishing of rights or obligations under, a derivative, as 
the context may require.
    (aa) Security has the meaning specified in section 3(a)(10) of the 
Exchange Act (15 U.S.C. 78c(a)(10)).
    (bb) Security-based swap dealer has the same meaning as in section 
3(a)(71) of the Exchange Act (15 U.S.C. 78c(a)(71)).
    (cc) Security future has the meaning specified in section 3(a)(55) 
of the Exchange Act (15 U.S.C. 78c(a)(55)).
    (dd) Separate account means an account established and maintained by 
an insurance company in connection with one or more insurance contracts 
to hold assets that are legally segregated from the insurance company's 
other assets, under which income, gains, and losses, whether or not 
realized, from assets allocated to such account, are, in accordance with 
the applicable contract, credited to or charged against such account 
without regard to other income, gains, or losses of the insurance 
company.
    (ee) Significant trading assets and liabilities means with respect 
to a banking entity that:
    (1)(i) The banking entity has, together with its affiliates and 
subsidiaries, trading assets and liabilities the average gross sum of 
which over the previous consecutive four quarters, as measured as of the 
last day of each of the four previous calendar quarters, equals or 
exceeds $20 billion; or
    (ii) The OCC has determined pursuant to Sec.  44.20(h) of this part 
that the banking entity should be treated as having significant trading 
assets and liabilities.
    (2) With respect to a banking entity, other than a banking entity 
described in paragraph (ee)(3) of this section, trading assets and 
liabilities for purposes of this paragraph (ee) means trading assets and 
liabilities (excluding trading assets and liabilities attributable to 
trading activities permitted pursuant to Sec.  44.6(a)(1) and (2) of 
subpart B) on a worldwide consolidated basis.
    (3)(i) With respect to a banking entity that is a foreign banking 
organization or a subsidiary of a foreign banking organization, trading 
assets and liabilities for purposes of this paragraph (ee) means the 
trading assets and liabilities (excluding trading assets and liabilities 
attributable to trading activities permitted pursuant to Sec.  
44.6(a)(1) and (2) of subpart B) of the combined U.S. operations of the 
top-tier foreign banking organization (including all subsidiaries, 
affiliates, branches, and agencies of the foreign banking organization 
operating, located, or organized in the United States as well as 
branches outside the United States that are managed or controlled by a 
branch or agency of the foreign banking entity operating, located or 
organized in the United States).
    (ii) For purposes of paragraph (ee)(3)(i) of this section, a U.S. 
branch, agency, or subsidiary of a banking entity is located in the 
United States; however, the foreign bank that operates or controls that 
branch, agency, or subsidiary is not considered to be located in the 
United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary. For purposes of paragraph (ee)(3)(i) of 
this section, all foreign operations of a U.S. agency, branch, or 
subsidiary of a foreign banking organization are considered to be 
located in the United States for purposes of calculating the banking 
entity's U.S. trading assets and liabilities.
    (ff) State means any State, the District of Columbia, the 
Commonwealth of Puerto Rico, Guam, American Samoa, the United States 
Virgin Islands, and the Commonwealth of the Northern Mariana Islands.

[[Page 859]]

    (gg) Subsidiary has the same meaning as in section 2(d) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(d)).
    (hh) State insurance regulator means the insurance commissioner, or 
a similar official or agency, of a State that is engaged in the 
supervision of insurance companies under State insurance law.
    (ii) Swap dealer has the same meaning as in section 1(a)(49) of the 
Commodity Exchange Act (7 U.S.C. 1a(49)).

[84 FR 62093, Nov. 14, 2019]



                      Subpart B_Proprietary Trading



Sec.  44.3  Prohibition on proprietary trading.

    (a) Prohibition. Except as otherwise provided in this subpart, a 
banking entity may not engage in proprietary trading. Proprietary 
trading means engaging as principal for the trading account of the 
banking entity in any purchase or sale of one or more financial 
instruments.
    (b) Definition of trading account. (1) Trading account. Trading 
account means:
    (i) Any account that is used by a banking entity to purchase or sell 
one or more financial instruments principally for the purpose of short-
term resale, benefitting from actual or expected short-term price 
movements, realizing short-term arbitrage profits, or hedging one or 
more of the positions resulting from the purchases or sales of financial 
instruments described in this paragraph;
    (ii) Any account that is used by a banking entity to purchase or 
sell one or more financial instruments that are both market risk capital 
rule covered positions and trading positions (or hedges of other market 
risk capital rule covered positions), if the banking entity, or any 
affiliate with which the banking entity is consolidated for regulatory 
reporting purposes, calculates risk-based capital ratios under the 
market risk capital rule; or
    (iii) Any account that is used by a banking entity to purchase or 
sell one or more financial instruments, if the banking entity:
    (A) Is licensed or registered, or is required to be licensed or 
registered, to engage in the business of a dealer, swap dealer, or 
security-based swap dealer, to the extent the instrument is purchased or 
sold in connection with the activities that require the banking entity 
to be licensed or registered as such; or
    (B) Is engaged in the business of a dealer, swap dealer, or 
security-based swap dealer outside of the United States, to the extent 
the instrument is purchased or sold in connection with the activities of 
such business.
    (2) Trading account application for certain banking entities. (i) A 
banking entity that is subject to paragraph (b)(1)(ii) of this section 
in determining the scope of its trading account is not subject to 
paragraph (b)(1)(i) of this section.
    (ii) A banking entity that does not calculate risk-based capital 
ratios under the market risk capital rule and is not a consolidated 
affiliate for regulatory reporting purposes of a banking entity that 
calculates risk based capital ratios under the market risk capital rule 
may elect to apply paragraph (b)(1)(ii) of this section in determining 
the scope of its trading account as if it were subject to that 
paragraph. A banking entity that elects under this section to apply 
paragraph (b)(1)(ii) of this section in determining the scope of its 
trading account as if it were subject to that paragraph is not required 
to apply paragraph (b)(1)(i) of this section.
    (3) Consistency of account election for certain banking entities. 
(i) Any election or change to an election under paragraph (b)(2)(ii) of 
this section must apply to the electing banking entity and all of its 
wholly owned subsidiaries. The primary financial regulatory agency of a 
banking entity that is affiliated with but is not a wholly owned 
subsidiary of such electing banking entity may require that the banking 
entity be subject to this uniform application requirement if the primary 
financial regulatory agency determines that it is necessary to prevent 
evasion of the requirements of this part after notice and opportunity 
for response as provided in subpart D of this part.
    (ii) A banking entity that does not elect under paragraph (b)(2)(ii) 
of this section to be subject to the trading account definition in 
(b)(1)(ii) of this section may continue to apply the trading account 
definition in paragraph

[[Page 860]]

(b)(1)(i) of this section for one year from the date on which it 
becomes, or becomes a consolidated affiliate for regulatory reporting 
purposes with, a banking entity that calculates risk-based capital 
ratios under the market risk capital rule.
    (4) Rebuttable presumption for certain purchases and sales. The 
purchase (or sale) of a financial instrument by a banking entity shall 
be presumed not to be for the trading account of the banking entity 
under paragraph (b)(1)(i) of this section if the banking entity holds 
the financial instrument for sixty days or longer and does not transfer 
substantially all of the risk of the financial instrument within sixty 
days of the purchase (or sale).
    (c) Financial instrument. (1) Financial instrument means:
    (i) A security, including an option on a security;
    (ii) A derivative, including an option on a derivative; or
    (iii) A contract of sale of a commodity for future delivery, or 
option on a contract of sale of a commodity for future delivery.
    (2) A financial instrument does not include:
    (i) A loan;
    (ii) A commodity that is not:
    (A) An excluded commodity (other than foreign exchange or currency);
    (B) A derivative;
    (C) A contract of sale of a commodity for future delivery; or
    (D) An option on a contract of sale of a commodity for future 
delivery; or
    (iii) Foreign exchange or currency.
    (d) Proprietary trading. Proprietary trading does not include:
    (1) Any purchase or sale of one or more financial instruments by a 
banking entity that arises under a repurchase or reverse repurchase 
agreement pursuant to which the banking entity has simultaneously 
agreed, in writing, to both purchase and sell a stated asset, at stated 
prices, and on stated dates or on demand with the same counterparty;
    (2) Any purchase or sale of one or more financial instruments by a 
banking entity that arises under a transaction in which the banking 
entity lends or borrows a security temporarily to or from another party 
pursuant to a written securities lending agreement under which the 
lender retains the economic interests of an owner of such security, and 
has the right to terminate the transaction and to recall the loaned 
security on terms agreed by the parties;
    (3) Any purchase or sale of a security, foreign exchange forward (as 
that term is defined in section 1a(24) of the Commodity Exchange Act (7 
U.S.C. 1a(24)), foreign exchange swap (as that term is defined in 
section 1a(25) of the Commodity Exchange Act (7 U.S.C. 1a(25)), or 
cross-currency swap by a banking entity for the purpose of liquidity 
management in accordance with a documented liquidity management plan of 
the banking entity that:
    (i) Specifically contemplates and authorizes the particular 
financial instruments to be used for liquidity management purposes, the 
amount, types, and risks of these financial instruments that are 
consistent with liquidity management, and the liquidity circumstances in 
which the particular financial instruments may or must be used;
    (ii) Requires that any purchase or sale of financial instruments 
contemplated and authorized by the plan be principally for the purpose 
of managing the liquidity of the banking entity, and not for the purpose 
of short-term resale, benefitting from actual or expected short-term 
price movements, realizing short-term arbitrage profits, or hedging a 
position taken for such short-term purposes;
    (iii) Requires that any financial instruments purchased or sold for 
liquidity management purposes be highly liquid and limited to financial 
instruments the market, credit, and other risks of which the banking 
entity does not reasonably expect to give rise to appreciable profits or 
losses as a result of short-term price movements;
    (iv) Limits any financial instruments purchased or sold for 
liquidity management purposes, together with any other financial 
instruments purchased or sold for such purposes, to an amount that is 
consistent with the banking entity's near-term funding needs, including 
deviations from normal operations of the banking entity or any affiliate 
thereof, as estimated and documented

[[Page 861]]

pursuant to methods specified in the plan;
    (v) Includes written policies and procedures, internal controls, 
analysis, and independent testing to ensure that the purchase and sale 
of financial instruments that are not permitted under Sec.  44.6(a) or 
(b) of this subpart are for the purpose of liquidity management and in 
accordance with the liquidity management plan described in this 
paragraph (d)(3); and
    (vi) Is consistent with the OCC's regulatory requirements regarding 
liquidity management;
    (4) Any purchase or sale of one or more financial instruments by a 
banking entity that is a derivatives clearing organization or a clearing 
agency in connection with clearing financial instruments;
    (5) Any excluded clearing activities by a banking entity that is a 
member of a clearing agency, a member of a derivatives clearing 
organization, or a member of a designated financial market utility;
    (6) Any purchase or sale of one or more financial instruments by a 
banking entity, so long as:
    (i) The purchase (or sale) satisfies an existing delivery obligation 
of the banking entity or its customers, including to prevent or close 
out a failure to deliver, in connection with delivery, clearing, or 
settlement activity; or
    (ii) The purchase (or sale) satisfies an obligation of the banking 
entity in connection with a judicial, administrative, self-regulatory 
organization, or arbitration proceeding;
    (7) Any purchase or sale of one or more financial instruments by a 
banking entity that is acting solely as agent, broker, or custodian;
    (8) Any purchase or sale of one or more financial instruments by a 
banking entity through a deferred compensation, stock-bonus, profit-
sharing, or pension plan of the banking entity that is established and 
administered in accordance with the law of the United States or a 
foreign sovereign, if the purchase or sale is made directly or 
indirectly by the banking entity as trustee for the benefit of persons 
who are or were employees of the banking entity;
    (9) Any purchase or sale of one or more financial instruments by a 
banking entity in the ordinary course of collecting a debt previously 
contracted in good faith, provided that the banking entity divests the 
financial instrument as soon as practicable, and in no event may the 
banking entity retain such instrument for longer than such period 
permitted by the OCC;
    (10) Any purchase or sale of one or more financial instruments that 
was made in error by a banking entity in the course of conducting a 
permitted or excluded activity or is a subsequent transaction to correct 
such an error;
    (11) Contemporaneously entering into a customer-driven swap or 
customer-driven security-based swap and a matched swap or security-based 
swap if:
    (i) The banking entity retains no more than minimal price risk; and
    (ii) The banking entity is not a registered dealer, swap dealer, or 
security-based swap dealer;
    (12) Any purchase or sale of one or more financial instruments that 
the banking entity uses to hedge mortgage servicing rights or mortgage 
servicing assets in accordance with a documented hedging strategy; or
    (13) Any purchase or sale of a financial instrument that does not 
meet the definition of trading asset or trading liability under the 
applicable reporting form for a banking entity as of January 1, 2020.
    (e) Definition of other terms related to proprietary trading. For 
purposes of this subpart:
    (1) Anonymous means that each party to a purchase or sale is unaware 
of the identity of the other party(ies) to the purchase or sale.
    (2) Clearing agency has the same meaning as in section 3(a)(23) of 
the Exchange Act (15 U.S.C. 78c(a)(23)).
    (3) Commodity has the same meaning as in section 1a(9) of the 
Commodity Exchange Act (7 U.S.C. 1a(9)), except that a commodity does 
not include any security;
    (4) Contract of sale of a commodity for future delivery means a 
contract of sale (as that term is defined in section 1a(13) of the 
Commodity Exchange Act (7 U.S.C. 1a(13)) for future delivery (as that 
term is defined in section 1a(27) of

[[Page 862]]

the Commodity Exchange Act (7 U.S.C. 1a(27))).
    (5) Cross-currency swap means a swap in which one party exchanges 
with another party principal and interest rate payments in one currency 
for principal and interest rate payments in another currency, and the 
exchange of principal occurs on the date the swap is entered into, with 
a reversal of the exchange of principal at a later date that is agreed 
upon when the swap is entered into.
    (6) Derivatives clearing organization means:
    (i) A derivatives clearing organization registered under section 5b 
of the Commodity Exchange Act (7 U.S.C. 7a-1);
    (ii) A derivatives clearing organization that, pursuant to CFTC 
regulation, is exempt from the registration requirements under section 
5b of the Commodity Exchange Act (7 U.S.C. 7a-1); or
    (iii) A foreign derivatives clearing organization that, pursuant to 
CFTC regulation, is permitted to clear for a foreign board of trade that 
is registered with the CFTC.
    (7) Exchange, unless the context otherwise requires, means any 
designated contract market, swap execution facility, or foreign board of 
trade registered with the CFTC, or, for purposes of securities or 
security-based swaps, an exchange, as defined under section 3(a)(1) of 
the Exchange Act (15 U.S.C. 78c(a)(1)), or security-based swap execution 
facility, as defined under section 3(a)(77) of the Exchange Act (15 
U.S.C. 78c(a)(77)).
    (8) Excluded clearing activities means:
    (i) With respect to customer transactions cleared on a derivatives 
clearing organization, a clearing agency, or a designated financial 
market utility, any purchase or sale necessary to correct trading errors 
made by or on behalf of a customer provided that such purchase or sale 
is conducted in accordance with, for transactions cleared on a 
derivatives clearing organization, the Commodity Exchange Act, CFTC 
regulations, and the rules or procedures of the derivatives clearing 
organization, or, for transactions cleared on a clearing agency, the 
rules or procedures of the clearing agency, or, for transactions cleared 
on a designated financial market utility that is neither a derivatives 
clearing organization nor a clearing agency, the rules or procedures of 
the designated financial market utility;
    (ii) Any purchase or sale in connection with and related to the 
management of a default or threatened imminent default of a customer 
provided that such purchase or sale is conducted in accordance with, for 
transactions cleared on a derivatives clearing organization, the 
Commodity Exchange Act, CFTC regulations, and the rules or procedures of 
the derivatives clearing organization, or, for transactions cleared on a 
clearing agency, the rules or procedures of the clearing agency, or, for 
transactions cleared on a designated financial market utility that is 
neither a derivatives clearing organization nor a clearing agency, the 
rules or procedures of the designated financial market utility;
    (iii) Any purchase or sale in connection with and related to the 
management of a default or threatened imminent default of a member of a 
clearing agency, a member of a derivatives clearing organization, or a 
member of a designated financial market utility;
    (iv) Any purchase or sale in connection with and related to the 
management of the default or threatened default of a clearing agency, a 
derivatives clearing organization, or a designated financial market 
utility; and
    (v) Any purchase or sale that is required by the rules or procedures 
of a clearing agency, a derivatives clearing organization, or a 
designated financial market utility to mitigate the risk to the clearing 
agency, derivatives clearing organization, or designated financial 
market utility that would result from the clearing by a member of 
security-based swaps that reference the member or an affiliate of the 
member.
    (9) Designated financial market utility has the same meaning as in 
section 803(4) of the Dodd-Frank Act (12 U.S.C. 5462(4)).
    (10) Issuer has the same meaning as in section 2(a)(4) of the 
Securities Act of 1933 (15 U.S.C. 77b(a)(4)).
    (11) Market risk capital rule covered position and trading position 
means a financial instrument that meets the criteria to be a covered 
position and a

[[Page 863]]

trading position, as those terms are respectively defined, without 
regard to whether the financial instrument is reported as a covered 
position or trading position on any applicable regulatory reporting 
forms:
    (i) In the case of a banking entity that is a bank holding company, 
savings and loan holding company, or insured depository institution, 
under the market risk capital rule that is applicable to the banking 
entity; and
    (ii) In the case of a banking entity that is affiliated with a bank 
holding company or savings and loan holding company, other than a 
banking entity to which a market risk capital rule is applicable, under 
the market risk capital rule that is applicable to the affiliated bank 
holding company or savings and loan holding company.
    (12) Market risk capital rule means the market risk capital rule 
that is contained in 12 CFR part 3, subpart F, with respect to a banking 
entity for which the OCC is the primary financial regulatory agency, 12 
CFR part 217 with respect to a banking entity for which the Board is the 
primary financial regulatory agency, or 12 CFR part 324 with respect to 
a banking entity for which the FDIC is the primary financial regulatory 
agency.
    (13) Municipal security means a security that is a direct obligation 
of or issued by, or an obligation guaranteed as to principal or interest 
by, a State or any political subdivision thereof, or any agency or 
instrumentality of a State or any political subdivision thereof, or any 
municipal corporate instrumentality of one or more States or political 
subdivisions thereof.
    (14) Trading desk means a unit of organization of a banking entity 
that purchases or sells financial instruments for the trading account of 
the banking entity or an affiliate thereof that is:
    (i)(A) Structured by the banking entity to implement a well-defined 
business strategy;
    (B) Organized to ensure appropriate setting, monitoring, and 
management review of the desk's trading and hedging limits, current and 
potential future loss exposures, and strategies; and
    (C) Characterized by a clearly defined unit that:
    (1) Engages in coordinated trading activity with a unified approach 
to its key elements;
    (2) Operates subject to a common and calibrated set of risk metrics, 
risk levels, and joint trading limits;
    (3) Submits compliance reports and other information as a unit for 
monitoring by management; and
    (4) Books its trades together; or
    (ii) For a banking entity that calculates risk-based capital ratios 
under the market risk capital rule, or a consolidated affiliate for 
regulatory reporting purposes of a banking entity that calculates risk-
based capital ratios under the market risk capital rule, established by 
the banking entity or its affiliate for purposes of market risk capital 
calculations under the market risk capital rule.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62095, Nov. 14, 
2019]



Sec.  44.4  Permitted underwriting and market making-related activities.

    (a) Underwriting activities--(1) Permitted underwriting activities. 
The prohibition contained in Sec.  44.3(a) does not apply to a banking 
entity's underwriting activities conducted in accordance with this 
paragraph (a).
    (2) Requirements. The underwriting activities of a banking entity 
are permitted under paragraph (a)(1) of this section only if:
    (i) The banking entity is acting as an underwriter for a 
distribution of securities and the trading desk's underwriting position 
is related to such distribution;
    (ii)(A) The amount and type of the securities in the trading desk's 
underwriting position are designed not to exceed the reasonably expected 
near term demands of clients, customers, or counterparties, taking into 
account the liquidity, maturity, and depth of the market for the 
relevant types of securities; and
    (B) Reasonable efforts are made to sell or otherwise reduce the 
underwriting position within a reasonable period, taking into account 
the liquidity, maturity, and depth of the market for the relevant types 
of securities;

[[Page 864]]

    (iii) In the case of a banking entity with significant trading 
assets and liabilities, the banking entity has established and 
implements, maintains, and enforces an internal compliance program 
required by subpart D of this part that is reasonably designed to ensure 
the banking entity's compliance with the requirements of paragraph (a) 
of this section, including reasonably designed written policies and 
procedures, internal controls, analysis and independent testing 
identifying and addressing:
    (A) The products, instruments or exposures each trading desk may 
purchase, sell, or manage as part of its underwriting activities;
    (B) Limits for each trading desk, in accordance with paragraph 
(a)(2)(ii)(A) of this section;
    (C) Written authorization procedures, including escalation 
procedures that require review and approval of any trade that would 
exceed a trading desk's limit(s), demonstrable analysis of the basis for 
any temporary or permanent increase to a trading desk's limit(s), and 
independent review of such demonstrable analysis and approval; and
    (D) Internal controls and ongoing monitoring and analysis of each 
trading desk's compliance with its limits.
    (iv) A banking entity with significant trading assets and 
liabilities may satisfy the requirements in paragraphs (a)(2)(iii)(B) 
and (C) of this section by complying with the requirements set forth in 
paragraph (c) of this section;
    (v) The compensation arrangements of persons performing the 
activities described in this paragraph (a) are designed not to reward or 
incentivize prohibited proprietary trading; and
    (vi) The banking entity is licensed or registered to engage in the 
activity described in this paragraph (a) in accordance with applicable 
law.
    (3) Definition of distribution. For purposes of this paragraph (a), 
a distribution of securities means:
    (i) An offering of securities, whether or not subject to 
registration under the Securities Act of 1933, that is distinguished 
from ordinary trading transactions by the presence of special selling 
efforts and selling methods; or
    (ii) An offering of securities made pursuant to an effective 
registration statement under the Securities Act of 1933.
    (4) Definition of underwriter. For purposes of this paragraph (a), 
underwriter means:
    (i) A person who has agreed with an issuer or selling security 
holder to:
    (A) Purchase securities from the issuer or selling security holder 
for distribution;
    (B) Engage in a distribution of securities for or on behalf of the 
issuer or selling security holder; or
    (C) Manage a distribution of securities for or on behalf of the 
issuer or selling security holder; or
    (ii) A person who has agreed to participate or is participating in a 
distribution of such securities for or on behalf of the issuer or 
selling security holder.
    (5) Definition of selling security holder. For purposes of this 
paragraph (a), selling security holder means any person, other than an 
issuer, on whose behalf a distribution is made.
    (6) Definition of underwriting position. For purposes of this 
section, underwriting position means the long or short positions in one 
or more securities held by a banking entity or its affiliate, and 
managed by a particular trading desk, in connection with a particular 
distribution of securities for which such banking entity or affiliate is 
acting as an underwriter.
    (7) Definition of client, customer, and counterparty. For purposes 
of this paragraph (a), the terms client, customer, and counterparty, on 
a collective or individual basis, refer to market participants that may 
transact with the banking entity in connection with a particular 
distribution for which the banking entity is acting as underwriter.
    (b) Market making-related activities--(1) Permitted market making-
related activities. The prohibition contained in Sec.  44.3(a) does not 
apply to a banking entity's market making-related activities conducted 
in accordance with this paragraph (b).
    (2) Requirements. The market making-related activities of a banking 
entity are permitted under paragraph (b)(1) of this section only if:

[[Page 865]]

    (i) The trading desk that establishes and manages the financial 
exposure, routinely stands ready to purchase and sell one or more types 
of financial instruments related to its financial exposure, and is 
willing and available to quote, purchase and sell, or otherwise enter 
into long and short positions in those types of financial instruments 
for its own account, in commercially reasonable amounts and throughout 
market cycles on a basis appropriate for the liquidity, maturity, and 
depth of the market for the relevant types of financial instruments;
    (ii) The trading desk's market-making related activities are 
designed not to exceed, on an ongoing basis, the reasonably expected 
near term demands of clients, customers, or counterparties, taking into 
account the liquidity, maturity, and depth of the market for the 
relevant types of financial instruments;
    (iii) In the case of a banking entity with significant trading 
assets and liabilities, the banking entity has established and 
implements, maintains, and enforces an internal compliance program 
required by subpart D of this part that is reasonably designed to ensure 
the banking entity's compliance with the requirements of this paragraph 
(b), including reasonably designed written policies and procedures, 
internal controls, analysis and independent testing identifying and 
addressing:
    (A) The financial instruments each trading desk stands ready to 
purchase and sell in accordance with paragraph (b)(2)(i) of this 
section;
    (B) The actions the trading desk will take to demonstrably reduce or 
otherwise significantly mitigate promptly the risks of its financial 
exposure consistent with the limits required under paragraph 
(b)(2)(iii)(C) of this section; the products, instruments, and exposures 
each trading desk may use for risk management purposes; the techniques 
and strategies each trading desk may use to manage the risks of its 
market making-related activities and positions; and the process, 
strategies, and personnel responsible for ensuring that the actions 
taken by the trading desk to mitigate these risks are and continue to be 
effective;
    (C) Limits for each trading desk, in accordance with paragraph 
(b)(2)(ii) of this section;
    (D) Written authorization procedures, including escalation 
procedures that require review and approval of any trade that would 
exceed a trading desk's limit(s), demonstrable analysis of the basis for 
any temporary or permanent increase to a trading desk's limit(s), and 
independent review of such demonstrable analysis and approval; and
    (E) Internal controls and ongoing monitoring and analysis of each 
trading desk's compliance with its limits.
    (iv) A banking entity with significant trading assets and 
liabilities may satisfy the requirements in paragraphs (b)(2)(iii)(C) 
and (D) by complying with the requirements set forth in paragraph (c) of 
this section;
    (v) The compensation arrangements of persons performing the 
activities described in this paragraph (b) are designed not to reward or 
incentivize prohibited proprietary trading; and
    (vi) The banking entity is licensed or registered to engage in 
activity described in this paragraph (b) in accordance with applicable 
law.
    (3) Definition of client, customer, and counterparty. For purposes 
of this paragraph (b), the terms client, customer, and counterparty, on 
a collective or individual basis refer to market participants that make 
use of the banking entity's market making-related services by obtaining 
such services, responding to quotations, or entering into a continuing 
relationship with respect to such services, provided that:
    (i) A trading desk or other organizational unit of another banking 
entity is not a client, customer, or counterparty of the trading desk if 
that other entity has trading assets and liabilities of $50 billion or 
more as measured in accordance with the methodology described in Sec.  
44.2(ee) of this part, unless:
    (A) The trading desk documents how and why a particular trading desk 
or other organizational unit of the entity should be treated as a 
client, customer, or counterparty of the trading desk for purposes of 
paragraph (b)(2) of this section; or

[[Page 866]]

    (B) The purchase or sale by the trading desk is conducted 
anonymously on an exchange or similar trading facility that permits 
trading on behalf of a broad range of market participants.
    (ii) [Reserved]
    (4) Definition of financial exposure. For purposes of this section, 
financial exposure means the aggregate risks of one or more financial 
instruments and any associated loans, commodities, or foreign exchange 
or currency, held by a banking entity or its affiliate and managed by a 
particular trading desk as part of the trading desk's market making-
related activities.
    (5) Definition of market-maker positions. For the purposes of this 
section, market-maker positions means all of the positions in the 
financial instruments for which the trading desk stands ready to make a 
market in accordance with paragraph (b)(2)(i) of this section, that are 
managed by the trading desk, including the trading desk's open positions 
or exposures arising from open transactions.
    (c) Rebuttable presumption of compliance--(1) Internal limits. (i) A 
banking entity shall be presumed to meet the requirement in paragraph 
(a)(2)(ii)(A) or (b)(2)(ii) of this section with respect to the purchase 
or sale of a financial instrument if the banking entity has established 
and implements, maintains, and enforces the internal limits for the 
relevant trading desk as described in paragraph (c)(1)(ii) of this 
section.
    (ii)(A) With respect to underwriting activities conducted pursuant 
to paragraph (a) of this section, the presumption described in paragraph 
(c)(1)(i) of this section shall be available to each trading desk that 
establishes, implements, maintains, and enforces internal limits that 
should take into account the liquidity, maturity, and depth of the 
market for the relevant types of securities and are designed not to 
exceed the reasonably expected near term demands of clients, customers, 
or counterparties, based on the nature and amount of the trading desk's 
underwriting activities, on the:
    (1) Amount, types, and risk of its underwriting position;
    (2) Level of exposures to relevant risk factors arising from its 
underwriting position; and
    (3) Period of time a security may be held.
    (B) With respect to market making-related activities conducted 
pursuant to paragraph (b) of this section, the presumption described in 
paragraph (c)(1)(i) of this section shall be available to each trading 
desk that establishes, implements, maintains, and enforces internal 
limits that should take into account the liquidity, maturity, and depth 
of the market for the relevant types of financial instruments and are 
designed not to exceed the reasonably expected near term demands of 
clients, customers, or counterparties, based on the nature and amount of 
the trading desk's market-making related activities, that address the:
    (1) Amount, types, and risks of its market-maker positions;
    (2) Amount, types, and risks of the products, instruments, and 
exposures the trading desk may use for risk management purposes;
    (3) Level of exposures to relevant risk factors arising from its 
financial exposure; and
    (4) Period of time a financial instrument may be held.
    (2) Supervisory review and oversight. The limits described in 
paragraph (c)(1) of this section shall be subject to supervisory review 
and oversight by the OCC on an ongoing basis.
    (3) Limit breaches and increases. (i) With respect to any limit set 
pursuant to paragraph (c)(1)(ii)(A) or (B) of this section, a banking 
entity shall maintain and make available to the OCC upon request records 
regarding:
    (A) Any limit that is exceeded; and
    (B) Any temporary or permanent increase to any limit(s), in each 
case in the form and manner as directed by the OCC.
    (ii) In the event of a breach or increase of any limit set pursuant 
to paragraph (c)(1)(ii)(A) or (B) of this section, the presumption 
described in paragraph (c)(1)(i) of this section shall continue to be 
available only if the banking entity:
    (A) Takes action as promptly as possible after a breach to bring the 
trading desk into compliance; and

[[Page 867]]

    (B) Follows established written authorization procedures, including 
escalation procedures that require review and approval of any trade that 
exceeds a trading desk's limit(s), demonstrable analysis of the basis 
for any temporary or permanent increase to a trading desk's limit(s), 
and independent review of such demonstrable analysis and approval.
    (4) Rebutting the presumption. The presumption in paragraph 
(c)(1)(i) of this section may be rebutted by the OCC if the OCC 
determines, taking into account the liquidity, maturity, and depth of 
the market for the relevant types of financial instruments and based on 
all relevant facts and circumstances, that a trading desk is engaging in 
activity that is not based on the reasonably expected near term demands 
of clients, customers, or counterparties. The OCC's rebuttal of the 
presumption in paragraph (c)(1)(i) must be made in accordance with the 
notice and response procedures in subpart D of this part.

[84 FR 62096, Nov. 14, 2019]



Sec.  44.5  Permitted risk-mitigating hedging activities.

    (a) Permitted risk-mitigating hedging activities. The prohibition 
contained in Sec.  44.3(a) does not apply to the risk-mitigating hedging 
activities of a banking entity in connection with and related to 
individual or aggregated positions, contracts, or other holdings of the 
banking entity and designed to reduce the specific risks to the banking 
entity in connection with and related to such positions, contracts, or 
other holdings.
    (b) Requirements. (1) The risk-mitigating hedging activities of a 
banking entity that has significant trading assets and liabilities are 
permitted under paragraph (a) of this section only if:
    (i) The banking entity has established and implements, maintains and 
enforces an internal compliance program required by subpart D of this 
part that is reasonably designed to ensure the banking entity's 
compliance with the requirements of this section, including:
    (A) Reasonably designed written policies and procedures regarding 
the positions, techniques and strategies that may be used for hedging, 
including documentation indicating what positions, contracts or other 
holdings a particular trading desk may use in its risk-mitigating 
hedging activities, as well as position and aging limits with respect to 
such positions, contracts or other holdings;
    (B) Internal controls and ongoing monitoring, management, and 
authorization procedures, including relevant escalation procedures; and
    (C) The conduct of analysis and independent testing designed to 
ensure that the positions, techniques and strategies that may be used 
for hedging may reasonably be expected to reduce or otherwise 
significantly mitigate the specific, identifiable risk(s) being hedged;
    (ii) The risk-mitigating hedging activity:
    (A) Is conducted in accordance with the written policies, 
procedures, and internal controls required under this section;
    (B) At the inception of the hedging activity, including, without 
limitation, any adjustments to the hedging activity, is designed to 
reduce or otherwise significantly mitigate one or more specific, 
identifiable risks, including market risk, counterparty or other credit 
risk, currency or foreign exchange risk, interest rate risk, commodity 
price risk, basis risk, or similar risks, arising in connection with and 
related to identified positions, contracts, or other holdings of the 
banking entity, based upon the facts and circumstances of the identified 
underlying and hedging positions, contracts or other holdings and the 
risks and liquidity thereof;
    (C) Does not give rise, at the inception of the hedge, to any 
significant new or additional risk that is not itself hedged 
contemporaneously in accordance with this section;
    (D) Is subject to continuing review, monitoring and management by 
the banking entity that:
    (1) Is consistent with the written hedging policies and procedures 
required under paragraph (b)(1)(i) of this section;
    (2) Is designed to reduce or otherwise significantly mitigate the 
specific, identifiable risks that develop over time from the risk-
mitigating hedging

[[Page 868]]

activities undertaken under this section and the underlying positions, 
contracts, and other holdings of the banking entity, based upon the 
facts and circumstances of the underlying and hedging positions, 
contracts and other holdings of the banking entity and the risks and 
liquidity thereof; and
    (3) Requires ongoing recalibration of the hedging activity by the 
banking entity to ensure that the hedging activity satisfies the 
requirements set out in paragraph (b)(1)(ii) of this section and is not 
prohibited proprietary trading; and
    (iii) The compensation arrangements of persons performing risk-
mitigating hedging activities are designed not to reward or incentivize 
prohibited proprietary trading.
    (2) The risk-mitigating hedging activities of a banking entity that 
does not have significant trading assets and liabilities are permitted 
under paragraph (a) of this section only if the risk-mitigating hedging 
activity:
    (i) At the inception of the hedging activity, including, without 
limitation, any adjustments to the hedging activity, is designed to 
reduce or otherwise significantly mitigate one or more specific, 
identifiable risks, including market risk, counterparty or other credit 
risk, currency or foreign exchange risk, interest rate risk, commodity 
price risk, basis risk, or similar risks, arising in connection with and 
related to identified positions, contracts, or other holdings of the 
banking entity, based upon the facts and circumstances of the identified 
underlying and hedging positions, contracts or other holdings and the 
risks and liquidity thereof; and
    (ii) Is subject, as appropriate, to ongoing recalibration by the 
banking entity to ensure that the hedging activity satisfies the 
requirements set out in paragraph (b)(2) of this section and is not 
prohibited proprietary trading.
    (c) Documentation requirement. (1) A banking entity that has 
significant trading assets and liabilities must comply with the 
requirements of paragraphs (c)(2) and (3) of this section, unless the 
requirements of paragraph (c)(4) of this section are met, with respect 
to any purchase or sale of financial instruments made in reliance on 
this section for risk-mitigating hedging purposes that is:
    (i) Not established by the specific trading desk establishing or 
responsible for the underlying positions, contracts, or other holdings 
the risks of which the hedging activity is designed to reduce;
    (ii) Established by the specific trading desk establishing or 
responsible for the underlying positions, contracts, or other holdings 
the risks of which the purchases or sales are designed to reduce, but 
that is effected through a financial instrument, exposure, technique, or 
strategy that is not specifically identified in the trading desk's 
written policies and procedures established under paragraph (b)(1) of 
this section or under Sec.  44.4(b)(2)(iii)(B) of this subpart as a 
product, instrument, exposure, technique, or strategy such trading desk 
may use for hedging; or
    (iii) Established to hedge aggregated positions across two or more 
trading desks.
    (2) In connection with any purchase or sale identified in paragraph 
(c)(1) of this section, a banking entity must, at a minimum, and 
contemporaneously with the purchase or sale, document:
    (i) The specific, identifiable risk(s) of the identified positions, 
contracts, or other holdings of the banking entity that the purchase or 
sale is designed to reduce;
    (ii) The specific risk-mitigating strategy that the purchase or sale 
is designed to fulfill; and
    (iii) The trading desk or other business unit that is establishing 
and responsible for the hedge.
    (3) A banking entity must create and retain records sufficient to 
demonstrate compliance with the requirements of this paragraph (c) for a 
period that is no less than five years in a form that allows the banking 
entity to promptly produce such records to the OCC on request, or such 
longer period as required under other law or this part.
    (4) The requirements of paragraphs (c)(2) and (3) of this section do 
not apply to the purchase or sale of a financial instrument described in 
paragraph (c)(1) of this section if:
    (i) The financial instrument purchased or sold is identified on a 
written

[[Page 869]]

list of pre-approved financial instruments that are commonly used by the 
trading desk for the specific type of hedging activity for which the 
financial instrument is being purchased or sold; and
    (ii) At the time the financial instrument is purchased or sold, the 
hedging activity (including the purchase or sale of the financial 
instrument) complies with written, pre-approved limits for the trading 
desk purchasing or selling the financial instrument for hedging 
activities undertaken for one or more other trading desks. The limits 
shall be appropriate for the:
    (A) Size, types, and risks of the hedging activities commonly 
undertaken by the trading desk;
    (B) Financial instruments purchased and sold for hedging activities 
by the trading desk; and
    (C) Levels and duration of the risk exposures being hedged.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62098, Nov. 14, 
2019]



Sec.  44.6  Other permitted proprietary trading activities.

    (a) Permitted trading in domestic government obligations. The 
prohibition contained in Sec.  44.3(a) does not apply to the purchase or 
sale by a banking entity of a financial instrument that is:
    (1) An obligation of, or issued or guaranteed by, the United States;
    (2) An obligation, participation, or other instrument of, or issued 
or guaranteed by, an agency of the United States, the Government 
National Mortgage Association, the Federal National Mortgage 
Association, the Federal Home Loan Mortgage Corporation, a Federal Home 
Loan Bank, the Federal Agricultural Mortgage Corporation or a Farm 
Credit System institution chartered under and subject to the provisions 
of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.);
    (3) An obligation of any State or any political subdivision thereof, 
including any municipal security; or
    (4) An obligation of the FDIC, or any entity formed by or on behalf 
of the FDIC for purpose of facilitating the disposal of assets acquired 
or held by the FDIC in its corporate capacity or as conservator or 
receiver under the Federal Deposit Insurance Act or Title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act.
    (b) Permitted trading in foreign government obligations--(1) 
Affiliates of foreign banking entities in the United States. The 
prohibition contained in Sec.  44.3(a) does not apply to the purchase or 
sale of a financial instrument that is an obligation of, or issued or 
guaranteed by, a foreign sovereign (including any multinational central 
bank of which the foreign sovereign is a member), or any agency or 
political subdivision of such foreign sovereign, by a banking entity, so 
long as:
    (i) The banking entity is organized under or is directly or 
indirectly controlled by a banking entity that is organized under the 
laws of a foreign sovereign and is not directly or indirectly controlled 
by a top-tier banking entity that is organized under the laws of the 
United States;
    (ii) The financial instrument is an obligation of, or issued or 
guaranteed by, the foreign sovereign under the laws of which the foreign 
banking entity referred to in paragraph (b)(1)(i) of this section is 
organized (including any multinational central bank of which the foreign 
sovereign is a member), or any agency or political subdivision of that 
foreign sovereign; and
    (iii) The purchase or sale as principal is not made by an insured 
depository institution.
    (2) Foreign affiliates of a U.S. banking entity. The prohibition 
contained in Sec.  44.3(a) does not apply to the purchase or sale of a 
financial instrument that is an obligation of, or issued or guaranteed 
by, a foreign sovereign (including any multinational central bank of 
which the foreign sovereign is a member), or any agency or political 
subdivision of that foreign sovereign, by a foreign entity that is owned 
or controlled by a banking entity organized or established under the 
laws of the United States or any State, so long as:
    (i) The foreign entity is a foreign bank, as defined in section 
211.2(j) of the Board's Regulation K (12 CFR 211.2(j)), or is regulated 
by the foreign sovereign as a securities dealer;
    (ii) The financial instrument is an obligation of, or issued or 
guaranteed by, the foreign sovereign under the

[[Page 870]]

laws of which the foreign entity is organized (including any 
multinational central bank of which the foreign sovereign is a member), 
or any agency or political subdivision of that foreign sovereign; and
    (iii) The financial instrument is owned by the foreign entity and is 
not financed by an affiliate that is located in the United States or 
organized under the laws of the United States or of any State.
    (c) Permitted trading on behalf of customers--(1) Fiduciary 
transactions. The prohibition contained in Sec.  44.3(a) does not apply 
to the purchase or sale of financial instruments by a banking entity 
acting as trustee or in a similar fiduciary capacity, so long as:
    (i) The transaction is conducted for the account of, or on behalf 
of, a customer; and
    (ii) The banking entity does not have or retain beneficial ownership 
of the financial instruments.
    (2) Riskless principal transactions. The prohibition contained in 
Sec.  44.3(a) does not apply to the purchase or sale of financial 
instruments by a banking entity acting as riskless principal in a 
transaction in which the banking entity, after receiving an order to 
purchase (or sell) a financial instrument from a customer, purchases (or 
sells) the financial instrument for its own account to offset a 
contemporaneous sale to (or purchase from) the customer.
    (d) Permitted trading by a regulated insurance company. The 
prohibition contained in Sec.  44.3(a) does not apply to the purchase or 
sale of financial instruments by a banking entity that is an insurance 
company or an affiliate of an insurance company if:
    (1) The insurance company or its affiliate purchases or sells the 
financial instruments solely for:
    (i) The general account of the insurance company; or
    (ii) A separate account established by the insurance company;
    (2) The purchase or sale is conducted in compliance with, and 
subject to, the insurance company investment laws, regulations, and 
written guidance of the State or jurisdiction in which such insurance 
company is domiciled; and
    (3) The appropriate Federal banking agencies, after consultation 
with the Financial Stability Oversight Council and the relevant 
insurance commissioners of the States and foreign jurisdictions, as 
appropriate, have not jointly determined, after notice and comment, that 
a particular law, regulation, or written guidance described in paragraph 
(d)(2) of this section is insufficient to protect the safety and 
soundness of the covered banking entity, or the financial stability of 
the United States.
    (e) Permitted trading activities of foreign banking entities. (1) 
The prohibition contained in Sec.  44.3(a) does not apply to the 
purchase or sale of financial instruments by a banking entity if:
    (i) The banking entity is not organized or directly or indirectly 
controlled by a banking entity that is organized under the laws of the 
United States or of any State;
    (ii) The purchase or sale by the banking entity is made pursuant to 
paragraph (9) or (13) of section 4(c) of the BHC Act; and
    (iii) The purchase or sale meets the requirements of paragraph 
(e)(3) of this section.
    (2) A purchase or sale of financial instruments by a banking entity 
is made pursuant to paragraph (9) or (13) of section 4(c) of the BHC Act 
for purposes of paragraph (e)(1)(ii) of this section only if:
    (i) The purchase or sale is conducted in accordance with the 
requirements of paragraph (e) of this section; and
    (ii)(A) With respect to a banking entity that is a foreign banking 
organization, the banking entity meets the qualifying foreign banking 
organization requirements of section 211.23(a), (c) or (e) of the 
Board's Regulation K (12 CFR 211.23(a), (c) or (e)), as applicable; or
    (B) With respect to a banking entity that is not a foreign banking 
organization, the banking entity is not organized under the laws of the 
United States or of any State and the banking entity, on a fully-
consolidated basis, meets at least two of the following requirements:
    (1) Total assets of the banking entity held outside of the United 
States exceed total assets of the banking entity held in the United 
States;

[[Page 871]]

    (2) Total revenues derived from the business of the banking entity 
outside of the United States exceed total revenues derived from the 
business of the banking entity in the United States; or
    (3) Total net income derived from the business of the banking entity 
outside of the United States exceeds total net income derived from the 
business of the banking entity in the United States.
    (3) A purchase or sale by a banking entity is permitted for purposes 
of this paragraph (e) if:
    (i) The banking entity engaging as principal in the purchase or sale 
(including relevant personnel) is not located in the United States or 
organized under the laws of the United States or of any State;
    (ii) The banking entity (including relevant personnel) that makes 
the decision to purchase or sell as principal is not located in the 
United States or organized under the laws of the United States or of any 
State; and
    (iii) The purchase or sale, including any transaction arising from 
risk-mitigating hedging related to the instruments purchased or sold, is 
not accounted for as principal directly or on a consolidated basis by 
any branch or affiliate that is located in the United States or 
organized under the laws of the United States or of any State.
    (4) For purposes of this paragraph (e), a U.S. branch, agency, or 
subsidiary of a foreign banking entity is considered to be located in 
the United States; however, the foreign bank that operates or controls 
that branch, agency, or subsidiary is not considered to be located in 
the United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary.
    (f) Permitted trading activities of qualifying foreign excluded 
funds. The prohibition contained in Sec.  44.3(a) does not apply to the 
purchase or sale of a financial instrument by a qualifying foreign 
excluded fund. For purposes of this paragraph (f), a qualifying foreign 
excluded fund means a banking entity that:
    (1) Is organized or established outside the United States, and the 
ownership interests of which are offered and sold solely outside the 
United States;
    (2)(i) Would be a covered fund if the entity were organized or 
established in the United States, or
    (ii) Is, or holds itself out as being, an entity or arrangement that 
raises money from investors primarily for the purpose of investing in 
financial instruments for resale or other disposition or otherwise 
trading in financial instruments;
    (3) Would not otherwise be a banking entity except by virtue of the 
acquisition or retention of an ownership interest in, sponsorship of, or 
relationship with the entity, by another banking entity that meets the 
following:
    (i) The banking entity is not organized, or directly or indirectly 
controlled by a banking entity that is organized, under the laws of the 
United States or of any State; and
    (ii) The banking entity's acquisition or retention of an ownership 
interest in or sponsorship of the fund meets the requirements for 
permitted covered fund activities and investments solely outside the 
United States, as provided in Sec.  44.13(b);
    (4) Is established and operated as part of a bona fide asset 
management business; and
    (5) Is not operated in a manner that enables the banking entity that 
sponsors or controls the qualifying foreign excluded fund, or any of its 
affiliates, to evade the requirements of section 13 of the BHC Act or 
this part.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62099, Nov. 14, 
2019; 85 FR 46496, July 31, 2020]



Sec.  44.7  Limitations on permitted proprietary trading activities.

    (a) No transaction, class of transactions, or activity may be deemed 
permissible under Sec. Sec.  44.4 through 44.6 if the transaction, class 
of transactions, or activity would:
    (1) Involve or result in a material conflict of interest between the 
banking entity and its clients, customers, or counterparties;
    (2) Result, directly or indirectly, in a material exposure by the 
banking entity to a high-risk asset or a high-risk trading strategy; or
    (3) Pose a threat to the safety and soundness of the banking entity 
or to

[[Page 872]]

the financial stability of the United States.
    (b) Definition of material conflict of interest. (1) For purposes of 
this section, a material conflict of interest between a banking entity 
and its clients, customers, or counterparties exists if the banking 
entity engages in any transaction, class of transactions, or activity 
that would involve or result in the banking entity's interests being 
materially adverse to the interests of its client, customer, or 
counterparty with respect to such transaction, class of transactions, or 
activity, and the banking entity has not taken at least one of the 
actions in paragraph (b)(2) of this section.
    (2) Prior to effecting the specific transaction or class or type of 
transactions, or engaging in the specific activity, the banking entity:
    (i) Timely and effective disclosure. (A) Has made clear, timely, and 
effective disclosure of the conflict of interest, together with other 
necessary information, in reasonable detail and in a manner sufficient 
to permit a reasonable client, customer, or counterparty to meaningfully 
understand the conflict of interest; and
    (B) Such disclosure is made in a manner that provides the client, 
customer, or counterparty the opportunity to negate, or substantially 
mitigate, any materially adverse effect on the client, customer, or 
counterparty created by the conflict of interest; or
    (ii) Information barriers. Has established, maintained, and enforced 
information barriers that are memorialized in written policies and 
procedures, such as physical separation of personnel, or functions, or 
limitations on types of activity, that are reasonably designed, taking 
into consideration the nature of the banking entity's business, to 
prevent the conflict of interest from involving or resulting in a 
materially adverse effect on a client, customer, or counterparty. A 
banking entity may not rely on such information barriers if, in the case 
of any specific transaction, class or type of transactions or activity, 
the banking entity knows or should reasonably know that, notwithstanding 
the banking entity's establishment of information barriers, the conflict 
of interest may involve or result in a materially adverse effect on a 
client, customer, or counterparty.
    (c) Definition of high-risk asset and high-risk trading strategy. 
For purposes of this section:
    (1) High-risk asset means an asset or group of related assets that 
would, if held by a banking entity, significantly increase the 
likelihood that the banking entity would incur a substantial financial 
loss or would pose a threat to the financial stability of the United 
States.
    (2) High-risk trading strategy means a trading strategy that would, 
if engaged in by a banking entity, significantly increase the likelihood 
that the banking entity would incur a substantial financial loss or 
would pose a threat to the financial stability of the United States.



Sec. Sec.  44.8-44.9  [Reserved]



           Subpart C_Covered Funds Activities and Investments



Sec.  44.10  Prohibition on acquiring or retaining an ownership interest 
in and having certain relationships with a covered fund.

    (a) Prohibition. (1) Except as otherwise provided in this subpart, a 
banking entity may not, as principal, directly or indirectly, acquire or 
retain any ownership interest in or sponsor a covered fund.
    (2) Paragraph (a)(1) of this section does not include acquiring or 
retaining an ownership interest in a covered fund by a banking entity:
    (i) Acting solely as agent, broker, or custodian, so long as;
    (A) The activity is conducted for the account of, or on behalf of, a 
customer; and
    (B) The banking entity and its affiliates do not have or retain 
beneficial ownership of such ownership interest;
    (ii) Through a deferred compensation, stock-bonus, profit-sharing, 
or pension plan of the banking entity (or an affiliate thereof) that is 
established and administered in accordance with the law of the United 
States or a foreign sovereign, if the ownership interest is held or 
controlled directly or indirectly by the banking entity as trustee for 
the

[[Page 873]]

benefit of persons who are or were employees of the banking entity (or 
an affiliate thereof);
    (iii) In the ordinary course of collecting a debt previously 
contracted in good faith, provided that the banking entity divests the 
ownership interest as soon as practicable, and in no event may the 
banking entity retain such ownership interest for longer than such 
period permitted by the OCC; or
    (iv) On behalf of customers as trustee or in a similar fiduciary 
capacity for a customer that is not a covered fund, so long as:
    (A) The activity is conducted for the account of, or on behalf of, 
the customer; and
    (B) The banking entity and its affiliates do not have or retain 
beneficial ownership of such ownership interest.
    (b) Definition of covered fund. (1) Except as provided in paragraph 
(c) of this section, covered fund means:
    (i) An issuer that would be an investment company, as defined in the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), but for 
section 3(c)(1) or 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or (7));
    (ii) Any commodity pool under section 1a(10) of the Commodity 
Exchange Act (7 U.S.C. 1a(10)) for which:
    (A) The commodity pool operator has claimed an exemption under 17 
CFR 4.7; or
    (B)(1) A commodity pool operator is registered with the CFTC as a 
commodity pool operator in connection with the operation of the 
commodity pool;
    (2) Substantially all participation units of the commodity pool are 
owned by qualified eligible persons under 17 CFR 4.7(a)(2) and (3); and
    (3) Participation units of the commodity pool have not been publicly 
offered to persons who are not qualified eligible persons under 17 CFR 
4.7(a)(2) and (3); or
    (iii) For any banking entity that is, or is controlled directly or 
indirectly by a banking entity that is, located in or organized under 
the laws of the United States or of any State, an entity that:
    (A) Is organized or established outside the United States and the 
ownership interests of which are offered and sold solely outside the 
United States;
    (B) Is, or holds itself out as being, an entity or arrangement that 
raises money from investors primarily for the purpose of investing in 
securities for resale or other disposition or otherwise trading in 
securities; and
    (C)(1) Has as its sponsor that banking entity (or an affiliate 
thereof); or
    (2) Has issued an ownership interest that is owned directly or 
indirectly by that banking entity (or an affiliate thereof).
    (2) An issuer shall not be deemed to be a covered fund under 
paragraph (b)(1)(iii) of this section if, were the issuer subject to 
U.S. securities laws, the issuer could rely on an exclusion or exemption 
from the definition of ``investment company'' under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) other than the exclusions 
contained in section 3(c)(1) and 3(c)(7) of that Act.
    (3) For purposes of paragraph (b)(1)(iii) of this section, a U.S. 
branch, agency, or subsidiary of a foreign banking entity is located in 
the United States; however, the foreign bank that operates or controls 
that branch, agency, or subsidiary is not considered to be located in 
the United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary.
    (c) Notwithstanding paragraph (b) of this section, unless the 
appropriate Federal banking agencies, the SEC, and the CFTC jointly 
determine otherwise, a covered fund does not include:
    (1) Foreign public funds. (i) Subject to paragraphs (c)(1)(ii) and 
(iii) of this section, an issuer that:
    (A) Is organized or established outside of the United States; and
    (B) Is authorized to offer and sell ownership interests, and such 
interests are offered and sold, through one or more public offerings.
    (ii) With respect to a banking entity that is, or is controlled 
directly or indirectly by a banking entity that is, located in or 
organized under the laws of the United States or of any State and any 
issuer for which such banking entity acts as sponsor, the sponsoring 
banking entity may not rely on the exemption in paragraph (c)(1)(i) of 
this section for such issuer unless more

[[Page 874]]

than 75 percent of the ownership interests in the issuer are sold to 
persons other than:
    (A) Such sponsoring banking entity;
    (B) Such issuer;
    (C) Affiliates of such sponsoring banking entity or such issuer; and
    (D) Directors and senior executive officers as defined in Sec.  
225.71(c) of the Board's Regulation Y (12 CFR 225.71(c)) of such 
entities.
    (iii) For purposes of paragraph (c)(1)(i)(B) of this section, the 
term ``public offering'' means a distribution (as defined in Sec.  
44.4(a)(3)) of securities in any jurisdiction outside the United States 
to investors, including retail investors, provided that:
    (A) The distribution is subject to substantive disclosure and retail 
investor protection laws or regulations;
    (B) With respect to an issuer for which the banking entity serves as 
the investment manager, investment adviser, commodity trading advisor, 
commodity pool operator, or sponsor, the distribution complies with all 
applicable requirements in the jurisdiction in which such distribution 
is being made;
    (C) The distribution does not restrict availability to investors 
having a minimum level of net worth or net investment assets; and
    (D) The issuer has filed or submitted, with the appropriate 
regulatory authority in such jurisdiction, offering disclosure documents 
that are publicly available.
    (2) Wholly-owned subsidiaries. An entity, all of the outstanding 
ownership interests of which are owned directly or indirectly by the 
banking entity (or an affiliate thereof), except that:
    (i) Up to five percent of the entity's outstanding ownership 
interests, less any amounts outstanding under paragraph (c)(2)(ii) of 
this section, may be held by employees or directors of the banking 
entity or such affiliate (including former employees or directors if 
their ownership interest was acquired while employed by or in the 
service of the banking entity); and
    (ii) Up to 0.5 percent of the entity's outstanding ownership 
interests may be held by a third party if the ownership interest is 
acquired or retained by the third party for the purpose of establishing 
corporate separateness or addressing bankruptcy, insolvency, or similar 
concerns.
    (3) Joint ventures. A joint venture between a banking entity or any 
of its affiliates and one or more unaffiliated persons, provided that 
the joint venture:
    (i) Is composed of no more than 10 unaffiliated co-venturers;
    (ii) Is in the business of engaging in activities that are 
permissible for the banking entity or affiliate, other than investing in 
securities for resale or other disposition; and
    (iii) Is not, and does not hold itself out as being, an entity or 
arrangement that raises money from investors primarily for the purpose 
of investing in securities for resale or other disposition or otherwise 
trading in securities.
    (4) Acquisition vehicles. An issuer:
    (i) Formed solely for the purpose of engaging in a bona fide merger 
or acquisition transaction; and
    (ii) That exists only for such period as necessary to effectuate the 
transaction.
    (5) Foreign pension or retirement funds. A plan, fund, or program 
providing pension, retirement, or similar benefits that is:
    (i) Organized and administered outside the United States;
    (ii) A broad-based plan for employees or citizens that is subject to 
regulation as a pension, retirement, or similar plan under the laws of 
the jurisdiction in which the plan, fund, or program is organized and 
administered; and
    (iii) Established for the benefit of citizens or residents of one or 
more foreign sovereigns or any political subdivision thereof.
    (6) Insurance company separate accounts. A separate account, 
provided that no banking entity other than the insurance company 
participates in the account's profits and losses.
    (7) Bank owned life insurance. A separate account that is used 
solely for the purpose of allowing one or more banking entities to 
purchase a life insurance policy for which the banking entity or 
entities is beneficiary, provided that no banking entity that purchases 
the policy:
    (i) Controls the investment decisions regarding the underlying 
assets or holdings of the separate account; or

[[Page 875]]

    (ii) Participates in the profits and losses of the separate account 
other than in compliance with applicable requirements regarding bank 
owned life insurance.
    (8) Loan securitizations--(i) Scope. An issuing entity for asset-
backed securities that satisfies all the conditions of this paragraph 
(c)(8) and the assets or holdings of which are composed solely of:
    (A) Loans as defined in Sec.  44.2(t);
    (B) Rights or other assets designed to assure the servicing or 
timely distribution of proceeds to holders of such securities and rights 
or other assets that are related or incidental to purchasing or 
otherwise acquiring and holding the loans, provided that each asset that 
is a security (other than special units of beneficial interest and 
collateral certificates meeting the requirements of paragraph (c)(8)(v) 
of this section) meets the requirements of paragraph (c)(8)(iii) of this 
section;
    (C) Interest rate or foreign exchange derivatives that meet the 
requirements of paragraph (c)(8)(iv) of this section;
    (D) Special units of beneficial interest and collateral certificates 
that meet the requirements of paragraph (c)(8)(v) of this section; and
    (E) Debt securities, other than asset-backed securities and 
convertible securities, provided that:
    (1) The aggregate value of such debt securities does not exceed five 
percent of the aggregate value of loans held under paragraph 
(c)(8)(i)(A) of this section, cash and cash equivalents held under 
paragraph (c)(8)(iii)(A) of this section, and debt securities held under 
this paragraph (c)(8)(i)(E); and
    (2) The aggregate value of the loans, cash and cash equivalents, and 
debt securities for purposes of this paragraph is calculated at par 
value at the most recent time any such debt security is acquired, except 
that the issuing entity may instead determine the value of any such 
loan, cash equivalent, or debt security based on its fair market value 
if:
    (i) The issuing entity is required to use the fair market value of 
such assets for purposes of calculating compliance with concentration 
limitations or other similar calculations under its transaction 
agreements, and
    (ii) The issuing entity's valuation methodology values similarly 
situated assets consistently.
    (ii) Impermissible assets. For purposes of this paragraph (c)(8), 
except as permitted under paragraph (c)(8)(i)(E) of this section, the 
assets or holdings of the issuing entity shall not include any of the 
following:
    (A) A security, including an asset-backed security, or an interest 
in an equity or debt security other than as permitted in paragraphs 
(c)(8)(iii), (iv), or (v) of this section;
    (B) A derivative, other than a derivative that meets the 
requirements of paragraph (c)(8)(iv) of this section; or
    (C) A commodity forward contract.
    (iii) Permitted securities. Notwithstanding paragraph (c)(8)(ii)(A) 
of this section, the issuing entity may hold securities, other than debt 
securities permitted under paragraph (c)(8)(i)(E) of this section, if 
those securities are:
    (A) Cash equivalents--which, for the purposes of this paragraph, 
means high quality, highly liquid investments whose maturity corresponds 
to the securitization's expected or potential need for funds and whose 
currency corresponds to either the underlying loans or the asset-backed 
securities--for purposes of the rights and assets in paragraph 
(c)(8)(i)(B) of this section; or
    (B) Securities received in lieu of debts previously contracted with 
respect to the loans supporting the asset-backed securities.
    (iv) Derivatives. The holdings of derivatives by the issuing entity 
shall be limited to interest rate or foreign exchange derivatives that 
satisfy all of the following conditions:
    (A) The written terms of the derivatives directly relate to the 
loans, the asset-backed securities, the contractual rights or other 
assets described in paragraph (c)(8)(i)(B) of this section, or the debt 
securities described in paragraph (c)(8)(i)(E) of this section; and
    (B) The derivatives reduce the interest rate and/or foreign exchange 
risks related to the loans, the asset-backed securities, the contractual 
rights or other assets described in paragraph (c)(8)(i)(B) of this 
section, or the debt securities described in paragraph (c)(8)(i)(E) of 
this section.

[[Page 876]]

    (v) Special units of beneficial interest and collateral 
certificates. The assets or holdings of the issuing entity may include 
collateral certificates and special units of beneficial interest issued 
by a special purpose vehicle, provided that:
    (A) The special purpose vehicle that issues the special unit of 
beneficial interest or collateral certificate meets the requirements in 
this paragraph (c)(8);
    (B) The special unit of beneficial interest or collateral 
certificate is used for the sole purpose of transferring to the issuing 
entity for the loan securitization the economic risks and benefits of 
the assets that are permissible for loan securitizations under this 
paragraph (c)(8) and does not directly or indirectly transfer any 
interest in any other economic or financial exposure;
    (C) The special unit of beneficial interest or collateral 
certificate is created solely to satisfy legal requirements or otherwise 
facilitate the structuring of the loan securitization; and
    (D) The special purpose vehicle that issues the special unit of 
beneficial interest or collateral certificate and the issuing entity are 
established under the direction of the same entity that initiated the 
loan securitization.
    (9) Qualifying asset-backed commercial paper conduits. (i) An 
issuing entity for asset-backed commercial paper that satisfies all of 
the following requirements:
    (A) The asset-backed commercial paper conduit holds only:
    (1) Loans and other assets permissible for a loan securitization 
under paragraph (c)(8)(i) of this section; and
    (2) Asset-backed securities supported solely by assets that are 
permissible for loan securitizations under paragraph (c)(8)(i) of this 
section and acquired by the asset-backed commercial paper conduit as 
part of an initial issuance either directly from the issuing entity of 
the asset-backed securities or directly from an underwriter in the 
distribution of the asset-backed securities;
    (B) The asset-backed commercial paper conduit issues only asset-
backed securities, comprised of a residual interest and securities with 
a legal maturity of 397 days or less; and
    (C) A regulated liquidity provider has entered into a legally 
binding commitment to provide full and unconditional liquidity coverage 
with respect to all of the outstanding asset-backed securities issued by 
the asset-backed commercial paper conduit (other than any residual 
interest) in the event that funds are required to redeem maturing asset-
backed securities.
    (ii) For purposes of this paragraph (c)(9), a regulated liquidity 
provider means:
    (A) A depository institution, as defined in section 3(c) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(c));
    (B) A bank holding company, as defined in section 2(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(a)), or a subsidiary 
thereof;
    (C) A savings and loan holding company, as defined in section 10a of 
the Home Owners' Loan Act (12 U.S.C. 1467a), provided all or 
substantially all of the holding company's activities are permissible 
for a financial holding company under section 4(k) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1843(k)), or a subsidiary thereof;
    (D) A foreign bank whose home country supervisor, as defined in 
Sec.  211.21(q) of the Board's Regulation K (12 CFR 211.21(q)), has 
adopted capital standards consistent with the Capital Accord for the 
Basel Committee on banking Supervision, as amended, and that is subject 
to such standards, or a subsidiary thereof; or
    (E) The United States or a foreign sovereign.
    (10) Qualifying covered bonds--(i) Scope. An entity owning or 
holding a dynamic or fixed pool of loans or other assets as provided in 
paragraph (c)(8) of this section for the benefit of the holders of 
covered bonds, provided that the assets in the pool are composed solely 
of assets that meet the conditions in paragraph (c)(8)(i) of this 
section.
    (ii) Covered bond. For purposes of this paragraph (c)(10), a covered 
bond means:
    (A) A debt obligation issued by an entity that meets the definition 
of foreign banking organization, the payment obligations of which are 
fully and unconditionally guaranteed by an entity that meets the 
conditions set forth

[[Page 877]]

in paragraph (c)(10)(i) of this section; or
    (B) A debt obligation of an entity that meets the conditions set 
forth in paragraph (c)(10)(i) of this section, provided that the payment 
obligations are fully and unconditionally guaranteed by an entity that 
meets the definition of foreign banking organization and the entity is a 
wholly-owned subsidiary, as defined in paragraph (c)(2) of this section, 
of such foreign banking organization.
    (11) SBICs and public welfare investment funds. An issuer:
    (i) That is a small business investment company, as defined in 
section 103(3) of the Small Business Investment Act of 1958 (15 U.S.C. 
662), or that has received from the Small Business Administration notice 
to proceed to qualify for a license as a small business investment 
company, which notice or license has not been revoked, or that has 
voluntarily surrendered its license to operate as a small business 
investment company in accordance with 13 CFR 107.1900 and does not make 
any new investments (other than investments in cash equivalents, which, 
for the purposes of this paragraph, means high quality, highly liquid 
investments whose maturity corresponds to the issuer's expected or 
potential need for funds and whose currency corresponds to the issuer's 
assets) after such voluntary surrender;
    (ii) The business of which is to make investments that are:
    (A) Designed primarily to promote the public welfare, of the type 
permitted under paragraph (11) of section 5136 of the Revised Statutes 
of the United States (12 U.S.C. 24), including the welfare of low- and 
moderate-income communities or families (such as providing housing, 
services, or jobs) and including investments that qualify for 
consideration under the regulations implementing the Community 
Reinvestment Act (12 U.S.C. 2901 et seq.); or
    (B) Qualified rehabilitation expenditures with respect to a 
qualified rehabilitated building or certified historic structure, as 
such terms are defined in section 47 of the Internal Revenue Code of 
1986 or a similar State historic tax credit program;
    (iii) That has elected to be regulated or is regulated as a rural 
business investment company, as described in 15 U.S.C. 80b-3(b)(8)(A) or 
(B), or that has terminated its participation as a rural business 
investment company in accordance with 7 CFR 4290.1900 and does not make 
any new investments (other than investments in cash equivalents, which, 
for the purposes of this paragraph, means high quality, highly liquid 
investments whose maturity corresponds to the issuer's expected or 
potential need for funds and whose currency corresponds to the issuer's 
assets) after such termination; or
    (iv) That is a qualified opportunity fund, as defined in 26 U.S.C. 
1400Z-2(d).
    (12) Registered investment companies and excluded entities. An 
issuer:
    (i) That is registered as an investment company under section 8 of 
the Investment Company Act of 1940 (15 U.S.C. 80a-8), or that is formed 
and operated pursuant to a written plan to become a registered 
investment company as described in Sec.  44.20(e)(3) of subpart D and 
that complies with the requirements of section 18 of the Investment 
Company Act of 1940 (15 U.S.C. 80a-18);
    (ii) That may rely on an exclusion or exemption from the definition 
of ``investment company'' under the Investment Company Act of 1940 (15 
U.S.C. 80a-1 et seq.) other than the exclusions contained in section 
3(c)(1) and 3(c)(7) of that Act; or
    (iii) That has elected to be regulated as a business development 
company pursuant to section 54(a) of that Act (15 U.S.C. 80a-53) and has 
not withdrawn its election, or that is formed and operated pursuant to a 
written plan to become a business development company as described in 
Sec.  44.20(e)(3) of subpart D and that complies with the requirements 
of section 61 of the Investment Company Act of 1940 (15 U.S.C. 80a-60).
    (13) Issuers in conjunction with the FDIC's receivership or 
conservatorship operations. An issuer that is an entity formed by or on 
behalf of the FDIC for the purpose of facilitating the disposal of 
assets acquired in the FDIC's capacity as conservator or receiver under 
the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act.

[[Page 878]]

    (14) Other excluded issuers. (i) Any issuer that the appropriate 
Federal banking agencies, the SEC, and the CFTC jointly determine the 
exclusion of which is consistent with the purposes of section 13 of the 
BHC Act.
    (ii) A determination made under paragraph (c)(14)(i) of this section 
will be promptly made public.
    (15) Credit funds. Subject to paragraphs (c)(15)(iii), (iv), and (v) 
of this section, an issuer that satisfies the asset and activity 
requirements of paragraphs (c)(15)(i) and (ii) of this section.
    (i) Asset requirements. The issuer's assets must be composed solely 
of:
    (A) Loans as defined in Sec.  44.2(t);
    (B) Debt instruments, subject to paragraph (c)(15)(iv) of this 
section;
    (C) Rights and other assets that are related or incidental to 
acquiring, holding, servicing, or selling such loans or debt 
instruments, provided that:
    (1) Each right or asset held under this paragraph (c)(15)(i)(C) that 
is a security is either:
    (i) A cash equivalent (which, for the purposes of this paragraph, 
means high quality, highly liquid investments whose maturity corresponds 
to the issuer's expected or potential need for funds and whose currency 
corresponds to either the underlying loans or the debt instruments);
    (ii) A security received in lieu of debts previously contracted with 
respect to such loans or debt instruments; or
    (iii) An equity security (or right to acquire an equity security) 
received on customary terms in connection with such loans or debt 
instruments; and
    (2) Rights or other assets held under this paragraph (c)(15)(i)(C) 
of this section may not include commodity forward contracts or any 
derivative; and
    (D) Interest rate or foreign exchange derivatives, if:
    (1) The written terms of the derivative directly relate to the 
loans, debt instruments, or other rights or assets described in 
paragraph (c)(15)(i)(C) of this section; and
    (2) The derivative reduces the interest rate and/or foreign exchange 
risks related to the loans, debt instruments, or other rights or assets 
described in paragraph (c)(15)(i)(C) of this section.
    (ii) Activity requirements. To be eligible for the exclusion of 
paragraph (c)(15) of this section, an issuer must:
    (A) Not engage in any activity that would constitute proprietary 
trading under Sec.  44.3(b)(l)(i), as if the issuer were a banking 
entity; and
    (B) Not issue asset-backed securities.
    (iii) Requirements for a sponsor, investment adviser, or commodity 
trading advisor. A banking entity that acts as a sponsor, investment 
adviser, or commodity trading advisor to an issuer that meets the 
conditions in paragraphs (c)(15)(i) and (ii) of this section may not 
rely on this exclusion unless the banking entity:
    (A) Provides in writing to any prospective and actual investor in 
the issuer the disclosures required under Sec.  44.11(a)(8) of this 
subpart, as if the issuer were a covered fund;
    (B) Ensures that the activities of the issuer are consistent with 
safety and soundness standards that are substantially similar to those 
that would apply if the banking entity engaged in the activities 
directly; and
    (C) Complies with the limitations imposed in Sec.  44.14, as if the 
issuer were a covered fund, except the banking entity may acquire and 
retain any ownership interest in the issuer.
    (iv) Additional Banking Entity Requirements. A banking entity may 
not rely on this exclusion with respect to an issuer that meets the 
conditions in paragraphs (c)(15)(i) and (ii) of this section unless:
    (A) The banking entity does not, directly or indirectly, guarantee, 
assume, or otherwise insure the obligations or performance of the issuer 
or of any entity to which such issuer extends credit or in which such 
issuer invests; and
    (B) Any assets the issuer holds pursuant to paragraphs (c)(15)(i)(B) 
or (i)(C)(1)(iii) of this section would be permissible for the banking 
entity to acquire and hold directly under applicable federal banking 
laws and regulations.
    (v) Investment and Relationship Limits. A banking entity's 
investment in, and relationship with, the issuer must:
    (A) Comply with the limitations imposed in Sec.  44.15, as if the 
issuer were a covered fund; and

[[Page 879]]

    (B) Be conducted in compliance with, and subject to, applicable 
banking laws and regulations, including applicable safety and soundness 
standards.
    (16) Qualifying venture capital funds. (i) Subject to paragraphs 
(c)(16)(ii) through (iv) of this section, an issuer that:
    (A) Is a venture capital fund as defined in 17 CFR 275.203(l)-1; and
    (B) Does not engage in any activity that would constitute 
proprietary trading under Sec.  44.3(b)(1)(i), as if the issuer were a 
banking entity.
    (ii) A banking entity that acts as a sponsor, investment adviser, or 
commodity trading advisor to an issuer that meets the conditions in 
paragraph (c)(16)(i) of this section may not rely on this exclusion 
unless the banking entity:
    (A) Provides in writing to any prospective and actual investor in 
the issuer the disclosures required under Sec.  44.11(a)(8), as if the 
issuer were a covered fund;
    (B) Ensures that the activities of the issuer are consistent with 
safety and soundness standards that are substantially similar to those 
that would apply if the banking entity engaged in the activities 
directly; and
    (C) Complies with the restrictions in Sec.  44.14 as if the issuer 
were a covered fund (except the banking entity may acquire and retain 
any ownership interest in the issuer).
    (iii) The banking entity must not, directly or indirectly, 
guarantee, assume, or otherwise insure the obligations or performance of 
the issuer.
    (iv) A banking entity's ownership interest in or relationship with 
the issuer must:
    (A) Comply with the limitations imposed in Sec.  44.15, as if the 
issuer were a covered fund; and
    (B) Be conducted in compliance with, and subject to, applicable 
banking laws and regulations, including applicable safety and soundness 
standards.
    (17) Family wealth management vehicles. (i) Subject to paragraph 
(c)(17)(ii) of this section, any entity that is not, and does not hold 
itself out as being, an entity or arrangement that raises money from 
investors primarily for the purpose of investing in securities for 
resale or other disposition or otherwise trading in securities, and:
    (A) If the entity is a trust, the grantor(s) of the entity are all 
family customers; and
    (B) If the entity is not a trust:
    (1) A majority of the voting interests in the entity are owned 
(directly or indirectly) by family customers;
    (2) A majority of the interests in the entity are owned (directly or 
indirectly) by family customers;
    (3) The entity is owned only by family customers and up to 5 closely 
related persons of the family customers; and
    (C) Notwithstanding paragraph (c)(17)(i)(A) and (B) of this section, 
up to an aggregate 0.5 percent of the entity's outstanding ownership 
interests may be acquired or retained by one or more entities that are 
not family customers or closely related persons if the ownership 
interest is acquired or retained by such parties for the purpose of and 
to the extent necessary for establishing corporate separateness or 
addressing bankruptcy, insolvency, or similar concerns.
    (ii) A banking entity may rely on the exclusion in paragraph 
(c)(17)(i) of this section with respect to an entity provided that the 
banking entity (or an affiliate):
    (A) Provides bona fide trust, fiduciary, investment advisory, or 
commodity trading advisory services to the entity;
    (B) Does not, directly or indirectly, guarantee, assume, or 
otherwise insure the obligations or performance of such entity;
    (C) Complies with the disclosure obligations under Sec.  
44.11(a)(8), as if such entity were a covered fund, provided that the 
content may be modified to prevent the disclosure from being misleading 
and the manner of disclosure may be modified to accommodate the specific 
circumstances of the entity;
    (D) Does not acquire or retain, as principal, an ownership interest 
in the entity, other than as described in paragraph (c)(17)(i)(C) of 
this section;
    (E) Complies with the requirements of Sec. Sec.  44.14(b) and 44.15, 
as if such entity were a covered fund; and
    (F) Except for riskless principal transactions as defined in 
paragraph

[[Page 880]]

(d)(11) of this section, complies with the requirements of 12 CFR 
223.15(a), as if such banking entity and its affiliates were a member 
bank and the entity were an affiliate thereof.
    (iii) For purposes of paragraph (c)(17) of this section, the 
following definitions apply:
    (A) Closely related person means a natural person (including the 
estate and estate planning vehicles of such person) who has longstanding 
business or personal relationships with any family customer.
    (B) Family customer means:
    (1) A family client, as defined in Rule 202(a)(11)(G)-1(d)(4) of the 
Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1(d)(4)); or
    (2) Any natural person who is a father-in-law, mother-in-law, 
brother-in-law, sister-in-law, son-in-law or daughter-in-law of a family 
client, or a spouse or a spousal equivalent of any of the foregoing.
    (18) Customer facilitation vehicles. (i) Subject to paragraph 
(c)(18)(ii) of this section, an issuer that is formed by or at the 
request of a customer of the banking entity for the purpose of providing 
such customer (which may include one or more affiliates of such 
customer) with exposure to a transaction, investment strategy, or other 
service provided by the banking entity.
    (ii) A banking entity may rely on the exclusion in paragraph 
(c)(18)(i) of this section with respect to an issuer provided that:
    (A) All of the ownership interests of the issuer are owned by the 
customer (which may include one or more of its affiliates) for whom the 
issuer was created;
    (B) Notwithstanding paragraph (c)(18)(ii)(A) of this section, up to 
an aggregate 0.5 percent of the issuer's outstanding ownership interests 
may be acquired or retained by one or more entities that are not 
customers if the ownership interest is acquired or retained by such 
parties for the purpose of and to the extent necessary for establishing 
corporate separateness or addressing bankruptcy, insolvency, or similar 
concerns; and
    (C) The banking entity and its affiliates:
    (1) Maintain documentation outlining how the banking entity intends 
to facilitate the customer's exposure to such transaction, investment 
strategy, or service;
    (2) Do not, directly or indirectly, guarantee, assume, or otherwise 
insure the obligations or performance of such issuer;
    (3) Comply with the disclosure obligations under Sec.  44.11(a)(8), 
as if such issuer were a covered fund, provided that the content may be 
modified to prevent the disclosure from being misleading and the manner 
of disclosure may be modified to accommodate the specific circumstances 
of the issuer;
    (4) Do not acquire or retain, as principal, an ownership interest in 
the issuer, other than as described in paragraph (c)(18)(ii)(B) of this 
section;
    (5) Comply with the requirements of Sec. Sec.  44.14(b) and 44.15, 
as if such issuer were a covered fund; and
    (6) Except for riskless principal transactions as defined in 
paragraph (d)(11) of this section, comply with the requirements of 12 
CFR 223.15(a), as if such banking entity and its affiliates were a 
member bank and the issuer were an affiliate thereof.
    (d) Definition of other terms related to covered funds. For purposes 
of this subpart:
    (1) Applicable accounting standards means U.S. generally accepted 
accounting principles, or such other accounting standards applicable to 
a banking entity that the OCC determines are appropriate and that the 
banking entity uses in the ordinary course of its business in preparing 
its consolidated financial statements.
    (2) Asset-backed security has the meaning specified in Section 
3(a)(79) of the Exchange Act (15 U.S.C. 78c(a)(79).
    (3) Director has the same meaning as provided in section 215.2(d)(1) 
of the Board's Regulation O (12 CFR 215.2(d)(1)).
    (4) Issuer has the same meaning as in section 2(a)(22) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(22)).
    (5) Issuing entity means with respect to asset-backed securities the 
special purpose vehicle that owns or holds the pool assets underlying 
asset-backed securities and in whose name the asset-

[[Page 881]]

backed securities supported or serviced by the pool assets are issued.
    (6) Ownership interest--(i) Ownership interest means any equity, 
partnership, or other similar interest. An ``other similar interest'' 
means an interest that:
    (A) Has the right to participate in the selection or removal of a 
general partner, managing member, member of the board of directors or 
trustees, investment manager, investment adviser, or commodity trading 
advisor of the covered fund, excluding:
    (1) The rights of a creditor to exercise remedies upon the 
occurrence of an event of default or an acceleration event; and
    (2) The right to participate in the removal of an investment manager 
for ``cause'' or participate in the selection of a replacement manager 
upon an investment manager's resignation or removal. For purposes of 
this paragraph (d)(6)(i)(A)(2), ``cause'' for removal of an investment 
manager means one or more of the following events:
    (i) The bankruptcy, insolvency, conservatorship or receivership of 
the investment manager;
    (ii) The breach by the investment manager of any material provision 
of the covered fund's transaction agreements applicable to the 
investment manager;
    (iii) The breach by the investment manager of material 
representations or warranties;
    (iv) The occurrence of an act that constitutes fraud or criminal 
activity in the performance of the investment manager's obligations 
under the covered fund's transaction agreements;
    (v) The indictment of the investment manager for a criminal offense, 
or the indictment of any officer, member, partner or other principal of 
the investment manager for a criminal offense materially related to his 
or her investment management activities;
    (vi) A change in control with respect to the investment manager;
    (vii) The loss, separation or incapacitation of an individual 
critical to the operation of the investment manager or primarily 
responsible for the management of the covered fund's assets; or
    (viii) Other similar events that constitute ``cause'' for removal of 
an investment manager, provided that such events are not solely related 
to the performance of the covered fund or the investment manager's 
exercise of investment discretion under the covered fund's transaction 
agreements;
    (B) Has the right under the terms of the interest to receive a share 
of the income, gains or profits of the covered fund;
    (C) Has the right to receive the underlying assets of the covered 
fund after all other interests have been redeemed and/or paid in full 
(excluding the rights of a creditor to exercise remedies upon the 
occurrence of an event of default or an acceleration event);
    (D) Has the right to receive all or a portion of excess spread (the 
positive difference, if any, between the aggregate interest payments 
received from the underlying assets of the covered fund and the 
aggregate interest paid to the holders of other outstanding interests);
    (E) Provides under the terms of the interest that the amounts 
payable by the covered fund with respect to the interest could be 
reduced based on losses arising from the underlying assets of the 
covered fund, such as allocation of losses, write-downs or charge-offs 
of the outstanding principal balance, or reductions in the amount of 
interest due and payable on the interest;
    (F) Receives income on a pass-through basis from the covered fund, 
or has a rate of return that is determined by reference to the 
performance of the underlying assets of the covered fund; or
    (G) Any synthetic right to have, receive, or be allocated any of the 
rights in paragraphs (d)(6)(i)(A) through (F) of this section.
    (ii) Ownership interest does not include:
    (A) Restricted profit interest, which is an interest held by an 
entity (or an employee or former employee thereof) in a covered fund for 
which the entity (or employee thereof) serves as investment manager, 
investment adviser, commodity trading advisor, or other service 
provider, so long as:

[[Page 882]]

    (1) The sole purpose and effect of the interest is to allow the 
entity (or employee or former employee thereof) to share in the profits 
of the covered fund as performance compensation for the investment 
management, investment advisory, commodity trading advisory, or other 
services provided to the covered fund by the entity (or employee or 
former employee thereof), provided that the entity (or employee or 
former employee thereof) may be obligated under the terms of such 
interest to return profits previously received;
    (2) All such profit, once allocated, is distributed to the entity 
(or employee or former employee thereof) promptly after being earned or, 
if not so distributed, is retained by the covered fund for the sole 
purpose of establishing a reserve amount to satisfy contractual 
obligations with respect to subsequent losses of the covered fund and 
such undistributed profit of the entity (or employee or former employee 
thereof) does not share in the subsequent investment gains of the 
covered fund;
    (3) Any amounts invested in the covered fund, including any amounts 
paid by the entity in connection with obtaining the restricted profit 
interest, are within the limits of Sec.  44.12 of this subpart; and
    (4) The interest is not transferable by the entity (or employee or 
former employee thereof) except to an affiliate thereof (or an employee 
of the banking entity or affiliate), to immediate family members, or 
through the intestacy, of the employee or former employee, or in 
connection with a sale of the business that gave rise to the restricted 
profit interest by the entity (or employee or former employee thereof) 
to an unaffiliated party that provides investment management, investment 
advisory, commodity trading advisory, or other services to the fund.
    (B) Any senior loan or senior debt interest that has the following 
characteristics:
    (1) Under the terms of the interest the holders of such interest do 
not have the right to receive a share of the income, gains, or profits 
of the covered fund, but are entitled to receive only:
    (i) Interest at a stated interest rate, as well as commitment fees 
or other fees, which are not determined by reference to the performance 
of the underlying assets of the covered fund; and
    (ii) Repayment of a fixed principal amount, on or before a maturity 
date, in a contractually-determined manner (which may include prepayment 
premiums intended solely to reflect, and compensate holders of the 
interest for, forgone income resulting from an early prepayment);
    (2) The entitlement to payments under the terms of the interest are 
absolute and could not be reduced based on losses arising from the 
underlying assets of the covered fund, such as allocation of losses, 
write-downs or charge-offs of the outstanding principal balance, or 
reductions in the amount of interest due and payable on the interest; 
and
    (3) The holders of the interest are not entitled to receive the 
underlying assets of the covered fund after all other interests have 
been redeemed or paid in full (excluding the rights of a creditor to 
exercise remedies upon the occurrence of an event of default or an 
acceleration event).
    (7) Prime brokerage transaction means any transaction that would be 
a covered transaction, as defined in section 23A(b)(7) of the Federal 
Reserve Act (12 U.S.C. 371c(b)(7)), that is provided in connection with 
custody, clearance and settlement, securities borrowing or lending 
services, trade execution, financing, or data, operational, and 
administrative support.
    (8) Resident of the United States means a person that is a ``U.S. 
person'' as defined in rule 902(k) of the SEC's Regulation S (17 CFR 
230.902(k)).
    (9) Sponsor means, with respect to a covered fund:
    (i) To serve as a general partner, managing member, or trustee of a 
covered fund, or to serve as a commodity pool operator with respect to a 
covered fund as defined in (b)(1)(ii) of this section;
    (ii) In any manner to select or to control (or to have employees, 
officers, or directors, or agents who constitute) a majority of the 
directors, trustees, or management of a covered fund; or
    (iii) To share with a covered fund, for corporate, marketing, 
promotional, or other purposes, the same name or a

[[Page 883]]

variation of the same name, except as permitted under Sec.  44.11(a)(6).
    (10) Trustee. (i) For purposes of paragraph (d)(9) of this section 
and Sec.  44.11 of subpart C, a trustee does not include:
    (A) A trustee that does not exercise investment discretion with 
respect to a covered fund, including a trustee that is subject to the 
direction of an unaffiliated named fiduciary who is not a trustee 
pursuant to section 403(a)(1) of the Employee's Retirement Income 
Security Act (29 U.S.C. 1103(a)(1)); or
    (B) A trustee that is subject to fiduciary standards imposed under 
foreign law that are substantially equivalent to those described in 
paragraph (d)(10)(i)(A) of this section;
    (ii) Any entity that directs a person described in paragraph 
(d)(10)(i) of this section, or that possesses authority and discretion 
to manage and control the investment decisions of a covered fund for 
which such person serves as trustee, shall be considered to be a trustee 
of such covered fund.
    (11) Riskless principal transaction. Riskless principal transaction 
means a transaction in which a banking entity, after receiving an order 
from a customer to buy (or sell) a security, purchases (or sells) the 
security in the secondary market for its own account to offset a 
contemporaneous sale to (or purchase from) the customer.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 35020, July 22, 
2019; 84 FR 62099, Nov. 14, 2019; 85 FR 46496, July 31, 2020]



Sec.  44.11  Permitted organizing and offering, underwriting, 
and market making with respect to a covered fund.

    (a) Organizing and offering a covered fund in general. 
Notwithstanding Sec.  44.10(a) of this subpart, a banking entity is not 
prohibited from acquiring or retaining an ownership interest in, or 
acting as sponsor to, a covered fund in connection with, directly or 
indirectly, organizing and offering a covered fund, including serving as 
a general partner, managing member, trustee, or commodity pool operator 
of the covered fund and in any manner selecting or controlling (or 
having employees, officers, directors, or agents who constitute) a 
majority of the directors, trustees, or management of the covered fund, 
including any necessary expenses for the foregoing, only if:
    (1) The banking entity (or an affiliate thereof) provides bona fide 
trust, fiduciary, investment advisory, or commodity trading advisory 
services;
    (2) The covered fund is organized and offered only in connection 
with the provision of bona fide trust, fiduciary, investment advisory, 
or commodity trading advisory services and only to persons that are 
customers of such services of the banking entity (or an affiliate 
thereof), pursuant to a written plan or similar documentation outlining 
how the banking entity or such affiliate intends to provide advisory or 
similar services to its customers through organizing and offering such 
fund;
    (3) The banking entity and its affiliates do not acquire or retain 
an ownership interest in the covered fund except as permitted under 
Sec.  44.12 of this subpart;
    (4) The banking entity and its affiliates comply with the 
requirements of Sec.  44.14 of this subpart;
    (5) The banking entity and its affiliates do not, directly or 
indirectly, guarantee, assume, or otherwise insure the obligations or 
performance of the covered fund or of any covered fund in which such 
covered fund invests;
    (6) The covered fund, for corporate, marketing, promotional, or 
other purposes:
    (i) Does not share the same name or a variation of the same name 
with the banking entity (or an affiliate thereof) except that a covered 
fund may share the same name or a variation of the same name with a 
banking entity that is an investment adviser to the covered fund if:
    (A) The investment adviser is not an insured depository institution, 
a company that controls an insured depository institution, or a company 
that is treated as a bank holding company for purposes of section 8 of 
the International Banking Act of 1978 (12 U.S.C. 3106); and
    (B) The investment adviser does not share the same name or a 
variation of the same name as an insured depository institution, a 
company that controls an insured depository institution, or a company 
that is treated as a bank

[[Page 884]]

holding company for purposes of section 8 of the International Banking 
Act of 1978 (12 U.S.C. 3106); and
    (ii) Does not use the word ``bank'' in its name;
    (7) No director or employee of the banking entity (or an affiliate 
thereof) takes or retains an ownership interest in the covered fund, 
except for any director or employee of the banking entity or such 
affiliate who is directly engaged in providing investment advisory, 
commodity trading advisory, or other services to the covered fund at the 
time the director or employee takes the ownership interest; and
    (8) The banking entity:
    (i) Clearly and conspicuously discloses, in writing, to any 
prospective and actual investor in the covered fund (such as through 
disclosure in the covered fund's offering documents):
    (A) That ``any losses in [such covered fund] will be borne solely by 
investors in [the covered fund] and not by [the banking entity] or its 
affiliates; therefore, [the banking entity's] losses in [such covered 
fund] will be limited to losses attributable to the ownership interests 
in the covered fund held by [the banking entity] and any affiliate in 
its capacity as investor in the [covered fund] or as beneficiary of a 
restricted profit interest held by [the banking entity] or any 
affiliate'';
    (B) That such investor should read the fund offering documents 
before investing in the covered fund;
    (C) That the ``ownership interests in the covered fund are not 
insured by the FDIC, and are not deposits, obligations of, or endorsed 
or guaranteed in any way, by any banking entity'' (unless that happens 
to be the case); and
    (D) The role of the banking entity and its affiliates and employees 
in sponsoring or providing any services to the covered fund; and
    (ii) Complies with any additional rules of the appropriate Federal 
banking agencies, the SEC, or the CFTC, as provided in section 13(b)(2) 
of the BHC Act, designed to ensure that losses in such covered fund are 
borne solely by investors in the covered fund and not by the covered 
banking entity and its affiliates.
    (b) Organizing and offering an issuing entity of asset-backed 
securities. (1) Notwithstanding Sec.  44.10(a) of this subpart, a 
banking entity is not prohibited from acquiring or retaining an 
ownership interest in, or acting as sponsor to, a covered fund that is 
an issuing entity of asset-backed securities in connection with, 
directly or indirectly, organizing and offering that issuing entity, so 
long as the banking entity and its affiliates comply with all of the 
requirements of paragraph (a)(3) through (8) of this section.
    (2) For purposes of this paragraph (b), organizing and offering a 
covered fund that is an issuing entity of asset-backed securities means 
acting as the securitizer, as that term is used in section 15G(a)(3) of 
the Exchange Act (15 U.S.C. 78o-11(a)(3)) of the issuing entity, or 
acquiring or retaining an ownership interest in the issuing entity as 
required by section 15G of that Act (15 U.S.C.78o-11) and the 
implementing regulations issued thereunder.
    (c) Underwriting and market making in ownership interests of a 
covered fund. The prohibition contained in Sec.  44.10(a) of this 
subpart does not apply to a banking entity's underwriting activities or 
market making-related activities involving a covered fund so long as:
    (1) Those activities are conducted in accordance with the 
requirements of Sec.  44.4(a) or (b) of subpart B, respectively; and
    (2) With respect to any banking entity (or any affiliate thereof) 
that: Acts as a sponsor, investment adviser or commodity trading advisor 
to a particular covered fund or otherwise acquires and retains an 
ownership interest in such covered fund in reliance on paragraph (a) of 
this section; or acquires and retains an ownership interest in such 
covered fund and is either a securitizer, as that term is used in 
section 15G(a)(3) of the Exchange Act (15 U.S.C. 78o-11(a)(3)), or is 
acquiring and retaining an ownership interest in such covered fund in 
compliance with section 15G of that Act (15 U.S.C. 78o-11) and the 
implementing regulations issued thereunder each as permitted by 
paragraph (b) of this section, then in each such case any ownership 
interests acquired or retained by the banking entity and its affiliates 
in connection with underwriting and market making

[[Page 885]]

related activities for that particular covered fund are included in the 
calculation of ownership interests permitted to be held by the banking 
entity and its affiliates under the limitations of Sec.  44.12(a)(2)(ii) 
and (iii) and (d).

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 35020, July 22, 
2019; 84 FR 62099, Nov. 14, 2019]



Sec.  44.12  Permitted investment in a covered fund.

    (a) Authority and limitations on permitted investments in covered 
funds. (1) Notwithstanding the prohibition contained in Sec.  44.10(a) 
of this subpart, a banking entity may acquire and retain an ownership 
interest in a covered fund that the banking entity or an affiliate 
thereof organizes and offers pursuant to Sec.  44.11, for the purposes 
of:
    (i) Establishment. Establishing the fund and providing the fund with 
sufficient initial equity for investment to permit the fund to attract 
unaffiliated investors, subject to the limits contained in paragraphs 
(a)(2)(i) and (iii) of this section; or
    (ii) De minimis investment. Making and retaining an investment in 
the covered fund subject to the limits contained in paragraphs 
(a)(2)(ii) and (iii) of this section.
    (2) Investment limits--(i) Seeding period. With respect to an 
investment in any covered fund made or held pursuant to paragraph 
(a)(1)(i) of this section, the banking entity and its affiliates:
    (A) Must actively seek unaffiliated investors to reduce, through 
redemption, sale, dilution, or other methods, the aggregate amount of 
all ownership interests of the banking entity in the covered fund to the 
amount permitted in paragraph (a)(2)(i)(B) of this section; and
    (B) Must, no later than 1 year after the date of establishment of 
the fund (or such longer period as may be provided by the Board pursuant 
to paragraph (e) of this section), conform its ownership interest in the 
covered fund to the limits in paragraph (a)(2)(ii) of this section;
    (ii) Per-fund limits. (A) Except as provided in paragraph 
(a)(2)(ii)(B) of this section, an investment by a banking entity and its 
affiliates in any covered fund made or held pursuant to paragraph 
(a)(1)(ii) of this section may not exceed 3 percent of the total number 
or value of the outstanding ownership interests of the fund.
    (B) An investment by a banking entity and its affiliates in a 
covered fund that is an issuing entity of asset-backed securities may 
not exceed 3 percent of the total fair market value of the ownership 
interests of the fund measured in accordance with paragraph (b)(3) of 
this section, unless a greater percentage is retained by the banking 
entity and its affiliates in compliance with the requirements of section 
15G of the Exchange Act (15 U.S.C. 78o-11) and the implementing 
regulations issued thereunder, in which case the investment by the 
banking entity and its affiliates in the covered fund may not exceed the 
amount, number, or value of ownership interests of the fund required 
under section 15G of the Exchange Act and the implementing regulations 
issued thereunder.
    (iii) Aggregate limit. The aggregate value of all ownership 
interests of the banking entity and its affiliates in all covered funds 
acquired or retained under this section may not exceed 3 percent of the 
tier 1 capital of the banking entity, as provided under paragraph (c) of 
this section, and shall be calculated as of the last day of each 
calendar quarter.
    (iv) Date of establishment. For purposes of this section, the date 
of establishment of a covered fund shall be:
    (A) In general. The date on which the investment adviser or similar 
entity to the covered fund begins making investments pursuant to the 
written investment strategy for the fund;
    (B) Issuing entities of asset-backed securities. In the case of an 
issuing entity of asset-backed securities, the date on which the assets 
are initially transferred into the issuing entity of asset-backed 
securities.
    (b) Rules of construction--(1) Attribution of ownership interests to 
a covered banking entity. (i) For purposes of paragraph (a)(2) of this 
section, the amount and value of a banking entity's permitted investment 
in any single covered fund shall include any ownership interest held 
under Sec.  44.12 directly by

[[Page 886]]

the banking entity, including any affiliate of the banking entity.
    (ii) Treatment of registered investment companies, SEC-regulated 
business development companies, and foreign public funds. For purposes 
of paragraph (b)(1)(i) of this section, a registered investment company, 
SEC-regulated business development companies, or foreign public fund as 
described in Sec.  44.10(c)(1) will not be considered to be an affiliate 
of the banking entity so long as:
    (A) The banking entity, together with its affiliates, does not own, 
control, or hold with the power to vote 25 percent or more of the voting 
shares of the company or fund; and
    (B) The banking entity, or an affiliate of the banking entity, 
provides investment advisory, commodity trading advisory, 
administrative, and other services to the company or fund in compliance 
with the limitations under applicable regulation, order, or other 
authority.
    (iii) Covered funds. For purposes of paragraph (b)(1)(i) of this 
section, a covered fund will not be considered to be an affiliate of a 
banking entity so long as the covered fund is held in compliance with 
the requirements of this subpart.
    (iv) Treatment of employee and director investments financed by the 
banking entity. For purposes of paragraph (b)(1)(i) of this section, an 
investment by a director or employee of a banking entity who acquires an 
ownership interest in his or her personal capacity in a covered fund 
sponsored by the banking entity will be attributed to the banking entity 
if the banking entity, directly or indirectly, extends financing for the 
purpose of enabling the director or employee to acquire the ownership 
interest in the fund and the financing is used to acquire such ownership 
interest in the covered fund.
    (2) Calculation of permitted ownership interests in a single covered 
fund. Except as provided in paragraph (b)(3) or (4), for purposes of 
determining whether an investment in a single covered fund complies with 
the restrictions on ownership interests under paragraphs (a)(2)(i)(B) 
and (a)(2)(ii)(A) of this section:
    (i) The aggregate number of the outstanding ownership interests held 
by the banking entity shall be the total number of ownership interests 
held under this section by the banking entity in a covered fund divided 
by the total number of ownership interests held by all entities in that 
covered fund, as of the last day of each calendar quarter (both measured 
without regard to committed funds not yet called for investment);
    (ii) The aggregate value of the outstanding ownership interests held 
by the banking entity shall be the aggregate fair market value of all 
investments in and capital contributions made to the covered fund by the 
banking entity, divided by the value of all investments in and capital 
contributions made to that covered fund by all entities, as of the last 
day of each calendar quarter (all measured without regard to committed 
funds not yet called for investment). If fair market value cannot be 
determined, then the value shall be the historical cost basis of all 
investments in and contributions made by the banking entity to the 
covered fund;
    (iii) For purposes of the calculation under paragraph (b)(2)(ii) of 
this section, once a valuation methodology is chosen, the banking entity 
must calculate the value of its investment and the investments of all 
others in the covered fund in the same manner and according to the same 
standards.
    (3) Issuing entities of asset-backed securities. In the case of an 
ownership interest in an issuing entity of asset-backed securities, for 
purposes of determining whether an investment in a single covered fund 
complies with the restrictions on ownership interests under paragraphs 
(a)(2)(i)(B) and (a)(2)(ii)(B) of this section:
    (i) For securitizations subject to the requirements of section 15G 
of the Exchange Act (15 U.S.C. 78o-11), the calculations shall be made 
as of the date and according to the valuation methodology applicable 
pursuant to the requirements of section 15G of the Exchange Act (15 
U.S.C. 78o-11) and the implementing regulations issued thereunder; or
    (ii) For securitization transactions completed prior to the 
compliance date

[[Page 887]]

of such implementing regulations (or as to which such implementing 
regulations do not apply), the calculations shall be made as of the date 
of establishment as defined in paragraph (a)(2)(iv)(B) of this section 
or such earlier date on which the transferred assets have been valued 
for purposes of transfer to the covered fund, and thereafter only upon 
the date on which additional securities of the issuing entity of asset-
backed securities are priced for purposes of the sales of ownership 
interests to unaffiliated investors.
    (iii) For securitization transactions completed prior to the 
compliance date of such implementing regulations (or as to which such 
implementing regulations do not apply), the aggregate value of the 
outstanding ownership interests in the covered fund shall be the fair 
market value of the assets transferred to the issuing entity of the 
securitization and any other assets otherwise held by the issuing entity 
at such time, determined in a manner that is consistent with its 
determination of the fair market value of those assets for financial 
statement purposes.
    (iv) For purposes of the calculation under paragraph (b)(3)(iii) of 
this section, the valuation methodology used to calculate the fair 
market value of the ownership interests must be the same for both the 
ownership interests held by a banking entity and the ownership interests 
held by all others in the covered fund in the same manner and according 
to the same standards.
    (4) Multi-tier fund investments--(i) Master-feeder fund investments. 
If the principal investment strategy of a covered fund (the ``feeder 
fund'') is to invest substantially all of its assets in another single 
covered fund (the ``master fund''), then for purposes of the investment 
limitations in paragraphs (a)(2)(i)(B) and (a)(2)(ii) of this section, 
the banking entity's permitted investment in such funds shall be 
measured only by reference to the value of the master fund. The banking 
entity's permitted investment in the master fund shall include any 
investment by the banking entity in the master fund, as well as the 
banking entity's pro-rata share of any ownership interest in the master 
fund that is held through the feeder fund; and
    (ii) Fund-of-funds investments. If a banking entity organizes and 
offers a covered fund pursuant to Sec.  44.11 for the purpose of 
investing in other covered funds (a ``fund of funds'') and that fund of 
funds itself invests in another covered fund that the banking entity is 
permitted to own, then the banking entity's permitted investment in that 
other fund shall include any investment by the banking entity in that 
other fund, as well as the banking entity's pro-rata share of any 
ownership interest in the fund that is held through the fund of funds. 
The investment of the banking entity may not represent more than 3 
percent of the amount or value of any single covered fund.
    (5) Parallel Investments and Co-Investments. (i) A banking entity 
shall not be required to include in the calculation of the investment 
limits under paragraph (a)(2) of this section any investment the banking 
entity makes alongside a covered fund as long as the investment is made 
in compliance with applicable laws and regulations, including applicable 
safety and soundness standards.
    (ii) A banking entity shall not be restricted under this section in 
the amount of any investment the banking entity makes alongside a 
covered fund as long as the investment is made in compliance with 
applicable laws and regulations, including applicable safety and 
soundness standards.
    (c) Aggregate permitted investments in all covered funds. (1)(i) For 
purposes of paragraph (a)(2)(iii) of this section, the aggregate value 
of all ownership interests held by a banking entity shall be the sum of 
all amounts paid or contributed by the banking entity in connection with 
acquiring or retaining an ownership interest in covered funds (together 
with any amounts paid by the entity in connection with obtaining a 
restricted profit interest under Sec.  44.10(d)(6)(ii)), on a historical 
cost basis;
    (ii) Treatment of employee and director restricted profit interests 
financed by the banking entity. For purposes of paragraph (c)(1)(i) of 
this section, an investment by a director or employee

[[Page 888]]

of a banking entity who acquires a restricted profit interest in his or 
her personal capacity in a covered fund sponsored by the banking entity 
will be attributed to the banking entity if the banking entity, directly 
or indirectly, extends financing for the purpose of enabling the 
director or employee to acquire the restricted profit interest in the 
fund and the financing is used to acquire such ownership interest in the 
covered fund.
    (2) Calculation of tier 1 capital. For purposes of paragraph 
(a)(2)(iii) of this section:
    (i) Entities that are required to hold and report tier 1 capital. If 
a banking entity is required to calculate and report tier 1 capital, the 
banking entity's tier 1 capital shall be equal to the amount of tier 1 
capital of the banking entity as of the last day of the most recent 
calendar quarter, as reported to its primary financial regulatory 
agency; and
    (ii) If a banking entity is not required to calculate and report 
tier 1 capital, the banking entity's tier 1 capital shall be determined 
to be equal to:
    (A) In the case of a banking entity that is controlled, directly or 
indirectly, by a depository institution that calculates and reports tier 
1 capital, be equal to the amount of tier 1 capital reported by such 
controlling depository institution in the manner described in paragraph 
(c)(2)(i) of this section;
    (B) In the case of a banking entity that is not controlled, directly 
or indirectly, by a depository institution that calculates and reports 
tier 1 capital:
    (1) Bank holding company subsidiaries. If the banking entity is a 
subsidiary of a bank holding company or company that is treated as a 
bank holding company, be equal to the amount of tier 1 capital reported 
by the top-tier affiliate of such covered banking entity that calculates 
and reports tier 1 capital in the manner described in paragraph 
(c)(2)(i) of this section; and
    (2) Other holding companies and any subsidiary or affiliate thereof. 
If the banking entity is not a subsidiary of a bank holding company or a 
company that is treated as a bank holding company, be equal to the total 
amount of shareholders' equity of the top-tier affiliate within such 
organization as of the last day of the most recent calendar quarter that 
has ended, as determined under applicable accounting standards.
    (iii) Treatment of foreign banking entities--(A) Foreign banking 
entities. Except as provided in paragraph (c)(2)(iii)(B) of this 
section, with respect to a banking entity that is not itself, and is not 
controlled directly or indirectly by, a banking entity that is located 
or organized under the laws of the United States or of any State, the 
tier 1 capital of the banking entity shall be the consolidated tier 1 
capital of the entity as calculated under applicable home country 
standards.
    (B) U.S. affiliates of foreign banking entities. With respect to a 
banking entity that is located or organized under the laws of the United 
States or of any State and is controlled by a foreign banking entity 
identified under paragraph (c)(2)(iii)(A) of this section, the banking 
entity's tier 1 capital shall be as calculated under paragraphs 
(c)(2)(i) or (ii) of this section.
    (d) Capital treatment for a permitted investment in a covered fund. 
For purposes of calculating compliance with the applicable regulatory 
capital requirements, a banking entity shall deduct from the banking 
entity's tier 1 capital (as determined under paragraph (c)(2) of this 
section) the greater of:
    (1)(i) The sum of all amounts paid or contributed by the banking 
entity in connection with acquiring or retaining an ownership interest 
(together with any amounts paid by the entity in connection with 
obtaining a restricted profit interest under Sec.  44.10(d)(6)(ii) of 
subpart C of this part), on a historical cost basis, plus any earnings 
received; and
    (ii) The fair market value of the banking entity's ownership 
interests in the covered fund as determined under paragraph (b)(2)(ii) 
or (b)(3) of this section (together with any amounts paid by the entity 
in connection with obtaining a restricted profit interest under Sec.  
44.10(d)(6)(ii) of subpart C of this part), if the banking entity 
accounts for the profits (or losses) of the fund investment in its 
financial statements.
    (2) Treatment of employee and director restricted profit interests 
financed by the banking entity. For purposes of

[[Page 889]]

paragraph (d)(1) of this section, an investment by a director or 
employee of a banking entity who acquires a restricted profit interest 
in his or her personal capacity in a covered fund sponsored by the 
banking entity will be attributed to the banking entity if the banking 
entity, directly or indirectly, extends financing for the purpose of 
enabling the director or employee to acquire the restricted profit 
interest in the fund and the financing is used to acquire such ownership 
interest in the covered fund.
    (e) Extension of time to divest an ownership interest--(1) Extension 
period. Upon application by a banking entity, the Board may extend the 
period under paragraph (a)(2)(i) of this section for up to 2 additional 
years if the Board finds that an extension would be consistent with 
safety and soundness and not detrimental to the public interest.
    (2) Application requirements. An application for extension must:
    (i) Be submitted to the Board at least 90 days prior to the 
expiration of the applicable time period;
    (ii) Provide the reasons for application, including information that 
addresses the factors in paragraph (e)(3) of this section; and
    (iii) Explain the banking entity's plan for reducing the permitted 
investment in a covered fund through redemption, sale, dilution or other 
methods as required in paragraph (a)(2) of this section.
    (3) Factors governing the Board determinations. In reviewing any 
application under paragraph (e)(1) of this section, the Board may 
consider all the facts and circumstances related to the permitted 
investment in a covered fund, including:
    (i) Whether the investment would result, directly or indirectly, in 
a material exposure by the banking entity to high-risk assets or high-
risk trading strategies;
    (ii) The contractual terms governing the banking entity's interest 
in the covered fund;
    (iii) The date on which the covered fund is expected to have 
attracted sufficient investments from investors unaffiliated with the 
banking entity to enable the banking entity to comply with the 
limitations in paragraph (a)(2)(i) of this section;
    (iv) The total exposure of the covered banking entity to the 
investment and the risks that disposing of, or maintaining, the 
investment in the covered fund may pose to the banking entity and the 
financial stability of the United States;
    (v) The cost to the banking entity of divesting or disposing of the 
investment within the applicable period;
    (vi) Whether the investment or the divestiture or conformance of the 
investment would involve or result in a material conflict of interest 
between the banking entity and unaffiliated parties, including clients, 
customers, or counterparties to which it owes a duty;
    (vii) The banking entity's prior efforts to reduce through 
redemption, sale, dilution, or other methods its ownership interests in 
the covered fund, including activities related to the marketing of 
interests in such covered fund;
    (viii) Market conditions; and
    (ix) Any other factor that the Board believes appropriate.
    (4) Authority to impose restrictions on activities or investment 
during any extension period. The Board may impose such conditions on any 
extension approved under paragraph (e)(1) of this section as the Board 
determines are necessary or appropriate to protect the safety and 
soundness of the banking entity or the financial stability of the United 
States, address material conflicts of interest or other unsound banking 
practices, or otherwise further the purposes of section 13 of the BHC 
Act and this part.
    (5) Consultation. In the case of a banking entity that is primarily 
regulated by another Federal banking agency, the SEC, or the CFTC, the 
Board will consult with such agency prior to acting on an application by 
the banking entity for an extension under paragraph (e)(1) of this 
section.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62100, Nov. 14, 
2019; 85 FR 46500, July 31, 2020]



Sec.  44.13  Other permitted covered fund activities and investments.

    (a) Permitted risk-mitigating hedging activities. (1) The 
prohibition contained

[[Page 890]]

in Sec.  44.10(a) of this subpart does not apply with respect to an 
ownership interest in a covered fund acquired or retained by a banking 
entity that is designed to reduce or otherwise significantly mitigate 
the specific, identifiable risks to the banking entity in connection 
with:
    (i) A compensation arrangement with an employee of the banking 
entity or an affiliate thereof that directly provides investment 
advisory, commodity trading advisory or other services to the covered 
fund; or
    (ii) A position taken by the banking entity when acting as 
intermediary on behalf of a customer that is not itself a banking entity 
to facilitate the exposure by the customer to the profits and losses of 
the covered fund.
    (2) The risk-mitigating hedging activities of a banking entity are 
permitted under this paragraph (a) only if:
    (i) The banking entity has established and implements, maintains and 
enforces an internal compliance program in accordance with subpart D of 
this part that is reasonably designed to ensure the banking entity's 
compliance with the requirements of this section, including:
    (A) Reasonably designed written policies and procedures; and
    (B) Internal controls and ongoing monitoring, management, and 
authorization procedures, including relevant escalation procedures; and
    (ii) The acquisition or retention of the ownership interest:
    (A) Is made in accordance with the written policies, procedures, and 
internal controls required under this section;
    (B) At the inception of the hedge, is designed to reduce or 
otherwise significantly mitigate one or more specific, identifiable 
risks arising:
    (1) Out of a transaction conducted solely to accommodate a specific 
customer request with respect to the covered fund; or
    (2) In connection with the compensation arrangement with the 
employee that directly provides investment advisory, commodity trading 
advisory, or other services to the covered fund;
    (C) Does not give rise, at the inception of the hedge, to any 
significant new or additional risk that is not itself hedged 
contemporaneously in accordance with this section; and
    (D) Is subject to continuing review, monitoring and management by 
the banking entity.
    (iii) With respect to risk-mitigating hedging activity conducted 
pursuant to paragraph (a)(1)(i) of this section, the compensation 
arrangement relates solely to the covered fund in which the banking 
entity or any affiliate has acquired an ownership interest pursuant to 
paragraph (a)(1)(i) and such compensation arrangement provides that any 
losses incurred by the banking entity on such ownership interest will be 
offset by corresponding decreases in amounts payable under such 
compensation arrangement.
    (b) Certain permitted covered fund activities and investments 
outside of the United States. (1) The prohibition contained in Sec.  
44.10(a) of this subpart does not apply to the acquisition or retention 
of any ownership interest in, or the sponsorship of, a covered fund by a 
banking entity only if:
    (i) The banking entity is not organized or directly or indirectly 
controlled by a banking entity that is organized under the laws of the 
United States or of one or more States;
    (ii) The activity or investment by the banking entity is pursuant to 
paragraph (9) or (13) of section 4(c) of the BHC Act;
    (iii) No ownership interest in the covered fund is offered for sale 
or sold to a resident of the United States; and
    (iv) The activity or investment occurs solely outside of the United 
States.
    (2) An activity or investment by the banking entity is pursuant to 
paragraph (9) or (13) of section 4(c) of the BHC Act for purposes of 
paragraph (b)(1)(ii) of this section only if:
    (i) The activity or investment is conducted in accordance with the 
requirements of this section; and
    (ii)(A) With respect to a banking entity that is a foreign banking 
organization, the banking entity meets the qualifying foreign banking 
organization requirements of section 211.23(a), (c) or (e) of the 
Board's Regulation K (12 CFR 211.23(a), (c) or (e)), as applicable; or

[[Page 891]]

    (B) With respect to a banking entity that is not a foreign banking 
organization, the banking entity is not organized under the laws of the 
United States or of one or more States and the banking entity, on a 
fully-consolidated basis, meets at least two of the following 
requirements:
    (1) Total assets of the banking entity held outside of the United 
States exceed total assets of the banking entity held in the United 
States;
    (2) Total revenues derived from the business of the banking entity 
outside of the United States exceed total revenues derived from the 
business of the banking entity in the United States; or
    (3) Total net income derived from the business of the banking entity 
outside of the United States exceeds total net income derived from the 
business of the banking entity in the United States.
    (3) An ownership interest in a covered fund is not offered for sale 
or sold to a resident of the United States for purposes of paragraph 
(b)(1)(iii) of this section only if it is not sold and has not been sold 
pursuant to an offering that targets residents of the United States in 
which the banking entity or any affiliate of the banking entity 
participates. If the banking entity or an affiliate sponsors or serves, 
directly or indirectly, as the investment manager, investment adviser, 
commodity pool operator or commodity trading advisor to a covered fund, 
then the banking entity or affiliate will be deemed for purposes of this 
paragraph (b)(3) to participate in any offer or sale by the covered fund 
of ownership interests in the covered fund.
    (4) An activity or investment occurs solely outside of the United 
States for purposes of paragraph (b)(1)(iv) of this section only if:
    (i) The banking entity acting as sponsor, or engaging as principal 
in the acquisition or retention of an ownership interest in the covered 
fund, is not itself, and is not controlled directly or indirectly by, a 
banking entity that is located in the United States or organized under 
the laws of the United States or of any State;
    (ii) The banking entity (including relevant personnel) that makes 
the decision to acquire or retain the ownership interest or act as 
sponsor to the covered fund is not located in the United States or 
organized under the laws of the United States or of any State; and
    (iii) The investment or sponsorship, including any transaction 
arising from risk-mitigating hedging related to an ownership interest, 
is not accounted for as principal directly or indirectly on a 
consolidated basis by any branch or affiliate that is located in the 
United States or organized under the laws of the United States or of any 
State.
    (5) For purposes of this section, a U.S. branch, agency, or 
subsidiary of a foreign bank, or any subsidiary thereof, is located in 
the United States; however, a foreign bank of which that branch, agency, 
or subsidiary is a part is not considered to be located in the United 
States solely by virtue of operation of the U.S. branch, agency, or 
subsidiary.
    (c) Permitted covered fund interests and activities by a regulated 
insurance company. The prohibition contained in Sec.  44.10(a) of this 
subpart does not apply to the acquisition or retention by an insurance 
company, or an affiliate thereof, of any ownership interest in, or the 
sponsorship of, a covered fund only if:
    (1) The insurance company or its affiliate acquires and retains the 
ownership interest solely for the general account of the insurance 
company or for one or more separate accounts established by the 
insurance company;
    (2) The acquisition and retention of the ownership interest is 
conducted in compliance with, and subject to, the insurance company 
investment laws and regulations of the State or jurisdiction in which 
such insurance company is domiciled; and
    (3) The appropriate Federal banking agencies, after consultation 
with the Financial Stability Oversight Council and the relevant 
insurance commissioners of the States and foreign jurisdictions, as 
appropriate, have not jointly determined, after notice and comment, that 
a particular law or regulation described in paragraph (c)(2) of this 
section is insufficient to protect

[[Page 892]]

the safety and soundness of the banking entity, or the financial 
stability of the United States.
    (d) Permitted covered fund activities and investments of qualifying 
foreign excluded funds. (1) The prohibition contained in Sec.  44.10(a) 
does not apply to a qualifying foreign excluded fund.
    (2) For purposes of this paragraph (d), a qualifying foreign 
excluded fund means a banking entity that:
    (i) Is organized or established outside the United States, and the 
ownership interests of which are offered and sold solely outside the 
United States;
    (ii)(A) Would be a covered fund if the entity were organized or 
established in the United States, or
    (B) Is, or holds itself out as being, an entity or arrangement that 
raises money from investors primarily for the purpose of investing in 
financial instruments for resale or other disposition or otherwise 
trading in financial instruments;
    (iii) Would not otherwise be a banking entity except by virtue of 
the acquisition or retention of an ownership interest in, sponsorship 
of, or relationship with the entity, by another banking entity that 
meets the following:
    (A) The banking entity is not organized, or directly or indirectly 
controlled by a banking entity that is organized, under the laws of the 
United States or of any State; and
    (B) The banking entity's acquisition of an ownership interest in or 
sponsorship of the fund by the foreign banking entity meets the 
requirements for permitted covered fund activities and investments 
solely outside the United States, as provided in Sec.  44.13(b);
    (iv) Is established and operated as part of a bona fide asset 
management business; and
    (v) Is not operated in a manner that enables the banking entity that 
sponsors or controls the qualifying foreign excluded fund, or any of its 
affiliates, to evade the requirements of section 13 of the BHC Act or 
this part.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62100, Nov. 14, 
2019; 85 FR 46502, July 31, 2020]



Sec.  44.14  Limitations on relationships with a covered fund.

    (a) Relationships with a covered fund. (1) Except as provided for in 
paragraph (a)(2) of this section, no banking entity that serves, 
directly or indirectly, as the investment manager, investment adviser, 
commodity trading advisor, or sponsor to a covered fund, that organizes 
and offers a covered fund pursuant to Sec.  44.11 of this subpart, or 
that continues to hold an ownership interest in accordance with Sec.  
44.11(b) of this subpart, and no affiliate of such entity, may enter 
into a transaction with the covered fund, or with any other covered fund 
that is controlled by such covered fund, that would be a covered 
transaction as defined in section 23A of the Federal Reserve Act (12 
U.S.C. 371c(b)(7)), as if such banking entity and the affiliate thereof 
were a member bank and the covered fund were an affiliate thereof.
    (2) Notwithstanding paragraph (a)(1) of this section, a banking 
entity may:
    (i) Acquire and retain any ownership interest in a covered fund in 
accordance with the requirements of Sec.  44.11, Sec.  44.12, or Sec.  
44.13;
    (ii) Enter into any prime brokerage transaction with any covered 
fund in which a covered fund managed, sponsored, or advised by such 
banking entity (or an affiliate thereof) has taken an ownership 
interest, if:
    (A) The banking entity is in compliance with each of the limitations 
set forth in Sec.  44.11 of this subpart with respect to a covered fund 
organized and offered by such banking entity (or an affiliate thereof);
    (B) The chief executive officer (or equivalent officer) of the 
banking entity certifies in writing annually no later than March 31 to 
the OCC (with a duty to update the certification if the information in 
the certification materially changes) that the banking entity does not, 
directly or indirectly, guarantee, assume, or otherwise insure the 
obligations or performance of the covered fund or of any covered fund in 
which such covered fund invests; and
    (C) The Board has not determined that such transaction is 
inconsistent with the safe and sound operation and condition of the 
banking entity; and

[[Page 893]]

    (iii) Enter into a transaction with a covered fund that would be an 
exempt covered transaction under 12 U.S.C. 371c(d) or Sec.  223.42 of 
the Board's Regulation W (12 CFR 223.42) subject to the limitations 
specified under 12 U.S.C. 371c(d) or Sec.  223.42 of the Board's 
Regulation W (12 CFR 223.42), as applicable,
    (iv) Enter into a riskless principal transaction with a covered 
fund; and
    (v) Extend credit to or purchase assets from a covered fund, 
provided:
    (A) Each extension of credit or purchase of assets is in the 
ordinary course of business in connection with payment transactions; 
settlement services; or futures, derivatives, and securities clearing;
    (B) Each extension of credit is repaid, sold, or terminated by the 
end of five business days; and
    (C) The banking entity making each extension of credit meets the 
requirements of Sec.  223.42(l)(1)(i) and (ii) of the Board's Regulation 
W (12 CFR 223.42(l)(1)(i) and(ii)), as if the extension of credit was an 
intraday extension of credit, regardless of the duration of the 
extension of credit.
    (3) Any transaction or activity permitted under paragraphs 
(a)(2)(iii), (iv) or (v) of this section must comply with the 
limitations in Sec.  44.15.
    (b) Restrictions on transactions with covered funds. A banking 
entity that serves, directly or indirectly, as the investment manager, 
investment adviser, commodity trading advisor, or sponsor to a covered 
fund, or that organizes and offers a covered fund pursuant to Sec.  
44.11 of this subpart, or that continues to hold an ownership interest 
in accordance with Sec.  44.11(b) of this subpart, shall be subject to 
section 23B of the Federal Reserve Act (12 U.S.C. 371c-1), as if such 
banking entity were a member bank and such covered fund were an 
affiliate thereof.
    (c) Restrictions on other permitted transactions. Any transaction 
permitted under paragraphs (a)(2)(ii), (iii), or (iv) of this section 
shall be subject to section 23B of the Federal Reserve Act (12 U.S.C. 
371c-1) as if the counterparty were an affiliate of the banking entity 
under section 23B.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62101, Nov. 14, 
2019; 85 FR 46502, July 31, 2020]



Sec.  44.15  Other limitations on permitted covered fund activities 
and investments.

    (a) No transaction, class of transactions, or activity may be deemed 
permissible under Sec. Sec.  44.11 through 44.13 of this subpart if the 
transaction, class of transactions, or activity would:
    (1) Involve or result in a material conflict of interest between the 
banking entity and its clients, customers, or counterparties;
    (2) Result, directly or indirectly, in a material exposure by the 
banking entity to a high-risk asset or a high-risk trading strategy; or
    (3) Pose a threat to the safety and soundness of the banking entity 
or to the financial stability of the United States.
    (b) Definition of material conflict of interest. (1) For purposes of 
this section, a material conflict of interest between a banking entity 
and its clients, customers, or counterparties exists if the banking 
entity engages in any transaction, class of transactions, or activity 
that would involve or result in the banking entity's interests being 
materially adverse to the interests of its client, customer, or 
counterparty with respect to such transaction, class of transactions, or 
activity, and the banking entity has not taken at least one of the 
actions in paragraph (b)(2) of this section.
    (2) Prior to effecting the specific transaction or class or type of 
transactions, or engaging in the specific activity, the banking entity:
    (i) Timely and effective disclosure. (A) Has made clear, timely, and 
effective disclosure of the conflict of interest, together with other 
necessary information, in reasonable detail and in a manner sufficient 
to permit a reasonable client, customer, or counterparty to meaningfully 
understand the conflict of interest; and
    (B) Such disclosure is made in a manner that provides the client, 
customer, or counterparty the opportunity to negate, or substantially 
mitigate, any materially adverse effect on the client, customer, or 
counterparty created by the conflict of interest; or
    (ii) Information barriers. Has established, maintained, and enforced 
information barriers that are memorialized

[[Page 894]]

in written policies and procedures, such as physical separation of 
personnel, or functions, or limitations on types of activity, that are 
reasonably designed, taking into consideration the nature of the banking 
entity's business, to prevent the conflict of interest from involving or 
resulting in a materially adverse effect on a client, customer, or 
counterparty. A banking entity may not rely on such information barriers 
if, in the case of any specific transaction, class or type of 
transactions or activity, the banking entity knows or should reasonably 
know that, notwithstanding the banking entity's establishment of 
information barriers, the conflict of interest may involve or result in 
a materially adverse effect on a client, customer, or counterparty.
    (c) Definition of high-risk asset and high-risk trading strategy. 
For purposes of this section:
    (1) High-risk asset means an asset or group of related assets that 
would, if held by a banking entity, significantly increase the 
likelihood that the banking entity would incur a substantial financial 
loss or would pose a threat to the financial stability of the United 
States.
    (2) High-risk trading strategy means a trading strategy that would, 
if engaged in by a banking entity, significantly increase the likelihood 
that the banking entity would incur a substantial financial loss or 
would pose a threat to the financial stability of the United States.



Sec.  44.16  Ownership of interests in and sponsorship of issuers 
of certain collateralized debt obligations backed by 
trust-preferred securities.

    (a) The prohibition contained in Sec.  44.10(a)(1) does not apply to 
the ownership by a banking entity of an interest in, or sponsorship of, 
any issuer if:
    (1) The issuer was established, and the interest was issued, before 
May 19, 2010;
    (2) The banking entity reasonably believes that the offering 
proceeds received by the issuer were invested primarily in Qualifying 
TruPS Collateral; and
    (3) The banking entity acquired such interest on or before December 
10, 2013 (or acquired such interest in connection with a merger with or 
acquisition of a banking entity that acquired the interest on or before 
December 10, 2013).
    (b) For purposes of this Sec.  44.16, Qualifying TruPS Collateral 
shall mean any trust preferred security or subordinated debt instrument 
issued prior to May 19, 2010 by a depository institution holding company 
that, as of the end of any reporting period within 12 months immediately 
preceding the issuance of such trust preferred security or subordinated 
debt instrument, had total consolidated assets of less than 
$15,000,000,000 or issued prior to May 19, 2010 by a mutual holding 
company.
    (c) Notwithstanding paragraph (a)(3) of this section, a banking 
entity may act as a market maker with respect to the interests of an 
issuer described in paragraph (a) of this section in accordance with the 
applicable provisions of Sec. Sec.  44.4 and 44.11.
    (d) Without limiting the applicability of paragraph (a) of this 
section, the Board, the FDIC and the OCC will make public a non-
exclusive list of issuers that meet the requirements of paragraph (a). A 
banking entity may rely on the list published by the Board, the FDIC and 
the OCC.

[79 FR 5227, Jan. 31, 2014]



Sec. Sec.  44.17-44.19  [Reserved]



          Subpart D_Compliance Program Requirement; Violations



Sec.  44.20  Program for compliance; reporting.

    (a) Program requirement. Each banking entity (other than a banking 
entity with limited trading assets and liabilities or a qualifying 
foreign excluded fund under section 44.6(f) or 44.13(d)) shall develop 
and provide for the continued administration of a compliance program 
reasonably designed to ensure and monitor compliance with the 
prohibitions and restrictions on proprietary trading and covered fund 
activities and investments set forth in section 13 of the BHC Act and 
this part. The terms, scope, and detail of the compliance program shall 
be appropriate for the types, size, scope, and complexity of activities 
and business structure of the banking entity.

[[Page 895]]

    (b) Banking entities with significant trading assets and 
liabilities. With respect to a banking entity with significant trading 
assets and liabilities, the compliance program required by paragraph (a) 
of this section, at a minimum, shall include:
    (1) Written policies and procedures reasonably designed to document, 
describe, monitor and limit trading activities subject to subpart B 
(including those permitted under Sec. Sec.  44.3 to 44.6 of subpart B), 
including setting, monitoring and managing required limits set out in 
Sec. Sec.  44.4 and 44.5, and activities and investments with respect to 
a covered fund subject to subpart C (including those permitted under 
Sec. Sec.  44.11 through 44.14 of subpart C) conducted by the banking 
entity to ensure that all activities and investments conducted by the 
banking entity that are subject to section 13 of the BHC Act and this 
part comply with section 13 of the BHC Act and this part;
    (2) A system of internal controls reasonably designed to monitor 
compliance with section 13 of the BHC Act and this part and to prevent 
the occurrence of activities or investments that are prohibited by 
section 13 of the BHC Act and this part;
    (3) A management framework that clearly delineates responsibility 
and accountability for compliance with section 13 of the BHC Act and 
this part and includes appropriate management review of trading limits, 
strategies, hedging activities, investments, incentive compensation and 
other matters identified in this part or by management as requiring 
attention;
    (4) Independent testing and audit of the effectiveness of the 
compliance program conducted periodically by qualified personnel of the 
banking entity or by a qualified outside party;
    (5) Training for trading personnel and managers, as well as other 
appropriate personnel, to effectively implement and enforce the 
compliance program; and
    (6) Records sufficient to demonstrate compliance with section 13 of 
the BHC Act and this part, which a banking entity must promptly provide 
to the OCC upon request and retain for a period of no less than 5 years 
or such longer period as required by the OCC.
    (c) CEO attestation. The CEO of a banking entity that has 
significant trading assets and liabilities must, based on a review by 
the CEO of the banking entity, attest in writing to the OCC, each year 
no later than March 31, that the banking entity has in place processes 
to establish, maintain, enforce, review, test and modify the compliance 
program required by paragraph (b) of this section in a manner reasonably 
designed to achieve compliance with section 13 of the BHC Act and this 
part. In the case of a U.S. branch or agency of a foreign banking 
entity, the attestation may be provided for the entire U.S. operations 
of the foreign banking entity by the senior management officer of the 
U.S. operations of the foreign banking entity who is located in the 
United States.
    (d) Reporting requirements under appendix A to this part. (1) A 
banking entity (other than a qualifying foreign excluded fund under 
section 44.6(f) or 44.13(d)) engaged in proprietary trading activity 
permitted under subpart B shall comply with the reporting requirements 
described in appendix A to this part, if:
    (i) The banking entity has significant trading assets and 
liabilities; or
    (ii) The OCC notifies the banking entity in writing that it must 
satisfy the reporting requirements contained in appendix A to this part.
    (2) Frequency of reporting: Unless the OCC notifies the banking 
entity in writing that it must report on a different basis, a banking 
entity subject to the appendix shall report the information required by 
appendix A to this part for each quarter within 30 days of the end of 
the quarter.
    (e) Additional documentation for covered funds. A banking entity 
with significant trading assets and liabilities (other than a qualifying 
foreign excluded fund under section 44.6(f) or 44.13(d)) shall maintain 
records that include:
    (1) Documentation of the exclusions or exemptions other than 
sections 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 
relied on by each fund sponsored by the banking entity (including all 
subsidiaries and affiliates) in determining that such fund is not a 
covered fund;

[[Page 896]]

    (2) For each fund sponsored by the banking entity (including all 
subsidiaries and affiliates) for which the banking entity relies on one 
or more of the exclusions from the definition of covered fund provided 
by Sec.  44.10(c)(1), Sec.  44.10(c)(5), Sec.  44.10(c)(8), Sec.  
44.10(c)(9), or Sec.  44.10(c)(10) of subpart C, documentation 
supporting the banking entity's determination that the fund is not a 
covered fund pursuant to one or more of those exclusions;
    (3) For each seeding vehicle described in Sec.  44.10(c)(12)(i) or 
(iii) of subpart C that will become a registered investment company or 
SEC-regulated business development company, a written plan documenting 
the banking entity's determination that the seeding vehicle will become 
a registered investment company or SEC-regulated business development 
company; the period of time during which the vehicle will operate as a 
seeding vehicle; and the banking entity's plan to market the vehicle to 
third-party investors and convert it into a registered investment 
company or SEC-regulated business development company within the time 
period specified in Sec.  44.12(a)(2)(i)(B) of subpart C;
    (4) For any banking entity that is, or is controlled directly or 
indirectly by a banking entity that is, located in or organized under 
the laws of the United States or of any State, if the aggregate amount 
of ownership interests in foreign public funds that are described in 
Sec.  44.10(c)(1) of subpart C owned by such banking entity (including 
ownership interests owned by any affiliate that is controlled directly 
or indirectly by a banking entity that is located in or organized under 
the laws of the United States or of any State) exceeds $50 million at 
the end of two or more consecutive calendar quarters, beginning with the 
next succeeding calendar quarter, documentation of the value of the 
ownership interests owned by the banking entity (and such affiliates) in 
each foreign public fund and each jurisdiction in which any such foreign 
public fund is organized, calculated as of the end of each calendar 
quarter, which documentation must continue until the banking entity's 
aggregate amount of ownership interests in foreign public funds is below 
$50 million for two consecutive calendar quarters; and
    (5) For purposes of paragraph (e)(4) of this section, a U.S. branch, 
agency, or subsidiary of a foreign banking entity is located in the 
United States; however, the foreign bank that operates or controls that 
branch, agency, or subsidiary is not considered to be located in the 
United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary.
    (f) Simplified programs for less active banking entities--(1) 
Banking entities with no covered activities. A banking entity that does 
not engage in activities or investments pursuant to subpart B or subpart 
C (other than trading activities permitted pursuant to Sec.  44.6(a) of 
subpart B) may satisfy the requirements of this section by establishing 
the required compliance program prior to becoming engaged in such 
activities or making such investments (other than trading activities 
permitted pursuant to Sec.  44.6(a) of subpart B).
    (2) Banking entities with moderate trading assets and liabilities. A 
banking entity with moderate trading assets and liabilities may satisfy 
the requirements of this section by including in its existing compliance 
policies and procedures appropriate references to the requirements of 
section 13 of the BHC Act and this part and adjustments as appropriate 
given the activities, size, scope, and complexity of the banking entity.
    (g) Rebuttable presumption of compliance for banking entities with 
limited trading assets and liabilities--(1) Rebuttable presumption. 
Except as otherwise provided in this paragraph, a banking entity with 
limited trading assets and liabilities shall be presumed to be compliant 
with subpart B and subpart C of this part and shall have no obligation 
to demonstrate compliance with this part on an ongoing basis.
    (2) Rebuttal of presumption. If upon examination or audit, the OCC 
determines that the banking entity has engaged in proprietary trading or 
covered fund activities that are otherwise prohibited under subpart B or 
subpart C of this part, the OCC may require the banking entity to be 
treated under this part as if it did not have limited trading assets and 
liabilities. The OCC's rebuttal of the presumption in this paragraph 
must be made in accordance with

[[Page 897]]

the notice and response procedures in paragraph (i) of this section.
    (h) Reservation of authority. Notwithstanding any other provision of 
this part, the OCC retains its authority to require a banking entity 
without significant trading assets and liabilities to apply any 
requirements of this part that would otherwise apply if the banking 
entity had significant or moderate trading assets and liabilities if the 
OCC determines that the size or complexity of the banking entity's 
trading or investment activities, or the risk of evasion of subpart B or 
subpart C of this part, does not warrant a presumption of compliance 
under paragraph (g) of this section or treatment as a banking entity 
with moderate trading assets and liabilities, as applicable. The OCC's 
exercise of this reservation of authority must be made in accordance 
with the notice and response procedures in paragraph (i) of this 
section.
    (i) Notice and response procedures--(1) Notice. The OCC will notify 
the banking entity in writing of any determination requiring notice 
under this part and will provide an explanation of the determination.
    (2) Response. The banking entity may respond to any or all items in 
the notice described in paragraph (i)(1) of this section. The response 
should include any matters that the banking entity would have the OCC 
consider in deciding whether to make the determination. The response 
must be in writing and delivered to the designated OCC official within 
30 days after the date on which the banking entity received the notice. 
The OCC may shorten the time period when, in the opinion of the OCC, the 
activities or condition of the banking entity so requires, provided that 
the banking entity is informed of the time period at the time of notice, 
or with the consent of the banking entity. In its discretion, the OCC 
may extend the time period for good cause.
    (3) Waiver. Failure to respond within 30 days or such other time 
period as may be specified by the OCC shall constitute a waiver of any 
objections to the OCC's determination.
    (4) Decision. The OCC will notify the banking entity of the decision 
in writing. The notice will include an explanation of the decision.

[79 FR 5779, 5804, Jan. 31, 2014, as amended at 84 FR 62101, Nov. 14, 
2019; 85 FR 46502, July 31, 2020]



Sec.  44.21  Termination of activities or investments; 
penalties for violations.

    (a) Any banking entity that engages in an activity or makes an 
investment in violation of section 13 of the BHC Act or this part, or 
acts in a manner that functions as an evasion of the requirements of 
section 13 of the BHC Act or this part, including through an abuse of 
any activity or investment permitted under subparts B or C, or otherwise 
violates the restrictions and requirements of section 13 of the BHC Act 
or this part, shall, upon discovery, promptly terminate the activity 
and, as relevant, dispose of the investment.
    (b) Whenever the OCC finds reasonable cause to believe any banking 
entity has engaged in an activity or made an investment in violation of 
section 13 of the BHC Act or this part, or engaged in any activity or 
made any investment that functions as an evasion of the requirements of 
section 13 of the BHC Act or this part, the OCC may take any action 
permitted by law to enforce compliance with section 13 of the BHC Act 
and this part, including directing the banking entity to restrict, 
limit, or terminate any or all activities under this part and dispose of 
any investment.





Sec. Appendix A to Part 44--Reporting and Recordkeeping Requirements for 
                       Covered Trading Activities

                               I. Purpose

    a. This appendix sets forth reporting and recordkeeping requirements 
that certain banking entities must satisfy in connection with the 
restrictions on proprietary trading set forth in subpart B 
(``proprietary trading restrictions''). Pursuant to Sec.  44.20(d), this 
appendix applies to a banking entity that, together with its affiliates 
and subsidiaries, has significant trading assets and liabilities. These 
entities are required to (i) furnish periodic reports to the OCC 
regarding a variety of quantitative measurements of their covered 
trading activities, which vary depending on the scope and size of 
covered

[[Page 898]]

trading activities, and (ii) create and maintain records documenting the 
preparation and content of these reports. The requirements of this 
appendix must be incorporated into the banking entity's internal 
compliance program under Sec.  44.20.
    b. The purpose of this appendix is to assist banking entities and 
the OCC in:
    (1) Better understanding and evaluating the scope, type, and profile 
of the banking entity's covered trading activities;
    (2) Monitoring the banking entity's covered trading activities;
    (3) Identifying covered trading activities that warrant further 
review or examination by the banking entity to verify compliance with 
the proprietary trading restrictions;
    (4) Evaluating whether the covered trading activities of trading 
desks engaged in market making-related activities subject to Sec.  
44.4(b) are consistent with the requirements governing permitted market 
making-related activities;
    (5) Evaluating whether the covered trading activities of trading 
desks that are engaged in permitted trading activity subject to Sec.  
44.4, Sec.  44.5, or Sec.  44.6(a) and (b) (i.e., underwriting and 
market making-related activity, risk-mitigating hedging, or trading in 
certain government obligations) are consistent with the requirement that 
such activity not result, directly or indirectly, in a material exposure 
to high-risk assets or high-risk trading strategies;
    (6) Identifying the profile of particular covered trading activities 
of the banking entity, and the individual trading desks of the banking 
entity, to help establish the appropriate frequency and scope of 
examination by the OCC of such activities; and
    (7) Assessing and addressing the risks associated with the banking 
entity's covered trading activities.
    c. Information that must be furnished pursuant to this appendix is 
not intended to serve as a dispositive tool for the identification of 
permissible or impermissible activities.
    d. In addition to the quantitative measurements required in this 
appendix, a banking entity may need to develop and implement other 
quantitative measurements in order to effectively monitor its covered 
trading activities for compliance with section 13 of the BHC Act and 
this part and to have an effective compliance program, as required by 
Sec.  44.20. The effectiveness of particular quantitative measurements 
may differ based on the profile of the banking entity's businesses in 
general and, more specifically, of the particular trading desk, 
including types of instruments traded, trading activities and 
strategies, and history and experience (e.g., whether the trading desk 
is an established, successful market maker or a new entrant to a 
competitive market). In all cases, banking entities must ensure that 
they have robust measures in place to identify and monitor the risks 
taken in their trading activities, to ensure that the activities are 
within risk tolerances established by the banking entity, and to monitor 
and examine for compliance with the proprietary trading restrictions in 
this part.
    e. On an ongoing basis, banking entities must carefully monitor, 
review, and evaluate all furnished quantitative measurements, as well as 
any others that they choose to utilize in order to maintain compliance 
with section 13 of the BHC Act and this part. All measurement results 
that indicate a heightened risk of impermissible proprietary trading, 
including with respect to otherwise-permitted activities under 
Sec. Sec.  44.4 through 44.6(a) and (b), or that result in a material 
exposure to high-risk assets or high-risk trading strategies, must be 
escalated within the banking entity for review, further analysis, 
explanation to the OCC, and remediation, where appropriate. The 
quantitative measurements discussed in this appendix should be helpful 
to banking entities in identifying and managing the risks related to 
their covered trading activities.

                             II. Definitions

    The terms used in this appendix have the same meanings as set forth 
in Sec. Sec.  44.2 and 44.3. In addition, for purposes of this appendix, 
the following definitions apply:
    Applicability identifies the trading desks for which a banking 
entity is required to calculate and report a particular quantitative 
measurement based on the type of covered trading activity conducted by 
the trading desk.
    Calculation period means the period of time for which a particular 
quantitative measurement must be calculated.
    Comprehensive profit and loss means the net profit or loss of a 
trading desk's material sources of trading revenue over a specific 
period of time, including, for example, any increase or decrease in the 
market value of a trading desk's holdings, dividend income, and interest 
income and expense.
    Covered trading activity means trading conducted by a trading desk 
under Sec.  44.4, Sec.  44.5, Sec.  44.6(a), or Sec.  44.6(b). A banking 
entity may include in its covered trading activity trading conducted 
under Sec.  44.3(d), Sec.  44.6(c), Sec.  44.6(d), or Sec.  44.6(e).
    Measurement frequency means the frequency with which a particular 
quantitative metric must be calculated and recorded.
    Trading day means a calendar day on which a trading desk is open for 
trading.

                    III. Reporting and Recordkeeping

                     a. Scope of Required Reporting

    1. Quantitative measurements. Each banking entity made subject to 
this appendix by

[[Page 899]]

Sec.  44.20 must furnish the following quantitative measurements, as 
applicable, for each trading desk of the banking entity engaged in 
covered trading activities and calculate these quantitative measurements 
in accordance with this appendix:
    i. Internal Limits and Usage;
    ii. Value-at-Risk;
    iii. Comprehensive Profit and Loss Attribution;
    iv. Positions; and
    v. Transaction Volumes.
    2. Trading desk information. Each banking entity made subject to 
this appendix by Sec.  44.20 must provide certain descriptive 
information, as further described in this appendix, regarding each 
trading desk engaged in covered trading activities.
    3. Quantitative measurements identifying information. Each banking 
entity made subject to this appendix by Sec.  44.20 must provide certain 
identifying and descriptive information, as further described in this 
appendix, regarding its quantitative measurements.
    4. Narrative statement. Each banking entity made subject to this 
appendix by Sec.  44.20 may provide an optional narrative statement, as 
further described in this appendix.
    5. File identifying information. Each banking entity made subject to 
this appendix by Sec.  44.20 must provide file identifying information 
in each submission to the OCC pursuant to this appendix, including the 
name of the banking entity, the RSSD ID assigned to the top-tier banking 
entity by the Board, and identification of the reporting period and 
creation date and time.

                       b. Trading Desk Information

    1. Each banking entity must provide descriptive information 
regarding each trading desk engaged in covered trading activities, 
including:
    i. Name of the trading desk used internally by the banking entity 
and a unique identification label for the trading desk;
    ii. Identification of each type of covered trading activity in which 
the trading desk is engaged;
    iii. Brief description of the general strategy of the trading desk;
    v. A list identifying each Agency receiving the submission of the 
trading desk;
    2. Indication of whether each calendar date is a trading day or not 
a trading day for the trading desk; and
    3. Currency reported and daily currency conversion rate.

          c. Quantitative Measurements Identifying Information

    Each banking entity must provide the following information regarding 
the quantitative measurements:
    1. An Internal Limits Information Schedule that provides identifying 
and descriptive information for each limit reported pursuant to the 
Internal Limits and Usage quantitative measurement, including the name 
of the limit, a unique identification label for the limit, a description 
of the limit, the unit of measurement for the limit, the type of limit, 
and identification of the corresponding risk factor attribution in the 
particular case that the limit type is a limit on a risk factor 
sensitivity and profit and loss attribution to the same risk factor is 
reported; and
    2. A Risk Factor Attribution Information Schedule that provides 
identifying and descriptive information for each risk factor attribution 
reported pursuant to the Comprehensive Profit and Loss Attribution 
quantitative measurement, including the name of the risk factor or other 
factor, a unique identification label for the risk factor or other 
factor, a description of the risk factor or other factor, and the risk 
factor or other factor's change unit.

                         d. Narrative Statement

    Each banking entity made subject to this appendix by Sec.  44.20 may 
submit in a separate electronic document a Narrative Statement to the 
OCC with any information the banking entity views as relevant for 
assessing the information reported. The Narrative Statement may include 
further description of or changes to calculation methods, identification 
of material events, description of and reasons for changes in the 
banking entity's trading desk structure or trading desk strategies, and 
when any such changes occurred.

      e. Frequency and Method of Required Calculation and Reporting

    A banking entity must calculate any applicable quantitative 
measurement for each trading day. A banking entity must report the 
Trading Desk Information, the Quantitative Measurements Identifying 
Information, and each applicable quantitative measurement electronically 
to the OCC on the reporting schedule established in Sec.  44.20 unless 
otherwise requested by the OCC. A banking entity must report the Trading 
Desk Information, the Quantitative Measurements Identifying Information, 
and each applicable quantitative measurement to the OCC in accordance 
with the XML Schema specified and published on the OCC's website.

                            f. Recordkeeping

    A banking entity must, for any quantitative measurement furnished to 
the OCC pursuant to this appendix and Sec.  44.20(d), create and 
maintain records documenting the preparation and content of these 
reports, as well as such information as is necessary to permit the OCC 
to verify the accuracy of such reports, for a period of five years from 
the end of the calendar year for which the

[[Page 900]]

measurement was taken. A banking entity must retain the Narrative 
Statement, the Trading Desk Information, and the Quantitative 
Measurements Identifying Information for a period of five years from the 
end of the calendar year for which the information was reported to the 
OCC.

                      IV. Quantitative Measurements

                     a. Risk-Management Measurements

                      1. Internal Limits and Usage

    i. Description: For purposes of this appendix, Internal Limits are 
the constraints that define the amount of risk and the positions that a 
trading desk is permitted to take at a point in time, as defined by the 
banking entity for a specific trading desk. Usage represents the value 
of the trading desk's risk or positions that are accounted for by the 
current activity of the desk. Internal limits and their usage are key 
compliance and risk management tools used to control and monitor risk 
taking and include, but are not limited to, the limits set out in 
Sec. Sec.  44.4 and 44.5. A trading desk's risk limits, commonly 
including a limit on ``Value-at-Risk,'' are useful in the broader 
context of the trading desk's overall activities, particularly for the 
market making activities under Sec.  44.4(b) and hedging activity under 
Sec.  44.5. Accordingly, the limits required under Sec. Sec.  
44.4(b)(2)(iii)(C) and 44.5(b)(1)(i)(A) must meet the applicable 
requirements under Sec. Sec.  44.4(b)(2)(iii)(C) and 44.5(b)(1)(i)(A) 
and also must include appropriate metrics for the trading desk limits 
including, at a minimum, ``Value-at-Risk'' except to the extent the 
``Value-at-Risk'' metric is demonstrably ineffective for measuring and 
monitoring the risks of a trading desk based on the types of positions 
traded by, and risk exposures of, that desk.
    A. A banking entity must provide the following information for each 
limit reported pursuant to this quantitative measurement: The unique 
identification label for the limit reported in the Internal Limits 
Information Schedule, the limit size (distinguishing between an upper 
and a lower limit), and the value of usage of the limit.
    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks engaged in covered trading 
activities.

                            2. Value-at-Risk

    i. Description: For purposes of this appendix, Value-at-Risk 
(``VaR'') is the measurement of the risk of future financial loss in the 
value of a trading desk's aggregated positions at the ninety-nine 
percent confidence level over a one-day period, based on current market 
conditions.
    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks engaged in covered trading 
activities.

                    b. Source-of-Revenue Measurements

              1. Comprehensive Profit and Loss Attribution

    i. Description: For purposes of this appendix, Comprehensive Profit 
and Loss Attribution is an analysis that attributes the daily 
fluctuation in the value of a trading desk's positions to various 
sources. First, the daily profit and loss of the aggregated positions is 
divided into two categories: (i) Profit and loss attributable to a 
trading desk's existing positions that were also positions held by the 
trading desk as of the end of the prior day (``existing positions''); 
and (ii) profit and loss attributable to new positions resulting from 
the current day's trading activity (``new positions'').
    A. The comprehensive profit and loss associated with existing 
positions must reflect changes in the value of these positions on the 
applicable day. The comprehensive profit and loss from existing 
positions must be further attributed, as applicable, to (i) changes in 
the specific risk factors and other factors that are monitored and 
managed as part of the trading desk's overall risk management policies 
and procedures; and (ii) any other applicable elements, such as cash 
flows, carry, changes in reserves, and the correction, cancellation, or 
exercise of a trade.
    B. For the attribution of comprehensive profit and loss from 
existing positions to specific risk factors and other factors, a banking 
entity must provide the following information for the factors that 
explain the preponderance of the profit or loss changes due to risk 
factor changes: The unique identification label for the risk factor or 
other factor listed in the Risk Factor Attribution Information Schedule, 
and the profit or loss due to the risk factor or other factor change.
    C. The comprehensive profit and loss attributed to new positions 
must reflect commissions and fee income or expense and market gains or 
losses associated with transactions executed on the applicable day. New 
positions include purchases and sales of financial instruments and other 
assets/liabilities and negotiated amendments to existing positions. The 
comprehensive profit and loss from new positions may be reported in the 
aggregate and does not need to be further attributed to specific 
sources.
    D. The portion of comprehensive profit and loss from existing 
positions that is not attributed to changes in specific risk factors and 
other factors must be allocated to a residual category. Significant 
unexplained profit and loss must be escalated for further investigation 
and analysis.
    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.

[[Page 901]]

    iv. Applicability: All trading desks engaged in covered trading 
activities.

            c. Positions and Transaction Volumes Measurements

                              1. Positions

    i. Description: For purposes of this appendix, Positions is the 
value of securities and derivatives positions managed by the trading 
desk. For purposes of the Positions quantitative measurement, do not 
include in the Positions calculation for ``securities'' those securities 
that are also ``derivatives,'' as those terms are defined under subpart 
A; instead, report those securities that are also derivatives as 
``derivatives.'' \1223\ A banking entity must separately report the 
trading desk's market value of long securities positions, short 
securities positions, derivatives receivables, and derivatives payables.
---------------------------------------------------------------------------

    \1223\ See Sec.  44.2(h), (aa). For example, under this part, a 
security-based swap is both a ``security'' and a ``derivative.'' For 
purposes of the Positions quantitative measurement, security-based swaps 
are reported as derivatives rather than securities.
---------------------------------------------------------------------------

    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks that rely on Sec.  44.4(a) or 
(b) to conduct underwriting activity or market-making-related activity, 
respectively.

                         2. Transaction Volumes

    i. Description: For purposes of this appendix, Transaction Volumes 
measures three exclusive categories of covered trading activity 
conducted by a trading desk. A banking entity is required to report the 
value and number of security and derivative transactions conducted by 
the trading desk with: (i) Customers, excluding internal transactions; 
(ii) non-customers, excluding internal transactions; and (iii) trading 
desks and other organizational units where the transaction is booked 
into either the same banking entity or an affiliated banking entity. For 
securities, value means gross market value. For derivatives, value means 
gross notional value. For purposes of calculating the Transaction 
Volumes quantitative measurement, do not include in the Transaction 
Volumes calculation for ``securities'' those securities that are also 
``derivatives,'' as those terms are defined under subpart A; instead, 
report those securities that are also derivatives as ``derivatives.'' 
\1224\ Further, for purposes of the Transaction Volumes quantitative 
measurement, a customer of a trading desk that relies on Sec.  44.4(a) 
to conduct underwriting activity is a market participant identified in 
Sec.  44.4(a)(7), and a customer of a trading desk that relies on Sec.  
44.4(b) to conduct market making-related activity is a market 
participant identified in Sec.  44.4(b)(3).
---------------------------------------------------------------------------

    \1224\ See Sec.  44.2(h), (aa).
---------------------------------------------------------------------------

    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks that rely on Sec.  44.4(a) or 
(b) to conduct underwriting activity or market-making-related activity, 
respectively.

[84 FR 62102, Nov. 14, 2019]



PART 45_MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES--
Table of Contents



Sec.
45.1 Authority, purpose, scope, exemptions and compliance dates.
45.2 Definitions.
45.3 Initial margin.
45.4 Variation margin.
45.5 Netting arrangements, minimum transfer amount, and satisfaction of 
          collecting and posting requirements.
45.6 Eligible collateral.
45.7 Segregation of collateral.
45.8 Initial margin models and standardized amounts.
45.9 Cross-border application of margin requirements.
45.10 Documentation of margin matters.
45.11 Special rules for affiliates.
45.12 Capital.

Appendix A to Part 45--Standardized Minimum Initial Margin Requirements 
          for Non-Cleared Swaps and Non-Cleared Security-Based Swaps
Appendix B to Part 45--Margin Values for Eligible Noncash Margin 
          Collateral

    Authority: 7 U.S.C. 6s(e), 12 U.S.C. 1 et seq., 12 U.S.C. 93a, 161, 
481, 1818, 3907, 3909, 5412(b)(2)(B), and 15 U.S.C. 78o-10(e).

    Source: 80 FR 74898, 74910, Nov. 30, 2015, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 45 appear at 80 FR 
74898, 74910, Nov. 30, 2015.



Sec.  45.1  Authority, purpose, scope, exemptions and compliance dates.

    (a) Authority. This part is issued under the authority of 7 U.S.C. 
6s(e), 12 U.S.C. 1 et seq., 93a, 161, 481, 1818, 3907, 3909, 
5412(b)(2)(B), and 15 U.S.C. 78o-10(e).
    (b) Purpose. Section 4s of the Commodity Exchange Act of 1936 (7 
U.S.C. 6s) and section 15F of the Securities Exchange Act of 1934 (15 
U.S.C. 78o-10) require the OCC to establish capital and margin 
requirements for any for

[[Page 902]]

any national bank or subsidiary thereof, Federal savings association or 
subsidiary thereof, or Federal branch or agency of a foreign bank that 
is registered as a swap dealer, major swap participant, security-based 
swap dealer, or major security-based swap participant with respect to 
all non-cleared swaps and non-cleared security-based swaps. This 
regulation implements section 4s of the Commodity Exchange Act of 1936 
and section 15F of the Securities Exchange Act of 1934 by defining terms 
used in the statute and related terms, establishing capital and margin 
requirements, and explaining the statutes' requirements.
    (c) Scope. This part establishes minimum capital and margin 
requirements for each covered swap entity subject to this part with 
respect to all non-cleared swaps and non-cleared security-based swaps. 
This part applies to any non-cleared swap or non-cleared security-based 
swap entered into by a covered swap entity on or after the relevant 
compliance date set forth in paragraph (e) of this section. Nothing in 
this part is intended to prevent a covered swap entity from collecting 
margin in amounts greater than are required under this part.
    (d) Exemptions--(1) Swaps. The requirements of this part (except for 
Sec.  45.12) shall not apply to a non-cleared swap if the counterparty:
    (i) Qualifies for an exception from clearing under section 
2(h)(7)(A) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(7)(A)) 
and implementing regulations;
    (ii) Qualifies for an exemption from clearing under a rule, 
regulation, or order that the Commodity Futures Trading Commission 
issued pursuant to its authority under section 4(c)(1) of the Commodity 
Exchange Act of 1936 (7 U.S.C. 6(c)(1)) concerning cooperative entities 
that would otherwise be subject to the requirements of section 
2(h)(1)(A) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(1)(A)); 
or
    (iii) Satisfies the criteria in section 2(h)(7)(D) of the Commodity 
Exchange Act of 1936 (7 U.S.C. 2(h)(7)(D)) and implementing regulations.
    (2) Security-based swaps. The requirements of this part (except for 
Sec.  45.12) shall not apply to a non-cleared security-based swap if the 
counterparty:
    (i) Qualifies for an exception from clearing under section 3C(g)(1) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78c-3(g)(1)) and 
implementing regulations; or
    (ii) Satisfies the criteria in section 3C(g)(4) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c-3(g)(4)) and implementing 
regulations.
    (e) Compliance dates. Covered swap entities shall comply with the 
minimum margin requirements of this part on or before the following 
dates for non-cleared swaps and non-cleared security-based swaps entered 
into on or after the following dates:
    (1) September 1, 2016 with respect to the requirements in Sec.  45.3 
for initial margin and Sec.  45.4 for variation margin for any non-
cleared swaps and non-cleared security-based swaps, where both:
    (i) The covered swap entity combined with all its affiliates; and
    (ii) Its counterparty combined with all its affiliates, have an 
average daily aggregate notional amount of non-cleared swaps, non-
cleared security-based swaps, foreign exchange forwards and foreign 
exchange swaps for March, April and May 2016 that exceeds $3 trillion, 
where such amounts are calculated only for business days; and
    (iii) In calculating the amounts in paragraphs (e)(1)(i) and (ii) of 
this section, an entity shall count the average daily aggregate notional 
amount of a non-cleared swap, a non-cleared security-based swap, a 
foreign exchange forward or a foreign exchange swap between the entity 
and an affiliate only one time, and shall not count a swap or security-
based swap that is exempt pursuant to paragraph (d) of this section.
    (2) March 1, 2017 with respect to the requirements in Sec.  45.4 for 
variation margin for any other covered swap entity with respect to non-
cleared swaps and non-cleared security-based swaps entered into with any 
other counterparty.
    (3) September 1, 2017 with respect to the requirements in Sec.  45.3 
for initial margin for any non-cleared swaps and non-cleared security-
based swaps, where both:

[[Page 903]]

    (i) The covered swap entity combined with all its affiliates; and
    (ii) Its counterparty combined with all its affiliates, have an 
average daily aggregate notional amount of non-cleared swaps, non-
cleared security-based swaps, foreign exchange forwards and foreign 
exchange swaps for March, April and May 2017 that exceeds $2.25 
trillion, where such amounts are calculated only for business days; and
    (iii) In calculating the amounts in paragraphs (e)(3)(i) and (ii) of 
this section, an entity shall count the average daily aggregate notional 
amount of a non-cleared swap, a non-cleared security-based swap, a 
foreign exchange forward or a foreign exchange swap between the entity 
and an affiliate only one time, and shall not count a swap or security-
based swap that is exempt pursuant to paragraph (d) of this section.
    (4) September 1, 2018 with respect to the requirements in Sec.  45.3 
for initial margin for any non-cleared swaps and non-cleared security-
based swaps, where both:
    (i) The covered swap entity combined with all its affiliates; and
    (ii) Its counterparty combined with all its affiliates, have an 
average daily aggregate notional amount of non-cleared swaps, non-
cleared security-based swaps, foreign exchange forwards and foreign 
exchange swaps for March, April and May 2018 that exceeds $1.5 trillion, 
where such amounts are calculated only for business days; and
    (iii) In calculating the amounts in paragraphs (e)(4)(i) and (ii) of 
this section, an entity shall count the average daily aggregate notional 
amount of a non-cleared swap, a non-cleared security-based swap, a 
foreign exchange forward or a foreign exchange swap between the entity 
and an affiliate only one time, and shall not count a swap or security-
based swap that is exempt pursuant to paragraph (d) of this section.
    (5) September 1, 2019 with respect to the requirements in Sec.  45.3 
for initial margin for any non-cleared swaps and non-cleared security-
based swaps, where both:
    (i) The covered swap entity combined with all its affiliates; and
    (ii) Its counterparty combined with all its affiliates, have an 
average daily aggregate notional amount of non-cleared swaps, non-
cleared security-based swaps, foreign exchange forwards and foreign 
exchange swaps for March, April and May 2019 that exceeds $0.75 
trillion, where such amounts are calculated only for business days; and
    (iii) In calculating the amounts in paragraphs (e)(5)(i) and (ii) of 
this section, an entity shall count the average daily aggregate notional 
amount of a non-cleared swap, a non-cleared security-based swap, a 
foreign exchange forward or a foreign exchange swap between the entity 
and an affiliate only one time, and shall not count a swap or security-
based swap that is exempt pursuant to paragraph (d) of this section.
    (6) September 1, 2021 with respect to requirements in Sec.  45.3 for 
initial margin for any non-cleared swaps and non-cleared security-based 
swaps, where both:
    (i) The covered swap entity combined with all its affiliates; and
    (ii) Its counterparty combined with all its affiliates, have an 
average daily aggregate notional amount of non-cleared swaps, foreign 
exchange forwards and foreign exchange swaps for March, April and May 
2021 that exceeds $50 billion, where such amounts are calculated only 
for business days; and
    (iii) In calculating the amounts in paragraphs (e)(6)(i) and (ii) of 
this section, an entity shall count the average daily aggregate notional 
amount of a non-cleared swap, a non-cleared security-based swap, a 
foreign exchange forward or a foreign exchange swap between the entity 
and an affiliate only one time, and shall not count a swap or security-
based swap that is exempt pursuant to paragraph (d) of this section.
    (7) September 1, 2022 with respect to requirements in Sec.  45.3 for 
initial margin for any other covered swap entity with respect to non-
cleared swaps and non-cleared security-based swaps entered into with any 
other counterparty.
    (f) Once a covered swap entity must comply with the margin 
requirements for non-cleared swaps and non-cleared security-based swaps 
with respect to a particular counterparty based on the

[[Page 904]]

compliance dates in paragraph (e) of this section, the covered swap 
entity shall remain subject to the requirements of this part with 
respect to that counterparty.
    (g)(1) If a covered swap entity's counterparty changes its status 
such that a non-cleared swap or non-cleared security-based swap with 
that counterparty becomes subject to stricter margin requirements under 
this part (such as if the counterparty's status changes from a financial 
end user without material swaps exposure to a financial end user with 
material swaps exposure), then the covered swap entity shall comply with 
the stricter margin requirements for any non-cleared swap or non-cleared 
security-based swap entered into with that counterparty after the 
counterparty changes its status.
    (2) If a covered swap entity's counterparty changes its status such 
that a non-cleared swap or non-cleared security-based swap with that 
counterparty becomes subject to less strict margin requirements under 
this part (such as if the counterparty's status changes from a financial 
end user with material swaps exposure to a financial end user without 
material swaps exposure), then the covered swap entity may comply with 
the less strict margin requirements for any non-cleared swap or non-
cleared security-based swap entered into with that counterparty after 
the counterparty changes its status as well as for any outstanding non-
cleared swap or non-cleared security-based swap entered into after the 
applicable compliance date in paragraph (e) of this section and before 
the counterparty changed its status.
    (h) Legacy swaps. Covered swaps entities are required to comply with 
the requirements of this part for non-cleared swaps and non-cleared 
security-based swaps entered into on or after the relevant compliance 
dates for variation margin and for initial margin established in 
paragraph (e) of this section. Any non-cleared swap or non-cleared 
security-based swap entered into before such relevant date shall remain 
outside the scope of this part if amendments are made to the non-cleared 
swap or non-cleared security-based swap by method of adherence to a 
protocol, other amendment of a contract or confirmation, or execution of 
a new contract or confirmation in replacement of and immediately upon 
termination of an existing contract or confirmation, as follows:
    (1) Amendments to the non-cleared swap or non-cleared security-based 
swap solely to comply with the requirements of 12 CFR part 47, 12 CFR 
part 252 subpart I, or 12 CFR part 382, as applicable;
    (2) The non-cleared swap or non-cleared security based swap was 
amended under the following conditions:
    (i) The swap was originally entered into before the relevant 
compliance date established in paragraph (e) of this section and one 
party to the swap booked it at, or otherwise held it at, an entity 
(including a branch or other authorized form of establishment) located 
in the United Kingdom;
    (ii) The entity in the United Kingdom subsequently arranged to amend 
the swap, solely for the purpose of transferring it to an affiliate, or 
a branch or other authorized form of establishment, located in any 
European Union member state or the United States, in connection with the 
entity's planning for or response to the event described in paragraph 
(h)(2)(iii) of this section, and the transferee is:
    (A) A covered swap entity, or
    (B) A covered swap entity's counterparty to the swap, and the 
counterparty represents to the covered swap entity that the counterparty 
performed the transfer in compliance with the requirements of paragraphs 
(h)(2)(i) and (ii) of this section;
    (iii) The law of the European Union ceases to apply to the United 
Kingdom pursuant to Article 50(3) of the Treaty on European Union, 
without conclusion of a Withdrawal Agreement between the United Kingdom 
and the European Union pursuant to Article 50(2);
    (iv) The amendments do not modify any of the following: The payment 
amount calculation methods, the maturity date, or the notional amount of 
the swap;
    (v) The amendments cause the transfer to take effect on or after the 
date of the event described in paragraph (h)(2)(iii) of this section 
transpires; and

[[Page 905]]

    (iv) The amendments cause the transfer to take effect by the later 
of:
    (A) The date that is one year after the date of the event described 
in paragraph (h)(2)(iii); or
    (B) Such other date permitted by transitional provisions under 
Article 35 of Commission Delegated Regulation (E.U.) No. 2016/2251, as 
amended.
    (3)(i) Amendments to the non-cleared swap or non-cleared security-
based swap that are made solely to accommodate the replacement of:
    (A) An interbank offered rate (IBOR) including, but not limited to, 
the London Interbank Offered Rate (LIBOR), the Tokyo Interbank Offered 
Rate (TIBOR), the Bank Bill Swap Rate (BBSW), the Singapore Interbank 
Offered Rate (SIBOR), the Canadian Dollar Offered Rate (CDOR), Euro 
Interbank Offered Rate (EURIBOR), and the Hong Kong Interbank Offered 
Rate (HIBOR);
    (B) Any other interest rate that a covered swap entity reasonably 
expects to be replaced or discontinued or reasonably determines has lost 
its relevance as a reliable benchmark due to a significant impairment; 
or
    (C) Any other interest rate that succeeds a rate referenced in 
paragraph (h)(3)(i)(A) or (B) of this section. An amendment made under 
this paragraph (h)(3)(i)(C) could be one of multiple amendments made 
under this paragraph (h)(3)(i)(C). For example, an amendment could 
replace an IBOR with a temporary interest rate and later replace the 
temporary interest rate with a permanent interest rate.
    (ii) Amendments to accommodate replacement of an interest rate 
described in paragraph (h)(3)(i) of this section may also incorporate 
spreads or other adjustments to the replacement interest rate and make 
other necessary technical changes to operationalize the determination of 
payments or other exchanges of economic value using the replacement 
interest rate, including changes to determination dates, calculation 
agents, and payment dates. The changes may not extend the maturity or 
increase the total effective notional amount of the non-cleared swap or 
non-cleared security-based swap beyond what is necessary to accommodate 
the differences between market conventions for an outgoing interest rate 
and its replacement.
    (iii) Amendments to accommodate replacement of an interest rate 
described in paragraph (h)(3)(i) of this section may also be effectuated 
through portfolio compression between or among covered swap entities and 
their counterparties. Portfolio compression under this paragraph is not 
subject to the limitations in paragraph (h)(4) of this section but any 
non-cleared swaps or non-cleared security-based swaps resulting from the 
portfolio compression may not have a longer maturity or increase the 
total effective notional amount more than what is necessary to 
accommodate the differences between market conventions for an outgoing 
interest rate and its replacement.
    (4) Amendments solely to reduce risk or remain risk-neutral through 
portfolio compression between or among covered swap entities and their 
counterparties, as long as any non-cleared swaps or non-cleared 
security-based swaps resulting from the portfolio compression do not:
    (i) Exceed the sum of the total effective notional amounts of all of 
the swaps that were submitted to the compression exercise that had the 
same or longer remaining maturity as the resulting swap; or
    (ii) Exceed the longest remaining maturity of all the swaps 
submitted to the compression exercise.
    (5) The non-cleared swap or non-cleared security-based swap was 
amended solely for one of the following reasons:
    (i) To reflect technical changes, such as addresses, identities of 
parties for delivery of formal notices, and other administrative or 
operational provisions as long as they do not alter the non-cleared 
swap's or non-cleared security-based swap's underlying asset or 
reference, the remaining maturity, or the total effective notional 
amount; or
    (ii) To reduce the notional amount, so long as:
    (A) All payment obligations attached to the total effective notional 
amount being eliminated as a result of the amendment are fully 
terminated; or
    (B) All payment obligations attached to the total effective notional 
amount

[[Page 906]]

being eliminated as a result of the amendment are fully novated to a 
third party, who complies with applicable margin rules for the novated 
portion upon the transfer.

[80 FR 74898, 74910, Nov. 30, 2015, as amended at 80 FR 74910, 74923, 
Nov. 30, 2015; 83 FR 50811, Oct. 10, 2018; 84 FR 9948, Mar. 19, 2019; 85 
FR 39468, 39771, July 1, 2020]

    Editorial Note: At 84 FR 9948, Mar. 19, 2019, Sec.  45.1 was amended 
by adding paragraph (h), containing two subparagraphs designated 
(h)(2)(iv).



Sec.  45.2  Definitions.

    Affiliate. A company is an affiliate of another company if:
    (1) Either company consolidates the other on financial statements 
prepared in accordance with U.S. Generally Accepted Accounting 
Principles, the International Financial Reporting Standards, or other 
similar standards;
    (2) Both companies are consolidated with a third company on a 
financial statement prepared in accordance with such principles or 
standards;
    (3) For a company that is not subject to such principles or 
standards, if consolidation as described in paragraph (1) or (2) of this 
definition would have occurred if such principles or standards had 
applied; or
    (4) The OCC has determined that a company is an affiliate of another 
company, based on OCC's conclusion that either company provides 
significant support to, or is materially subject to the risks or losses 
of, the other company.
    Bank holding company has the meaning specified in section 2 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1841).
    Broker has the meaning specified in section 3(a)(4) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)).
    Business day means any day other than a Saturday, Sunday, or legal 
holiday.
    Clearing agency has the meaning specified in section 3(a)(23) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)).
    Company means a corporation, partnership, limited liability company, 
business trust, special purpose entity, association, or similar 
organization.
    Counterparty means, with respect to any non-cleared swap or non-
cleared security-based swap to which a person is a party, each other 
party to such non-cleared swap or non-cleared security-based swap.
    Covered swap entity means any national bank or subsidiary thereof, 
Federal savings association or subsidiary thereof, or Federal branch or 
agency of a foreign bank that is a swap entity, or any other entity that 
the OCC determines.
    Cross-currency swap means a swap in which one party exchanges with 
another party principal and interest rate payments in one currency for 
principal and interest rate payments in another currency, and the 
exchange of principal occurs on the date the swap is entered into, with 
a reversal of the exchange of principal at a later date that is agreed 
upon when the swap is entered into.
    Currency of settlement means a currency in which a party has agreed 
to discharge payment obligations related to a non-cleared swap, a non-
cleared security-based swap, a group of non-cleared swaps, or a group of 
non-cleared security-based swaps subject to a master agreement at the 
regularly occurring dates on which such payments are due in the ordinary 
course.
    Day of execution means the calendar day at the time the parties 
enter into a non-cleared swap or non-cleared security-based swap, 
provided:
    (1) If each party is in a different calendar day at the time the 
parties enter into the non-cleared swap or non-cleared security-based 
swap, the day of execution is deemed the latter of the two dates; and
    (2) If a non-cleared swap or non-cleared security-based swap is:
    (i) Entered into after 4:00 p.m. in the location of a party; or
    (ii) Entered into on a day that is not a business day in the 
location of a party, then the non-cleared swap or non-cleared security-
based swap is deemed to have been entered into on the immediately 
succeeding day that is a business day for both parties, and both parties 
shall determine the day of execution with reference to that business 
day.

[[Page 907]]

    Dealer has the meaning specified in section 3(a)(5) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5)).
    Depository institution has the meaning specified in section 3(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
    Derivatives clearing organization has the meaning specified in 
section 1a(15) of the Commodity Exchange Act of 1936 (7 U.S.C. 1a(15)).
    Eligible collateral means collateral described in Sec.  45.6.
    Eligible master netting agreement means a written, legally 
enforceable agreement provided that:
    (1) The agreement creates a single legal obligation for all 
individual transactions covered by the agreement upon an event of 
default following any stay permitted by paragraph (2) of this 
definition, including upon an event of receivership, conservatorship, 
insolvency, liquidation, or similar proceeding, of the counterparty;
    (2) The agreement provides the covered swap entity the right to 
accelerate, terminate, and close-out on a net basis all transactions 
under the agreement and to liquidate or set-off collateral promptly upon 
an event of default, including upon an event of receivership, 
conservatorship, insolvency, liquidation, or similar proceeding, of the 
counterparty, provided that, in any such case:
    (i) Any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions, other than:
    (A) In receivership, conservatorship, or resolution under the 
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), Title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 
5381 et seq.), the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, as amended (12 U.S.C. 4617), or the Farm Credit 
Act of 1971, as amended (12 U.S.C. 2183 and 2279cc), or laws of foreign 
jurisdictions that are substantially similar to the U.S. laws referenced 
in this paragraph (2)(i)(A) in order to facilitate the orderly 
resolution of the defaulting counterparty; or
    (B) Where the agreement is subject by its terms to, or incorporates, 
any of the laws referenced in paragraph (2)(i)(A) of this definition; 
and
    (ii) The agreement may limit the right to accelerate, terminate, and 
close-out on a net basis all transactions under the agreement and to 
liquidate or set-off collateral promptly upon an event of default of the 
counterparty to the extent necessary for the counterparty to comply with 
the requirements of part 47, subpart I of part 252 or part 382 of Title 
12, as applicable;
    (3) The agreement does not contain a walkaway clause (that is, a 
provision that permits a non-defaulting counterparty to make a lower 
payment than it otherwise would make under the agreement, or no payment 
at all, to a defaulter or the estate of a defaulter, even if the 
defaulter or the estate of the defaulter is a net creditor under the 
agreement); and
    (4) A covered swap entity that relies on the agreement for purposes 
of calculating the margin required by this part must:
    (i) Conduct sufficient legal review to conclude with a well-founded 
basis (and maintain sufficient written documentation of that legal 
review) that:
    (A) The agreement meets the requirements of paragraph (2) of this 
definition; and
    (B) In the event of a legal challenge (including one resulting from 
default or from receivership, conservatorship, insolvency, liquidation, 
or similar proceeding), the relevant court and administrative 
authorities would find the agreement to be legal, valid, binding, and 
enforceable under the law of the relevant jurisdictions; and
    (ii) Establish and maintain written procedures to monitor possible 
changes in relevant law and to ensure that the agreement continues to 
satisfy the requirements of this definition.
    Financial end user means:
    (1) Any counterparty that is not a swap entity and that is:
    (i) A bank holding company or an affiliate thereof; a savings and 
loan holding company; a U.S. intermediate holding company established or 
designated for purposes of compliance with 12 CFR 252.153; or a nonbank 
financial institution supervised by the Board of Governors of the 
Federal Reserve System

[[Page 908]]

under Title I of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5323);
    (ii) A depository institution; a foreign bank; a Federal credit 
union or State credit union as defined in section 2 of the Federal 
Credit Union Act (12 U.S.C. 1752(1) & (6)); an institution that 
functions solely in a trust or fiduciary capacity as described in 
section 2(c)(2)(D) of the Bank Holding Company Act (12 U.S.C. 
1841(c)(2)(D)); an industrial loan company, an industrial bank, or other 
similar institution described in section 2(c)(2)(H) of the Bank Holding 
Company Act (12 U.S.C. 1841(c)(2)(H));
    (iii) An entity that is state-licensed or registered as:
    (A) A credit or lending entity, including a finance company; money 
lender; installment lender; consumer lender or lending company; mortgage 
lender, broker, or bank; motor vehicle title pledge lender; payday or 
deferred deposit lender; premium finance company; commercial finance or 
lending company; or commercial mortgage company; except entities 
registered or licensed solely on account of financing the entity's 
direct sales of goods or services to customers;
    (B) A money services business, including a check casher; money 
transmitter; currency dealer or exchange; or money order or traveler's 
check issuer;
    (iv) A regulated entity as defined in section 1303(20) of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 
as amended (12 U.S.C. 4502(20)) or any entity for which the Federal 
Housing Finance Agency or its successor is the primary federal 
regulator;
    (v) Any institution chartered in accordance with the Farm Credit Act 
of 1971, as amended, 12 U.S.C. 2001 et seq., that is regulated by the 
Farm Credit Administration;
    (vi) A securities holding company; a broker or dealer; an investment 
adviser as defined in section 202(a) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-2(a)); an investment company registered with the 
U.S. Securities and Exchange Commission under the Investment Company Act 
of 1940 (15 U.S.C. 80a-1 et seq.); or a company that has elected to be 
regulated as a business development company pursuant to section 54(a) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-53(a));
    (vii) A private fund as defined in section 202(a) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80-b-2(a)); an entity that would be an 
investment company under section 3 of the Investment Company Act of 1940 
(15 U.S.C. 80a-3) but for section 3(c)(5)(C); or an entity that is 
deemed not to be an investment company under section 3 of the Investment 
Company Act of 1940 pursuant to Investment Company Act Rule 3a-7 (17 CFR 
270.3a-7) of the U.S. Securities and Exchange Commission;
    (viii) A commodity pool, a commodity pool operator, or a commodity 
trading advisor as defined, respectively, in section 1a(10), 1a(11), and 
1a(12) of the Commodity Exchange Act of 1936 (7 U.S.C. 1a(10), 1a(11), 
and 1a(12)); a floor broker, a floor trader, or introducing broker as 
defined, respectively, in 1a(22), 1a(23) and 1a(31) of the Commodity 
Exchange Act of 1936 (7 U.S.C. 1a(22), 1a(23), and 1a(31)); or a futures 
commission merchant as defined in 1a(28) of the Commodity Exchange Act 
of 1936 (7 U.S.C. 1a(28));
    (ix) An employee benefit plan as defined in paragraphs (3) and (32) 
of section 3 of the Employee Retirement Income and Security Act of 1974 
(29 U.S.C. 1002);
    (x) An entity that is organized as an insurance company, primarily 
engaged in writing insurance or reinsuring risks underwritten by 
insurance companies, or is subject to supervision as such by a State 
insurance regulator or foreign insurance regulator;
    (xi) An entity, person or arrangement that is, or holds itself out 
as being, an entity, person, or arrangement that raises money from 
investors, accepts money from clients, or uses its own money primarily 
for the purpose of investing or trading or facilitating the investing or 
trading in loans, securities, swaps, funds or other assets for resale or 
other disposition or otherwise trading in loans, securities, swaps, 
funds or other assets; or
    (xii) An entity that would be a financial end user described in 
paragraph (1) of this definition or a swap entity, if it were organized 
under the laws of the United States or any State thereof.

[[Page 909]]

    (2) The term ``financial end user'' does not include any 
counterparty that is:
    (i) A sovereign entity;
    (ii) A multilateral development bank;
    (iii) The Bank for International Settlements;
    (iv) An entity that is exempt from the definition of financial 
entity pursuant to section 2(h)(7)(C)(iii) of the Commodity Exchange Act 
of 1936 (7 U.S.C. 2(h)(7)(C)(iii)) and implementing regulations; or
    (v) An affiliate that qualifies for the exemption from clearing 
pursuant to section 2(h)(7)(D) of the Commodity Exchange Act of 1936 (7 
U.S.C. 2(h)(7)(D)) or section 3C(g)(4) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c-3(g)(4)) and implementing regulations.
    Foreign bank means an organization that is organized under the laws 
of a foreign country and that engages directly in the business of 
banking outside the United States.
    Foreign exchange forward has the meaning specified in section 1a(24) 
of the Commodity Exchange Act of 1936 (7 U.S.C. 1a(24)).
    Foreign exchange swap has the meaning specified in section 1a(25) of 
the Commodity Exchange Act of 1936 (7 U.S.C. 1a(25)).
    Initial margin means the collateral as calculated in accordance with 
Sec.  45.8 that is posted or collected in connection with a non-cleared 
swap or non-cleared security-based swap.
    Initial margin collection amount means:
    (1) In the case of a covered swap entity that does not use an 
initial margin model, the amount of initial margin with respect to a 
non-cleared swap or non-cleared security-based swap that is required 
under appendix A of this part; and
    (2) In the case of a covered swap entity that uses an initial margin 
model pursuant to Sec.  45.8, the amount of initial margin with respect 
to a non-cleared swap or non-cleared security-based swap that is 
required under the initial margin model.
    Initial margin model means an internal risk management model that:
    (1) Has been developed and designed to identify an appropriate, 
risk-based amount of initial margin that the covered swap entity must 
collect with respect to one or more non-cleared swaps or non-cleared 
security-based swaps to which the covered swap entity is a party; and
    (2) Has been approved by the OCC pursuant to Sec.  45.8.
    Initial margin threshold amount means an aggregate credit exposure 
of $50 million resulting from all non-cleared swaps and non-cleared 
security-based swaps between a covered swap entity and its affiliates, 
and a counterparty and its affiliates. For purposes of this calculation, 
an entity shall not count a swap or security-based swap that is exempt 
pursuant to Sec.  45.1(d).
    Major currency means:
    (1) United States Dollar (USD);
    (2) Canadian Dollar (CAD);
    (3) Euro (EUR);
    (4) United Kingdom Pound (GBP);
    (5) Japanese Yen (JPY);
    (6) Swiss Franc (CHF);
    (7) New Zealand Dollar (NZD);
    (8) Australian Dollar (AUD);
    (9) Swedish Kronor (SEK);
    (10) Danish Kroner (DKK);
    (11) Norwegian Krone (NOK); or
    (12) Any other currency as determined by the OCC.
    Margin means initial margin and variation margin.
    Market intermediary means a securities holding company; a broker or 
dealer; a futures commission merchant as defined in 1a(28) of the 
Commodity Exchange Act of 1936 (7 U.S.C. 1a(28)); a swap dealer as 
defined in section 1a(49) of the Commodity Exchange Act of 1936 (7 
U.S.C. 1a(49)); or a security-based swap dealer as defined in section 
3(a)(71) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(71)).
    Material swaps exposure for an entity means that an entity and its 
affiliates have an average daily aggregate notional amount of non-
cleared swaps, non-cleared security-based swaps, foreign exchange 
forwards, and foreign exchange swaps with all counterparties for June, 
July, and August of the previous calendar year that exceeds $8 billion, 
where such amount is calculated only for business days. An entity shall 
count the average daily aggregate notional amount of a non-cleared swap, 
a

[[Page 910]]

non-cleared security-based swap, a foreign exchange forward or a foreign 
exchange swap between the entity and an affiliate only one time. For 
purposes of this calculation, an entity shall not count a swap or 
security-based swap that is exempt pursuant to Sec.  45.1(d).
    Multilateral development bank means the International Bank for 
Reconstruction and Development, the Multilateral Investment Guarantee 
Agency, the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African Development 
Bank, the European Bank for Reconstruction and Development, the European 
Investment Bank, the European Investment Fund, the Nordic Investment 
Bank, the Caribbean Development Bank, the Islamic Development Bank, the 
Council of Europe Development Bank, and any other entity that provides 
financing for national or regional development in which the U.S. 
government is a shareholder or contributing member or which the OCC 
determines poses comparable credit risk.
    Non-cleared security-based swap means a security-based swap that is 
not, directly or indirectly, submitted to and cleared by a clearing 
agency registered with the U.S. Securities and Exchange Commission 
pursuant to section 17A of the Securities Exchange Act of 1934 (15 
U.S.C. 78q-1) or by a clearing agency that the U.S. Securities and 
Exchange Commission has exempted from registration by rule or order 
pursuant to section 17A of the Securities Exchange Act of 1934 (15 
U.S.C. 78q-1).
    Non-cleared swap means a swap that is not cleared by a derivatives 
clearing organization registered with the Commodity Futures Trading 
Commission pursuant to section 5b(a) of the Commodity Exchange Act of 
1936 (7 U.S.C. 7a-1(a)) or by a clearing organization that the Commodity 
Futures Trading Commission has exempted from registration by rule or 
order pursuant to section 5b(h) of the Commodity Exchange Act of 1936 (7 
U.S.C. 7a-1(h)).
    Prudential regulator has the meaning specified in section 1a(39) of 
the Commodity Exchange Act of 1936 (7 U.S.C. 1a(39)).
    Savings and loan holding company has the meaning specified in 
section 10(n) of the Home Owners' Loan Act (12 U.S.C. 1467a(n)).
    Securities holding company has the meaning specified in section 618 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 
U.S.C. 1850a).
    Security-based swap has the meaning specified in section 3(a)(68) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)).
    Sovereign entity means a central government (including the U.S. 
government) or an agency, department, ministry, or central bank of a 
central government.
    State means any State, commonwealth, territory, or possession of the 
United States, the District of Columbia, the Commonwealth of Puerto 
Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, 
Guam, or the United States Virgin Islands.
    Subsidiary. A company is a subsidiary of another company if:
    (1) The company is consolidated by the other company on financial 
statements prepared in accordance with U.S. Generally Accepted 
Accounting Principles, the International Financial Reporting Standards, 
or other similar standards;
    (2) For a company that is not subject to such principles or 
standards, if consolidation as described in paragraph (1) of this 
definition would have occurred if such principles or standards had 
applied; or
    (3) The OCC has determined that the company is a subsidiary of 
another company, based on OCC's conclusion that either company provides 
significant support to, or is materially subject to the risks of loss 
of, the other company.
    Swap has the meaning specified in section 1a(47) of the Commodity 
Exchange Act of 1936 (7 U.S.C. 1a(47)).
    Swap entity means a person that is registered with the Commodity 
Futures Trading Commission as a swap dealer or major swap participant 
pursuant to the Commodity Exchange Act of 1936 (7 U.S.C. 1 et seq.), or 
a person that is registered with the U.S. Securities and Exchange 
Commission as a security-based swap dealer or a major security-based 
swap participant pursuant

[[Page 911]]

to the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
    U.S. Government-sponsored enterprise means an entity established or 
chartered by the U.S. government to serve public purposes specified by 
federal statute but whose debt obligations are not explicitly guaranteed 
by the full faith and credit of the U.S. government.
    Variation margin means collateral provided by one party to its 
counterparty to meet the performance of its obligations under one or 
more non-cleared swaps or non-cleared security-based swaps between the 
parties as a result of a change in value of such obligations since the 
last time such collateral was provided.
    Variation margin amount means the cumulative mark-to-market change 
in value to a covered swap entity of a non-cleared swap or non-cleared 
security-based swap, as measured from the date it is entered into (or, 
in the case of a non-cleared swap or non-cleared security-based swap 
that has a positive or negative value to a covered swap entity on the 
date it is entered into, such positive or negative value plus any 
cumulative mark-to-market change in value to the covered swap entity of 
a non-cleared swap or non-cleared security-based swap after such date), 
less the value of all variation margin previously collected, plus the 
value of all variation margin previously posted with respect to such 
non-cleared swap or non-cleared security-based swap.

[80 FR 74898, 74910, Nov. 30, 2015, as amended at 80 FR 74911, Nov. 30, 
2015; 83 FR 50811, Oct. 10, 2018]



Sec.  45.3  Initial margin.

    (a) Collection of margin. A covered swap entity shall collect 
initial margin with respect to any non-cleared swap or non-cleared 
security-based swap from a counterparty that is a financial end user 
with material swaps exposure or that is a swap entity in an amount that 
is no less than the greater of:
    (1) Zero; or
    (2) The initial margin collection amount for such non-cleared swap 
or non-cleared security-based swap less the initial margin threshold 
amount (not including any portion of the initial margin threshold amount 
already applied by the covered swap entity or its affiliates to other 
non-cleared swaps or non-cleared security-based swaps with the 
counterparty or its affiliates), as applicable.
    (b) Posting of margin. A covered swap entity shall post initial 
margin with respect to any non-cleared swap or non-cleared security-
based swap to a counterparty that is a financial end user with material 
swaps exposure. Such initial margin shall be in an amount at least as 
large as the covered swap entity would be required to collect under 
paragraph (a) of this section if it were in the place of the 
counterparty.
    (c) Timing. A covered swap entity shall comply with the initial 
margin requirements described in paragraphs (a) and (b) of this section 
on each business day, for a period beginning on or before the business 
day following the day of execution and ending on the date the non-
cleared swap or non-cleared security-based swap terminates or expires.
    (d) Other counterparties. A covered swap entity is not required to 
collect or post initial margin with respect to any non-cleared swap or 
non-cleared security-based swap described in Sec.  45.1(d). For any 
other non-cleared swap or non-cleared security-based swap between a 
covered swap entity and a counterparty that is neither a financial end 
user with a material swaps exposure nor a swap entity, the covered swap 
entity shall collect initial margin at such times and in such forms and 
such amounts (if any), that the covered swap entity determines 
appropriately addresses the credit risk posed by the counterparty and 
the risks of such non-cleared swap or non-cleared security-based swap.



Sec.  45.4  Variation margin.

    (a) General. After the date on which a covered swap entity enters 
into a non-cleared swap or non-cleared security-based swap with a swap 
entity or financial end user, the covered swap entity shall collect 
variation margin equal to the variation margin amount from the 
counterparty to such non-cleared swap or non-cleared security-based swap 
when the amount is positive and post variation margin equal to the 
variation

[[Page 912]]

margin amount to the counterparty to such non-cleared swap or non-
cleared security-based swap when the amount is negative.
    (b) Timing. A covered swap entity shall comply with the variation 
margin requirements described in paragraph (a) of this section on each 
business day, for a period beginning on or before the business day 
following the day of execution and ending on the date the non-cleared 
swap or non-cleared security based swap terminates or expires.
    (c) Other counterparties. A covered swap entity is not required to 
collect or post variation margin with respect to any non-cleared swap or 
non-cleared security-based swap described in Sec.  45.1(d). For any 
other non-cleared swap or non-cleared security-based swap between a 
covered swap entity and a counterparty that is neither a financial end 
user nor a swap entity, the covered swap entity shall collect variation 
margin at such times and in such forms and such amounts (if any), that 
the covered swap entity determines appropriately addresses the credit 
risk posed by the counterparty and the risks of such non-cleared swap or 
non-cleared security-based swap.



Sec.  45.5  Netting arrangements, minimum transfer amount, and satisfaction 
of collecting and posting requirements.

    (a) Netting arrangements. (1) For purposes of calculating and 
complying with the initial margin requirements of Sec.  45.3 using an 
initial margin model as described in Sec.  45.8, or with the variation 
margin requirements of Sec.  45.4, a covered swap entity may net non-
cleared swaps or non-cleared security-based swaps in accordance with 
this subsection.
    (2) To the extent that one or more non-cleared swaps or non-cleared 
security-based swaps are executed pursuant to an eligible master netting 
agreement between a covered swap entity and its counterparty that is a 
swap entity or financial end user, a covered swap entity may calculate 
and comply with the applicable requirements of this part on an aggregate 
net basis with respect to all non-cleared swaps and non-cleared 
security-based swaps governed by such agreement, subject to paragraph 
(a)(3) of this section.
    (3)(i) Except as permitted in paragraph (a)(3)(ii) of this section, 
if an eligible master netting agreement covers non-cleared swaps and 
non-cleared security-based swaps entered into on or after the applicable 
compliance date set forth in Sec.  45.1(e) or (g), all the non-cleared 
swaps and non-cleared security-based swaps covered by that agreement are 
subject to the requirements of this part and included in the aggregate 
netting portfolio for the purposes of calculating and complying with the 
margin requirements of this part.
    (ii) An eligible master netting agreement may identify one or more 
separate netting portfolios that independently meet the requirements in 
paragraph (1) of the definition of ``Eligible master netting agreement'' 
in Sec.  45.2 and to which collection and posting of margin applies on 
an aggregate net basis separate from and exclusive of any other non-
cleared swaps or non-cleared security-based swaps covered by the 
eligible master netting agreement. Any such netting portfolio that 
contains any non-cleared swap or non-cleared security-based swap entered 
into on or after the applicable compliance date set forth in Sec.  
45.1(e) or (g) is subject to the requirements of this part. Any such 
netting portfolio that contains only non-cleared swaps or non-cleared 
security-based swaps entered into before the applicable compliance date 
is not subject to the requirements of this part.
    (4) If a covered swap entity cannot conclude after sufficient legal 
review with a well-founded basis that the netting agreement described in 
this section meets the definition of eligible master netting agreement 
set forth in Sec.  45.2, the covered swap entity must treat the non-
cleared swaps and non-cleared security based swaps covered by the 
agreement on a gross basis for the purposes of calculating and complying 
with the requirements of this part to collect margin, but the covered 
swap entity may net those non-cleared swaps and non-cleared security-
based swaps in accordance with paragraphs (a)(1) through (3) of this 
section for the purposes of calculating and complying with the 
requirements of this part to post margin.

[[Page 913]]

    (b) Minimum transfer amount. Notwithstanding Sec.  45.3 or Sec.  
45.4, a covered swap entity is not required to collect or post margin 
pursuant to this part with respect to a particular counterparty unless 
and until the combined amount of initial margin and variation margin 
that is required pursuant to this part to be collected or posted and 
that has not yet been collected or posted with respect to the 
counterparty is greater than $500,000.
    (c) Satisfaction of collecting and posting requirements. A covered 
swap entity shall not be deemed to have violated its obligation to 
collect or post margin from or to a counterparty under Sec.  45.3, Sec.  
45.4, or Sec.  45.6(e) if:
    (1) The counterparty has refused or otherwise failed to provide or 
accept the required margin to or from the covered swap entity; and
    (2) The covered swap entity has:
    (i) Made the necessary efforts to collect or post the required 
margin, including the timely initiation and continued pursuit of formal 
dispute resolution mechanisms, or has otherwise demonstrated upon 
request to the satisfaction of the OCC that it has made appropriate 
efforts to collect or post the required margin; or
    (ii) Commenced termination of the non-cleared swap or non-cleared 
security-based swap with the counterparty promptly following the 
applicable cure period and notification requirements.



Sec.  45.6  Eligible collateral.

    (a) Non-cleared swaps and non-cleared security-based swaps with a 
swap entity. For a non-cleared swap or non-cleared security-based swap 
with a swap entity, a covered swap entity shall collect initial margin 
and variation margin required pursuant to this part solely in the form 
of the following types of collateral:
    (1) Immediately available cash funds that are denominated in:
    (i) U.S. dollars or another major currency; or
    (ii) The currency of settlement for the non-cleared swap or non-
cleared security-based swap;
    (2) With respect to initial margin only:
    (i) A security that is issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, the U.S. Department 
of the Treasury;
    (ii) A security that is issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, a U.S. government 
agency (other than the U.S. Department of Treasury) whose obligations 
are fully guaranteed by the full faith and credit of the United States 
government;
    (iii) A security that is issued by, or fully guaranteed as to the 
payment of principal and interest by, the European Central Bank or a 
sovereign entity that is assigned no higher than a 20 percent risk 
weight under the capital rules applicable to the covered swap entity as 
set forth in Sec.  45.12;
    (iv) A publicly traded debt security issued by, or an asset-backed 
security fully guaranteed as to the payment of principal and interest 
by, a U.S. Government-sponsored enterprise that is operating with 
capital support or another form of direct financial assistance received 
from the U.S. government that enables the repayments of the U.S. 
Government-sponsored enterprise's eligible securities;
    (v) A publicly traded debt security that meets the terms of 12 CFR 
part 1 and is issued by a U.S. Government-sponsored enterprise not 
operating with capital support or another form of direct financial 
assistance from the U.S. government, and is not an asset-backed 
security;
    (vi) A security that is issued by, or fully guaranteed as to the 
payment of principal and interest by, the Bank for International 
Settlements, the International Monetary Fund, or a multilateral 
development bank;
    (vii) A security solely in the form of:
    (A) Publicly traded debt not otherwise described in paragraph (a)(2) 
of this section that meets the terms of 12 CFR part 1 and is not an 
asset-backed security;
    (B) Publicly traded common equity that is included in:
    (1) The Standard & Poor's Composite 1500 Index or any other similar 
index of liquid and readily marketable equity securities as determined 
by the OCC; or
    (2) An index that a covered swap entity's supervisor in a foreign 
jurisdiction recognizes for purposes of including

[[Page 914]]

publicly traded common equity as initial margin under applicable 
regulatory policy, if held in that foreign jurisdiction;
    (viii) Securities in the form of redeemable securities in a pooled 
investment fund representing the security-holder's proportional interest 
in the fund's net assets and that are issued and redeemed only on the 
basis of the market value of the fund's net assets prepared each 
business day after the security-holder makes its investment commitment 
or redemption request to the fund, if:
    (A) The fund's investments are limited to the following:
    (1) Securities that are issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, the U.S. Department 
of the Treasury, and immediately-available cash funds denominated in 
U.S. dollars; or
    (2) Securities denominated in a common currency and issued by, or 
fully guaranteed as to the payment of principal and interest by, the 
European Central Bank or a sovereign entity that is assigned no higher 
than a 20 percent risk weight under the capital rules applicable to the 
covered swap entity as set forth in Sec.  45.12, and immediately-
available cash funds denominated in the same currency; and
    (B) Assets of the fund may not be transferred through securities 
lending, securities borrowing, repurchase agreements, reverse repurchase 
agreements, or other means that involve the fund having rights to 
acquire the same or similar assets from the transferee; or
    (ix) Gold.
    (b) Non-cleared swaps and non-cleared security-based swaps with a 
financial end user. For a non-cleared swap or non-cleared security-based 
swap with a financial end user, a covered swap entity shall collect and 
post initial margin and variation margin required pursuant to this part 
solely in the form of the following types of collateral:
    (1) Immediately available cash funds that are denominated in:
    (i) U.S. dollars or another major currency; or
    (ii) The currency of settlement for the non-cleared swap or non-
cleared security-based swap;
    (2) A security that is issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, the U.S. Department 
of the Treasury;
    (3) A security that is issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, a U.S. government 
agency (other than the U.S. Department of Treasury) whose obligations 
are fully guaranteed by the full faith and credit of the United States 
government;
    (4) A security that is issued by, or fully guaranteed as to the 
payment of principal and interest by, the European Central Bank or a 
sovereign entity that is assigned no higher than a 20 percent risk 
weight under the capital rules applicable to the covered swap entity as 
set forth in Sec.  45.12;
    (5) A publicly traded debt security issued by, or an asset-backed 
security fully guaranteed as to the payment of principal and interest 
by, a U.S. Government-sponsored enterprise that is operating with 
capital support or another form of direct financial assistance received 
from the U.S. government that enables the repayments of the U.S. 
Government-sponsored enterprise's eligible securities;
    (6) A publicly traded debt security that meets the terms of 12 CFR 
part 1 and is issued by a U.S. Government-sponsored enterprise not 
operating with capital support or another form of direct financial 
assistance from the U.S. government, and is not an asset-backed 
security;
    (7) A security that is issued by, or fully guaranteed as to the 
payment of principal and interest by, the Bank for International 
Settlements, the International Monetary Fund, or a multilateral 
development bank;
    (8) A security solely in the form of:
    (i) Publicly traded debt not otherwise described in this paragraph 
(b) that meets the terms of 12 CFR part 1 and is not an asset-backed 
security;
    (ii) Publicly traded common equity that is included in:
    (A) The Standard & Poor's Composite 1500 Index or any other similar 
index of liquid and readily marketable equity securities as determined 
by the OCC; or

[[Page 915]]

    (B) An index that a covered swap entity's supervisor in a foreign 
jurisdiction recognizes for purposes of including publicly traded common 
equity as initial margin under applicable regulatory policy, if held in 
that foreign jurisdiction;
    (9) Securities in the form of redeemable securities in a pooled 
investment fund representing the security-holder's proportional interest 
in the fund's net assets and that are issued and redeemed only on the 
basis of the market value of the fund's net assets prepared each 
business day after the security-holder makes its investment commitment 
or redemption request to the fund, if:
    (i) The fund's investments are limited to the following:
    (A) Securities that are issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, the U.S. Department 
of the Treasury, and immediately-available cash funds denominated in 
U.S. dollars; or
    (B) Securities denominated in a common currency and issued by, or 
fully guaranteed as to the payment of principal and interest by, the 
European Central Bank or a sovereign entity that is assigned no higher 
than a 20 percent risk weight under the capital rules applicable to the 
covered swap entity as set forth in Sec.  45.12, and immediately-
available cash funds denominated in the same currency; and
    (ii) Assets of the fund may not be transferred through securities 
lending, securities borrowing, repurchase agreements, reverse repurchase 
agreements, or other means that involve the fund having rights to 
acquire the same or similar assets from the transferee; or
    (10) Gold.
    (c)(1) The value of any eligible collateral collected or posted to 
satisfy margin requirements pursuant to this part is subject to the sum 
of the following discounts, as applicable:
    (i) An 8 percent discount for variation margin collateral 
denominated in a currency that is not the currency of settlement for the 
non-cleared swap or non-cleared security-based swap, except for 
immediately available cash funds denominated in U.S. dollars or another 
major currency;
    (ii) An 8 percent discount for initial margin collateral denominated 
in a currency that is not the currency of settlement for the non-cleared 
swap or non-cleared security-based swap, except for eligible types of 
collateral denominated in a single termination currency designated as 
payable to the non-posting counterparty as part of the eligible master 
netting agreement; and
    (iii) For variation and initial margin non-cash collateral, the 
discounts described in appendix B of this part.
    (2) The value of variation margin or initial margin collateral is 
computed as the product of the cash or market value of the eligible 
collateral asset times one minus the applicable discounts pursuant to 
paragraph (c)(1) of this section expressed in percentage terms. The 
total value of all variation margin or initial margin collateral is 
calculated as the sum of those values for each eligible collateral 
asset.
    (d) Notwithstanding paragraphs (a) and (b) of this section, eligible 
collateral for initial margin and variation margin required by this part 
does not include a security issued by:
    (1) The party or an affiliate of the party pledging such collateral;
    (2) A bank holding company, a savings and loan holding company, a 
U.S. intermediate holding company established or designated for purposes 
of compliance with 12 CFR 252.153, a foreign bank, a depository 
institution, a market intermediary, a company that would be any of the 
foregoing if it were organized under the laws of the United States or 
any State, or an affiliate of any of the foregoing institutions; or
    (3) A nonbank financial institution supervised by the Board of 
Governors of the Federal Reserve System under Title I of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (12 U.S.C. 5323).
    (e) A covered swap entity shall monitor the market value and 
eligibility of all collateral collected and posted to satisfy the 
minimum initial margin and minimum variation margin requirements of this 
part. To the extent that the market value of such collateral has 
declined, the covered swap entity shall promptly collect or post such 
additional eligible collateral as is necessary to maintain compliance 
with

[[Page 916]]

the margin requirements of this part. To the extent that the collateral 
is no longer eligible, the covered swap entity shall promptly collect or 
post sufficient eligible replacement collateral to comply with the 
margin requirements of this part.
    (f) A covered swap entity may collect or post initial margin and 
variation margin that is required by Sec.  45.3(d) or Sec.  45.4(c) or 
that is not required pursuant to this part in any form of collateral.

[80 FR 74898, 74910, Nov. 30, 2015, as amended at 80 FR 74911, Nov. 30, 
2015]



Sec.  45.7  Segregation of collateral.

    (a) A covered swap entity that posts any collateral other than for 
variation margin with respect to a non-cleared swap or a non-cleared 
security-based swap shall require that all funds or other property other 
than variation margin provided by the covered swap entity be held by one 
or more custodians that are not the covered swap entity or counterparty 
and not affiliates of the covered swap entity or the counterparty.
    (b) A covered swap entity that collects initial margin required by 
Sec.  45.3(a) with respect to a non-cleared swap or a non-cleared 
security-based swap shall require that such initial margin be held by 
one or more custodians that are not the covered swap entity or 
counterparty and not affiliates of the covered swap entity or the 
counterparty.
    (c) For purposes of paragraphs (a) and (b) of this section, the 
custodian must act pursuant to a custody agreement that:
    (1) Prohibits the custodian from rehypothecating, repledging, 
reusing, or otherwise transferring (through securities lending, 
securities borrowing, repurchase agreement, reverse repurchase agreement 
or other means) the collateral held by the custodian, except that cash 
collateral may be held in a general deposit account with the custodian 
if the funds in the account are used to purchase an asset described in 
Sec.  45.6(a)(2) or (b), such asset is held in compliance with this 
Sec.  45.7, and such purchase takes place within a time period 
reasonably necessary to consummate such purchase after the cash 
collateral is posted as initial margin; and
    (2) Is a legal, valid, binding, and enforceable agreement under the 
laws of all relevant jurisdictions, including in the event of 
bankruptcy, insolvency, or a similar proceeding.
    (d) Notwithstanding paragraph (c)(1) of this section, a custody 
agreement may permit the posting party to substitute or direct any 
reinvestment of posted collateral held by the custodian, provided that, 
with respect to collateral collected by a covered swap entity pursuant 
to Sec.  45.3(a) or posted by a covered swap entity pursuant to Sec.  
45.3(b), the agreement requires the posting party to:
    (1) Substitute only funds or other property that would qualify as 
eligible collateral under Sec.  45.6, and for which the amount net of 
applicable discounts described in appendix B of this part would be 
sufficient to meet the requirements of Sec.  45.3; and
    (2) Direct reinvestment of funds only in assets that would qualify 
as eligible collateral under Sec.  45.6, and for which the amount net of 
applicable discounts described in appendix B of this part would be 
sufficient to meet the requirements of Sec.  45.3.



Sec.  45.8  Initial margin models and standardized amounts.

    (a) Standardized amounts. Unless a covered swap entity's initial 
margin model conforms to the requirements of this section, the covered 
swap entity shall calculate the amount of initial margin required to be 
collected or posted for one or more non-cleared swaps or non-cleared 
security-based swaps with a given counterparty pursuant to Sec.  45.3 on 
a daily basis pursuant to appendix A of this part.
    (b) Use of initial margin models. A covered swap entity may 
calculate the amount of initial margin required to be collected or 
posted for one or more non-cleared swaps or non-cleared security-based 
swaps with a given counterparty pursuant to Sec.  45.3 on a daily basis 
using an initial margin model only if the initial margin model meets the 
requirements of this section.
    (c) Requirements for initial margin model. (1) A covered swap entity 
must obtain the prior written approval of

[[Page 917]]

the OCC before using any initial margin model to calculate the initial 
margin required in this part.
    (2) A covered swap entity must demonstrate that the initial margin 
model satisfies all of the requirements of this section on an ongoing 
basis.
    (3) A covered swap entity must notify the OCC in writing 60 days 
prior to:
    (i) Extending the use of an initial margin model that the OCC has 
approved under this section to an additional product type;
    (ii) Making any change to any initial margin model approved by the 
OCC under this section that would result in a material change in the 
covered swap entity's assessment of initial margin requirements; or
    (iii) Making any material change to modeling assumptions used by the 
initial margin model.
    (4) The OCC may rescind its approval of the use of any initial 
margin model, in whole or in part, or may impose additional conditions 
or requirements if the OCC determines, in its sole discretion, that the 
initial margin model no longer complies with this section.
    (d) Quantitative requirements. (1) The covered swap entity's initial 
margin model must calculate an amount of initial margin that is equal to 
the potential future exposure of the non-cleared swap, non-cleared 
security-based swap or netting portfolio of non-cleared swaps or non-
cleared security-based swaps covered by an eligible master netting 
agreement. Potential future exposure is an estimate of the one-tailed 99 
percent confidence interval for an increase in the value of the non-
cleared swap, non-cleared security-based swap or netting portfolio of 
non-cleared swaps or non-cleared security-based swaps due to an 
instantaneous price shock that is equivalent to a movement in all 
material underlying risk factors, including prices, rates, and spreads, 
over a holding period equal to the shorter of ten business days or the 
maturity of the non-cleared swap, non-cleared security-based swap or 
netting portfolio.
    (2) All data used to calibrate the initial margin model must be 
based on an equally weighted historical observation period of at least 
one year and not more than five years and must incorporate a period of 
significant financial stress for each broad asset class that is 
appropriate to the non-cleared swaps and non-cleared security-based 
swaps to which the initial margin model is applied.
    (3) The covered swap entity's initial margin model must use risk 
factors sufficient to measure all material price risks inherent in the 
transactions for which initial margin is being calculated. The risk 
categories must include, but should not be limited to, foreign exchange 
or interest rate risk, credit risk, equity risk, and commodity risk, as 
appropriate. For material exposures in significant currencies and 
markets, modeling techniques must capture spread and basis risk and must 
incorporate a sufficient number of segments of the yield curve to 
capture differences in volatility and imperfect correlation of rates 
along the yield curve.
    (4) In the case of a non-cleared cross-currency swap, the covered 
swap entity's initial margin model need not recognize any risks or risk 
factors associated with the fixed, physically-settled foreign exchange 
transaction associated with the exchange of principal embedded in the 
non-cleared cross-currency swap. The initial margin model must recognize 
all material risks and risk factors associated with all other payments 
and cash flows that occur during the life of the non-cleared cross-
currency swap.
    (5) The initial margin model may calculate initial margin for a non-
cleared swap or non-cleared security-based swap or a netting portfolio 
of non-cleared swaps or non-cleared security-based swaps covered by an 
eligible master netting agreement. It may reflect offsetting exposures, 
diversification, and other hedging benefits for non-cleared swaps and 
non-cleared security-based swaps that are governed by the same eligible 
master netting agreement by incorporating empirical correlations within 
the following broad risk categories, provided the covered swap entity 
validates and demonstrates the reasonableness of its process for 
modeling and measuring hedging benefits: Commodity, credit, equity, and 
foreign exchange or interest rate. Empirical correlations under

[[Page 918]]

an eligible master netting agreement may be recognized by the initial 
margin model within each broad risk category, but not across broad risk 
categories.
    (6) If the initial margin model does not explicitly reflect 
offsetting exposures, diversification, and hedging benefits between 
subsets of non-cleared swaps or non-cleared security-based swaps within 
a broad risk category, the covered swap entity must calculate an amount 
of initial margin separately for each subset within which such 
relationships are explicitly recognized by the initial margin model. The 
sum of the initial margin amounts calculated for each subset of non-
cleared swaps and non-cleared security-based swaps within a broad risk 
category will be used to determine the aggregate initial margin due from 
the counterparty for the portfolio of non-cleared swaps and non-cleared 
security-based swaps within the broad risk category.
    (7) The sum of the initial margin amounts calculated for each broad 
risk category will be used to determine the aggregate initial margin due 
from the counterparty.
    (8) The initial margin model may not permit the calculation of any 
initial margin collection amount to be offset by, or otherwise take into 
account, any initial margin that may be owed or otherwise payable by the 
covered swap entity to the counterparty.
    (9) The initial margin model must include all material risks arising 
from the nonlinear price characteristics of option positions or 
positions with embedded optionality and the sensitivity of the market 
value of the positions to changes in the volatility of the underlying 
rates, prices, or other material risk factors.
    (10) The covered swap entity may not omit any risk factor from the 
calculation of its initial margin that the covered swap entity uses in 
its initial margin model unless it has first demonstrated to the 
satisfaction of the OCC that such omission is appropriate.
    (11) The covered swap entity may not incorporate any proxy or 
approximation used to capture the risks of the covered swap entity's 
non-cleared swaps or non-cleared security-based swaps unless it has 
first demonstrated to the satisfaction of the OCC that such proxy or 
approximation is appropriate.
    (12) The covered swap entity must have a rigorous and well-defined 
process for re-estimating, re-evaluating, and updating its internal 
margin model to ensure continued applicability and relevance.
    (13) The covered swap entity must review and, as necessary, revise 
the data used to calibrate the initial margin model at least annually, 
and more frequently as market conditions warrant, to ensure that the 
data incorporate a period of significant financial stress appropriate to 
the non-cleared swaps and non-cleared security-based swaps to which the 
initial margin model is applied.
    (14) The level of sophistication of the initial margin model must be 
commensurate with the complexity of the non-cleared swaps and non-
cleared security-based swaps to which it is applied. In calculating an 
initial margin collection amount, the initial margin model may make use 
of any of the generally accepted approaches for modeling the risk of a 
single instrument or portfolio of instruments.
    (15) The OCC may in its sole discretion require a covered swap 
entity using an initial margin model to collect a greater amount of 
initial margin than that determined by the covered swap entity's initial 
margin model if the OCC determines that the additional collateral is 
appropriate due to the nature, structure, or characteristics of the 
covered swap entity's transaction(s), or is commensurate with the risks 
associated with the transaction(s).
    (e) Periodic review. A covered swap entity must periodically, but no 
less frequently than annually, review its initial margin model in light 
of developments in financial markets and modeling technologies, and 
enhance the initial margin model as appropriate to ensure that the 
initial margin model continues to meet the requirements for approval in 
this section.
    (f) Control, oversight, and validation mechanisms. (1) The covered 
swap entity must maintain a risk control unit

[[Page 919]]

that reports directly to senior management and is independent from the 
business trading units.
    (2) The covered swap entity's risk control unit must validate its 
initial margin model prior to implementation and on an ongoing basis. 
The covered swap entity's validation process must be independent of the 
development, implementation, and operation of the initial margin model, 
or the validation process must be subject to an independent review of 
its adequacy and effectiveness. The validation process must include:
    (i) An evaluation of the conceptual soundness of (including 
developmental evidence supporting) the initial margin model;
    (ii) An ongoing monitoring process that includes verification of 
processes and benchmarking by comparing the covered swap entity's 
initial margin model outputs (estimation of initial margin) with 
relevant alternative internal and external data sources or estimation 
techniques. The benchmark(s) must address the chosen model's 
limitations. When applicable, the covered swap entity should consider 
benchmarks that allow for non-normal distributions such as historical 
and Monte Carlo simulations. When applicable, validation shall include 
benchmarking against observable margin standards to ensure that the 
initial margin required is not less than what a derivatives clearing 
organization or a clearing agency would require for similar cleared 
transactions; and
    (iii) An outcomes analysis process that includes backtesting the 
initial margin model. This analysis must recognize and compensate for 
the challenges inherent in back-testing over periods that do not contain 
significant financial stress.
    (3) If the validation process reveals any material problems with the 
initial margin model, the covered swap entity must promptly notify the 
OCC of the problems, describe to the OCC any remedial actions being 
taken, and adjust the initial margin model to ensure an appropriately 
conservative amount of required initial margin is being calculated.
    (4) The covered swap entity must have an internal audit function 
independent of business-line management and the risk control unit that 
at least annually assesses the effectiveness of the controls supporting 
the covered swap entity's initial margin model measurement systems, 
including the activities of the business trading units and risk control 
unit, compliance with policies and procedures, and calculation of the 
covered swap entity's initial margin requirements under this part. At 
least annually, the internal audit function must report its findings to 
the covered swap entity's board of directors or a committee thereof.
    (g) Documentation. The covered swap entity must adequately document 
all material aspects of its initial margin model, including the 
management and valuation of the non-cleared swaps and non-cleared 
security-based swaps to which it applies, the control, oversight, and 
validation of the initial margin model, any review processes and the 
results of such processes.
    (h) Escalation procedures. The covered swap entity must adequately 
document internal authorization procedures, including escalation 
procedures, that require review and approval of any change to the 
initial margin calculation under the initial margin model, demonstrable 
analysis that any basis for any such change is consistent with the 
requirements of this section, and independent review of such 
demonstrable analysis and approval.



Sec.  45.9  Cross-border application of margin requirements.

    (a) Transactions to which this rule does not apply. The requirements 
of Sec. Sec.  45.3 through 45.8 and Sec. Sec.  45.10 through 45.12 shall 
not apply to any foreign non-cleared swap or foreign non-cleared 
security-based swap of a foreign covered swap entity.
    (b) For purposes of this section, a foreign non-cleared swap or 
foreign non-cleared security-based swap is any non-cleared swap or non-
cleared security-based swap with respect to which neither the 
counterparty to the foreign covered swap entity nor any party that 
provides a guarantee of either party's obligations under the non-cleared 
swap or non-cleared security-based swap is:
    (1) An entity organized under the laws of the United States or any 
State

[[Page 920]]

(including a U.S. branch, agency, or subsidiary of a foreign bank) or a 
natural person who is a resident of the United States;
    (2) A branch or office of an entity organized under the laws of the 
United States or any State; or
    (3) A swap entity that is a subsidiary of an entity that is 
organized under the laws of the United States or any State.
    (c) For purposes of this section, a foreign covered swap entity is 
any covered swap entity that is not:
    (1) An entity organized under the laws of the United States or any 
State, including a U.S. branch, agency, or subsidiary of a foreign bank;
    (2) A branch or office of an entity organized under the laws of the 
United States or any State; or
    (3) An entity that is a subsidiary of an entity that is organized 
under the laws of the United States or any State.
    (d) Transactions for which substituted compliance determination may 
apply--(1) Determinations and reliance. For non-cleared swaps and non-
cleared security-based swaps entered into by covered swap entities 
described in paragraph (d)(3) of this section, a covered swap entity may 
satisfy the provisions of this part by complying with the foreign 
regulatory framework for non-cleared swaps and non-cleared security-
based swaps that the prudential regulators jointly, conditionally or 
unconditionally, determine by public order satisfy the corresponding 
requirements of Sec. Sec.  45.3 through 45.8 and Sec. Sec.  45.10 
through 45.12.
    (2) Standard. In determining whether to make a determination under 
paragraph (d)(1) of this section, the prudential regulators will 
consider whether the requirements of such foreign regulatory framework 
for non-cleared swaps and non-cleared security-based swaps applicable to 
such covered swap entities are comparable to the otherwise applicable 
requirements of this part and appropriate for the safe and sound 
operation of the covered swap entity, taking into account the risks 
associated with non-cleared swaps and non-cleared security-based swaps.
    (3) Covered swap entities eligible for substituted compliance. A 
covered swap entity may rely on a determination under paragraph (d)(1) 
of this section only if:
    (i) The covered swap entity's obligations under the non-cleared swap 
or non-cleared security-based swap do not have a guarantee from:
    (A) An entity organized under the laws of the United States or any 
State (other than a U.S. branch or agency of a foreign bank) or a 
natural person who is a resident of the United States; or
    (B) A branch or office of an entity organized under the laws of the 
United States or any State; and
    (ii) The covered swap entity is:
    (A) A foreign covered swap entity;
    (B) A U.S. branch or agency of a foreign bank; or
    (C) An entity that is not organized under the laws of the United 
States or any State and is a subsidiary of a depository institution, 
Edge corporation, or agreement corporation.
    (4) Compliance with foreign margin collection requirement. A covered 
swap entity satisfies its requirement to post initial margin under Sec.  
45.3(b) by posting to its counterparty initial margin in the form and 
amount, and at such times, that its counterparty is required to collect 
pursuant to a foreign regulatory framework, provided that the 
counterparty is subject to the foreign regulatory framework and the 
prudential regulators have made a determination under paragraph (d)(1) 
of this section, unless otherwise stated in that determination, and the 
counterparty's obligations under the non-cleared swap or non-cleared 
security-based swap do not have a guarantee from:
    (i) An entity organized under the laws of the United States or any 
State (including a U.S. branch, agency, or subsidiary of a foreign bank) 
or a natural person who is a resident of the United States; or
    (ii) A branch or office of an entity organized under the laws of the 
United States or any State.
    (e) Requests for determinations. (1) A covered swap entity described 
in paragraph (d)(3) of this section may request that the prudential 
regulators make a determination pursuant to this section. A request for 
a determination must include a description of:
    (i) The scope and objectives of the foreign regulatory framework for 
non-

[[Page 921]]

cleared swaps and non-cleared security-based swaps;
    (ii) The specific provisions of the foreign regulatory framework for 
non-cleared swaps and non-cleared security-based swaps that govern:
    (A) The scope of transactions covered;
    (B) The determination of the amount of initial margin and variation 
margin required and how that amount is calculated;
    (C) The timing of margin requirements;
    (D) Any documentation requirements;
    (E) The forms of eligible collateral;
    (F) Any segregation and rehypothecation requirements; and
    (G) The approval process and standards for models used in 
calculating initial margin and variation margin;
    (iii) The supervisory compliance program and enforcement authority 
exercised by a foreign financial regulatory authority or authorities in 
such system to support its oversight of the application of the non-
cleared swap or non-cleared security-based swap regulatory framework and 
how that framework applies to the non-cleared swaps or non-cleared 
security-based swaps of the covered swap entity; and
    (iv) Any other descriptions and documentation that the prudential 
regulators determine are appropriate.
    (2) A covered swap entity described in paragraph (d)(3) of this 
section may make a request under this section only if the non-cleared 
swap or non-cleared security-based swap activities of the covered swap 
entity are directly supervised by the authorities administering the 
foreign regulatory framework for non-cleared swaps and non-cleared 
security-based swaps.
    (f) Segregation unavailable. Sections 45.3(b) and 45.7 do not apply 
to a non-cleared swap or non-cleared security-based swap entered into 
by:
    (1) A foreign branch of a covered swap entity that is a depository 
institution; or
    (2) A covered swap entity that is not organized under the laws of 
the United States or any State and is a subsidiary of a depository 
institution, Edge corporation, or agreement corporation, if:
    (i) Inherent limitations in the legal or operational infrastructure 
in the foreign jurisdiction make it impracticable for the covered swap 
entity and the counterparty to post any form of eligible initial margin 
collateral recognized pursuant to Sec.  45.6(b) in compliance with the 
segregation requirements of Sec.  45.7;
    (ii) The covered swap entity is subject to foreign regulatory 
restrictions that require the covered swap entity to transact in the 
non-cleared swap or non-cleared security-based swap with the 
counterparty through an establishment within the foreign jurisdiction 
and do not accommodate the posting of collateral for the non-cleared 
swap or non-cleared security-based swap outside the jurisdiction;
    (iii) The counterparty to the non-cleared swap or non-cleared 
security-based swap is not, and the counterparty's obligations under the 
non-cleared swap or non-cleared security-based swap do not have a 
guarantee from:
    (A) An entity organized under the laws of the United States or any 
State (including a U.S. branch, agency, or subsidiary of a foreign bank) 
or a natural person who is a resident of the United States; or
    (B) A branch or office of an entity organized under the laws of the 
United States or any State;
    (iv) The covered swap entity collects initial margin for the non-
cleared swap or non-cleared security-based swap in accordance with Sec.  
45.3(a) in the form of cash pursuant to Sec.  45.6(b)(1), and posts and 
collects variation margin in accordance with Sec.  45.4(a) in the form 
of cash pursuant to Sec.  45.6(b)(1); and
    (v) The OCC provides the covered swap entity with prior written 
approval for the covered swap entity's reliance on this paragraph (f) 
for the foreign jurisdiction.
    (g) Guarantee means an arrangement pursuant to which one party to a 
non-cleared swap or non-cleared security-based swap has rights of 
recourse against a third-party guarantor, with respect to its 
counterparty's obligations under the non-cleared swap or non-cleared 
security-based swap. For these purposes, a party to a non-cleared swap 
or non-cleared security-

[[Page 922]]

based swap has rights of recourse against a guarantor if the party has a 
conditional or unconditional legally enforceable right to receive or 
otherwise collect, in whole or in part, payments from the guarantor with 
respect to its counterparty's obligations under the non-cleared swap or 
non-cleared security-based swap. In addition, any arrangement pursuant 
to which the guarantor has a conditional or unconditional legally 
enforceable right to receive or otherwise collect, in whole or in part, 
payments from any other third party guarantor with respect to the 
counterparty's obligations under the non-cleared swap or non-cleared 
security-based swap, such arrangement will be deemed a guarantee of the 
counterparty's obligations under the non-cleared swap or non-cleared 
security-based swap by the other guarantor.
    (h)(1) A covered swap entity described in paragraphs (d)(3)(i) and 
(ii) of this section is not subject to the requirements of Sec.  45.3(a) 
or Sec.  45.11(a) for any non-cleared swap or non-cleared security-based 
swap executed with an affiliate of the covered swap entity; and
    (2) For purposes of paragraph (h)(1) of this section, ``affiliate'' 
has the same meaning provided in Sec.  45.11(d).

[80 FR 74898, Nov. 30, 2015, as amended at 85 FR 39772, July 1, 2020]



Sec.  45.10  Documentation of margin matters.

    A covered swap entity shall execute trading documentation with each 
counterparty that is either a swap entity or financial end user 
regarding credit support arrangements that:
    (a) Provides the covered swap entity and its counterparty with the 
contractual right to collect and post initial margin and variation 
margin in such amounts, in such form, and under such circumstances as 
are required by this subpart, and at such time as initial margin or 
variation margin is required to be collected or posted under Sec.  45.3 
or Sec.  45.4, as applicable; and
    (b) Specifies:
    (1) The methods, procedures, rules, and inputs for determining the 
value of each non-cleared swap or non-cleared security-based swap for 
purposes of calculating variation margin requirements; and
    (2) The procedures by which any disputes concerning the valuation of 
non-cleared swaps or non-cleared security-based swaps, or the valuation 
of assets collected or posted as initial margin or variation margin, may 
be resolved; and
    (c) Describes the methods, procedures, rules, and inputs used to 
calculate initial margin for non-cleared swaps and non-cleared security 
based swaps entered into between the covered swap entity and the 
counterparty.

[80 FR 74898, Nov. 30, 2015, as amended at 85 FR 39772, July 1, 2020]



Sec.  45.11  Special rules for affiliates.

    (a)(1) A covered swap entity shall calculate on each business day an 
initial margin collection amount for each counterparty that is a swap 
entity or financial end user with a material swaps exposure and an 
affiliate of the covered swap entity.
    (2) If the aggregate of all initial margin collection amounts 
calculated under paragraph (a)(1) of this section does not exceed 15 
percent of the covered swap entity's tier 1 capital, the requirements 
for a covered swap entity to collect initial margin under Sec.  45.3(a) 
do not apply with respect to any non-cleared swap or non-cleared 
security-based swap with a counterparty that is an affiliate.
    (3) On each business day that the aggregate of all initial margin 
collection amounts calculated under paragraph (a)(1) of this section 
exceeds 15 percent of the covered swap entity's tier 1 capital:
    (i) The covered swap entity shall collect initial margin under Sec.  
45.3(a) for each additional non-cleared swap and non-cleared security-
based swap executed that business day with a counterparty that is a swap 
entity or financial end user with a material swaps exposure and an 
affiliate of the covered swap entity, commencing on the day after 
execution and continuing on a daily basis as required under Sec.  
45.3(c), until the earlier of:
    (A) The termination date of such non-cleared swap or non-cleared 
security-based swap, or
    (B) The business day on which the aggregate of all initial margin 
collection

[[Page 923]]

amounts calculated under Sec.  45.11(a)(1) falls below 15 percent of the 
covered swap entity's tier 1 capital;
    (ii) Notwithstanding Sec.  45.7(b), to the extent the covered swap 
entity collects initial margin pursuant to paragraph (a)(3)(i) of this 
section in the form of collateral other than cash collateral, the 
custodian for such collateral may be the covered swap entity or an 
affiliate of the covered swap entity;
    (4) For purposes of this paragraph (a), ``tier 1 capital'' means the 
sum of common equity tier 1 capital as defined in 12 CFR 3.20(b) and 
additional tier 1 capital as defined in 12 CFR 3.20(c), as reported in 
the institution's most recent Consolidated Reports of Income and 
Condition (Call Report); and
    (5) If any subsidiary of the covered swap entity (including a 
subsidiary described in Sec.  45.9(h)) executes any non-cleared swap or 
non-cleared security-based swap with any counterparty that is a swap 
entity or financial end user with a material swaps exposure and an 
affiliate of the covered swap entity:
    (i) The covered swap entity shall treat such non-cleared swap or 
security-based swap as its own for purposes of this paragraph (a); and
    (ii) If the subsidiary is itself a covered swap entity, the 
compliance by its parent covered swap entity with this paragraph (a)(5) 
shall be deemed to establish the subsidiary's compliance with the 
requirements of this paragraph (a) and to exempt the subsidiary from the 
requirements for a covered swap entity to collect initial margin under 
Sec.  45.3(a) from an affiliate.
    (b) The requirement for a covered swap entity to post initial margin 
under Sec.  45.3(b) does not apply with respect to any non-cleared swap 
or non-cleared security-based swap with a counterparty that is an 
affiliate.
    (c) Section 45.3(d) shall apply to a counterparty that is an 
affiliate in the same manner as it applies to any counterparty that is 
neither a financial end user without a material swap exposure nor a swap 
entity.
    (d) For purposes of this section:
    (1) An affiliate means:
    (i) An affiliate as defined in Sec.  45.2; or
    (ii) Any company that controls, is controlled by, or is under common 
control with the covered swap entity through the direct or indirect 
exercise of controlling influence over the management or policies of the 
controlled company.
    (2) A subsidiary means:
    (i) A subsidiary as defined in Sec.  45.2; or
    (ii) Any company that is controlled by the covered swap entity 
through the direct or indirect exercise of controlling influence over 
the management or policies of the controlled company.

[85 FR 39772, July 1, 2020]



Sec.  45.12  Capital.

    A covered swap entity shall comply with:
    (a) In the case of a covered swap entity that is a national bank or 
Federal savings association, the minimum capital requirements as 
generally provided 12 CFR part 3.
    (b) In the case of a covered swap entity that is a Federal branch or 
agency of a foreign bank, the capital adequacy guidelines applicable as 
generally provided under 12 CFR 28.14.

[80 FR 74911, Nov. 30, 2015]



    Sec. Appendix A to Part 45--Standardized Minimum Initial Margin 
Requirements for Non-cleared Swaps and Non--cleared Security-based Swaps

Table A--Standardized Minimum Gross Initial Margin Requirements for Non-
          cleared Swaps and Non-cleared Security-Based Swaps\1\
------------------------------------------------------------------------
                                                           Gross initial
                                                           margin (% of
                       Asset Class                           notional
                                                             exposure)
------------------------------------------------------------------------
Credit: 0-2 year duration...............................               2
Credit: 2-5 year duration...............................               5
Credit: 5+ year duration................................              10
Commodity...............................................              15
Equity..................................................              15
Foreign Exchange/Currency...............................               6

[[Page 924]]

 
Cross Currency Swaps: 0-2 year duration.................               1
Cross-Currency Swaps: 2-5 year duration.................               2
Cross-Currency Swaps: 5+ year duration..................               4
Interest Rate: 0-2 year duration........................               1
Interest Rate: 2-5 year duration........................               2
Interest Rate: 5+ year duration.........................               4
Other...................................................              15
------------------------------------------------------------------------
\1\ The initial margin amount applicable to multiple non-cleared swaps
  or non-cleared security-based swaps subject to an eligible master
  netting agreement that is calculated according to Appendix A will be
  computed as follows:
Initial Margin=0.4xGross Initial Margin +0.6x NGRxGross Initial Margin
where;
Gross Initial Margin = the sum of the product of each non-cleared swap's
  or non-cleared security-based swap's effective notional amount and the
  gross initial margin requirement for all non-cleared swaps and non-
  cleared security-based swaps subject to the eligible master netting
  agreement;
and
NGR = the net-to-gross ratio (that is, the ratio of the net current
  replacement cost to the gross current replacement cost). In
  calculating NGR, the gross current replacement cost equals the sum of
  the replacement cost for each non-cleared swap and non-cleared
  security-based swap subject to the eligible master netting agreement
  for which the cost is positive. The net current replacement cost
  equals the total replacement cost for all non-cleared swaps and non-
  cleared security-based swaps subject to the eligible master netting
  agreement. In cases where the gross replacement cost is zero, the NGR
  should be set to 1.0.



 Sec. Appendix B to Part 45--Margin Values for Eligible Noncash Margin 
                               Collateral.

      Table B--Margin Values for Eligible Noncash Margin Collateral
------------------------------------------------------------------------
                       Asset class                         Discount (%)
------------------------------------------------------------------------
Eligible government and related (e.g., central bank,                 0.5
 multilateral development bank, GSE securities
 identified in Sec.   45.6(a)(2)(iv) or (b)(5) debt:
 residual maturity less than one-year...................
Eligible government and related (e.g., central bank,                 2.0
 multilateral development bank, GSE securities
 identified in Sec.   45.6(a)(2)(iv) or (b)(5) debt:
 residual maturity between one and five years...........
Eligible government and related (e.g., central bank,                 4.0
 multilateral development bank, GSE securities
 identified in Sec.   45.6(a)(2)(iv) or (b)(5) debt:
 residual maturity greater than five years..............
Eligible GSE debt securities not identified in Sec.                  1.0
 45.6(a)(2)(iv) or (b)(5): residual maturity less than
 one-year...............................................
Eligible GSE debt securities not identified in Sec.                  4.0
 45.6(a)(2)(iv) or (b)(5): residual maturity between one
 and five years:........................................
Eligible GSE debt securities not identified in Sec.                  8.0
 45.6(a)(2)(iv) or (b)(5): residual maturity greater
 than five years:.......................................
Other eligible publicly traded debt: residual maturity               1.0
 less than one-year.....................................
Other eligible publicly traded debt: residual maturity               4.0
 between one and five years.............................
Other eligible publicly traded debt: residual maturity               8.0
 greater than five years................................
Equities included in S&P 500 or related index...........            15.0
Equities included in S&P 1500 Composite or related index            25.0
 but not S&P 500 or related index.......................
Gold....................................................            15.0
------------------------------------------------------------------------
\1\ The discount to be applied to an eligible investment fund is the
  weighted average discount on all assets within the eligible investment
  fund at the end of the prior month. The weights to be applied in the
  weighted average should be calculated as a fraction of the fund's
  total market value that is invested in each asset with a given
  discount amount. As an example, an eligible investment fund that is
  comprised solely of $100 of 91 day Treasury bills and $100 of 3 year
  US Treasury bonds would receive a discount of (100/200)*0.5+(100/
  200)*2.0=(0.5)*0.5+(0.5)*2.0=1.25 percent.



PART 46_STRESS TESTING--Table of Contents



Sec.
46.1 Authority and purpose.
46.2 Definitions.
46.3 Applicability.
46.4 Reservation of authority.
46.5 Stress testing.
46.6 Stress test methodologies and practices.
46.7 Reports to the Office of the Comptroller of the Currency and the 
          Federal Reserve Board.
46.8 Publication of disclosures.

    Authority: 12 U.S.C. 93a; 1463(a)(2); 5365(i)(2); and 5412(b)(2)(B).

    Source: 77 FR 61246, Oct. 9, 2012, unless otherwise noted.



Sec.  46.1  Authority and purpose.

    (a) Authority. 12 U.S.C. 93a; 12 U.S.C. 1463(a)(2); 12 U.S.C. 
5365(i)(2); 12 U.S.C. 5412(b)(2)(B).

[[Page 925]]

    (b) Purpose. This part implements 12 U.S.C. 5365(i)(2), which 
requires a national bank or Federal savings association with total 
consolidated assets of more than $10 billion to conduct an annual stress 
test and establishes a definition of stress test, methodologies for 
conducting stress tests, and reporting and disclosure requirements.



Sec.  46.2  Definitions.

    For purposes of this part, the following definitions apply:
    Call Report means the Consolidated Report of Condition and Income.
    Covered institution means a national bank or Federal savings 
association with average total consolidated assets, calculated as 
required under this part, that are greater than $250 billion.
    Federal savings association has the same meaning as in 12 U.S.C. 
1813(b)(2).
    Planning horizon means a set period of time over which the impact of 
the scenarios is assessed.
    Pre-provision net revenue means the sum of net interest income and 
non-interest income less expenses before adjusting for loss provisions.
    Reporting year means the calendar year in which a covered 
institution must conduct, report, and publish its stress test.
    Scenarios means sets of conditions that affect the U.S. economy or 
the financial condition of a covered institution that the OCC determines 
are appropriate for use in the stress tests under this part, including, 
but not limited to, baseline and severely adverse scenarios.
    Stress test means a process to assess the potential impact of 
scenarios on the consolidated earnings, losses, and capital of a covered 
institution over the planning horizon, taking into account the covered 
institution's current condition, risks, exposures, strategies, and 
activities.

[77 FR 61246, Oct. 9, 2012, as amended at 83 FR 7953, Feb. 23, 2018; 84 
FR 54475, Oct. 10, 2019]



Sec.  46.3  Applicability.

    (a) Measurement of average total consolidated assets for a covered 
institution. A covered institution's average total consolidated assets 
is calculated as the average of the covered institution's total 
consolidated assets, as reported on the covered institution's Call 
Reports, for the four most recent consecutive quarters. If the covered 
institution has not filed a Call Report for each of the four most recent 
consecutive quarters, the covered institution's average total 
consolidated assets is calculated as the average of the covered 
institution's total consolidated assets, as reported on the covered 
institution's Call Reports, for the most recent one or more consecutive 
quarters. The date on which a national bank or Federal savings 
association becomes a covered institution shall be the as-of date of the 
most recent Call Report used in the calculation of the average.
    (b) Covered institutions that become subject to stress testing 
requirements. A national bank or Federal savings association that 
becomes a covered institution shall conduct its first stress test under 
this part in the first reporting year that begins more than three 
calendar quarters after the date the national bank or Federal savings 
association becomes a covered institution, unless otherwise determined 
by the OCC in writing.
    (c) Ceasing to be a covered institution or changing categories. A 
covered institution shall remain subject to the stress test requirements 
until total consolidated assets of the covered institution falls below 
the relevant size threshold for each of four consecutive quarters as 
reported by the covered institution's most recent Call Reports, 
effective on the ``as of'' date of the fourth consecutive Call Report.

[77 FR 61246, Oct. 9, 2012, as amended at 79 FR 71633, Dec. 3, 2014; 83 
FR 7953, Feb. 23, 2018; 84 FR 54476, Oct. 10, 2019]



Sec.  46.4  Reservation of authority.

    (a) Generally. The OCC may require a national bank or Federal 
savings association not otherwise subject to this part to comply with 
the stress test requirements of this part. With respect to any national 
bank or Federal savings association subject to the stress test 
requirements of this part pursuant to Sec.  46.3(a), the OCC may modify 
or delay some or all of the requirements of this part which include:
    (1) Timing of stress test. The OCC may accelerate or extend any 
specified deadline for stress testing, reporting,

[[Page 926]]

or publication of disclosures of the stress test results.
    (2) Stress tests. The OCC may require additional stress tests not 
otherwise required by this part or may require or permit different or 
additional analytical techniques and methods, different scenarios, or 
different assumptions, as appropriate for the covered institution to use 
in meeting the stress test requirements of this part. In addition, the 
OCC may specify a different as-of date for any or all categories of 
financial data used by the stress test. The OCC may also exempt one or 
more covered institutions from the requirement to conduct a stress test 
in a particular reporting year.
    (3) Reporting and disclosures. The OCC may modify the reporting date 
or any reporting requirement of a report required by this part, or may 
require any additional reports relating to stress testing as may be 
appropriate. The OCC may delay or otherwise modify the publication 
requirements of this part if the disclosure of stress test results under 
this part would not provide sufficiently meaningful or useful 
information to the public. In addition, the OCC may require different or 
additional disclosures not otherwise required by this part, if the 
existing disclosures do not adequately address one or more material 
elements of the stress test.
    (b) Factors considered. Any exercise of authority under this section 
by the OCC will be in writing and will consider the nature and level of 
the activities, complexity, risks, operations, and regulatory capital of 
the national bank or Federal savings association, in addition to any 
other relevant factors.
    (c) Notice and comment procedures. In making a determination under 
paragraph (a) of this section, the OCC will apply notice and response 
procedures, in the same manner and to the same extent as the notice and 
response procedures in 12 CFR 3.404.

[77 FR 61246, Oct. 9, 2012, as amended at 79 FR 11313, Feb. 28, 2014; 84 
FR 54476, Oct. 10, 2019]



Sec.  46.5  Stress testing.

    Each covered institution must conduct the stress test under this 
part subject to the following requirements:
    (a) Financial data. A covered institution must use financial data 
available as of December 31 of the calendar year prior to the reporting 
year.
    (b) Scenarios provided by the OCC. In conducting the stress test 
under this part, each covered institution must use the scenarios 
provided by the OCC. The scenarios provided by the OCC will reflect a 
minimum of two sets of economic and financial conditions, including 
baseline and severely adverse scenarios. The OCC will provide a 
description of the scenarios required to be used by each covered 
institution no later than February 15 of the reporting year.
    (c) Significant trading activities. The OCC may require a covered 
institution with significant trading activities, as determined by the 
OCC, to include trading and counterparty components in its adverse and 
severely adverse scenarios. The trading and counterparty position data 
to be used in this component will be as of a date between October 1 of 
the previous calendar year and March 1 of that calendar year in which 
the stress test is performed, and the OCC will communicate a description 
of the component to the covered institution no later than March 1 of 
that calendar year.
    (d) Use of stress test results. The board of directors and senior 
management of each covered institution must consider the results of the 
stress tests conducted under this section in the normal course of 
business, including but not limited to the covered institution's capital 
planning, assessment of capital adequacy, and risk management practices.
    (e) Frequency. A covered institution that is consolidated under a 
holding company that is required, pursuant to applicable regulations of 
the Board of Governors of the Federal Reserve, to conduct a stress test 
at least once every calendar year must treat every calendar year as a 
reporting year, unless otherwise determined by the OCC. All other 
covered institutions must treat every even-numbered calendar year 
beginning January 1, 2020 (i.e., 2022, 2024, 2026, etc.), as a reporting

[[Page 927]]

year, unless otherwise determined by the OCC.

[83 FR 7953, Feb. 23, 2018, as amended at 84 FR 54476, Oct. 10, 2019]



Sec.  46.6  Stress test methodologies and practices.

    (a) Potential impact on capital. During each quarter of the planning 
horizon, a covered institution shall estimate the following for each 
scenario required to be used:
    (1) Pre-provision net revenues, losses, loan loss provisions, and 
net income, and
    (2) The potential impact on the covered institution's regulatory 
capital levels and ratios applicable to the covered institution under 12 
CFR part 3 and any other capital ratios specified by the OCC, 
incorporating the effects of any capital actions over the planning 
horizon and maintenance by the covered institution of an allowance for 
loan losses appropriate for credit exposures throughout the planning 
horizon.
    (b) Planning horizon. A covered institution must use a minimum 
planning horizon of at least nine quarters, beginning with the first day 
of the period covered by the stress tests.
    (c) Controls and oversight of stress test processes. (1) The senior 
management of the covered institution must establish and maintain a 
system of controls, oversight, and documentation, including policies and 
procedures, designed to ensure that the stress test processes used by 
the covered institution satisfy the requirements in this part. These 
policies and procedures must, at a minimum, describe the covered 
institution's stress test practices and methodologies, and processes for 
validating and updating the covered institution's stress test practices 
and methodologies consistent with applicable laws, regulations, and 
supervisory guidance.
    (2) The board of directors of the covered institution, or a 
committee thereof, shall approve and review the policies and procedures 
of the covered institution's stress testing processes as frequently as 
economic conditions or the condition of the institution may warrant, but 
no less than once every reporting year. The board of directors and 
senior management must be provided with a summary of the stress test 
results.

[77 FR 61246, Oct. 9, 2012, as amended at 79 FR 71633, Dec. 3, 2014; 84 
FR 54476, Oct. 10, 2019; 84 FR 56376, Oct. 22, 2019]



Sec.  46.7  Reports to the Office of the Comptroller of the Currency 
and the Federal Reserve Board.

    (a) Timing. A covered institution must report to the OCC and to the 
Board of Governors of the Federal Reserve System, on or before April 5 
of the reporting year, the results of the stress test in the manner and 
form specified by the OCC.
    (b) Confidentiality of Reports. As provided by Sec.  4.32(b) of this 
title, the report required under this section is non-public OCC 
information because it is deemed to be a record created or obtained by 
the OCC in connection with the OCC's performance of its 
responsibilities, such as a record concerning supervision, licensing, 
regulations, and examination, of a national bank, a Federal savings 
association, a bank holding company, a savings and loan holding company, 
or an affiliate. The report is the property of the OCC and unauthorized 
disclosure of the report is generally prohibited pursuant to Sec.  4.37 
of this part.

[77 FR 61246, Oct. 9, 2012, as amended at 79 FR 71633, Dec. 3, 2014; 83 
FR 7953, Feb. 23, 2018; 84 FR 54476, Oct. 10, 2019]



Sec.  46.8  Publication of disclosures.

    (a) Publication date. A covered institution must publish a summary 
of the results of its stress test in the period starting June 15 and 
ending July 15 of the reporting year, provided:
    (1) Unless the OCC determines otherwise, if the $50 billion or over 
covered institution is a consolidated subsidiary of a bank holding 
company or savings and loan holding company subject to supervisory 
stress tests conducted by the Board of Governors of the Federal Reserve 
System pursuant to 12 CFR part 252, then within the June 15 to July 15 
period such covered institution may not publish the required summary of 
its annual stress test earlier than the date that the Board of Governors 
of the Federal Reserve System publishes the supervisory stress test 
results of

[[Page 928]]

the covered bank's parent holding company.
    (2) If the Board of Governors of the Federal Reserve System 
publishes the supervisory stress test results of the covered 
institution's parent holding company prior to June 15, then such covered 
institution may publish its stress test results prior to June 15, but no 
later than July 15, through actual publication by the covered 
institution or through publication by the parent holding company 
pursuant to paragraph (b) of this section.
    (b) Publication method. The summary required under this section may 
be published on the covered institution's Web site or in any other forum 
that is reasonably accessible to the public. A covered institution 
controlled by a bank holding company that is required to conduct a 
company-run stress test under applicable regulations of the Board of 
Governors of the Federal Reserve System will be deemed to have satisfied 
the publication requirement of this section when the bank holding 
company publicly discloses summary results of its stress test in 
satisfaction of the requirements of applicable regulations of the Board 
of Governors of the Federal Reserve System, unless the OCC determines 
that the disclosures at the holding company level do not adequately 
capture the potential impact of the scenarios on the capital of the 
covered institution.
    (c) Information to be disclosed in the summary. The information 
disclosed shall, at a minimum, include--
    (1) A description of the types of risks included in the stress test 
under this part;
    (2) A summary description of the methodologies used in the stress 
test;
    (3) Estimates of aggregate losses, pre-provision net revenue, 
provisions for credit losses, net income, and pro forma capital ratios 
(including regulatory and any other capital ratios specified by the 
OCC); and
    (4) An explanation of the most significant causes of the changes in 
regulatory capital ratios.
    (d) Disclosure of estimates for the planning horizon. (1) The 
disclosure of the estimates of aggregate losses, pre-provision net 
revenue, provisions for credit losses, net income, and pro forma capital 
ratios (including regulatory and any other capital ratios specified by 
the OCC), as required by paragraph (b) of this section, must reflect the 
estimated cumulative effects, as well as the estimated capital ratios, 
at the end of the planning horizon for the severely adverse scenario.
    (2) With respect to the capital ratio disclosure required in 
paragraph (d)(1) of this section, the disclosure must also include the 
value at the beginning of the planning horizon, and the minimum over the 
planning horizon of the estimated quarter-end values of each ratio.

[77 FR 61246, Oct. 9, 2012, as amended at 79 FR 71634, Dec. 3, 2014; 83 
FR 7954, Feb. 23, 2018; 84 FR 4240, Feb. 14, 2019; 84 FR 54476, Oct. 10, 
2019]



PART 47_MANDATORY CONTRACTUAL STAY REQUIREMENTS FOR QUALIFIED 
FINANCIAL CONTRACTS--Table of Contents



Sec.
47.1 Authority and purpose.
47.2 Definitions.
47.3 Applicability.
47.4 U.S. special resolution regimes.
47.5 Insolvency proceedings.
47.6 Approval of enhanced creditor protection conditions.
47.7 Foreign bank multi-branch master agreements.
47.8 Exclusion of certain QFCs.

    Authority: 12 U.S.C. 1, 93a, 481, 1462a, 1463, 1464, 1467a, 1818, 
1828, 1831n, 1831o, 1831p-1, 1831w, 1835, 3102(b), 3108(a), 
5412(b)(2)(B), (D)-(F).

    Source: 82 FR 56662, Nov. 29, 2017, unless otherwise noted.



Sec.  47.1  Authority and purpose.

    (a) Authority. 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 1467a, 1818, 
1828, 1831n, 1831p-1, 1831w, 1835, 3102(b), 3108(a), 5412(b)(2)(B), (D)-
(F).
    (b) Purpose. The purpose of this part is to promote the safety and 
soundness of federally chartered or licensed institutions by mitigating 
the potential destabilizing effects of the resolution of a global 
systemically important banking entity on an affiliate that is a covered 
bank (as defined by this part) by requiring covered banks to include in 
financial contracts covered by this part

[[Page 929]]

certain mandatory contractual provisions relating to stays on 
acceleration and close out rights and transfer rights.



Sec.  47.2  Definitions.

    As used in this part:
    Affiliate means an affiliate as defined in 12 U.S.C. 1841(k) (Bank 
Holding Company Act).
    Central counterparty (CCP) means a counterparty (for example, a 
clearing house) that facilitates trades between counterparties in one or 
more financial markets by either guaranteeing trades or novating 
contracts.
    Chapter 11 proceeding means a proceeding under Chapter 11 of Title 
11, United States Code (11 U.S.C. 1101-74).
    Consolidated affiliate means an affiliate of another company that:
    (1) Either consolidates the other company, or is consolidated by the 
other company, on financial statements prepared in accordance with U.S. 
Generally Accepted Accounting Principles, the International Financial 
Reporting Standards, or other similar standards;
    (2) Is, along with the other company, consolidated with a third 
company on a financial statement prepared in accordance with principles 
or standards referenced in paragraph (1) of this definition; or
    (3) For a company that is not subject to principles or standards 
referenced in paragraph (1) of this definition, if consolidation as 
described in paragraph (1) or (2) of this definition would have occurred 
if such principles or standards had applied.
    Control has the same meaning as in 12 U.S.C. 1841 (Bank Holding 
Company Act).
    Covered entity has the same meaning as in Sec.  252.82(a) of this 
title (Federal Reserve Board Regulation YY) (12 CFR 252.82).
    Covered FSI has the same meaning as in Sec.  382.2(b) of this title 
(Federal Deposit Insurance Corporation) (12 CFR 382.2(b)).
    Default right (1) Means, with respect to a QFC, any:
    (i) Right of a party, whether contractual or otherwise (including, 
without limitation, rights incorporated by reference to any other 
contract, agreement, or document, and rights afforded by statute, civil 
code, regulation, and common law), to liquidate, terminate, cancel, 
rescind, or accelerate such agreement or transactions thereunder, set 
off or net amounts owing in respect thereto (except rights related to 
same-day payment netting), exercise remedies in respect of collateral or 
other credit support or property related thereto (including the purchase 
and sale of property), demand payment or delivery thereunder or in 
respect thereof (other than a right or operation of a contractual 
provision arising solely from a change in the value of collateral or 
margin or a change in the amount of an economic exposure), suspend, 
delay, or defer payment or performance thereunder, or modify the 
obligations of a party thereunder, or any similar rights; and
    (ii) Right or contractual provision that alters the amount of 
collateral or margin that must be provided with respect to an exposure 
thereunder, including by altering any initial amount, threshold amount, 
variation margin, minimum transfer amount, the margin value of 
collateral, or any similar amount, that entitles a party to demand the 
return of any collateral or margin transferred by it to the other party 
or a custodian or that modifies a transferee's right to reuse collateral 
or margin (if such right previously existed), or any similar rights, in 
each case, other than a right or operation of a contractual provision 
arising solely from a change in the value of collateral or margin or a 
change in the amount of an economic exposure;
    (2) With respect to Sec.  47.5, does not include any right under a 
contract that allows a party to terminate the contract on demand or at 
its option at a specified time, or from time to time, without the need 
to show cause.
    FDI Act proceeding means a proceeding that commences upon the 
Federal Deposit Insurance Corporation being appointed as conservator or 
receiver under section 11 of the Federal Deposit Insurance Act (12 
U.S.C. 1821).
    FDI Act stay period means, in connection with an FDI Act proceeding, 
the period of time during which a party to a QFC with a party that is 
subject to

[[Page 930]]

an FDI Act proceeding may not exercise any right that the party that is 
not subject to an FDI Act proceeding has to terminate, liquidate, or net 
such QFC, in accordance with section 11(e) of the Federal Deposit 
Insurance Act (12 U.S.C. 1821(e)) and any implementing regulations.
    Financial counterparty means a person that is:
    (1)(i) A bank holding company or an affiliate thereof; a savings and 
loan holding company as defined in section 10(n) of the Home Owners' 
Loan Act (12 U.S.C. 1467a(n)); a U.S. intermediate holding company that 
is established or designated for purposes of compliance with Sec.  
252.153 of this title (Federal Reserve Board Regulation YY) (12 CFR 
252.153); or a nonbank financial company supervised by the Federal 
Reserve Board under Title II of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (12 U.S.C. 5323);
    (ii) A depository institution as defined in section 3(c) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(c)); an organization that 
is organized under the laws of a foreign country and that engages 
directly in the business of banking outside the United States; a Federal 
credit union or State credit union as defined in section 2 of the 
Federal Credit Union Act (12 U.S.C. 1752(1) and (6)); an institution 
that functions solely in a trust or fiduciary capacity as described in 
section 2(c)(2)(D) of the Bank Holding Company Act (12 U.S.C. 
1841(c)(2)(D)); an industrial loan company, an industrial bank, or other 
similar institution described in section 2(c)(2)(H) of the Bank Holding 
Company Act (12 U.S.C. 1841(c)(2)(H));
    (iii) An entity that is state-licensed or registered as:
    (A) A credit or lending entity, including a finance company, money 
lender; installment lender; consumer lender or lending company; mortgage 
lender, broker, or bank; motor vehicle title pledge lender; payday or 
deferred deposit lender; premium finance company; commercial finance or 
lending company; or commercial mortgage company; except entities 
registered or licensed solely on account of financing the entity's 
direct sales of goods or services to customers;
    (B) A money services business, including a check casher; money 
transmitter; currency dealer or exchange; or money order or traveler's 
check issuer;
    (iv) A regulated entity as defined in section 1303(20) of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 
as amended (12 U.S.C. 4502(20)) or any entity for which the Federal 
Housing Finance Agency or its successor is the primary federal 
regulator;
    (v) Any institution chartered in accordance with the Farm Credit Act 
of 1971, as amended (12 U.S.C. 2002 et seq.), that is regulated by the 
Farm Credit Administration;
    (vi) Any entity registered with the Commodity Futures Trading 
Commission as a swap dealer or major swap participant pursuant to the 
Commodity Exchange Act of 1936 (7 U.S.C. 1 et seq.), or an entity that 
is registered with the U.S. Securities and Exchange Commission as a 
security-based swap dealer or a major security-based swap participant 
pursuant to the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
    (vii) A securities holding company, with the meaning specified in 
section 618 of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (12 U.S.C. 1850a); a broker or dealer as defined in sections 3(a)(4) 
and 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)-
(5)); an investment adviser as defined in section 202(a) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)); an investment 
company registered with the U.S. Securities and Exchange Commission 
under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.); or a 
company that has elected to be regulated as a business development 
company pursuant to section 54(a) of the Investment Company Act of 1940 
(15 U.S.C. 80a-53(a));
    (viii) A private fund as defined in section 202(a) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80-b-2(a)); an entity that would be an 
investment company under section 3 of the Investment Company Act of 1940 
(15 U.S.C. 80a-3) but for section 3(c)(5)(C); or an entity that is 
deemed not to be an investment company under section 3 of the Investment 
Company Act of 1940 pursuant to Investment Company Act Rule 3a-7 (17

[[Page 931]]

CFR 270.3a-7) of the U.S. Securities and Exchange Commission;
    (ix) A commodity pool, a commodity pool operator, or a commodity 
trading advisor as defined, respectively, in sections 1a(10), 1a(11), 
and 1a(12) of the Commodity Exchange Act of 1936 (7 U.S.C. 1a(10), 
1a(11), and 1a(12)); a floor broker, a floor trader, or introducing 
broker as defined, respectively, in sections 1a(22), 1a(23) and 1a(31) 
of the Commodity Exchange Act of 1936 (7 U.S.C. 1a(22), 1a(23), and 
1a(31)); or a futures commission merchant as defined in section 1a(28) 
of the Commodity Exchange Act of 1936 (7 U.S.C. 1a(28));
    (x) An employee benefit plan as defined in paragraphs (3) and (32) 
of section 3 of the Employee Retirement Income and Security Act of 1974 
(29 U.S.C. 1002);
    (xi) An entity that is organized as an insurance company, primarily 
engaged in writing insurance or reinsuring risks underwritten by 
insurance companies, or is subject to supervision as such by a State 
insurance regulator or foreign insurance regulator; or
    (xii) An entity that would be a financial counterparty described in 
paragraphs (1)(i)-(xi) of this definition, if the entity were organized 
under the laws of the United States or any state thereof.
    (2) The term ``financial counterparty'' does not include any 
counterparty that is:
    (i) A sovereign entity;
    (ii) A multilateral development bank; or
    (iii) The Bank for International Settlements.
    Financial market utility (FMU) means any person, regardless of the 
jurisdiction in which the person is located or organized, that manages 
or operates a multilateral system for the purpose of transferring, 
clearing, or settling payments, securities, or other financial 
transactions among financial institutions or between financial 
institutions and the person, but does not include:
    (1) Designated contract markets, registered futures associations, 
swap data repositories, and swap execution facilities registered under 
the Commodity Exchange Act (7 U.S.C. 1 et seq.), or national securities 
exchanges, national securities associations, alternative trading 
systems, security-based swap data repositories, and swap execution 
facilities registered under the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.), solely by reason of their providing facilities for 
comparison of data respecting the terms of settlement of securities or 
futures transactions effected on such exchange or by means of any 
electronic system operated or controlled by such entities, provided that 
the exclusions in paragraph (1) of this definition apply only with 
respect to the activities that require the entity to be so registered; 
or
    (2) Any broker, dealer, transfer agent, or investment company, or 
any futures commission merchant, introducing broker, commodity trading 
advisor, or commodity pool operator, solely by reason of functions 
performed by such institution as part of brokerage, dealing, transfer 
agency, or investment company activities, or solely by reason of acting 
on behalf of a FMU or a participant therein in connection with the 
furnishing by the FMU of services to its participants or the use of 
services of the FMU by its participants, provided that services 
performed by such institution do not constitute critical risk management 
or processing functions of the FMU.
    Investment advisory contract means any contract or agreement whereby 
a person agrees to act as investment adviser to or to manage any 
investment or trading account of another person.
    Master agreement means a QFC of the type set forth in section 
210(c)(8)(D)(ii)(XI), (iii)(IX), (iv)(IV), (v)(V), or (vi)(V) of Title 
II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 
U.S.C. 5390(c)(8)(D)(ii)(XI), (iii)(IX), (iv)(IV), (v)(V), or (vi)(V)) 
or a master agreement that the Federal Deposit Insurance Corporation 
determines by regulation is a QFC pursuant to section 210(c)(8)(D)(i) of 
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (12 U.S.C. 5390(c)(8)(D)(i)).
    Person includes an individual, bank, corporation, partnership, 
trust, association, joint venture, pool, syndicate, sole proprietorship, 
unincorporated organization, or any other form of entity.

[[Page 932]]

    Qualified financial contract (QFC) has the same meaning as in 
section 210(c)(8)(D) of Title II of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (12 U.S.C. 5390(c)(8)(D)).
    Retail customer or counterparty means a customer or counterparty 
that is:
    (1) An individual;
    (2) A business customer, but solely if and to the extent that:
    (i) The national bank, Federal savings association, or Federal 
branch or agency manages its transactions with the business customer, 
including deposits, unsecured funding, and credit facility and liquidity 
facility transactions, in the same way it manages its transactions with 
individuals;
    (ii) Transactions with the business customer have liquidity risk 
characteristics that are similar to comparable transactions with 
individuals; and
    (iii) The total aggregate funding raised from the business customer 
is less than $1.5 million; or
    (3) A living or testamentary trust that:
    (i) Is solely for the benefit of natural persons;
    (ii) Does not have a corporate trustee; and
    (iii) Terminates within 21 years and 10 months after the death of 
grantors or beneficiaries of the trust living on the effective date of 
the trust or within 25 years, if applicable under state law.
    Small financial institution means a company that:
    (1) Is organized as a bank, as defined in section 3(a) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(a)), the deposits of which 
are insured by the Federal Deposit Insurance Corporation; a savings 
association, as defined in section 3(b) of the Federal Deposit Insurance 
Act (12 U.S.C. 1813(b)), the deposits of which are insured by the 
Federal Deposit Insurance Corporation; a farm credit system institution 
chartered under the Farm Credit Act of 1971 (12 U.S.C. 2002 et seq.); or 
an insured Federal credit union or State-chartered credit union under 
the Federal Credit Union Act (12 U.S.C. 1751 et seq.); and
    (2) Has total assets of $10,000,000,000 or less on the last day of 
the company's most recent fiscal year.
    State means any state, commonwealth, territory, or possession of the 
United States, the District of Columbia, the Commonwealth of Puerto 
Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, 
Guam, or the United States Virgin Islands.
    Subsidiary of a covered bank means any operating subsidiary of a 
national bank, Federal savings association, or Federal branch or agency 
as defined in Sec.  5.34 of this chapter (national banks), or Sec.  5.38 
of this chapter (Federal savings associations), or any other entity 
owned or controlled by the covered bank that would be a subsidiary under 
12 U.S.C. 1841 (Bank Holding Company Act).
    U.S. agency has the same meaning as the term ``agency'' in 12 U.S.C. 
3101(1).
    U.S. branch has the same meaning as the term ``branch'' in 12 U.S.C. 
3101(3).
    U.S. special resolution regimes means the Federal Deposit Insurance 
Act (12 U.S.C. 1811-1835a) and regulations promulgated thereunder and 
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (12 U.S.C. 5381-5394) and regulations promulgated thereunder.



Sec.  47.3  Applicability.

    (a) General requirement. A covered bank must ensure that each 
covered QFC conforms to the requirements of Sec. Sec.  47.4 and 47.5.
    (b) Covered bank--(1) Generally. For purposes of this part, a 
covered bank is:
    (i) A national bank or Federal savings association that has more 
than $700 billion in total assets as reported on the national bank's or 
Federal savings association's most recent Consolidated Reports of 
Condition and Income (Call Report);
    (ii) A national bank or Federal savings association that is a 
subsidiary of a global systemically important bank holding company that 
has been designated pursuant to Sec.  252.82 of this title (Federal 
Reserve Board Regulation YY) (12 CFR 252.82);
    (iii) A national bank or Federal savings association that is a 
subsidiary of a global systemically important foreign banking 
organization that has been designated pursuant to Sec.  252.87 of

[[Page 933]]

this title (Federal Reserve Board Regulation YY) (12 CFR 252.87); or
    (iv) A Federal branch or agency, as defined in subpart B of this 
chapter (governing Federal branches and agencies), of a global 
systemically important foreign banking organization that has been 
designated pursuant to Sec.  252.87 of this title (Federal Reserve Board 
Regulation YY) (12 CFR 252.87).
    (2) Subsidiary of a covered bank. This part applies to a subsidiary 
of a covered bank as provided under paragraph (b)(1) of this section. 
Specifically, the covered bank is required to ensure that a covered QFC 
to which the subsidiary of a covered bank is a party (as a direct 
counterparty or a support provider) satisfies the requirements of 
Sec. Sec.  47.4 and 47.5 in the same manner and to the same extent 
applicable to the covered bank.
    (3) Subsidiaries not included as covered banks. Notwithstanding 
paragraphs (b)(1) and (2) of this section, a covered bank does not 
include:
    (i) A subsidiary that is owned by a covered bank in satisfaction of 
debt previously contracted in good faith pursuant to section 5137 of the 
Revised Statutes (12 U.S.C. 29) (national bank) or section 5(c) of the 
Home Owners' Loan Act (12 U.S.C. 1464) (Federal savings association);
    (ii) A portfolio concern, as defined under 13 CFR 107.50, that is 
controlled by a small business investment company, as defined in section 
103(3) of the Small Business Investment Act of 1958 (15 U.S.C. 662) 
(national banks), or under section 5(c) of the Home Owners' Loan Act (12 
U.S.C. 1464(c)) (Federal savings associations);
    (iii) A subsidiary that is owned pursuant to paragraph (7) of 
section 5136 of the Revised Statutes (12 U.S.C. 24(Seventh)), or 
paragraph (11) of section 5136 of the Revised Statutes (12 U.S.C. 
24(Eleventh)) (national banks), or Sec.  5.59 of this chapter (12 CFR 
5.59) (Federal savings associations) designed primarily to promote the 
public welfare, including the welfare of low- and moderate-income 
communities or families (such as providing housing, services or jobs).
    (c) Covered QFCs. For purposes of this part, a covered QFC is:
    (1) With respect to a covered bank that is a covered bank on January 
1, 2018, an in-scope QFC that the covered bank:
    (i) Enters, executes, or otherwise becomes a party to on or after 
January 1, 2019; or
    (ii) Entered, executed, or otherwise became a party to before 
January 1, 2019, if the covered bank, or any affiliate that is a covered 
entity, covered bank, or covered FSI, also enters, executes, or 
otherwise becomes a party to a QFC with the same person or a 
consolidated affiliate of the same person on or after January 1, 2019.
    (2) With respect to a covered bank that becomes a covered bank after 
January 1, 2018, an in-scope QFC that the covered bank:
    (i) Enters, executes or otherwise becomes a party to on or after the 
later of the date the covered bank first becomes a covered bank and 
January 1, 2019; or
    (ii) Entered, executed, or otherwise became a party to before the 
date identified in paragraph (c)(2)(i) of this section with respect to 
the covered bank, if the covered bank or any affiliate that is a covered 
entity, covered bank, or covered FSI, also enters, executes, or 
otherwise becomes a party to a QFC with the same person or consolidated 
affiliate of the same person on or after the date identified in 
paragraph (c)(2)(i) of this section with respect to the covered bank.
    (d) In-scope QFCs. An in-scope QFC is a QFC that explicitly:
    (1) Restricts the transfer of a QFC (or any interest or obligation 
in or under, or any property securing, the QFC) from a covered bank; or
    (2) Provides one or more default rights with respect to a QFC that 
may be exercised against a covered bank.
    (e) Rules of construction. For purposes of this part:
    (1) A covered bank does not become a party to a QFC solely by acting 
as agent with respect to the QFC; and
    (2) The exercise of a default right with respect to a covered QFC 
includes the automatic or deemed exercise of the default right pursuant 
to the terms of the QFC or other arrangement.
    (f) Initial applicability of requirements for covered QFCs. (1) With 
respect to

[[Page 934]]

each of its covered QFCs, a covered bank that is a covered bank on 
January 1, 2018, must conform the covered QFC to the requirements of 
this part by:
    (i) January 1, 2019, if each party to the covered QFC is a covered 
entity, covered bank, or covered FSI;
    (ii) July 1, 2019, if each party to the covered QFC (other than the 
covered bank) is a financial counterparty that is not a covered entity, 
covered bank, or covered FSI; or
    (iii) January 1, 2020, if a party to the covered QFC (other than the 
covered bank) is not described in paragraphs (f)(1)(i) or (f)(1)(ii) of 
this section, or if, notwithstanding paragraph (f)(1)(ii) of this 
section, a party to the covered QFC (other than the covered bank) is a 
small financial institution.
    (2) With respect to each of its covered QFCs, a covered bank that is 
not a covered bank on January 1, 2018, must conform the covered QFC to 
the requirements of this part by:
    (i) The first day of the calendar quarter immediately following one 
year after the date the covered bank first becomes a covered bank if 
each party to the covered QFC is a covered entity, covered bank, or 
covered FSI;
    (ii) The first day of the calendar quarter immediately following 18 
months from the date the covered bank first becomes a covered bank if 
each party to the covered QFC (other than the covered bank) is a 
financial counterparty that is not a covered entity, covered bank, or 
covered FSI; or
    (iii) The first day of the calendar quarter immediately following 
two years from the date the covered bank first becomes a covered bank if 
a party to the covered QFC (other than the covered bank) is not 
described in paragraphs (f)(2)(i) or (f)(2)(ii) of this section, or if, 
notwithstanding paragraph (f)(2)(ii) of this section, a party to the 
covered QFC (other than the covered bank) is a small financial 
institution.



Sec.  47.4  U.S. special resolution regimes.

    (a) Covered QFCs not required to be conformed. (1) Notwithstanding 
Sec.  47.3, a covered bank is not required to conform a covered QFC to 
the requirements of this section if:
    (i) The covered QFC designates, in the manner described in paragraph 
(a)(2) of this section, the U.S. special resolution regimes as part of 
the law governing the QFC; and
    (ii) Each party to the covered QFC, other than the covered bank, is:
    (A) An individual that is domiciled in the United States, including 
any State;
    (B) A company that is incorporated in or organized under the laws of 
the United States or any State;
    (C) A company the principal place of business of which is located in 
the United States, including any State; or
    (D) A U.S. branch or U.S. agency.
    (2) A covered QFC designates the U.S. special resolution regimes as 
part of the law governing the QFC if the covered QFC:
    (i) Explicitly provides that the covered QFC is governed by the laws 
of the United States or a state of the United States; and
    (ii) Does not explicitly provide that one or both of the U.S. 
special resolution regimes, or a broader set of laws that includes a 
U.S. special resolution regime, is excluded from the laws governing the 
covered QFC.
    (b) Provisions required. A covered QFC must explicitly provide that:
    (1) In the event the covered bank becomes subject to a proceeding 
under a U.S. special resolution regime, the transfer of the covered QFC 
(and any interest and obligation in or under, and any property securing, 
the covered QFC) from the covered bank will be effective to the same 
extent as the transfer would be effective under the U.S. special 
resolution regime if the covered QFC (and any interest and obligation in 
or under, and any property securing, the covered QFC) were governed by 
the laws of the United States or a state of the United States; and
    (2) In the event the covered bank or an affiliate of the covered 
bank becomes subject to a proceeding under a U.S. special resolution 
regime, default rights with respect to the covered QFC that may be 
exercised against the covered bank are permitted to be exercised to no 
greater extent than the default rights could be exercised under the U.S. 
special resolution regime if the covered QFC were governed by the laws

[[Page 935]]

of the United States or a state of the United States.
    (c) Relevance of creditor protection provisions. The requirements of 
this section apply notwithstanding paragraphs (d), (f), and (h) of Sec.  
47.5.



Sec.  47.5  Insolvency proceedings.

    (a) Covered QFCs not required to be conformed. Notwithstanding Sec.  
47.3, a covered bank is not required to conform a covered QFC to the 
requirements of this section if the covered QFC:
    (1) Does not explicitly provide any default right with respect to 
the covered QFC that is related, directly or indirectly, to an affiliate 
of the direct party becoming subject to a receivership, insolvency, 
liquidation, resolution, or similar proceeding; and
    (2) Does not explicitly prohibit the transfer of a covered affiliate 
credit enhancement, any interest or obligation in or under the covered 
affiliate credit enhancement, or any property securing the covered 
affiliate credit enhancement to a transferee upon or following an 
affiliate of the direct party becoming subject to a receivership, 
insolvency, liquidation, resolution, or similar proceeding or would 
prohibit such a transfer only if the transfer would result in the 
supported party being the beneficiary of the credit enhancement in 
violation of any law applicable to the supported party.
    (b) General prohibitions. (1) A covered QFC may not permit the 
exercise of any default right with respect to the covered QFC that is 
related, directly or indirectly, to an affiliate of the direct party 
becoming subject to a receivership, insolvency, liquidation, resolution, 
or similar proceeding.
    (2) A covered QFC may not prohibit the transfer of a covered 
affiliate credit enhancement, any interest or obligation in or under the 
covered affiliate credit enhancement, or any property securing the 
covered affiliate credit enhancement to a transferee upon or following 
an affiliate of the direct party becoming subject to a receivership, 
insolvency, liquidation, resolution, or similar proceeding unless the 
transfer would result in the supported party being the beneficiary of 
the credit enhancement in violation of any law applicable to the 
supported party.
    (c) Definitions relevant to the general prohibitions--(1) Direct 
party. Direct party means a covered entity, covered bank, or covered FSI 
that is a party to the direct QFC.
    (2) Direct QFC. Direct QFC means a QFC that is not a credit 
enhancement, provided that, for a QFC that is a master agreement that 
includes an affiliate credit enhancement as a supplement to the master 
agreement, the direct QFC does not include the affiliate credit 
enhancement.
    (3) Affiliate credit enhancement. Affiliate credit enhancement means 
a credit enhancement that is provided by an affiliate of a party to the 
direct QFC that the credit enhancement supports.
    (d) General creditor protections. Notwithstanding paragraph (b) of 
this section, a covered direct QFC and covered affiliate credit 
enhancement that supports the covered direct QFC may permit the exercise 
of a default right with respect to the covered QFC that arises as a 
result of:
    (1) The direct party becoming subject to a receivership, insolvency, 
liquidation, resolution, or similar proceeding;
    (2) The direct party not satisfying a payment or delivery obligation 
pursuant to the covered QFC or another contract between the same parties 
that gives rise to a default right in the covered QFC; or
    (3) The covered affiliate support provider or transferee not 
satisfying a payment or delivery obligation pursuant to a covered 
affiliate credit enhancement that supports the covered direct QFC.
    (e) Definitions relevant to the general creditor protections--(1) 
Covered direct QFC. Covered direct QFC means a direct QFC to which a 
covered entity, covered bank, or covered FSI is a party.
    (2) Covered affiliate credit enhancement. Covered affiliate credit 
enhancement means an affiliate credit enhancement in which a covered 
entity, covered bank, or covered FSI is the obligor of the credit 
enhancement.
    (3) Covered affiliate support provider. Covered affiliate support 
provider means, with respect to a covered affiliate credit enhancement, 
the affiliate of the direct party that is obligated under the

[[Page 936]]

covered affiliate credit enhancement and is not a transferee.
    (4) Supported party. Supported party means, with respect to a 
covered affiliate credit enhancement and the direct QFC that the covered 
affiliate credit enhancement supports, a party that is a beneficiary of 
the covered affiliate support provider's obligation under the covered 
affiliate credit enhancement.
    (f) Additional creditor protections for supported QFCs. 
Notwithstanding paragraph (b) of this section, with respect to a covered 
direct QFC that is supported by a covered affiliate credit enhancement, 
the covered direct QFC and the covered affiliate credit enhancement may 
permit the exercise of a default right after the stay period that is 
related, directly or indirectly, to the covered affiliate support 
provider becoming subject to a receivership, insolvency, liquidation, 
resolution, or similar proceeding if:
    (1) The covered affiliate support provider that remains obligated 
under the covered affiliate credit enhancement becomes subject to a 
receivership, insolvency, liquidation, resolution, or similar proceeding 
other than a Chapter 11 proceeding;
    (2) Subject to paragraph (h) of this section, the transferee, if 
any, becomes subject to a receivership, insolvency, liquidation, 
resolution, or similar proceeding;
    (3) The covered affiliate support provider does not remain, and a 
transferee does not become, obligated to the same, or substantially 
similar, extent as the covered affiliate support provider was obligated 
immediately prior to entering the receivership, insolvency, liquidation, 
resolution, or similar proceeding with respect to:
    (i) The covered affiliate credit enhancement;
    (ii) All other covered affiliate credit enhancements provided by the 
covered affiliate support provider in support of other covered direct 
QFCs between the direct party and the supported party under the covered 
affiliate credit enhancement referenced in paragraph (f)(3)(i) of this 
section; and
    (iii) All covered affiliate credit enhancements provided by the 
covered affiliate support provider in support of covered direct QFCs 
between the direct party and affiliates of the supported party 
referenced in paragraph (f)(3)(ii) of this section; or
    (4) In the case of a transfer of the covered affiliate credit 
enhancement to a transferee:
    (i) All of the ownership interests of the direct party directly or 
indirectly held by the covered affiliate support provider are not 
transferred to the transferee; or
    (ii) Reasonable assurance has not been provided that all or 
substantially all of the assets of the covered affiliate support 
provider (or net proceeds therefrom), excluding any assets reserved for 
the payment of costs and expenses of administration in the receivership, 
insolvency, liquidation, resolution, or similar proceeding, will be 
transferred or sold to the transferee in a timely manner.
    (g) Definitions relevant to the additional creditor protections for 
supported QFCs--(1) Stay period. Stay period means, with respect to a 
receivership, insolvency, liquidation, resolution, or similar 
proceeding, the period of time beginning on the commencement of the 
proceeding and ending at the later of 5:00 p.m. (eastern time) on the 
business day following the date of the commencement of the proceeding 
and 48 hours after the commencement of the proceeding.
    (2) Business day. Business day means a day on which commercial banks 
in the jurisdiction the proceeding is commenced are open for general 
business (including dealings in foreign exchange and foreign currency 
deposits).
    (3) Transferee. Transferee means a person to whom a covered 
affiliate credit enhancement is transferred upon the covered affiliate 
support provider entering a receivership, insolvency, liquidation, 
resolution, or similar proceeding or thereafter as part of the 
resolution, restructuring, or reorganization involving the covered 
affiliate support provider.
    (h) Creditor protections related to FDI Act proceedings. 
Notwithstanding paragraphs (b), (d), and (f) of this section, with 
respect to a covered direct QFC that is supported by a covered affiliate 
credit enhancement, the covered direct QFC and the covered affiliate 
credit enhancement may permit the exercise of

[[Page 937]]

a default right that is related, directly or indirectly, to the covered 
affiliate support provider becoming subject to FDI Act proceedings:
    (1) After the FDI Act stay period, if the covered affiliate credit 
enhancement is not transferred pursuant to section 11(e)(9)-(e)(10) of 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(9)-(e)(10)) and any 
regulations promulgated thereunder; or
    (2) During the FDI Act stay period, if the default right may only be 
exercised so as to permit the supported party under the covered 
affiliate credit enhancement to suspend performance with respect to the 
supported party's obligations under the covered direct QFC to the same 
extent as the supported party would be entitled to do if the covered 
direct QFC were with the covered affiliate support provider and were 
treated in the same manner as the covered affiliate credit enhancement.
    (i) Prohibited terminations. A covered QFC must require, after an 
affiliate of the direct party has become subject to a receivership, 
insolvency, liquidation, resolution, or similar proceeding:
    (1) The party seeking to exercise a default right to bear the burden 
of proof that the exercise is permitted under the covered QFC; and
    (2) Clear and convincing evidence or a similar or higher burden of 
proof to exercise a default right.



Sec.  47.6  Approval of enhanced creditor protection conditions.

    (a) Protocol compliance. (1) Unless the OCC determines otherwise 
based on the specific facts and circumstances, a covered QFC is deemed 
to comply with this part if it is amended by the universal protocol or 
the U.S. protocol.
    (2) A covered QFC will be deemed to be amended by the universal 
protocol for purposes of paragraph (a)(1) of this section 
notwithstanding the covered QFC being amended by one or more Country 
Annexes, as the term is defined in the universal protocol.
    (3) For purposes of paragraphs (a)(1) and (2) of this section:
    (i) The universal protocol means the ISDA 2015 Universal Resolution 
Stay Protocol, including the Securities Financing Transaction Annex and 
Other Agreements Annex, published by the International Swaps and 
Derivatives Association, Inc., as of May 3, 2016, and minor or technical 
amendments thereto;
    (ii) The U.S. protocol means a protocol that is the same as the 
universal protocol other than as provided in paragraphs (a)(3)(ii)(A)-
(F) of this section.
    (A) The provisions of Section 1 of the attachment to the universal 
protocol may be limited in their application to a covered entity, 
covered bank, or covered FSI and may be limited with respect to 
resolutions under the Identified Regimes, as those regimes are 
identified by the universal protocol;
    (B) The provisions of Section 2 of the attachment to the universal 
protocol may be limited in their application to a covered entity, 
covered bank, or covered FSI;
    (C) The provisions of Section 4(b)(i)(A) of the attachment to the 
universal protocol must not apply with respect to U.S. special 
resolution regimes;
    (D) The provision of Section 4(b) of the attachment to the universal 
protocol may only be effective to the extent that the covered QFC 
affected by an adherent's election thereunder would continue to meet the 
requirements of this part;
    (E) The provisions of Section 2(k) of the attachment to the 
universal protocol must not apply; and
    (F) The U.S. protocol may include minor and technical differences 
from the universal protocol and differences necessary to conform the 
U.S. protocol to the differences described in paragraphs (a)(3)(ii)(A)-
(E) of this section;
    (iii) Amended by the universal protocol or the U.S. protocol, with 
respect to covered QFCs between adherents to the protocol, includes 
amendments through incorporation of the terms of the protocol (by 
reference or otherwise) into the covered QFC; and
    (iv) The attachment to the universal protocol means the attachment 
that the universal protocol identifies as ``ATTACHMENT to the ISDA 2015 
UNIVERSAL RESOLUTION STAY PROTOCOL.''
    (b) Proposal of enhanced creditor protection conditions. (1) A 
covered bank may request that the OCC approve as

[[Page 938]]

compliant with the requirements of Sec. Sec.  47.4 and 47.5 proposed 
provisions of one or more forms of covered QFCs, or proposed amendments 
to one or more forms of covered QFCs, with enhanced creditor protection 
conditions.
    (2) Enhanced creditor protection conditions means a set of limited 
exemptions to the requirements of Sec.  47.5(b) that are different than 
that of paragraphs (d), (f), and (h) of Sec.  47.5.
    (3) A covered bank making a request under paragraph (b)(1) of this 
section must provide:
    (i) An analysis of the proposal that addresses each consideration in 
paragraph (d) of this section;
    (ii) A written legal opinion verifying that proposed provisions or 
amendments would be valid and enforceable under applicable law of the 
relevant jurisdictions, including, in the case of proposed amendments, 
the validity and enforceability of the proposal to amend the covered 
QFCs; and
    (iii) Any other relevant information that the OCC requests.
    (c) OCC approval. The OCC may approve, subject to any conditions or 
commitments the OCC may set, a proposal by a covered bank under 
paragraph (b) of this section if the proposal, as compared to a covered 
QFC that contains only the limited exemptions in paragraphs of (d), (f), 
and (h) of Sec.  47.5 or that is amended as provided under paragraph (a) 
of this section, would promote the safety and soundness of federally 
chartered or licensed institutions by mitigating the potential 
destabilizing effects of the resolution of a global significantly 
important banking entity that is an affiliate of the covered bank, at 
least to the same extent.
    (d) Considerations. In reviewing a proposal under this section, the 
OCC may consider all facts and circumstances related to the proposal, 
including:
    (1) Whether, and the extent to which, the proposal would reduce the 
resiliency of such covered banks during distress or increase the impact 
on U.S. financial stability were one or more of the covered banks to 
fail;
    (2) Whether, and the extent to which, the proposal would materially 
decrease the ability of a covered bank, or an affiliate of a covered 
bank, to be resolved in a rapid and orderly manner in the event of the 
financial distress or failure of the covered bank, or an affiliate of a 
covered bank, that is required to submit a resolution plan;
    (3) Whether, and the extent to which, the set of conditions or the 
mechanism in which they are applied facilitates, on an industry-wide 
basis, contractual modifications to remove impediments to resolution and 
increase market certainty, transparency, and equitable treatment with 
respect to the default rights of non-defaulting parties to a covered 
QFC;
    (4) Whether, and the extent to which, the proposal applies to 
existing and future transactions;
    (5) Whether, and the extent to which, the proposal would apply to 
multiple forms of QFCs or multiple covered banks or an affiliates of 
covered banks;
    (6) Whether the proposal would permit a party to a covered QFC that 
is within the scope of the proposal to adhere to the proposal with 
respect to only one or a subset of covered banks or an affiliates of 
covered banks;
    (7) With respect to a supported party, the degree of assurance the 
proposal provides to the supported party that the material payment and 
delivery obligations of the covered affiliate credit enhancement and the 
covered direct QFC it supports will continue to be performed after the 
covered affiliate support provider enters a receivership, insolvency, 
liquidation, resolution, or similar proceeding;
    (8) The presence, nature, and extent of any provisions that require 
a covered affiliate support provider or transferee to meet conditions 
other than material payment or delivery obligations to its creditors;
    (9) The extent to which the supported party's overall credit risk to 
the direct party may increase if the enhanced creditor protection 
conditions are not met and the likelihood that the supported party's 
credit risk to the direct party would decrease or remain the same if the 
enhanced creditor protection conditions are met; and
    (10) Whether the proposal provides the counterparty with additional 
default rights or other rights.

[[Page 939]]



Sec.  47.7  Foreign bank multi-branch master agreements.

    (a) Treatment of foreign bank multi-branch master agreements. With 
respect to a Federal branch or agency of a global systemically important 
foreign banking organization, a foreign bank multi-branch master 
agreement that is a covered QFC solely because the master agreement 
permits agreements or transactions that are QFCs to be entered into at 
one or more Federal branches or agencies of the global systemically 
important foreign banking organization will be considered a covered QFC 
for purposes of this part only with respect to such agreements or 
transactions booked at such Federal branches or agencies.
    (b) Definition of foreign bank multi-branch master agreements. A 
foreign bank multi-branch master agreement means a master agreement that 
permits a Federal branch or agency and another place of business of a 
foreign bank that is outside the United States to enter transactions 
under the agreement.



Sec.  47.8  Exclusion of certain QFCs.

    (a) Exclusion of QFCs with FMUs. Notwithstanding Sec.  47.3, a 
covered bank is not required to conform to the requirements of this part 
a covered QFC to which:
    (1) A CCP is party; or
    (2) Each party (other than the covered bank) is an FMU.
    (b) Exclusion of certain covered entity and covered FSI QFCs. If a 
covered QFC is also a covered QFC under part 382 or 252, subpart I, of 
this title that an affiliate of the covered bank is also required to 
conform pursuant to part 382 or 252, subpart I, of this title and the 
covered bank is:
    (1) The affiliate credit enhancement provider with respect to the 
covered QFC, then the covered bank is required to conform the credit 
enhancement to the requirements of this part but is not required to 
conform the direct QFC to the requirements of this part; or
    (2) The direct party to which the excluded bank is the affiliate 
credit enhancement provider, then the covered bank is required to 
conform the direct QFC to the requirements of this part but is not 
required to conform the credit enhancement to the requirements of this 
part.
    (c) Exclusion of certain contracts. Notwithstanding Sec.  47.3, a 
covered bank is not required to conform the following types of contracts 
or agreements to the requirements of this part:
    (1) An investment advisory contract that:
    (i) Is with a retail customer or counterparty;
    (ii) Does not explicitly restrict the transfer of the contract (or 
any QFC entered into pursuant thereto or governed thereby, or any 
interest or obligation in or under, or any property securing, any such 
QFC or the contract) from the covered bank except as necessary to comply 
with section 205(a)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-5(a)(2)); and
    (iii) Does not explicitly provide a default right with respect to 
the contract or any QFC entered pursuant thereto or governed thereby.
    (2) A warrant that:
    (i) Evidences a right to subscribe to or otherwise acquire a 
security of the covered bank or an affiliate of the covered bank; and
    (ii) Was issued prior to January 1, 2018.
    (d) Exemption by order. The OCC may exempt by order one or more 
covered banks from conforming one or more contracts or types of 
contracts to one or more of the requirements of this part after 
considering:
    (1) The potential impact of the exemption on the ability of the 
covered bank, or affiliates of the covered bank, to be resolved in a 
rapid and orderly manner in the event of the financial distress or 
failure of the entity that is required to submit a resolution plan;
    (2) The burden the exemption would relieve; and
    (3) Any other factor the OCC deems relevant.



PART 48_RETAIL FOREIGN EXCHANGE TRANSACTIONS--Table of Contents



Sec.
48.1 Authority, purpose, and scope.
48.2 Definitions.
48.3 Prohibited transactions.
48.4 Supervisory non-objection.
48.5 Application and closing out of offsetting long and short positions.

[[Page 940]]

48.6 Disclosure.
48.7 Recordkeeping.
48.8 Capital requirements.
48.9 Margin requirements.
48.10 Required reporting to customers.
48.11 Unlawful representations.
48.12 Authorization to trade.
48.13 Trading and operational standards.
48.14 Supervision.
48.15 Notice of transfers.
48.16 Customer dispute resolution.
48.17 Reservation of authority.

    Authority: 7 U.S.C. 27 et seq.; 12 U.S.C. 1 et seq., 24, 93a, 161, 
1461 et seq., 1462a, 1463, 1464, 1813(q), 1818, 1831o, 3101 et seq., 
3102, 3106a, 3108, and 5412.

    Source: 76 FR 41384, July 14, 2011, unless otherwise noted.



Sec.  48.1  Authority, purpose, and scope.

    (a) Authority--(1) National banks. A national bank may offer or 
enter into retail foreign exchange transactions. A national bank 
offering or entering into retail foreign exchange transactions must 
comply with the requirements of this part.
    (2) Federal savings associations. A Federal savings association may 
offer or enter into retail foreign exchange transactions. A Federal 
savings association offering or entering into retail foreign exchange 
transactions must comply with the requirements of this part as if each 
reference to a national bank were a reference to a Federal savings 
association.
    (b) Purpose. This part establishes rules applicable to retail 
foreign exchange transactions engaged in by national banks and applies 
on or after the effective date.
    (c) Scope. Except as provided in paragraph (d) of this section, this 
part applies to national banks.
    (d) International applicability. Sections 48.3 and 48.5 to 48.16 do 
not apply to retail foreign exchange transactions between a foreign 
branch of a national bank and a non-U.S. customer. With respect to those 
transactions, the foreign branch remains subject to any disclosure, 
recordkeeping, capital, margin, reporting, business conduct, 
documentation, and other requirements of foreign law applicable to the 
branch.

[76 FR 41384, July 14, 2011, as amended at 76 FR 56096, Sept. 12, 2011]



Sec.  48.2  Definitions.

    In addition to the definitions in this section, for purposes of this 
part, the following terms have the same meaning as in the Commodity 
Exchange Act: ``Affiliated person of a futures commission merchant''; 
``associated person''; ``contract of sale''; ``commodity''; ``eligible 
contract participant''; ``futures commission merchant''; ``future 
delivery''; ``option''; ``security''; and ``security futures product''.
    Affiliate has the same meaning as in section 2(k) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(k)).
    Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. 1 
et seq.).
    Federal savings association means a Federal savings association or 
Federal savings bank chartered under section 5 of the Home Owners' Loan 
Act (12 U.S.C. 1464) or an operating subsidiary thereof.
    Forex means foreign exchange.
    Identified banking product has the same meaning as in section 401(b) 
of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(b)).
    Institution-affiliated party or IAP has the same meaning as in 
section 3(u)(1), (2), or (3) of the Federal Deposit Insurance Act (12 
U.S.C. 1813(u)(1), (2), or (3)).
    Introducing broker means any person that solicits or accepts orders 
from a retail forex customer in connection with retail forex 
transactions.
    National bank means:
    (1) A national bank;
    (2) A Federal branch or agency of a foreign bank, each as defined in 
12 U.S.C. 3101; and
    (3) An operating subsidiary of a national bank or an operating 
subsidiary of a Federal branch or agency of a foreign bank.
    Related person, when used in reference to a retail forex 
counterparty, means:
    (1) Any general partner, officer, director, or owner of 10 percent 
or more of the capital stock of the retail forex counterparty;
    (2) An associated person or employee of the retail forex 
counterparty, if the retail forex counterparty is not a national bank;

[[Page 941]]

    (3) An IAP of the retail forex counterparty, if the retail forex 
counterparty is a national bank; and
    (4) A relative or spouse of any of the foregoing persons, or a 
relative of such spouse, who shares the same home as any of the 
foregoing persons.
    Retail foreign exchange dealer means any person other than a retail 
forex customer that is, or that offers to be, the counterparty to a 
retail forex transaction, except for a person described in item (aa), 
(bb), (cc)(AA), (dd), or (ff) of section 2(c)(2)(B)(i)(II) of the 
Commodity Exchange Act (7 U.S.C. 2(c)(2)(B)(i)(II)).
    Retail forex account means the account of a retail forex customer, 
established with a national bank, in which retail forex transactions 
with the national bank as counterparty are undertaken, or the account of 
a retail forex customer that is established in order to enter into such 
transactions.
    Retail forex account agreement means the contractual agreement 
between a national bank and a retail forex customer that contains the 
terms governing the customer's retail forex account with the national 
bank.
    Retail forex business means engaging in one or more retail forex 
transactions with the intent to derive income from those transactions, 
either directly or indirectly.
    Retail forex counterparty includes, as appropriate:
    (1) A national bank;
    (2) A retail foreign exchange dealer;
    (3) A futures commission merchant; and
    (4) An affiliated person of a futures commission merchant.
    Retail forex customer means a customer that is not an eligible 
contract participant, acting on his, her, or its own behalf and engaging 
in retail forex transactions.
    Retail forex obligation means an obligation of a retail forex 
customer with respect to a retail forex transaction, including trading 
losses, fees, spreads, charges, and commissions.
    Retail forex proprietary account means: A retail forex account 
carried on the books of a national bank for one of the following 
persons; a retail forex account of which 10 percent or more is owned by 
one of the following persons; or a retail forex account of which an 
aggregate of 10 percent or more of which is owned by more than one of 
the following persons:
    (1) The national bank;
    (2) An officer, director, or owner of 10 percent or more of the 
capital stock of the national bank; or
    (3) An employee of the national bank, whose duties include:
    (i) The management of the national bank's business;
    (ii) The handling of the national bank's retail forex transactions;
    (iii) The keeping of records, including without limitation the 
software used to make or maintain those records, pertaining to the 
national bank's retail forex transactions; or
    (iv) The signing or co-signing of checks or drafts on behalf of the 
national bank;
    (4) A spouse or minor dependent living in the same household as any 
of the foregoing persons; or
    (5) An affiliate of the national bank.
    Retail forex transaction means an agreement, contract, or 
transaction in foreign currency, other than an identified banking 
product or a part of an identified banking product, that is offered or 
entered into by a national bank with a person that is not an eligible 
contract participant and that is:
    (1) A contract of sale of a commodity for future delivery or an 
option on such a contract;
    (2) An option, other than an option executed or traded on a national 
securities exchange registered pursuant to section 6(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78(f)(a)); or
    (3) Offered or entered into on a leveraged or margined basis, or 
financed by a national bank, its affiliate, or any person acting in 
concert with the national bank or its affiliate on a similar basis, 
other than:
    (i) A security that is not a security futures product as defined in 
section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)); or
    (ii) A contract of sale that:
    (A) Results in actual delivery within two days; or
    (B) Creates an enforceable obligation to deliver between a seller 
and buyer

[[Page 942]]

that have the ability to deliver and accept delivery, respectively, in 
connection with their line of business; or
    (iii) An agreement, contract, or transaction that the OCC determines 
is not functionally or economically similar to:
    (A) A contract of sale of a commodity for future delivery or an 
option on such a contract; or
    (B) An option, other than an option executed or traded on a national 
securities exchange registered pursuant to section 6(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78(f)(a)).

[76 FR 41384, July 14, 2011, as amended at 76 FR 56096, Sept. 12, 2011]



Sec.  48.3  Prohibited transactions.

    (a) Fraudulent conduct prohibited. No national bank or its IAPs may, 
directly or indirectly, in or in connection with any retail forex 
transaction:
    (1) Cheat or defraud or attempt to cheat or defraud any person;
    (2) Willfully make or cause to be made to any person any false 
report or statement or cause to be entered for any person any false 
record; or
    (3) Willfully deceive or attempt to deceive any person by any means 
whatsoever.
    (b) Acting as counterparty and exercising discretion prohibited. If 
a national bank can cause retail forex transactions to be effected for a 
retail forex customer without the retail forex customer's specific 
authorization, then neither the national bank nor its affiliates may act 
as the counterparty for any retail forex transaction with that retail 
forex customer.



Sec.  48.4  Supervisory non-objection.

    (a) Supervisory non-objection required. Before commencing a retail 
forex business, a national bank must provide the OCC with prior notice 
and obtain from the OCC a written supervisory non-objection.
    (b) Requirements for obtaining supervisory non-objection. (1) In 
order to obtain a written supervisory non-objection, a national bank 
must:
    (i) Establish to the satisfaction of the OCC that the national bank 
has established and implemented written policies, procedures, and risk 
measurement and management systems and controls for the purpose of 
ensuring that it conducts retail forex transactions in a safe and sound 
manner and in compliance with this part; and
    (ii) Provide such other information as the OCC may require.
    (2) The information provided under paragraph (b)(1) of this section 
must include, without limitation, information regarding:
    (i) Customer due diligence, including without limitation credit 
evaluations, customer appropriateness, and ``know your customer'' 
documentation;
    (ii) New product approvals;
    (iii) The haircuts that the national bank will apply to noncash 
margin as provided in Sec.  48.9(b)(2); and
    (iv) Conflicts of interest.
    (c) Treatment of existing retail forex businesses. A national bank 
that is engaged in a retail forex business on July 15, 2011 or September 
12, 2011 for Federal savings associations, may continue to do so for up 
to six months, subject to an extension of time by the OCC, if it 
requests the supervisory non-objection required by paragraph (a) of this 
section within 30 days of July 15, 2011 or September 12, 2011 for 
Federal savings associations, and submits the information required to be 
submitted under paragraph (b) of this section.
    (d) Compliance with the Commodity Exchange Act. A national bank that 
is engaged in a retail forex business on July 15, 2011 or September 12, 
2011 for Federal savings associations and complies with paragraph (c) of 
this section will be deemed, during the six-month or extended period 
described in paragraph (c) of this section, to be acting pursuant to a 
rule or regulation described in section 2(c)(2)(E)(ii)(I) of the 
Commodity Exchange Act (7 U.S.C. 2(c)(2)(E)(ii)(I)).

[76 FR 41384, July 14, 2011, as amended at 76 FR 56096, Sept. 12, 2011]



Sec.  48.5  Application and closing out of offsetting long and short positions.

    (a) Application of purchases and sales. Any national bank that--
    (1) Engages in a retail forex transaction involving the purchase of 
any currency for the account of any retail forex customer when the 
account of such retail forex customer at the time of such purchase has 
an open retail

[[Page 943]]

forex transaction for the sale of the same currency;
    (2) Engages in a retail forex transaction involving the sale of any 
currency for the account of any retail forex customer when the account 
of such retail forex customer at the time of such sale has an open 
retail forex transaction for the purchase of the same currency;
    (3) Purchases a put or call option involving foreign currency for 
the account of any retail forex customer when the account of such retail 
forex customer at the time of such purchase has a short put or call 
option position with the same underlying currency, strike price, and 
expiration date as that purchased; or
    (4) Sells a put or call option involving foreign currency for the 
account of any retail forex customer when the account of such retail 
forex customer at the time of such sale has a long put or call option 
position with the same underlying currency, strike price, and expiration 
date as that sold must:
    (i) Immediately apply such purchase or sale against such previously 
held opposite transaction; and
    (ii) Promptly furnish such retail forex customer with a statement 
showing the financial result of the transactions involved and the name 
of any introducing broker to the account.
    (b) Close-out against oldest open position. In all instances in 
which the short or long position in a customer's retail forex account 
immediately prior to an offsetting purchase or sale is greater than the 
quantity purchased or sold, the national bank must apply such offsetting 
purchase or sale to the oldest portion of the previously held short or 
long position.
    (c) Transactions to be applied as directed by customer. 
Notwithstanding paragraphs (a) and (b) of this section, to the extent 
the national bank allows retail forex customers to use other methods of 
offsetting retail forex transactions, the offsetting transaction must be 
applied as directed by a retail forex customer's specific instructions. 
These instructions may not be made by the national bank or an IAP of the 
national bank.



Sec.  48.6  Disclosure.

    (a) Risk disclosure statement required. No national bank may open or 
maintain open an account that will engage in retail forex transactions 
for a retail forex customer unless the national bank has furnished the 
retail forex customer with a separate written disclosure statement 
containing only the language set forth in paragraph (d) of this section 
and the disclosures required by paragraphs (e) and (f) of this section.
    (b) Acknowledgment of risk disclosure statement required. The 
national bank must receive from the retail forex customer a written 
acknowledgment signed and dated by the customer that the customer 
received and understood the written disclosure statement required by 
paragraph (a) of this section.
    (c) Placement of risk disclosure statement. The disclosure statement 
may be attached to other documents as the initial page(s) of such 
documents and as the only material on such page(s).
    (d) Content of risk disclosure statement. The language set forth in 
the written disclosure statement required by paragraph (a) of this 
section is as follows:

                        Risk Disclosure Statement

    Retail forex transactions involve the leveraged trading of contracts 
denominated in foreign currency with [name of entity] as your 
counterparty. Because of the leverage and the other risks disclosed 
here, you can rapidly lose all of the funds or property you pledge to 
[name of entity] as margin for retail forex trading. You may lose more 
than you pledge as margin.
    If your margin falls below the required amount, and you fail to 
provide the required additional margin, [name of entity] is required to 
liquidate your retail forex transactions. [Name of entity] cannot apply 
your retail forex losses to any of your assets or liabilities at [name 
of entity] other than funds or property that you have pledged as margin 
for retail forex transactions. However, if you lose more money than you 
have pledged as margin, [name of entity] may seek to recover that 
deficiency in an appropriate forum, such as a court of law.
    You should be aware of and carefully consider the following points 
before determining whether retail forex trading is appropriate for you.
    (1) Trading is not on a regulated market or exchange--[name of 
entity] is your trading counterparty and has conflicting interests. The 
retail forex transaction you are entering

[[Page 944]]

into is not conducted on an interbank market nor is it conducted on a 
futures exchange subject to regulation as a designated contract market 
by the Commodity Futures Trading Commission. The foreign currency trades 
you transact are trades with [name of entity] as the counterparty. When 
you sell, [name of entity] is the buyer. When you buy, [name of entity] 
is the seller. As a result, when you lose money trading, [name of 
entity] is making money on such trades, in addition to any fees, 
commissions, or spreads [name of entity] may charge.
    (2) An electronic trading platform for retail foreign currency 
transactions is not an exchange. It is an electronic connection for 
accessing [name of entity]. The terms of availability of such a platform 
are governed only by your contract with [name of entity]. Any trading 
platform that you may use to enter into off-exchange foreign currency 
transactions is only connected to [name of entity]. You are accessing 
that trading platform only to transact with [name of entity]. You are 
not trading with any other entities or customers of [name of entity] by 
accessing such platform. The availability and operation of any such 
platform, including the consequences of the unavailability of the 
trading platform for any reason, is governed only by the terms of your 
account agreement with [name of entity].
    (3) You may be able to offset or liquidate any trading positions 
only through [name of national bank] because the transactions are not 
made on an exchange or regulated contract market, and [name of entity] 
may set its own prices. Your ability to close your transactions or 
offset positions is limited to what [name of entity] will offer to you, 
as there is no other market for these transactions. [Name of entity] may 
offer any prices it wishes, including prices derived from outside 
sources or not in its discretion. [Name of entity] may establish its 
prices by offering spreads from third-party prices, but it is under no 
obligation to do so or to continue to do so. [Name of entity] may offer 
different prices to different customers at any point in time on its own 
terms. The terms of your account agreement alone govern the obligations 
[name of entity] has to you to offer prices and offer offset or 
liquidating transactions in your account and make any payments to you. 
The prices offered by [name of entity] may or may not reflect prices 
available elsewhere at any exchange, interbank, or other market for 
foreign currency.
    (4) Paid solicitors may have undisclosed conflicts. [Name of entity] 
may compensate introducing brokers for introducing your account in ways 
that are not disclosed to you. Such paid solicitors are not required to 
have, and may not have, any special expertise in trading and may have 
conflicts of interest based on the method by which they are compensated. 
You should thoroughly investigate the manner in which all such 
solicitors are compensated and be very cautious in granting any person 
or entity authority to trade on your behalf. You should always consider 
obtaining dated written confirmation of any information you are relying 
on from [name of entity] in making any trading or account decisions.
    (5) Retail forex transactions are not insured by the Federal Deposit 
Insurance Corporation.
    (6) Retail forex transactions are not a deposit in, or guaranteed 
by, [name of entity].
    (7) Retail forex transactions are subject to investment risks, 
including possible loss of all amounts invested.
    Finally, you should thoroughly investigate any statements by [name 
of entity] that minimize the importance of, or contradict, any of the 
terms of this risk disclosure. These statements may indicate sales 
fraud.
    This brief statement cannot, of course, disclose all the risks and 
other aspects of trading off-exchange foreign currency with [name of 
entity].
    I hereby acknowledge that I have received and understood this risk 
disclosure statement.
________________________________________________________________________
Date
________________________________________________________________________
Signature of Customer

    (e)(1) Disclosure of profitable accounts ratio. Immediately 
following the language set forth in paragraph (d) of this section, the 
statement required by paragraph (a) of this section must include, for 
each of the most recent four calendar quarters during which the national 
bank maintained retail forex customer accounts:
    (i) The total number of retail forex customer accounts maintained by 
the national bank over which the national bank does not exercise 
investment discretion;
    (ii) The percentage of such accounts that were profitable for retail 
forex customer accounts during the quarter; and
    (iii) The percentage of such accounts that were not profitable for 
retail forex customer accounts during the quarter.
    (2) The national bank's statement of profitable trades must include 
the following legend: ``Past performance is not necessarily indicative 
of future results.'' Each national bank must provide, upon request, to 
any retail forex customer or prospective retail forex customer the total 
number of retail

[[Page 945]]

forex accounts maintained by the national bank for which the national 
bank does not exercise investment discretion, the percentage of such 
accounts that were profitable, and the percentage of such accounts that 
were not profitable for each calendar quarter during the most recent 
five-year period during which the national bank maintained such 
accounts.
    (f) Disclosure of fees and other charges. Immediately following the 
language required by paragraph (e) of this section, the statement 
required by paragraph (a) of this section must include:
    (1) The amount of any fee, charge, spread, or commission that the 
national bank may impose on the retail forex customer in connection with 
a retail forex account or retail forex transaction;
    (2) An explanation of how the national bank will determine the 
amount of such fees, charges, spreads, or commissions; and
    (3) The circumstances under which the national bank may impose such 
fees, charges, spreads, or commissions.
    (g) Future disclosure requirements. If, with regard to a retail 
forex customer, the national bank changes any fee, charge, or commission 
required to be disclosed under paragraph (f) of this section, then the 
national bank must mail or deliver to the retail forex customer a notice 
of the changes at least 15 days prior to the effective date of the 
change.
    (h) Form of disclosure requirements. The disclosures required by 
this section must be clear and conspicuous and designed to call 
attention to the nature and significance of the information provided.
    (i) Other disclosure requirements unaffected. This section does not 
relieve a national bank from any other disclosure obligation it may have 
under applicable law.

[76 FR 41384, July 14, 2011, as amended at 76 FR 56096, Sept. 12, 2011]



Sec.  48.7  Recordkeeping.

    (a) General rule. A national bank engaging in retail forex 
transactions must keep full, complete, and systematic records, together 
with all pertinent data and memoranda, pertaining to its retail forex 
business, including the following 6 types of records:
    (1) Retail forex account records. For each retail forex account:
    (i) The name and address of the person for whom the account is 
carried or introduced and the principal occupation or business of the 
person;
    (ii) The name of any other person guaranteeing the account or 
exercising trading control with respect to the account;
    (iii) The establishment or termination of the account;
    (iv) A means to identify the person that has solicited and is 
responsible for the account;
    (v) The funds in the account, net of any commissions and fees;
    (vi) The account's net profits and losses on open trades;
    (vii) The funds in the account plus or minus the net profits and 
losses on open trades, adjusted for the net option value in the case of 
open options positions;
    (viii) Financial ledger records that show all charges against and 
credits to the account, including deposits, withdrawals, and transfers, 
and charges or credits resulting from losses or gains on closed 
transactions; and
    (ix) A list of all retail forex transactions executed for the 
account, with the details specified in paragraph (a)(2) of this section.
    (2) Retail forex transaction records. For each retail forex 
transaction:
    (i) The date and time the national bank received the order;
    (ii) The price at which the national bank placed the order, or, in 
the case of an option, the premium that the retail forex customer paid;
    (iii) The customer account identification information;
    (iv) The currency pair;
    (v) The size or quantity of the order;
    (vi) Whether the order was a buy or sell order;
    (vii) The type of order, if the order was not a market order;
    (viii) The size and price at which the order is executed, or in the 
case of an option, the amount of the premium paid for each option 
purchased, or the amount credited for each option sold;

[[Page 946]]

    (ix) For options, whether the option is a put or call, expiration 
date, quantity, underlying contract for future delivery or underlying 
physical, strike price, and details of the purchase price of the option, 
including premium, mark-up, commission, and fees; and
    (x) For futures, the delivery date; and
    (xi) If the order was made on a trading platform:
    (A) The price quoted on the trading platform when the order was 
placed, or, in the case of an option, the premium quoted;
    (B) The date and time the order was transmitted to the trading 
platform; and
    (C) The date and time the order was executed.
    (3) Price changes on a trading platform. If a trading platform is 
used, daily logs showing each price change on the platform, the time of 
the change to the nearest second, and the trading volume at that time 
and price.
    (4) Methods or algorithms. Any method or algorithm used to determine 
the bid or asked price for any retail forex transaction or the prices at 
which customer orders are executed, including, but not limited to, any 
markups, fees, commissions or other items which affect the profitability 
or risk of loss of a retail forex customer's transaction.
    (5) Daily records which show for each business day complete details 
of:
    (i) All retail forex transactions that are futures transactions 
executed on that day, including the date, price, quantity, market, 
currency pair, delivery date, and the person for whom such transaction 
was made;
    (ii) All retail forex transactions that are option transactions 
executed on that day, including the date, whether the transaction 
involved a put or call, the expiration date, quantity, currency pair, 
delivery date, strike price, details of the purchase price of the 
option, including premium, mark-up, commission and fees, and the person 
for whom the transaction was made; and
    (iii) All other retail forex transactions executed on that day for 
such account, including the date, price, quantity, currency and the 
person for whom such transaction was made.
    (6) Other records. Written acknowledgments of receipt of the risk 
disclosure statement required by Sec.  48.6(b), offset instructions 
pursuant to Sec.  48.5(c), records required under paragraphs (b) through 
(f) of this section, trading cards, signature cards, street books, 
journals, ledgers, payment records, copies of statements of purchase, 
and all other records, data, and memoranda that have been prepared in 
the course of the national bank's retail forex business.
    (b) Ratio of profitable accounts. (1) With respect to its active 
retail forex customer accounts over which it did not exercise investment 
discretion and that are not retail forex proprietary accounts open for 
any period of time during the quarter, a national bank must prepare and 
maintain on a quarterly basis (calendar quarter):
    (i) A calculation of the percentage of such accounts that were 
profitable;
    (ii) A calculation of the percentage of such accounts that were not 
profitable; and
    (iii) Data supporting the calculations described in paragraphs 
(b)(1)(i) and (ii) of this section.
    (2) In calculating whether a retail forex account was profitable or 
not profitable during the quarter, the national bank must compute the 
realized and unrealized gains or losses on all retail forex transactions 
carried in the retail forex account at any time during the quarter, 
subtract all fees, commissions, and any other charges posted to the 
retail forex account during the quarter, and add any interest income and 
other income or rebates credited to the retail forex account during the 
quarter. All deposits and withdrawals of funds made by the retail forex 
customer during the quarter must be excluded from the computation of 
whether the retail forex account was profitable or not profitable during 
the quarter. Computations that result in a zero or negative number must 
be considered a retail forex account that was not profitable. 
Computations that result in a positive number must be considered a 
retail forex account that was profitable.
    (3) A retail forex account must be considered ``active'' for 
purposes of paragraph (b)(1) of this section if and

[[Page 947]]

only if for the relevant calendar quarter a retail forex transaction was 
executed in that account or the retail forex account contained an open 
position resulting from a retail forex transaction.
    (c) Records related to violations of law. A national bank engaging 
in retail forex transactions must make a record of all communications 
received by the national bank or its IAPs concerning facts giving rise 
to possible violations of law related to the national bank's retail 
forex business. The record must contain: The name of the complainant, if 
provided; the date of the communication; the relevant agreement, 
contract, or transaction; the substance of the communication; the name 
of the person that received the communication; and the final disposition 
of the matter.
    (d) Records for noncash margin. A national bank must maintain a 
record of all noncash margin collected pursuant to Sec.  48.9. The 
record must show separately for each retail forex customer:
    (1) A description of the securities or property received;
    (2) The name and address of such retail forex customer;
    (3) The dates when the securities or property were received;
    (4) The identity of the depositories or other places where such 
securities or property are segregated or held, if applicable;
    (5) The dates in which the national bank placed or removed such 
securities or property into or from such depositories; and
    (6) The dates of return of such securities or property to such 
retail forex customer, or other disposition thereof, together with the 
facts and circumstances of such other disposition.
    (e) Order Tickets. (1) Except as provided in paragraph (e)(2) of 
this section, immediately upon the receipt of a retail forex transaction 
order, a national bank must prepare an order ticket for the order 
(whether unfulfilled, executed, or canceled). The order ticket must 
include:
    (i) Account identification (account or customer name with which the 
retail forex transaction was effected);
    (ii) Order number;
    (iii) Type of order (market order, limit order, or subject to 
special instructions);
    (iv) Date and time, to the nearest minute, that the retail forex 
transaction order was received (as evidenced by time-stamp or other 
timing device);
    (v) Time, to the nearest minute, that the retail forex transaction 
order was executed; and
    (vi) Price at which the retail forex transaction was executed.
    (2) Post-execution allocation of bunched orders. Specific 
identifiers for retail forex accounts included in bunched orders need 
not be recorded at time of order placement or upon report of execution 
as required under paragraph (e)(1) of this section if the following 
requirements are met:
    (i) The national bank placing and directing the allocation of an 
order eligible for post-execution allocation has been granted written 
investment discretion with regard to participating customer accounts and 
makes the following information available to retail forex customers upon 
request:
    (A) The general nature of the post-execution allocation methodology 
the national bank will use;
    (B) Whether the national bank has any interest in accounts that may 
be included with customer accounts in bunched orders eligible for post-
execution allocation; and
    (C) Summary or composite data sufficient for that customer to 
compare the customer's results with those of other comparable customers 
and, if applicable, any account in which the national bank has an 
interest.
    (ii) Post-execution allocations are made as soon as practicable 
after the entire transaction is executed;
    (iii) Post-execution allocations are fair and equitable, with no 
account or group of accounts receiving consistently favorable or 
unfavorable treatment; and
    (iv) The post-execution allocation methodology is sufficiently 
objective and specific to permit the OCC to verify the fairness of the 
allocations using that methodology.
    (f) Record of monthly statements and confirmations. A national bank 
must retain a copy of each monthly statement and confirmation required 
by Sec.  48.10.

[[Page 948]]

    (g) Form of record and manner of maintenance. The records required 
by this section must clearly and accurately reflect the information 
required and provide an adequate basis for the audit of the information. 
A national bank must create and maintain audio recordings of oral orders 
and oral offset instructions. Record maintenance may include the use of 
automated or electronic records provided that the records are easily 
retrievable and readily available for inspection.
    (h) Length of maintenance. A national bank must keep each record 
required by this section for at least five years from the date the 
record is created.



Sec.  48.8  Capital requirements.

    A national bank offering or entering into retail forex transactions 
must be well capitalized as defined by 12 CFR part 6.



Sec.  48.9  Margin requirements.

    (a) Margin required. A national bank engaging, or offering to 
engage, in retail forex transactions must collect from each retail forex 
customer an amount of margin not less than:
    (1) Two percent of the notional value of the retail forex 
transaction for major currency pairs and 5 percent of the notional value 
of the retail forex transaction for all other currency pairs;
    (2) For short options, 2 percent for major currency pairs and 5 
percent for all other currency pairs of the notional value of the retail 
forex transaction, plus the premium received by the retail forex 
customer; or
    (3) For long options, the full premium charged and received by the 
national bank.
    (b)(1) Form of margin. Margin collected under paragraph (a) of this 
section or pledged by a retail forex customer for retail forex 
transactions must be in the form of cash or the following financial 
instruments:
    (i) Obligations of the United States and obligations fully 
guaranteed as to principal and interest by the United States;
    (ii) General obligations of any State or of any political 
subdivision thereof;
    (iii) General obligations issued or guaranteed by any enterprise, as 
defined in 12 U.S.C. 4502(10);
    (iv) Certificates of deposit issued by an insured depository 
institution, as defined in section 3(c)(2) of the Federal Deposit 
Insurance Act (12 U.S.C. 1813(c)(2));
    (v) Commercial paper;
    (vi) Corporate notes or bonds;
    (vii) General obligations of a sovereign nation;
    (viii) Interests in money market mutual funds; and
    (ix) Such other financial instruments as the OCC deems appropriate.
    (2) Haircuts. A national bank must establish written policies and 
procedures that include:
    (i) Haircuts for noncash margin collected under this section; and
    (ii) Annual evaluation, and, if appropriate, modification, of the 
haircuts.
    (c) Separate margin account. Margin collected by the national bank 
from a retail forex customer for retail forex transactions or pledged by 
a retail forex customer for retail forex transactions must be placed 
into a separate account.
    (d) Margin calls; liquidation of position. (1) For each retail forex 
customer, at least once per day, a national bank must:
    (i) Mark the value of the retail forex customer's open retail forex 
positions to market;
    (ii) Mark the value of the margin collected under this section from 
the retail forex customer to market; and
    (iii) Determine whether, based on the marks in paragraphs (d)(1)(i) 
and (ii) of this section, the national bank has collected margin from 
the retail forex customer sufficient to satisfy the requirements of this 
section.
    (2) If, pursuant to paragraph (d)(1)(iii) of this section, the 
national bank determines that it has not collected margin from the 
retail forex customer sufficient to satisfy the requirements of this 
section then, within a reasonable period of time, the national bank must 
either:
    (i) Collect margin from the retail forex customer sufficient to 
satisfy the requirements of this section; or
    (ii) Liquidate the retail forex customer's retail forex 
transactions.

[[Page 949]]

    (e) Set-off prohibited. A national bank may not:
    (1) Apply a retail forex customer's retail forex obligations against 
any funds or other asset of the retail forex customer other than margin 
in the separate margin account described in paragraph (c) of this 
section;
    (2) Apply a retail forex customer's retail forex obligations to 
increase the amount owed by the retail forex customer to the national 
bank under any loan; or
    (3) Collect the margin required under this section by use of any 
right of set-off.



Sec.  48.10  Required reporting to customers.

    (a) Monthly statements. Each national bank must promptly furnish to 
each retail forex customer, as of the close of the last business day of 
each month or as of any regular monthly date selected, except for 
accounts in which there are neither open positions at the end of the 
statement period nor any changes to the account balance since the prior 
statement period but, in any event, not less frequently than once every 
three months, a statement that clearly shows:
    (1) For each retail forex customer:
    (i) The open retail forex transactions with prices at which 
acquired;
    (ii) The net unrealized profits or losses in all open retail forex 
transactions marked to the market;
    (iii) Any money, securities, or other property in the separate 
margin account required by Sec.  48.9(c); and
    (iv) A detailed accounting of all financial charges and credits to 
the retail forex customer's retail forex accounts during the monthly 
reporting period, including: Money, securities, or property received 
from or disbursed to such customer; realized profits and losses; and 
fees, charges, spreads, and commissions.
    (2) For each retail forex customer engaging in retail forex 
transactions that are options:
    (i) All such options purchased, sold, exercised, or expired during 
the monthly reporting period, identified by underlying retail forex 
transaction or underlying currency, strike price, transaction date, and 
expiration date;
    (ii) The open option positions carried for such customer and arising 
as of the end of the monthly reporting period, identified by underlying 
retail forex transaction or underlying currency, strike price, 
transaction date, and expiration date;
    (iii) All such option positions marked to the market and the amount 
each position is in the money, if any;
    (iv) Any money, securities, or other property in the separate margin 
account required by Sec.  48.9(c); and
    (v) A detailed accounting of all financial charges and credits to 
the retail forex customer's retail forex accounts during the monthly 
reporting period, including: Money, securities, or property received 
from or disbursed to such customer; realized profits and losses; 
premiums and mark-ups; and fees, charges, and commissions.
    (b) Confirmation statement. Each national bank must, not later than 
the next business day after any retail forex transaction, send:
    (1) To each retail forex customer, a written confirmation of each 
retail forex transaction caused to be executed by it for the customer, 
including offsetting transactions executed during the same business day 
and the rollover of an open retail forex transaction to the next 
business day;
    (2) To each retail forex customer engaging in forex option 
transactions, a written confirmation of each forex option transaction, 
containing at least the following information:
    (i) The retail forex customer's account identification number;
    (ii) A separate listing of the actual amount of the premium, as well 
as each markup thereon, if applicable, and all other commissions, costs, 
fees, and other charges incurred in connection with the forex option 
transaction;
    (iii) The strike price;
    (iv) The underlying retail forex transaction or underlying currency;
    (v) The final exercise date of the forex option purchased or sold; 
and
    (vi) The date that the forex option transaction was executed.
    (3) To each retail forex customer engaging in forex option 
transactions, upon the expiration or exercise of any option, a written 
confirmation statement thereof, which statement must

[[Page 950]]

include the date of such occurrence, a description of the option 
involved, and, in the case of exercise, the details of the retail forex 
or physical currency position that resulted therefrom including, if 
applicable, the final trading date of the retail forex transaction 
underlying the option.
    (c) Notwithstanding paragraph (b) of this section, a retail forex 
transaction that is caused to be executed for a pooled investment 
vehicle that engages in retail forex transactions need be confirmed only 
to the operator of such pooled investment vehicle.
    (d) Controlled accounts. With respect to any account controlled by 
any person other than the retail forex customer for whom such account is 
carried, each national bank must promptly furnish in writing to such 
other person the information required by paragraphs (a) and (b) of this 
section.
    (e) Introduced accounts. Each statement provided pursuant to the 
provisions of this section must, if applicable, show that the account 
for which the national bank was introduced by an introducing broker and 
the name of the introducing broker.



Sec.  48.11  Unlawful representations.

    (a) No implication or representation of limiting losses. No national 
bank engaged in retail foreign exchange transactions or its IAPs may 
imply or represent that it will, with respect to any retail customer 
forex account, for or on behalf of any person:
    (1) Guarantee such person or account against loss;
    (2) Limit the loss of such person or account; or
    (3) Not call for or attempt to collect margin as established for 
retail forex customers.
    (b) No implication of representation of engaging in prohibited acts. 
No national bank or its IAPs may in any way imply or represent that it 
will engage in any of the acts or practices described in paragraph (a) 
of this section.
    (c) No Federal government endorsement. No national bank or its IAPs 
may represent or imply in any manner whatsoever that any retail forex 
transaction or retail forex product has been sponsored, recommended, or 
approved by the OCC, the Federal government, or any agency thereof.
    (d) Assuming or sharing of liability from bank error. This section 
does not prevent a national bank from assuming or sharing in the losses 
resulting from the national bank's error or mishandling of a retail 
forex transaction.
    (e) Certain guaranties unaffected. This section does not affect any 
guarantee entered into prior to the effective date of this part, but 
this section does apply to any extension, modification, or renewal 
thereof entered into after such date.



Sec.  48.12  Authorization to trade.

    (a) Specific authorization required. No national bank may directly 
or indirectly effect a retail forex transaction for the account of any 
retail forex customer unless, before the retail forex transaction 
occurs, the retail forex customer specifically authorized the national 
bank to effect the retail forex transaction.
    (b) Requirements for specific authorization. A retail forex 
transaction is ``specifically authorized'' for purposes of this section 
if the retail forex customer specifies:
    (1) The precise retail forex transaction to be effected;
    (2) The exact amount of the foreign currency to be purchased or 
sold; and
    (3) In the case of an option, the identity of the foreign currency 
or contract that underlies the option.



Sec.  48.13  Trading and operational standards.

    (a) Internal rules, procedures, and controls required. A national 
bank engaging in retail forex transactions must establish and implement 
internal policies, procedures, and controls designed, at a minimum, to:
    (1) Ensure, to the extent reasonable, that each retail forex 
transaction that is executable at or near the price that the national 
bank has quoted to the retail forex customer is entered for execution 
before any retail forex transaction for:
    (i) A proprietary account;
    (ii) An account for which a related person may originate orders 
without the prior specific consent of the account owner, if the related 
person has

[[Page 951]]

gained knowledge of the retail forex customer's order prior to the 
transmission of an order for a proprietary account;
    (iii) An account in which a related person has an interest, if the 
related person has gained knowledge of the retail forex customer's order 
prior to the transmission of an order for a proprietary account; or
    (iv) An account in which a related person may originate orders 
without the prior specific consent of the account owner, if the related 
person has gained knowledge of the retail forex customer's order prior 
to the transmission of an order for a proprietary account;
    (2) Prevent national-bank related persons from placing orders, 
directly or indirectly, with another person in a manner designed to 
circumvent the provisions of paragraph (a)(1) of this section; and
    (3) Fairly and objectively establish settlement prices for retail 
forex transactions.
    (b) Disclosure of retail forex transactions. No national bank 
engaging in retail forex transactions may disclose that an order of 
another person is being held by the national bank, unless the disclosure 
is necessary to the effective execution of such order or the disclosure 
is made at the request of the OCC.
    (c) Handling of retail forex accounts of related persons of retail 
forex counterparties. No national bank engaging in retail forex 
transactions may knowingly handle the retail forex account of an 
employee of another retail forex counterparty's retail forex business 
unless the national bank:
    (1) Receives written authorization from a person designated by the 
other retail forex counterparty with responsibility for the surveillance 
over the account pursuant to paragraph (a)(2) of this section;
    (2) Prepares immediately upon receipt of an order for the account a 
written record of the order, including the account identification and 
order number, and records thereon to the nearest minute, by time-stamp 
or other timing device, the date and time the order was received; and
    (3) Transmits on a regular basis to the other retail forex 
counterparty copies of all statements for the account and of all written 
records prepared upon the receipt of orders for the account pursuant to 
paragraph (c)(2) of this section.
    (d) Related person of national bank establishing account at another 
retail forex counterparty. No related person of a national bank working 
in the national bank's retail forex business may have an account, 
directly or indirectly, with another retail forex counterparty unless 
the other retail forex counterparty:
    (1) Receives written authorization to open and maintain the account 
from a person designated by the national bank with responsibility for 
the surveillance over the account pursuant to paragraph (a)(2) of this 
section; and
    (2) Transmits on a regular basis to the national bank copies of all 
statements for the account and of all written records prepared by the 
other retail forex counterparty upon receipt of orders for the account 
pursuant to paragraph (a)(2) of this section.
    (e) Prohibited trading practices. No national bank engaging in 
retail forex transactions may:
    (1) Enter into a retail forex transaction, to be executed pursuant 
to a market or limit order at a price that is not at or near the price 
at which other retail forex customers, during that same time period, 
have executed retail forex transactions with the national bank;
    (2) Adjust or alter prices for a retail forex transaction after the 
transaction has been confirmed to the retail forex customer;
    (3) Provide to a retail forex customer a new bid price for a retail 
forex transaction that is higher than its previous bid without providing 
a new asked price that is also higher than its previous asked price by a 
similar amount;
    (4) Provide to a retail forex customer a new bid price for a retail 
forex transaction that is lower than its previous bid without providing 
a new asked price that is also lower than its previous asked price by a 
similar amount; or
    (5) Establish a new position for a retail forex customer (except one 
that

[[Page 952]]

offsets an existing position for that retail forex customer) where the 
national bank holds outstanding orders of other retail forex customers 
for the same currency pair at a comparable price.



Sec.  48.14  Supervision.

    (a) Supervision by the national bank. A national bank engaging in 
retail forex transactions must diligently supervise the handling by its 
officers, employees, and agents (or persons occupying a similar status 
or performing a similar function) of all retail forex accounts carried, 
operated, or advised by at the national bank and all activities of its 
officers, employees, and agents (or persons occupying a similar status 
or performing a similar function) relating to its retail forex business.
    (b) Supervision by officers, employees, or agents. An officer, 
employee, or agent of a national bank must diligently supervise his or 
her subordinates' handling of all retail forex accounts at the national 
bank and all the subordinates' activities relating to the national 
bank's retail forex business.



Sec.  48.15  Notice of transfers.

    (a) Prior notice generally required. Except as provided in paragraph 
(b) of this section, a national bank must provide a retail forex 
customer with 30 days' prior notice of any assignment of any position or 
transfer of any account of the retail forex customer. The notice must 
include a statement that the retail forex customer is not required to 
accept the proposed assignment or transfer and may direct the national 
bank to liquidate the positions of the retail forex customer or transfer 
the account to a retail forex counterparty of the retail forex 
customer's selection.
    (b) Exceptions. The requirements of paragraph (a) of this section do 
not apply to transfers:
    (1) Requested by the retail forex customer;
    (2) Made by the Federal Deposit Insurance Corporation as receiver or 
conservator under the Federal Deposit Insurance Act; or
    (3) Otherwise authorized by applicable law.
    (c) Obligations of transferee national bank. A national bank to 
which retail forex accounts or positions are assigned or transferred 
under paragraph (a) of this section must provide to the affected retail 
forex customers the risk disclosure statements and forms of 
acknowledgment required by this part and receive the required signed 
acknowledgments within 60 days of such assignments or transfers. This 
requirement does not apply if the national bank has clear written 
evidence that the retail forex customer has received and acknowledged 
receipt of the required disclosure statements.



Sec.  48.16  Customer dispute resolution.

    (a) Voluntary submission of claims to dispute or settlement 
procedures. No national bank may enter into any agreement or 
understanding with a retail forex customer in which the customer agrees, 
prior to the time a claim or grievance arises, to submit such claim or 
grievance to any settlement procedure unless the following conditions 
are satisfied:
    (1) Signing the agreement is not a condition for the customer to use 
the services offered by the national bank.
    (2) If the agreement is contained as a clause or clauses of a 
broader agreement, the customer separately endorses the clause or 
clauses.
    (3) The agreement advises the retail forex customer that, at such 
time as the customer notifies the national bank that the customer 
intends to submit a claim to arbitration, or at such time the national 
bank notifies the customer of its intent to submit a claim to 
arbitration, the customer will have the opportunity to choose a person 
qualified in dispute resolution to conduct the proceeding.
    (4) The agreement must acknowledge that the national bank will pay 
any incremental fees that may be assessed in connection with the dispute 
resolution, unless it is determined in the proceeding that the retail 
forex customer has acted in bad faith in initiating the proceeding.
    (5) The agreement must include the following language printed in 
large boldface type:

    Two forums exist for the resolution of disputes related to retail 
forex transactions: civil court litigation and arbitration conducted by 
a private organization. The opportunity to settle disputes by 
arbitration may

[[Page 953]]

in some cases provide benefits to customers, including the ability to 
obtain an expeditious and final resolution of disputes without incurring 
substantial cost. Each customer must individually examine the relative 
merits of arbitration and consent to this arbitration agreement must be 
voluntary.
    By signing this agreement, you: (1) May be waving your right to sue 
in a court of law; and (2) are agreeing to be bound by arbitration of 
any claims or counterclaims that you or [name of entity] may submit to 
arbitration under this agreement. In the event a dispute arises, you 
will be notified if [name of entity] intends to submit the dispute to 
arbitration.
    You need not sign this agreement to open or maintain a retail forex 
account with [name of entity].

    (b) Election of forum. (1) Within 10 business days after receipt of 
notice from the retail forex customer that the customer intends to 
submit a claim to arbitration, the national bank must provide the 
customer with a list of persons qualified in dispute resolution.
    (2) The customer must, within 45 days after receipt of such list, 
notify the national bank of the person selected. The customer's failure 
to provide such notice must give the national bank the right to select a 
person from the list.
    (c) Enforceability. A dispute settlement procedure may require 
parties using the procedure to agree, under applicable state law, 
submission agreement, or otherwise, to be bound by an award rendered in 
the procedure if the agreement to submit the claim or grievance to the 
procedure complies with paragraph (a) of this section or the agreement 
to submit the claim or grievance to the procedure was made after the 
claim or grievance arose. Any award so rendered by the procedure will be 
enforceable in accordance with applicable law.
    (d) Time limits for submission of claims. The dispute settlement 
procedure used by the parties may not include any unreasonably short 
limitation period foreclosing submission of a customer's claims or 
grievances or counterclaims.
    (e) Counterclaims. A procedure for the settlement of a retail forex 
customer's claims or grievances against a national bank or employee 
thereof may permit the submission of a counterclaim in the procedure by 
a person against whom a claim or grievance is brought if the 
counterclaim:
    (1) Arises out of the transaction or occurrence that is the subject 
of the retail forex customer's claim or grievance; and
    (2) Does not require for adjudication the presence of essential 
witnesses, parties, or third persons over which the settlement process 
lacks jurisdiction.

[76 FR 41384, July 14, 2011, as amended at 76 FR 56097, Sept. 12, 2011]



Sec.  48.17  Reservation of authority.

    The OCC may modify the disclosure, recordkeeping, capital and 
margin, reporting, business conduct, documentation, or other standards 
or requirements under this part for a specific retail forex transaction 
or a class of retail forex transactions if the OCC determines that the 
modification is consistent with safety and soundness and the protection 
of retail forex customers.

                           PART 49 [RESERVED]



PART 50_LIQUIDITY RISK MEASUREMENT STANDARDS--Table of Contents



                      Subpart A_General Provisions

Sec.
50.1 Purpose and applicability.
50.2 Reservation of authority.
50.3 Definitions.
50.4 Certain operational requirements.

                   Subpart B_Liquidity Coverage Ratio

50.10 Liquidity coverage ratio.

                  Subpart C_High-Quality Liquid Assets

50.20 High-quality liquid asset criteria.
50.21 High-quality liquid asset amount.
50.22 Requirements for eligible high-quality liquid assets.

                    Subpart D_Total Net Cash Outflow

50.30 Total net cash outflow amount.
50.31 Determining maturity.
50.32 Outflow amounts.
50.33 Inflow amounts.
50.34 Cash flows related to Covered Federal Reserve Facility Funding.

                 Subpart E_Liquidity Coverage Shortfall

50.40 Liquidity coverage shortfall: Supervisory framework.

[[Page 954]]

                          Subpart F_Transitions

50.50 Transitions.

Subparts G-J [Reserved]

                   Subpart K_Net Stable Funding Ratio

50.100 Net stable funding ratio.
50.101 Determining maturity.
50.102 Rules of construction.
50.103 Calculation of available stable funding amount.
50.104 ASF factors.
50.105 Calculation of required stable funding amount.
50.106 RSF factors.
50.107 Calculation of NSFR derivatives amounts.
50.108 Funding related to Covered Federal Reserve Facility Funding.
50.109 Rules for consolidation.

                 Subpart L_Net Stable Funding Shortfall

50.110 NSFR shortfall: Supervisory framework.

                          Subpart M_Transitions

50.120 Transitions.

    Authority: 12 U.S.C. 1 et seq., 93a, 481, 1818, 1828, and 1462 et 
seq.

    Source: 79 FR 61523, 61538, Oct. 10, 2014, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  [thinsp]50.1  Purpose and applicability.

    (a) Purpose. This part establishes a minimum liquidity standard and 
a minimum stable funding standard for certain national banks and Federal 
savings associations on a consolidated basis, as set forth herein.
    (b) Applicability. (1) A national bank or Federal savings 
association is subject to the minimum liquidity standard, minimum stable 
funding standard, and other requirements of this part if:
    (i) It is a:
    (A) GSIB depository institution supervised by the OCC;
    (B) Category II national bank or Federal savings association; or
    (C) Category III national bank or Federal savings association; or
    (ii) The OCC has determined that application of this part is 
appropriate in light of the national bank's or Federal savings 
association's asset size, level of complexity, risk profile, scope of 
operations, affiliation with foreign or domestic covered entities, or 
risk to the financial system.
    (2) This part does not apply to:
    (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), 
or a subsidiary of a bridge financial company;
    (ii) A new depository institution or a bridge depository 
institution, as defined in 12 U.S.C. 1813(i); or
    (iii) A Federal branch or agency as defined by 12 CFR 28.11.
    (3) In making a determination under paragraph (b)(1)(ii) of this 
section, the OCC will apply notice and response procedures in the same 
manner and to the same extent as the notice and response procedures in 
12 CFR 3.404.

[84 FR 59266, Nov. 1, 2019, as amended at 86 FR 9207, Feb. 11, 2021]



Sec.  50.2  Reservation of authority.

    (a) The OCC may require a national bank or Federal savings 
association to hold an amount of high-quality liquid assets (HQLA) 
greater than otherwise required under this part, or to take any other 
measure to improve the national bank's or Federal savings association's 
liquidity risk profile, if the OCC determines that the national bank's 
or Federal savings association's liquidity requirements as calculated 
under this part are not commensurate with the national bank's or Federal 
savings association's liquidity risks. In making determinations under 
this section, the OCC will apply notice and response procedures as set 
forth in 12 CFR 3.404.
    (b) The OCC may require a national bank or Federal savings 
association to maintain an amount of available stable funding greater 
than otherwise required under this part, or to take any other measure to 
improve the national bank's or Federal savings association's stable 
funding, if the OCC determines that the national bank's or Federal 
savings association's stable funding requirements as calculated under 
this part are not commensurate with the national bank's or Federal 
savings association's funding risks. In making determinations under this 
section, the OCC will apply notice and response procedures as set forth 
in 12 CFR 3.404.
    (c) Nothing in this part limits the authority of the OCC under any 
other provision of law or regulation to take

[[Page 955]]

supervisory or enforcement action, including action to address unsafe or 
unsound practices or conditions, deficient liquidity levels, deficient 
stable funding levels, or violations of law.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 86 FR 9207, Feb. 11, 
2021]



Sec.  50.3  Definitions.

    For the purposes of this part:
    Affiliated depository institution means with respect to a national 
bank or Federal savings association that is a depository institution, 
another depository institution that is a consolidated subsidiary of a 
bank holding company or savings and loan holding company of which the 
national bank or Federal savings association is also a consolidated 
subsidiary.
    Asset exchange means a transaction in which, as of the calculation 
date, the counterparties have previously exchanged non-cash assets, and 
have each agreed to return such assets to each other at a future date. 
Asset exchanges do not include secured funding and secured lending 
transactions.
    Average weighted short-term wholesale funding means the average of 
the national bank's or Federal savings association's weighted short-term 
wholesale funding for each of the four most recent calendar quarters as 
reported quarterly on the FR Y-15 or, if the national bank or Federal 
savings association has not filed the FR Y-15 for each of the four most 
recent calendar quarters, for the most recent quarter or averaged over 
the most recent quarters, as applicable.
    Bank holding company is defined in section 2 of the Bank Holding 
Company Act of 1956, as amended (12 U.S.C. 1841 et seq.).
    Brokered deposit means any deposit held at the national bank or 
Federal savings association that is obtained, directly or indirectly, 
from or through the mediation or assistance of a deposit broker as that 
term is defined in section 29 of the Federal Deposit Insurance Act (12 
U.S.C. 1831f(g)) and the Federal Deposit Insurance Corporation's 
regulations.
    Brokered reciprocal deposit means a brokered deposit that a national 
bank or Federal savings association receives through a deposit placement 
network on a reciprocal basis, such that:
    (1) For any deposit received, the national bank or Federal savings 
association (as agent for the depositors) places the same amount with 
other depository institutions through the network; and
    (2) Each member of the network sets the interest rate to be paid on 
the entire amount of funds it places with other network members.
    Calculation date means, for subparts B through J of this part, any 
date on which a national bank or Federal savings association calculates 
its liquidity coverage ratio under Sec.  50.10, and for subparts K 
through M of this part, any date on which a national bank or Federal 
savings association calculates its net stable funding ratio under Sec.  
50.100.
    Call Report means the Consolidated Reports of Condition and Income.
    Carrying value means, with respect to an asset, NSFR regulatory 
capital element, or NSFR liability, the value on the balance sheet of 
the national bank or Federal savings association, each as determined in 
accordance with GAAP.
    Category II national bank or Federal savings association means:
    (1)(i) A national bank or Federal savings association that:
    (A) Is a consolidated subsidiary of:
    (1) A company that is identified as a Category II banking 
organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable;
    (2) A U.S. intermediate holding company that is identified as a 
Category II banking organization pursuant to 12 CFR 252.5; or
    (3) A depository institution that meets the criteria in paragraph 
(2)(ii)(A) or (B) of this definition; and
    (B) Has total consolidated assets, calculated based on the average 
of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Call Report, equal to $10 billion or more.
    (ii) If the national bank or Federal savings association has not 
filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets is calculated based on its total 
consolidated assets, as reported on the Call Report, for the most recent

[[Page 956]]

quarter or the average of the most recent quarters, as applicable. After 
meeting the criteria under this paragraph (1), a national bank or 
Federal savings association continues to be a Category II national bank 
or Federal savings association until the national bank or Federal 
savings association has less than $10 billion in total consolidated 
assets, as reported on the Call Report, for each of the four most recent 
calendar quarters, or the national bank or Federal savings association 
is no longer a consolidated subsidiary of an entity described in 
paragraph (1)(i)(A)(1), (2), or (3) of this definition; or
    (2) A national bank or Federal savings association that:
    (i) Is not a subsidiary of a depository institution holding company; 
and
    (ii)(A) Has total consolidated assets, calculated based on the 
average of the depository institution's total consolidated assets for 
the four most recent calendar quarters as reported on the Call Report, 
equal to $700 billion or more. If the depository institution has not 
filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets is calculated based on its total 
consolidated assets, as reported on the Call Report, for the most recent 
quarter or the average of the most recent quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the depository institution's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, of $100 billion 
or more but less than $700 billion. If the depository institution has 
not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or the 
average of the most recent quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross-jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional liabilities, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form.
    (iii) After meeting the criteria in paragraphs (2)(i) and (ii) of 
this definition, a national bank or Federal savings association 
continues to be a Category II national bank or Federal savings 
association until the national bank or Federal savings association:
    (A)(1) Has less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Has less than $75 billion in cross-jurisdictional activity for 
each of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a GSIB depository institution.
    Category III national bank or Federal savings association means:
    (1)(i) A national bank or Federal savings association that:
    (A) Is a consolidated subsidiary of:
    (1) A company that is identified as a Category III banking 
organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; 
or
    (2) A U.S. intermediate holding company that is identified as a 
Category III banking organization pursuant to 12 CFR 252.5; or
    (3) A depository institution that meets the criteria in paragraph 
(2)(ii)(A) or (B) of this definition; and
    (B) Has total consolidated assets, calculated based on the average 
of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Call Report, equal to $10 billion or more.
    (ii) If the national bank or Federal savings association has not 
filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or

[[Page 957]]

the average of the most recent quarters, as applicable. After meeting 
the criteria under this paragraph (1), a national bank or Federal 
savings association continues to be a Category III national bank or 
Federal savings association until the national bank or Federal savings 
association has less than $10 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters, or the national bank or Federal savings association is no 
longer a consolidated subsidiary of an entity described in paragraph 
(1)(i)(A)(1), (2), or (3) of this definition; or
    (2) A national bank or Federal savings association that:
    (i) Is not a subsidiary of a depository institution holding company; 
and
    (ii)(A) Has total consolidated assets, calculated based on the 
average of the depository institution's total consolidated assets for 
the four most recent calendar quarters as reported on the Call Report, 
equal to $250 billion or more. If the depository institution has not 
filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or the 
average of the most recent quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the depository institution's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, of $100 billion 
or more but less than $250 billion. If the depository institution has 
not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or the 
average of the most recent quarters, as applicable; and
    (2) One or more of the following in paragraphs (2)(ii)(B)(2)(i) 
through (iii) of this definition, each measured as the average of the 
four most recent calendar quarters, or if the depository institution has 
not filed the FR Y-9LP or equivalent reporting form, Call Report, or FR 
Y-15 or equivalent reporting form, as applicable for each of the four 
most recent calendar quarters, for the most recent quarter or the 
average of the most recent quarters, as applicable:
    (i) Total nonbank assets, calculated in accordance with instructions 
to the FR Y-9LP or equivalent reporting form, equal to $75 billion or 
more;
    (ii) Off-balance sheet exposure, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form, minus the 
total consolidated assets of the depository institution, as reported on 
the Call Report, equal to $75 billion or more; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (iii) After meeting the criteria in paragraphs (2)(i) and (ii) of 
this definition, a national bank or Federal savings association 
continues to be a Category III national bank or Federal savings 
association until the national bank or Federal savings association:
    (A)(1) Has less than $250 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (2) Has less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent reporting 
form, for each of the four most recent calendar quarters;
    (3) Has less than $75 billion in off-balance sheet exposure for each 
of the four most recent calendar quarters. Off-balance sheet exposure is 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, minus the total consolidated assets of the 
depository institution, as reported on the Call Report; and
    (4) Has less than $75 billion in weighted short-term wholesale 
funding, calculated in accordance with the instructions to the FR Y-15 
or equivalent reporting form, for each of the four most recent calendar 
quarters; or
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a Category II national bank or Federal savings bank; or
    (D) Is a GSIB depository institution.

[[Page 958]]

    Client pool security means a security that is owned by a customer of 
the national bank or Federal savings association that is not an asset of 
the national bank or Federal savings association, regardless of a 
national bank's or Federal savings association's hypothecation rights 
with respect to the security.
    Collateralized deposit means:
    (1) A deposit of a public sector entity held at the national bank or 
Federal savings association that is required to be secured under 
applicable law by a lien on assets owned by the national bank or Federal 
savings association and that gives the depositor, as holder of the lien, 
priority over the assets in the event the national bank or Federal 
savings association enters into receivership, bankruptcy, insolvency, 
liquidation, resolution, or similar proceeding;
    (2) A deposit of a fiduciary account awaiting investment or 
distribution held at the national bank or Federal savings association 
for which the national bank or Federal savings association is a 
fiduciary and is required under 12 CFR 9.10(b) (national banks) or 12 
CFR 150.300 through 150.320 (Federal savings associations) to set aside 
assets owned by the national bank or Federal savings association as 
security, which gives the depositor priority over the assets in the 
event the national bank or Federal savings association enters into 
receivership, bankruptcy, insolvency, liquidation, resolution, or 
similar proceeding; or
    (3) A deposit of a fiduciary account awaiting investment or 
distribution held at the national bank or Federal savings association 
for which the national bank's or Federal savings association's 
affiliated insured depository institution is a fiduciary and where the 
national bank or Federal savings association under 12 CFR 9.10(c) 
(national banks), 12 CFR 150.310 (Federal savings associations), or 
applicable state law (state member and nonmember banks, and state 
savings associations) has set aside assets owned by the national bank or 
Federal savings association as security, which gives the depositor 
priority over the assets in the event the national bank or Federal 
savings association enters into receivership, bankruptcy, insolvency, 
liquidation, resolution, or similar proceeding.
    Committed means, with respect to a credit or liquidity facility, 
that under the terms of the facility, it is not unconditionally 
cancelable.
    Company means a corporation, partnership, limited liability company, 
depository institution, business trust, special purpose entity, 
association, or similar organization.
    Consolidated subsidiary means a company that is consolidated on the 
balance sheet of a national bank or Federal savings association or other 
company under GAAP.
    Controlled subsidiary means, with respect to a company or a national 
bank or Federal savings association, a consolidated subsidiary or a 
company that otherwise meets the definition of ``subsidiary'' in section 
2(d) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(d)).
    Covered depository institution holding company means a top-tier bank 
holding company or savings and loan holding company domiciled in the 
United States other than:
    (1) A top-tier savings and loan holding company that is:
    (i) A grandfathered unitary savings and loan holding company as 
defined in section 10(c)(9)(A) of the Home Owners' Loan Act (12 U.S.C. 
1461 et seq.); and
    (ii) As of June 30 of the previous calendar year, derived 50 percent 
or more of its total consolidated assets or 50 percent of its total 
revenues on an enterprise-wide basis (as calculated under GAAP) from 
activities that are not financial in nature under section 4(k) of the 
Bank Holding Company Act (12 U.S.C. 1843(k));
    (2) A top-tier depository institution holding company that is an 
insurance underwriting company;
    (3)(i) A top-tier depository institution holding company that, as of 
June 30 of the previous calendar year, held 25 percent or more of its 
total consolidated assets in subsidiaries that are insurance 
underwriting companies (other than assets associated with insurance for 
credit risk); and
    (ii) For purposes of paragraph (3)(i) of this definition, the 
company must calculate its total consolidated assets in

[[Page 959]]

accordance with GAAP, or if the company does not calculate its total 
consolidated assets under GAAP for any regulatory purpose (including 
compliance with applicable securities laws), the company may estimate 
its total consolidated assets, subject to review and adjustment by the 
Board of Governors of the Federal Reserve System; or
    (4) A U.S. intermediate holding company.
    Covered Federal Reserve Facility Funding means a non-recourse loan 
that is extended as part of the Money Market Mutual Fund Liquidity 
Facility or Paycheck Protection Program Liquidity Facility authorized by 
the Board of Governors of the Federal Reserve System pursuant to section 
13(3) of the Federal Reserve Act.\1\
---------------------------------------------------------------------------

    \1\ The Money Market Mutual Fund Liquidity Facility was authorized 
on March 18, 2020, and the Paycheck Protection Program Liquidity 
Facility was authorized on April 6, 2020.
---------------------------------------------------------------------------

    Credit facility means a legally binding agreement to extend funds if 
requested at a future date, including a general working capital facility 
such as a revolving credit facility for general corporate or working 
capital purposes. A credit facility does not include a legally binding 
written agreement to extend funds at a future date to a counterparty 
that is made for the purpose of refinancing the debt of the counterparty 
when it is unable to obtain a primary or anticipated source of funding. 
See liquidity facility.
    Customer short position means a legally binding written agreement 
pursuant to which the customer must deliver to the national bank or 
Federal savings association a non-cash asset that the customer has 
already sold.
    Deposit means ``deposit'' as defined in section 3(l) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(l)) or an equivalent liability of 
the national bank or Federal savings association in a jurisdiction 
outside of the United States.
    Depository institution is defined in section 3(c) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(c)).
    Depository institution holding company means a bank holding company 
or savings and loan holding company.
    Deposit insurance means deposit insurance provided by the Federal 
Deposit Insurance Corporation under the Federal Deposit Insurance Act 
(12 U.S.C. 1811 et seq.).
    Derivative transaction means a financial contract whose value is 
derived from the values of one or more underlying assets, reference 
rates, or indices of asset values or reference rates. Derivative 
contracts include interest rate derivative contracts, exchange rate 
derivative contracts, equity derivative contracts, commodity derivative 
contracts, credit derivative contracts, forward contracts, and any other 
instrument that poses similar counterparty credit risks. Derivative 
contracts also include unsettled securities, commodities, and foreign 
currency exchange transactions with a contractual settlement or delivery 
lag that is longer than the lesser of the market standard for the 
particular instrument or five business days. A derivative does not 
include any identified banking product, as that term is defined in 
section 402(b) of the Legal Certainty for Bank Products Act of 2000 (7 
U.S.C. 27(b)), that is subject to section 403(a) of that Act (7 U.S.C. 
27a(a)).
    Designated company means a company that the Financial Stability 
Oversight Council has determined under section 113 of the Dodd-Frank Act 
(12 U.S.C. 5323) shall be supervised by the Board of Governors of the 
Federal Reserve System and for which such determination is still in 
effect.
    Dodd-Frank Act means the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 1376 (2010).
    Eligible HQLA means a high-quality liquid asset that meets the 
requirements set forth in Sec.  50.22.
    Encumbered means, with respect to an asset, that the asset:
    (1) Is subject to legal, regulatory, contractual, or other 
restriction on the ability of the national bank or Federal savings 
association to monetize the asset; or
    (2) Is pledged, explicitly or implicitly, to secure or to provide 
credit enhancement to any transaction, not including when the asset is 
pledged to a central bank or a U.S. government-sponsored enterprise 
where:

[[Page 960]]

    (i) Potential credit secured by the asset is not currently extended 
to the national bank or Federal savings association or its consolidated 
subsidiaries; and
    (ii) The pledged asset is not required to support access to the 
payment services of a central bank.
    Fair value means fair value as determined under GAAP.
    Financial sector entity means an investment adviser, investment 
company, pension fund, non-regulated fund, regulated financial company, 
or identified company.
    Foreign withdrawable reserves means a national bank's or Federal 
savings association's balances held by or on behalf of the national bank 
or Federal savings association at a foreign central bank that are not 
subject to restrictions on the national bank's or Federal savings 
association's ability to use the reserves.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
    FR Y-15 means the Systemic Risk Report.
    GAAP means generally accepted accounting principles as used in the 
United States.
    Global systemically important BHC means a bank holding company 
identified as a global systemically important BHC pursuant to 12 CFR 
217.402.
    GSIB depository institution means a depository institution that is a 
consolidated subsidiary of a global systemically important BHC and has 
total consolidated assets equal to $10 billion or more, calculated based 
on the average of the depository institution's total consolidated assets 
for the four most recent calendar quarters as reported on the Call 
Report. If the depository institution has not filed the Call Report for 
each of the four most recent calendar quarters, total consolidated 
assets means its total consolidated assets, as reported on the Call 
Report, for the most recent calendar quarter or the average of the most 
recent calendar quarters, as applicable. After meeting the criteria 
under this definition, a depository institution continues to be a GSIB 
depository institution until the depository institution has less than 
$10 billion in total consolidated assets, as reported on the Call 
Report, for each of the four most recent calendar quarters, or the 
depository institution is no longer a consolidated subsidiary of a 
global systemically important BHC.
    High-quality liquid asset (HQLA) means an asset that is a level 1 
liquid asset, level 2A liquid asset, or level 2B liquid asset, in 
accordance with the criteria set forth in Sec.  50.20.
    HQLA amount means the HQLA amount as calculated under Sec.  50.21.
    Identified company means any company that the OCC has determined 
should be treated for the purposes of this part the same as a regulated 
financial company, investment company, non-regulated fund, pension fund, 
or investment adviser, based on activities similar in scope, nature, or 
operations to those entities.
    Individual means a natural person, and does not include a sole 
proprietorship.
    Investment adviser means a company registered with the SEC as an 
investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. 
80b-1 et seq.) or foreign equivalents of such company.
    Investment company means a person or company registered with the SEC 
under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or 
foreign equivalents of such persons or companies.
    Liquid and readily-marketable has the meaning given the term in 12 
CFR 249.3.
    Liquidity facility means a legally binding written agreement to 
extend funds at a future date to a counterparty that is made for the 
purpose of refinancing the debt of the counterparty when it is unable to 
obtain a primary or anticipated source of funding. A liquidity facility 
includes an agreement to provide liquidity support to asset-backed 
commercial paper by lending to, or purchasing assets from, any 
structure, program or conduit in the event that funds are required to 
repay maturing asset-backed commercial paper. Liquidity facilities 
exclude facilities that are established

[[Page 961]]

solely for the purpose of general working capital, such as revolving 
credit facilities for general corporate or working capital purposes. If 
a facility has characteristics of both credit and liquidity facilities, 
the facility must be classified as a liquidity facility. See credit 
facility.
    Multilateral development bank means the International Bank for 
Reconstruction and Development, the Multilateral Investment Guarantee 
Agency, the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African Development 
Bank, the European Bank for Reconstruction and Development, the European 
Investment Bank, the European Investment Fund, the Nordic Investment 
Bank, the Caribbean Development Bank, the Islamic Development Bank, the 
Council of Europe Development Bank, and any other entity that provides 
financing for national or regional development in which the U.S. 
government is a shareholder or contributing member or which the OCC 
determines poses comparable risk.
    Municipal obligation means an obligation of:
    (1) A state or any political subdivision thereof; or
    (2) Any agency or instrumentality of a state or any political 
subdivision thereof.
    Non-regulated fund means any hedge fund or private equity fund whose 
investment adviser is required to file SEC Form PF (Reporting Form for 
Investment Advisers to Private Funds and Certain Commodity Pool 
Operators and Commodity Trading Advisors), other than a small business 
investment company as defined in section 102 of the Small Business 
Investment Act of 1958 (15 U.S.C. 661 et seq.).
    Nonperforming exposure means an exposure that is past due by more 
than 90 days or nonaccrual.
    NSFR liability means any liability or equity reported on a national 
bank's or Federal savings association's balance sheet that is not an 
NSFR regulatory capital element.
    NSFR regulatory capital element means any capital element included 
in a national bank's or Federal savings association's common equity tier 
1 capital, additional tier 1 capital, and tier 2 capital, in each case 
as defined in 12 CFR 3.20, prior to application of capital adjustments 
or deductions as set forth in 12 CFR 3.22, excluding any debt or equity 
instrument that does not meet the criteria for additional tier 1 or tier 
2 capital instruments in 12 CFR 3.22 and is being phased out of tier 1 
capital or tier 2 capital pursuant to subpart G of 12 CFR part 3.
    Operational deposit means short-term unsecured wholesale funding 
that is a deposit, unsecured wholesale lending that is a deposit, or a 
collateralized deposit, in each case that meets the requirements of 
Sec.  50.4(b) with respect to that deposit and is necessary for the 
provision of operational services as an independent third-party 
intermediary, agent, or administrator to the wholesale customer or 
counterparty providing the deposit.
    Operational services means the following services, provided they are 
performed as part of cash management, clearing, or custody services:
    (1) Payment remittance;
    (2) Administration of payments and cash flows related to the 
safekeeping of investment assets, not including the purchase or sale of 
assets;
    (3) Payroll administration and control over the disbursement of 
funds;
    (4) Transmission, reconciliation, and confirmation of payment 
orders;
    (5) Daylight overdraft;
    (6) Determination of intra-day and final settlement positions;
    (7) Settlement of securities transactions;
    (8) Transfer of capital distributions and recurring contractual 
payments;
    (9) Customer subscriptions and redemptions;
    (10) Scheduled distribution of customer funds;
    (11) Escrow, funds transfer, stock transfer, and agency services, 
including payment and settlement services, payment of fees, taxes, and 
other expenses; and
    (12) Collection and aggregation of funds.
    Pension fund means an employee benefit plan as defined in paragraphs 
(3) and (32) of section 3 of the Employee Retirement Income and Security 
Act of

[[Page 962]]

1974 (29 U.S.C. 1001 et seq.), a ``governmental plan'' (as defined in 29 
U.S.C. 1002(32)) that complies with the tax deferral qualification 
requirements provided in the Internal Revenue Code, or any similar 
employee benefit plan established under the laws of a foreign 
jurisdiction.
    Public sector entity means a state, local authority, or other 
governmental subdivision below the U.S. sovereign entity level.
    Publicly traded means, with respect to an equity security, that the 
equity security is traded on:
    (1) Any exchange registered with the SEC as a national securities 
exchange under section 6 of the Securities Exchange Act of 1934 (15 
U.S.C. 78f); or
    (2) Any non-U.S.-based securities exchange that:
    (i) Is registered with, or approved by, a national securities 
regulatory authority; and
    (ii) Provides a liquid, two-way market for the security in question.
    QMNA netting set means a group of derivative transactions with a 
single counterparty that is subject to a qualifying master netting 
agreement and is netted under the qualifying master netting agreement.
    Qualifying master netting agreement means a written, legally 
enforceable agreement provided that:
    (1) The agreement creates a single legal obligation for all 
individual transactions covered by the agreement upon an event of 
default following any stay permitted by paragraph (2) of this 
definition, including upon an event of receivership, conservatorship, 
insolvency, liquidation, or similar proceeding, of the counterparty;
    (2) The agreement provides the national bank or Federal savings 
association the right to accelerate, terminate, and close-out on a net 
basis all transactions under the agreement and to liquidate or set-off 
collateral promptly upon an event of default, including upon an event of 
receivership, conservatorship, insolvency, liquidation, or similar 
proceeding, of the counterparty, provided that, in any such case:
    (i) Any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions, other than:
    (A) In receivership, conservatorship, or resolution under the 
Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under 
any similar insolvency law applicable to GSEs, or laws of foreign 
jurisdictions that are substantially similar to the U.S. laws referenced 
in this paragraph (2)(i)(A) in order to facilitate the orderly 
resolution of the defaulting counterparty; or
    (B) Where the agreement is subject by its terms to, or incorporates, 
any of the laws referenced in paragraph (2)(i)(A) of this definition; 
and
    (ii) The agreement may limit the right to accelerate, terminate, and 
close-out on a net basis all transactions under the agreement and to 
liquidate or set-off collateral promptly upon an event of default of the 
counterparty to the extent necessary for the counterparty to comply with 
the requirements of part 47, subpart I of part 225, or part 382 of this 
title, as applicable;
    Regulated financial company means:
    (1) A depository institution holding company or designated company;
    (2) A company included in the organization chart of a depository 
institution holding company on the Form FR Y-6, as listed in the 
hierarchy report of the depository institution holding company produced 
by the National Information Center (NIC) website,\2\ provided that the 
top-tier depository institution holding company is subject to a minimum 
liquidity standard under 12 CFR part 249;
---------------------------------------------------------------------------

    \2\ http://www.ffiec.gov/ nicpubweb/nicweb/ NicHome.aspx.
---------------------------------------------------------------------------

    (3) A depository institution; foreign bank; credit union; industrial 
loan company, industrial bank, or other similar institution described in 
section 2 of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 
1841 et seq.); national bank, state member bank, or state non-member 
bank that is not a depository institution;
    (4) An insurance company;
    (5) A securities holding company as defined in section 618 of the 
Dodd-Frank Act (12 U.S.C. 1850a); broker or dealer registered with the 
SEC under section 15 of the Securities Exchange

[[Page 963]]

Act (15 U.S.C. 78o); futures commission merchant as defined in section 
1a of the Commodity Exchange Act of 1936 (7 U.S.C. 1 et seq.); swap 
dealer as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 
1a); or security-based swap dealer as defined in section 3 of the 
Securities Exchange Act (15 U.S.C. 78c);
    (6) A designated financial market utility, as defined in section 803 
of the Dodd-Frank Act (12 U.S.C. 5462);
    (7) A U.S. intermediate holding company; and
    (8) Any company not domiciled in the United States (or a political 
subdivision thereof) that is supervised and regulated in a manner 
similar to entities described in paragraphs (1) through (7) of this 
definition (e.g., a foreign banking organization, foreign insurance 
company, foreign securities broker or dealer or foreign financial market 
utility).
    (9) A regulated financial company does not include:
    (i) U.S. government-sponsored enterprises;
    (ii) Small business investment companies, as defined in section 102 
of the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.);
    (iii) Entities designated as Community Development Financial 
Institutions (CDFIs) under 12 U.S.C. 4701 et seq. and 12 CFR part 1805; 
or
    (iv) Central banks, the Bank for International Settlements, the 
International Monetary Fund, or multilateral development banks.
    Reserve Bank balances means:
    (1) Balances held in a master account of the national bank or 
Federal savings association at a Federal Reserve Bank, less any balances 
that are attributable to any respondent of the national bank or Federal 
savings association if the national bank or Federal savings association 
is a correspondent for a pass-through account as defined in section 
204.2(l) of Regulation D (12 CFR 204.2(l));
    (2) Balances held in a master account of a correspondent of the 
national bank or Federal savings association that are attributable to 
the national bank or Federal savings association if the national bank or 
Federal savings association is a respondent for a pass-through account 
as defined in section 204.2(l) of Regulation D;
    (3) ``Excess balances'' of the national bank or Federal savings 
association as defined in section 204.2(z) of Regulation D (12 CFR 
204.2(z)) that are maintained in an ``excess balance account'' as 
defined in section 204.2(aa) of Regulation D (12 CFR 204.2(aa)) if the 
national bank or Federal savings association is an excess balance 
account participant; or
    (4) ``Term deposits'' of the national bank or Federal savings 
association as defined in section 204.2(dd) of Regulation D (12 CFR 
204.2(dd)) if such term deposits are offered and maintained pursuant to 
terms and conditions that:
    (i) Explicitly and contractually permit such term deposits to be 
withdrawn upon demand prior to the expiration of the term, or that
    (ii) Permit such term deposits to be pledged as collateral for term 
or automatically-renewing overnight advances from the Federal Reserve 
Bank.
    Retail customer or counterparty means a customer or counterparty 
that is:
    (1) An individual;
    (2) A business customer, but solely if and to the extent that:
    (i) The national bank or Federal savings association manages its 
transactions with the business customer, including deposits, unsecured 
funding, and credit facility and liquidity facility transactions, in the 
same way it manages its transactions with individuals;
    (ii) Transactions with the business customer have liquidity risk 
characteristics that are similar to comparable transactions with 
individuals; and
    (iii) The total aggregate funding raised from the business customer 
is less than $1.5 million; or
    (3) A living or testamentary trust that:
    (i) Is solely for the benefit of natural persons;
    (ii) Does not have a corporate trustee; and
    (iii) Terminates within 21 years and 10 months after the death of 
grantors or beneficiaries of the trust living on the effective date of 
the trust or within 25 years, if applicable under state law.
    Retail deposit means a demand or term deposit that is placed with 
the

[[Page 964]]

national bank or Federal savings association by a retail customer or 
counterparty, other than a brokered deposit.
    Retail mortgage means a mortgage that is primarily secured by a 
first or subsequent lien on one-to-four family residential property.
    Savings and loan holding company means a savings and loan holding 
company as defined in section 10 of the Home Owners' Loan Act (12 U.S.C. 
1467a).
    SEC means the Securities and Exchange Commission.
    Secured funding transaction means any funding transaction that is 
subject to a legally binding agreement that gives rise to a cash 
obligation of the national bank or Federal savings association to a 
wholesale customer or counterparty that is secured under applicable law 
by a lien on securities or loans provided by the national bank or 
Federal savings association, which gives the wholesale customer or 
counterparty, as holder of the lien, priority over the securities or 
loans in the event the national bank or Federal savings association 
enters into receivership, bankruptcy, insolvency, liquidation, 
resolution, or similar proceeding. Secured funding transactions include 
repurchase transactions, securities lending transactions, other secured 
loans, and borrowings from a Federal Reserve Bank. Secured funding 
transactions do not include securities.
    Secured lending transaction means any lending transaction that is 
subject to a legally binding agreement that gives rise to a cash 
obligation of a wholesale customer or counterparty to the national bank 
or Federal savings association that is secured under applicable law by a 
lien on securities or loans provided by the wholesale customer or 
counterparty, which gives the national bank or Federal savings 
association, as holder of the lien, priority over the securities or 
loans in the event the counterparty enters into receivership, 
bankruptcy, insolvency, liquidation, resolution, or similar proceeding. 
Secured lending transactions include reverse repurchase transactions and 
securities borrowing transactions. Secured lending transactions do not 
include securities.
    Securities Exchange Act means the Securities Exchange Act of 1934 
(15 U.S.C. 78a et seq.).
    Sovereign entity means a central government (including the U.S. 
government) or an agency, department, ministry, or central bank of a 
central government.
    Special purpose entity means a company organized for a specific 
purpose, the activities of which are significantly limited to those 
appropriate to accomplish a specific purpose, and the structure of which 
is intended to isolate the credit risk of the special purpose entity.
    Stable retail deposit means a retail deposit that is entirely 
covered by deposit insurance and:
    (1) Is held by the depositor in a transactional account; or
    (2) The depositor that holds the account has another established 
relationship with the national bank or Federal savings association such 
as another deposit account, a loan, bill payment services, or any 
similar service or product provided to the depositor that the national 
bank or Federal savings association demonstrates to the satisfaction of 
the OCC would make deposit withdrawal highly unlikely during a liquidity 
stress event.
    State means any state, commonwealth, territory, or possession of the 
United States, the District of Columbia, the Commonwealth of Puerto 
Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, 
Guam, or the United States Virgin Islands.
    Structured security means a security whose cash flow characteristics 
depend upon one or more indices or that has embedded forwards, options, 
or other derivatives or a security where an investor's investment return 
and the issuer's payment obligations are contingent on, or highly 
sensitive to, changes in the value of underlying assets, indices, 
interest rates, or cash flows.
    Structured transaction means a secured transaction in which 
repayment of obligations and other exposures to the transaction is 
largely derived, directly or indirectly, from the cash flow

[[Page 965]]

generated by the pool of assets that secures the obligations and other 
exposures to the transaction.
    Sweep deposit means a deposit held at the national bank or Federal 
savings association by a customer or counterparty through a contractual 
feature that automatically transfers to the national bank or Federal 
savings association from another regulated financial company at the 
close of each business day amounts identified under the agreement 
governing the account from which the amount is being transferred.
    Two-way market means a market where there are independent bona fide 
offers to buy and sell so that a price reasonably related to the last 
sales price or current bona fide competitive bid and offer quotations 
can be determined within one day and settled at that price within a 
relatively short time frame conforming to trade custom.
    U.S. government-sponsored enterprise means an entity established or 
chartered by the Federal government to serve public purposes specified 
by the United States Congress, but whose debt obligations are not 
explicitly guaranteed by the full faith and credit of the United States 
government.
    U.S. intermediate holding company means the top-tier company that is 
required to be established pursuant to 12 CFR 252.153.
    Unconditionally cancelable means, with respect to a credit or 
liquidity facility, that a national bank or Federal savings association 
may, at any time, with or without cause, refuse to extend credit under 
the facility (to the extent permitted under applicable law).
    Unsecured wholesale funding means a liability or general obligation 
of the national bank or Federal savings association to a wholesale 
customer or counterparty that is not a secured funding transaction. 
Unsecured wholesale funding includes wholesale deposits. Unsecured 
wholesale funding does not include asset exchanges.
    Unsecured wholesale lending means a liability or general obligation 
of a wholesale customer or counterparty to the national bank or Federal 
savings association that is not a secured lending transaction or a 
security. Unsecured wholesale lending does not include asset exchanges.
    Wholesale customer or counterparty means a customer or counterparty 
that is not a retail customer or counterparty.
    Wholesale deposit means a demand or term deposit that is provided by 
a wholesale customer or counterparty.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 79 FR 78294, Dec. 30, 
2014; 82 FR 56669, Nov. 29, 2017; 83 FR 44454, Aug. 31, 2018; 84 FR 
59266, Nov. 1, 2019; 85 FR 26841, May 6, 2020; 86 FR 9207, Feb. 11, 
2021]



Sec.  50.4  Certain operational requirements.

    (a) Qualifying master netting agreements. In order to recognize an 
agreement as a qualifying master netting agreement as defined in Sec.  
50.3, a national bank or Federal savings association must:
    (1) Conduct sufficient legal review to conclude with a well-founded 
basis (and maintain sufficient written documentation of that legal 
review) that:
    (i) The agreement meets the requirements of the definition of 
qualifying master netting agreement in Sec.  50.3; and
    (ii) In the event of a legal challenge (including one resulting from 
default or from receivership, bankruptcy, insolvency, liquidation, 
resolution, or similar proceeding) the relevant judicial and 
administrative authorities would find the agreement to be legal, valid, 
binding, and enforceable under the law of the relevant jurisdictions; 
and
    (2) Establish and maintain written procedures to monitor possible 
changes in relevant law and to ensure that the agreement continues to 
satisfy the requirements of the definition of qualifying master netting 
agreement in Sec.  50.3.
    (b) Operational deposits. In order to recognize a deposit as an 
operational deposit as defined in Sec.  50.3:
    (1) The related operational services must be performed pursuant to a 
legally binding written agreement, and:
    (i) The termination of the agreement must be subject to a minimum 30 
calendar-day notice period; or
    (ii) As a result of termination of the agreement or transfer of 
services to a

[[Page 966]]

third-party provider, the customer providing the deposit would incur 
significant contractual termination costs or switching costs (switching 
costs include significant technology, administrative, and legal service 
costs incurred in connection with the transfer of the operational 
services to a third-party provider);
    (2) The deposit must be held in an account designated as an 
operational account;
    (3) The customer must hold the deposit at the national bank or 
Federal savings association for the primary purpose of obtaining the 
operational services provided by the national bank or Federal savings 
association;
    (4) The deposit account must not be designed to create an economic 
incentive for the customer to maintain excess funds therein through 
increased revenue, reduction in fees, or other offered economic 
incentives;
    (5) The national bank or Federal savings association must 
demonstrate that the deposit is empirically linked to the operational 
services and that it has a methodology that takes into account the 
volatility of the average balance for identifying any excess amount, 
which must be excluded from the operational deposit amount;
    (6) The deposit must not be provided in connection with the national 
bank's or Federal savings association's provision of prime brokerage 
services, which, for the purposes of this part, are a package of 
services offered by the national bank or Federal savings association 
whereby the national bank or Federal savings association, among other 
services, executes, clears, settles, and finances transactions entered 
into by the customer or a third-party entity on behalf of the customer 
(such as an executing broker), and where the national bank or Federal 
savings association has a right to use or rehypothecate assets provided 
by the customer, including in connection with the extension of margin 
and other similar financing of the customer, subject to applicable law, 
and includes operational services provided to a non-regulated fund; and
    (7) The deposits must not be for arrangements in which the national 
bank or Federal savings association (as correspondent) holds deposits 
owned by another depository institution bank (as respondent) and the 
respondent temporarily places excess funds in an overnight deposit with 
the national bank or Federal savings association.



                   Subpart B_Liquidity Coverage Ratio



Sec.  50.10  Liquidity coverage ratio.

    (a) Minimum liquidity coverage ratio requirement. Subject to the 
transition provisions in subpart F of this part, a national bank or 
Federal savings association must calculate and maintain a liquidity 
coverage ratio that is equal to or greater than 1.0 on each business day 
in accordance with this part. A national bank or Federal savings 
association must calculate its liquidity coverage ratio as of the same 
time on each calculation date (the elected calculation time). The 
national bank or Federal savings association must select this time by 
written notice to the OCC prior to December 31, 2019. The national bank 
or Federal savings association may not thereafter change its elected 
calculation time without prior written approval from the OCC.
    (b) Calculation of the liquidity coverage ratio. A national bank's 
or Federal savings association's liquidity coverage ratio equals:
    (1) The national bank's or Federal savings association's HQLA amount 
as of the calculation date, calculated under subpart C of this part; 
divided by
    (2) The national bank's or Federal savings association's total net 
cash outflow amount as of the calculation date, calculated under subpart 
D of this part.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 84 FR 59268, Nov. 1, 
2019]



                  Subpart C_High-Quality Liquid Assets



Sec.  50.20  High-quality liquid asset criteria.

    (a) Level 1 liquid assets. An asset is a level 1 liquid asset if it 
is one of the following types of assets:
    (1) Reserve Bank balances;
    (2) Foreign withdrawable reserves;
    (3) A security that is issued by, or unconditionally guaranteed as 
to the

[[Page 967]]

timely payment of principal and interest by, the U.S. Department of the 
Treasury;
    (4) A security that is issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, a U.S. government 
agency (other than the U.S. Department of the Treasury) whose 
obligations are fully and explicitly guaranteed by the full faith and 
credit of the U.S. government, provided that the security is liquid and 
readily-marketable;
    (5) A security that is issued by, or unconditionally guaranteed as 
to the timely payment of principal and interest by, a sovereign entity, 
the Bank for International Settlements, the International Monetary Fund, 
the European Central Bank, European Community, or a multilateral 
development bank, that is:
    (i) Assigned a zero percent risk weight under subpart D of (12 CFR 
part 3) as of the calculation date;
    (ii) Liquid and readily-marketable;
    (iii) Issued or guaranteed by an entity whose obligations have a 
proven record as a reliable source of liquidity in repurchase or sales 
markets during stressed market conditions; and
    (iv) Not an obligation of a financial sector entity and not an 
obligation of a consolidated subsidiary of a financial sector entity; or
    (6) A security issued by, or unconditionally guaranteed as to the 
timely payment of principal and interest by, a sovereign entity that is 
not assigned a zero percent risk weight under subpart D of (12 CFR part 
3), where the sovereign entity issues the security in its own currency, 
the security is liquid and readily-marketable, and the national bank or 
Federal savings association holds the security in order to meet its net 
cash outflows in the jurisdiction of the sovereign entity, as calculated 
under subpart D of this part.
    (b) Level 2A liquid assets. An asset is a level 2A liquid asset if 
the asset is liquid and readily-marketable and is one of the following 
types of assets:
    (1) A security issued by, or guaranteed as to the timely payment of 
principal and interest by, a U.S. government-sponsored enterprise, that 
is investment grade under 12 CFR part 1 as of the calculation date, 
provided that the claim is senior to preferred stock; or
    (2) A security that is issued by, or guaranteed as to the timely 
payment of principal and interest by, a sovereign entity or multilateral 
development bank that is:
    (i) Not included in level 1 liquid assets;
    (ii) Assigned no higher than a 20 percent risk weight under subpart 
D of (12 CFR part 3) as of the calculation date;
    (iii) Issued or guaranteed by an entity whose obligations have a 
proven record as a reliable source of liquidity in repurchase or sales 
markets during stressed market conditions, as demonstrated by:
    (A) The market price of the security or equivalent securities of the 
issuer declining by no more than 10 percent during a 30 calendar-day 
period of significant stress, or
    (B) The market haircut demanded by counterparties to secured lending 
and secured funding transactions that are collateralized by the security 
or equivalent securities of the issuer increasing by no more than 10 
percentage points during a 30 calendar-day period of significant stress; 
and
    (iv) Not an obligation of a financial sector entity, and not an 
obligation of a consolidated subsidiary of a financial sector entity.
    (c) Level 2B liquid assets. An asset is a level 2B liquid asset if 
the asset is liquid and readily-marketable and is one of the following 
types of assets:
    (1) A corporate debt security that is:
    (i) Investment grade under 12 CFR part 1 as of the calculation date;
    (ii) Issued or guaranteed by an entity whose obligations have a 
proven record as a reliable source of liquidity in repurchase or sales 
markets during stressed market conditions, as demonstrated by:
    (A) The market price of the corporate debt security or equivalent 
securities of the issuer declining by no more than 20 percent during a 
30 calendar-day period of significant stress, or
    (B) The market haircut demanded by counterparties to secured lending 
and secured funding transactions that are collateralized by the 
corporate debt security or equivalent securities of the issuer 
increasing by no more than 20

[[Page 968]]

percentage points during a 30 calendar-day period of significant stress; 
and
    (iii) Not an obligation of a financial sector entity and not an 
obligation of a consolidated subsidiary of a financial sector entity;
    (2) A publicly traded common equity share that is:
    (i) Included in:
    (A) The Russell 1000 Index; or
    (B) An index that a national bank's or Federal savings association's 
supervisor in a foreign jurisdiction recognizes for purposes of 
including equity shares in level 2B liquid assets under applicable 
regulatory policy, if the share is held in that foreign jurisdiction;
    (ii) Issued in:
    (A) U.S. dollars; or
    (B) The currency of a jurisdiction where the national bank or 
Federal savings association operates and the national bank or Federal 
savings association holds the common equity share in order to cover its 
net cash outflows in that jurisdiction, as calculated under subpart D of 
this part;
    (iii) Issued by an entity whose publicly traded common equity shares 
have a proven record as a reliable source of liquidity in repurchase or 
sales markets during stressed market conditions, as demonstrated by:
    (A) The market price of the security or equivalent securities of the 
issuer declining by no more than 40 percent during a 30 calendar-day 
period of significant stress, or
    (B) The market haircut demanded by counterparties to securities 
borrowing and lending transactions that are collateralized by the 
publicly traded common equity shares or equivalent securities of the 
issuer increasing by no more than 40 percentage points, during a 30 
calendar day period of significant stress;
    (iv) Not issued by a financial sector entity and not issued by a 
consolidated subsidiary of a financial sector entity;
    (v) If held by a depository institution, is not acquired in 
satisfaction of a debt previously contracted (DPC); and
    (vi) If held by a consolidated subsidiary of a depository 
institution, the depository institution can include the publicly traded 
common equity share in its level 2B liquid assets only if the share is 
held to cover net cash outflows of the depository institution's 
consolidated subsidiary in which the publicly traded common equity share 
is held, as calculated by the national bank or Federal savings 
association under subpart D of this part; or
    (3) A municipal obligation that is investment grade under 12 CFR 
part 1 as of the calculation date.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 83 FR 44454, Aug. 31, 
2018]



Sec.  50.21  High-quality liquid asset amount.

    (a) Calculation of the HQLA amount. As of the calculation date, a 
national bank's or Federal savings association's HQLA amount equals:
    (1) The level 1 liquid asset amount; plus
    (2) The level 2A liquid asset amount; plus
    (3) The level 2B liquid asset amount; minus
    (4) The greater of:
    (i) The unadjusted excess HQLA amount; and
    (ii) The adjusted excess HQLA amount.
    (b) Calculation of liquid asset amounts--(1) Level 1 liquid asset 
amount. The level 1 liquid asset amount equals the fair value of all 
level 1 liquid assets held by the national bank or Federal savings 
association as of the calculation date that are eligible HQLA, less the 
amount of the reserve balance requirement under section 204.5 of 
Regulation D (12 CFR 204.5).
    (2) Level 2A liquid asset amount. The level 2A liquid asset amount 
equals 85 percent of the fair value of all level 2A liquid assets held 
by the national bank or Federal savings association as of the 
calculation date that are eligible HQLA.
    (3) Level 2B liquid asset amount. The level 2B liquid asset amount 
equals 50 percent of the fair value of all level 2B liquid assets held 
by the national bank or Federal savings association as of the 
calculation date that are eligible HQLA.
    (c) Calculation of the unadjusted excess HQLA amount. As of the 
calculation date, the unadjusted excess HQLA amount equals:

[[Page 969]]

    (1) The level 2 cap excess amount; plus
    (2) The level 2B cap excess amount.
    (d) Calculation of the level 2 cap excess amount. As of the 
calculation date, the level 2 cap excess amount equals the greater of:
    (1) The level 2A liquid asset amount plus the level 2B liquid asset 
amount minus 0.6667 times the level 1 liquid asset amount; and
    (2) 0.
    (e) Calculation of the level 2B cap excess amount. As of the 
calculation date, the level 2B excess amount equals the greater of:
    (1) The level 2B liquid asset amount minus the level 2 cap excess 
amount minus 0.1765 times the sum of the level 1 liquid asset amount and 
the level 2A liquid asset amount; and
    (2) 0.
    (f) Calculation of adjusted liquid asset amounts--(1) Adjusted level 
1 liquid asset amount. A national bank's or Federal savings 
association's adjusted level 1 liquid asset amount equals the fair value 
of all level 1 liquid assets that would be eligible HQLA and would be 
held by the national bank or Federal savings association upon the unwind 
of any secured funding transaction (other than a collateralized 
deposit), secured lending transaction, asset exchange, or collateralized 
derivatives transaction that matures within 30 calendar days of the 
calculation date where the national bank or Federal savings association 
will provide an asset that is eligible HQLA and the counterparty will 
provide an asset that will be eligible HQLA; less the amount of the 
reserve balance requirement under section 204.5 of Regulation D (12 CFR 
204.5).
    (2) Adjusted level 2A liquid asset amount. A national bank's or 
Federal savings association's adjusted level 2A liquid asset amount 
equals 85 percent of the fair value of all level 2A liquid assets that 
would be eligible HQLA and would be held by the national bank or Federal 
savings association upon the unwind of any secured funding transaction 
(other than a collateralized deposit), secured lending transaction, 
asset exchange, or collateralized derivatives transaction that matures 
within 30 calendar days of the calculation date where the national bank 
or Federal savings association will provide an asset that is eligible 
HQLA and the counterparty will provide an asset that will be eligible 
HQLA.
    (3) Adjusted level 2B liquid asset amount. A national bank's or 
Federal savings association's adjusted level 2B liquid asset amount 
equals 50 percent of the fair value of all level 2B liquid assets that 
would be eligible HQLA and would be held by the national bank or Federal 
savings association upon the unwind of any secured funding transaction 
(other than a collateralized deposit), secured lending transaction, 
asset exchange, or collateralized derivatives transaction that matures 
within 30 calendar days of the calculation date where the national bank 
or Federal savings association will provide an asset that is eligible 
HQLA and the counterparty will provide an asset that will be eligible 
HQLA.
    (g) Calculation of the adjusted excess HQLA amount. As of the 
calculation date, the adjusted excess HQLA amount equals:
    (1) The adjusted level 2 cap excess amount; plus
    (2) The adjusted level 2B cap excess amount.
    (h) Calculation of the adjusted level 2 cap excess amount. As of the 
calculation date, the adjusted level 2 cap excess amount equals the 
greater of:
    (1) The adjusted level 2A liquid asset amount plus the adjusted 
level 2B liquid asset amount minus 0.6667 times the adjusted level 1 
liquid asset amount; and
    (2) 0.
    (i) Calculation of the adjusted level 2B excess amount. As of the 
calculation date, the adjusted level 2B excess liquid asset amount 
equals the greater of:
    (1) The adjusted level 2B liquid asset amount minus the adjusted 
level 2 cap excess amount minus 0.1765 times the sum of the adjusted 
level 1 liquid asset amount and the adjusted level 2A liquid asset 
amount; and
    (2) 0.



Sec.  50.22  Requirements for eligible high-quality liquid assets.

    (a) Operational requirements for eligible HQLA. With respect to each 
asset that is eligible for inclusion in a national bank's or Federal 
savings association's

[[Page 970]]

HQLA amount, a national bank or Federal savings association must meet 
all of the following operational requirements:
    (1) The national bank or Federal savings association must 
demonstrate the operational capability to monetize the HQLA by:
    (i) Implementing and maintaining appropriate procedures and systems 
to monetize any HQLA at any time in accordance with relevant standard 
settlement periods and procedures; and
    (ii) Periodically monetizing a sample of HQLA that reasonably 
reflects the composition of the national bank's or Federal savings 
association's eligible HQLA, including with respect to asset type, 
maturity, and counterparty characteristics;
    (2) The national bank or Federal savings association must implement 
policies that require eligible HQLA to be under the control of the 
management function in the national bank or Federal savings association 
that is charged with managing liquidity risk, and this management 
function must evidence its control over the HQLA by either:
    (i) Segregating the HQLA from other assets, with the sole intent to 
use the HQLA as a source of liquidity; or
    (ii) Demonstrating the ability to monetize the assets and making the 
proceeds available to the liquidity management function without 
conflicting with a business or risk management strategy of the national 
bank or Federal savings association;
    (3) The fair value of the eligible HQLA must be reduced by the 
outflow amount that would result from the termination of any specific 
transaction hedging eligible HQLA;
    (4) The national bank or Federal savings association must implement 
and maintain policies and procedures that determine the composition of 
its eligible HQLA on each calculation date, by:
    (i) Identifying its eligible HQLA by legal entity, geographical 
location, currency, account, or other relevant identifying factors as of 
the calculation date;
    (ii) Determining that eligible HQLA meet the criteria set forth in 
this section; and
    (iii) Ensuring the appropriate diversification of the eligible HQLA 
by asset type, counterparty, issuer, currency, borrowing capacity, or 
other factors associated with the liquidity risk of the assets; and
    (5) The national bank or Federal savings association must have a 
documented methodology that results in a consistent treatment for 
determining that the national bank's or Federal savings association's 
eligible HQLA meet the requirements set forth in this section.
    (b) Generally applicable criteria for eligible HQLA. A national 
bank's or Federal savings association's eligible HQLA must meet all of 
the following criteria:
    (1) The assets are not encumbered.
    (2) The asset is not:
    (i) A client pool security held in a segregated account; or
    (ii) An asset received from a secured funding transaction involving 
client pool securities that were held in a segregated account;
    (3) For eligible HQLA held in a legal entity that is a U.S. 
consolidated subsidiary of a national bank or Federal savings 
association:
    (i) If the U.S. consolidated subsidiary is subject to a minimum 
liquidity standard under this part, the national bank or Federal savings 
association may include the eligible HQLA of the U.S. consolidated 
subsidiary in its HQLA amount up to:
    (A) The amount of net cash outflows of the U.S. consolidated 
subsidiary calculated by the U.S. consolidated subsidiary for its own 
minimum liquidity standard under this part; plus
    (B) Any additional amount of assets, including proceeds from the 
monetization of assets, that would be available for transfer to the top-
tier national bank or Federal savings association during times of stress 
without statutory, regulatory, contractual, or supervisory restrictions, 
including sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 
371c and 12 U.S.C. 371c-1) and Regulation W (12 CFR part 223); and
    (ii) If the U.S. consolidated subsidiary is not subject to a minimum 
liquidity standard under this part, the national bank or Federal savings 
association may include the eligible HQLA of the U.S. consolidated 
subsidiary in its HQLA amount up to:

[[Page 971]]

    (A) The amount of the net cash outflows of the U.S. consolidated 
subsidiary as of the 30th calendar day after the calculation date, as 
calculated by the national bank or Federal savings association for the 
national bank's or Federal savings association's minimum liquidity 
standard under this part; plus
    (B) Any additional amount of assets, including proceeds from the 
monetization of assets, that would be available for transfer to the top-
tier national bank or Federal savings association during times of stress 
without statutory, regulatory, contractual, or supervisory restrictions, 
including sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 
371c and 12 U.S.C. 371c-1) and Regulation W (12 CFR part 223);
    (4) For HQLA held by a consolidated subsidiary of the national bank 
or Federal savings association that is organized under the laws of a 
foreign jurisdiction, the national bank or Federal savings association 
may include the eligible HQLA of the consolidated subsidiary organized 
under the laws of a foreign jurisdiction in its HQLA amount up to:
    (i) The amount of net cash outflows of the consolidated subsidiary 
as of the 30th calendar day after the calculation date, as calculated by 
the national bank or Federal savings association for the national bank's 
or Federal savings association's minimum liquidity standard under this 
part; plus
    (ii) Any additional amount of assets that are available for transfer 
to the top-tier national bank or Federal savings association during 
times of stress without statutory, regulatory, contractual, or 
supervisory restrictions;
    (5) The national bank or Federal savings association must not 
include as eligible HQLA any assets, or HQLA resulting from transactions 
involving an asset that the national bank or Federal savings association 
received with rehypothecation rights, if the counterparty that provided 
the asset or the beneficial owner of the asset has a contractual right 
to withdraw the assets without an obligation to pay more than de minimis 
remuneration at any time during the 30 calendar days following the 
calculation date; and
    (6) The national bank or Federal savings association has not 
designated the assets to cover operational costs.
    (c) Maintenance of U.S. eligible HQLA. A national bank or Federal 
savings association is generally expected to maintain as eligible HQLA 
an amount and type of eligible HQLA in the United States that is 
sufficient to meet its total net cash outflow amount in the United 
States under subpart D of this part.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 86 FR 9209, Feb. 11, 
2021]



                    Subpart D_Total Net Cash Outflow



Sec.  50.30  Total net cash outflow amount.

    (a) Calculation of total net cash outflow amount. As of the 
calculation date, a national bank's or Federal savings association's 
total net cash outflow amount equals the national bank's or Federal 
savings association's outflow adjustment percentage as determined under 
paragraph (c) of this section multiplied by:
    (1) The sum of the outflow amounts calculated under Sec.  50.32(a) 
through (l); minus
    (2) The lesser of:
    (i) The sum of the inflow amounts calculated under Sec.  50.33(b) 
through (g); and
    (ii) 75 percent of the amount calculated under paragraph (a)(1) of 
this section; plus
    (3) The maturity mismatch add-on as calculated under paragraph (b) 
of this section.
    (b) Calculation of maturity mismatch add-on. (1) For purposes of 
this section:
    (i) The net cumulative maturity outflow amount for any of the 30 
calendar days following the calculation date is equal to the sum of the 
outflow amounts for instruments or transactions identified in Sec.  
50.32(g), (h)(1), (h)(2), (h)(5), (j), (k), and (l) that have a maturity 
date prior to or on that calendar day minus the sum of the inflow 
amounts for instruments or transactions identified in Sec.  50.33(c), 
(d), (e), and (f) that have a maturity date prior to or on that calendar 
day.
    (ii) The net day 30 cumulative maturity outflow amount is equal to, 
as of

[[Page 972]]

the 30th day following the calculation date, the sum of the outflow 
amounts for instruments or transactions identified in Sec.  50.32(g), 
(h)(1), (h)(2), (h)(5), (j), (k), and (l) that have a maturity date 30 
calendar days or less from the calculation date minus the sum of the 
inflow amounts for instruments or transactions identified in Sec.  
50.33(c), (d), (e), and (f) that have a maturity date 30 calendar days 
or less from the calculation date.
    (2) As of the calculation date, a national bank's or Federal savings 
association's maturity mismatch add-on is equal to:
    (i) The greater of:
    (A) 0; and
    (B) The largest net cumulative maturity outflow amount as calculated 
under paragraph (b)(1)(i) of this section for any of the 30 calendar 
days following the calculation date; minus
    (ii) The greater of:
    (A) 0; and
    (B) The net day 30 cumulative maturity outflow amount as calculated 
under paragraph (b)(1)(ii) of this section.
    (3) Other than the transactions identified in Sec.  50.32(h)(2), 
(h)(5), or (j) or Sec.  50.33(d) or (f), the maturity of which is 
determined under Sec.  50.31(a), transactions that have an open maturity 
are not included in the calculation of the maturity mismatch add-on.
    (c) Outflow adjustment percentage. A national bank's or Federal 
savings association's outflow adjustment percentage is determined 
pursuant to Table 1 to this paragraph (c).

       Table 1 to Sec.   50.30(c)--Outflow Adjustment Percentages
------------------------------------------------------------------------
                                                              Percent
------------------------------------------------------------------------
                      Outflow adjustment percentage
------------------------------------------------------------------------
GSIB depository institution that is a national bank or               100
 Federal savings association............................
Category II national bank or Federal savings association             100
Category III national bank or Federal savings                        100
 association that:
    (1) Is a consolidated subsidiary of (a) a covered
     depository institution holding company or U.S.
     intermediate holding company identified as a
     Category III banking organization pursuant to 12
     CFR 252.5 or 12 CFR 238.10 or (b) a depository
     institution that meets the criteria set forth in
     paragraphs(2)(ii)(A) and (B) of the definition of
     Category III national bank or Federal savings
     association in this part, in each case with $75
     billion or more in average weighted short-term
     wholesale funding; or
    (2) Has $75 billion or more in average weighted
     short-term wholesale funding and is not a
     consolidated subsidiary of (a) a covered depository
     institution holding company or U.S. intermediate
     holding company identified as a Category III
     banking organization pursuant to 12 CFR 252.5 or 12
     CFR 238.10 or (b) a depository institution that
     meets the criteria set forth in paragraphs
     (2)(ii)(A) and (B) of the definition of Category
     III national bank or Federal savings association in
     this part
Category III national bank or Federal savings                         85
 association that:
    (1) Is a consolidated subsidiary of (a) a covered
     depository institution holding company or U.S.
     intermediate holding company identified as a
     Category III banking organization pursuant to 12
     CFR 252.5 or 12 CFR 238.10 or (b) a depository
     institution that meets the criteria set forth in
     paragraphs (2)(ii)(A) and (B) of the definition of
     Category III national bank or Federal savings
     association in this part, in each case with less
     than $75 billion in average weighted short-term
     wholesale funding; or
    (2) Has less than $75 billion in average weighted
     short-term wholesale funding and is not a
     consolidated subsidiary of (a) a covered depository
     institution holding company or U.S. intermediate
     holding company identified as a Category III
     banking organization pursuant to 12 CFR 252.5 or 12
     CFR 238.10 or (b) a depository institution that
     meets the criteria set forth in paragraphs
     (2)(ii)(A) and (B) of the definition of Category
     III national bank or Federal savings association in
     this part
------------------------------------------------------------------------

    (d) Transition into a different outflow adjustment percentage. (1) A 
national bank or Federal savings association whose outflow adjustment 
percentage increases from a lower to a higher outflow adjustment 
percentage may continue to use its previous lower outflow adjustment 
percentage until the first day of the third calendar quarter after the 
outflow adjustment percentage increases.
    (2) A national bank or Federal savings association whose outflow 
adjustment percentage decreases from a higher to a lower outflow 
adjustment percentage must continue to use its previous higher outflow 
adjustment percentage until the first day of the

[[Page 973]]

first calendar quarter after the outflow adjustment percentage 
decreases.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 84 FR 59268, Nov. 1, 
2019; 86 FR 9209, Feb. 11, 2021]



Sec.  50.31  Determining maturity.

    (a) For purposes of calculating its liquidity coverage ratio and the 
components thereof under this subpart, a national bank or Federal 
savings association shall assume an asset or transaction matures:
    (1) With respect to an instrument or transaction subject to Sec.  
50.32, on the earliest possible contractual maturity date or the 
earliest possible date the transaction could occur, taking into account 
any option that could accelerate the maturity date or the date of the 
transaction, except that when considering the earliest possible 
contractual maturity date or the earliest possible date the transaction 
could occur, the national bank or Federal savings association should 
exclude any contingent options that are triggered only by regulatory 
actions or changes in law or regulation, as follows:
    (i) If an investor or funds provider has an option that would reduce 
the maturity, the national bank or Federal savings association must 
assume that the investor or funds provider will exercise the option at 
the earliest possible date;
    (ii) If an investor or funds provider has an option that would 
extend the maturity, the national bank or Federal savings association 
must assume that the investor or funds provider will not exercise the 
option to extend the maturity;
    (iii) If the national bank or Federal savings association has an 
option that would reduce the maturity of an obligation, the national 
bank or Federal savings association must assume that the national bank 
or Federal savings association will exercise the option at the earliest 
possible date, except if either of the following criteria are satisfied, 
in which case the maturity of the obligation for purposes of this part 
will be the original maturity date at issuance:
    (A) The original maturity of the obligation is greater than one year 
and the option does not go into effect for a period of 180 days 
following the issuance of the instrument; or
    (B) The counterparty is a sovereign entity, a U.S. government-
sponsored enterprise, or a public sector entity.
    (iv) If the national bank or Federal savings association has an 
option that would extend the maturity of an obligation it issued, the 
national bank or Federal savings association must assume the national 
bank or Federal savings association will not exercise that option to 
extend the maturity; and
    (v) If an option is subject to a contractually defined notice 
period, the national bank or Federal savings association must determine 
the earliest possible contractual maturity date regardless of the notice 
period.
    (2) With respect to an instrument or transaction subject to Sec.  
50.33, on the latest possible contractual maturity date or the latest 
possible date the transaction could occur, taking into account any 
option that could extend the maturity date or the date of the 
transaction, except that when considering the latest possible 
contractual maturity date or the latest possible date the transaction 
could occur, the national bank or Federal savings association may 
exclude any contingent options that are triggered only by regulatory 
actions or changes in law or regulation, as follows:
    (i) If the borrower has an option that would extend the maturity, 
the national bank or Federal savings association must assume that the 
borrower will exercise the option to extend the maturity to the latest 
possible date;
    (ii) If the borrower has an option that would reduce the maturity, 
the national bank or Federal savings association must assume that the 
borrower will not exercise the option to reduce the maturity;
    (iii) If the national bank or Federal savings association has an 
option that would reduce the maturity of an instrument or transaction, 
the national bank or Federal savings association must assume the 
national bank or Federal savings association will not exercise the 
option to reduce the maturity;
    (iv) If the national bank or Federal savings association has an 
option that would extend the maturity of an instrument or transaction, 
the national

[[Page 974]]

bank or Federal savings association must assume the national bank or 
Federal savings association will exercise the option to extend the 
maturity to the latest possible date; and
    (v) If an option is subject to a contractually defined notice 
period, the national bank or Federal savings association must determine 
the latest possible contractual maturity date based on the borrower 
using the entire notice period.
    (3) With respect to a transaction subject to Sec.  50.33(f)(1)(iii) 
through (vii) (secured lending transactions) or Sec.  50.33(f)(2)(ii) 
through (x) (asset exchanges), to the extent the transaction is secured 
by collateral that has been pledged in connection with either a secured 
funding transaction or asset exchange that has a remaining maturity of 
30 calendar days or less as of the calculation date, the maturity date 
is the later of the maturity date determined under paragraph (a)(2) of 
this section for the secured lending transaction or asset exchange or 
the maturity date determined under paragraph (a)(1) of this section for 
the secured funding transaction or asset exchange for which the 
collateral has been pledged.
    (4) With respect to a transaction that has an open maturity, is not 
an operational deposit, and is subject to the provisions of Sec.  
50.32(h)(2), (h)(5), (j), or (k) or Sec.  50.33(d) or (f), the maturity 
date is the first calendar day after the calculation date. Any other 
transaction that has an open maturity and is subject to the provisions 
of Sec.  50.32 shall be considered to mature within 30 calendar days of 
the calculation date.
    (5) With respect to a transaction subject to the provisions of Sec.  
50.33(g), on the date of the next scheduled calculation of the amount 
required under applicable legal requirements for the protection of 
customer assets with respect to each broker-dealer segregated account, 
in accordance with the national bank's or Federal savings association's 
normal frequency of recalculating such requirements.
    (b) [Reserved]

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 86 FR 9209, Feb. 11, 
2021]



Sec.  50.32  Outflow amounts.

    (a) Retail funding outflow amount. A national bank's or Federal 
savings association's retail funding outflow amount as of the 
calculation date includes (regardless of maturity or collateralization):
    (1) 3 percent of all stable retail deposits held at the national 
bank or Federal savings association;
    (2) 10 percent of all other retail deposits held at the national 
bank or Federal savings association;
    (3) 20 percent of all deposits placed at the national bank or 
Federal savings association by a third party on behalf of a retail 
customer or counterparty that are not brokered deposits, where the 
retail customer or counterparty owns the account and the entire amount 
is covered by deposit insurance;
    (4) 40 percent of all deposits placed at the national bank or 
Federal savings association by a third party on behalf of a retail 
customer or counterparty that are not brokered deposits, where the 
retail customer or counterparty owns the account and where less than the 
entire amount is covered by deposit insurance; and
    (5) 40 percent of all funding from a retail customer or counterparty 
that is not:
    (i) A retail deposit;
    (ii) A brokered deposit provided by a retail customer or 
counterparty; or
    (iii) A debt instrument issued by the national bank or Federal 
savings association that is owned by a retail customer or counterparty 
(see paragraph (h)(2)(ii) of this section).
    (b) Structured transaction outflow amount. If the national bank or 
Federal savings association is a sponsor of a structured transaction 
where the issuing entity is not consolidated on the national bank's or 
Federal savings association's balance sheet under GAAP, the structured 
transaction outflow amount for each such structured transaction as of 
the calculation date is the greater of:
    (1) 100 percent of the amount of all debt obligations of the issuing 
entity that mature 30 calendar days or less from such calculation date 
and all

[[Page 975]]

commitments made by the issuing entity to purchase assets within 30 
calendar days or less from such calculation date; and
    (2) The maximum contractual amount of funding the national bank or 
Federal savings association may be required to provide to the issuing 
entity 30 calendar days or less from such calculation date through a 
liquidity facility, a return or repurchase of assets from the issuing 
entity, or other funding agreement.
    (c) Net derivative cash outflow amount. The net derivative cash 
outflow amount as of the calculation date is the sum of the net 
derivative cash outflow amount for each counterparty. The net derivative 
cash outflow amount does not include forward sales of mortgage loans and 
any derivatives that are mortgage commitments subject to paragraph (d) 
of this section. The net derivative cash outflow amount for a 
counterparty is the sum of:
    (1) The amount, if greater than zero, of contractual payments and 
collateral that the national bank or Federal savings association will 
make or deliver to the counterparty 30 calendar days or less from the 
calculation date under derivative transactions other than transactions 
described in paragraph (c)(2) of this section, less the contractual 
payments and collateral that the national bank or Federal savings 
association will receive from the counterparty 30 calendar days or less 
from the calculation date under derivative transactions other than 
transactions described in paragraph (c)(2) of this section, provided 
that the derivative transactions are subject to a qualifying master 
netting agreement; and
    (2) The amount, if greater than zero, of contractual principal 
payments that the national bank or Federal savings association will make 
to the counterparty 30 calendar days or less from the calculation date 
under foreign currency exchange derivative transactions that result in 
the full exchange of contractual cash principal payments in different 
currencies within the same business day, less the contractual principal 
payments that the national bank or Federal savings association will 
receive from the counterparty 30 calendar days or less from the 
calculation date under foreign currency exchange derivative transactions 
that result in the full exchange of contractual cash principal payments 
in different currencies within the same business day.
    (d) Mortgage commitment outflow amount. The mortgage commitment 
outflow amount as of a calculation date is 10 percent of the amount of 
funds the national bank or Federal savings association has contractually 
committed for its own origination of retail mortgages that can be drawn 
upon 30 calendar days or less from such calculation date.
    (e) Commitment outflow amount. (1) A national bank's or Federal 
savings association's commitment outflow amount as of the calculation 
date includes:
    (i) Zero percent of the undrawn amount of all committed credit and 
liquidity facilities extended by a national bank or Federal savings 
association that is a depository institution to an affiliated depository 
institution that is subject to a minimum liquidity standard under this 
part;
    (ii) 5 percent of the undrawn amount of all committed credit and 
liquidity facilities extended by the national bank or Federal savings 
association to retail customers or counterparties;
    (iii) 10 percent of the undrawn amount of all committed credit 
facilities extended by the national bank or Federal savings association 
to a wholesale customer or counterparty that is not a financial sector 
entity or a consolidated subsidiary thereof, including a special purpose 
entity (other than those described in paragraph (e)(1)(viii) of this 
section) that is a consolidated subsidiary of such wholesale customer or 
counterparty;
    (iv) 30 percent of the undrawn amount of all committed liquidity 
facilities extended by the national bank or Federal savings association 
to a wholesale customer or counterparty that is not a financial sector 
entity or a consolidated subsidiary thereof, including a special purpose 
entity (other than those described in paragraph (e)(1)(viii) of this 
section) that is a consolidated subsidiary of such wholesale customer or 
counterparty;

[[Page 976]]

    (v) 50 percent of the undrawn amount of all committed credit and 
liquidity facilities extended by the national bank or Federal savings 
association to depository institutions, depository institution holding 
companies, and foreign banks, but excluding commitments described in 
paragraph (e)(1)(i) of this section;
    (vi) 40 percent of the undrawn amount of all committed credit 
facilities extended by the national bank or Federal savings association 
to a financial sector entity or a consolidated subsidiary thereof, 
including a special purpose entity (other than those described in 
paragraph (e)(1)(viii) of this section) that is a consolidated 
subsidiary of a financial sector entity, but excluding other commitments 
described in paragraph (e)(1)(i) or (v) of this section;
    (vii) 100 percent of the undrawn amount of all committed liquidity 
facilities extended by the national bank or Federal savings association 
to a financial sector entity or a consolidated subsidiary thereof, 
including a special purpose entity (other than those described in 
paragraph (e)(1)(viii) of this section) that is a consolidated 
subsidiary of a financial sector entity, but excluding other commitments 
described in paragraph (e)(1)(i) or (v) of this section and liquidity 
facilities included in paragraph (b)(2) of this section;
    (viii) 100 percent of the undrawn amount of all committed credit and 
liquidity facilities extended to a special purpose entity that issues or 
has issued commercial paper or securities (other than equity securities 
issued to a company of which the special purpose entity is a 
consolidated subsidiary) to finance its purchases or operations, and 
excluding liquidity facilities included in paragraph (b)(2) of this 
section; and
    (ix) 100 percent of the undrawn amount of all other committed credit 
or liquidity facilities extended by the national bank or Federal savings 
association.
    (2) For the purposes of this paragraph (e), the undrawn amount of a 
committed credit facility or committed liquidity facility is the entire 
unused amount of the facility that could be drawn upon within 30 
calendar days of the calculation date under the governing agreement, 
less the amount of level 1 liquid assets and the amount of level 2A 
liquid assets securing the facility.
    (3) For the purposes of this paragraph (e), the amount of level 1 
liquid assets and level 2A liquid assets securing a committed credit or 
liquidity facility is the fair value of level 1 liquid assets and 85 
percent of the fair value of level 2A liquid assets that are required to 
be pledged as collateral by the counterparty to secure the facility, 
provided that:
    (i) The assets pledged upon a draw on the facility would be eligible 
HQLA; and
    (ii) The national bank or Federal savings association has not 
included the assets as eligible HQLA under subpart C of this part as of 
the calculation date.
    (f) Collateral outflow amount. The collateral outflow amount as of 
the calculation date includes:
    (1) Changes in financial condition. 100 percent of all additional 
amounts of collateral the national bank or Federal savings association 
could be contractually required to pledge or to fund under the terms of 
any transaction as a result of a change in the national bank's or 
Federal savings association's financial condition;
    (2) Derivative collateral potential valuation changes. 20 percent of 
the fair value of any collateral securing a derivative transaction 
pledged to a counterparty by the national bank or Federal savings 
association that is not a level 1 liquid asset;
    (3) Potential derivative valuation changes. The absolute value of 
the largest 30-consecutive calendar day cumulative net mark-to-market 
collateral outflow or inflow realized during the preceding 24 months 
resulting from derivative transaction valuation changes;
    (4) Excess collateral. 100 percent of the fair value of collateral 
that:
    (i) The national bank or Federal savings association could be 
required by contract to return to a counterparty because the collateral 
pledged to the national bank or Federal savings association exceeds the 
current collateral requirement of the counterparty under the governing 
contract;

[[Page 977]]

    (ii) Is not segregated from the national bank's or Federal savings 
association's other assets such that it cannot be rehypothecated; and
    (iii) Is not already excluded as eligible HQLA by the national bank 
or Federal savings association under Sec.  50.22(b)(5);
    (5) Contractually required collateral. 100 percent of the fair value 
of collateral that the national bank or Federal savings association is 
contractually required to pledge to a counterparty and, as of such 
calculation date, the national bank or Federal savings association has 
not yet pledged;
    (6) Collateral substitution. (i) Zero percent of the fair value of 
collateral pledged to the national bank or Federal savings association 
by a counterparty where the collateral qualifies as level 1 liquid 
assets and eligible HQLA and where, under the contract governing the 
transaction, the counterparty may replace the pledged collateral with 
other assets that qualify as level 1 liquid assets, without the consent 
of the national bank or Federal savings association;
    (ii) 15 percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty, where 
the collateral qualifies as level 1 liquid assets and eligible HQLA and 
where, under the contract governing the transaction, the counterparty 
may replace the pledged collateral with assets that qualify as level 2A 
liquid assets, without the consent of the national bank or Federal 
savings association;
    (iii) 50 percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral qualifies as level 1 liquid assets and eligible HQLA and 
where under, the contract governing the transaction, the counterparty 
may replace the pledged collateral with assets that qualify as level 2B 
liquid assets, without the consent of the national bank or Federal 
savings association;
    (iv) 100 percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral qualifies as level 1 liquid assets and eligible HQLA and 
where, under the contract governing the transaction, the counterparty 
may replace the pledged collateral with assets that do not qualify as 
HQLA, without the consent of the national bank or Federal savings 
association;
    (v) Zero percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral qualifies as level 2A liquid assets and eligible HQLA and 
where, under the contract governing the transaction, the counterparty 
may replace the pledged collateral with assets that qualify as level 1 
or level 2A liquid assets, without the consent of the national bank or 
Federal savings association;
    (vi) 35 percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral qualifies as level 2A liquid assets and eligible HQLA and 
where, under the contract governing the transaction, the counterparty 
may replace the pledged collateral with assets that qualify as level 2B 
liquid assets, without the consent of the national bank or Federal 
savings association;
    (vii) 85 percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral qualifies as level 2A liquid assets and eligible HQLA and 
where, under the contract governing the transaction, the counterparty 
may replace the pledged collateral with assets that do not qualify as 
HQLA, without the consent of the national bank or Federal savings 
association;
    (viii) Zero percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral qualifies as level 2B liquid assets and eligible HQLA and 
where, under the contract governing the transaction, the counterparty 
may replace the pledged collateral with other assets that qualify as 
HQLA, without the consent of the national bank or Federal savings 
association; and
    (ix) 50 percent of the fair value of collateral pledged to the 
national bank or Federal savings association by a counterparty where the 
collateral

[[Page 978]]

qualifies as level 2B liquid assets and eligible HQLA and where, under 
the contract governing the transaction, the counterparty may replace the 
pledged collateral with assets that do not qualify as HQLA, without the 
consent of the national bank or Federal savings association.
    (g) Brokered deposit outflow amount for retail customers or 
counterparties. The brokered deposit outflow amount for retail customers 
or counterparties as of the calculation date includes:
    (1) 100 percent of all brokered deposits at the national bank or 
Federal savings association provided by a retail customer or 
counterparty that are not described in paragraphs (g)(5) through (9) of 
this section and which mature 30 calendar days or less from the 
calculation date;
    (2) 10 percent of all brokered deposits at the national bank or 
Federal savings association provided by a retail customer or 
counterparty that are not described in paragraphs (g)(5) through (9) of 
this section and which mature later than 30 calendar days from the 
calculation date;
    (3) 20 percent of all brokered deposits at the national bank or 
Federal savings association provided by a retail customer or 
counterparty that are not described in paragraphs (g)(5) through (9) of 
this section and which are held in a transactional account with no 
contractual maturity date, where the entire amount is covered by deposit 
insurance;
    (4) 40 percent of all brokered deposits at the national bank or 
Federal savings association provided by a retail customer or 
counterparty that are not described in paragraphs (g)(5) through (9) of 
this section and which are held in a transactional account with no 
contractual maturity date, where less than the entire amount is covered 
by deposit insurance;
    (5) 10 percent of all brokered reciprocal deposits at the national 
bank or Federal savings association provided by a retail customer or 
counterparty, where the entire amount is covered by deposit insurance;
    (6) 25 percent of all brokered reciprocal deposits at the national 
bank or Federal savings association provided by a retail customer or 
counterparty, where less than the entire amount is covered by deposit 
insurance;
    (7) 10 percent of all sweep deposits at the national bank or Federal 
savings association provided by a retail customer or counterparty:
    (i) That are deposited in accordance with a contract between the 
retail customer or counterparty and the national bank or Federal savings 
association, a controlled subsidiary of the national bank or Federal 
savings association, or a company that is a controlled subsidiary of the 
same top-tier company of which the national bank or Federal savings 
association is a controlled subsidiary; and
    (ii) Where the entire amount of the deposits is covered by deposit 
insurance;
    (8) 25 percent of all sweep deposits at the national bank or Federal 
savings association provided by a retail customer or counterparty:
    (i) That are not deposited in accordance with a contract between the 
retail customer or counterparty and the national bank or Federal savings 
association, a controlled subsidiary of the national bank or Federal 
savings association, or a company that is a controlled subsidiary of the 
same top-tier company of which the national bank or Federal savings 
association is a controlled subsidiary; and
    (ii) Where the entire amount of the deposits is covered by deposit 
insurance; and
    (9) 40 percent of all sweep deposits at the national bank or Federal 
savings association provided by a retail customer or counterparty where 
less than the entire amount of the deposit balance is covered by deposit 
insurance.
    (h) Unsecured wholesale funding outflow amount. A national bank's or 
Federal savings association's unsecured wholesale funding outflow 
amount, for all transactions that mature within 30 calendar days or less 
of the calculation date, as of the calculation date includes:
    (1) For unsecured wholesale funding that is not an operational 
deposit and is not provided by a financial sector entity or consolidated 
subsidiary of a financial sector entity:
    (i) 20 percent of all such funding, where the entire amount is 
covered by

[[Page 979]]

deposit insurance and the funding is not a brokered deposit;
    (ii) 40 percent of all such funding, where:
    (A) Less than the entire amount is covered by deposit insurance; or
    (B) The funding is a brokered deposit;
    (2) 100 percent of all unsecured wholesale funding that is not an 
operational deposit and is not included in paragraph (h)(1) of this 
section, including:
    (i) Funding provided by a company that is a consolidated subsidiary 
of the same top-tier company of which the national bank or Federal 
savings association is a consolidated subsidiary; and
    (ii) Debt instruments issued by the national bank or Federal savings 
association, including such instruments owned by retail customers or 
counterparties;
    (3) 5 percent of all operational deposits, other than operational 
deposits that are held in escrow accounts, where the entire deposit 
amount is covered by deposit insurance;
    (4) 25 percent of all operational deposits not included in paragraph 
(h)(3) of this section; and
    (5) 100 percent of all unsecured wholesale funding that is not 
otherwise described in this paragraph (h).
    (i) Debt security buyback outflow amount. A national bank's or 
Federal savings association's debt security buyback outflow amount for 
debt securities issued by the national bank or Federal savings 
association that mature more than 30 calendar days after the calculation 
date and for which the national bank or Federal savings association or a 
consolidated subsidiary of the national bank or Federal savings 
association is the primary market maker in such debt securities 
includes:
    (1) 3 percent of all such debt securities that are not structured 
securities; and
    (2) 5 percent of all such debt securities that are structured 
securities.
    (j) Secured funding and asset exchange outflow amount. (1) A 
national bank's or Federal savings association's secured funding outflow 
amount, for all transactions that mature within 30 calendar days or less 
of the calculation date, as of the calculation date includes:
    (i) Zero percent of all funds the national bank or Federal savings 
association must pay pursuant to secured funding transactions, to the 
extent that the funds are secured by level 1 liquid assets;
    (ii) 15 percent of all funds the national bank or Federal savings 
association must pay pursuant to secured funding transactions, to the 
extent that the funds are secured by level 2A liquid assets;
    (iii) 25 percent of all funds the national bank or Federal savings 
association must pay pursuant to secured funding transactions with 
sovereign entities, multilateral development banks, or U.S. government-
sponsored enterprises that are assigned a risk weight of 20 percent 
under subpart D of (12 CFR part 3), to the extent that the funds are not 
secured by level 1 or level 2A liquid assets;
    (iv) 50 percent of all funds the national bank or Federal savings 
association must pay pursuant to secured funding transactions, to the 
extent that the funds are secured by level 2B liquid assets;
    (v) 50 percent of all funds received from secured funding 
transactions that are customer short positions where the customer short 
positions are covered by other customers' collateral and the collateral 
does not consist of HQLA; and
    (vi) 100 percent of all other funds the national bank or Federal 
savings association must pay pursuant to secured funding transactions, 
to the extent that the funds are secured by assets that are not HQLA.
    (2) If an outflow rate specified in paragraph (j)(1) of this section 
for a secured funding transaction is greater than the outflow rate that 
the national bank or Federal savings association is required to apply 
under paragraph (h) of this section to an unsecured wholesale funding 
transaction that is not an operational deposit with the same 
counterparty, the national bank or Federal savings association may apply 
to the secured funding transaction the outflow rate that applies to an 
unsecured wholesale funding transaction that is not an operational 
deposit with that counterparty, except in the case of:

[[Page 980]]

    (i) Secured funding transactions that are secured by collateral that 
was received by the national bank or Federal savings association under a 
secured lending transaction or asset exchange, in which case the 
national bank or Federal savings association must apply the outflow rate 
specified in paragraph (j)(1) of this section for the secured funding 
transaction; and
    (ii) Collateralized deposits that are operational deposits, in which 
case the national bank or Federal savings association may apply to the 
operational deposit amount, as calculated in accordance with Sec.  
50.4(b), the operational deposit outflow rate specified in paragraph 
(h)(3) or (4) of this section, as applicable, if such outflow rate is 
lower than the outflow rate specified in paragraph (j)(1) of this 
section.
    (3) A national bank's or Federal savings association's asset 
exchange outflow amount, for all transactions that mature within 30 
calendar days or less of the calculation date, as of the calculation 
date includes:
    (i) Zero percent of the fair value of the level 1 liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive level 1 liquid assets from the asset 
exchange counterparty;
    (ii) 15 percent of the fair value of the level 1 liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive level 2A liquid assets from the asset 
exchange counterparty;
    (iii) 50 percent of the fair value of the level 1 liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive level 2B liquid assets from the asset 
exchange counterparty;
    (iv) 100 percent of the fair value of the level 1 liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive assets that are not HQLA from the asset 
exchange counterparty;
    (v) Zero percent of the fair value of the level 2A liquid assets 
that national bank or Federal savings association must post to a 
counterparty pursuant to asset exchanges, not described in paragraphs 
(j)(3)(x) through (xiii) of this section, where national bank or Federal 
savings association will receive level 1 or level 2A liquid assets from 
the asset exchange counterparty;
    (vi) 35 percent of the fair value of the level 2A liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive level 2B liquid assets from the asset 
exchange counterparty;
    (vii) 85 percent of the fair value of the level 2A liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive assets that are not HQLA from the asset 
exchange counterparty;
    (viii) Zero percent of the fair value of the level 2B liquid assets 
the national bank or Federal savings association must post to a 
counterparty pursuant to asset exchanges, not described in paragraphs 
(j)(3)(x) through (xiii) of this section, where the national bank or 
Federal savings association will receive HQLA from the asset exchange 
counterparty; and
    (ix) 50 percent of the fair value of the level 2B liquid assets the 
national bank or Federal savings association must post to a counterparty 
pursuant to asset exchanges, not described in paragraphs (j)(3)(x) 
through (xiii) of this section, where the national bank or Federal 
savings association will receive assets that are not HQLA from the asset 
exchange counterparty;

[[Page 981]]

    (x) Zero percent of the fair value of the level 1 liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to an asset exchange where the national bank or 
Federal savings association has rehypothecated the assets posted by the 
asset exchange counterparty, and, as of the calculation date, the assets 
will not be returned to the national bank or Federal savings association 
within 30 calendar days;
    (xi) 15 percent of the fair value of the level 2A liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to an asset exchange where the national bank or 
Federal savings association has rehypothecated the assets posted by the 
asset exchange counterparty, and, as of the calculation date, the assets 
will not be returned to the national bank or Federal savings association 
within 30 calendar days;
    (xii) 50 percent of the fair value of the level 2B liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to an asset exchange where the national bank or 
Federal savings association has rehypothecated the assets posted by the 
asset exchange counterparty, and, as of the calculation date, the assets 
will not be returned to the national bank or Federal savings association 
within 30 calendar days; and
    (xiii) 100 percent of the fair value of the non-HQLA the national 
bank or Federal savings association will receive from a counterparty 
pursuant to an asset exchange where the national bank or Federal savings 
association has rehypothecated the assets posted by the asset exchange 
counterparty, and, as of the calculation date, the assets will not be 
returned to the national bank or Federal savings association within 30 
calendar days.
    (k) Foreign central bank borrowing outflow amount. A national bank's 
or Federal savings association's foreign central bank borrowing outflow 
amount is, in a foreign jurisdiction where the national bank or Federal 
savings association has borrowed from the jurisdiction's central bank, 
the outflow amount assigned to borrowings from central banks in a 
minimum liquidity standard established in that jurisdiction. If the 
foreign jurisdiction has not specified a central bank borrowing outflow 
amount in a minimum liquidity standard, the foreign central bank 
borrowing outflow amount must be calculated in accordance with paragraph 
(j) of this section.
    (l) Other contractual outflow amount. A national bank's or Federal 
savings association's other contractual outflow amount is 100 percent of 
funding or amounts, with the exception of operating expenses of the 
national bank or Federal savings association (such as rents, salaries, 
utilities, and other similar payments), payable by the national bank or 
Federal savings association to counterparties under legally binding 
agreements that are not otherwise specified in this section.
    (m) Excluded amounts for intragroup transactions. The outflow 
amounts set forth in this section do not include amounts arising out of 
transactions between:
    (1) The national bank or Federal savings association and a 
consolidated subsidiary of the national bank or Federal savings 
association; or
    (2) A consolidated subsidiary of the national bank or Federal 
savings association and another consolidated subsidiary of the national 
bank or Federal savings association.

[79 FR 61523, 61538, Oct. 10, 2014, as amended at 86 FR 9209, Feb. 11, 
2021]



Sec.  50.33  Inflow amounts.

    (a) The inflows in paragraphs (b) through (g) of this section do not 
include:
    (1) Amounts the national bank or Federal savings association holds 
in operational deposits at other regulated financial companies;
    (2) Amounts the national bank or Federal savings association 
expects, or is contractually entitled to receive, 30 calendar days or 
less from the calculation date due to forward sales of mortgage loans 
and any derivatives that are mortgage commitments subject to Sec.  
50.32(d);
    (3) The amount of any credit or liquidity facilities extended to the 
national bank or Federal savings association;

[[Page 982]]

    (4) The amount of any asset that is eligible HQLA and any amounts 
payable to the national bank or Federal savings association with respect 
to that asset;
    (5) Any amounts payable to the national bank or Federal savings 
association from an obligation of a customer or counterparty that is a 
nonperforming asset as of the calculation date or that the national bank 
or Federal savings association has reason to expect will become a 
nonperforming exposure 30 calendar days or less from the calculation 
date; and
    (6) Amounts payable to the national bank or Federal savings 
association with respect to any transaction that has no contractual 
maturity date or that matures after 30 calendar days of the calculation 
date (as determined by Sec.  50.31).
    (b) Net derivative cash inflow amount. The net derivative cash 
inflow amount as of the calculation date is the sum of the net 
derivative cash inflow amount for each counterparty. The net derivative 
cash inflow amount does not include amounts excluded from inflows under 
paragraph (a)(2) of this section. The net derivative cash inflow amount 
for a counterparty is the sum of:
    (1) The amount, if greater than zero, of contractual payments and 
collateral that the national bank or Federal savings association will 
receive from the counterparty 30 calendar days or less from the 
calculation date under derivative transactions other than transactions 
described in paragraph (b)(2) of this section, less the contractual 
payments and collateral that the national bank or Federal savings 
association will make or deliver to the counterparty 30 calendar days or 
less from the calculation date under derivative transactions other than 
transactions described in paragraph (b)(2) of this section, provided 
that the derivative transactions are subject to a qualifying master 
netting agreement; and
    (2) The amount, if greater than zero, of contractual principal 
payments that the national bank or Federal savings association will 
receive from the counterparty 30 calendar days or less from the 
calculation date under foreign currency exchange derivative transactions 
that result in the full exchange of contractual cash principal payments 
in different currencies within the same business day, less the 
contractual principal payments that the national bank or Federal savings 
association will make to the counterparty 30 calendar days or less from 
the calculation date under foreign currency exchange derivative 
transactions that result in the full exchange of contractual cash 
principal payments in different currencies within the same business day.
    (c) Retail cash inflow amount. The retail cash inflow amount as of 
the calculation date includes 50 percent of all payments contractually 
payable to the national bank or Federal savings association from retail 
customers or counterparties.
    (d) Unsecured wholesale cash inflow amount. The unsecured wholesale 
cash inflow amount as of the calculation date includes:
    (1) 100 percent of all payments contractually payable to the 
national bank or Federal savings association from financial sector 
entities, or from a consolidated subsidiary thereof, or central banks; 
and
    (2) 50 percent of all payments contractually payable to the national 
bank or Federal savings association from wholesale customers or 
counterparties that are not financial sector entities or consolidated 
subsidiaries thereof, provided that, with respect to revolving credit 
facilities, the amount of the existing loan is not included in the 
unsecured wholesale cash inflow amount and the remaining undrawn balance 
is included in the outflow amount under Sec.  50.32(e)(1).
    (e) Securities cash inflow amount. The securities cash inflow amount 
as of the calculation date includes 100 percent of all contractual 
payments due to the national bank or Federal savings association on 
securities it owns that are not eligible HQLA.
    (f) Secured lending and asset exchange cash inflow amount. (1) A 
national bank's or Federal savings association's secured lending cash 
inflow amount as of the calculation date includes:
    (i) Zero percent of all contractual payments due to the national 
bank or Federal savings association pursuant

[[Page 983]]

to secured lending transactions, including margin loans extended to 
customers, to the extent that the payments are secured by collateral 
that has been rehypothecated in a transaction and, as of the calculation 
date, will not be returned to the national bank or Federal savings 
association within 30 calendar days;
    (ii) 100 percent of all contractual payments due to the national 
bank or Federal savings association pursuant to secured lending 
transactions not described in paragraph (f)(1)(vii) of this section, to 
the extent that the payments are secured by assets that are not eligible 
HQLA, but are still held by the national bank or Federal savings 
association and are available for immediate return to the counterparty 
at any time;
    (iii) Zero percent of all contractual payments due to the national 
bank or Federal savings association pursuant to secured lending 
transactions not described in paragraphs (f)(1)(i) or (ii) of this 
section, to the extent that the payments are secured by level 1 liquid 
assets;
    (iv) 15 percent of all contractual payments due to the national bank 
or Federal savings association pursuant to secured lending transactions 
not described in paragraphs (f)(1)(i) or (ii) of this section, to the 
extent that the payments are secured by level 2A liquid assets;
    (v) 50 percent of all contractual payments due to the national bank 
or Federal savings association pursuant to secured lending transactions 
not described in paragraphs (f)(1)(i) or (ii) of this section, to the 
extent that the payments are secured by level 2B liquid assets;
    (vi) 100 percent of all contractual payments due to the national 
bank or Federal savings association pursuant to secured lending 
transactions not described in paragraphs (f)(1)(i), (ii), or (vii) of 
this section, to the extent that the payments are secured by assets that 
are not HQLA; and
    (vii) 50 percent of all contractual payments due to the national 
bank or Federal savings association pursuant to collateralized margin 
loans extended to customers, not described in paragraph (f)(1)(i) of 
this section, provided that the loans are secured by assets that are not 
HQLA.
    (2) A national bank's or Federal savings association's asset 
exchange inflow amount as of the calculation date includes:
    (i) Zero percent of the fair value of assets the national bank or 
Federal savings association will receive from a counterparty pursuant to 
asset exchanges, to the extent that the asset received by the national 
bank or Federal savings association from the counterparty has been 
rehypothecated in a transaction and, as of the calculation date, will 
not be returned to the national bank or Federal savings association 
within 30 calendar days;
    (ii) Zero percent of the fair value of level 1 liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post level 1 liquid assets to the asset exchange 
counterparty;
    (iii) 15 percent of the fair value of level 1 liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post level 2A liquid assets to the asset exchange 
counterparty;
    (iv) 50 percent of the fair value of level 1 liquid assets the 
national bank or Federal savings association will receive from 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post level 2B liquid assets to the asset exchange 
counterparty;
    (v) 100 percent of the fair value of level 1 liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post assets that are not HQLA to the asset exchange 
counterparty;
    (vi) Zero percent of the fair value of level 2A liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to

[[Page 984]]

asset exchanges, not described in paragraph (f)(2)(i) of this section, 
where the national bank or Federal savings association must post level 1 
or level 2A liquid assets to the asset exchange counterparty;
    (vii) 35 percent of the fair value of level 2A liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post level 2B liquid assets to the asset exchange 
counterparty;
    (viii) 85 percent of the fair value of level 2A liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post assets that are not HQLA to the asset exchange 
counterparty;
    (ix) Zero percent of the fair value of level 2B liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post assets that are HQLA to the asset exchange 
counterparty; and
    (x) 50 percent of the fair value of level 2B liquid assets the 
national bank or Federal savings association will receive from a 
counterparty pursuant to asset exchanges, not described in paragraph 
(f)(2)(i) of this section, where the national bank or Federal savings 
association must post assets that are not HQLA to the asset exchange 
counterparty.
    (g) Broker-dealer segregated account inflow amount. A national 
bank's or Federal savings association's broker-dealer segregated account 
inflow amount is the fair value of all assets released from broker-
dealer segregated accounts maintained in accordance with statutory or 
regulatory requirements for the protection of customer trading assets, 
provided that the calculation of the broker-dealer segregated account 
inflow amount, for any transaction affecting the calculation of the 
segregated balance (as required by applicable law), shall be consistent 
with the following:
    (1) In calculating the broker-dealer segregated account inflow 
amount, the national bank or Federal savings association must calculate 
the fair value of the required balance of the customer reserve account 
as of 30 calendar days from the calculation date by assuming that 
customer cash and collateral positions have changed consistent with the 
outflow and inflow calculations required under Sec. Sec.  50.32 and 
50.33.
    (2) If the fair value of the required balance of the customer 
reserve account as of 30 calendar days from the calculation date, as 
calculated consistent with the outflow and inflow calculations required 
under Sec. Sec.  50.32 and 50.33, is less than the fair value of the 
required balance as of the calculation date, the difference is the 
segregated account inflow amount.
    (3) If the fair value of the required balance of the customer 
reserve account as of 30 calendar days from the calculation date, as 
calculated consistent with the outflow and inflow calculations required 
under Sec. Sec.  50.32 and 50.33, is more than the fair value of the 
required balance as of the calculation date, the segregated account 
inflow amount is zero.
    (h) Other cash inflow amounts. A national bank's or Federal savings 
association's inflow amount as of the calculation date includes zero 
percent of other cash inflow amounts not included in paragraphs (b) 
through (g) of this section.
    (i) Excluded amounts for intragroup transactions. The inflow amounts 
set forth in this section do not include amounts arising out of 
transactions between:
    (1) The national bank or Federal savings association and a 
consolidated subsidiary of the national bank or Federal savings 
association; or
    (2) A consolidated subsidiary of the national bank or Federal 
savings association and another consolidated subsidiary of the national 
bank or Federal savings association.



Sec.  50.34  Cash flows related to Covered Federal Reserve Facility Funding.

    (a) Treatment of Covered Federal Reserve Facility Funding. 
Notwithstanding

[[Page 985]]

any other section of this part and except as provided in paragraph (b) 
of this section, outflow amounts and inflow amounts related to Covered 
Federal Reserve Facility Funding and the assets securing Covered Federal 
Reserve Facility Funding are excluded from the calculation of a national 
bank's or Federal savings association's total net cash outflow amount 
calculated under Sec.  50.30.
    (b) Exception. To the extent the Covered Federal Reserve Facility 
Funding is secured by securities, debt obligations, or other instruments 
issued by the national bank or Federal savings association or one of its 
consolidated subsidiaries, the Covered Federal Reserve Facility Funding 
is not subject to paragraph (a) of this section and this outflow amount 
must be included in the national bank's or Federal savings association's 
total net cash outflow amount calculated under Sec.  50.30.

[85 FR 26841, May 6, 2020]



                 Subpart E_Liquidity Coverage Shortfall



Sec.  50.40  Liquidity coverage shortfall: Supervisory framework.

    (a) Notification requirements. A national bank or Federal savings 
association must notify the OCC on any business day when its liquidity 
coverage ratio is calculated to be less than the minimum requirement in 
Sec.  50.10.
    (b) Liquidity plan. (1) For the period during which a national bank 
or Federal savings association must calculate a liquidity coverage ratio 
on the last business day of each applicable calendar month under subpart 
F of this part, if the national bank's or Federal savings association's 
liquidity coverage ratio is below the minimum requirement in Sec.  50.10 
for any calculation date that is the last business day of the applicable 
calendar month, or if the OCC has determined that the national bank or 
Federal savings association is otherwise materially noncompliant with 
the requirements of this part, the national bank or Federal savings 
association must promptly consult with the OCC to determine whether the 
national bank or Federal savings association must provide to the OCC a 
plan for achieving compliance with the minimum liquidity requirement in 
Sec.  50.10 and all other requirements of this part.
    (2) For the period during which a national bank or Federal savings 
association must calculate a liquidity coverage ratio each business day 
under subpart F of this part, if a national bank's or Federal savings 
association's liquidity coverage ratio is below the minimum requirement 
in Sec.  50.10 for three consecutive business days, or if the OCC has 
determined that the national bank or Federal savings association is 
otherwise materially noncompliant with the requirements of this part, 
the national bank or Federal savings association must promptly provide 
to the OCC a plan for achieving compliance with the minimum liquidity 
requirement in Sec.  50.10 and all other requirements of this part.
    (3) The plan must include, as applicable:
    (i) An assessment of the national bank's or Federal savings 
association's liquidity position;
    (ii) The actions the national bank or Federal savings association 
has taken and will take to achieve full compliance with this part, 
including:
    (A) A plan for adjusting the national bank's or Federal savings 
association's risk profile, risk management, and funding sources in 
order to achieve full compliance with this part; and
    (B) A plan for remediating any operational or management issues that 
contributed to noncompliance with this part;
    (iii) An estimated time frame for achieving full compliance with 
this part; and
    (iv) A commitment to report to the OCC no less than weekly on 
progress to achieve compliance in accordance with the plan until full 
compliance with this part is achieved.
    (c) Supervisory and enforcement actions. The OCC may, at its 
discretion, take additional supervisory or enforcement actions to 
address noncompliance with the minimum liquidity standard and other 
requirements of this part.

[[Page 986]]



                          Subpart F_Transitions



Sec.  50.50  Transitions.

    (a) No transition for certain national banks and Federal savings 
association. A national bank or Federal savings association that is 
subject to the minimum liquidity standard and other requirements of this 
part prior to December 31, 2019 must comply with the minimum liquidity 
standard and other requirements of this part as of December 31, 2019.
    (b) [Reserved]
    (c) Initial application. (1) A national bank or Federal savings 
association that initially becomes subject to the minimum liquidity 
standard and other requirements of this part under Sec.  50.1(b)(1)(i) 
must comply with the requirements of this part beginning on the first 
day of the third calendar quarter after which the national bank or 
Federal savings association becomes subject to this part, except that a 
national bank or Federal savings association must:
    (i) For the first two calendar quarters after the national bank or 
Federal savings association begins complying with the minimum liquidity 
standard and other requirements of this part, calculate and maintain a 
liquidity coverage ratio monthly, on each calculation date that is the 
last business day of the applicable calendar month; and
    (ii) Beginning the first day of the fifth calendar quarter after the 
national bank or Federal savings association becomes subject to the 
minimum liquidity standard and other requirements of this part and 
continuing thereafter, calculate and maintain a liquidity coverage ratio 
on each calculation date.
    (2) A national bank or Federal savings association that becomes 
subject to the minimum liquidity standard and other requirements of this 
part under Sec.  50.1(b)(1)(ii), must comply with the requirements of 
this part subject to a transition period specified by the OCC.
    (d) Transition into a different outflow adjustment percentage. A 
national bank or Federal savings association whose outflow adjustment 
percentage changes is subject to transition periods as set forth in 
Sec.  50.30(d).
    (e) Compliance date. The OCC may extend or accelerate any compliance 
date of this part if the OCC determines that such extension or 
acceleration is appropriate. In determining whether an extension or 
acceleration is appropriate, the OCC will consider the effect of the 
modification on financial stability, the period of time for which the 
modification would be necessary to facilitate compliance with this part, 
and the actions the national bank or Federal savings association is 
taking to come into compliance with this part.

[84 FR 59269, Nov. 1, 2019]

Subparts G-J [Reserved]



                   Subpart K_Net Stable Funding Ratio

    Source: 86 FR 9202, 9209, Feb. 11, 2021, unless otherwise noted.



Sec.  50.100  Net stable funding ratio.

    (a) Minimum net stable funding ratio requirement. A national bank or 
Federal savings association must maintain a net stable funding ratio 
that is equal to or greater than 1.0 on an ongoing basis in accordance 
with this subpart.
    (b) Calculation of the net stable funding ratio. For purposes of 
this part, a national bank's or Federal savings association's net stable 
funding ratio equals:
    (1) The national bank's or Federal savings association's available 
stable funding (ASF) amount, calculated pursuant to Sec.  50.103, as of 
the calculation date; divided by
    (2) The national bank's or Federal savings association's required 
stable funding (RSF) amount, calculated pursuant to Sec.  50.105, as of 
the calculation date.



Sec.  50.101  Determining maturity.

    For purposes of calculating its net stable funding ratio, including 
its ASF amount and RSF amount, under subparts K through N, a national 
bank or Federal savings association shall assume each of the following:

[[Page 987]]

    (a) With respect to any NSFR liability, the NSFR liability matures 
according to Sec.  50.31(a)(1) of this part without regard to whether 
the NSFR liability is subject to Sec.  50.32;
    (b) With respect to an asset, the asset matures according to Sec.  
50.31(a)(2) of this part without regard to whether the asset is subject 
to Sec.  50.33 of this part;
    (c) With respect to an NSFR liability or asset that is perpetual, 
the NSFR liability or asset matures one year or more after the 
calculation date;
    (d) With respect to an NSFR liability or asset that has an open 
maturity, the NSFR liability or asset matures on the first calendar day 
after the calculation date, except that in the case of a deferred tax 
liability, the NSFR liability matures on the first calendar day after 
the calculation date on which the deferred tax liability could be 
realized; and
    (e) With respect to any principal payment of an NSFR liability or 
asset, such as an amortizing loan, that is due prior to the maturity of 
the NSFR liability or asset, the payment matures on the date on which it 
is contractually due.



Sec.  50.102  Rules of construction.

    (a) Balance-sheet metric. Unless otherwise provided in this subpart, 
an NSFR regulatory capital element, NSFR liability, or asset that is not 
included on a national bank's or Federal savings association's balance 
sheet is not assigned an RSF factor or ASF factor, as applicable; and an 
NSFR regulatory capital element, NSFR liability, or asset that is 
included on a national bank's or Federal savings association's balance 
sheet is assigned an RSF factor or ASF factor, as applicable.
    (b) Netting of certain transactions. Where a national bank or 
Federal savings association has secured lending transactions, secured 
funding transactions, or asset exchanges with the same counterparty and 
has offset the gross value of receivables due from the counterparty 
under the transactions by the gross value of payables under the 
transactions due to the counterparty, the receivables or payables 
associated with the offsetting transactions that are not included on the 
national bank's or Federal savings association's balance sheet are 
treated as if they were included on the national bank's or Federal 
savings association's balance sheet with carrying values, unless the 
criteria in 12 CFR 3.10(c)(2)(v)(A) through (C) are met.
    (c) Treatment of Securities Received in an Asset Exchange by a 
Securities Lender. Where a national bank or Federal savings association 
receives a security in an asset exchange, acts as a securities lender, 
includes the carrying value of the received security on its balance 
sheet, and has not rehypothecated the security received:
    (1) The security received by the national bank or Federal savings 
association is not assigned an RSF factor; and
    (2) The obligation to return the security received by the national 
bank or Federal savings association is not assigned an ASF factor.



Sec.  50.103  Calculation of available stable funding amount.

    A national bank's or Federal savings association's ASF amount equals 
the sum of the carrying values of the national bank's or Federal savings 
association's NSFR regulatory capital elements and NSFR liabilities, in 
each case multiplied by the ASF factor applicable in Sec.  50.104 or 
Sec.  50.107(c) and consolidated in accordance with Sec.  50.109.



Sec.  50.104  ASF factors.

    (a) NSFR regulatory capital elements and NSFR liabilities assigned a 
100 percent ASF factor. An NSFR regulatory capital element or NSFR 
liability of a national bank or Federal savings association is assigned 
a 100 percent ASF factor if it is one of the following:
    (1) An NSFR regulatory capital element; or
    (2) An NSFR liability that has a maturity of one year or more from 
the calculation date, is not described in paragraph (d)(9) of this 
section, and is not a retail deposit or brokered deposit provided by a 
retail customer or counterparty.
    (b) NSFR liabilities assigned a 95 percent ASF factor. An NSFR 
liability of a national bank or Federal savings association is assigned 
a 95 percent ASF factor if it is one of the following:
    (1) A stable retail deposit (regardless of maturity or 
collateralization) held

[[Page 988]]

at the national bank or Federal savings association; or
    (2) A sweep deposit that:
    (i) Is deposited in accordance with a contract between the retail 
customer or counterparty and the national bank or Federal savings 
association, a controlled subsidiary of the national bank or Federal 
savings association, or a company that is a controlled subsidiary of the 
same top-tier company of which the national bank or Federal savings 
association is a controlled subsidiary;
    (ii) Is entirely covered by deposit insurance; and
    (iii) The national bank or Federal savings association demonstrates 
to the satisfaction of the OCC that a withdrawal of such deposit is 
highly unlikely to occur during a liquidity stress event.
    (c) NSFR liabilities assigned a 90 percent ASF factor. An NSFR 
liability of a national bank or Federal savings association is assigned 
a 90 percent ASF factor if it is funding provided by a retail customer 
or counterparty that is:
    (1) A retail deposit (regardless of maturity or collateralization) 
other than a stable retail deposit or brokered deposit;
    (2) A brokered reciprocal deposit where the entire amount is covered 
by deposit insurance;
    (3) A sweep deposit that is deposited in accordance with a contract 
between the retail customer or counterparty and the national bank or 
Federal savings association, a controlled subsidiary of the national 
bank or Federal savings association, or a company that is a controlled 
subsidiary of the same top-tier company of which the national bank or 
Federal savings association is a controlled subsidiary, where the sweep 
deposit does not meet the requirements of paragraph (b)(2) of this 
section; or
    (4) A brokered deposit that is not a brokered reciprocal deposit or 
a sweep deposit, that is not held in a transactional account, and that 
matures one year or more from the calculation date.
    (d) NSFR liabilities assigned a 50 percent ASF factor. An NSFR 
liability of a national bank or Federal savings association is assigned 
a 50 percent ASF factor if it is one of the following:
    (1) Unsecured wholesale funding that:
    (i) Is not provided by a financial sector entity, a consolidated 
subsidiary of a financial sector entity, or a central bank;
    (ii) Matures less than one year from the calculation date; and
    (iii) Is not a security issued by the national bank or Federal 
savings association or an operational deposit placed at the national 
bank or Federal savings association;
    (2) A secured funding transaction with the following 
characteristics:
    (i) The counterparty is not a financial sector entity, a 
consolidated subsidiary of a financial sector entity, or a central bank;
    (ii) The secured funding transaction matures less than one year from 
the calculation date; and
    (iii) The secured funding transaction is not a collateralized 
deposit that is an operational deposit placed at the national bank or 
Federal savings association;
    (3) Unsecured wholesale funding that:
    (i) Is provided by a financial sector entity, a consolidated 
subsidiary of a financial sector entity, or a central bank;
    (ii) Matures six months or more, but less than one year, from the 
calculation date; and
    (iii) Is not a security issued by the national bank or Federal 
savings association or an operational deposit;
    (4) A secured funding transaction with the following 
characteristics:
    (i) The counterparty is a financial sector entity, a consolidated 
subsidiary of a financial sector entity, or a central bank;
    (ii) The secured funding transaction matures six months or more, but 
less than one year, from the calculation date; and
    (iii) The secured funding transaction is not a collateralized 
deposit that is an operational deposit;
    (5) A security issued by the national bank or Federal savings 
association that matures six months or more, but less than one year, 
from the calculation date;
    (6) An operational deposit placed at the national bank or Federal 
savings association;

[[Page 989]]

    (7) A brokered deposit provided by a retail customer or counterparty 
that is not described in paragraphs (c) or (e)(2) of this section;
    (8) A sweep deposit provided by a retail customer or counterparty 
that is not described in paragraphs (b) or (c) of this section;
    (9) An NSFR liability owed to a retail customer or counterparty that 
is not a deposit and is not a security issued by the national bank or 
Federal savings association; or
    (10) Any other NSFR liability that matures six months or more, but 
less than one year, from the calculation date and is not described in 
paragraphs (a) through (c) or (d)(1) through (d)(9) of this section.
    (e) NSFR liabilities assigned a zero percent ASF factor. An NSFR 
liability of a national bank or Federal savings association is assigned 
a zero percent ASF factor if it is one of the following:
    (1) A trade date payable that results from a purchase by the 
national bank or Federal savings association of a financial instrument, 
foreign currency, or commodity that is contractually required to settle 
within the lesser of the market standard settlement period for the 
particular transaction and five business days from the date of the sale;
    (2) A brokered deposit provided by a retail customer or counterparty 
that is not a brokered reciprocal deposit or sweep deposit, is not held 
in a transactional account, and matures less than six months from the 
calculation date;
    (3) A security issued by the national bank or Federal savings 
association that matures less than six months from the calculation date;
    (4) An NSFR liability with the following characteristics:
    (i) The counterparty is a financial sector entity, a consolidated 
subsidiary of a financial sector entity, or a central bank;
    (ii) The NSFR liability matures less than six months from the 
calculation date or has an open maturity; and
    (iii) The NSFR liability is not a security issued by the national 
bank or Federal savings association or an operational deposit placed at 
the national bank or Federal savings association; or
    (5) Any other NSFR liability that matures less than six months from 
the calculation date and is not described in paragraphs (a) through (d) 
or (e)(1) through (4) of this section.



Sec.  50.105  Calculation of required stable funding amount.

    (a) Required stable funding amount. A national bank's or Federal 
savings association's RSF amount equals the national bank's or Federal 
savings association's required stable funding adjustment percentage as 
determined under paragraph (b) of this section multiplied by the sum of:
    (1) The carrying values of a national bank's or Federal savings 
association's assets (other than amounts included in the calculation of 
the derivatives RSF amount pursuant to Sec.  50.107(b)) and the undrawn 
amounts of a national bank's or Federal savings association's credit and 
liquidity facilities, in each case multiplied by the RSF factors 
applicable in Sec.  50.106; and
    (2) The national bank's or Federal savings association's derivatives 
RSF amount calculated pursuant to Sec.  50.107(b).
    (b) Required stable funding adjustment percentage. A national bank's 
or Federal savings association's required stable funding adjustment 
percentage is determined pursuant to table 1 to this paragraph (b).

Table 1 to Paragraph (b)--Required Stable Funding Adjustment Percentages
------------------------------------------------------------------------
 
------------------------------------------------------------------------
GSIB depository institution that is a national bank or               100
 Federal savings association............................
Category II national bank or Federal savings association             100
Category III national bank or Federal savings                        100
 association that:......................................

[[Page 990]]

 
(1) Is a consolidated subsidiary of (a) a covered
 depository institution holding company or U.S.
 intermediate holding company identified as a Category
 III banking organization pursuant to 12 CFR 252.5 or 12
 CFR 238.10 or (b) a depository institution that meets
 the criteria set forth in paragraphs (2)(ii)(A) and (B)
 of the definition of Category III national bank or
 Federal savings association in this part, in each case
 with $75 billion or more in average weighted short-term
 wholesale funding; or
(2) Has $75 billion or more in average weighted short-
 term wholesale funding and is not a consolidated
 subsidiary of (a) a covered depository institution
 holding company or U.S. intermediate holding company
 identified as a Category III banking organization
 pursuant to 12 CFR 252.5 or 12 CFR 238.10 or (b) a
 depository institution that meets the criteria set
 forth in paragraphs (2)(ii)(A) and (B) of the
 definition of Category III national bank or Federal
 savings association in this part.
Category III national bank or Federal savings                         85
 association that:......................................
(1) Is a consolidated subsidiary of (a) a covered
 depository institution holding company or U.S.
 intermediate holding company identified as a Category
 III banking organization pursuant to 12 CFR 252.5 or 12
 CFR 238.10 or (b) a depository institution that meets
 the criteria set forth in paragraphs (2)(ii)(A) and (B)
 of the definition of Category III national bank or
 Federal savings association in this part, in each case
 with less than $75 billion in average weighted short-
 term wholesale funding; or
(2) Has less than $75 billion in average weighted short-
 term wholesale funding and is not a consolidated
 subsidiary of (a) a covered depository institution
 holding company or U.S. intermediate holding company
 identified as a Category III banking organization
 pursuant to 12 CFR 252.5 or 12 CFR 238.10 or (b) a
 depository institution that meets the criteria set
 forth in paragraphs (2)(ii)(A) and (B) of the
 definition of Category III national bank or Federal
 savings association in this part.
------------------------------------------------------------------------

    (c) Transition into a different required stable funding adjustment 
percentage. (1) A national bank or Federal savings association whose 
required stable funding adjustment percentage increases from a lower to 
a higher required stable funding adjustment percentage may continue to 
use its previous lower required stable funding adjustment percentage 
until the first day of the third calendar quarter after the required 
stable funding adjustment percentage increases.
    (2) A national bank or Federal savings association whose required 
stable funding adjustment percentage decreases from a higher to a lower 
required stable funding adjustment percentage must continue to use its 
previous higher required stable funding adjustment percentage until the 
first day of the first calendar quarter after the required stable 
funding adjustment percentage decreases.

[86 FR 9202, 9209, Feb. 11, 2021, as amended at 86 FR 9209, Feb. 11, 
2021]



Sec.  50.106  RSF factors.

    (a) Unencumbered assets and commitments. All assets and undrawn 
amounts under credit and liquidity facilities, unless otherwise provided 
in Sec.  50.107(b) relating to derivative transactions or paragraphs (b) 
through (d) of this section, are assigned RSF factors as follows:
    (1) Unencumbered assets assigned a zero percent RSF factor. An asset 
of a national bank or Federal savings association is assigned a zero 
percent RSF factor if it is one of the following:
    (i) Currency and coin;
    (ii) A cash item in the process of collection;
    (iii) A Reserve Bank balance or other claim on a Reserve Bank that 
matures

[[Page 991]]

less than six months from the calculation date;
    (iv) A claim on a foreign central bank that matures less than six 
months from the calculation date;
    (v) A trade date receivable due to the national bank or Federal 
savings association resulting from the national bank's or Federal 
savings association's sale of a financial instrument, foreign currency, 
or commodity that is required to settle no later than the market 
standard, without extension, for the particular transaction, and that 
has yet to settle but is not more than five business days past the 
scheduled settlement date;
    (vi) Any other level 1 liquid asset not described in paragraphs 
(a)(1)(i) through (a)(1)(v) of this section; or
    (vii) A secured lending transaction with the following 
characteristics:
    (A) The secured lending transaction matures less than six months 
from the calculation date;
    (B) The secured lending transaction is secured by level 1 liquid 
assets;
    (C) The borrower is a financial sector entity or a consolidated 
subsidiary thereof; and
    (D) The national bank or Federal savings association retains the 
right to rehypothecate the collateral provided by the counterparty for 
the duration of the secured lending transaction.
    (2) Unencumbered assets and commitments assigned a 5 percent RSF 
factor. An undrawn amount of a committed credit facility or committed 
liquidity facility extended by a national bank or Federal savings 
association is assigned a 5 percent RSF factor. For the purposes of this 
paragraph (a)(2), the undrawn amount of a committed credit facility or 
committed liquidity facility is the entire unused amount of the facility 
that could be drawn upon within one year of the calculation date under 
the governing agreement.
    (3) Unencumbered assets assigned a 15 percent RSF factor. An asset 
of a national bank or Federal savings association is assigned a 15 
percent RSF factor if it is one of the following:
    (i) A level 2A liquid asset; or
    (ii) A secured lending transaction or unsecured wholesale lending 
with the following characteristics:
    (A) The asset matures less than six months from the calculation 
date;
    (B) The borrower is a financial sector entity or a consolidated 
subsidiary thereof; and
    (C) The asset is not described in paragraph (a)(1)(vii) of this 
section and is not an operational deposit described in paragraph 
(a)(4)(iii) of this section.
    (4) Unencumbered assets assigned a 50 percent RSF factor. An asset 
of a national bank or Federal savings association is assigned a 50 
percent RSF factor if it is one of the following:
    (i) A level 2B liquid asset;
    (ii) A secured lending transaction or unsecured wholesale lending 
with the following characteristics:
    (A) The asset matures six months or more, but less than one year, 
from the calculation date;
    (B) The borrower is a financial sector entity, a consolidated 
subsidiary thereof, or a central bank; and
    (C) The asset is not an operational deposit described in paragraph 
(a)(4)(iii) of this section;
    (iii) An operational deposit placed by the national bank or Federal 
savings association at a financial sector entity or a consolidated 
subsidiary thereof; or
    (iv) An asset that is not described in paragraphs (a)(1) through 
(a)(3) or (a)(4)(i) through (a)(4)(iii) of this section that matures 
less than one year from the calculation date, including:
    (A) A secured lending transaction or unsecured wholesale lending 
where the borrower is a wholesale customer or counterparty that is not a 
financial sector entity, a consolidated subsidiary thereof, or a central 
bank; or
    (B) Lending to a retail customer or counterparty.
    (5) Unencumbered assets assigned a 65 percent RSF factor. An asset 
of a national bank or Federal savings association is assigned a 65 
percent RSF factor if it is one of the following:
    (i) A retail mortgage that matures one year or more from the 
calculation date and is assigned a risk weight of no greater than 50 
percent under subpart D of 12 CFR part 3; or
    (ii) A secured lending transaction, unsecured wholesale lending, or 
lending to a retail customer or counterparty with the following 
characteristics:

[[Page 992]]

    (A) The asset is not described in paragraphs (a)(1) through 
(a)(5)(i) of this section;
    (B) The borrower is not a financial sector entity or a consolidated 
subsidiary thereof;
    (C) The asset matures one year or more from the calculation date; 
and
    (D) The asset is assigned a risk weight of no greater than 20 
percent under subpart D of 12 CFR part 3.
    (6) Unencumbered assets assigned an 85 percent RSF factor. An asset 
of a national bank or Federal savings association is assigned an 85 
percent RSF factor if it is one of the following:
    (i) A retail mortgage that matures one year or more from the 
calculation date and is assigned a risk weight of greater than 50 
percent under subpart D of 12 CFR part 3;
    (ii) A secured lending transaction, unsecured wholesale lending, or 
lending to a retail customer or counterparty with the following 
characteristics:
    (A) The asset is not described in paragraphs (a)(1) through 
(a)(6)(i) of this section;
    (B) The borrower is not a financial sector entity or a consolidated 
subsidiary thereof;
    (C) The asset matures one year or more from the calculation date; 
and
    (D) The asset is assigned a risk weight of greater than 20 percent 
under subpart D of 12 CFR part 3;
    (iii) A publicly traded common equity share that is not HQLA;
    (iv) A security, other than a publicly traded common equity share, 
that matures one year or more from the calculation date and is not HQLA; 
or
    (v) A commodity for which derivative transactions are traded on a 
U.S. board of trade or trading facility designated as a contract market 
under sections 5 and 6 of the Commodity Exchange Act (7 U.S.C. 7 and 8) 
or on a U.S. swap execution facility registered under section 5h of the 
Commodity Exchange Act (7 U.S.C. 7b-3) or on another exchange, whether 
located in the United States or in a jurisdiction outside of the United 
States.
    (7) Unencumbered assets assigned a 100 percent RSF factor. An asset 
of a national bank or Federal savings association is assigned a 100 
percent RSF factor if it is not described in paragraphs (a)(1) through 
(a)(6) of this section, including a secured lending transaction or 
unsecured wholesale lending where the borrower is a financial sector 
entity or a consolidated subsidiary thereof and that matures one year or 
more from the calculation date.
    (b) Nonperforming assets. An RSF factor of 100 percent is assigned 
to any asset that is past due by more than 90 days or nonaccrual.
    (c) Encumbered assets. An encumbered asset, unless otherwise 
provided in Sec.  50.107(b) relating to derivative transactions, is 
assigned an RSF factor as follows:
    (1)(i) Encumbered assets with less than six months remaining in the 
encumbrance period. For an encumbered asset with less than six months 
remaining in the encumbrance period, the same RSF factor is assigned to 
the asset as would be assigned if the asset were not encumbered.
    (ii) Encumbered assets with six months or more, but less than one 
year, remaining in the encumbrance period. For an encumbered asset with 
six months or more, but less than one year, remaining in the encumbrance 
period:
    (A) If the asset would be assigned an RSF factor of 50 percent or 
less under paragraphs (a)(1) through (a)(4) of this section if the asset 
were not encumbered, an RSF factor of 50 percent is assigned to the 
asset.
    (B) If the asset would be assigned an RSF factor of greater than 50 
percent under paragraphs (a)(5) through (a)(7) of this section if the 
asset were not encumbered, the same RSF factor is assigned to the asset 
as would be assigned if it were not encumbered.
    (iii) Encumbered assets with one year or more remaining in the 
encumbrance period. For an encumbered asset with one year or more 
remaining in the encumbrance period, an RSF factor of 100 percent is 
assigned to the asset.
    (2) Assets encumbered for period longer than remaining maturity. If 
an asset is encumbered for an encumbrance period longer than the asset's 
maturity, the asset is assigned an RSF factor under paragraph (c)(1) of 
this section based on the length of the encumbrance period.

[[Page 993]]

    (3) Segregated account assets. An asset held in a segregated account 
maintained pursuant to statutory or regulatory requirements for the 
protection of customer assets is not considered encumbered for purposes 
of this paragraph solely because such asset is held in the segregated 
account.
    (d) Off-balance sheet rehypothecated assets. When an NSFR liability 
of a national bank or Federal savings association is secured by an off-
balance sheet asset or results from the national bank or Federal savings 
association selling an off-balance sheet asset (for instance, in the 
case of a short sale), other than an off-balance sheet asset received by 
the national bank or Federal savings association as variation margin 
under a derivative transaction:
    (1) If the national bank or Federal savings association received the 
off-balance sheet asset under a lending transaction, an RSF factor is 
assigned to the lending transaction as if it were encumbered for the 
longer of:
    (i) The remaining maturity of the NSFR liability; and
    (ii) Any other encumbrance period applicable to the lending 
transaction;
    (2) If the national bank or Federal savings association received the 
off-balance sheet asset under an asset exchange, an RSF factor is 
assigned to the asset provided by the national bank or Federal savings 
association in the asset exchange as if the provided asset were 
encumbered for the longer of:
    (i) The remaining maturity of the NSFR liability; and
    (ii) Any other encumbrance period applicable to the provided asset; 
or
    (3) If the national bank or Federal savings association did not 
receive the off-balance sheet asset under a lending transaction or asset 
exchange, an RSF factor is assigned to the on-balance sheet asset 
resulting from the rehypothecation of the off-balance sheet asset as if 
the on-balance sheet asset were encumbered for the longer of:
    (i) The remaining maturity of the NSFR liability; and
    (ii) Any other encumbrance period applicable to the transaction 
through which the off-balance sheet asset was received.



Sec.  50.107  Calculation of NSFR derivatives amounts.

    (a) General requirement. A national bank or Federal savings 
association must calculate its derivatives RSF amount and certain 
components of its ASF amount relating to the national bank's or Federal 
savings association's derivative transactions (which includes cleared 
derivative transactions of a customer with respect to which the national 
bank or Federal savings association is acting as agent for the customer 
that are included on the national bank's or Federal savings 
association's balance sheet under GAAP) in accordance with this section.
    (b) Calculation of required stable funding amount relating to 
derivative transactions. A national bank's or Federal savings 
association's derivatives RSF amount equals the sum of:
    (1) Current derivative transaction values. The national bank's or 
Federal savings association's NSFR derivatives asset amount, as 
calculated under paragraph (d)(1) of this section, multiplied by an RSF 
factor of 100 percent;
    (2) Variation margin provided. The carrying value of variation 
margin provided by the national bank or Federal savings association 
under each derivative transaction not subject to a qualifying master 
netting agreement and each QMNA netting set, to the extent the variation 
margin reduces the national bank's or Federal savings association's 
derivatives liability value under the derivative transaction or QMNA 
netting set, as calculated under paragraph (f)(2) of this section, 
multiplied by an RSF factor of zero percent;
    (3) Excess variation margin provided. The carrying value of 
variation margin provided by the national bank or Federal savings 
association under each derivative transaction not subject to a 
qualifying master netting agreement and each QMNA netting set in excess 
of the amount described in paragraph (b)(2) of this section for each 
derivative transaction or QMNA netting set, multiplied by the RSF factor 
assigned to each asset comprising the variation margin pursuant to Sec.  
50.106;
    (4) Variation margin received. The carrying value of variation 
margin received by the national bank or Federal savings association, 
multiplied by the

[[Page 994]]

RSF factor assigned to each asset comprising the variation margin 
pursuant to Sec.  50.106;
    (5) Potential valuation changes. (i) An amount equal to 5 percent of 
the sum of the gross derivative values of the national bank or Federal 
savings association that are liabilities, as calculated under paragraph 
(b)(5)(ii) of this section, for each of the national bank's or Federal 
savings association's derivative transactions not subject to a 
qualifying master netting agreement and each of its QMNA netting sets, 
multiplied by an RSF factor of 100 percent;
    (ii) For purposes of paragraph (5)(i) of this section, the gross 
derivative value of a derivative transaction not subject to a qualifying 
master netting agreement or of a QMNA netting set is equal to the value 
to the national bank or Federal savings association, calculated as if no 
variation margin had been exchanged and no settlement payments had been 
made based on changes in the value of the derivative transaction or QMNA 
netting set.
    (6) Contributions to central counterparty mutualized loss sharing 
arrangements. The fair value of a national bank's or Federal savings 
association's contribution to a central counterparty's mutualized loss 
sharing arrangement (regardless of whether the contribution is included 
on the national bank's or Federal savings association's balance sheet), 
multiplied by an RSF factor of 85 percent; and
    (7) Initial margin provided. The fair value of initial margin 
provided by the national bank or Federal savings association for 
derivative transactions (regardless of whether the initial margin is 
included on the national bank's or Federal savings association's balance 
sheet), which does not include initial margin provided by the national 
bank or Federal savings association for cleared derivative transactions 
with respect to which the national bank or Federal savings association 
is acting as agent for a customer and the national bank or Federal 
savings association does not guarantee the obligations of the customer's 
counterparty to the customer under the derivative transaction (such 
initial margin would be assigned an RSF factor pursuant to Sec.  50.106 
to the extent the initial margin is included on the national bank's or 
Federal savings association's balance sheet), multiplied by an RSF 
factor equal to the higher of 85 percent or the RSF factor assigned to 
each asset comprising the initial margin pursuant to Sec.  50.106.
    (c) Calculation of available stable funding amount relating to 
derivative transactions. The following amounts of a national bank or 
Federal savings association are assigned a zero percent ASF factor:
    (1) The national bank's or Federal savings association's NSFR 
derivatives liability amount, as calculated under paragraph (d)(2) of 
this section; and
    (2) The carrying value of NSFR liabilities in the form of an 
obligation to return initial margin or variation margin received by the 
national bank or Federal savings association.
    (d) Calculation of NSFR derivatives asset or liability amount. (1) A 
national bank's or Federal savings association's NSFR derivatives asset 
amount is the greater of:
    (i) Zero; and
    (ii) The national bank's or Federal savings association's total 
derivatives asset amount, as calculated under paragraph (e)(1) of this 
section, less the national bank's or Federal savings association's total 
derivatives liability amount, as calculated under paragraph (e)(2) of 
this section.
    (2) A national bank's or Federal savings association's NSFR 
derivatives liability amount is the greater of:
    (i) Zero; and
    (ii) The national bank's or Federal savings association's total 
derivatives liability amount, as calculated under paragraph (e)(2) of 
this section, less the national bank's or Federal savings association's 
total derivatives asset amount, as calculated under paragraph (e)(1) of 
this section.
    (e) Calculation of total derivatives asset and liability amounts. 
(1) A national bank's or Federal savings association's total derivatives 
asset amount is the sum of the national bank's or Federal savings 
association's derivatives asset values, as calculated under paragraph 
(f)(1) of this section, for each derivative transaction not subject to a 
qualifying

[[Page 995]]

master netting agreement and each QMNA netting set.
    (2) A national bank's or Federal savings association's total 
derivatives liability amount is the sum of the national bank's or 
Federal savings association's derivatives liability values, as 
calculated under paragraph (f)(2) of this section, for each derivative 
transaction not subject to a qualifying master netting agreement and 
each QMNA netting set.
    (f) Calculation of derivatives asset and liability values. For each 
derivative transaction not subject to a qualifying master netting 
agreement and each QMNA netting set:
    (1) The derivatives asset value is equal to the asset value to the 
national bank or Federal savings association, after taking into account:
    (i) Any variation margin received by the national bank or Federal 
savings association that is in the form of cash and meets the following 
conditions:
    (A) The variation margin is not segregated;
    (B) The variation margin is received in connection with a derivative 
transaction that is governed by a QMNA or other contract between the 
counterparties to the derivative transaction, which stipulates that the 
counterparties agree to settle any payment obligations on a net basis, 
taking into account any variation margin received or provided;
    (C) The variation margin is calculated and transferred on a daily 
basis based on mark-to-fair value of the derivative contract; and
    (D) The variation margin is in a currency specified as an acceptable 
currency to settle obligations in the relevant governing contract; and
    (ii) Any variation margin received by the national bank or Federal 
savings association that is in the form of level 1 liquid assets and 
meets the conditions of paragraph (f)(1)(i) of this section provided the 
national bank or Federal savings association retains the right to 
rehypothecate the asset for the duration of time that the asset is 
posted as variation margin to the national bank or Federal savings 
association; or
    (2) The derivatives liability value is equal to the liability value 
of the national bank or Federal savings association, after taking into 
account any variation margin provided by the national bank or Federal 
savings association.



Sec.  50.108  Funding related to Covered Federal Reserve Facility Funding.

    (a) Treatment of Covered Federal Reserve Facility Funding. 
Notwithstanding any other section of this part and except as provided in 
paragraph (b) of this section, available stable funding amounts and 
required stable funding amounts related to Covered Federal Reserve 
Facility Funding and the assets securing Covered Federal Reserve 
Facility Funding are excluded from the calculation of a national bank's 
or Federal savings association's net stable funding ratio calculated 
under Sec.  50.100(b).
    (b) Exception. To the extent the Covered Federal Reserve Facility 
Funding is secured by securities, debt obligations, or other instruments 
issued by the national bank or Federal savings association or one of its 
consolidated subsidiaries, the Covered Federal Reserve Facility Funding 
and assets securing the Covered Federal Reserve Facility Funding are not 
subject to paragraph (a) of this section and the available stable 
funding amount and required stable funding amount must be included in 
the national bank's or Federal savings association's net stable funding 
ratio calculated under Sec.  50.100(b).



Sec.  50.109  Rules for consolidation.

    (a) Consolidated subsidiary available stable funding amount. For 
available stable funding of a legal entity that is a consolidated 
subsidiary of a national bank or Federal savings association, including 
a consolidated subsidiary organized under the laws of a foreign 
jurisdiction, the national bank or Federal savings association may 
include the available stable funding of the consolidated subsidiary in 
its ASF amount up to:
    (1) The RSF amount of the consolidated subsidiary, as calculated by 
the national bank or Federal savings association for the national bank's 
or Federal savings association's net stable funding ratio under this 
part; plus

[[Page 996]]

    (2) Any amount in excess of the RSF amount of the consolidated 
subsidiary, as calculated by the national bank or Federal savings 
association for the national bank's or Federal savings association's net 
stable funding ratio under this part, to the extent the consolidated 
subsidiary may transfer assets to the top-tier national bank or Federal 
savings association, taking into account statutory, regulatory, 
contractual, or supervisory restrictions, such as sections 23A and 23B 
of the Federal Reserve Act (12 U.S.C. 371c and 12 U.S.C. 371c-1) and 
Regulation W (12 CFR part 223).
    (b) Required consolidation procedures. To the extent a national bank 
or Federal savings association includes an ASF amount in excess of the 
RSF amount of the consolidated subsidiary, the national bank or Federal 
savings association must implement and maintain written procedures to 
identify and monitor applicable statutory, regulatory, contractual, 
supervisory, or other restrictions on transferring assets from any of 
its consolidated subsidiaries. These procedures must document which 
types of transactions the national bank or Federal savings association 
could use to transfer assets from a consolidated subsidiary to the 
national bank or Federal savings association and how these types of 
transactions comply with applicable statutory, regulatory, contractual, 
supervisory, or other restrictions.



                 Subpart L_Net Stable Funding Shortfall

    Source: 86 FR 9202, 9209, Feb. 11, 2021, unless otherwise noted.



Sec.  50.110  NSFR shortfall: Supervisory framework.

    (a) Notification requirements. A national bank or Federal savings 
association must notify the OCC no later than 10 business days, or such 
other period as the OCC may otherwise require by written notice, 
following the date that any event has occurred that would cause or has 
caused the national bank's or Federal savings association's net stable 
funding ratio to be less than 1.0 as required under Sec.  50.100.
    (b) Liquidity Plan. (1) A national bank or Federal savings 
association must within 10 business days, or such other period as the 
OCC may otherwise require by written notice, provide to the OCC a plan 
for achieving a net stable funding ratio equal to or greater than 1.0 as 
required under Sec.  50.100 if:
    (i) The national bank or Federal savings association has or should 
have provided notice, pursuant to Sec.  50.110(a), that the national 
bank's or Federal savings association's net stable funding ratio is, or 
will become, less than 1.0 as required under Sec.  50.100;
    (ii) The national bank's or Federal savings association's reports or 
disclosures to the OCC indicate that the national bank's or Federal 
savings association's net stable funding ratio is less than 1.0 as 
required under Sec.  50.100; or
    (iii) The OCC notifies the national bank or Federal savings 
association in writing that a plan is required and provides a reason for 
requiring such a plan.
    (2) The plan must include, as applicable:
    (i) An assessment of the national bank's or Federal savings 
association's liquidity profile;
    (ii) The actions the national bank or Federal savings association 
has taken and will take to achieve a net stable funding ratio equal to 
or greater than 1.0 as required under Sec.  50.100, including:
    (A) A plan for adjusting the national bank's or Federal savings 
association's liquidity profile;
    (B) A plan for remediating any operational or management issues that 
contributed to noncompliance with subpart K of this part; and
    (iii) An estimated time frame for achieving full compliance with 
Sec.  50.100.
    (3) The national bank or Federal savings association must report to 
the OCC at least monthly, or such other frequency as required by the 
OCC, on progress to achieve full compliance with Sec.  50.100.
    (c) Supervisory and enforcement actions. The OCC may, at its 
discretion, take additional supervisory or enforcement actions to 
address noncompliance with the minimum net stable funding ratio and 
other requirements of subparts K through N of this part (see also Sec.  
50.2(c)).

[[Page 997]]



                          Subpart M_Transitions



Sec.  50.120  Transitions.

    (a) Initial application. (1) A national bank or Federal savings 
association that initially becomes subject to the minimum net stable 
funding requirement under Sec.  50.1(b)(1)(i) after July 1, 2021, must 
comply with the requirements of subparts K through M of this part 
beginning on the first day of the third calendar quarter after which the 
national bank or Federal savings association becomes subject to this 
part.
    (2) A national bank or Federal savings association that becomes 
subject to the minimum net stable funding requirement under Sec.  
50.1(b)(1)(ii) must comply with the requirements of subparts K through M 
of this part subject to a transition period specified by the OCC.
    (b) Transition to a different required stable funding adjustment 
percentage. (1) A national bank or Federal savings association whose 
required stable funding adjustment percentage changes is subject to the 
transition periods as set forth in Sec.  50.105(c).
    (2) A national bank or Federal savings association institution that 
is no longer subject to the minimum stable funding requirement of this 
part pursuant to Sec.  50.1(b)(1)(i) based on the size of total 
consolidated assets, cross-jurisdictional activity, total nonbank 
assets, weighted short-term wholesale funding, or off-balance sheet 
exposure calculated in accordance with the Call Report, or instructions 
to the FR Y-9LP, the FR Y-15, or equivalent reporting form, as 
applicable, for each of the four most recent calendar quarters may cease 
compliance with the requirements of subparts K through M of this part as 
of the first day of the first calendar quarter after it is no longer 
subject to Sec.  50.1(b).
    (c) Reservation of authority. The OCC may extend or accelerate any 
compliance date of this part if the OCC determines such extension or 
acceleration is appropriate. In determining whether an extension or 
acceleration is appropriate, the OCC will consider the effect of the 
modification on financial stability, the period of time for which the 
modification would be necessary to facilitate compliance with the 
requirements of subparts K through M of this part, and the actions the 
national bank or Federal savings association is taking to come into 
compliance with the requirements of subparts K through M of this part.

[86 FR 9210, Feb. 11, 2021]



PART 51_RECEIVERSHIPS FOR UNINSURED NATIONAL BANKS--Table of Contents



Sec.
51.1 Purpose and scope.
51.2 Appointment of receiver.
51.3 Notice of appointment of receiver.
51.4 Claims.
51.5 Order of priorities.
51.6 Administrative expenses of receiver.
51.7 Powers and duties of receiver; disposition of fiduciary and 
          custodial accounts.
51.8 Payment of claims and dividends to shareholders.
51.9 Termination of receivership.

    Authority: 12 U.S.C. 16, 93a, 191-200, 481, 482, 1831c, and 1867.

    Source: 81 FR 92602, Dec. 20, 2016, unless otherwise noted.



Sec.  51.1  Purpose and scope.

    (a) Purpose. This part sets out procedures for receiverships of 
national banks conducted by the Office of the Comptroller of the 
Currency (OCC) under the receivership provisions of the National Bank 
Act (NBA). These receivership provisions apply to national banks that 
are not insured by the Federal Deposit Insurance Corporation (FDIC).
    (b) Scope. This part applies to the appointment of a receiver for 
uninsured national banks (uninsured banks) and the operation of a 
receivership after appointment of a receiver for an uninsured bank under 
12 U.S.C. 191.\31\
---------------------------------------------------------------------------

    \31\ This part does not apply to receiverships for uninsured Federal 
branches or uninsured Federal agencies.
---------------------------------------------------------------------------



Sec.  51.2  Appointment of receiver.

    (a) In general. The Comptroller of the Currency (Comptroller) may 
appoint any person, including the OCC or another government agency, as 
receiver for an uninsured bank. The receiver performs its duties under 
the direction of the Comptroller and serves at the

[[Page 998]]

will of the Comptroller. The Comptroller may require the receiver to 
post a bond or other security. The receiver, with the approval of the 
Comptroller, may employ such staff and enter into contracts for 
professional services as are necessary to carry out the receivership.
    (b) Grounds for appointment. The Comptroller may appoint a receiver 
for an uninsured bank based on any of the grounds specified in 12 U.S.C. 
191(a).
    (c) Judicial review. If the Comptroller appoints a receiver for an 
uninsured bank, the bank may seek judicial review of the appointment as 
provided in 12 U.S.C. 191(b).



Sec.  51.3  Notice of appointment of receiver.

    Upon appointment of a receiver for an uninsured bank, the OCC will 
provide notice to the public of the receivership, including by 
publication in a newspaper of general circulation for three consecutive 
months. The notice of the receivership will provide instructions for 
creditors and other claimants seeking to submit claims with the receiver 
for the uninsured bank.



Sec.  51.4  Claims.

    (a) Submission of claims for consideration by the OCC. (1) Persons 
who have claims against the receivership for an uninsured bank may 
present such claims, along with supporting documentation, for 
consideration by the OCC. The OCC will determine the validity and 
approve the amounts of such claims.
    (2) The OCC will establish a date by which any person seeking to 
present a claim against the uninsured bank for consideration by the OCC 
must present their claim for determination. The deadline for filing such 
claims will not be less than 30 days after the end of the three-month 
notice period in Sec.  51.3.
    (3) The OCC will allow any claim against the uninsured bank received 
on or before the deadline for presenting claims if such claim is 
established to the OCC's satisfaction by the information on the 
uninsured bank's books and records or otherwise submitted. The OCC may 
disallow any portion of any claim by a creditor or claim of a security, 
preference, set-off, or priority which is not established to the 
satisfaction of the OCC.
    (b) Submission of claims to a court. Persons with claims against an 
uninsured bank in receivership may present their claims to a court of 
competent jurisdiction for adjudication. Such persons must submit a copy 
of any final judgment received from the court to the OCC, to participate 
in ratable dividends along with other proved claims.
    (c) Right of set-off. If a person with a claim against an uninsured 
bank in receivership also has an obligation owed to the bank, the claim 
and obligation will be set off against each other and only the net 
balance remaining after set-off shall be considered as a claim, provided 
such set-off is otherwise legally valid.



Sec.  51.5  Order of priorities.

    The OCC will pay receivership expenses and proved claims against the 
uninsured bank in receivership in the following order of priority:
    (a) Administrative expenses of the receiver;
    (b) Unsecured creditors of the uninsured bank, including secured 
creditors to the extent their claim exceeds their valid and enforceable 
security interest;
    (c) Creditors of the uninsured bank, if any, whose claims are 
subordinated to general creditor claims; and
    (d) Shareholders of the uninsured bank.



Sec.  51.6  Administrative expenses of receiver.

    (a) Priority of administrative expenses. All administrative expenses 
of the receiver for an uninsured bank shall be paid out of the assets of 
the bank in receivership before payment of claims against the 
receivership.
    (b) Scope of administrative expenses. Administrative expenses of the 
receiver for an uninsured bank include those expenses incurred by the 
receiver in maintaining banking operations during the receivership, to 
preserve assets of the uninsured bank, while liquidating or otherwise 
resolving the affairs of the uninsured bank. Such expenses include pre-
receivership and post-receivership obligations that the receiver 
determines are necessary and appropriate to facilitate the orderly

[[Page 999]]

liquidation or other resolution of the uninsured bank in receivership.
    (c) Types of administrative expenses. Administrative expenses for 
the receiver of an uninsured bank include:
    (1) Salaries, costs, and other expenses of the receiver and its 
staff, and costs of contracts entered into by the receiver for 
professional services relating to performing receivership duties; and
    (2) Expenses necessary for the operation of the uninsured bank, 
including wages and salaries of employees, expenses for professional 
services, contractual rent pursuant to an existing lease or rental 
agreement, and payments to third-party or affiliated service providers, 
that in the opinion of the receiver are of benefit to the receivership, 
until the date the receiver repudiates, terminates, cancels, or 
otherwise discontinues the applicable contract.



Sec.  51.7  Powers and duties of receiver; disposition of fiduciary 
and custodial accounts.

    (a) Marshalling of assets. In resolving the affairs of an uninsured 
bank in receivership, the receiver:
    (1) Takes possession of the books, records and other property and 
assets of the uninsured bank, including the value of collateral pledged 
by the uninsured bank to the extent it exceeds valid and enforceable 
security interests of a claimant;
    (2) Collects all debts, dues and claims belonging to the uninsured 
bank, including claims remaining after set-off;
    (3) Sells or compromises all bad or doubtful debts, subject to 
approval by a court of competent jurisdiction;
    (4) Sells the real and personal property of the uninsured bank, 
subject to approval by a court of competent jurisdiction, on such terms 
as the court shall direct; and
    (5) Deposits all receivership funds collected from the liquidation 
of the uninsured bank in an account designated by the OCC.
    (b) Disposition of fiduciary and custodial accounts. The receiver 
for an uninsured bank closes the bank's fiduciary and custodial 
appointments and accounts or transfers some or all of such accounts to 
successor fiduciaries and custodians, in accordance with 12 CFR 9.16, 
and other applicable Federal law.
    (c) Other powers. The receiver for an uninsured bank may exercise 
other rights, privileges, and powers authorized for receivers of 
national banks under the NBA and the common law of receiverships as 
applied by the courts to receiverships of national banks conducted under 
the NBA.
    (d) Reports to OCC. The receiver for an uninsured bank shall make 
periodic reports to the OCC on the status and proceedings of the 
receivership.
    (e) Receiver subject to removal; modification of fees. (1) The 
Comptroller may remove and replace the receiver for an uninsured bank 
if, in the Comptroller's discretion, the receiver is not conducting the 
receivership in accordance with applicable Federal laws or regulations 
or fails to comply with decisions of the Comptroller with respect to the 
conduct of the receivership or claims against the receivership.
    (2) The Comptroller may reduce the fees of the receiver for an 
uninsured bank if, in the Comptroller's discretion, the Comptroller 
finds the performance of the receiver to be deficient, or the fees of 
the receiver to be excessive, unreasonable, or beyond the scope of the 
work assigned to the receiver.



Sec.  51.8  Payment of claims and dividends to shareholders.

    (a) Claims. (1) After the administrative expenses of the 
receivership have been paid, the OCC shall make ratable dividends from 
time to time of available receivership funds according to the priority 
described in Sec.  51.5, based on the claims that have been proved to 
the OCC's satisfaction or adjudicated in a court of competent 
jurisdiction.
    (2) Dividend payments to creditors and other claimants of an 
uninsured bank will be made solely from receivership funds, if any, paid 
to the OCC by the receiver after payment of the expenses of the 
receiver.
    (b) Fiduciary and custodial assets. Assets held by an uninsured bank 
in a fiduciary or custodial capacity, as designated on the bank's books 
and records, will not be considered as part of the bank's general assets 
and liabilities held in connection with its other business, and will not 
be considered a

[[Page 1000]]

source for payment of unrelated claims of creditors and other claimants.
    (c) Timing of dividends. The payment of dividends, if any, under 
paragraph (a) of this section, on proved or adjudicated claims will be 
made periodically, at the discretion of the OCC, as the receiver 
liquidates the assets of the uninsured bank.
    (d) Distribution to shareholders. After all administrative expenses 
of the receiver and proved claims of creditors of the uninsured bank 
have been paid in full, to the extent there are receivership assets to 
make such payments, any remaining proceeds shall be paid to the 
shareholders, or their legal representatives, in proportion to their 
stock ownership.



Sec.  51.9  Termination of receivership.

    If there are assets remaining after full payment of the expenses of 
the receiver and all claims of creditors for an uninsured bank and all 
fiduciary accounts of the bank have been closed or transferred to a 
successor fiduciary and fiduciary powers surrendered, the Comptroller 
shall call a meeting of the shareholders of the uninsured bank, as 
provided in 12 U.S.C. 197, for the shareholders to decide the manner in 
which the liquidation will continue. The liquidation may continue by:
    (a) Continuing the receivership of the uninsured bank under the 
direction of the Comptroller; or
    (b) Ending the receivership and oversight by the Comptroller and 
replacing the receiver with a liquidating agent to proceed to liquidate 
the remaining assets of the uninsured bank for the benefit of the 
shareholders, as set out in 12 U.S.C. 197.



PART 52_REGULATORY REPORTING--Table of Contents



Sec.
52.1 Authority and purpose.
52.2 Definitions.
52.3 Reduced reporting.
52.4 Reservation of authority.
52.5 Temporary relief.

    Authority: 12 U.S.C. 93a, 161, 1463(a), 1464(v), and 1817(a)(12).

    Source: 84 FR 29050, June 21, 2019, unless otherwise noted.



Sec.  52.1  Authority and purpose.

    (a) Authority. This part is issued pursuant to 12 U.S.C. 93a, 161, 
1463(a), 1464(v), and 1817(a)(12).
    (b) Purpose. This part establishes a reduced reporting requirement 
for a covered depository institution making its reports of condition for 
the first and third calendar quarters of a year.



Sec.  52.2  Definitions.

    Covered depository institution means a national bank, Federal 
savings association, or insured Federal branch that meets the following 
criteria:
    (1) Has less than $5 billion in total consolidated assets as 
reported in its report of condition for the second calendar quarter of 
the preceding year;
    (2) Has no foreign offices, as defined in this section;
    (3) Is not required to or has not elected to use 12 CFR part 3, 
subpart E (for advanced approaches banks), to calculate its risk-based 
capital requirements;
    (4) Is not a large institution or highly complex institution, as 
such terms are defined in 12 CFR 327.8, or treated as a large 
institution, as requested under 12 CFR 327.16(f); and
    (5) Is not subject to the filing requirements for the FFIEC 002 
report of condition.
    Foreign country refers to one or more foreign nations, and includes 
the overseas territories, dependencies, and insular possessions of those 
nations and of the United States.
    Foreign office means:
    (1) A branch or consolidated subsidiary in a foreign country, unless 
the branch is located on a U.S. military facility;
    (2) An international banking facility as such term is defined in 12 
CFR 204.8;
    (3) A majority-owned Edge Act or Agreement subsidiary as defined in 
12 CFR 28.2, including both its U.S. and its foreign offices; and
    (4) For an institution chartered or headquartered in any U.S. state 
or the District of Columbia, a branch or consolidated subsidiary located 
in a U.S. territory or possession.
    Report of condition means the FFIEC 031, FFIEC 041, or FFIEC 051 
versions of the Consolidated Report of Condition and Income (Call 
Report) or the FFIEC

[[Page 1001]]

002 (Report of Assets and Liabilities of U.S. Branches and Agencies of 
Foreign Banks), as applicable, and as they may be amended or superseded 
from time to time in accordance with the Paperwork Reduction Act of 
1995, 44 U.S.C. chapter 35.
    Total consolidated assets means total assets as reported in an 
institution's report of condition.



Sec.  52.3  Reduced reporting.

    A covered depository institution may file the FFIEC 051 version of 
the Call Report, or any successor thereto, to satisfy its requirement to 
file a report of condition for the first and third calendar quarters of 
a year.



Sec.  52.4  Reservation of authority.

    The OCC may determine that a covered depository institution shall 
not use the reduced reporting in Sec.  52.3. In making this 
determination, the OCC will consider whether the institution is 
significantly engaged in complex, specialized, or higher risk 
activities, for which a reduced reporting requirement would not provide 
sufficient information. The institution has 30 days following 
notification from the OCC to inform the OCC, in writing, of why it 
should continue to be eligible to use reduced reporting or cannot cease 
using reduced reporting in the OCC's proposed timeframe. The OCC will 
make a final decision after reviewing any response. Nothing in this part 
shall be construed to limit the OCC's authority to obtain information 
from a covered depository institution.



Sec.  52.5  Temporary relief.

    In determining whether it meets the asset threshold in paragraph (1) 
of the definition of ``covered depository institution'' in Sec.  52.5 of 
this part, for purposes of a report required to be submitted for 
calendar year 2021, a national bank, Federal savings association, or 
insured Federal branch may refer to the lesser of its total consolidated 
assets as reported in its report of condition as of December 31, 2019, 
and its total consolidated assets as reported in its report of condition 
for the second calendar quarter of 2020.

[85 FR 77359, Dec. 2, 2020]



PART 53_COMPUTER-SECURITY INCIDENT NOTIFICATION--Table of Contents



Sec.
53.1 Authority, purpose, and scope.
53.2 Definitions.
53.3 Notification.
53.4 Bank service provider notification.

    Authority: 12 U.S.C. 1, 93a, 161, 481, 1463, 1464, 1861-1867, and 
3102.

    Source: 86 FR 66442, Nov. 23, 2021, unless otherwise noted.



Sec.  53.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the authority of 12 U.S.C. 
1, 93a, 161, 481, 1463, 1464, 1861-1867, and 3102.
    (b) Purpose. This part promotes the timely notification of computer-
security incidents that may materially and adversely affect Office of 
the Comptroller of the Currency (OCC)-supervised institutions.
    (c) Scope. This part applies to all national banks, Federal savings 
associations, and Federal branches and agencies of foreign banks. This 
part also applies to their bank service providers as defined in Sec.  
53.2(b)(2).



Sec.  53.2  Definitions.

    (a) Except as modified in this part, or unless the context otherwise 
requires, the terms used in this part have the same meanings as set 
forth in 12 U.S.C. 1813.
    (b) For purposes of this part, the following definitions apply.
    (1) Banking organization means a national bank, Federal savings 
association, or Federal branch or agency of a foreign bank; provided, 
however, that no designated financial market utility shall be considered 
a banking organization.
    (2) Bank service provider means a bank service company or other 
person that performs covered services; provided, however, that no 
designated financial market utility shall be considered a bank service 
provider.
    (3) Business line means a product or service offered by a banking 
organization to serve its customers or support other business needs.
    (4) Computer-security incident is an occurrence that results in 
actual harm to the confidentiality, integrity, or availability of an 
information system or the

[[Page 1002]]

information that the system processes, stores, or transmits.
    (5) Covered services are services performed, by a person, that are 
subject to the Bank Service Company Act (12 U.S.C. 1861-1867).
    (6) Designated financial market utility has the same meaning as set 
forth at 12 U.S.C. 5462(4).
    (7) Notification incident is a computer-security incident that has 
materially disrupted or degraded, or is reasonably likely to materially 
disrupt or degrade, a banking organization's--
    (i) Ability to carry out banking operations, activities, or 
processes, or deliver banking products and services to a material 
portion of its customer base, in the ordinary course of business;
    (ii) Business line(s), including associated operations, services, 
functions, and support, that upon failure would result in a material 
loss of revenue, profit, or franchise value; or
    (iii) Operations, including associated services, functions and 
support, as applicable, the failure or discontinuance of which would 
pose a threat to the financial stability of the United States.
    (8) Person has the same meaning as set forth at 12 U.S.C. 
1817(j)(8)(A).



Sec.  53.3  Notification.

    A banking organization must notify the appropriate OCC supervisory 
office, or OCC-designated point of contact, about a notification 
incident through email, telephone, or other similar methods that the OCC 
may prescribe. The OCC must receive this notification from the banking 
organization as soon as possible and no later than 36 hours after the 
banking organization determines that a notification incident has 
occurred.



Sec.  53.4  Bank service provider notification.

    (a) A bank service provider is required to notify at least one bank-
designated point of contact at each affected banking organization 
customer as soon as possible when the bank service provider determines 
that it has experienced a computer-security incident that has materially 
disrupted or degraded, or is reasonably likely to materially disrupt or 
degrade, covered services provided to such banking organization for four 
or more hours.
    (1) A bank-designated point of contact is an email address, phone 
number, or any other contact(s), previously provided to the bank service 
provider by the banking organization customer.
    (2) If the banking organization customer has not previously provided 
a bank-designated point of contact, such notification shall be made to 
the Chief Executive Officer and Chief Information Officer of the banking 
organization customer, or two individuals of comparable 
responsibilities, through any reasonable means.
    (b) The notification requirement in paragraph (a) of this section 
does not apply to any scheduled maintenance, testing, or software update 
previously communicated to a banking organization customer.

                         PARTS 54	99 [RESERVED]



PART 100_RULES APPLICABLE TO SAVINGS ASSOCIATIONS--Table of Contents



    Authority: 12 U.S.C. 1462a, 1463, 5412(b)(2)(B), 5414(b)(2).

    Source: 76 FR 48956, Aug. 9, 2011, unless otherwise noted.



Sec.  100.1  Certain regulations superseded.

    Effective on July 21, 2011, section 312(b)(2)(B) of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, 124 
Stat. 1376 (2010)) (12 U.S.C. 5412(b)(2)(B)) transferred rulemaking 
authority of the Office of Thrift Supervision (OTS) relating to all 
savings associations, both state and Federal to the OCC. The regulations 
set forth in parts 1 through 197 of this chapter I applying to Federal 
savings associations and state savings associations, as those terms are 
defined in section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(b)), supersede corresponding regulations set forth in parts 500 
through 591 of chapter V of the Code of Federal Regulations that were 
applicable to such entities prior to July 21, 2011.

[76 FR 48956, Aug. 9, 2011, as amended at 80 FR 28479, May 18, 2015]

[[Page 1003]]



Sec.  100.2  Waiver authority.

    The Comptroller of the Currency may, for good cause and to the 
extent permitted by statute, waive the applicability of any provision of 
parts 1 through 197 of this chapter I, as applicable, with respect to 
Federal savings associations.

[76 FR 48956, Aug. 9, 2011, as amended at 80 FR 28479, May 18, 2015]



PART 101_COVERED SAVINGS ASSOCIATIONS--Table of Contents



Sec.
101.1 Authority and purposes.
101.2 Definitions and computation of time.
101.3 Procedures.
101.4 Treatment of covered savings associations.
101.5 Nonconforming subsidiaries, assets, and activities.
101.6 Termination.
101.7 Reelection.
101.8 Evasion.

    Authority: 12 U.S.C. 93a, 1462a, 1463, 1464, 1464a, and 
5412(b)(2)(B).

    Source: 84 FR 24005, May 24, 2019, unless otherwise noted.



Sec.  101.1  Authority and purposes.

    (a) Authority. This part is issued pursuant to sections 3, 4, 5, and 
5A of the Home Owners' Loan Act (HOLA) (12 U.S.C. 1462a, 1463, 1464, and 
1464a), section 5239A of the Revised Statutes (12 U.S.C. 93a), and 
section 312(b)(2)(B) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5412(b)(2)(B)).
    (b) Purposes. This part establishes standards and procedures for a 
Federal savings association to elect to operate as a covered savings 
association pursuant to section 5A of the HOLA and clarifies the 
requirements for the treatment of covered savings associations. It also 
establishes standards and procedures to terminate an election and to 
reelect to operate as a covered savings association.



Sec.  101.2  Definitions and computation of time.

    (a) Definitions. As used in this part:
    (1) Covered savings association means a Federal savings association 
that has made an election that is in effect in accordance with Sec.  
101.3(b).
    (2) Effective date of the election means, with respect to a Federal 
savings association, the date on which the Federal savings association's 
election to operate as a covered savings association takes effect 
pursuant to Sec.  101.3(b).
    (3) Nonconforming subsidiary, asset, or activity. (i) With respect 
to a covered savings association:
    (A) Means any subsidiary, asset, or activity that is not permissible 
for a covered savings association or, if permissible, is being operated, 
held, or conducted in a manner that exceeds the limit applicable to a 
covered savings association; and
    (B) Includes an investment in a subsidiary or other entity that is 
not permissible for a covered savings association; and
    (ii) With respect to a Federal savings association that has 
terminated an election to operate as a covered savings association:
    (A) Means any subsidiary, asset, or activity that is not permissible 
for a Federal savings association or, if permissible, is being operated, 
held, or conducted in a manner that exceeds the limit applicable to a 
Federal savings association; and
    (B) Includes an investment in a subsidiary or other entity that is 
not permissible for a Federal savings association.
    (4) Similarly located national bank means, with respect to a covered 
savings association, a national bank that has its main office situated 
in the same location as the home office of the covered savings 
association.
    (b) Computation of time. The OCC will compute a period of days for 
purposes of this part in accordance with 12 CFR 5.12.



Sec.  101.3  Procedures.

    (a) Notice--(1) Submission. A Federal savings association that had 
total consolidated assets of $20 billion or less as of December 31, 
2017, as reported on the Federal savings association's Consolidated 
Reports of Condition and Income for December 31, 2017, may make an 
election to operate as a covered savings association by submitting a 
notice to the OCC.
    (2) Contents. The notice shall:

[[Page 1004]]

    (i) Be signed by a duly authorized officer of the Federal savings 
association; and
    (ii) Identify and describe each nonconforming subsidiary, asset, or 
activity that the Federal savings association operates, holds, or 
conducts at the time it submits the notice, each of which must be 
divested, conformed, or discontinued pursuant to Sec.  101.5.
    (b) Effective date of the election--(1) In general. An election to 
operate as a covered savings association shall take effect on the date 
that is 60 days after the date on which the OCC receives the notice 
submitted under paragraph (a) of this section.
    (2) Earlier notice. Notwithstanding paragraph (b)(1) of this 
section, the OCC may notify a Federal savings association in writing 
prior to the expiration of 60 days that it is eligible to make an 
election, and the election shall take effect on the date the OCC so 
notifies the Federal savings association.



Sec.  101.4  Treatment of covered savings associations.

    (a) In general--(1) National bank activities. Except as provided in 
this section, a covered savings association may engage in any activity 
that is permissible for a similarly located national bank to engage in 
as part of, or incidental to, the business of banking, or explicitly 
authorized by statute for a national bank, subject to the same 
authorization, terms, and conditions that would apply to a similarly 
located national bank, as determined by the OCC for purposes of this 
part.
    (2) Treatment as a Federal savings association. A covered savings 
association shall continue to comply with the provisions of law that 
apply to Federal savings associations for purposes of:
    (i) Governance (including incorporation, bylaws, boards of 
directors, shareholders, members, and distribution of dividends);
    (ii) Consolidation, merger, dissolution, conversion (including 
conversion to a stock bank or to another charter), conservatorship, and 
receivership;
    (iii) Provisions of law applicable only to Federal mutual savings 
associations;
    (iv) Offers and sales of securities at an office of a Federal 
savings association;
    (v) Savings bank activities authorized by section 5(i)(4) of HOLA;
    (vi) Issuance of subordinated debt securities and mandatorily 
redeemable preferred stock;
    (vii) Increases in permanent capital of a Federal stock savings 
association;
    (viii) Rules of practice and procedure in adjudicatory proceedings;
    (ix) Rules for investigative proceedings and formal examination 
proceedings;
    (x) Removals, suspensions, and prohibitions where a crime is charged 
or proven;
    (xi) Security procedures;
    (xii) Maintenance of records and recordkeeping and confirmation 
requirements for securities transactions;
    (xiii) Accounting and disclosure standards;
    (xiv) Nondiscrimination; and
    (xv) Advertising.
    (b) Existing branches. A covered savings association may continue to 
operate any branch or agency that the covered savings association 
operated on the effective date of the election.
    (c) Assets greater than $20 billion. A covered savings association 
may continue to operate as a covered savings association if, after the 
effective date of the election, it has total consolidated assets greater 
than $20 billion.



Sec.  101.5  Nonconforming subsidiaries, assets, and activities.

    (a) Divestiture, conformance, or discontinuation. A covered savings 
association shall divest, conform, or discontinue a nonconforming 
subsidiary, asset, or activity at the earliest time that prudent 
judgment dictates but not later than two years after the effective date 
of the election. The OCC may require a covered savings association to 
submit a plan to divest, conform, or discontinue a nonconforming 
subsidiary, asset, or activity.
    (b) Extension. The OCC may grant a covered savings association 
extensions of not more than two years each up to a maximum of eight 
years if the OCC determines that:
    (1) The covered savings association has made a good faith effort to 
divest,

[[Page 1005]]

conform, or discontinue the nonconforming subsidiary, asset, or 
activity;
    (2) Divestiture, conformance, or discontinuation would have a 
material adverse financial effect on the covered savings association; 
and
    (3) Retention or continuation of the nonconforming subsidiary, 
asset, or activity is consistent with the safe and sound operation of 
the covered savings association.
    (c) Applicable law. Until a covered savings association divests, 
conforms, or discontinues a nonconforming subsidiary, asset, or 
activity, the nonconforming subsidiary, asset, or activity shall 
continue to be subject to the same provisions of law that applied to the 
nonconforming subsidiary, asset, or activity on the day before the 
effective date of the election, including any amendments to those 
provisions of law.



Sec.  101.6  Termination.

    (a) Termination. A covered savings association may terminate its 
election to operate as a covered savings association, after an 
appropriate period of time as determined by the OCC, by submitting a 
notice to the OCC.
    (b) Procedures. A covered savings association wishing to terminate 
its election shall comply with, and shall be subject to, the provisions 
of Sec. Sec.  101.2, 101.3, and 101.5, except that:
    (1) The provisions of Sec. Sec.  101.3 and 101.5 shall be applied by 
substituting ``covered savings association'' for ``Federal savings 
association'' and ``Federal savings association'' for ``covered savings 
association'' each place those terms appear in those sections;
    (2) Section 101.3(a)(1) shall not apply; and
    (3) Sections 101.3 and 101.5 shall be applied by substituting 
``effective date of the termination'' for ``effective date of the 
election.''
    (c) Applicable law. On and after the effective date of the 
termination, a Federal savings association that has terminated its 
election to operate as a covered savings association shall be subject to 
the same provisions of law as a Federal savings association that has not 
made an election under this part.



Sec.  101.7  Reelection.

    (a) Reelection. A Federal savings association that has terminated 
its election to operate as a covered savings association may submit a 
notice to reelect to operate as a covered savings association, if at 
least five years have elapsed since the effective date of the 
termination. Upon determining that good cause exists, the OCC may permit 
a Federal savings association to reelect to operate as a covered savings 
association prior to the expiration of the five-year period.
    (b) Procedures and treatment. A Federal savings association 
reelecting to operate as a covered savings association shall comply 
with, and shall be subject to, the provisions of this part as if it were 
making an election for the first time.



Sec.  101.8  Evasion.

    The OCC may disapprove any notice submitted pursuant to this part if 
the OCC determines that the notice is made for the purpose of evading 
Sec.  101.5, including as that section applies to a covered savings 
association terminating an election.

                        PARTS 102	107 [RESERVED]



PART 108_REMOVALS, SUSPENSIONS, AND PROHIBITIONS WHERE A CRIME IS CHARGED 
OR PROVEN--Table of Contents



Sec.
108.1 Scope.
108.2 Definitions.
108.3 Issuance of Notice or Order.
108.4 Contents and service of the Notice or Order.
108.5 Petition for hearing.
108.6 Initiation of hearing.
108.7 Conduct of hearings.
108.8 Default.
108.9 Rules of evidence.
108.10 Burden of persuasion.
108.11 Relevant considerations.
108.12 Proposed findings and conclusions and recommended decision.
108.13 Decision of the OCC.
108.14 Miscellaneous.

    Authority: 12 U.S.C. 1464, 1818, 5412(b)(2)(B).

    Source: 76 FR 48956, Aug. 9, 2011, unless otherwise noted.

[[Page 1006]]


    Effective Date Note: At 88 FR 89908, Dec. 28, 2023, part 108 was 
removed, effective Apr. 1, 2024.



Sec.  108.1  Scope.

    The rules in this part apply to hearings, which are exempt from the 
adjudicative provisions of the Administrative Procedure Act, afforded to 
any officer, director, or other person participating in the conduct of 
the affairs of a Federal savings association, Federal savings 
association subsidiary, or affiliate service corporation, where such 
person has been suspended or removed from office or prohibited from 
further participation in the conduct of the affairs of one of the 
aforementioned entities by a Notice or Order served by the OCC upon the 
grounds set forth in section 8(g) of the Federal Deposit Insurance Act, 
(12 U.S.C. 1818(g)).



Sec.  108.2  Definitions.

    As used in this part--
    (a) The term OCC means the Office of the Comptroller of the 
Currency.
    (b) [Reserved]
    (c) The term Notice means a Notice of Suspension or Notice of 
Prohibition issued by the OCC pursuant to section 8(g) of the Federal 
Deposit Insurance Act.
    (d) The term Order means an Order of Removal or Order of Prohibition 
issued by the OCC pursuant to section 8(g) of the Federal Deposit 
Insurance Act.
    (e) The term association means a Federal savings association within 
the meaning of section 2(5) of the Home Owners' Loan Act of 1933, as 
amended, 12 U.S.C. 1462(5) (``HOLA''), Federal savings association 
subsidiary and an affiliate service corporation within the meaning of 
section 8(b)(8) of the Federal Deposit Insurance Act, as amended, 12 
U.S.C. 1818(b)(8) (``FDIA'').
    (f) The term subject individual means a person served with a Notice 
or Order.
    (g) The term petitioner means a subject individual who has filed a 
petition for informal hearing under this part.



Sec.  108.3  Issuance of Notice or Order.

    (a) The OCC may issue and serve a Notice upon an officer, director, 
or other person participating in the conduct of the affairs of an 
association, where the individual is charged in any information, 
indictment, or complaint with the commission of or participation in a 
crime involving dishonesty or breach of trust that is punishable by 
imprisonment for a term exceeding one year under state or Federal law, 
if the OCC, upon due deliberation, determines that continued service or 
participation by the individual may pose a threat to the interests of 
the association's depositors or may threaten to impair public confidence 
in the association. The Notice shall remain in effect until the 
information, indictment, or complaint is finally disposed of or until 
terminated by the OCC.
    (b) The OCC may issue and serve an Order upon a subject individual 
against whom a judgment of conviction, or an agreement to enter a 
pretrial diversion or other similar program has been rendered, where 
such judgment is not subject to further appellate review, and the OCC, 
upon the deliberation, has determined that continued service or 
participation by the subject individual may pose a threat to the 
interests of the association's depositors or may threaten to impair 
public confidence in the association.



Sec.  108.4  Contents and service of the Notice or Order.

    (a) The Notice or Order shall set forth the basis and facts in 
support of the OCC's issuance of such Notice or Order, and shall inform 
the subject individual of his right to a hearing, in accordance with 
this part, for the purpose of determining whether the Notice or Order 
should be continued, terminated, or otherwise modified.
    (b) The OCC shall serve a copy of the Notice or Order upon the 
subject individual and the related association in the manner set forth 
in Sec.  109.11 of this chapter.
    (c) Upon receipt of the Notice or Order, the subject individual 
shall immediately comply with the requirements thereof.



Sec.  108.5  Petition for hearing.

    (a) To obtain a hearing, the subject individual must file two copies 
of a petition with the OCC within 30 days of being served with the 
Notice or Order.
    (b) The petition filed under this section shall admit or deny 
specifically

[[Page 1007]]

each allegation in the Notice or Order, unless the petitioner is without 
knowledge or information, in which case the petition shall so state and 
the statement shall have the effect of a denial. Any allegation not 
denied shall be deemed to be admitted. When a petitioner intends in good 
faith to deny only a part of or to qualify an allegation, he shall 
specify so much of it as is true and shall deny only the remainder.
    (c) The petition shall state whether the petitioner is requesting 
termination or modification of the Notice or Order, and shall state with 
particularity how the petitioner intends to show that his continued 
service to or participation in the conduct of the affairs of the 
association would not, or is not likely to, pose a threat to the 
interests of the association's depositors or to impair public confidence 
in the association.



Sec.  108.6  Initiation of hearing.

    (a) Within 10 days of the filing of a petition for hearing, the OCC 
shall notify the petitioner of the time and place fixed for hearing, and 
it shall designate one or more OCC employees to serve as presiding 
officer.
    (b) The hearing shall be scheduled to be held no later than 30 days 
from the date the petition was filed, unless the time is extended at the 
request of the petitioner.
    (c) A petitioner may appear personally or through counsel, but if 
represented by counsel, said counsel is required to comply with Sec.  
109.6 of this chapter.
    (d) A representative(s) of the OCC's Enforcement Division also may 
attend the hearing and participate therein as a party.

[76 FR 48956, Aug. 9, 2011, as amended at 85 FR 42642, July 14, 2020]



Sec.  108.7  Conduct of hearings.

    (a) Hearings provided by this section are not subject to the 
adjudicative provisions of the Administrative Procedure Act (5 U.S.C. 
554-557). The presiding officer is, however, authorized to exercise all 
of the powers enumerated in Sec.  109.5 of this chapter.
    (b) Witnesses may be presented, within time limits specified by the 
presiding officer, provided that at least 10 days prior to the hearing 
date, the party presenting the witnesses furnishes the presiding officer 
and the opposing party with a list of such witnesses and a summary of 
the proposed testimony. However, the requirement for furnishing such a 
witness list and summary of testimony shall not apply to the 
presentation of rebuttal witnesses. The presiding officer may ask 
questions of any witness, and each party shall have an opportunity to 
cross-examine any witness presented by an opposing party.
    (c) Upon the request of either the petitioner or a representative of 
the Enforcement Division, the record shall remain open for a period of 5 
business days following the hearing, during which time the parties may 
make any additional submissions for the record. Thereafter, the record 
shall be closed.
    (d) Following the introduction of all evidence, the petitioner and 
the representative of the Enforcement Division shall have an opportunity 
for oral argument; however, the parties may jointly waive the right to 
oral argument, and, in lieu thereof, elect to submit written argument.
    (e) All oral testimony and oral argument shall be recorded, and 
transcripts made available to the petitioner upon payment of the cost 
thereof. A copy of the transcript shall be sent directly to the 
presiding officer, who shall have authority to correct the record sua 
sponte or upon the motion of any party.
    (f) The parties may, in writing, jointly waive an oral hearing and 
instead elect a hearing upon a written record in which all evidence and 
argument would be submitted to the presiding officer in documentary form 
and statements of individuals would be made by affidavit.

[76 FR 48956, Aug. 9, 2011, as amended at 85 FR 42642, July 14, 2020]



Sec.  108.8  Default.

    If the subject individual fails to file a petition for a hearing, or 
fails to appear at a hearing, either in person or by attorney, or fails 
to submit a written argument where oral argument has been waived 
pursuant to Sec.  108.7(d) or (f) of this part, the Notice shall remain 
in

[[Page 1008]]

effect until the information, indictment, or complaint is finally 
disposed of and the Order shall remain in effect until terminated by the 
OCC.



Sec.  108.9  Rules of evidence.

    (a) Formal rules of evidence shall not apply to a hearing, but the 
presiding officer may limit the introduction of irrelevant, immaterial, 
or unduly repetitious evidence.
    (b) All matters officially noticed by the presiding officer shall 
appear on the record.



Sec.  108.10  Burden of persuasion.

    The petitioner has the burden of showing, by a preponderance of the 
evidence, that his or her continued service to or participation in the 
conduct of the affairs of the association does not, or is not likely to, 
pose a threat to the interests of the association's depositors or 
threaten to impair public confidence in the association.



Sec.  108.11  Relevant considerations.

    (a) In determining whether the petitioner has shown that his or her 
continued service to or participation in the conduct of the affairs of 
the association would not, or is not likely to, pose a threat to the 
interests of the association's depositors or threaten to impair public 
confidence in the association, in order to decide whether the Notice or 
Order should be continued, terminated, or otherwise modified, the OCC 
will consider:
    (1) The nature and extent of the petitioner's participation in the 
affairs of the association;
    (2) The nature of the offense with which the petitioner has been 
charged;
    (3) The extent of the publicity accorded the indictment and trial; 
and
    (4) Such other relevant factors as may be entered on the record.
    (b) When considering a request for the termination or modification 
of a Notice, the OCC will not consider the ultimate guilt or innocence 
of the petitioner with respect to the criminal charge that is 
outstanding.
    (c) When considering a request for the termination or modification 
of an Order which has been issued following a final judgment of 
conviction against a subject individual, the OCC will not collaterally 
review such final judgment of conviction.



Sec.  108.12  Proposed findings and conclusions and recommended decision.

    (a) Within 30 days after completion of oral argument or the 
submission of written argument where oral argument has been waived, the 
presiding officer shall file with and certify to the OCC for decision 
the entire record of the hearing, which shall include a recommended 
decision, the Notice or Order, and all other documents filed in 
connection with the hearing.
    (b) The recommended decision shall contain:
    (1) A statement of the issue(s) presented,
    (2) A statement of findings and conclusions, and the reasons or 
basis therefor, on all material issues of fact, law, or discretion 
presented on the record, and
    (3) An appropriate recommendation as to whether the suspension, 
removal, or prohibition should be continued, modified, or terminated.



Sec.  108.13  Decision of the OCC.

    (a) Within 30 days after the recommended decision has been certified 
to the OCC, the OCC shall issue a final decision.
    (b) The OCC's final decision shall contain a statement of the basis 
therefor. The OCC may satisfy this requirement where it adopts the 
recommended decision of the presiding officer upon finding that the 
recommended decision satisfies the requirements of Sec.  109.38 of this 
chapter.
    (c) The OCC shall serve upon the petitioner and the representative 
of the Enforcement Division a copy of the OCC's final decision and the 
related recommended decision.

[76 FR 48956, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020]



Sec.  108.14  Miscellaneous.

    The provisions of Sec. Sec.  109.10, 109.11, and 109.12 of this 
chapter shall apply to proceedings under this part.

[[Page 1009]]



PART 109_RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY PROCEEDINGS--
Table of Contents



            Subpart A_Uniform Rules of Practice and Procedure

Sec.
109.1 Scope.
109.2 Rules of construction.
109.3 Definitions.
109.4 Authority of the Comptroller.
109.5 Authority of the administrative law judge.
109.6 Appearance and practice in adjudicatory proceedings.
109.7 Good faith certification.
109.8 Conflicts of interest.
109.9 Ex parte communications.
109.10 Filing of papers.
109.11 Service of papers.
109.12 Construction of time limits.
109.13 Change of time limits.
109.14 Witness fees and expenses.
109.15 Opportunity for informal settlement.
109.16 OCC's right to conduct examination.
109.17 Collateral attacks on adjudicatory proceeding.
109.18 Commencement of proceeding and contents of notice.
109.19 Answer.
109.20 Amended pleadings.
109.21 Failure to appear.
109.22 Consolidation and severance of actions.
109.23 Motions.
109.24 Scope of document discovery.
109.25 Request for document discovery from parties.
109.26 Document subpoenas to nonparties.
109.27 Deposition of witness unavailable for hearing.
109.28 Interlocutory review.
109.29 Summary disposition.
109.30 Partial summary disposition.
109.31 Scheduling and prehearing conferences.
109.32 Prehearing submissions.
109.33 Public hearings.
109.34 Hearing subpoenas.
109.35 Conduct of hearings.
109.36 Evidence.
109.37 Post-hearing filings.
109.38 Recommended decision and filing of record.
109.39 Exceptions to recommended decision.
109.40 Review by the Comptroller.
109.41 Stays pending judicial review.

                          Subpart B_Local Rules

109.100 Scope.
109.101 Appointment of Office of Financial Institution Adjudication.
109.102 Discovery.
109.103 Civil money penalties.
109.104 Additional procedures.

Subparts C-D [Reserved]

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 1468, 
1817, 1818, 1820(k), 1829(e), 1832, 1884, 1972, 3349, 4717, 
5412(b)(2)(B); 15 U.S.C. 78(l), 78o-5, 78u-2, 1639e; 28 U.S.C. 2461 
note; 31 U.S.C. 5321; and 42 U.S.C. 4012a.

    Source: 76 FR 48957, Aug. 9, 2011, unless otherwise noted.

    Effective Date Note: At 88 FR 89908, Dec. 28, 2023, part 109 was 
removed, effective Apr. 1, 2024.



            Subpart A_Uniform Rules of Practice and Procedure



Sec.  109.1  Scope.

    This subpart prescribes Uniform Rules of practice and procedure with 
regard to Federal savings associations applicable to adjudicatory 
proceedings as to which hearings on the record are provided for by the 
following statutory provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (FDIA) (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the OCC should issue an 
order to approve or disapprove a person's proposed acquisition of an 
institution;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (Exchange Act) (15 U.S.C. 78o-5), to impose sanctions upon 
any government securities broker or dealer or upon any person associated 
or seeking to become associated with a government securities broker or 
dealer for which the OCC is the appropriate agency.
    (e) Assessment of civil money penalties by the OCC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate agency for any violation of:
    (1) Section 5 of the Home Owners' Loan Act (HOLA) or any regulation 
or order issued thereunder, pursuant to 12 U.S.C. 1464 (d), (s) and (v);

[[Page 1010]]

    (2) Section 9 of the HOLA or any regulation or order issued 
thereunder, pursuant to 12 U.S.C. 1467(d);
    (3) Section 10 of the HOLA, pursuant to 12 U.S.C. 1467a (i) and (r);
    (4) Any provisions of the Change in Bank Control Act, any regulation 
or order issued thereunder or certain unsafe or unsound practices or 
breaches of fiduciary duty, pursuant to 12 U.S.C. 1817(j)(16);
    (5) Sections 22(h) and 23 of the Federal Reserve Act, or any 
regulation issued thereunder or certain unsafe or unsound practices or 
breaches of fiduciary duty, pursuant to 12 U.S.C. 1468;
    (6) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (7) Section 1120 of Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (12 U.S.C. 3349), or any order or regulation 
issued thereunder;
    (8) The terms of any final or temporary order issued or enforceable 
pursuant to section 8 of the FDIA or of any written agreement executed 
by the OCC, the terms of any conditions imposed in writing by the OCC in 
connection with the grant of an application or request, certain unsafe 
or unsound practices or breaches of fiduciary duty, or any law or 
regulation not otherwise provided herein pursuant to 12 U.S.C. 
1818(i)(2);
    (9) Any provision of law referenced in section 102 of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (10) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102 of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k)) 
to impose penalties on senior examiners for violation of post-employment 
prohibitions; and
    (h) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules.
    (i) [Reserved]



Sec.  109.2  Rules of construction.

    For purposes of this subpart:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate;
    (c) The term counsel includes a non-attorney representative; and
    (d) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.



Sec.  109.3  Definitions.

    For purposes of this subpart, unless explicitly stated to the 
contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Decisional employee means any member of the OCC's or 
administrative law judge's staff who has not engaged in an investigative 
or prosecutorial role in a proceeding and who may assist the OCC or the 
administrative law judge, respectively, in preparing orders, recommended 
decisions, decisions, and other documents under the Uniform Rules.
    (d) Comptroller means the Comptroller of the Currency or his or her 
designee.
    (e) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the OCC in an adjudicatory 
proceeding.
    (f) Final order means an order issued by the OCC with or without the 
consent of the affected institution or the institution-affiliated party 
that has become final, without regard to the pendency of any petition 
for reconsideration or review.
    (g) Institution includes any Federal savings association as that 
term is defined in section 3(b) of the FDIA (12 U.S.C. 1813(b)).
    (h) Institution-affiliated party means any institution-affiliated 
party as that

[[Page 1011]]

term is defined in section 3(u) of the FDIA (12 U.S.C. 1813(u)).
    (i) Local Rules means those rules found in subpart B of this part.
    (j) OCC means the Office of the Comptroller of the Currency.
    (k) Office of Financial Institution Adjudication (OFIA) means the 
executive body charged with overseeing the administration of 
administrative enforcement proceedings for the OCC, the Board of 
Governors of the Federal Reserve Board, the Federal Deposit Insurance 
Corporation, and the National Credit Union Administration.
    (l) Party means the OCC and any person named as a party in any 
notice.
    (m) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (g) of this section.
    (n) Respondent means any party other than the OCC.
    (o) Uniform Rules means those rules in subpart A of this part.
    (p) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.



Sec.  109.4  Authority of the Comptroller.

    The Comptroller may, at any time during the pendency of a proceeding 
perform, direct the performance of, or waive performance of, any act 
which could be done or ordered by the administrative law judge.



Sec.  109.5  Authority of the administrative law judge.

    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of 
the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec.  109.31 of this subpart;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Comptroller shall have the power to grant any motion to dismiss the 
proceeding or to decide any other motion that results in a final 
determination of the merits of the proceeding;
    (8) To prepare and present to the Comptroller a recommended decision 
as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.



Sec.  109.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the OCC or an administrative law judge--(1) By 
attorneys. Any member in good standing of the bar of the highest court 
of any state, commonwealth, possession, territory of the United States, 
or the District of Columbia may represent others before the OCC if such 
attorney is not currently suspended or debarred from practice before the 
OCC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent

[[Page 1012]]

the partnership; a duly authorized officer, director, or employee of any 
government unit, agency, institution, corporation or authority may 
represent that unit, agency, institution, corporation or authority if 
such officer, director, or employee is not currently suspended or 
debarred from practice before the OCC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the Comptroller, shall file a notice of appearance 
with OFIA at or before the time that individual submits papers or 
otherwise appears on behalf of a party in the adjudicatory proceeding. 
The notice of appearance must include a written declaration that the 
individual is currently qualified as provided in paragraph (a)(1) or 
(a)(2) of this section and is authorized to represent the particular 
party. By filing a notice of appearance on behalf of a party in an 
adjudicatory proceeding, the counsel agrees and represents that he or 
she is authorized to accept service on behalf of the represented party 
and that, in the event of withdrawal from representation, he or she 
will, if required by the administrative law judge, continue to accept 
service until new counsel has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.



Sec.  109.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel shall sign his or her individual name and state his or her 
address and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: the counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.



Sec.  109.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify

[[Page 1013]]

in writing at the time of filing the notice of appearance required by 
Sec.  109.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.



Sec.  109.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the OCC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Comptroller, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the Comptroller until the date that the Comptroller issues 
the final decision pursuant to Sec.  109.40(c) of this subpart:
    (1) No interested person outside the OCC shall make or knowingly 
cause to be made an ex parte communication to the Comptroller, the 
administrative law judge, or a decisional employee; and
    (2) The Comptroller, administrative law judge, or decisional 
employee shall not make or knowingly cause to be made to any interested 
person outside the OCC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, the 
Comptroller or other person identified in paragraph (a) of this section, 
that person shall cause all such written communications (or, if the 
communication is oral, a memorandum stating the substance of the 
communication) to be placed on the record of the proceeding and served 
on all parties. All other parties to the proceeding shall have an 
opportunity, within ten days of receipt of service of the ex parte 
communication to file responses thereto and to recommend any sanctions, 
in accordance with paragraph (d) of this section, that they believe to 
be appropriate under the circumstances.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Comptroller or the administrative 
law judge including, but not limited to, exclusion from the proceedings 
and an adverse ruling on the issue which is the subject of the 
prohibited communication.
    (e) Separation-of-functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the OCC in a case may not, 
in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec.  109.40 of this subpart, except as witness or 
counsel in public proceedings.



Sec.  109.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec.  
109.25 and 109.26 of this subpart, shall be filed with the OFIA, except 
as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Comptroller 
or the administrative law judge, filing may be accomplished by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon

[[Page 1014]]

any conditions specified, by the Comptroller or the administrative law 
judge. All papers filed by electronic media shall also concurrently be 
filed in accordance with paragraph (c) of this section as to form.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec.  109.7 of this subpart.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the OCC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Comptroller, 
or the administrative law judge, an original and one copy of all 
documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.



Sec.  109.11  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec.  109.10(c) of this 
subpart as to form.
    (c) By the Comptroller or the administrative law judge. (1) All 
papers required to be served by the Comptroller or the administrative 
law judge upon a party who has appeared in the proceeding through a 
counsel of record, shall be served by any means specified in paragraph 
(b) of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec.  109.6 of this subpart, the Comptroller or the administrative law 
judge shall make service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) By delivery to an agent, which in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any state, territory, possession of 
the

[[Page 1015]]

United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.



Sec.  109.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in paragraph (c) of this section, intermediate 
Saturdays, Sundays, and Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection; or
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Comptroller or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Comptroller or the administrative law judge in the case of filing, 
or by agreement among the parties in the case of service.



Sec.  109.13  Change of time limits.

    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or any notice or order issued in the proceedings. After 
the referral of the case to the Comptroller pursuant to Sec.  109.38 of 
this subpart, the Comptroller may grant extensions of the time limits 
for good cause shown. Extensions may be granted at the motion of a party 
or on the Comptroller's or the administrative law judge's own motion 
after notice and opportunity to respond is afforded all non-moving 
parties.



Sec.  109.14  Witness fees and expenses.

    Witnesses subpoenaed for testimony or deposition shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the OCC is the 
party requesting the subpoena. The OCC shall not be required to pay any

[[Page 1016]]

fees to, or expenses of, any witness not subpoenaed by the OCC.



Sec.  109.15  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any OCC representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.



Sec.  109.16  OCC's right to conduct examination.

    Nothing contained in this subpart limits in any manner the right of 
the OCC to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the OCC to 
conduct or continue any form of investigation authorized by law.



Sec.  109.17  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.



Sec.  109.18  Commencement of proceeding and contents of notice.

    (a) Commencement of proceeding. (1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the Comptroller.
    (ii) The notice must be served by the Comptroller upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law.
    (iii) The notice must be filed with the OFIA.
    (2) Change-in control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
Comptroller.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the OCC's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the OCC 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) The answer and/or request for a hearing shall be filed with 
OFIA.



Sec.  109.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding.

[[Page 1017]]

A respondent is not required to respond to the portion of a notice that 
constitutes the prayer for relief or proposed order. The answer must set 
forth affirmative defenses, if any, asserted by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the 
Comptroller a recommended decision containing the findings and the 
relief sought in the notice. Any final order issued by the Comptroller 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.



Sec.  109.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Comptroller or administrative law 
judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.



Sec.  109.21  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the Comptroller a recommended decision containing the findings and the 
relief sought in the notice.



Sec.  109.22  Consolidation and severance of actions.

    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the matter as 
to any respondent only if the administrative law judge finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.

[[Page 1018]]



Sec.  109.23  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, but upon the filing of the recommended decision, motions must 
be filed with the Comptroller.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Comptroller, any party may file a written response to a motion. The 
administrative law judge shall not rule on any oral or written motion 
before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec.  109.29 and 109.30 of this subpart.



Sec.  109.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by Sec.  109.102 of 
this part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec.  109.25 of 
this subpart.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative-process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing, except as provided in the 
Local Rules. No exceptions to this time limit shall be permitted, unless 
the administrative law judge finds on the record that good cause exists 
for waiving the requirements of this paragraph.

[[Page 1019]]



Sec.  109.25  Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages is 
requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests 250 pages or 
more of copying, the requesting party shall pay for the copying and 
shipping charges. Copying charges are the current per-page copying rate 
imposed under 12 CFR 4.17 for requests under the Freedom of Information 
Act (5 U.S.C. 552). The party to whom the request is addressed may 
require payment in advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec.  109.23 
of this subpart to revoke or otherwise limit the request. If an 
objection is made to only a portion of an item or category in a request, 
the portion objected to shall be specified. Any objections not made in 
accordance with this paragraph and Sec.  109.23 of this subpart are 
waived.
    (2) The party who served the request that is the subject of a motion 
to revoke or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney-work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec.  109.23 of this subpart for the issuance of a subpoena compelling 
production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents,

[[Page 1020]]

he or she may deny or modify the request, and may issue appropriate 
protective orders, upon such conditions as justice may require. The 
pendency of a motion to strike or limit discovery or to compel 
production is not a basis for staying or continuing the proceeding, 
unless otherwise ordered by the administrative law judge. 
Notwithstanding any other provision in this part, the administrative law 
judge may not release, or order a party to produce, documents withheld 
on grounds of privilege if the party has stated to the administrative 
law judge its intention to file a timely motion for interlocutory review 
of the administrative law judge's order to produce the documents, and 
until the motion for interlocutory review has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative law 
judge against a party who fails to produce subpoenaed documents.



Sec.  109.26  Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec.  109.24(d) of this subpart. The party 
obtaining the document subpoena is responsible for serving it on the 
subpoenaed person and for serving copies on all parties. Document 
subpoenas may be served in any state, territory, or possession of the 
United States, the District of Columbia, or as otherwise provided by 
law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec.  109.25(d) of this 
subpart, and during the same time limits during which such an objection 
could be filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with so much of the document subpoena as the administrative 
law judge has not quashed or modified. A party's right to seek court 
enforcement of a document subpoena shall in no way limit the sanctions 
that may be imposed by the administrative law judge on a party who 
induces a failure to comply with subpoenas issued under this section.

[[Page 1021]]



Sec.  109.27  Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party may apply in accordance with the procedures set forth 
in paragraph (a)(2) of this section, to the administrative law judge for 
the issuance of a subpoena, including a subpoena duces tecum, requiring 
the attendance of the witness at a deposition. The administrative law 
judge may issue a deposition subpoena under this section upon showing 
that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to answer or submit any evidence the witness has refused to 
submit during the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena

[[Page 1022]]

under paragraph (b) or (c)(2) of this section, the subpoenaing party or 
other aggrieved party may, to the extent authorized by applicable law, 
apply to an appropriate United States district court for an order 
requiring compliance with the portions of the subpoena that the 
administrative law judge has ordered enforced. A party's right to seek 
court enforcement of a deposition subpoena in no way limits the 
sanctions that may be imposed by the administrative law judge on a party 
who fails to comply with or procures a failure to comply with, a 
subpoena issued under this section.



Sec.  109.28  Interlocutory review.

    (a) General rule. The Comptroller may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Comptroller only in accordance with the procedures set forth in this 
section and Sec.  109.23 of this subpart.
    (b) Scope of review. The Comptroller may exercise interlocutory 
review of a ruling of the administrative law judge if the Comptroller 
finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec.  109.23 of this subpart. 
Any party may file a response to a request for interlocutory review in 
accordance with Sec.  109.23(d) of this subpart. Upon the expiration of 
the time for filing all responses, the administrative law judge shall 
refer the matter to the Comptroller for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Comptroller under 
this section suspends or stays the proceeding unless otherwise ordered 
by the administrative law judge or the Comptroller.



Sec.  109.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the Comptroller issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes that 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the administrative law judge, may 
file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits and any other evidentiary materials that the moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the

[[Page 1023]]

contention that summary disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the Comptroller. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.



Sec.  109.30  Partial summary disposition.

    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.



Sec.  109.31  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at its expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.



Sec.  109.32  Prehearing submissions.

    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and

[[Page 1024]]

    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec.  109.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Comptroller, in the Comptroller's discretion, determines that 
holding an open hearing would be contrary to the public interest. Within 
20 days of service of the notice or, in the case of change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), 
within 20 days from service of the hearing order, any respondent may 
file with the Comptroller a request for a private hearing, and any party 
may file a reply to such a request. A party must serve on the 
administrative law judge a copy of any request or reply the party files 
with the Comptroller. The form of, and procedure for, these requests and 
replies are governed by Sec.  109.23 of this subpart. A party's failure 
to file a request or a reply constitutes a waiver of any objections 
regarding whether the hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.



Sec.  109.34  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the administrative law judge may issue a subpoena or a subpoena 
duces tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at the hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek

[[Page 1025]]

enforcement of the subpoena pursuant to Sec.  109.26(c) of this subpart.



Sec.  109.35  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree the administrative 
law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.



Sec.  109.36  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the APA and 
other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or Comptroller shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by the appropriate Federal banking 
agency, as defined in section 3(q) of the FDIA (12 U.S.C. 1813(q)), or 
state regulatory agency, is admissible either with or without a 
sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of

[[Page 1026]]

testimony. Such materials may, subject to the administrative law judge's 
discretion, be used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness, either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Comptroller.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing, and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec.  109.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party, that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.



Sec.  109.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under Sec.  
109.37(b) of this subpart, the administrative law judge shall file with 
and certify to the Comptroller, for decision, the record of the 
proceeding. The record must include the administrative law judge's 
recommended decision, recommended findings of fact, recommended 
conclusions of law, and

[[Page 1027]]

proposed order; all prehearing and hearing transcripts, exhibits, and 
rulings; and the motions, briefs, memoranda, and other supporting papers 
filed in connection with the hearing. The administrative law judge shall 
serve upon each party the recommended decision, findings, conclusions, 
and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Comptroller for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the Comptroller a certified index of the entire record of the 
proceeding. The certified index shall include, at a minimum, an entry 
for each paper, document or motion filed with the administrative law 
judge in the proceeding, the date of the filing, and the identity of the 
filer. The certified index shall also include an exhibit index 
containing, at a minimum, an entry consisting of exhibit number and 
title or description for: Each exhibit introduced and admitted into 
evidence at the hearing; each exhibit introduced but not admitted into 
evidence at the hearing; each exhibit introduced and admitted into 
evidence after the completion of the hearing; and each exhibit 
introduced but not admitted into evidence after the completion of the 
hearing.



Sec.  109.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec.  109.38 of this subpart, a party may file with the Comptroller 
written exceptions to the administrative law judge's recommended 
decision, findings, conclusions or proposed order, to the admission or 
exclusion of evidence, or to the failure of the administrative law judge 
to make a ruling proposed by a party. A supporting brief may be filed at 
the time the exceptions are filed, either as part of the same document 
or in a separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Comptroller if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the administrative law judge and failed to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.



Sec.  109.40  Review by the Comptroller.

    (a) Notice of submission to the Comptroller. When the Comptroller 
determines that the record in the proceeding is complete, the 
Comptroller shall serve notice upon the parties that the proceeding has 
been submitted to the Comptroller for final decision.
    (b) Oral argument before the Comptroller. Upon the initiative of the 
Comptroller or on the written request of any party filed with the 
Comptroller within the time for filing exceptions, the Comptroller may 
order and hear oral argument on the recommended findings, conclusions, 
decision, and order of the administrative law judge. A written request 
by a party must show good cause for oral argument and state reasons why 
arguments cannot be presented adequately in writing. A denial of a 
request for oral argument may be set forth in the Comptroller's final 
decision. Oral argument before the Comptroller must be on the record.
    (c) Comptroller's final decision. (1) Decisional employees may 
advise and assist the Comptroller in the consideration and disposition 
of the case. The final decision of the Comptroller will be based upon 
review of the entire record of the proceeding, except that the 
Comptroller may limit the issues

[[Page 1028]]

to be reviewed to those findings and conclusions to which opposing 
arguments or exceptions have been filed by the parties.
    (2) The Comptroller shall render a final decision within 90 days 
after notification of the parties that the case has been submitted for 
final decision, or 90 days after oral argument, whichever is later, 
unless the Comptroller orders that the action or any aspect thereof be 
remanded to the administrative law judge for further proceedings. Copies 
of the final decision and order of the Comptroller shall be served upon 
each party to the proceeding, upon other persons required by statute, 
and, if directed by the Comptroller or required by statute, upon any 
appropriate state or Federal supervisory authority.



Sec.  109.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the OCC may not, unless specifically ordered by 
the Comptroller or a reviewing court, operate as a stay of any order 
issued by the Comptroller. The Comptroller may, in its discretion, and 
on such terms as it finds just, stay the effectiveness of all or any 
part of its order pending a final decision on a petition for review of 
the order.



                          Subpart B_Local Rules



Sec.  109.100  Scope.

    The rules and procedures in this subpart B shall apply to those 
proceedings covered by subpart A of this part. In addition, subpart A of 
this part and this subpart shall apply to adjudicatory proceedings for 
which hearings on the record are provided for by the following statutory 
provisions:
    (a) Proceedings under section 10(a)(2)(D) of the HOLA (12 U.S.C. 
1467a(a)(2)(D)) to determine whether any person directly or indirectly 
exercises a controlling influence over the management or policies of a 
savings association or any other company; and
    (b) [Reserved]
    (c) Proceedings under section 15(c)(4) of the Securities and 
Exchange Act of 1934 (15 U.S.C. 78o(c)(4)) (Exchange Act) to determine 
whether any Federal savings association or person subject to the 
jurisdiction of the OCC pursuant to section 12(i) of the Exchange Act 
(15 U.S.C. 78 l (i)) has failed to comply with the provisions of 
sections 12, 13, 14(a), 14(c), 14(d) or 14(f) of the Exchange Act.



Sec.  109.101  Appointment of Office of Financial Institution Adjudication.

    Unless otherwise directed by the OCC, all hearings under subpart A 
of this part and this subpart shall be conducted by administrative law 
judges under the direction of the Office of Financial Institution 
Adjudication.



Sec.  109.102  Discovery.

    (a) In general. A party may take the deposition of an expert, or of 
a person, including another party, who has direct knowledge of matters 
that are non-privileged, relevant and material to the proceeding and 
where there is a need for the deposition. The deposition of experts 
shall be limited to those experts who are expected to testify at the 
hearing.
    (b) Notice. A party desiring to take a deposition shall give 
reasonable notice in writing to the deponent and to every other party to 
the proceeding. The notice must state the time and place for taking the 
deposition and the name and address of the person to be deposed.
    (c) Time limits. A party may take depositions at any time after the 
commencement of the proceeding, but no later than ten days before the 
scheduled hearing date, except with permission of the administrative law 
judge for good cause shown.
    (d) Conduct of the deposition. The witness must be duly sworn, and 
each party shall have the right to examine the witness with respect to 
all non-privileged, relevant and material matters of which the witness 
has factual, direct and personal knowledge. Objections to questions or 
exhibits shall be in short form, stating the grounds for objection. 
Failure to object to questions or exhibits is not a waiver except where 
the grounds for the objection might have been avoided if the objection 
had been timely presented. The court reporter shall transcribe or 
otherwise record the witness's testimony, as agreed among the parties.
    (e) Protective orders. At any time after notice of a deposition has 
been given, a

[[Page 1029]]

party may file a motion for the issuance of a protective order. Such 
protective order may prohibit, terminate, or limit the scope or manner 
of the taking of a deposition. The administrative law judge shall grant 
such protective order upon a showing of sufficient grounds, including 
that the deposition:
    (1) Is unreasonable, oppressive, excessive in scope, or unduly 
burdensome;
    (2) Involves privileged, investigative, trial preparation, 
irrelevant or immaterial matters; or
    (3) Is being conducted in bad faith or in such manner as to 
unreasonably annoy, embarrass, or oppress the deponent.
    (f) Fees. Deposition witnesses, including expert witnesses, shall be 
paid the same expenses in the same manner as are paid witnesses in the 
district courts of the United States in proceedings in which the United 
States Government is a party. Expenses in accordance with this paragraph 
shall be paid by the party seeking to take the deposition.
    (g) Deposition subpoenas--(1) Issuance. At the request of a party, 
the administrative law judge shall issue a subpoena requiring the 
attendance of a witness at a deposition. The attendance of a witness may 
be required from any place in any state or territory that is subject to 
the jurisdiction of the United States or as otherwise permitted by law.
    (2) Service. The party requesting the subpoena must serve it on the 
person named therein or upon that person's counsel, by any of the 
methods identified in Sec.  109.11(d) of this part. The party serving 
the subpoena must file proof of service with the administrative law 
judge.
    (3) Motion to quash. A person named in the subpoena or a party may 
file a motion to quash or modify the subpoena. A statement of the 
reasons for the motion must accompany it and a copy of the motion must 
be served on the party that requested the subpoena. The motion must be 
made prior to the time for compliance specified in the subpoena and not 
more than ten days after the date of service of the subpoena, or if the 
subpoena is served within 15 days of the hearing, within five days after 
the date of service.
    (4) Enforcement of deposition subpoena. Enforcement of a deposition 
subpoena shall be in accordance with the procedures of Sec.  109.27(d) 
of this part.



Sec.  109.103  Civil money penalties.

    (a) Assessment. In the event of consent, or if upon the record 
developed at the hearing the OCC finds that any of the grounds specified 
in the notice issued pursuant to Sec.  109.18 of this part have been 
established, the OCC may serve an order of assessment of civil money 
penalty upon the party concerned. The assessment order shall be 
effective immediately upon service or upon such other date as may be 
specified therein and shall remain effective and enforceable until it is 
stayed, modified, terminated, or set aside by the OCC or by a reviewing 
court.
    (b) Payment. (1) Civil penalties assessed pursuant to subpart A of 
this part and this subpart B are payable and to be collected within 60 
days after the issuance of the notice of assessment, unless the OCC 
fixes a different time for payment where it determines that the purpose 
of the civil money penalty would be better served thereby; however, if a 
party has made a timely request for a hearing to challenge the 
assessment of the penalty, the party may not be required to pay such 
penalty until the OCC has issued a final order of assessment following 
the hearing. In such instances, the penalty shall be paid within 60 days 
of service of such order unless the OCC fixes a different time for 
payment. Notwithstanding the foregoing, the OCC may seek to attach the 
party's assets or to have a receiver appointed to secure payment of the 
potential civil money penalty or other obligation in advance of the 
hearing in accordance with section 8(i)(4) of the FDIA (12 U.S.C. 
1818(i)(4)).
    (2) Checks in payment of civil penalties shall be made payable to 
the Treasurer of the United States and sent to the OCC. Upon receipt, 
the OCC shall forward the check to the Treasury of the United States.
    (c) Maximum amount of civil money penalties--(1) Statutory formula. 
The OCC is required by statute to annually adjust for inflation the 
maximum

[[Page 1030]]

amount of each civil money penalty within its jurisdiction to 
administer. The inflation adjustment is calculated by multiplying the 
maximum dollar amount of the civil money penalty for the previous 
calendar year by the cost-of-living inflation adjustment multiplier 
provided annually by the Office of Management and Budget and rounding 
the total to the nearest dollar.
    (2) Notice of inflation adjustments. The OCC will publish notice in 
the Federal Register of the maximum penalties which may be assessed on 
an annual basis on, or before, January 15 of each calendar year based on 
the formula in paragraph (a) of this section, for penalties assessed on, 
or after, the date of publication of the most recent notice related to 
conduct occurring on or after November 2, 2015.

[76 FR 48957, Aug. 9, 2011, as amended at 77 FR 66534, Nov. 6, 2012; 77 
FR 76356, Dec. 28, 2012; 81 FR 43027, July 1, 2016; 82 FR 8587, Jan. 27, 
2017; 83 FR 1518, Jan. 12, 2018]



Sec.  109.104  Additional procedures.

    (a) Replies to exceptions. Replies to written exceptions to the 
administrative law judge's recommended decision, findings, conclusions 
or proposed order pursuant to Sec.  109.39 of this part shall be filed 
within 10-days of the date such written exceptions were required to be 
filed.
    (b) Motions. All motions shall be filed with the administrative law 
judge and an additional copy shall be filed with the OCC Hearing Clerk 
who receives adjudicatory filings; provided, however, that once the 
administrative law judge has certified the record to the Comptroller 
pursuant to Sec.  109.38 of this part, all motions must be filed with 
the Comptroller to the attention of the Hearing Clerk within the 10-day 
period following the filing of exceptions allowed for the filing of 
replies to exceptions. Responses to such motions filed in a timely 
manner with the Comptroller, other than motions for oral argument before 
the Comptroller, shall be allowed pursuant to the procedures at Sec.  
109.23(d) of this part. No response is required for the Comptroller to 
make a determination on a motion for oral argument.
    (c) Authority of administrative law judge. In addition to the powers 
listed in Sec.  109.5 of this part, the administrative law judge shall 
have the authority to deny any dispositive motion and shall follow the 
procedures set forth for motions for summary disposition at Sec.  109.29 
of this part and partial summary disposition at Sec.  109.30 of this 
part in making determinations on such motions.
    (d) Notification of submission of proceeding to the Comptroller. 
Upon the expiration of the time for filing any exceptions, any replies 
to such exceptions or any motions and any ruling thereon, and after 
receipt of certified record, the OCC shall notify the parties within ten 
days of the submission of the proceeding to the Comptroller for final 
determination.
    (e) Extensions of time for final determination. The Comptroller may, 
sua sponte, extend the time for final determination by signing an order 
of extension of time within the 90-day time period and notifying the 
parties of such extension thereafter.
    (f) Service upon the OCC. Service of any document upon the OCC shall 
be made by filing with the Hearing Clerk, in addition to the individuals 
and/or offices designated by the OCC in its Notice issued pursuant to 
Sec.  109.18 of this part, or such other means reasonably suited to 
provide notice of the person and/or offices designated to receive 
filings.
    (g) Filings with the Comptroller. An additional copy of all 
materials required or permitted to be filed with or referred to the 
administrative law judge pursuant to subpart A and B of this part shall 
be filed with the Hearing Clerk. This rule shall not apply to the 
transcript of testimony and exhibits adduced at the hearing or to 
proposed exhibits submitted in advance of the hearing pursuant to an 
order of the administrative law judge under Sec.  109.32 of this part. 
Materials required or permitted to be filed with or referred to the 
Comptroller pursuant to subparts A and B of this part shall be filed 
with the Comptroller, to the attention of the Hearing Clerk.
    (h) Presence of cameras and other recording devices. The use of 
cameras and other recording devices, other than those used by the court 
reporter, shall

[[Page 1031]]

be prohibited and excluded from the proceedings.

Subparts C-D [Reserved]

                        PARTS 110	111 [RESERVED]



PART 112_RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL 
EXAMINATION PROCEEDINGS--Table of Contents



Sec.
112.1 Scope of part.
112.2 Definitions.
112.3 Confidentiality of proceedings.
112.4 Transcripts.
112.5 Rights of witnesses.
112.6 Obstruction of the proceedings.
112.7 Subpoenas.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813, 1817(j), 
1818(n), 1820(c), 5412(b)(2)(B); 15 U.S.C. 78l.

    Source: 76 FR 48970, Aug. 9, 2011, unless otherwise noted.

    Effective Date Note: At 88 FR 89908, Dec. 28, 2023, part 112 was 
removed, effective Apr. 1, 2024.



Sec.  112.1  Scope of part.

    This part prescribes rules of practice and procedure applicable to 
the conduct of formal examination proceedings with respect to Federal 
savings associations and their affiliates under section 5(d)(1)(B) of 
the HOLA, as amended, 12 U.S.C. 1464(d)(1)(B) or section 7(j)(15) of the 
Federal Deposit Insurance Act, as amended, 12 U.S.C. 1817(j)(15) 
(``FDIA''), section 8(n) of the FDIA, 12 U.S.C. 1818(n), or section 
10(c) of the FDIA, 12 U.S.C. 1820(c). This part does not apply to 
adjudicatory proceedings as to which hearings are required by statute, 
the rules for which are contained in part 109 of this chapter.



Sec.  112.2  Definitions.

    As used in this part:
    (a) OCC means the Office of the Comptroller of the Currency;
    (b) [Reserved]
    (c) Formal examination proceeding means the administration of oaths 
and affirmations, taking and preserving of testimony, requiring the 
production of books, papers, correspondence, memoranda, and all other 
records, the issuance of subpoenas, and all related activities in 
connection with examination of savings associations and their affiliates 
conducted pursuant to section 5(d)(1)(B) of the HOLA, section 7(j)(15) 
of the FDIA, section 8(n) of the FDIA or section 10(c) of the FDIA; and
    (d) Designated representative means the person or persons empowered 
by the OCC to conduct an investigative proceeding or a formal 
examination proceeding.



Sec.  112.3  Confidentiality of proceedings.

    All formal examination proceedings shall be private and, unless 
otherwise ordered by the OCC, all investigative proceedings shall also 
be private. Unless otherwise ordered or permitted by the OCC, or 
required by law, and except as provided in Sec. Sec.  112.4 and 112.5, 
the entire record of any investigative proceeding or formal examination 
proceeding, including the resolution of the OCC or its delegate(s) 
authorizing the proceeding, the transcript of such proceeding, and all 
documents and information obtained by the designated representative(s) 
during the course of said proceedings shall be confidential.



Sec.  112.4  Transcripts.

    Transcripts or other recordings, if any, of investigative 
proceedings or formal examination proceedings shall be prepared solely 
by an official reporter or by any other person or means authorized by 
the designated representative. A person who has submitted documentary 
evidence or given testimony in an investigative proceeding or formal 
examination proceeding may procure a copy of his own documentary 
evidence or transcript of his own testimony upon payment of the cost 
thereof; provided, that a person seeking a transcript of his own 
testimony must file a written request with the OCC's Director for 
Enforcement stating the reason he desires to procure such transcript, 
and said persons may for good cause deny such request. In any event, any 
witness (or his counsel) shall have the right to inspect the transcript 
of the witness' own testimony.

[76 FR 48970, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020]

[[Page 1032]]



Sec.  112.5  Rights of witnesses.

    (a) Any person who is compelled or requested to furnish documentary 
evidence or give testimony at an investigative proceeding or formal 
examination proceeding shall have the right to examine, upon request, 
the OCC resolution authorizing such proceeding. Copies of such 
resolution shall be furnished, for their retention, to such persons only 
with the written approval of the OCC.
    (b) Any witness at an investigative proceeding or formal examination 
proceeding may be accompanied and advised by an attorney personally 
representing that witness.
    (1) Such attorney shall be a member in good standing of the bar of 
the highest court of any state, Commonwealth, possession, territory, or 
the District of Columbia, who has not been suspended or debarred from 
practice by the bar of any such political entity or before the OCC in 
accordance with the provisions of part 19 of this chapter and has not 
been excluded from the particular investigative proceeding or formal 
examination proceeding in accordance with paragraph (b)(3) of this 
section.
    (2) Such attorney may advise the witness before, during, and after 
the taking of his testimony and may briefly question the witness, on the 
record, at the conclusion of his testimony, for the sole purpose of 
clarifying any of the answers the witness has given. During the taking 
of the testimony of a witness, such attorney may make summary notes 
solely for his use in representing his client. All witnesses shall be 
sequestered, and, unless permitted in the discretion of the designated 
representative, no witness or accompanying attorney may be permitted to 
be present during the taking of testimony of any other witness called in 
such proceeding. Neither attorney(s) for the association(s) that are the 
subjects of the investigative proceedings or formal examination 
proceedings, nor attorneys for any other interested persons, shall have 
any right to be present during the testimony of any witness not 
personally being represented by such attorney.
    (3) The OCC, for good cause, may exclude a particular attorney from 
further participation in any investigation in which the OCC has found 
the attorney to have engaged in dilatory, obstructionist, egregious, 
contemptuous or contumacious conduct. The person conducting an 
investigation may report to the OCC instances of apparently dilatory, 
obstructionist, egregious, contemptuous or contumacious conduct on the 
part of an attorney. After due notice to the attorney, the OCC may take 
such action as the circumstances warrant based upon a written record 
evidencing the conduct of the attorney in that investigation or such 
other or additional written or oral presentation as the OCC may permit 
or direct.



Sec.  112.6  Obstruction of the proceedings.

    The designated representative shall report to the Comptroller any 
instances where any witness or counsel has engaged in dilatory, 
obstructionist, or contumacious conduct or has otherwise violated any 
provision of this part during the course of an investigative proceeding 
or formal examination proceeding; and the OCC may take such action as 
the circumstances warrant, including the exclusion of counsel from 
further participation in such proceeding.



Sec.  112.7  Subpoenas.

    (a) Service. Service of a subpoena in connection with any 
investigative proceeding or formal examination proceeding shall be 
effected in the following manner:
    (1) Service upon a natural person. Service of a subpoena upon a 
natural person may be effected by handing it to such person; by leaving 
it at his office with the person in charge thereof, or, if there is no 
one in charge, by leaving it in a conspicuous place therein; by leaving 
it at his dwelling place or usual place of abode with some person of 
suitable age and discretion then residing therein; by mailing it to him 
by registered or certified mail or by an express delivery service at his 
last known address; or by any method whereby actual notice is given to 
him.
    (2) Service upon other persons. When the person to be served is not 
a natural person, service of the subpoena may be effected by handing the 
subpoena to a registered agent for service, or to any

[[Page 1033]]

officer, director, or agent in charge of any office of such person; by 
mailing it to any such representative by registered or certified mail or 
by an express delivery service at his last known address; or by any 
method whereby actual notice is given to such person.
    (b) Motions to quash. Any person to whom a subpoena is directed may, 
prior to the time specified therein for compliance, but in no event more 
than 10 days after the date of service of such subpoena, apply to the 
Deputy Chief Counsel or his designee to quash or modify such subpoena, 
accompanying such application with a statement of the reasons therefor. 
The Deputy Chief Counsel or his designee, as appropriate, may:
    (1) Deny the application;
    (2) Quash or revoke the subpoena;
    (3) Modify the subpoena; or
    (4) Condition the granting of the application on such terms as the 
Deputy Chief Counsel or his designee determines to be just, reasonable, 
and proper.
    (c) Attendance of witnesses. Subpoenas issued in connection with an 
investigative proceeding or formal examination proceeding may require 
the attendance and/or testimony of witnesses from any state or territory 
of the United States and the production by such witnesses of documentary 
or other tangible evidence at any designated place where the proceeding 
is being (or is to be) conducted. Foreign nationals are subject to such 
subpoenas if such service is made upon a duly authorized agent located 
in the United States.
    (d) Witness fees and mileage. Witnesses summoned in any proceeding 
under this part shall be paid the same fees and mileage that are paid 
witnesses in the district courts of the United States. Such fees and 
mileage need not be tendered when the subpoena is issued on behalf of 
the OCC by any of its designated representatives.

                        PARTS 113	127 [RESERVED]



PART 128_NONDISCRIMINATION REQUIREMENTS--Table of Contents



Sec.
128.1 Definitions.
128.2 Nondiscrimination in lending and other services.
128.3 Nondiscrimination in applications.
128.4 Nondiscriminatory advertising.
128.5 Equal Housing Lender Poster.
128.6 Loan application register.
128.7 Nondiscrimination in employment.
128.8 Complaints.
128.9 Guidelines relating to nondiscrimination in lending.
128.10 Supplementary guidelines.
128.11 Nondiscriminatory appraisal and underwriting.


    Authority: 12 U.S.C. 1464, 5412(b)(2)(B).

    Source: 76 FR 48978, August 9, 2011, unless otherwise noted.



Sec.  128.1  Definitions.

    As used in this part 128--
    (a) Application. For purposes of this part, an application for a 
loan or other service is as defined in Regulation C, 12 CFR 203.2(b).
    (b) Savings association. The term ``savings association'' means any 
Federal savings association as defined in 12 U.S.C. 1813(b)(2).
    (c) Dwelling. The term ``dwelling'' means a residential structure 
(whether or not it is attached to real property) located in a state of 
the United States of America, the District of Columbia, or the 
Commonwealth of Puerto Rico. The term includes an individual condominium 
unit, cooperative unit, or mobile or manufactured home.



Sec.  128.2  Nondiscrimination in lending and other services.

    (a) No savings association may deny a loan or other service, or 
discriminate in the purchase of loans or securities or discriminate in 
fixing the amount, interest rate, duration, application procedures, 
collection or enforcement procedures, or other terms or conditions of 
such loan or other service on the basis of the age or location of the 
dwelling, or on the basis of the race, color, religion, sex, handicap, 
familial status (having one or more children under the age of 18), 
marital status, age (provided the person has the capacity to contract) 
or national origin of:
    (1) An applicant or joint applicant;
    (2) Any person associated with an applicant or joint applicant 
regarding such loan or other service, or with the purposes of such loan 
or other service;

[[Page 1034]]

    (3) The present or prospective owners, lessees, tenants, or 
occupants of the dwelling(s) for which such loan or other service is to 
be made or given;
    (4) The present or prospective owners, lessees, tenants, or 
occupants of other dwellings in the vicinity of the dwelling(s) for 
which such loan or other service is to be made or given.
    (b) A savings association shall consider without prejudice the 
combined income of joint applicants for a loan or other service.
    (c) No savings association may discriminate against an applicant for 
a loan or other service on any prohibited basis (as defined in 12 CFR 
202.2(z) and 24 CFR part 100).

    Note to Sec.  128.2: See also, Sec.  128.9(b) and (c).



Sec.  128.3  Nondiscrimination in applications.

    (a) No savings association may discourage, or refuse to allow, 
receive, or consider, any application, request, or inquiry regarding a 
loan or other service, or discriminate in imposing conditions upon, or 
in processing, any such application, request, or inquiry on the basis of 
the age or location of the dwelling, or on the basis of the race, color, 
religion, sex, handicap, familial status (having one or more children 
under the age of 18), marital status, age (provided the person has the 
capacity to contract), national origin, or other characteristics 
prohibited from consideration in Sec.  128.2(c) of this part, of the 
prospective borrower or other person, who:
    (1) Makes application for any such loan or other service;
    (2) Requests forms or papers to be used to make application for any 
such loan or other service; or
    (3) Inquires about the availability of such loan or other service.
    (b) A savings association shall inform each inquirer of his or her 
right to file a written loan application, and to receive a copy of the 
association's underwriting standards.

    Note to Sec.  128.3: See also, Sec.  128.9(a) through (d).



Sec.  128.4  Nondiscriminatory advertising.

    No savings association may directly or indirectly engage in any form 
of advertising that implies or suggests a policy of discrimination or 
exclusion in violation of title VIII of the Civil Rights Acts of 1968, 
the Equal Credit Opportunity Act, or this part 128. Advertisements for 
any loan for the purpose of purchasing, constructing, improving, 
repairing, or maintaining a dwelling or any loan secured by a dwelling 
shall include a facsimile of the following logotype and legend:
[GRAPHIC] [TIFF OMITTED] TR09AU11.000



Sec.  128.5  Equal Housing Lender Poster.

    (a) Each savings association shall post and maintain one or more 
Equal Housing Lender Posters, the text of which is prescribed in 
paragraph (b) of this section, in the lobby of each of its offices in a 
prominent place or places readily apparent to all persons seeking loans. 
The poster shall be at least 11 by 14 inches in size, and the text shall 
be easily legible. It is recommended that savings associations post a 
Spanish language version of the poster in offices serving areas with a 
substantial Spanish-speaking population.
    (b) The text of the Equal Housing Lender Poster shall be as follows:
    [GRAPHIC] [TIFF OMITTED] TR09AU11.001
    
    We Do Business In Accordance With Federal Fair Lending Laws.
    UNDER THE FEDERAL FAIR HOUSING ACT, IT IS ILLEGAL, ON THE BASIS OF 
RACE, COLOR, NATIONAL ORIGIN, RELIGION, SEX, HANDICAP, OR FAMILIAL 
STATUS (HAVING CHILDREN UNDER THE AGE OF 18) TO:
    [ ] Deny a loan for the purpose of purchasing, constructing, 
improving, repairing or maintaining a dwelling or to deny any loan 
secured by a dwelling; or
    [ ] Discriminate in fixing the amount, interest rate, duration, 
application procedures, or other terms or

[[Page 1035]]

conditions of such a loan or in appraising property.
    IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD:
    SEND A COMPLAINT TO:
    Assistant Secretary for Fair Housing and Equal Opportunity, 
Department of Housing and Urban Development, Washington, DC 20410.
    For processing under the Federal Fair Housing Act
    AND TO:
    [Insert contact information for appropriate Federal regulator]
    For processing under applicable Regulations.
    UNDER THE EQUAL CREDIT OPPORTUNITY ACT, IT IS ILLEGAL TO 
DISCRIMINATE IN ANY CREDIT TRANSACTION:
    [ ] On the basis of race, color, national origin, religion, sex, 
marital status, or age;
    [ ] Because income is from public assistance; or
    [ ] Because a right has been exercised under the Consumer Credit 
Protection Act.
    IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD SEND 
A COMPLAINT TO:
    [Insert contact information for appropriate Federal regulator]



Sec.  128.6  Loan application register.

    Savings associations and other lenders required to file Home 
Mortgage Disclosure Act Loan Application Registers with the OCC in 
accordance with 12 CFR part 203 must enter the reason for denial, using 
the codes provided in 12 CFR part 203, with respect to all loan denials.



Sec.  128.7  Nondiscrimination in employment.

    (a) No savings association shall, because of an individual's race, 
color, religion, sex, or national origin:
    (1) Fail or refuse to hire such individual;
    (2) Discharge such individual;
    (3) Otherwise discriminate against such individual with respect to 
such individual's compensation, promotion, or the terms, conditions, or 
privileges of such individual's employment; or
    (4) Discriminate in admission to, or employment in, any program of 
apprenticeship, training, or retraining, including on-the-job training.
    (b) No savings association shall limit, segregate, or classify its 
employees in any way which would deprive or tend to deprive any 
individual of employment opportunities or otherwise adversely affect 
such individual's status as an employee because of such individual's 
race, color, religion, sex, or national origin.
    (c) No savings association shall discriminate against any employee 
or applicant for employment because such employee or applicant has 
opposed any employment practice made unlawful by Federal, state, or 
local law or regulation or because he has in good faith made a charge of 
such practice or testified, assisted, or participated in any manner in 
an investigation, proceeding, or hearing of such practice by any 
lawfully constituted authority.
    (d) No savings association shall print or publish or cause to be 
printed or published any notice or advertisement relating to employment 
by such savings association indicating any preference, limitation, 
specification, or discrimination based on race, color, religion, sex, or 
national origin.
    (e) This regulation shall not apply in any case in which the Federal 
Equal Employment Opportunities law is made inapplicable by the 
provisions of section 2000e-1 or sections 2000e-2(e) through (j) of 
title 42, United States Code.
    (f) Any violation of the following laws or regulations by a savings 
association shall be deemed to be a violation of this part 128:
    (1) The Equal Employment Opportunity Act, as amended, 42 U.S.C. 
2000e-2000h-2, and Equal Employment Opportunity Commission (EEOC) 
regulations at 29 CFR part 1600;
    (2) The Age Discrimination in Employment Act, 29 U.S.C. 621-633, and 
EEOC and Department of Labor regulations;
    (3) Office of Federal Contract Compliance Programs (OFCCP) 
regulations at 41 CFR part 60;
    (4) The Veterans Employment and Readjustment Act of 1972, 38 U.S.C.

[[Page 1036]]

2011-2012, and the Vietnam Era Veterans Readjustment Adjustment 
Assistance Act of 1974, 38 U.S.C. 2021-2026;
    (5) The Rehabilitation Act of 1973, 29 U.S.C. 701 et seq.; and
    (6) The Immigration and Nationality Act, 8 U.S.C. 1324b, and INS 
regulations at 8 CFR part 274a.



Sec.  128.8  Complaints.

    Complaints alleging violations of the Fair Housing Act by a savings 
association shall be referred to the Assistant Secretary for Fair 
Housing and Equal Opportunity, U.S. Department of Housing and Urban 
Development, Washington, DC 20410 for processing under the Fair Housing 
Act, and to the appropriate Federal regulator for processing under 
applicable regulations. Complaints regarding discrimination in 
employment by a savings association should be referred to the Equal 
Employment Opportunity Commission, Washington, DC 20506 and a copy, for 
information only, sent to the appropriate Federal regulator.



Sec.  128.9  Guidelines relating to nondiscrimination in lending.

    (a) General. Fair housing and equal opportunity in home financing is 
a policy of the United States established by Federal statutes and 
Presidential orders and proclamations. In furtherance of the Federal 
civil rights laws and the economical home financing purposes of the 
statutes administered by the OCC, the OCC has adopted, in part 128 of 
this chapter, nondiscrimination regulations that, among other things, 
prohibit arbitrary refusals to consider loan applications on the basis 
of the age or location of a dwelling, and prohibit discrimination based 
on race, color, religion, sex, handicap, familial status (having one or 
more children under the age of 18), marital status, age (provided the 
person has the capacity to contract), or national origin in fixing the 
amount, interest rate, duration, application procedures, collection or 
enforcement procedures, or other terms or conditions of housing related 
loans. Such discrimination is also prohibited in the purchase of loans 
and securities. This section provides supplementary guidelines to aid 
savings associations in developing and implementing nondiscriminatory 
lending policies. Each savings association should reexamine its 
underwriting standards at least annually in order to ensure equal 
opportunity.
    (b) Loan underwriting standards. The basic purpose of the 
nondiscrimination regulations is to require that every applicant be 
given an equal opportunity to obtain a loan. Each loan applicant's 
creditworthiness should be evaluated on an individual basis without 
reference to presumed characteristics of a group. The use of lending 
standards which have no economic basis and which are discriminatory in 
effect is a violation of law even in the absence of an actual intent to 
discriminate. However, a standard which has a discriminatory effect is 
not necessarily improper if its use achieves a genuine business need 
which cannot be achieved by means which are not discriminatory in effect 
or less discriminatory in effect.
    (c) Discriminatory practices--(1) Discrimination on the basis of sex 
or marital status. The Civil Rights Act of 1968 and the National Housing 
Act prohibit discrimination in lending on the basis of sex. The Equal 
Credit Opportunity Act, in addition to this prohibition, forbids 
discrimination on the basis of marital status. Refusing to lend to, 
requiring higher standards of creditworthiness of, or imposing different 
requirements on, members of one sex or individuals of one marital 
status, is discrimination based on sex or marital status. Loan 
underwriting decisions must be based on an applicant's credit history 
and present and reasonably foreseeable economic prospects, rather than 
on the basis of assumptions regarding comparative differences in 
creditworthiness between married and unmarried individuals, or between 
men and women.
    (2) Discrimination on the basis of language. Requiring fluency in 
the English language as a prerequisite for obtaining a loan may be a 
discriminatory practice based on national origin.
    (3) Income of husbands and wives. A practice of discounting all or 
part of either spouse's income where spouses apply jointly is a 
violation of section 527 of the National Housing Act. As with other 
income, when spouses apply

[[Page 1037]]

jointly for a loan, the determination as to whether a spouse's income 
qualifies for credit purposes should depend upon a reasonable evaluation 
of his or her past, present, and reasonably foreseeable economic 
circumstances. Information relating to child-bearing intentions of a 
couple or an individual may not be requested.
    (4) Supplementary income. Lending standards which consider as 
effective only the non-overtime income of the primary wage-earner may 
result in discrimination because they do not take account of variations 
in employment patterns among individuals and families. The favored 
method of loan underwriting reasonably evaluates the credit worthiness 
of each applicant based on a realistic appraisal of his or her own past, 
present, and foreseeable economic circumstances. The determination as to 
whether primary income or additional income qualifies as effective for 
credit purposes should depend upon whether such income may reasonably be 
expected to continue through the early period of the mortgage risk. 
Automatically discounting other income from bonuses, overtime, or part-
time employment, will cause some applicants to be denied financing 
without a realistic analysis of their credit worthiness. Since 
statistics show that minority group members and low- and moderate-income 
families rely more often on such supplemental income, the practice may 
be racially discriminatory in effect, as well as artificially 
restrictive of opportunities for home financing.
    (5) Applicant's prior history. Loan decisions should be based upon a 
realistic evaluation of all pertinent factors respecting an individual's 
creditworthiness, without giving undue weight to any one factor. The 
savings association should, among other things, take into consideration 
that:
    (i) In some instances, past credit difficulties may have resulted 
from discriminatory practices;
    (ii) A policy favoring applicants who previously owned homes may 
perpetuate prior discrimination;
    (iii) A current, stable earnings record may be the most reliable 
indicator of credit-worthiness, and entitled to more weight than factors 
such as educational level attained;
    (iv) Job or residential changes may indicate upward mobility; and
    (v) Preferring applicants who have done business with the lender can 
perpetuate previous discriminatory policies.
    (6) Income level or racial composition of area. Refusing to lend or 
lending on less favorable terms in particular areas because of their 
racial composition is unlawful. Refusing to lend, or offering less 
favorable terms (such as interest rate, downpayment, or maturity) to 
applicants because of the income level in an area can discriminate 
against minority group persons.
    (7) Age and location factors. Sections 128.2, 128.11, and 128.3 of 
this chapter prohibit loan denials based upon the age or location of a 
dwelling. These restrictions are intended to prohibit use of unfounded 
or unsubstantiated assumptions regarding the effect upon loan risk of 
the age of a dwelling or the physical or economic characteristics of an 
area. Loan decisions should be based on the present market value of the 
property offered as security (including consideration of specific 
improvements to be made by the borrower) and the likelihood that the 
property will retain an adequate value over the term of the loan. 
Specific factors which may negatively affect its short-range future 
value (up to 3-5 years) should be clearly documented. Factors which in 
some cases may cause the market value of a property to decline are 
recent zoning changes or a significant number of abandoned homes in the 
immediate vicinity of the property. However, not all zoning changes will 
cause a decline in property values, and proximity to abandoned buildings 
may not affect the market value of a property because of rehabilitation 
programs or affirmative lending programs, or because the cause of 
abandonment is unrelated to high risk. Proper underwriting 
considerations include the condition and utility of the improvements, 
and various physical factors such as street conditions, amenities such 
as parks and recreation areas, availability of public utilities and 
municipal services, and exposure to flooding and land faults. However,

[[Page 1038]]

arbitrary decisions based on age or location are prohibited, since many 
older, soundly constructed homes provide housing opportunities which may 
be precluded by an arbitrary lending policy.
    (8) Fair Housing Act (title VIII, Civil Rights Act of 1968, as 
amended). Savings associations must comply with all regulations 
promulgated by the Department of Housing and Urban Development to 
implement the Fair Housing Act, found at 24 CFR parts 100 through 125, 
except that they shall use the Equal Housing Lender logo and poster 
prescribed by OCC regulations at 12 CFR 128.4 and 128.5 rather than the 
Equal Housing Opportunity logo and poster required by 24 CFR part 110.
    (d) Marketing practices. Savings associations should review their 
advertising and marketing practices to ensure that their services are 
available without discrimination to the community they serve. 
Discrimination in lending is not limited to loan decisions and 
underwriting standards; a savings association does not meet its 
obligations to the community or implement its equal lending 
responsibility if its marketing practices and business relationships 
with developers and real estate brokers improperly restrict its 
clientele to segments of the community. A review of marketing practices 
could begin with an examination of an association's loan portfolio and 
applications to ascertain whether, in view of the demographic 
characteristics and credit demands of the community in which the 
institution is located, it is adequately serving the community on a 
nondiscriminatory basis. The OCC will systematically review marketing 
practices where evidence of discrimination in lending is discovered.



Sec.  128.10  Supplementary guidelines.

    The policy statement found at 12 CFR 128.9 supplements this part and 
should be read together with this part. Refer also to the HUD Fair 
Housing regulations at 24 CFR parts 100 through 125, Federal Reserve 
Regulation B at 12 CFR part 202, and Federal Reserve Regulation C at 12 
CFR part 203.



Sec.  128.11  Nondiscriminatory appraisal and underwriting.

    (a) Appraisal. No savings association may use or rely upon an 
appraisal of a dwelling which the savings association knows, or 
reasonably should know, is discriminatory on the basis of the age or 
location of the dwelling, or is discriminatory per se or in effect under 
the Fair Housing Act of 1968 or the Equal Credit Opportunity Act.
    (b) Underwriting. Each savings association shall have clearly 
written, non-discriminatory loan underwriting standards, available to 
the public upon request, at each of its offices. Each association shall, 
at least annually, review its standards, and business practices 
implementing them, to ensure equal opportunity in lending.
    Note to Sec.  128.11: See also, Sec.  128.9(b), (c)(6), and (c)(7).

                        PARTS 129	140 [RESERVED]



PART 141_DEFINITIONS FOR REGULATIONS AFFECTING FEDERAL SAVINGS ASSOCIATIONS--
Table of Contents



Sec.
141.1 When do the definitions in this part apply?
141.2 [Reserved]
141.5 Commercial paper.
141.7 Corporate debt security.
141.8 [Reserved]
141.10 Dwelling unit.
141.11 Federal savings association.
141.14 Home.
141.15-141.19 [Reserved]
141.20 Loans.
141.21 Nonresidential real estate.
141.22 [Reserved]
141.23 Residential real estate.
141.25 Single-family dwelling.
141.26 Surplus.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).

    Source: 76 FR 48990, Aug. 9, 2011, unless otherwise noted.



Sec.  141.1  When do the definitions in this part apply?

    The definitions in this part and in 12 CFR part 161 apply throughout 
parts 100 through 199 of this chapter, unless another definition is 
specifically provided.

[[Page 1039]]



Sec.  141.2  [Reserved]



Sec.  141.5  Commercial paper.

    The term commercial paper means any note, draft, or bill of exchange 
which arises out of a current transaction or the proceeds of which have 
been or are to be used for current transactions, and which has a 
maturity at the time of issuance of not exceeding nine months, exclusive 
of days of grace, or any renewal thereof the maturity of which is 
likewise limited.



Sec.  141.7  Corporate debt security.

    The term corporate debt security means a marketable obligation, 
evidencing the indebtedness of any corporation in the form of a bond, 
note and/or debenture which is commonly regarded as a debt security and 
is not predominantly speculative in nature. A security is marketable if 
it may be sold with reasonable promptness at a price which corresponds 
reasonably to its fair value.



Sec.  141.8  [Reserved]



Sec.  141.10  Dwelling unit.

    The term dwelling unit means the unified combination of rooms 
designed for residential use by one family, other than a single-family 
dwelling.



Sec.  141.11  Federal savings association.

    The term Federal savings association means a Federal savings 
association or Federal savings bank chartered under section 5 of the 
Act.



Sec.  141.14  Home.

    The term home means real estate comprising a single-family 
dwelling(s) or a dwelling unit(s) for four or fewer families in the 
aggregate.



Sec.  141.15-141.19  [Reserved]



Sec.  141.20  Loans.

    The term loans means obligations and extensions or advances of 
credit; and any reference to a loan or investment includes an interest 
in such a loan or investment.



Sec.  141.21  Nonresidential real estate.

    The terms nonresidential real estate or nonresidential real property 
mean real estate that is not residential real estate, as that term is 
defined in Sec.  141.23 of this part.



Sec.  141.22  [Reserved]



Sec.  141.23  Residential real estate.

    The terms residential real estate or residential real property mean:
    (a) Homes (including a dwelling unit in a multi-family residential 
property such as a condominium or a cooperative);
    (b) Combinations of homes and business property (i.e., a home used 
in part for business);
    (c) Other real estate used for primarily residential purposes other 
than a home (but which may include homes);
    (d) Combinations of such real estate and business property involving 
only minor business use (i.e., where no more than 20 percent of the 
total appraised value of the real estate is attributable to the business 
use);
    (e) Farm residences and combinations of farm residences and 
commercial farm real estate;
    (f) Property to be improved by the construction of such structures; 
or
    (g) Leasehold interests in the above real estate.



Sec.  141.25  Single-family dwelling.

    The term single-family dwelling means a structure designed for 
residential use by one family, or a unit so designed, whose owner owns, 
directly or through a non-profit cooperative housing organization, an 
undivided interest in the underling real estate, including property 
owned in common with others which contributes to the use and enjoyment 
of the structure or unit.



Sec.  141.26  Surplus.

    The term surplus means undistributed earnings held as unallocated 
reserves for general corporate use.

                           PART 142 [RESERVED]



PART 143_FEDERAL SAVINGS ASSOCIATIONS_GRANDFATHERED AUTHORITY--
Table of Contents



    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 2901 et seq., 
5412(b)(2)(B).

[[Page 1040]]


    Source: 76 FR 48991, Aug. 9, 2011, unless otherwise noted.



Sec.  143.12  Grandfathered authority.

    (a) A Federal savings bank formerly chartered or designated as a 
mutual savings bank under state law may exercise any authority it was 
authorized to exercise as a mutual savings bank under state law at the 
time of its conversion from a state mutual savings bank to a Federal or 
other state charter. Except to the extent such authority may be 
exercised by Federal savings associations not enjoying grandfathered 
rights hereunder, such authority may be exercised only to the degree 
authorized under state law at the time of such conversion. Unless 
otherwise determined by the OTS prior to July 21, 2011 or by the OCC an 
association, in the exercise of grandfathered authority, may continue to 
follow applicable state laws and regulations in effect at the time of 
such conversion.
    (b) A Federal savings association that acquires, or has acquired, a 
Federal savings bank by merger or consolidation may itself exercise any 
grandfathered rights enjoyed by the disappearing institution, whether 
such rights were obtained directly through conversion or through merger 
or consolidation. The extent of the grandfathered rights of a Federal 
savings association that disappeared prior to the effective date of this 
section shall be determined exclusively pursuant to this section.
    (c) This section shall not be construed to prevent the exercise by a 
Federal savings association enjoying grandfathered rights hereunder of 
authority that is available under the applicable state law only upon the 
occurrence of specific preconditions, such as the attainment of a 
particular future date or specified level of regulatory capital, which 
have not occurred at the time of conversion from a state mutual savings 
bank, provided they occur thereafter.
    (d) This section shall not be construed to permit the exercise of 
any particular authority on a more liberal basis than is allowable under 
the most liberal construction of either state or Federal law or 
regulation.



PART 144_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_COMMUNICATION BETWEEN MEMBERS--
Table of Contents



    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 2901 et seq., 
5412(b)(2)(B).

    Source: 76 FR 48995, Aug. 9, 2011, unless otherwise noted.



Sec.  144.8  Communication between members of a Federal mutual 
savings association.

    (a) Right of communication with other members. A member of a Federal 
mutual savings association has the right to communicate, as prescribed 
in paragraph (b) of this section, with other members of the Federal 
savings association regarding any matter related to the Federal savings 
association's affairs, except for ``improper'' communications, as 
defined in paragraph (c) of this section. The association may not defeat 
that right by redeeming a savings member's savings account in the 
Federal mutual savings association.
    (b) Member communication procedures. If a member of a Federal mutual 
savings association desires to communicate with other members, the 
following procedures shall be followed:
    (1) The member shall give the Federal mutual savings association a 
written request to communicate;
    (2) If the proposed communication is in connection with a meeting of 
the Federal savings association's members, the request shall be given at 
least thirty days before the annual meeting or 10 days before a special 
meeting;
    (3) The request shall contain--
    (i) The member's full name and address;
    (ii) The nature and extent of the member's interest in the Federal 
savings association at the time the information is given;
    (iii) A copy of the proposed communication; and
    (iv) If the communication is in connection with a meeting of the 
members, the date of the meeting;
    (4) The Federal savings association shall reply to the request 
within either--
    (i) Fourteen days;

[[Page 1041]]

    (ii) Ten days, if the communication is in connection with the annual 
meeting; or
    (iii) Three days, if the communication is in connection with a 
special meeting;
    (5) The reply shall provide either--
    (i) The number of the Federal savings association's members and the 
estimated reasonable cost to the Federal savings association of mailing 
to them the proposed communication; or
    (ii) Notification that the Federal savings association has 
determined not to mail the communication because it is ``improper'', as 
defined in paragraph (c) of this section;
    (6) After receiving the amount of the estimated costs of mailing and 
sufficient copies of the communication, the Federal savings association 
shall mail the communication to all members, by a class of mail 
specified by the requesting member, either--
    (i) Within fourteen days;
    (ii) Within seven days, if the communication is in connection with 
the annual meeting;
    (iii) As soon as practicable before the meeting, if the 
communication is in connection with a special meeting; or
    (iv) On a later date specified by the member;
    (7) If the Federal savings association refuses to mail the proposed 
communication, it shall return the requesting member's materials 
together with a written statement of the specific reasons for refusal, 
and shall simultaneously send to the appropriate OCC licensing office 
two copies each of the requesting member's materials, the Federal 
savings association's written statement, and any other relevant 
material. The materials shall be sent within:
    (i) Fourteen days,
    (ii) Ten days if the communication is in connection with the annual 
meeting, or
    (iii) Three days, if the communication is in connection with a 
special meeting, after the Federal savings association receives the 
request for communication.
    (c) Improper communication. A communication is an ``improper 
communication'' if it contains material which:
    (1) At the time and in the light of the circumstances under which it 
is made:
    (i) Is false or misleading with respect to any material fact; or
    (ii) Omits a material fact necessary to make the statements therein 
not false or misleading, or necessary to correct a statement in an 
earlier communication on the same subject which has become false or 
misleading;
    (2) Relates to a personal claim or a personal grievance, or is 
solicitous of personal gain or business advantage by or on behalf of any 
party;
    (3) Relates to any matter, including a general economic, political, 
racial, religious, social, or similar cause, that is not significantly 
related to the business of the Federal savings association or is not 
within the control of the Federal savings association; or
    (4) Directly or indirectly and without expressed factual foundation:
    (i) Impugns character, integrity, or personal reputation,
    (ii) Makes charges concerning improper, illegal, or immoral conduct, 
or
    (iii) Makes statements impugning the stability and soundness of the 
Federal savings association.



PART 145_FEDERAL SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents



Sec.
145.1 General authority.
145.2 [Reserved]
145.16 Public deposits, depositaries, and fiscal agents.
145.17 Funds transfer services.
145.92 Branch offices.
145.101 Fiscal agency.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1828, 5412(b)(2)(B).

    Source: 76 FR 48999, Aug. 9, 2011, unless otherwise noted.



Sec.  145.1  General authority.

    A Federal savings association may exercise all authority granted it 
by the Home Owners' Loan Act of 1933 (``Act''), 12 U.S.C. 1464, as 
amended, and its charter and bylaws, whether or not implemented 
specifically by OCC regulations, subject to the limitations and 
interpretations contained in this part.

[[Page 1042]]



Sec.  145.2  [Reserved]



Sec.  145.16  Public deposits, depositaries, and fiscal agents.

    (a) Definitions. As used in this section--
    (1) Moneys includes monies and has the same meaning it has in 
applicable state law;
    (2) State law includes actions by a governmental body which has a 
charter adopted under the constitution of the state with provisions 
respecting deposits of public money of that body;
    (3) Surety means surety under real and/or personal suretyship, and 
includes guarantor; and
    (4) Terms in paragraph (b) of this section have the meanings they 
have under applicable state law.
    (b) Authority to act as surety for public deposits. (1) A Federal 
savings association that is a deposit association may give bond or 
security for deposit in it of public moneys or investment in it by a 
governmental unit if required to do so by state law, either as an 
alternative condition or otherwise, regardless of the amount required. 
Any bond or security may be given and any substitution or increase 
thereof may be made under this section at any time.
    (2) If state law requires as a condition of such deposit or 
investment that the Federal savings association or its bond or security, 
or any combination thereof, be surety for or with respect to other 
deposits or instruments, whether of that depositor or investor or of any 
other(s), and whether in the Federal savings association or in any other 
institution(s) having, when the investments or deposits were made, 
insurance by the Federal Deposit Insurance Corporation, the same shall 
become, or if the state law is self-executing shall be, such surety.
    (c) Depositaries and fiscal agents. Subject to regulation of the 
United States Treasury Department, a Federal savings association may 
serve as a depositary for Federal taxes, as a Treasury tax and loan 
depositary, or as a depositary of public money and fiscal agent of the 
Government or any other instrumentality thereof when designated for that 
purpose by such instrumentality and approved by the OCC, and may satisfy 
any requirement in connection therewith, including maintaining accounts 
described in Sec. Sec.  161.33, 161.52, 161.53, and 161.54 of this 
chapter; pledging collateral; and performing the services outlined in 31 
CFR 202.3(b) or any section that supersedes or amends Sec.  202.3(b).



Sec.  145.17  Funds transfer services.

    A Federal savings association is authorized to transfer, with or 
without fee, its customers' funds from any account (including a line of 
credit) of the customer at the Federal savings association or at another 
financial intermediary to third parties or other accounts of the 
customer on the customer's order or authorization by any mechanism or 
device, including cashier's checks, conforming with applicable laws and 
established commercial practices.



Sec.  145.92  Branch offices.

    (a) Definition. A branch office of a Federal savings association 
(``you'') is any office other than your home office, agency office, 
administrative office, data processing office, or an electronic means or 
facility under part 155 of this chapter.
    (b) Branching. Subject to the application and notice requirements at 
Sec.  5.31 of this chapter, you may branch in any state or states of the 
United States and its territories unless the location would violate:
    (1) Section 5(r) of the HOLA (12 U.S.C. 1464(r));
    (2) Section 10(e)(3) of the HOLA (12 U.S.C. 1467a(e)(3)); or
    (3) Section 13(k)(4) of the FDIA (12 U.S.C. 1823(k)(4)).
    (c) Preemption. This exercise of the OCC's authority is preemptive 
of any state law purporting to address the subject of branching by a 
Federal savings association.

[76 FR 48999, Aug. 9, 2011, as amended at 80 FR 28480, May 18, 2015]



Sec.  145.101  Fiscal agency.

    A Federal savings association designated fiscal agent by the 
Secretary of the Treasury or with OCC approval by another 
instrumentality of the United States, shall, as such, perform such 
reasonable duties and exercise only

[[Page 1043]]

such powers and privileges as the Secretary of the Treasury or such 
instrumentality may prescribe.

                        PARTS 146	149 [RESERVED]



PART 150_FIDUCIARY POWERS OF FEDERAL SAVINGS ASSOCIATIONS--Table of Contents



Sec.
150.10 What regulations govern the fiduciary operations of Federal 
          savings associations?
150.20 What are fiduciary powers?
150.30 What fiduciary capacities does this part cover?
150.40 When do I have investment discretion?
150.50 What is a fiduciary account?
150.60 What other definitions apply to this part?

                  Subpart A_Obtaining Fiduciary Powers

150.70 Must I obtain OCC approval or file a notice before I exercise 
          fiduciary powers?

                  Subpart B_Exercising Fiduciary Powers

150.130 How may I conduct multi-state operations?
150.135 How do I determine which state's laws apply to my operations?
150.136 To what extent do state laws apply to my fiduciary operations?
150.140 Must I adopt and follow written policies and procedures in 
          exercising fiduciary powers?

                   Fiduciary Personnel and Facilities

150.150 Who is responsible for the exercise of fiduciary powers?
150.160 What personnel and facilities may I use to perform fiduciary 
          services?
150.170 May my other departments or affiliates use fiduciary personnel 
          and facilities to perform other services?
150.180 May I perform fiduciary services for, or purchase fiduciary 
          services from, another association or entity?
150.190 Must fiduciary officers and employees be bonded?

                      Review of a Fiduciary Account

150.200 Must I review a prospective account before I accept it?
150.210 Must I conduct another review of an account after I accept it?
150.220 Are any other account reviews required?

                      Custody and Control of Assets

150.230 Who must maintain custody or control of assets in a fiduciary 
          account?
150.240 May I hold investments of a fiduciary account off-premises?
150.245 When is a fiduciary not required to maintain custody or control 
          of fiduciary assets?
150.250 Must I keep fiduciary assets separate from other assets?

                 Investing Funds of a Fiduciary Account

150.260 How may I invest funds of a fiduciary account?

                Funds Awaiting Investment or Distribution

150.290 What must I do with fiduciary funds awaiting investment or 
          distribution?
150.300 Where may I deposit fiduciary funds awaiting investment or 
          distribution?
150.310 What if the FDIC does not insure the deposits?
150.320 What is acceptable collateral for uninsured deposits?

                      Restrictions on Self Dealing

150.330 Are there investments in which I may not invest funds of a 
          fiduciary account?
150.340 May I exercise rights to purchase additional stock or fractional 
          shares of my stock or obligations or the stock or obligations 
          of my affiliates?
150.350 May I lend, sell, or transfer assets of a fiduciary account if I 
          have an interest in the transaction?
150.360 May I make a loan to a fiduciary account that is secured by an 
          interest in the assets of the account?
150.370 May I sell assets or lend money between fiduciary accounts?

                    Compensation, Gifts, and Bequests

150.380 May I earn compensation for acting in a fiduciary capacity?
150.390 May my officer or employee retain compensation for acting as a 
          co-fiduciary?
150.400 May my fiduciary officer or employee accept a gift or bequest?

                       Recordkeeping Requirements

150.410 What records must I keep?
150.420 How long must I keep these records?
150.430 Must I keep fiduciary records separate and distinct from other 
          records?

                           Audit Requirements

150.440 When do I have to audit my fiduciary activities?
150.450 What standards govern the conduct of the audit?
150.460 Who may conduct an audit?
150.470 Who directs the conduct of the audit?
150.480 How do I report the results of the audit?

[[Page 1044]]

         Subpart C_Depositing Securities With State Authorities

150.490 When must I deposit securities with state authorities?
150.500 How much must I deposit if I administer fiduciary assets in more 
          than one state?
150.510 What must I do if state authorities refuse my deposit?

 Subpart D_Terminating Fiduciary Activities Receivership or Liquidation

150.520 What happens if I am placed in receivership or voluntary 
          liquidation?

                      Surrender of Fiduciary Powers

150.530 How do I surrender fiduciary powers?
150.540 When will the OCC terminate my fiduciary powers?
150.550 May I recover my deposit from state authorities?

                     Revocation of Fiduciary Powers

150.560 When may the OCC revoke my fiduciary powers?
150.570 What procedures govern the revocation?

               Subpart E_Activities Exempt From This Part

150.580 When may I conduct fiduciary activities without obtaining OCC 
          approval?
150.590 What standards must I observe when acting in exempt fiduciary 
          capacities?
150.600 How may funds be invested when I act in an exempt fiduciary 
          capacity?
150.610 What disclosures must I make when acting in exempt fiduciary 
          capacities?
150.620 May I receive compensation for acting in exempt fiduciary 
          capacities?

    Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).

    Source: 76 FR 49003, Aug. 9, 2011, unless otherwise noted.



Sec.  150.10  What regulations govern the fiduciary operations 
of Federal savings associations?

    A Federal savings association (``you'') must conduct its fiduciary 
operations in accordance with 12 U.S.C. 1464(n) and this part.



Sec.  150.20  What are fiduciary powers?

    Fiduciary powers are the authority that the OCC permits you to 
exercise under 12 U.S.C. 1464(n).



Sec.  150.30  What fiduciary capacities does this part cover?

    You are subject to this part if you act in a fiduciary capacity, 
except as described in subpart E of this part. You act in a fiduciary 
capacity when you act in any of the following capacities:
    (a) Trustee.
    (b) Executor.
    (c) Administrator.
    (d) Registrar of stocks and bonds.
    (e) Transfer agent.
    (f) Assignee.
    (g) Receiver.
    (h) Guardian or conservator of the estate of a minor, an incompetent 
person, an absent person, or a person over whose estate a court has 
taken jurisdiction, other than under bankruptcy or insolvency laws.
    (i) A fiduciary in a relationship established under a state law that 
is substantially similar to the Uniform Gifts to Minors Act or the 
Uniform Transfers to Minors Act as published by the American Law 
Institute.
    (j) Investment adviser, if you receive a fee for your investment 
advice.
    (k) Any capacity in which you have investment discretion on behalf 
of another.
    (l) Any other similar capacity that the OCC may authorize under 12 
U.S.C. 1464(n).



Sec.  150.40  When do I have investment discretion?

    (a) General. You have investment discretion when you have, with 
respect to a fiduciary account, the sole or shared authority to 
determine what securities or other assets to purchase or sell on behalf 
of that account. It does not matter whether you have exercised this 
authority.
    (b) Delegations. You retain investment discretion if you delegate 
investment discretion to another. You also have investment discretion if 
you receive delegated authority to exercise investment discretion from 
another.



Sec.  150.50  What is a fiduciary account?

    A fiduciary account is an account that you administer acting in a 
fiduciary capacity.

[[Page 1045]]



Sec.  150.60  What other definitions apply to this part?

    Activities ancillary to your fiduciary business include advertising, 
marketing, or soliciting fiduciary business, contacting existing or 
potential customers, answering questions and providing information to 
customers related to their accounts, acting as liaison between you and 
your customer (for example, forwarding requests for distribution, 
changes in investment objectives, forms, or funds received from the 
customer), and inspecting or maintaining custody of fiduciary assets or 
holding title to real property. This list is illustrative and not 
comprehensive. Other activities may also be ``ancillary activities'' for 
purposes of this definition.
    Affiliate has the same meaning as in 12 U.S.C. 221a(b). For purposes 
of this part, substitute the term ``Federal savings association'' for 
the term ``member bank'' whenever it appears in 12 U.S.C. 221a(b).
    Applicable law means the law of a state or other jurisdiction 
governing your fiduciary relationships, any Federal law governing those 
relationships, the terms of the instrument governing a fiduciary 
relationship, and any court order pertaining to the relationship.
    Fiduciary activities include accepting a fiduciary appointment, 
executing fiduciary-related documents, providing investment advice for a 
fee regarding fiduciary assets, or making discretionary decisions 
regarding investment or distribution of assets.
    Fiduciary officers and employees means the officers and employees of 
a Federal savings association to whom the board of directors or its 
designee has assigned functions involving the exercise of the 
association's fiduciary powers.



                  Subpart A_Obtaining Fiduciary Powers



Sec.  150.70  Must I obtain OCC approval or file a notice before 
I exercise fiduciary powers?

    Except for fiduciary activities subject solely to subpart E, you 
should refer to 12 CFR 5.26 to determine if you must obtain OCC approval 
or file a notice with the OCC before you exercise fiduciary powers. A 
Federal savings association may not exercise fiduciary powers unless it 
obtains prior approval from the OCC to the extent required under 12 CFR 
5.26.

[80 FR 28480, May 18, 2015]



                  Subpart B_Exercising Fiduciary Powers



Sec.  150.130  How may I conduct multi-state operations?

    (a) Conducting fiduciary activities in more than one state. You may 
conduct fiduciary activities in any state, subject to the application 
and notice requirements in Sec.  5.26 of this chapter.
    (b) Serving customers in more than one state. When you conduct 
fiduciary activities in a state:
    (1) You may market your fiduciary services to, and act as a 
fiduciary for, customers located in any state, may act as a fiduciary 
for relationships that include property located in other states, and may 
act as a testamentary trustee for a testator located in other states.
    (2) You may establish or utilize an office in any state to perform 
activities that are ancillary to your fiduciary business.

[76 FR 49003, Aug. 9, 2011, as amended at 80 FR 28480, May 18, 2015]



Sec.  150.135  How do I determine which state's laws apply to my operations?

    (a) The state laws that apply to you by virtue of 12 U.S.C. 1464(n) 
are the laws of the states in which you conduct fiduciary activities. 
For each individual state, you may conduct fiduciary activities in the 
capacity of trustee, executor, administrator, guardian, or in any other 
fiduciary capacity the state permits for its state banks, trust 
companies, or other corporations that compete with Federal savings 
associations in the state.
    (b) For each fiduciary relationship, the state referred to in 12 
U.S.C. 1464(n) is the state in which you conduct fiduciary activities 
for that relationship.



Sec.  150.136  To what extent do state laws apply to my fiduciary operations?

    (a) Application of state law. To enhance safety and soundness and to 
enable Federal savings associations to

[[Page 1046]]

conduct their fiduciary activities in accordance with the best practices 
of thrift institutions in the United States (by efficiently delivering 
fiduciary services to the public free from undue regulatory duplication 
and burden), the OCC intends to give Federal savings associations 
maximum flexibility to exercise their fiduciary powers in accordance 
with a uniform scheme of Federal regulation. Accordingly, Federal 
savings associations may exercise fiduciary powers as authorized under 
Federal law, including this part, without regard to state laws that 
purport to regulate or otherwise affect their fiduciary activities, 
except to the extent provided in 12 U.S.C. 1464(n) (state laws regarding 
scope of fiduciary powers, access to examination reports regarding trust 
activities, deposits of securities, oaths and affidavits, and capital) 
or in paragraph (c) of this section. For purposes of this section, 
``state law'' includes any state statute, regulation, ruling, order, or 
judicial decision.
    (b) Illustrative examples. Examples of state laws that are preempted 
by the HOLA and this section include those regarding:
    (1) Registration and licensing;
    (2) Recordkeeping;
    (3) Advertising and marketing;
    (4) The ability of a Federal savings association conducting 
fiduciary activities to maintain an action or proceeding in state court; 
and
    (5) Fiduciary-related fees.
    (c) State laws that are not preempted. State laws of the following 
types are not preempted to the extent that they only incidentally affect 
the fiduciary operations of Federal savings associations or are 
otherwise consistent with the purposes of paragraph (a) of this section:
    (1) Contract and commercial law;
    (2) Real property law;
    (3) Tort law;
    (4) Criminal law;
    (5) Probate law; and
    (6) Any other law that the OCC, upon review, finds:
    (i) Furthers a vital state interest; and
    (ii) Either has only an incidental effect on fiduciary operations or 
is not otherwise contrary to the purposes expressed in paragraph (a) of 
this section.



Sec.  150.140  Must I adopt and follow written policies and procedures 
in exercising fiduciary powers?

    You must adopt and follow written policies and procedures adequate 
to maintain your fiduciary activities in compliance with applicable law. 
Among other relevant matters, the policies and procedures should 
address, where appropriate, the following areas:
    (a) Your brokerage placement practices.
    (b) Your methods for ensuring that your fiduciary officers and 
employees do not use material inside information in connection with any 
decision or recommendation to purchase or sell any security.
    (c) Your methods for preventing self-dealing and conflicts of 
interest.
    (d) Your selection and retention of legal counsel who is ready and 
available to advise you and your fiduciary officers and employees on 
fiduciary matters.
    (e) Your investment of funds held as fiduciary, including short-term 
investments and the treatment of fiduciary funds awaiting investment or 
distribution.

                   Fiduciary Personnel and Facilities



Sec.  150.150  Who is responsible for the exercise of fiduciary powers?

    The exercise of your fiduciary powers must be managed by or under 
the direction of your board of directors. In discharging its 
responsibilities, the board may assign any function related to the 
exercise of fiduciary powers to any director, officer, employee, or 
committee of directors, officers, or employees.



Sec.  150.160  What personnel and facilities may I use to perform 
fiduciary services?

    You may use your qualified personnel and facilities or an 
affiliate's qualified personnel and facilities to perform services 
related to the exercise of fiduciary powers.



Sec.  150.170  May my other departments or affiliates use fiduciary personnel 
and facilities to perform other services?

    Your other departments or affiliates may use fiduciary officers, 
employees,

[[Page 1047]]

and facilities to perform services unrelated to the exercise of 
fiduciary powers, to the extent not prohibited by applicable law.



Sec.  150.180  May I perform fiduciary services for, or purchase 
fiduciary services from, another association or entity?

    You may perform services related to the exercise of fiduciary powers 
for another association or other entity under a written agreement. You 
may also purchase services related to the exercise of fiduciary powers 
from another association or other entity under a written agreement.



Sec.  150.190  Must fiduciary officers and employees be bonded?

    You must obtain an adequate bond for all fiduciary officers and 
employees.

                      Review of a Fiduciary Account



Sec.  150.200  Must I review a prospective account before I accept it?

    Before accepting a prospective fiduciary account, you must review it 
to determine whether you can properly administer the account.



Sec.  150.210  Must I conduct another review of an account after I accept it?

    After you accept a fiduciary account for which you have investment 
discretion, you must conduct a prompt review of all assets of the 
account to evaluate whether they are appropriate, individually and 
collectively, for the account.



Sec.  150.220  Are any other account reviews required?

    At least once every calendar year, you must conduct a review of all 
assets of each fiduciary account for which you have investment 
discretion. In this review, you must evaluate whether the assets are 
appropriate, individually and collectively, for the account.

                      Custody and Control of Assets



Sec.  150.230  Who must maintain custody or control of assets 
in a fiduciary account?

    You must place assets of fiduciary accounts in the joint custody or 
control of not fewer than two fiduciary officers or employees designated 
for that purpose by the board of directors.



Sec.  150.240  May I hold investments of a fiduciary account off-premises?

    You may hold the investments of a fiduciary account off-premises, if 
this practice is consistent with applicable law, and you maintain 
adequate safeguards and controls.



Sec.  150.245  When is a fiduciary not required to maintain custody 
or control of fiduciary assets?

    If you are deemed a fiduciary based solely on your capacity as 
investment advisor, as that capacity is defined in Sec.  9.101(a) of 
this chapter, and have no other fiduciary capacity as enumerated in 
Sec.  150.30, you are not required to maintain custody or control of 
fiduciary assets as set forth in Sec.  150.220 or Sec.  150.240.

[82 FR 8109, Jan. 23, 2017]



Sec.  150.250  Must I keep fiduciary assets separate from other assets?

    You must keep the assets of fiduciary accounts separate from your 
other assets. You must also keep the assets of each fiduciary account 
separate from all other accounts, or you must identify the investments 
as the property of a particular account, except as provided in Sec.  
150.260.

                 Investing Funds of a Fiduciary Account



Sec.  150.260  How may I invest funds of a fiduciary account?

    (a) General. You must invest funds of a fiduciary account in a 
manner consistent with applicable law.
    (b) Collective investment funds. (1) You may invest funds of a 
fiduciary account in a collective investment fund, including a 
collective investment fund that you have established. In establishing 
and administering such funds, you must comply with 12 CFR 9.18.
    (2) If you must file a document with the OCC under 12 CFR 9.18, the 
OCC may review such documents for compliance with this part and other 
laws and regulations.

[[Page 1048]]

    (3) ``Bank'' and ``national bank'' as used in 12 CFR 9.18 shall be 
deemed to include a Federal savings association.

                Funds Awaiting Investment or Distribution



Sec.  150.290  What must I do with fiduciary funds awaiting investment 
or distribution?

    If you have investment discretion or discretion over distributions 
for a fiduciary account which contains funds awaiting investment or 
distribution, you must ensure that those funds do not remain uninvested 
and undistributed any longer than is reasonable for the proper 
management of the account and consistent with applicable law. You also 
must obtain a rate of return for those funds that is consistent with 
applicable law.



Sec.  150.300  Where may I deposit fiduciary funds awaiting investment 
or distribution?

    (a) Self deposits. You may deposit funds of a fiduciary account that 
are awaiting investment or distribution in your other departments, 
unless prohibited by applicable law.
    (b) Affiliate deposits. You may also deposit funds of a fiduciary 
account that are awaiting investment or distribution with an affiliated 
insured depository institution, unless prohibited by applicable law.



Sec.  150.310  What if the FDIC does not insure the deposits?

    If the FDIC does not insure the entire amount of a self deposit, you 
must set aside collateral as security. If the FDIC does not insure the 
entire amount of an affiliate deposit, you or your affiliate must set 
aside collateral as security. The market value of the collateral must at 
all times equal or exceed the amount of the uninsured fiduciary funds. 
You must place the collateral under the control of appropriate fiduciary 
officers and employees.



Sec.  150.320  What is acceptable collateral for uninsured deposits?

    Any of the following is acceptable collateral for self deposits or 
affiliate deposits under Sec.  150.310:
    (a) Direct obligations of the United States, or other obligations 
fully guaranteed by the United States as to principal and interest.
    (b) Readily marketable securities of the classes in which state-
chartered corporate fiduciaries are permitted to invest fiduciary funds 
under applicable state law.
    (c) Other readily marketable securities as the OCC may determine.
    (d) Surety bonds, to the extent they provide adequate security, 
unless prohibited by applicable law.
    (e) Any other assets that qualify under applicable state law as 
appropriate security for deposits of fiduciary funds.

                      Restrictions on Self Dealing



Sec.  150.330  Are there investments in which I may not invest funds 
of a fiduciary account?

    You may not invest funds of a fiduciary account for which you have 
investment discretion in the following assets, unless authorized by 
applicable law:
    (a) The stock or obligations of, or assets acquired from, you or any 
of your directors, officers, or employees.
    (b) The stock or obligations of, or assets acquired from, your 
affiliates or any of their directors, officers, or employees.
    (c) The stock or obligations of, or assets acquired from, other 
individuals or organizations if you have an interest in the individual 
or organization that might affect the exercise of your best judgment.



Sec.  150.340  May I exercise rights to purchase additional stock 
or fractional shares of my stock or obligations or the stock 
or obligations of my affiliates?

    If the retention of investments in your stock or obligations or the 
stock or obligations of an affiliate in fiduciary accounts is consistent 
with applicable law, you may do either of the following:
    (a) Exercise rights to purchase additional stock (or securities 
convertible into additional stock) when these rights are offered pro 
rata to stockholders.
    (b) Purchase fractional shares to complement fractional shares 
acquired through the exercise of rights or

[[Page 1049]]

through the receipt of a stock dividend resulting in fractional share 
holdings.



Sec.  150.350  May I lend, sell, or transfer assets of a fiduciary account 
if I have an interest in the transaction?

    (a) General restriction. Except as provided in paragraph (b) of this 
section, you may not lend, sell, or otherwise transfer assets of a 
fiduciary account for which you have investment discretion to yourself 
or any of your directors, officers, or employees; to your affiliates or 
any of their directors, officers, or employees; or to other individuals 
or organizations with whom you have an interest that might affect the 
exercise of your best judgment.
    (b) Exceptions--(1) Funds for which you have investment discretion. 
You may lend, sell or otherwise transfer assets of a fiduciary account 
for which you have investment discretion to yourself or any of your 
directors, officers, or employees; to your affiliates or any of their 
directors, officers, or employees; or to other individuals or 
organizations with whom you have an interest that might affect the 
exercise of your best judgment, if you meet one of the following 
conditions:
    (i) The transaction is authorized by applicable law.
    (ii) Legal counsel advises you in writing that you have incurred, in 
your fiduciary capacity, a contingent or potential liability. Upon the 
sale or transfer of assets, you must reimburse the fiduciary account in 
cash in an amount equal to the greater of book or market value of the 
assets.
    (iii) The transaction is permitted under 12 CFR 9.18(b)(8)(iii) for 
defaulted fixed-income investments.
    (iv) The OCC requires you to do so.
    (2) Funds held as trustee. You may make loans of funds held in trust 
to any of your directors, officers, or employees if the funds are held 
in an employee benefit plan and the loan is made in accordance with the 
exemptions found at section 408 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108).



Sec.  150.360  May I make a loan to a fiduciary account that is secured by 
an interest in the assets of the account?

    You may make a loan to a fiduciary account that is secured by an 
interest in the assets of the account, if the transaction is fair to the 
account and is not prohibited by applicable law.



Sec.  150.370  May I sell assets or lend money between fiduciary accounts?

    You may sell assets or lend money between fiduciary accounts, if the 
transaction is fair to both accounts and is not prohibited by applicable 
law.

                    Compensation, Gifts, and Bequests



Sec.  150.380  May I earn compensation for acting in a fiduciary capacity?

    If the amount of your compensation for acting in a fiduciary 
capacity is not set or governed by applicable law, you may charge a 
reasonable fee for your services.



Sec.  150.390  May my officer or employee retain compensation for acting 
as a co-fiduciary?

    You may not permit your officers or employees to retain any 
compensation for acting as a co-fiduciary with you in the administration 
of a fiduciary account, except with the specific approval of your board 
of directors.



Sec.  150.400  May my fiduciary officer or employee accept a gift or bequest?

    You may not permit any fiduciary officer or employee to accept a 
bequest or gift of fiduciary assets, unless the bequest or gift is 
directed or made by a relative of the officer or employee or is 
specifically approved by your board of directors.

                       Recordkeeping Requirements



Sec.  150.410  What records must I keep?

    You must keep adequate records for all fiduciary accounts. For 
example, you must keep documents on the establishment and termination of 
each fiduciary account.



Sec.  150.420  How long must I keep these records?

    You must keep fiduciary records for three years after the 
termination of

[[Page 1050]]

the account or the termination of any litigation relating to the 
account, whichever is later.



Sec.  150.430  Must I keep fiduciary records separate and distinct 
from other records?

    You must keep fiduciary records separate and distinct from your 
other records.

                           Audit Requirements



Sec.  150.440  When do I have to audit my fiduciary activities?

    (a) Annual audit. If you do not use a continuous audit system 
described in paragraph (b) of this section, then you must arrange for a 
suitable audit of all significant fiduciary activities at least once 
during each calendar year.
    (b) Continuous audit. Instead of an annual audit, you may adopt a 
continuous audit system. Under a continuous audit system, you must 
arrange for a discrete audit of each significant fiduciary activity 
(i.e., on an activity-by-activity basis) at an interval commensurate 
with the nature and risk of that activity. Some fiduciary activities may 
receive audits at intervals greater or less than one year, as 
appropriate.



Sec.  150.450  What standards govern the conduct of the audit?

    Auditors must follow generally accepted standards for attestation 
engagements and other standards established by the OCC. An audit must 
ascertain whether your internal control policies and procedures provide 
reasonable assurance of three things:
    (a) You are administering fiduciary activities in accordance with 
applicable law.
    (b) You are properly safeguarding fiduciary assets.
    (c) You are accurately recording transactions in appropriate 
accounts in a timely manner.



Sec.  150.460  Who may conduct an audit?

    Internal auditors, external auditors, or other qualified persons who 
are responsible only to the board of directors, may conduct an audit.



Sec.  150.470  Who directs the conduct of the audit?

    Your fiduciary audit committee directs the conduct of the audit. 
Your fiduciary audit committee may consist of a committee of your 
directors or an audit committee of an affiliate. There are two 
restrictions on who may serve on the committee:
    (a) Your officers and officers of an affiliate who participate 
significantly in administering your fiduciary activities may not serve 
on the audit committee.
    (b) A majority of the members of the audit committee may not serve 
on any committee to which the board of directors has delegated power to 
manage and control your fiduciary activities.



Sec.  150.480  How do I report the results of the audit?

    (a) Annual audit. If you conduct an annual audit, you must note the 
results of the audit (including significant actions taken as a result of 
the audit) in the minutes of the board of directors.
    (b) Continuous audit. If you adopt a continuous audit system, you 
must note the results of all discrete audits conducted since the last 
audit report (including significant actions taken as a result of the 
audits) in the minutes of the board of directors at least once during 
each calendar year.



         Subpart C_Depositing Securities With State Authorities



Sec.  150.490  When must I deposit securities with state authorities?

    You must deposit securities with a state's authorities or, if 
applicable, a Federal Home Loan Bank under Sec.  150.510, if you meet 
all of the following:
    (a) You are located in the state.
    (b) You act as a private or court-appointed trustee.
    (c) The law of the state requires corporations acting in a fiduciary 
capacity to deposit securities with state authorities for the protection 
of private or court trusts.

[[Page 1051]]



Sec.  150.500  How much must I deposit if I administer fiduciary assets 
in more than one state?

    If you administer fiduciary assets in more than one state, you must 
compute the amount of deposit required for each state on the basis of 
fiduciary assets that you administer primarily from offices located in 
that state.



Sec.  150.510  What must I do if state authorities refuse my deposit?

    If state authorities refuse to accept your deposit under Sec.  
150.490, you must deposit the securities with the Federal Home Loan Bank 
of which you are a member. The Federal Home Loan Bank will hold the 
securities for the protection of private or court trusts to the same 
extent as if the securities had been deposited with state authorities.



 Subpart D_Terminating Fiduciary Activities Receivership or Liquidation



Sec.  150.520  What happens if I am placed in receivership 
or voluntary liquidation?

    If the OCC appoints a conservator or receiver, or if you place 
yourself in voluntary liquidation, the receiver, conservator, or 
liquidating agent must promptly close or transfer all fiduciary accounts 
to a substitute fiduciary, in accordance with OCC instructions and the 
orders of the court having jurisdiction.

                      Surrender of Fiduciary Powers



Sec.  150.530  How do I surrender fiduciary powers?

    If you want to surrender your fiduciary powers, you must file a 
certified copy of a resolution of your board of directors evidencing 
that intent. You must file the resolution with the appropriate OCC 
licensing office.



Sec.  150.540  When will the OCC terminate my fiduciary powers?

    If, after appropriate investigation, the OCC is satisfied that you 
have been discharged from all fiduciary duties, the appropriate OCC 
licensing office will issue a written notice indicating that you are no 
longer authorized to exercise fiduciary powers.



Sec.  150.550  May I recover my deposit from state authorities?

    Upon issuance of the OCC written notice under Sec.  150.540, you may 
recover any securities deposited with state authorities, or a Federal 
Home Loan Bank, under subpart C of this part.

                     Revocation of Fiduciary Powers



Sec.  150.560  When may the OCC revoke my fiduciary powers?

    The OCC may revoke your fiduciary powers if it determines that you 
have done any of the following:
    (a) Exercised those fiduciary powers unlawfully or unsoundly.
    (b) Failed to exercise those fiduciary powers for five consecutive 
years.
    (c) Otherwise failed to follow the requirements of this part.



Sec.  150.570  What procedures govern the revocation?

    The procedures for revocation of fiduciary powers are set forth in 
12 U.S.C. 1464(n)(10). The OCC will conduct the hearing required under 
12 U.S.C. 1464(n)(10)(B) under part 109 of this chapter.

    Effective Date Note: At 88 FR 89908, Dec. 28, 2023, Sec.  150.570 
was amended by removing the words ``part 109'' and adding in their place 
the words ``part 19'', effective Apr. 1, 2024.



               Subpart E_Activities Exempt From This Part



Sec.  150.580  When may I conduct fiduciary activities without 
obtaining OCC approval?

    Subject to the requirements of this subpart E, you do not need OCC 
approval under subpart B if you conduct fiduciary activities in the 
following fiduciary capacities:
    (a) Trustee of a trust created or organized in the United States and 
forming part of a stock bonus, pension, or profit-sharing plan 
qualifying for specific tax treatment under section 401(d) of the 
Internal Revenue Code of 1954 (26 U.S.C. 401(d)).
    (b) Trustee or custodian of a Individual Retirement Account within 
the meaning of section 408(a) of the Internal Revenue Code of 1954 (26 
U.S.C. 408(a)).

[[Page 1052]]



Sec.  150.590  What standards must I observe when acting in exempt 
fiduciary capacities?

    You must observe principles of sound fiduciary administration, 
including those related to recordkeeping and segregation of assets.



Sec.  150.600  How may funds be invested when I act in an exempt 
fiduciary capacity?

    If you act in an exempt fiduciary capacity under Sec.  150.580, the 
funds of the fiduciary account may be invested only in the following:
    (a) Your accounts, deposits, obligations, or securities.
    (b) Other assets as the customer may direct, provided you do not 
exercise any investment discretion and do not directly or indirectly 
provide any investment advice for the fiduciary account.



Sec.  150.610  What disclosures must I make when acting in exempt 
fiduciary capacities?

    (a) If you act in an exempt fiduciary capacity under Sec.  150.580 
and fiduciary investments are not limited to accounts or deposits 
insured by the FDIC, you must include the following language in bold 
type on the first page of any contract documents:
    (b) Funds invested pursuant to this agreement are not insured by the 
FDIC merely because the trustee or custodian is a Federal savings 
association the accounts of which are covered by such insurance. Only 
investments in the accounts of a Federal savings association are insured 
by the FDIC, subject to its rules and regulations.



Sec.  150.620  May I receive compensation for acting in exempt 
fiduciary capacities?

    You may receive reasonable compensation.



PART 151_RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR 
SECURITIES TRANSACTIONS--Table of Contents



Sec.
151.10 What does this part do?
151.20 Must I comply with this part?
151.30 What requirements apply to all transactions?
151.40 What definitions apply to this part?

                  Subpart A_Recordkeeping Requirements

151.50 What records must I maintain for securities transactions?
151.60 How must I maintain my records?

                 Subpart B_Content and Timing of Notice

151.70 What type of notice must I provide when I effect a securities 
          transaction for a customer?
151.80 How do I provide a registered broker-dealer confirmation?
151.90 How do I provide a written notice?
151.100 What are the alternate notice requirements?
151.120 May I charge a fee for a notice?

             Subpart C_Settlement of Securities Transactions

151.130 When must I settle a securities transaction?

          Subpart D_Securities Trading Policies and Procedures

151.140 What policies and procedures must I maintain and follow for 
          securities transactions?
151.150 How do my officers and employees file reports of personal 
          securities trading transactions?

    Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).

    Source: 76 FR 49008, Aug. 9, 2011, unless otherwise noted.



Sec.  151.10  What does this part do?

    This part establishes recordkeeping and confirmation requirements 
that apply when a Federal savings association (``you'') effects certain 
securities transactions for customers.



Sec.  151.20  Must I comply with this part?

    (a) General. Except as provided under paragraph (b) of this section, 
you must comply with this part when:
    (1) You effect a securities transaction for a customer.
    (2) You effect a transaction in government securities.
    (3) You effect a transaction in municipal securities and are not 
registered as a municipal securities dealer with the SEC.
    (4) You effect a securities transaction as fiduciary. You also must 
comply with 12 CFR part 150 when you effect such a transaction.
    (b) Exceptions--(1) Small number of transactions. You are not 
required to

[[Page 1053]]

comply with Sec. Sec.  151.50(b) through (d) (recordkeeping) and 
151.140(a) through (c) (policies and procedures), if you effected an 
average of fewer than 500 securities transactions per year for customers 
over the three prior calendar years. You may exclude transactions in 
government securities when you calculate this average.
    (2) Government securities. If you effect fewer than 500 government 
securities brokerage transactions per year, you are not required to 
comply with Sec.  151.50 (recordkeeping) for those transactions. This 
exception does not apply to government securities dealer transactions. 
See 17 CFR 404.4(a).
    (3) Municipal securities. If you are registered with the SEC as a 
``municipal securities dealer,'' as defined in 15 U.S.C. 78c(a)(30) (see 
15 U.S.C. 78o-4), you are not required to comply with this part when you 
conduct municipal securities transactions.
    (4) Foreign branches. You are not required to comply with this part 
when you conduct a transaction at your foreign branch.
    (5) Transactions by registered broker-dealers. You are not required 
to comply with this part for securities transactions effected by a 
registered broker-dealer, if the registered broker-dealer directly 
provides the customer with a confirmation. These transactions include a 
transaction effected by your employee who also acts as an employee of a 
registered broker-dealer (``dual employee'').



Sec.  151.30  What requirements apply to all transactions?

    You must effect all transactions, including transactions excepted 
under Sec.  151.20, in a safe and sound manner. You must maintain 
effective systems of records and controls regarding your customers' 
securities transactions. These systems must clearly and accurately 
reflect all appropriate information and provide an adequate basis for an 
audit.



Sec.  151.40  What definitions apply to this part?

    Asset-backed security means a security that is primarily serviced by 
the cash flows of a discrete pool of receivables or other financial 
assets, either fixed or revolving, that by their terms convert into cash 
within a finite time period. Asset-backed security includes any rights 
or other assets designed to ensure the servicing or timely distribution 
of proceeds to the security holders.
    Common or collective investment fund means any fund established 
under 12 CFR 150.260(b) or 12 CFR 9.18.
    Completion of the transaction means:
    (1) If the customer purchases a security through or from you, except 
as provided in paragraph (2) of this definition, the time the customer 
pays you any part of the purchase price. If payment is made by a 
bookkeeping entry, the time you make the bookkeeping entry for any part 
of the purchase price.
    (2) If the customer purchases a security through or from you and 
pays for the security before you request payment or notify the customer 
that payment is due, the time you deliver the security to or into the 
account of the customer.
    (3) If the customer sells a security through or to you, except as 
provided in paragraph (4) of this definition, the time the customer 
delivers the security to you. If you have custody of the security at the 
time of sale, the time you transfer the security from the customer's 
account.
    (4) If the customer sells a security through or to you and delivers 
the security to you before you request delivery or notify the customer 
that delivery is due, the time you pay the customer or pay into the 
customer's account.
    Customer means a person or account, including an agency, trust, 
estate, guardianship, or other fiduciary account for which you effect a 
securities transaction. Customer does not include a broker or dealer, or 
you when you: act as a broker or dealer; act as a fiduciary with 
investment discretion over an account; are a trustee that acts as the 
shareholder of record for the purchase or sale of securities; or are the 
issuer of securities that are the subject of the transaction.
    Debt security means any security, such as a bond, debenture, note, 
or any

[[Page 1054]]

other similar instrument that evidences a liability of the issuer 
(including any security of this type that is convertible into stock or a 
similar security). Debt security also includes a fractional or 
participation interest in these debt securities. Debt security does not 
include securities issued by an investment company registered under the 
Investment Company Act of 1940, 15 U.S.C. 80a-1, et seq.
    Government security means:
    (1) A security that is a direct obligation of, or an obligation that 
is guaranteed as to principal and interest by, the United States;
    (2) A security that is issued or guaranteed by a corporation in 
which the United States has a direct or indirect interest if the 
Secretary of the Treasury has designated the security for exemption as 
necessary or appropriate in the public interest or for the protection of 
investors;
    (3) A security issued or guaranteed as to principal and interest by 
a corporation if a statute specifically designates, by name, the 
corporation's securities as exempt securities within the meaning of the 
laws administered by the SEC; or
    (4) Any put, call, straddle, option, or privilege on a government 
security described in this definition, other than a put, call, straddle, 
option, or privilege:
    (i) That is traded on one or more national securities exchanges; or
    (ii) For which quotations are disseminated through an automated 
quotation system operated by a registered securities association.
    Investment discretion means the same as under 12 CFR 150.40(a).
    Investment company plan means any plan under which:
    (1) A customer purchases securities issued by an open-end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940, making the payments directly to, or made payable to, the 
registered investment company, or the principal underwriter, custodian, 
trustee, or other designated agent of the registered investment company; 
or
    (2) A customer sells securities issued by an open-end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940 under:
    (i) An individual retirement or individual pension plan qualified 
under the Internal Revenue Code; or
    (ii) A contractual or systematic agreement under which the customer 
purchases at the applicable public offering price, or redeems at the 
applicable redemption price, securities in specified amounts (calculated 
in security units or dollars) at specified time intervals, and stating 
the commissions or charges (or the means of calculating them) that the 
customer will pay in connection with the purchase.
    Municipal security means:
    (1) A security that is a direct obligation of, or an obligation 
guaranteed as to principal or interest by, a state or any political 
subdivision, or any agency or instrumentality of a state or any 
political subdivision.
    (2) A security that is a direct obligation of, or an obligation 
guaranteed as to principal or interest by, any municipal corporate 
instrumentality of one or more states; or
    (3) A security that is an industrial development bond.
    Periodic plan means a written document that authorizes you to act as 
agent to purchase or sell for a customer a specific security or 
securities (other than securities issued by an open end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940). The written document must authorize you to purchase or 
sell in specific amounts (calculated in security units or dollars) or to 
the extent of dividends and funds available, at specific time intervals, 
and must set forth the commission or charges to be paid by the customer 
or the manner of calculating them.
    SEC means the Securities and Exchange Commission.
    Security means any note, stock, treasury stock, bond, debenture, 
certificate of interest or participation in any profit-sharing agreement 
or in any oil, gas, or other mineral royalty or lease, any collateral-
trust certificate, preorganization certificate or subscription, 
transferable share, investment contract, voting-trust certificate, and 
any put, call, straddle, option, or privilege on any security or group 
or index

[[Page 1055]]

of securities (including any interest therein or based on the value 
thereof), or, in general, any instrument commonly known as a 
``security'; or any certificate of interest or participation in, 
temporary or interim certificate for, receipt for, or warrant or right 
to subscribe to or purchase, any of the foregoing.
    Security does not include currency; any note, draft, bill of 
exchange, or banker's acceptance which has a maturity at the time of 
issuance of less than nine months, exclusive of days of grace, or any 
renewal thereof, the maturity of which is likewise limited; a deposit or 
share account in a Federal or state chartered depository institution; a 
loan participation; a letter of credit or other form of bank 
indebtedness incurred in the ordinary course of business; units of a 
collective investment fund; interests in a variable amount (master) note 
of a borrower of prime credit; U.S. Savings Bonds; or any other 
instrument the OCC determines does not constitute a security for 
purposes of this part.
    Sweep account means any prearranged, automatic transfer or sweep of 
funds above a certain dollar level from a deposit account to purchase a 
security or securities, or any prearranged, automatic redemption or sale 
of a security or securities when a deposit account drops below a certain 
level with the proceeds being transferred into a deposit account.

[76 FR 49008, Aug. 9, 2011, as amended at 82 FR 8110, Jan. 23, 2017]



                  Subpart A_Recordkeeping Requirements



Sec.  151.50  What records must I maintain for securities transactions?

    If you effect securities transactions for customers, you must 
maintain all of the following records for at least three years:
    (a) Chronological records. You must maintain an itemized daily 
record of each purchase and sale of securities in chronological order, 
including:
    (1) The account or customer name for which you effected each 
transaction;
    (2) The name and amount of the securities;
    (3) The unit and aggregate purchase or sale price;
    (4) The trade date; and
    (5) The name or other designation of the registered broker-dealer or 
other person from whom you purchased the securities or to whom you sold 
the securities.
    (b) Account records. You must maintain account records for each 
customer reflecting:
    (1) Purchases and sales of securities;
    (2) Receipts and deliveries of securities;
    (3) Receipts and disbursements of cash; and
    (4) Other debits and credits pertaining to transactions in 
securities.
    (c) Memorandum (order ticket). You must make and keep current a 
memorandum (order ticket) of each order or any other instruction given 
or received for the purchase or sale of securities (whether executed or 
not), including:
    (1) The account or customer name for which you effected each 
transaction;
    (2) Whether the transaction was a market order, limit order, or 
subject to special instructions;
    (3) The time the trader received the order;
    (4) The time the trader placed the order with the registered broker-
dealer, or if there was no registered broker-dealer, the time the trader 
executed or cancelled the order;
    (5) The price at which the trader executed the order;
    (6) The name of the registered broker-dealer you used.
    (d) Record of registered broker-dealers. You must maintain a record 
of all registered broker-dealers that you selected to effect securities 
transactions and the amount of commissions that you paid or allocated to 
each registered broker-dealer during each calendar year.
    (e) Notices. You must maintain a copy of the written notice required 
under subpart B of this part.



Sec.  151.60  How must I maintain my records?

    (a) In general. The records required by Sec.  151.50 must clearly 
and accurately reflect the information required and provide an adequate 
basis for the audit

[[Page 1056]]

of the information. Record maintenance may include the use of automated 
or electronic records provided the records are easily retrievable, 
readily available for inspection, and capable of being reproduced in a 
hard copy.
    (b) Use of third party. You may contract with third-party service 
providers to maintain the records required by this section, provided 
that you maintain effective oversight of the third-party vendor to 
ensure records meet the requirements of Sec.  150.50 and this section.

[82 FR 8110, Jan. 23, 2017]



                 Subpart B_Content and Timing of Notice



Sec.  151.70  What type of notice must I provide when I effect 
a securities transaction for a customer?

    If you effect a securities transaction for a customer, you must give 
or send the customer the registered broker-dealer confirmation described 
at Sec.  151.80, or the written notice described at Sec.  151.90. For 
certain types of transactions, you may elect to provide the alternate 
notices described in Sec.  151.100.



Sec.  151.80  How do I provide a registered broker-dealer confirmation?

    (a) If you elect to satisfy Sec.  151.70 by providing the customer 
with a registered broker-dealer confirmation, you must provide the 
confirmation by having the registered broker-dealer send the 
confirmation directly to the customer or by sending a copy of the 
registered broker-dealer's confirmation to the customer within one 
business day after you receive it.
    (b) Unless you have determined remuneration in a written agreement 
with the customer, if you have received or will receive remuneration 
from any source, including the customer, in connection with the 
transaction, you must provide a statement of the source and amount of 
the remuneration in addition to the registered broker-dealer 
confirmation described in paragraph (a) of this section.

[76 FR 49008, Aug. 9, 2011, as amended at 82 FR 8110, Jan. 23, 2017]



Sec.  151.90  How do I provide a written notice?

    If you elect to satisfy Sec.  151.70 by providing the customer a 
written notice, you must give or send the written notice at or before 
the completion of the securities transaction. You must include all of 
the following information in a written notice:
    (a) Your name and the customer's name.
    (b) The capacity in which you acted (for example, as agent).
    (c) The date and time of execution of the securities transaction (or 
a statement that you will furnish this information within a reasonable 
time after the customer's written request), and the identity, price, and 
number of shares or units (or principal amount in the case of debt 
securities) of the security the customer purchased or sold.
    (d) The name of the person from whom you purchased or to whom you 
sold the security, or a statement that you will furnish this information 
within a reasonable time after the customer's written request.
    (e) The amount of any remuneration that you have received or will 
receive from the customer in connection with the transaction unless the 
remuneration paid by the customer is determined under a written 
agreement, other than on a transaction basis.
    (f) The source and amount of any other remuneration you have 
received or will receive in connection with the transaction. If, in the 
case of a purchase, you were not participating in a distribution, or in 
the case of a sale, were not participating in a tender offer, the 
written notice may state whether you have or will receive any other 
remuneration and state that you will furnish the source and amount of 
the other remuneration within a reasonable time after the customer's 
written request.
    (g) That you are not a member of the Securities Investor Protection 
Corporation, if that is the case. This does not apply to a transaction 
in shares of a registered open-end investment company or unit investment 
trust if the customer sends funds or securities directly to, or receives 
funds or securities directly from, the registered open-

[[Page 1057]]

end investment company or unit investment trust, its transfer agent, its 
custodian, or a designated broker or dealer who sends the customer 
either a confirmation or the written notice in this section.
    (h) Additional disclosures. You must provide all of the additional 
disclosures described in the following chart for transactions involving 
certain debt securities:

------------------------------------------------------------------------
                                          You must provide the following
If you effect a transaction involving .   additional information in your
                  . .                          written notice . . .
------------------------------------------------------------------------
(1) A debt security subject to           A statement that the issuer may
 redemption before maturity.              redeem the debt security in
                                          whole or in part before
                                          maturity, that the redemption
                                          could affect the represented
                                          yield, and that additional
                                          redemption information is
                                          available upon request.
(2) A debt security that you effected    (i) The dollar price at which
 exclusively on the basis of a dollar     you effected the transaction;
 price.                                   and
                                         (ii) The yield to maturity
                                          calculated from the dollar
                                          price. You do not have to
                                          disclose the yield to maturity
                                          if:
                                         (A) The issuer may extend the
                                          maturity date of the security
                                          with a variable interest rate;
                                          or
                                         (B) The security is an asset-
                                          backed security that
                                          represents an interest in, or
                                          is secured by, a pool of
                                          receivables or other financial
                                          assets that are subject
                                          continuously to prepayment.
(3) A debt security that you effected    (i) The yield at which the
 on basis of yield.                       transaction, including the
                                          percentage amount and its
                                          characterization (e.g.,
                                          current yield, yield to
                                          maturity, or yield to call).
                                          If you effected the
                                          transaction at yield to call,
                                          you must indicate the type of
                                          call, the call date, and the
                                          call price;
                                         (ii) The dollar price
                                          calculated from that yield;
                                          and
                                         (iii) The yield to maturity and
                                          the represented yield, if you
                                          effected the transaction on a
                                          basis other than yield to
                                          maturity and the yield to
                                          maturity is lower than the
                                          represented yield. You are not
                                          required to disclose this
                                          information if:
                                         (A) The issuer may extend the
                                          maturity date of the security
                                          with a variable interest rate;
                                          or
                                         (B) The security is an asset-
                                          backed security that
                                          represents an interest in, or
                                          is secured by, a pool of
                                          receivables or other financial
                                          assets that are subject
                                          continuously to prepayment.
(4) A debt security that is an asset-    (i) A statement that the actual
 backed security that represents an       yield of the asset-backed
 interest in, or is secured by, a pool    security may vary according to
 of receivables or other financial        the rate at which the
 assets that are subject continuously     underlying receivables or
 to prepayment.                           other financial assets are
                                          prepaid; and
                                         (ii) A statement that you will
                                          furnish information concerning
                                          the factors that affect yield
                                          (including at a minimum
                                          estimated yield, weighted
                                          average life, and the
                                          prepayment assumptions
                                          underlying yield) upon the
                                          customer's written request.
(5) A debt security, other than a        A statement that the security
 government security.                     is unrated by a nationally
                                          recognized statistical rating
                                          organization, if that is the
                                          case.
------------------------------------------------------------------------



Sec.  151.100  What are the alternate notice requirements?

    You may elect to satisfy Sec.  151.70 by providing the alternate 
notices described in the following chart for certain types of 
transactions.

------------------------------------------------------------------------
 If you effect a securities transaction
                 . . .                     Then you may elect to . . .
------------------------------------------------------------------------
(a) For or with the account of a         Give or send to the customer
 customer under a periodic plan, sweep    within five business days
 account, or investment company plan.     after the end of each
                                          quarterly period a written
                                          statement disclosing: (1) Each
                                          purchase and redemption that
                                          you effected for or with, and
                                          each dividend or distribution
                                          that you credited to or
                                          reinvested for, the customer's
                                          account during the period;
                                         (2) The date of each
                                          transaction;
                                         (3) The identity, number, and
                                          price of any securities that
                                          the customer purchased or
                                          redeemed in each transaction;
                                         (4) The total number of shares
                                          of the securities in the
                                          customer's account;
                                         (5) Any remuneration that you
                                          received or will receive in
                                          connection with the
                                          transaction; and
                                         (6) That you will give or send
                                          the registered broker-dealer
                                          confirmation described in Sec.
                                            151.80 or the written notice
                                          described in Sec.   151.90
                                          within a reasonable time after
                                          the customer's written
                                          request.

[[Page 1058]]

 
(b) For or with the account of a         Give or send to the customer
 customer in shares of an open-ended      the written statement
 management company registered under      described at paragraph (a) of
 the Investment Company Act of 1940       this section on a monthly
 that holds itself out as a money         basis. You may not use the
 market fund and attempts to maintain a   alternate notice, however, if
 stable net asset value per share.        you deduct sales loads upon
                                          the purchase or redemption of
                                          shares in the money market
                                          fund.
(c) For an account for which you do not  Give or send to the customer a
 exercise investment discretion, and      written notice at the agreed-
 for which you and the customer have      upon time and with the agreed-
 agreed in writing to an arrangement      upon content, and include a
 concerning the time and content of the   statement that you will
 written notice.                          furnish the registered broker-
                                          dealer confirmation described
                                          in Sec.   151.80 or the
                                          written notice described in
                                          Sec.   151.90 within a
                                          reasonable time after the
                                          customer's written request.
(d) For an account for which you         Give or send the registered
 exercise investment discretion other     broker-dealer confirmation
 than in an agency capacity, excluding    described in Sec.   151.80 or
 common or collective investment funds.   the written notice described
                                          in Sec.   151.90 within a
                                          reasonable time after a
                                          written request by the person
                                          with the power to terminate
                                          the account or, if there is no
                                          such person, any person
                                          holding a vested beneficial
                                          interest in the account.
(e) For an account in which you          Give or send each customer a
 exercise investment discretion in an     written itemized statement
 agency capacity.                         specifying the funds and
                                          securities in your custody or
                                          possession and all debits,
                                          credits, and transactions in
                                          the customer's account. You
                                          must provide this information
                                          to the customer not less than
                                          once every three months. You
                                          must give or send the
                                          registered broker-dealer
                                          confirmation described in Sec.
                                            151.80 or the written notice
                                          described in Sec.   151.90
                                          within a reasonable time after
                                          a customer's written request.
(f) For a common or collective           (1) Give or send to a customer
 investment fund.                         who invests in the fund a copy
                                          of the annual financial report
                                          of the fund, or
                                         (2) Notify the customer that a
                                          copy of the report is
                                          available and that you will
                                          furnish the report within a
                                          reasonable time after a
                                          written request by a person to
                                          whom a regular periodic
                                          accounting would ordinarily be
                                          rendered with respect to each
                                          participating account.
------------------------------------------------------------------------



Sec.  151.120  May I charge a fee for a notice?

    You may not charge a fee for providing a notice required under this 
subpart B, except that you may charge a reasonable fee for the notices 
provided under Sec. Sec.  151.100(a), (d), and (e).



             Subpart C_Settlement of Securities Transactions



Sec.  151.130  When must I settle a securities transaction?

    (a) You may not effect or enter into a contract for the purchase or 
sale of a security that provides for payment of funds and delivery of 
securities later than the latest of:
    (1) The number of business days in the standard settlement cycle 
followed by registered broker dealers in the United States after the 
date of the contract. The number of business days in the standard 
settlement cycle shall be determined by reference to paragraph (a) of 
SEC Rule 15c6-1, 17 CFR 240.15c6-1(a);
    (2) The fourth business day after the contract, if the contract 
involves the sale for cash of securities that are priced after 4:30 p.m. 
Eastern Standard Time on the date the securities are priced and are sold 
by an issuer to an underwriter under a firm commitment underwritten 
offering registered under the Securities Act of 1933, 15 U.S.C. 77a, et 
seq., or are sold by you to an initial purchaser participating in the 
offering;
    (3) Such time as the SEC may specify pursuant to an order of 
exemption in accordance with paragraph (b)(2) of SEC Rule 15c6-1; or
    (4) Such time as the parties expressly agree at the time of the 
transaction. The parties to a contract are deemed to have expressly 
agreed to an alternate date for payment of funds and delivery of 
securities at the time of the transaction for a contract for the sale 
for cash of securities under a firm commitment offering, if the managing 
underwriter and the issuer have agreed to the date for all securities 
sold under

[[Page 1059]]

the offering and the parties to the contract have not expressly agreed 
to another date for payment of funds and delivery of securities at the 
time of the transaction.
    (b) The deadlines in paragraph (a) of this section do not apply to 
the purchase or sale of limited partnership interests that are not 
listed on an exchange or for which quotations are not disseminated 
through an automated quotation system of a registered securities 
association.

[76 FR 49008, Aug. 9, 2011, as amended at 83 FR 26349, June 7, 2018]



          Subpart D_Securities Trading Policies and Procedures



Sec.  151.140  What policies and procedures must I maintain and follow 
for securities transactions?

    If you effect securities transactions for customers, you must 
maintain and follow policies and procedures that meet all of the 
following requirements:
    (a) Your policies and procedures must assign responsibility for the 
supervision of all officers or employees who:
    (1) Transmit orders to, or place orders with, registered broker-
dealers;
    (2) Execute transactions in securities for customers; or
    (3) Process orders for notice or settlement purposes, or perform 
other back office functions for securities transactions that you effect 
for customers. Policies and procedures for personnel described in this 
paragraph (a)(3) must provide supervision and reporting lines that are 
separate from supervision and reporting lines for personnel described in 
paragraphs (a)(1) and (2) of this section.
    (b) Your policies and procedures must provide for the fair and 
equitable allocation of securities and prices to accounts when you 
receive orders for the same security at approximately the same time and 
you place the orders for execution either individually or in 
combination.
    (c) Your policies and procedures must provide for securities 
transactions in which you act as agent for the buyer and seller 
(crossing of buy and sell orders) on a fair and equitable basis to the 
parties to the transaction, where permissible under applicable law.
    (d) Your policies and procedures must require your officers and 
employees to file the personal securities trading reports described at 
Sec.  151.150, if the officer or employee:
    (1) Makes investment recommendations or decisions for the accounts 
of customers;
    (2) Participates in the determination of these recommendations or 
decisions; or
    (3) In connection with their duties, obtains information concerning 
which securities you intend to purchase, sell, or recommend for purchase 
or sale.



Sec.  151.150  How do my officers and employees file reports of 
personal securities trading transactions?

    An officer or employee described in Sec.  151.140(d) must report all 
personal transactions in securities made by or on behalf of the officer 
or employee if he or she has a beneficial interest in the security.
    (a) Contents and filing of report. The officer or employee must file 
the report with you no later than 30 calendar days after the end of each 
calendar quarter. The report must include the following information:
    (1) The date of each transaction, the title and number of shares, 
the interest rate and maturity date (if applicable), and the principal 
amount of each security involved.
    (2) The nature of each transaction (i.e., purchase, sale, or other 
type of acquisition or disposition).
    (3) The price at which each transaction was effected.
    (4) The name of the broker, dealer, or other intermediary effecting 
the transaction.
    (5) The date the officer or employee submitted the report.
    (b) Report not required for certain transactions. Your officer or 
employee is not required to report a transaction if:
    (1) He or she has no direct or indirect influence or control over 
the account for which the transaction was effected or over the 
securities held in that account;
    (2) The transaction was in shares issued by an open-end investment 
company registered under the Investment Company Act of 1940;

[[Page 1060]]

    (3) The transaction was in direct obligations of the government of 
the United States;
    (4) The transaction was in bankers' acceptances, bank certificates 
of deposit, commercial paper or high quality short term debt 
instruments, including repurchase agreements; or
    (5) The officer or employee had an aggregate amount of purchases and 
sales of $10,000 or less during the calendar quarter.
    (c) Alternate report. When you act as an investment adviser to an 
investment company registered under the Investment Company Act of 1940, 
an officer or employee that is an ``access person'' may fulfill his or 
her reporting requirements under this section by filing with you the 
``access person'' personal securities trading report required by SEC 
Rule 17j-1(d), 17 CFR 270.17j-1(d).

                        PARTS 152	154 [RESERVED]



PART 155_ELECTRONIC OPERATIONS OF FEDERAL SAVINGS ASSOCIATIONS--
Table of Contents



Sec.
155.100 Scope.
155.200 Use of electronic means and facilities.
155.210 Requirements for using electronic means and facilities.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).

    Source: 82 FR 8110, Jan. 23, 2017, unless otherwise noted.



Sec.  155.100  Scope.

    This part describes how a Federal savings association may provide 
products and services through electronic means and facilities.



Sec.  155.200  Use of electronic means and facilities.

    (a) General. A Federal savings association may use, or participate 
with others to use, electronic means or facilities to perform any 
function, or provide any product or service, as part of an authorized 
activity. Electronic means or facilities include, but are not limited 
to, automated teller machines, automated loan machines, personal 
computers, the internet, telephones, and other similar electronic 
devices.
    (b) Other. To optimize the use of resources, a Federal savings 
association may market and sell, or participate with others to market 
and sell, electronic capacities and by-products to third-parties, if the 
savings association acquired or developed these capacities and by-
products in good faith as part of providing financial services.



Sec.  155.210  Requirements for using electronic means and facilities.

    To use electronic means and facilities under this subpart, a Federal 
savings association's management must:
    (a) Identify, assess, and mitigate potential risks and establish 
prudent internal controls; and
    (b) Implement security measures designed to ensure secure 
operations. Such measures must be adequate to:
    (1) Prevent unauthorized access to the savings association's records 
and its customers' records;
    (2) Prevent financial fraud through the use of electronic means or 
facilities; and
    (3) Comply with applicable security devices requirements of part 168 
of this chapter.

                           PART 156 [RESERVED]



PART 157_DEPOSITS--Table of Contents



Sec.
157.1 What does this part do?
157.10 What authorities govern the issuance of deposit accounts by a 
          Federal savings association?
157.11 To what extent does Federal law preempt state laws?
157.12-157.13 [Reserved]
157.14 What interest rate may I pay on accounts?
157.15 Who owns a deposit account?
157.20 What records should I maintain on deposit activities?

    Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).

    Source: 76 FR 49025, Aug. 9, 2011, unless otherwise noted.



Sec.  157.1  What does this part do?

    This part applies to the deposit activities of Federal savings 
associations.

[[Page 1061]]



Sec.  157.10  What authorities govern the issuance of deposit accounts 
by Federal savings associations?

    A Federal savings association (``you'') may raise funds through 
accounts and may issue evidence of accounts under section 5(b)(1) of the 
HOLA (12 U.S.C. 1464(b)(1)), your charter, and this part. Additionally, 
12 CFR parts 204 and 230 apply to your deposit activities.



Sec.  157.11  To what extent does Federal law preempt 
deposit-related state laws?

    State law applies to the deposit activities of Federal savings 
associations and their subsidiaries to the same extent and in the same 
manner that those laws apply to national banks and their subsidiaries.



Sec. Sec.  157.12-157.13  [Reserved]



Sec.  157.14  What interest rate may I pay on accounts?

    (a) You may pay interest at any rate or anticipated rate of return 
on accounts, either in deposit or in share form, as provided in your 
charter and the account's terms.
    (b) You may pay fixed or variable rates. If you pay a variable rate, 
you must base it on a schedule, index, or formula that you specify in 
the account's terms.



Sec.  157.15  Who owns a deposit account?

    You may treat the holder of record as the account owner, even if you 
receive contrary notice, until you transfer the account on your records.



Sec.  157.20  What records should I maintain on deposit activities?

    You should establish and maintain deposit documentation practices 
and records that demonstrate that you appropriately administer and 
monitor deposit-related activities. Your records should adequately 
evidence ownership, balances, and all transactions involving each 
account. You may maintain records on deposit activities in any format 
that is consistent with standard business practices.

                        PARTS 158	159 [RESERVED]



PART 160_LENDING AND INVESTMENT--Table of Contents



Sec.
160.1 General.
160.2 Applicability of law.
160.3 Definitions.
160.30 General lending and investment powers of Federal savings 
          associations.
160.31 Election regarding categorization of loans or investments and 
          related calculations.
160.32 Pass-through investments.
160.33 Late charges.
160.34 Prepayments.
160.35 Adjustments to home loans.
160.36 De minimis investments.
160.40 Commercial paper and corporate debt securities.
160.41 Leasing.
160.42 State and local government obligations.
160.43 Foreign assistance investments.
160.60 Suretyship and guaranty.
160.100 Real estate lending standards; purpose and scope.
160.101 Real estate lending standards.
160.110 Most favored lender usury preemption.
160.121 Investment in state housing corporations.
160.130 Prohibition on loan procurement fees.
160.160 Asset classification.
160.170 Records for lending transactions.
160.210 [Reserved]
160.220 [Reserved]

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1701j-3, 1828, 3803, 
3806, 5412(b)(2)(B); 42 U.S.C. 4106.

    Source: 76 FR 49030, Aug. 9, 2011, unless otherwise noted.



Sec.  160.1  General.

    (a) Authority and scope. This part is being issued by the Office of 
the Comptroller of the Currency (OCC) under its general rulemaking and 
supervisory authority under the Home Owners' Loan Act (HOLA), 12 U.S.C. 
1462 et seq.
    (b) General lending standards. Each savings association is expected 
to conduct its lending and investment activities prudently. Each 
association should use lending and investment standards that are 
consistent with safety and soundness, ensure adequate portfolio 
diversification and are appropriate for the size and condition of the 
institution, the nature and scope of its operations, and conditions in 
its lending

[[Page 1062]]

market. Each association should adequately monitor the condition of its 
portfolio and the adequacy of any collateral securing its loans.

[76 FR 49030, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020]



Sec.  160.2  Applicability of law.

    State law applies to the lending activities of Federal savings 
associations and their subsidiaries to the same extent and in the same 
manner that those laws apply to national banks and their subsidiaries.



Sec.  160.3  Definitions.

    For purposes of this part and any determination under 12 U.S.C. 
1467a(m):
    Consumer loans include loans for personal, family, or household 
purposes and loans reasonably incident thereto, and may be made as 
either open-end or closed-end consumer credit (as defined at 12 CFR 
226.2(a)(10) and (20)). Consumer loans do not include credit extended in 
connection with credit card loans, bona fide overdraft loans, and other 
loans that the savings association has designated as made under 
investment or lending authority other than section 5(c)(2)(D) of the 
HOLA.
    Credit card is any card, plate, coupon book, or other single credit 
device that may be used from time to time to obtain credit.
    Credit card account is a credit account established in conjunction 
with the issuance of, or the extension of credit through, a credit card. 
This term includes loans made to consolidate credit card debt, including 
credit card debt held by other lenders, and participation certificates, 
securities and similar instruments secured by credit card receivables.
    Home loans include any loans made on the security of a home 
(including a dwelling unit in a multi-family residential property such 
as a condominium or a cooperative), combinations of homes and business 
property (i.e., a home used in part for business), farm residences, and 
combinations of farm residences and commercial farm real estate.
    Investment grade means a security that meets the creditworthiness 
standards described in 12 U.S.C. 1831e.
    Loan commitment includes a loan in process, a letter of credit, or 
any other commitment to extend credit.
    Real estate loan, for purposes of this part, is a loan for which the 
savings association substantially relies upon a security interest in 
real estate given by the borrower as a condition of making the loan. A 
loan is made on the security of real estate if:
    (1) The security property is real estate pursuant to the law of the 
state in which the property is located;
    (2) The security interest of the Federal savings association may be 
enforced as a real estate mortgage or its equivalent pursuant to the law 
of the state in which the property is located;
    (3) The security property is capable of separate appraisal; and
    (4) With regard to a security property that is a leasehold or other 
interest for a period of years, the term of the interest extends, or is 
subject to extension or renewal at the option of the Federal savings 
association for a term of at least five years following the maturity of 
the loan.
    Small business includes a small business concern or entity as 
defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a), and 
implemented by the regulations of the Small Business Administration at 
13 CFR part 121.
    Small business loans and loans to small businesses include any loan 
to a small business as defined in this section; or a loan that does not 
exceed $2 million (including a group of loans to one borrower) and is 
for commercial, corporate, business, or agricultural purposes.
    Total capital means:
    (1) For a qualifying community banking organization that has elected 
to use the community bank leverage ratio framework, as set forth under 
the OCC's Capital Adequacy Standards at part 3 of this chapter, total 
capital refers to the qualifying community banking organization's tier 1 
capital, as used under Sec.  3.12(b)(2) of this chapter;
    (2) For all other Federal savings associations, total capital means 
the sum of tier 1 capital and tier 2 capital, as calculated under part 3 
of this chapter.

[76 FR 49030, Aug. 9, 2011, as amended at 77 FR 35258, June 13, 2012; 84 
FR 61795, Nov. 13, 2019]

[[Page 1063]]



Sec.  160.30  General lending and investment powers of 
Federal savings associations.

    Pursuant to section 5(c) of the Home Owners' Loan Act (``HOLA''), 12 
U.S.C. 1464(c), a Federal savings association may make, invest in, 
purchase, sell, participate in, or otherwise deal in (including 
brokerage or warehousing) all loans and investments allowed under 
section 5(c) of the HOLA including, without limitation, the following 
loans, extensions of credit, and investments, subject to the limitations 
indicated and any such terms, conditions, or limitations as may be 
prescribed from time to time by the OCC by policy directive, order, or 
regulation:

                   Lending and Investment Powers Chart
------------------------------------------------------------------------
                                                    Statutory investment
                                                         limitations
                                    Statutory         (Endnotes contain
          Category              authorization \1\        applicable
                                                         regulatory
                                                        limitations)
------------------------------------------------------------------------
Bankers' bank stock.........  5(c)(4)(E)..........  Same terms as
                                                     applicable to
                                                     national banks.
Business development credit   5(c)(4)(A)..........  The lesser of .5% of
 corporations.                                       total outstanding
                                                     loans or $250,000.
Commercial loans............  5(c)(2)(A)..........  20% of total assets,
                                                     provided that
                                                     amounts in excess
                                                     of 10% of total
                                                     assets may be used
                                                     only for small
                                                     business loans.
Commercial paper and          5(c)(2)(D)..........  Up to 35% of total
 corporate debt securities.                          assets. \2 3\
Community development loans   5(c)(3)(A)..........  5% of total assets,
 and equity investments.                             provided equity
                                                     investments do not
                                                     exceed 2% of total
                                                     assets. \4\
Construction loans without    5(c)(3)(C)..........  In the aggregate,
 security.                                           the greater of
                                                     total capital or 5%
                                                     of total assets.
Consumer loans..............  5(c)(2)(D)..........  Up to 35% of total
                                                     assets. \2 5\
Credit card loans or loans    5(c)(1)(T)..........  None. \6\
 made through credit card
 accounts.
Deposits in insured           5(c)(1)(G)..........  None. \6\
 depository institutions.
Education loans.............  5(c)(1)(U)..........  None. \6\
Federal government and        5(c)(1)(C),           None. \6\
 government-sponsored          5(c)(1)(D),
 enterprise securities and     5(c)(1)(E),
 instruments.                  5(c)(1)(F).
Finance leasing.............  5(c)(1)(B),           Based on purpose and
                               5(c)(2)(A),           property financed.
                               5(c)(2)(B),           \7\
                               5(c)(2)(D).
Foreign assistance            5(c)(4)(C)..........  1% of total assets.
 investments.                                        \8\
General leasing.............  5(c)(2)(C)..........  10% of assets. \7\
Home improvement loans......  5(c)(1)(J)..........  None. \6\
Home (residential) loans \9\  5(c)(1)(B)..........  None. \6 10\
HUD-insured or guaranteed     5(c)(1)(O)..........  None. \6\
 investments.
Insured loans...............  5(c)(1)(I),           None. \6\
                               5(c)(1)(K).
Liquidity investments.......  5(c)(1)(M)..........  None. \6\
Loans secured by deposit      5(c)(1)(A)..........  None. \6 11\
 accounts.
Loans to financial            5(c)(1)(L)..........  None. \6 12\
 institutions, brokers, and
 dealers.
Manufactured home loans.....  5(c)(1)(J)..........  None. \6 13\
Mortgage-backed securities..  5(c)(1)(R)..........  None. \6\
National Housing Partnership  5(c)(1)(N)..........  None. \6\
 Corporation and related
 partnerships and joint
 ventures.
New markets venture capital   5(c)(4)(F)..........  5% of total capital.
 companies.
Nonconforming loans.........  5(c)(3)(B)..........  5% of total assets.
Nonresidential real property  5(c)(2)(B)..........  400% of total
 loans.                                              capital. \14\
Open-end management           5(c)(1)(Q)..........  None. \6\
 investment companies \15\.
Rural business investment     7 U.S.C. 2009cc-9...  Five percent of
 companies.                                          total capital.
Service corporations........  5(c)(4)(B)..........  3% of total assets,
                                                     as long as any
                                                     amounts in excess
                                                     of 2% of total
                                                     assets further
                                                     community, inner
                                                     city, or community
                                                     development
                                                     purposes. \16\
Small business investment     15 U.S.C. 682(b)(2).  5% of total capital.
 companies.
Small business-related        5(c)(1)(S)..........  None. \6\
 securities.
State and local government    5(c)(1)(H)..........  None for general
 obligations.                                        obligations. Per
                                                     issuer limitation
                                                     of 10% of capital
                                                     for other
                                                     obligations. \6 17\
State housing corporations..  5(c)(1)(P)..........  None. \6 18\

[[Page 1064]]

 
Transaction account loans,    5(c)(1)(A)..........  None. \6 19\
 including overdrafts.
------------------------------------------------------------------------
Endnotes
\1\ All references are to section 5 of the Home Owners' Loan Act (12
  U.S.C. 1464) unless otherwise indicated.
\2\ For purposes of determining a Federal savings association's
  percentage of assets limitation, investment in commercial paper and
  corporate debt securities must be aggregated with the Federal savings
  association's investment in consumer loans.
\3\ A Federal savings association may invest in commercial paper and
  corporate debt securities, which includes corporate debt securities
  convertible into stock, subject to the provisions of Sec.   160.40 of
  this part. Amounts in excess of 30% of assets, in the aggregate, may
  be invested only in obligations purchased by the association directly
  from the original obligor and for which no finder's or referral fees
  have been paid.
\4\ The 2% of assets limitation is a sublimit for investments within the
  overall 5% of assets limitation on community development loans and
  investments. The qualitative standards for such loans and investments
  are set forth in HOLA section 5(c)(3)(A) (formerly 5(c)(3)(B)), as
  explained in an opinion of the Office of Thrift Supervision Chief
  Counsel dated May 10, 1995.
\5\ Amounts in excess of 30% of assets, in the aggregate, may be
  invested only in loans made by the association directly to the
  original obligor and for which no finder's or referral fees have been
  paid. A Federal savings association may include loans to dealers in
  consumer goods to finance inventory and floor planning in the total
  investment made under this section.
\6\ While there is no statutory limit on certain categories of loans and
  investments, including credit card loans, home improvement loans,
  education loans, and deposit account loans, the OCC may establish an
  individual limit on such loans or investments if the association's
  concentration in such loans or investments presents a safety and
  soundness concern.
\7\ A Federal savings association may engage in leasing activities
  subject to the provisions of Sec.   160.41 of this part.
\8\ This 1% of assets limitation applies to the aggregate outstanding
  investments made under the Foreign Assistance Act and in the capital
  of the Inter-American Savings and Loan Bank. Such investments may be
  made subject to the provisions of Sec.   160.43 of this part.
\9\ A home (or residential) loan includes loans secured by one-to-four
  family dwellings, multi-family residential property, and loans secured
  by a unit or units of a condominium or housing cooperative.
\10\ A Federal savings association may make home loans subject to the
  provisions of Sec.  Sec.   160.33, 160.34, and 160.35 of this part.
\11\ Loans secured by savings accounts and other time deposits may be
  made without limitation, provided the Federal savings association
  obtains a lien on, or a pledge of, such accounts. Such loans may not
  exceed the withdrawable amount of the account.
\12\ A Federal savings association may only invest in these loans if
  they are secured by obligations of, or by obligations fully guaranteed
  as to principal and interest by, the United States or any of its
  agencies or instrumentalities, the borrower is a financial institution
  insured by the Federal Deposit Insurance Corporation or is a broker or
  dealer registered with the Securities and Exchange Commission, and the
  market value of the securities for each loan at least equals the
  amount of the loan at the time it is made.
\13\ If the wheels and axles of the manufactured home have been removed
  and it is permanently affixed to a foundation, a loan secured by a
  combination of a manufactured home and developed residential lot on
  which it sits may be treated as a home loan.
\14\ Without regard to any limitations of this part, a Federal savings
  association may make or invest in the fully insured or guaranteed
  portion of nonresidential real estate loans insured or guaranteed by
  the Economic Development Administration, the Farmers Home
  Administration, or the Small Business Administration. Unguaranteed
  portions of guaranteed loans must be aggregated with uninsured loans
  when determining an association's compliance with the 400% of capital
  limitation for other real estate loans.
\15\ This authority is limited to investments in open-end management
  investment companies that are registered with the Securities and
  Exchange Commission under the Investment Company Act of 1940. The
  portfolio of the investment company must be restricted by the
  company's investment policy (changeable only if authorized by
  shareholder vote) solely to investments that a Federal savings
  association may, without limitation as to percentage of assets, invest
  in, sell, redeem, hold, or otherwise deal in. Separate and apart from
  this authority, a Federal savings association may make pass-through
  investments to the extent authorized by Sec.   160.32 of this part.
\16\ A Federal savings association may invest in service corporations
  subject to the provisions of Sec.   5.59 of this chapter.
\17\ This category includes obligations issued by any state, territory,
  or possession of the United States or political subdivision thereof
  (including any agency, corporation, or instrumentality of a state or
  political subdivision), subject to Sec.   160.42 of this part.
\18\ A Federal savings association may invest in state housing
  corporations subject to the provisions of Sec.   160.121 of this part.
\19\ Payments on accounts in excess of the account balance (overdrafts)
  on commercial deposit or transaction accounts shall be considered
  commercial loans for purposes of determining the association's
  percentage of assets limitation.


[76 FR 49030, Aug. 9, 2011, as amended at 80 FR 28480, May 18, 2015]



Sec.  160.31  Election regarding categorization of loans or investments 
and related calculations.

    (a) If a loan or other investment is authorized under more than one 
section of the HOLA, as amended, or this part, a Federal savings 
association may designate under which section the loan or investment has 
been made. Such a loan or investment may be apportioned among 
appropriate categories, and may be moved, in whole or part, from one 
category to another. A loan commitment shall be counted as an investment 
and included in total assets of a Federal savings association for 
purposes of calculating compliance with HOLA section 5(c)'s investment 
limitations only to the extent that funds have been advanced and not 
repaid pursuant to the commitment.
    (b) Loans or portions of loans sold to a third party shall be 
included in the calculation of a percentage-of-assets or percentage-of-
capital investment limitation only to the extent they are sold with 
recourse.

[[Page 1065]]

    (c) A Federal savings association may make a loan secured by an 
assignment of loans to the extent that it could, under applicable law 
and regulations, make or purchase the underlying assigned loans.



Sec.  160.32  Pass-through investments.

    (a) A Federal savings association (``you'') may make pass-through 
investments. A pass-through investment occurs when you invest in an 
entity (``company'') that engages only in activities that you may 
conduct directly and the investment meets the requirements of this 
section. If an investment is authorized under both this section and some 
other provision of law, you may designate under which authority or 
authorities the investment is made. When making a pass-through 
investment, you must comply with all the statutes and regulations that 
would apply if you were engaging in the activity directly. For example, 
your proportionate share of the company's assets will be aggregated with 
the assets you hold directly in calculating investment limits (e.g., no 
more than 400% of total capital may be invested in nonresidential real 
property loans).
    (b) Your pass-through investments are subject to the requirements 
and filing procedures of 12 CFR 5.58.

[76 FR 49030, Aug. 9, 2011, as amended at 80 FR 28480, May 18, 2015]



Sec.  160.33  Late charges.

    A Federal savings association may include in a home loan contract a 
provision authorizing the imposition of a late charge with respect to 
the payment of any delinquent periodic payment. With respect to any loan 
made after July 31, 1976, on the security of a home occupied or to be 
occupied by the borrower, no late charge, regardless of form, shall be 
assessed or collected by a Federal savings association, unless any 
billing, coupon, or notice the Federal savings association may provide 
regarding installment payments due on the loan discloses the date after 
which the charge may be assessed. A Federal savings association may not 
impose a late charge more than one time for late payment of the same 
installment, and any installment payment made by the borrower shall be 
applied to the longest outstanding installment due. A Federal savings 
association shall not assess a late charge as to any payment received by 
it within fifteen days after the due date of such payment. No form of 
such late charge permitted by this paragraph shall be considered as 
interest to the Federal savings association and the Federal savings 
association shall not deduct late charges from the regular periodic 
installment payments on the loan, but must collect them as such from the 
borrower.



Sec.  160.34  Prepayments.

    Any prepayment on a real estate loan must be applied directly to 
reduce the principal balance on the loan unless the loan contract or the 
borrower specifies otherwise. Subject to the terms of the loan contract, 
a Federal savings association may impose a fee for any prepayment of a 
loan.



Sec.  160.35  Adjustments to home loans.

    (a) For any home loan secured by borrower-occupied property, or 
property to be occupied by the borrower, adjustments to the interest 
rate, payment, balance, or term to maturity must comply with the 
limitations of this section and the disclosure and notice requirements 
of 560.210 until superseding regulations are issued by the Consumer 
Financial Protection Bureau.
    (b) Adjustments to the interest rate shall correspond directly to 
the movement of an index satisfying the requirements of paragraph (d) of 
this section. A Federal savings association also may increase the 
interest rate pursuant to a formula or schedule that specifies the 
amount of the increase, the time at which it may be made, and which is 
set forth in the loan contract. A Federal savings association may 
decrease the interest rate at any time.
    (c) Adjustments to the payment and the loan balance that do not 
reflect an interest-rate adjustment may be made if:
    (1) The adjustments reflect a change in an index that may be used 
pursuant to paragraph (d) of this section;
    (2) In the case of a payment adjustment, the adjustment reflects a 
change in the loan balance or is made pursuant

[[Page 1066]]

to a formula, or to a schedule specifying the percentage or dollar 
change in the payment as set forth in the loan contract; or
    (3) In the case of an open-end line-of-credit loan, the adjustment 
reflects an advance taken by the borrower under the line-of-credit and 
is permitted by the loan contract.
    (d)(1) Any index used must be readily available and independently 
verifiable. If set forth in the loan contract, an association may use 
any combination of indices, a moving average of index values, or more 
than one index during the term of a loan.
    (2) Except as provided in paragraph (d)(3) of this section, any 
index used must be a national or regional index.
    (3) A Federal savings association may use an index not satisfying 
the requirements of paragraph (d)(2) of this section 30 days after 
filing a notice unless, within that 30-day period, the OCC has notified 
the association that the notice presents supervisory concerns or raises 
significant issues of law or policy. If the OCC provides such notice to 
the Federal savings association, the Federal savings association may not 
use that index unless it applies for and receives the OCC's prior 
written approval.

[76 FR 49030, Aug. 9, 2011, as amended at 80 FR 28480, May 18, 2015]



Sec.  160.36  De minimis investments.

    A Federal savings association may invest in the aggregate up to the 
greater of 1% of its total capital or $250,000 in community development 
investments of the type permitted for a national bank under 12 CFR part 
24.



Sec.  160.40  Commercial paper and corporate debt securities.

    Pursuant to HOLA section 5(c)(2)(D), a Federal savings association 
may invest in, sell, or hold commercial paper and corporate debt 
securities subject to the provisions of this section.
    (a) Limitations. (1) Commercial paper must be:
    (i) Investment grade as of the date of purchase; or
    (ii) Guaranteed by a company having outstanding paper that meets the 
standard set forth in paragraph (a)(1)(i) of this section.
    (2) Corporate debt securities must be:
    (i) Securities that may be sold with reasonable promptness at a 
price that corresponds reasonably to their fair value; and
    (ii) Investment grade.
    (3) A Federal savings association's total investment in the 
commercial paper and corporate debt securities of any one issuer, or 
issued by any one person or entity affiliated with such issuer, together 
with other loans, shall not exceed the general lending limitations 
contained in Sec.  32.3(a) of this chapter.
    (4) Investments in corporate debt securities convertible into stock 
are subject to the following additional limitations:
    (i) The purchase of securities convertible into stock at the option 
of the issuer is prohibited;
    (ii) At the time of purchase, the cost of such securities must be 
written down to an amount that represents the investment value of the 
securities considered independently of the conversion feature; and
    (iii) Federal savings associations are prohibited from exercising 
the conversion feature.
    (5) A Federal savings association shall maintain information in its 
files adequate to demonstrate that it has exercised prudent judgment in 
making investments under this section.
    (b) Notwithstanding the limitations contained in this section, the 
OCC may permit investment in corporate debt securities of another 
savings association in connection with the purchase or sale of a branch 
office or in connection with a supervisory merger or acquisition.
    (c) Underwriting. Before committing to acquire any investment 
security, a Federal savings association must determine whether the 
investment is safe and sound and suitable for the association. The 
Federal savings association must consider, as appropriate, the interest 
rate, credit, liquidity, price, transaction, and other risks associated 
with the investment activity. The Federal savings association must also 
determine that the issuer has adequate

[[Page 1067]]

resources and the willingness to provide for all required payments on 
its obligations in a timely manner.

[76 FR 49030, Aug. 9, 2011, as amended at 77 FR 35258, June 13, 2012; 77 
FR 37283, June 21, 2012]



Sec.  160.41  Leasing.

    (a) Permissible activities. Subject to the limitations of this 
section, a Federal savings association may engage in leasing activities. 
These activities include becoming the legal or beneficial owner of 
tangible personal property or real property for the purpose of leasing 
such property, obtaining an assignment of a lessor's interest in a lease 
of such property, and incurring obligations incidental to its position 
as the legal or beneficial owner and lessor of the leased property.
    (b) Definitions. For the purposes of this section:
    (1) The term net lease means a lease under which the Federal savings 
association will not, directly or indirectly, provide or be obligated to 
provide for:
    (i) The servicing, repair or maintenance of the leased property 
during the lease term;
    (ii) The purchasing of parts and accessories for the leased 
property, except that improvements and additions to the leased property 
may be leased to the lessee upon its request in accordance with the 
full-payout requirements of paragraph (c)(2)(i) of this section;
    (iii) The loan of replacement or substitute property while the 
leased property is being serviced;
    (iv) The purchasing of insurance for the lessee, except where the 
lessee has failed to discharge a contractual obligation to purchase or 
maintain insurance; or
    (v) The renewal of any license, registration, or filing for the 
property unless such action by the Federal savings association is 
necessary to protect its interest as an owner or financier of the 
property.
    (2) The term full-payout lease means a lease transaction in which 
any unguaranteed portion of the estimated residual value relied on by 
the association to yield the return of its full investment in the leased 
property, plus the estimated cost of financing the property over the 
term of the lease, does not exceed 25% of the original cost of the 
property to the lessor. In general, a lease will qualify as a full-
payout lease if the scheduled payments provide at least 75% of the 
principal and interest payments that a lessor would receive if the 
finance lease were structured as a market-rate loan.
    (3) The term realization of investment means that a Federal savings 
association that enters into a lease financing transaction must 
reasonably expect to realize the return of its full investment in the 
leased property, plus the estimated cost of financing the property over 
the term of the lease from:
    (i) Rentals;
    (ii) Estimated tax benefits, if any; and
    (iii) The estimated residual value of the property at the expiration 
of the term of the lease.
    (c) Finance leasing--(1) Investment limits. A Federal savings 
association may exercise its authority under HOLA sections 5(c)(1)(B) 
(residential real estate loans), 5(c)(2)(A) (commercial, business, 
corporate or agricultural loans), 5(c)(2)(B) (nonresidential real estate 
loans), and 5(c)(2)(D) (consumer loans) by conducting leasing activities 
that are the functional equivalent of loans made under those HOLA 
sections. These activities are commonly referred to as financing leases. 
Such financing leases are subject to the same investment limits that 
apply to loans made under those sections. For example, a financing lease 
of tangible personal property made to a natural person for personal, 
family or household purposes is subject to all limitations applicable to 
the amount of a Federal savings association's investment in consumer 
loans. A financing lease made for commercial, corporate, business, or 
agricultural purposes is subject to all limitations applicable to the 
amount of a Federal savings association's investment in commercial 
loans. A financing lease of residential or nonresidential real property 
is subject to all limitations applicable to the amount of a Federal 
savings association's investment in these types of real estate loans.
    (2) Functional equivalent of lending. To qualify as the functional 
equivalent of a loan:

[[Page 1068]]

    (i) The lease must be a net, full-payout lease representing a non-
cancelable obligation of the lessee, notwithstanding the possible early 
termination of the lease;
    (ii) The portion of the estimated residual value of the property 
relied upon by the lessor to satisfy the requirements of a full-payout 
lease must be reasonable in light of the nature of the leased property 
and all relevant circumstances so that realization of the lessor's full 
investment plus the cost of financing the property depends primarily on 
the creditworthiness of the lessee, and not on the residual market value 
of the leased property; and
    (iii) At the termination of a financing lease, either by expiration 
or default, property acquired must be liquidated or released on a net 
basis as soon as practicable. Any property held in anticipation of re-
leasing must be reevaluated and recorded at the lower of fair market 
value or book value.
    (d) General leasing. Pursuant to section 5(c)(2)(C) of the HOLA, a 
Federal savings association may invest in tangible personal property, 
including vehicles, manufactured homes, machinery, equipment, or 
furniture, for the purpose of leasing that property. In contrast to 
financing leases, lease investments made under this authority need not 
be the functional equivalent of loans.
    (e) Leasing salvage powers. If, in good faith, a Federal savings 
association believes that there has been an unanticipated change in 
conditions that threatens its financial position by significantly 
increasing its exposure to loss, it may:
    (1) As the owner and lessor, take reasonable and appropriate action 
to salvage or protect the value of the property or its interest arising 
under the lease;
    (2) As the assignee of a lessor's interest in a lease, become the 
owner and lessor of the leased property pursuant to its contractual 
right, or take any reasonable and appropriate action to salvage or 
protect the value of the property or its interest arising under the 
lease; or
    (3) Include any provisions in a lease, or make any additional 
agreements, to protect its financial position or investment in the 
circumstances set forth in paragraphs (e)(1) and (e)(2) of this section.



Sec.  160.42  State and local government obligations.

    (a) Pursuant to HOLA section 5(c)(1)(H), a Federal savings 
association may invest in obligations issued by any state, territory, 
possession, or political subdivision thereof (``governmental entity''), 
subject to appropriate underwriting and the following conditions:

------------------------------------------------------------------------
                                       Aggregate          Per-issuer
                                      limitation          limitation
------------------------------------------------------------------------
 (1) General obligations........  None..............  None.
 (2) Other obligations of a       None..............  10% of the
 governmental entity (e.g.,                            institution's
 revenue bonds) if the issuer                          total capital.
 has an adequate capacity to
 meet financial commitments
 under the security for the
 projected life of the asset or
 exposure. An issuer has an
 adequate capacity to meet
 financial commitments if the
 risk of default by the obligor
 is low and the full and timely
 repayment of principal and
 interest is expected.
 (3) Obligations of a             As approved by the  10% of the
 governmental entity that do not   OCC.                institution's
 qualify under any other                               total capital.
 paragraph but are approved by
 the OCC.
------------------------------------------------------------------------

    (b) What is a political subdivision? Political subdivision means a 
county, city, town, or other municipal corporation, a public authority, 
or a publicly-owned entity that is an instrumentality of a state or a 
municipal corporation.
    (c) What is a general obligation of a state or political 
subdivision? A general obligation is an obligation that is guaranteed by 
the full faith and credit of a state or political subdivision that has 
the power to tax. Indirect payments, such as through a special fund, may 
qualify as general obligations if a state or political subdivision with 
taxing authority has unconditionally agreed to provide funds to cover 
payments.
    (d) For all securities, the institution must consider, as 
appropriate, the interest rate, credit, liquidity, price, transaction, 
and other risks associated

[[Page 1069]]

with the investment activity and determine that such investment is 
appropriate for the institution. The institution must also determine 
that the obligor has adequate resources and willingness to provide for 
all required payments on its obligations in a timely manner.

[76 FR 49030, Aug. 9, 2011, as amended at 77 FR 35258, June 13, 2012]



Sec.  160.43  Foreign assistance investments.

    Pursuant to HOLA section 5(c)(4)(C), a Federal savings association 
may make foreign assistance investments in an aggregate amount not to 
exceed one percent of its assets, subject to the following conditions:
    (a) For any investment made under the Foreign Assistance Act, the 
loan agreement shall specify what constitutes an event of default, and 
provide that upon default in payment of principal or interest under such 
agreement, the entire amount of outstanding indebtedness thereunder 
shall become immediately due and payable, at the lender's option. 
Additionally, the contract of guarantee shall cover 100% of any loss of 
investment thereunder, except for any portion of the loan arising out of 
fraud or misrepresentation for which the party seeking payment is 
responsible, and provide that the guarantor shall pay for any such loss 
in U.S. dollars within a specified reasonable time after the date of 
application for payment.
    (b) To make any investments in the share capital and capital reserve 
of the Inter-American Savings and Loan Bank, a Federal savings 
association must be adequately capitalized and have adequate allowances 
for loan and lease losses. The Federal savings association's aggregate 
investment in such capital or capital reserve, including the amount of 
any obligations undertaken to provide said Bank with reserve capital in 
the future (call-able capital), must not, as a result of such 
investment, exceed the lesser of one-quarter of 1% of its assets or 
$100,000.



Sec.  160.60  Suretyship and guaranty.

    Pursuant to section 5(b)(2) of the HOLA, a Federal savings 
association may enter into a repayable suretyship or guaranty agreement, 
subject to the conditions in this section.
    (a) What is a suretyship or guaranty agreement? Under a suretyship, 
a Federal savings association is bound with its principal to pay or 
perform an obligation to a third person. Under a guaranty agreement, a 
Federal savings association agrees to satisfy the obligation of the 
principal only if the principal fails to pay or perform.
    (b) What requirements apply to suretyship and guaranty agreements 
under this section? A Federal savings association may enter into a 
suretyship or guaranty agreement under this section, subject to each of 
the following requirements:
    (1) The Federal savings association must limit its obligations under 
the agreement to a fixed dollar amount and a specified duration.
    (2) The Federal savings association's performance under the 
agreement must create an authorized loan or other investment.
    (3) The Federal savings association must treat its obligation under 
the agreement as a loan to the principal for purposes of 12 CFR 31.2 and 
part 32 of this chapter.
    (4) The Federal savings association must take and maintain a 
perfected security interest in collateral sufficient to cover its total 
obligation under the agreement.
    (c) What collateral is sufficient? (1) The Federal savings 
association must take and maintain a perfected security interest in real 
estate or marketable securities equal to at least 110 percent of its 
obligation under the agreement, except as provided in paragraph (c)(2) 
of this section.
    (i) If the collateral is real estate, the Federal savings 
association must establish the value by a signed appraisal or evaluation 
in accordance with part 34, subpart C of this chapter. In determining 
the value of the collateral, the Federal savings association must factor 
in the value of any existing senior mortgages, liens or other 
encumbrances on the property, except those held by the principal to the 
suretyship or guaranty agreement.
    (ii) If the collateral is marketable securities, the Federal savings 
association must be authorized to invest in

[[Page 1070]]

that security taken as collateral. The Federal savings association must 
ensure that the value of the security is 110 percent of the obligation 
at all times during the term of agreement.
    (2) The Federal savings association may take and maintain a 
perfected security interest in collateral which is at all times equal to 
at least 100 percent of its obligation, if the collateral is:
    (i) Cash;
    (ii) Obligations of the United States or its agencies;
    (iii) Obligations fully guarantied by the United States or its 
agencies as to principal and interest; or
    (iv) Notes, drafts, or bills of exchange or bankers' acceptances 
that are eligible for rediscount or purchase by a Federal Reserve Bank.

[76 FR 49030, Aug. 9, 2011, as amended at 77 FR 37283, June 21, 2012; 79 
FR 28401, May 16, 2014; 85 FR 42643, July 14, 2020]



Sec.  160.100  Real estate lending standards; purpose and scope.

    This section, and Sec.  160.101 of this subpart, issued pursuant to 
section 304 of the Federal Deposit Insurance Corporation Improvement Act 
of 1991, 12 U.S.C. 1828(o), prescribe standards for real estate lending 
to be used by Federal savings associations and all their includable 
subsidiaries, as defined in 12 CFR 3.22(a)(8)(iv) over which the savings 
associations exercise control, in adopting internal real estate lending 
policies.

[76 FR 49030, Aug. 9, 2011, as amended at 79 FR 11313, Feb. 28, 2014; 84 
FR 56376, Oct. 22, 2019]



Sec.  160.101  Real estate lending standards.

    (a) Each Federal savings association shall adopt and maintain 
written policies that establish appropriate limits and standards for 
extensions of credit that are secured by liens on or interests in real 
estate, or that are made for the purpose of financing permanent 
improvements to real estate.
    (b)(1) Real estate lending policies adopted pursuant to this section 
must:
    (i) Be consistent with safe and sound banking practices;
    (ii) Be appropriate to the size of the institution and the nature 
and scope of its operations; and
    (iii) Be reviewed and approved by the savings association's board of 
directors at least annually.
    (2) The lending policies must establish:
    (i) Loan portfolio diversification standards;
    (ii) Prudent underwriting standards, including loan-to-value limits, 
that are clear and measurable;
    (iii) Loan administration procedures for the savings association's 
real estate portfolio; and
    (iv) Documentation, approval, and reporting requirements to monitor 
compliance with the savings association's real estate lending policies.
    (c) Each Federal savings association must monitor conditions in the 
real estate market in its lending area to ensure that its real estate 
lending policies continue to be appropriate for current market 
conditions.
    (d) The real estate lending policies adopted pursuant to this 
section should reflect consideration of the Interagency Guidelines for 
Real Estate Lending Policies established by the Federal bank and thrift 
supervisory agencies.

   Appendix to Sec.  160.101--Interagency Guidelines for Real Estate 
                            Lending Policies

    The agencies' regulations require that each insured depository 
institution adopt and maintain a written policy that establishes 
appropriate limits and standards for all extensions of credit that are 
secured by liens on or interests in real estate or made for the purpose 
of financing the construction of a building or other improvements.\1\ 
These guidelines are intended to assist institutions in the formulation 
and maintenance of a real estate lending policy that is appropriate to 
the size of the institution and the nature and scope of its individual 
operations, as well as satisfies the requirements of the regulation.
---------------------------------------------------------------------------

    \1\ The agencies have adopted a uniform rule on real estate lending. 
See 12 CFR part 365 (FDIC); 12 CFR part 208, subpart C (Board); 12 CFR 
part 34, subpart D and 12 CFR 160.100-160.101 (OCC).
---------------------------------------------------------------------------

    Each institution's policies must be comprehensive, and consistent 
with safe and sound lending practices, and must ensure that the 
institution operates within limits and according to standards that are 
reviewed and approved at least annually by the board of directors. Real 
estate lending is an integral part of many institutions' business plans 
and, when undertaken in a prudent

[[Page 1071]]

manner, will not be subject to examiner criticism.

                Loan Portfolio Management Considerations

    The lending policy should contain a general outline of the scope and 
distribution of the institution's credit facilities and the manner in 
which real estate loans are made, serviced, and collected. In 
particular, the institution's policies on real estate lending should:
     Identify the geographic areas in which the 
institution will consider lending.
     Establish a loan portfolio diversification policy 
and set limits for real estate loans by type and geographic market 
(e.g., limits on higher risk loans).
     Identify appropriate terms and conditions by type 
of real estate loan.
     Establish loan origination and approval 
procedures, both generally and by size and type of loan.
     Establish prudent underwriting standards that are 
clear and measurable, including loan-to-value limits, that are 
consistent with these supervisory guidelines.
     Establish review and approval procedures for 
exception loans, including loans with loan-to-value percentages in 
excess of supervisory limits.
     Establish loan administration procedures, 
including documentation, disbursement, collateral inspection, 
collection, and loan review.
     Establish real estate appraisal and evaluation 
programs.
     Require that management monitor the loan 
portfolio and provide timely and adequate reports to the board of 
directors.
    The institution should consider both internal and external factors 
in the formulation of its loan policies and strategic plan. Factors that 
should be considered include:
     The size and financial condition of the 
institution.
     The expertise and size of the lending staff.
     The need to avoid undue concentrations of risk.
     Compliance with all real estate related laws and 
regulations, including the Community Reinvestment Act, anti-
discrimination laws, and for savings associations, the Qualified Thrift 
Lender test.
     Market conditions.
    The institution should monitor conditions in the real estate markets 
in its lending area so that it can react quickly to changes in market 
conditions that are relevant to its lending decisions. Market supply and 
demand factors that should be considered include:
     Demographic indicators, including population and 
employment trends.
     Zoning requirements.
     Current and projected vacancy, construction, and 
absorption rates.
     Current and projected lease terms, rental rates, 
and sales prices, including concessions.
     Current and projected operating expenses for 
different types of projects.
     Economic indicators, including trends and 
diversification of the lending area.
     Valuation trends, including discount and direct 
capitalization rates.

                         Underwriting Standards

    Prudently underwritten real estate loans should reflect all relevant 
credit factors, including:
     The capacity of the borrower, or income from the 
underlying property, to adequately service the debt.
     The value of the mortgaged property.
     The overall creditworthiness of the borrower.
     The level of equity invested in the property.
     Any secondary sources of repayment.
     Any additional collateral or credit enhancements 
(such as guarantees, mortgage insurance or takeout commitments).
    The lending policies should reflect the level of risk that is 
acceptable to the board of directors and provide clear and measurable 
underwriting standards that enable the institution's lending staff to 
evaluate these credit factors. The underwriting standards should 
address:
     The maximum loan amount by type of property.
     Maximum loan maturities by type of property.
     Amortization schedules.
     Pricing structure for different types of real 
estate loans.
     Loan-to-value limits by type of property.
    For development and construction projects, and completed commercial 
properties, the policy should also establish, commensurate with the size 
and type of the project or property:
     Requirements for feasibility studies and 
sensitivity and risk analyses (e.g., sensitivity of income projections 
to changes in economic variables such as interest rates, vacancy rates, 
or operating expenses).
     Minimum requirements for initial investment and 
maintenance of hard equity by the borrower (e.g., cash or unencumbered 
investment in the underlying property).
     Minimum standards for net worth, cash flow, and 
debt service coverage of the borrower or underlying property.
     Standards for the acceptability of and limits on 
non-amortizing loans.
     Standards for the acceptability of and limits on 
the use of interest reserves.
     Pre-leasing and pre-sale requirements for income-
producing property.
     Pre-sale and minimum unit release requirements 
for non-income-producing property loans.

[[Page 1072]]

     Limits on partial recourse or nonrecourse loans 
and requirements for guarantor support.
     Requirements for takeout commitments.
     Minimum covenants for loan agreements.

                           Loan Administration

    The institution should also establish loan administration procedures 
for its real estate portfolio that address:
     Documentation, including:
    Type and frequency of financial statements, including requirements 
for verification of information provided by the borrower;
    Type and frequency of collateral evaluations (appraisals and other 
estimates of value).
     Loan closing and disbursement.
     Payment processing.
     Escrow administration.
     Collateral administration.
     Loan payoffs.
     Collections and foreclosure, including:
    Delinquency follow-up procedures;
    Foreclosure timing;
    Extensions and other forms of forbearance;
    Acceptance of deeds in lieu of foreclosure.
     Claims processing (e.g., seeking recovery on a 
defaulted loan covered by a government guaranty or insurance program).
     Servicing and participation agreements.

                    Supervisory Loan-to-Value Limits

    Institutions should establish their own internal loan-to-value 
limits for real estate loans. These internal limits should not exceed 
the following supervisory limits:

------------------------------------------------------------------------
                                                          Loan-to-value
                     Loan category                       limit (percent)
------------------------------------------------------------------------
Raw land..............................................                65
Land development......................................                75
Construction:
    Commercial, multifamily,\1\ and other                             80
     nonresidential...................................
    1- to 4-family residential........................                85
Improved property.....................................                85
Owner-occupied 1- to 4-family and home equity.........            ( \2\)
------------------------------------------------------------------------
\1\ Multifamily construction includes condominiums and cooperatives.
\2\ A loan-to-value limit has not been established for permanent
  mortgage or home equity loans on owner-occupied, 1- to 4-family
  residential property. However, for any such loan with a loan-to-value
  ratio that equals or exceeds 90 percent at origination, an institution
  should require appropriate credit enhancement in the form of either
  mortgage insurance or readily marketable collateral.

    The supervisory loan-to-value limits should be applied to the 
underlying property that collateralizes the loan. For loans that fund 
multiple phases of the same real estate project (e.g., a loan for both 
land development and construction of an office building), the 
appropriate loan-to-value limit is the limit applicable to the final 
phase of the project funded by the loan; however, loan disbursements 
should not exceed actual development or construction outlays. In 
situations where a loan is fully cross-collateralized by two or more 
properties or is secured by a collateral pool of two or more properties, 
the appropriate maximum loan amount under supervisory loan-to-value 
limits is the sum of the value of each property, less senior liens, 
multiplied by the appropriate loan-to-value limit for each property. To 
ensure that collateral margins remain within the supervisory limits, 
lenders should redetermine conformity whenever collateral substitutions 
are made to the collateral pool.
    In establishing internal loan-to-value limits, each lender is 
expected to carefully consider the institution-specific and market 
factors listed under ``Loan Portfolio Management Considerations,'' as 
well as any other relevant factors, such as the particular subcategory 
or type of loan. For any subcategory of loans that exhibits greater 
credit risk than the overall category, a lender should consider the 
establishment of an internal loan-to-value limit for that subcategory 
that is lower than the limit for the overall category.
    The loan-to-value ratio is only one of several pertinent credit 
factors to be considered when underwriting a real estate loan. Other 
credit factors to be taken into account are highlighted in the 
``Underwriting Standards'' section above. Because of these other 
factors, the establishment of these supervisory limits should not be 
interpreted to mean that loans at these levels will automatically be 
considered sound.

         Loans in Excess of the Supervisory Loan-to-Value Limits

    The agencies recognize that appropriate loan-to-value limits vary 
not only among categories of real estate loans but also among individual 
loans. Therefore, it may be appropriate in individual cases to originate 
or purchase loans with loan-to-value ratios in excess of the supervisory 
loan-to-value limits, based on the support provided by other credit 
factors. Such loans should be identified in the institutions' records, 
and their aggregate amount reported at least

[[Page 1073]]

quarterly to the institution's board of directors. (see additional 
reporting requirements described under ``Exceptions to the General 
Policy.'') The aggregate amount of all loans in excess of the 
supervisory loan-to-value limits should not exceed 100 percent of total 
capital.\2\ Moreover, within the aggregate limit, total loans for all 
commercial, agricultural, multifamily or other non-1-to-4 family 
residential properties should not exceed 30 percent of total capital. An 
institution will come under increased supervisory scrutiny as the total 
of such loans approaches these levels.
---------------------------------------------------------------------------

    \2\ For the state member banks, the term ``total capital'' means 
``total risk-based capital'' as defined in Appendix A to 12 CFR part 
208. For insured state non-member banks, ``total capital'' refers to 
that term described in table I of Appendix A to 12 CFR part 325. For 
national banks and Federal savings associations, the term ``total 
capital'' is defined at 12 CFR 3.2.
---------------------------------------------------------------------------

    In determining the aggregate amount of such loans, institutions 
should: (a) Include all loans secured by the same property if any one of 
those loans exceeds the supervisory loan-to-value limits; and (b) 
include the recourse obligation of any such loan sold with recourse. 
Conversely, a loan should no longer be reported to the directors as part 
of aggregate totals when reduction in principal or senior liens, or 
additional contribution of collateral or equity (e.g., improvements to 
the real property securing the loan), bring the loan-to-value ratio into 
compliance with supervisory limits.

                          Excluded Transactions

    The agencies also recognize that there are a number of lending 
situations in which other factors significantly outweigh the need to 
apply the supervisory loan-to-value limits.
    These include:
     Loans guaranteed or insured by the U.S. 
government or its agencies, provided that the amount of the guaranty or 
insurance is at least equal to the portion of the loan that exceeds the 
supervisory loan-to-value limit.
     Loans backed by the full faith and credit of a 
state government, provided that the amount of the assurance is at least 
equal to the portion of the loan that exceeds the supervisory loan-to-
value limit.
     Loans guaranteed or insured by a state, municipal 
or local government, or an agency thereof, provided that the amount of 
the guaranty or insurance is at least equal to the portion of the loan 
that exceeds the supervisory loan-to-value limit, and provided that the 
lender has determined that the guarantor or insurer has the financial 
capacity and willingness to perform under the terms of the guaranty or 
insurance agreement.
     Loans that are to be sold promptly after 
origination, without recourse, to a financially responsible third party.
     Loans that are renewed, refinanced, or 
restructured without the advancement of new funds or an increase in the 
line of credit (except for reasonable closing costs), or loans that are 
renewed, refinanced, or restructured in connection with a workout 
situation, either with or without the advancement of new funds, where 
consistent with safe and sound banking practices and part of a clearly 
defined and well-documented program to achieve orderly liquidation of 
the debt, reduce risk of loss, or maximize recovery on the loan.
     Loans that facilitate the sale of real estate 
acquired by the lender in the ordinary course of collecting a debt 
previously contracted in good faith.
     Loans for which a lien on or interest in real 
property is taken as additional collateral through an abundance of 
caution by the lender (e.g., the institution takes a blanket lien on all 
or substantially all of the assets of the borrower, and the value of the 
real property is low relative to the aggregate value of all other 
collateral).
     Loans, such as working capital loans, where the 
lender does not rely principally on real estate as security and the 
extension of credit is not used to acquire, develop, or construct 
permanent improvements on real property.
     Loans for the purpose of financing permanent 
improvements to real property, but not secured by the property, if such 
security interest is not required by prudent underwriting practice.

                Exceptions to the General Lending Policy

    Some provision should be made for the consideration of loan requests 
from creditworthy borrowers whose credit needs do not fit within the 
institution's general lending policy. An institution may provide for 
prudently underwritten exceptions to its lending policies, including 
loan-to-value limits, on a loan-by-loan basis. However, any exceptions 
from the supervisory loan-to-value limits should conform to the 
aggregate limits on such loans discussed above.
    The board of directors is responsible for establishing standards for 
the review and approval of exception loans. Each institution should 
establish an appropriate internal process for the review and approval of 
loans that do not conform to its own internal policy standards. The 
approval of any such loan should be supported by a written justification 
that clearly sets forth all of the relevant credit factors that support 
the underwriting decision. The justification and approval documents for 
such loans should be maintained as a part of the permanent loan

[[Page 1074]]

file. Each institution should monitor compliance with its real estate 
lending policy and individually report exception loans of a significant 
size to its board of directors.

    Supervisory Review of Real Estate Lending Policies and Practices

    The real estate lending policies of institutions will be evaluated 
by examiners during the course of their examinations to determine if the 
policies are consistent with safe and sound lending practices, these 
guidelines, and the requirements of the regulation. In evaluating the 
adequacy of the institution's real estate lending policies and 
practices, examiners will take into consideration the following factors:
     The nature and scope of the institution's real 
estate lending activities.
     The size and financial condition of the 
institution.
     The quality of the institution's management and 
internal controls.
     The expertise and size of the lending and loan 
administration staff.
     Market conditions.
    Lending policy exception reports will also be reviewed by examiners 
during the course of their examinations to determine whether the 
institutions' exceptions are adequately documented and appropriate in 
light of all of the relevant credit considerations. An excessive volume 
of exceptions to an institution's real estate lending policy may signal 
a weakening of its underwriting practices, or may suggest a need to 
revise the loan policy.

                               Definitions

    For the purposes of these Guidelines:
    Construction loan means an extension of credit for the purpose of 
erecting or rehabilitating buildings or other structures, including any 
infrastructure necessary for development.
    Extension of credit or loan means:
    (1) The total amount of any loan, line of credit, or other legally 
binding lending commitment with respect to real property; and
    (2) The total amount, based on the amount of consideration paid, of 
any loan, line of credit, or other legally binding lending commitment 
acquired by a lender by purchase, assignment, or otherwise.
    Improved property loan means an extension of credit secured by one 
of the following types of real property:
    (1) Farmland, ranchland or timberland committed to ongoing 
management and agricultural production;
    (2) 1- to 4-family residential property that is not owner-occupied;
    (3) Residential property containing five or more individual dwelling 
units;
    (4) Completed commercial property; or
    (5) Other income-producing property that has been completed and is 
available for occupancy and use, except income-producing owner-occupied 
1- to 4-family residential property.
    Land development loan means an extension of credit for the purpose 
of improving unimproved real property prior to the erection of 
structures. The improvement of unimproved real property may include the 
laying or placement of sewers, water pipes, utility cables, streets, and 
other infrastructure necessary for future development.
    Loan origination means the time of inception of the obligation to 
extend credit (i.e., when the last event or prerequisite, controllable 
by the lender, occurs causing the lender to become legally bound to fund 
an extension of credit).
    Loan-to-value or loan-to-value ratio means the percentage or ratio 
that is derived at the time of loan origination by dividing an extension 
of credit by the total value of the property(ies) securing or being 
improved by the extension of credit plus the amount of any readily 
marketable collateral and other acceptable collateral that secures the 
extension of credit. The total amount of all senior liens on or 
interests in such property(ies) should be included in determining the 
loan-to-value ratio. When mortgage insurance or collateral is used in 
the calculation of the loan-to-value ratio, and such credit enhancement 
is later released or replaced, the loan-to-value ratio should be 
recalculated.
    Other acceptable collateral means any collateral in which the lender 
has a perfected security interest that has a quantifiable value, and is 
accepted by the lender in accordance with safe and sound lending 
practices. Other acceptable collateral should be appropriately 
discounted by the lender consistent with the lender's usual practices 
for making loans secured by such collateral. Other acceptable collateral 
includes, among other items, unconditional irrevocable standby letters 
of credit for the benefit of the lender.
    Owner-occupied, when used in conjunction with the term 1- to 4-
family residential property means that the owner of the underlying real 
property occupies at least one unit of the real property as a principal 
residence of the owner.
    Readily marketable collateral means insured deposits, financial 
instruments, and bullion in which the lender has a perfected interest. 
Financial instruments and bullion must be salable under ordinary 
circumstances with reasonable promptness at a fair market value 
determined by quotations based on actual transactions, on an auction or 
similarly available daily bid and ask price market. Readily marketable 
collateral should be appropriately discounted by the lender consistent 
with the lender's usual practices for making loans secured by such 
collateral.

[[Page 1075]]

    Value means an opinion or estimate, set forth in an appraisal or 
evaluation, whichever may be appropriate, of the market value of real 
property, prepared in accordance with the agency's appraisal regulations 
and guidance. For loans to purchase an existing property, the term 
``value'' means the lesser of the actual acquisition cost or the 
estimate of value.
    1- to 4-family residential property means property containing fewer 
than five individual dwelling units, including manufactured homes 
permanently affixed to the underlying property (when deemed to be real 
property under state law).

[76 FR 49030, Aug. 9, 2011, as amended at 79 FR 11313, Feb. 28, 2014; 84 
FR 56376, Oct. 22, 2019]



Sec.  160.110  Most favored lender usury preemption for all 
savings associations.

    (a) Definition. The term ``interest'' as used in 12 U.S.C. 1463(g) 
includes any payment compensating a creditor or prospective creditor for 
an extension of credit, making available of a line of credit, or any 
default or breach by a borrower of a condition upon which credit was 
extended. It includes, among other things, the following fees connected 
with credit extension or availability: numerical periodic rates, late 
fees, not sufficient funds (NSF) fees, overlimit fees, annual fees, cash 
advance fees, and membership fees. It does not ordinarily include 
appraisal fees, premiums and commissions attributable to insurance 
guaranteeing repayment of any extension of credit, finders' fees, fees 
for document preparation or notarization, or fees incurred to obtain 
credit reports.
    (b) Authority. A savings association located in a state may charge 
interest at the maximum rate permitted to any state-chartered or 
licensed lending institution by the law of that state. If state law 
permits different interest charges on specified classes of loans, a 
Federal savings association making such loans is subject only to the 
provisions of state law relating to that class of loans that are 
material to the determination of the permitted interest. For example, a 
Federal savings association may lawfully charge the highest rate 
permitted to be charged by a state-licensed small loan company, without 
being so licensed, but subject to state law limitations on the size of 
loans made by small loan companies. State supervisors determine the 
degree to which state-chartered savings associations must comply with 
state laws other than those imposing restrictions on interest, as 
defined in paragraph (a) of this section.
    (c) Effect on state definitions of interest. The Federal definition 
of the term ``interest'' in paragraph (a) of this section does not 
change how interest is defined by the individual states (nor how the 
state definition of interest is used) solely for purposes of state law. 
For example, if late fees are not ``interest'' under state law where a 
savings association is located but state law permits its most favored 
lender to charge late fees, then a savings association located in that 
state may charge late fees to its intrastate customers. The savings 
association may also charge late fees to its interstate customers 
because the fees are interest under the Federal definition of interest 
and an allowable charge under state law where the savings association is 
located. However, the late fees would not be treated as interest for 
purposes of evaluating compliance with state usury limitations because 
state law excludes late fees when calculating the maximum interest that 
lending institutions may charge under those limitations.
    (d) Transferred loans. Interest on a loan that is permissible under 
12 U.S.C. 1463(g)(1) shall not be affected by the sale, assignment, or 
other transfer of the loan.

[76 FR 49030, Aug. 9, 2011, as amended at 85 FR 33536, June 2, 2020]



Sec.  160.121  Investment in state housing corporations.

    (a) Any Federal savings association to the extent it has legal 
authority to do so, may make investments in, commitments to invest in, 
loans to, or commitments to lend to any state housing corporation; 
provided, that such obligations or loans are secured directly, or 
indirectly through a fiduciary, by a first lien on improved real estate 
which is insured under the National Housing Act, as amended, and that in 
the event of default, the holder of such obligations or loans has the 
right directly, or indirectly through a

[[Page 1076]]

fiduciary, to subject to the satisfaction of such obligations or loans 
the real estate described in the first lien, or the insurance proceeds.
    (b) Any Federal savings association that is adequately capitalized 
may, to the extent it has legal authority to do so, invest in 
obligations (including loans) of, or issued by, any state housing 
corporation incorporated in the state in which such savings association 
has its home or a branch office; provided (except with respect to 
loans), that:
    (1) The obligations are investment grade; or
    (2) The obligations are approved by the OCC. The aggregate 
outstanding direct investment in obligations under paragraph (b) of this 
section shall not exceed the amount of the Federal savings association's 
total capital.
    (c) Each state housing corporation in which a savings association 
invests under the authority of paragraph (b) of this section shall 
agree, before accepting any such investment (including any loan or loan 
commitment), to make available at any time to the OCC such information 
as the OCC may consider to be necessary to ensure that investments are 
properly made under this section.

[76 FR 49030, Aug. 9, 2011, as amended at 77 FR 35259, June 13, 2012]



Sec.  160.130  Prohibition on loan procurement fees.

    If you are a director, officer, or other natural person having the 
power to direct the management or policies of a Federal savings 
association, you must not receive, directly or indirectly, any 
commission, fee, or other compensation in connection with the 
procurement of any loan made by the savings association or a subsidiary 
of the savings association.



Sec.  160.160  Asset classification.

    (a)(1) Each savings association must evaluate and classify its 
assets on a regular basis in a manner consistent with, or reconcilable 
to, the asset classification system used by the OCC.
    (2) In connection with the examination of a savings association or 
its affiliates, OCC examiners may identify problem assets and classify 
them, if appropriate. The association must recognize such examiner 
classifications in its subsequent reports to the OCC.
    (b) Based on the evaluation and classification of its assets, each 
savings association shall establish adequate valuation allowances or 
charge-offs, as appropriate, consistent with generally accepted 
accounting principles and the practices of the Federal banking agencies.



Sec.  160.170  Records for lending transactions.

    In establishing and maintaining its records pursuant to Sec.  
163.170 of this chapter, each Federal savings association and service 
corporation should establish and maintain loan documentation practices 
that:
    (a) Ensure that the institution can make an informed lending 
decision and can assess risk on an ongoing basis;
    (b) Identify the purpose and all sources of repayment for each loan, 
and assess the ability of the borrower(s) and any guarantor(s) to repay 
the indebtedness in a timely manner;
    (c) Ensure that any claims against a borrower, guarantor, security 
holders, and collateral are legally enforceable;
    (d) Demonstrate appropriate administration and monitoring of its 
loans; and
    (e) Take into account the size and complexity of its loans.



Sec.  160.210  [Reserved]



Sec.  160.220  [Reserved]



PART 161_DEFINITIONS FOR REGULATIONS AFFECTING ALL SAVINGS ASSOCIATIONS--
Table of Contents



Sec.
161.1 When do the definitions in this part apply?
161.2 Account.
161.3 [Reserved]
161.4 Affiliate.
161.5 Affiliated person.
161.6 [Reserved]
161.7 Appropriate Federal banking agency.
161.8 [Reserved]
161.9 Certificate account.
161.10 Comptroller
161.12 Consumer credit.
161.14 Controlling person.
161.15 Corporation.
161.16 Demand accounts.

[[Page 1077]]

161.18 Director.
161.19 Financial institution.
161.24 Immediate family.
161.26-161.31 [Reserved]
161.33 Note account.
161.34 OCC.
161.35 Officer.
161.37 Parent company; subsidiary.
161.38 Political subdivision.
161.39 [Reserved]
161.40 Public unit.
161.41 [Reserved]
161.42 Savings account.
161.43 Savings association.
161.44 Security.
161.45 [Reserved]
161.50 State.
161.51 [Reserved]
161.52 Tax and loan account.
161.53 United States Treasury General Account.
161.54 United States Treasury Time Deposit Open Account.
161.55 With recourse.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 5412(b)(2)(B).

    Source: 76 FR 49043, Aug. 9, 2011, unless otherwise noted.



Sec.  161.1  When do the definitions in this part apply?

    The definitions in this part and in 12 CFR part 141 apply throughout 
parts 100-199 of this chapter, unless another definition is specifically 
provided.



Sec.  161.2  Account.

    The term account means any savings account, demand account, 
certificate account, tax and loan account, note account, United States 
Treasury general account or United States Treasury time deposit-open 
account, whether in the form of a deposit or a share, held by an 
accountholder in a savings association.



Sec.  161.3  [Reserved]



Sec.  161.4  Affiliate.

    The term affiliate of a savings association, unless otherwise 
defined, means any corporation, business trust, association, or other 
similar organization:
    (a) Of which a savings association, directly or indirectly, owns or 
controls either a majority of the voting shares or more than 50 per 
centum of the number of shares voted for the election of its directors, 
trustees, or other persons exercising similar functions at the preceding 
election, or controls in any manner the election of a majority of its 
directors, trustees, or other persons exercising similar functions; or
    (b) Of which control is held, directly or indirectly through stock 
ownership or in any other manner, by the shareholders of a savings 
association who own or control either a majority of the shares of such 
savings association or more than 50 per centum of the number of shares 
voted for the election of directors of such savings association at the 
preceding election, or by trustees for the benefit of the shareholders 
of any such savings association; or
    (c) Of which a majority of its directors, trustees, or other persons 
exercising similar functions are directors of any one savings 
association.



Sec.  161.5  Affiliated person.

    The term affiliated person of a savings association means the 
following:
    (a) A director, officer, or controlling person of such association;
    (b) A spouse of a director, officer, or controlling person of such 
association;
    (c) A member of the immediate family of a director, officer, or 
controlling person of such association, who has the same home as such 
person or who is a director or officer of any subsidiary of such 
association or of any holding company affiliate of such association;
    (d) Any corporation or organization (other than the savings 
association or a corporation or organization through which the savings 
association operates) of which a director, officer or the controlling 
person of such association:
    (1) Is chief executive officer, chief financial officer, or a person 
performing similar functions;
    (2) Is a general partner;
    (3) Is a limited partner who, directly or indirectly either alone or 
with his or her spouse and the members of his or her immediate family 
who are also affiliated persons of the association, owns an interest of 
10 percent or more in the partnership (based on the value of his or her 
contribution) or who, directly or indirectly with other directors, 
officers, and controlling persons of such association and their spouses 
and their immediate family members who are also affiliated persons of 
the

[[Page 1078]]

association, owns an interest of 25 percent or more in the partnership; 
or
    (4) Directly or indirectly either alone or with his or her spouse 
and the members of his or her immediate family who are also affiliated 
persons of the association, owns or controls 10 percent or more of any 
class of equity securities or owns or controls, with other directors, 
officers, and controlling persons of such association and their spouses 
and their immediate family members who are also affiliated persons of 
the association, 25 percent or more of any class of equity securities; 
and
    (5) Any trust or other estate in which a director, officer, or 
controlling person of such association or the spouse of such person has 
a substantial beneficial interest or as to which such person or his or 
her spouse serves as trustee or in a similar fiduciary capacity.



Sec.  161.6  [Reserved]



Sec.  161.7  Appropriate Federal banking agency.

    The term appropriate Federal banking agency means appropriate 
Federal banking agency as that term is defined in 12 U.S.C. 1813(q).



Sec.  161.8  [Reserved]



Sec.  161.9  Certificate account.

    The term certificate account means a savings account evidenced by a 
certificate that must be held for a fixed or minimum term.



Sec.  161.10  Comptroller.

    The term Comptroller means the Comptroller of the Currency.



Sec.  161.12  Consumer credit.

    The term consumer credit means credit extended to a natural person 
for personal, family, or household purposes, including loans secured by 
liens on real estate and chattel liens secured by mobile homes and 
leases of personal property to consumers that may be considered the 
functional equivalent of loans on personal security: Provided, the 
savings association relies substantially upon other factors, such as the 
general credit standing of the borrower, guaranties, or security other 
than the real estate or mobile home, as the primary security for the 
loan. Appropriate evidence to demonstrate justification for such 
reliance should be retained in a savings association's files. Among the 
types of credit included within this term are consumer loans; 
educational loans; unsecured loans for real property alteration, repair 
or improvement, or for the equipping of real property; loans in the 
nature of overdraft protection; and credit extended in connection with 
credit cards.



Sec.  161.14  Controlling person.

    The term controlling person of a savings association means any 
person or entity which, either directly or indirectly, or acting in 
concert with one or more other persons or entities, owns, controls, or 
holds with power to vote, or holds proxies representing, ten percent or 
more of the voting shares or rights of such savings association; or 
controls in any manner the election or appointment of a majority of the 
directors of such savings association. However, a director of a savings 
association will not be deemed to be a controlling person of such 
savings association based upon his or her voting, or acting in concert 
with other directors in voting, proxies:
    (a) Obtained in connection with an annual solicitation of proxies, 
or
    (b) Obtained from savings account holders and borrowers if such 
proxies are voted as directed by a majority vote of the entire board of 
directors of such association, or of a committee of such directors if 
such committee's composition and authority are controlled by a majority 
vote of the entire board and if its authority is revocable by such a 
majority.



Sec.  161.15  Corporation.

    The terms Corporation and FDIC mean the Federal Deposit Insurance 
Corporation.



Sec.  161.16  Demand accounts.

    The term demand accounts means non-interest-bearing demand deposits 
that are subject to check or to withdrawal or transfer on negotiable or 
transferable order to the savings association and that are permitted to 
be

[[Page 1079]]

issued by statute, regulation, or otherwise and are payable on demand.



Sec.  161.18  Director.

    (a) The term director means any director, trustee, or other person 
performing similar functions with respect to any organization whether 
incorporated or unincorporated. Such term does not include an advisory 
director, honorary director, director emeritus, or similar person, 
unless the person is otherwise performing functions similar to those of 
a director.
    (b) [Reserved]



Sec.  161.19  Financial institution.

    The term financial institution has the same meaning as the term 
depository institution set forth in 12 U.S.C. 1813(c)(1).



Sec.  161.24  Immediate family.

    The term immediate family of any natural person means the following 
(whether by the full or half blood or by adoption):
    (a) Such person's spouse, father, mother, children, brothers, 
sisters, and grandchildren;
    (b) The father, mother, brothers, and sisters of such person's 
spouse; and
    (c) The spouse of a child, brother, or sister of such person.



Sec. Sec.  161.26-161.31  [Reserved]



Sec.  161.33  Note account.

    The term note account means a note, subject to the right of 
immediate call, evidencing funds held by depositories electing the note 
option under applicable United States Treasury Department regulations. 
Note accounts are not savings accounts or savings deposits.



Sec.  161.34  OCC.

    The term OCC means Office of the Comptroller of the Currency.



Sec.  161.35  Officer.

    The term Officer means the president, any vice-president (but not an 
assistant vice-president, second vice-president, or other vice president 
having authority similar to an assistant or second vice-president), the 
secretary, the treasurer, the comptroller, and any other person 
performing similar functions with respect to any organization whether 
incorporated or unincorporated. The term officer also includes the 
chairman of the board of directors if the chairman is authorized by the 
charter or by-laws of the organization to participate in its operating 
management or if the chairman in fact participates in such management.



Sec.  161.37  Parent company; subsidiary.

    The term subsidiary means any company which is owned or controlled 
directly or indirectly by a person, and includes any service corporation 
owned in whole or in part by a savings association, or a subsidiary of 
such service corporation.

[76 FR 49043, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020]



Sec.  161.38  Political subdivision.

    The term political subdivision includes any subdivision of a public 
unit, any principal department of such public unit:
    (a) The creation of which subdivision or department has been 
expressly authorized by state statute,
    (b) To which some functions of government have been delegated by 
state statute, and
    (c) To which funds have been allocated by statute or ordinance for 
its exclusive use and control. It also includes drainage, irrigation, 
navigation, improvement, levee, sanitary, school or power districts and 
bridge or port authorities and other special districts created by state 
statute or compacts between the states. Excluded from the term are 
subordinate or nonautonomous divisions, agencies or boards within 
principal departments.



Sec.  161.39  [Reserved]



Sec.  161.40  Public unit.

    The term public unit means the United States, any state of the 
United States, the District of Columbia, any territory of the United 
States, Puerto Rico, the Virgin Islands, any county, any municipality or 
any political subdivision thereof.

[[Page 1080]]



Sec.  161.41  [Reserved]



Sec.  161.42  Savings account.

    The term savings account means any withdrawable account, except a 
demand account as defined in Sec.  161.16 of this chapter, a tax and 
loan account, a note account, a United States Treasury general account, 
or a United States Treasury time deposit-open account.



Sec.  161.43  Savings association.

    The term savings association means a savings association as defined 
in section 3 of the Federal Deposit Insurance Act, the deposits of which 
are insured by the Corporation. It includes a Federal savings 
association or Federal savings bank, chartered under section 5 of the 
Act, or a building and loan, savings and loan, or homestead association, 
or a cooperative bank (other than a cooperative bank which is a state 
bank as defined in section 3(a)(2) of the Federal Deposit Insurance Act) 
organized and operating according to the laws of the state in which it 
is chartered or organized, or a corporation (other than a bank as 
defined in section 3(a)(1) of the Federal Deposit Insurance Act) that 
the Board of Directors of the Federal Deposit Insurance Corporation and 
the Comptroller jointly determine to be operating substantially in the 
same manner as a savings association.



Sec.  161.44  Security.

    The term security means any non-withdrawable account, note, stock, 
treasury stock, bond, debenture, evidence of indebtedness, certificate 
of interest or participation in any profit-sharing agreement, 
collateral-trust certificate, preorganization certificate or 
subscription, transferable share, investment contract, voting-trust 
certificate, or, in general, any interest or instrument commonly known 
as a security, or any certificate of interest or participation in, 
temporary or interim certificate for, receipt for, guarantee of, or 
warrant or right to subscribe to or purchase, any of the foregoing, 
except that a security shall not include an account or deposit insured 
by the Federal Deposit Insurance Corporation.



Sec.  161.45  [Reserved]



Sec.  161.50  State.

    The term ``State'' means any State of the United States, the 
District of Columbia, any territory of the United States, Puerto Rico, 
Guam, American Samoa, the Trust Territory of the Pacific Islands, the 
Virgin Islands, and the Northern Mariana Islands.

[85 FR 42643, July 14, 2020]



Sec.  161.51  [Reserved]



Sec.  161.52  Tax and loan account.

    The term tax and loan account means an account, the balance of which 
is subject to the right of immediate withdrawal, established for receipt 
of payments of Federal taxes and certain United States obligations. Such 
accounts are not savings accounts or savings deposits.



Sec.  161.53  United States Treasury General Account.

    The term United States Treasury General Account means an account 
maintained in the name of the United States Treasury the balance of 
which is subject to the right of immediate withdrawal, except in the 
case of the closure of the member, and in which a zero balance may be 
maintained. Such accounts are not savings accounts or savings deposits.



Sec.  161.54  United States Treasury Time Deposit Open Account.

    The term United States Treasury Time Deposit Open Account means a 
non-interest-bearing account maintained in the name of the United States 
Treasury which may not be withdrawn prior to the expiration of 30 days' 
written notice from the United States Treasury, or such other period of 
notice as the Treasury may require. Such accounts are not savings 
accounts or savings deposits.



Sec.  161.55  With recourse.

    (a) The term with recourse means, in connection with the sale of a 
loan or a participation interest in a loan, an agreement or arrangement 
under which the purchaser is to be entitled to receive from the seller a 
sum of money or

[[Page 1081]]

thing of value, whether tangible or intangible (including any 
substitution), upon default in payment of any loan involved or any part 
thereof or to withhold or to have withheld from the seller a sum of 
money or anything of value by way of security against default. The 
recourse liability resulting from a sale with recourse shall be the 
total book value of any loan sold with recourse less:
    (1) The amount of any insurance or guarantee against loss in the 
event of default provided by a third party,
    (2) The amount of any loss to be borne by the purchaser in the event 
of default, and
    (3) The amount of any loss resulting from a recourse obligation 
entered on the books and records of the savings association.
    (b) The term with recourse does not include loans or interests 
therein where the agreement of sale provides for the savings association 
directly or indirectly:
    (1) To hold or retain a subordinate interest in a specified 
percentage of the loans or interests; or
    (2) To guarantee against loss up to a specified percentage of the 
loans or interests, which specified percentage shall not exceed ten 
percent of the outstanding balance of the loans or interests at the time 
of sale: Provided, That the savings association designates adequate 
reserves for the subordinate interest or guarantee.
    (c) This definition does not apply for purposes of determining the 
capital adequacy requirements under 12 CFR part 3.

[76 FR 49043, Aug. 9, 2011, as amended at 79 FR 11313, Feb. 28, 2014; 84 
FR 56376, Oct. 22, 2019]



PART 162_ACCOUNTING AND DISCLOSURE STANDARDS--Table of Contents



    Authority: 12 U.S.C. 1463, 5412(b)(2)(B).



Sec.  162.1  Accounting and disclosure standards.

    A Federal savings association shall follow U.S. generally accepted 
accounting principles (GAAP) and the disclosure standards included 
therein when complying with all applicable regulations, unless otherwise 
required by statute, regulation, or the OCC.

[82 FR 8110, Jan. 23, 2017]



PART 163_SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents



                           Subpart A_Accounts

Sec.
163.4 [Reserved]
163.5 Securities: Statement of non-insurance.

                    Subpart B_Operation and Structure

163.27 Advertising.
163.33 Directors, officers, and employees.
163.36 Tying restriction exception.
163.39 [Reserved]
163.47 Pension plans.

                   Subpart C_Securities and Borrowings

163.74 Mutual capital certificates.
163.76 Offers and sales of securities at an office of a Federal savings 
          association.
163.80 Borrowing limitations.

Subparts D-E [Reserved]

                 Subpart F_Financial Management Policies

163.170 Examinations and audits; appraisals; establishment and 
          maintenance of records.
163.171 [Reserved]
163.172 Financial derivatives.
163.176 Interest-rate-risk-management procedures.

                     Subpart G_Reporting and Bonding

163.180 Suspicious Activity Reports and other reports and statements.
163.200 Conflicts of interest.
163.201 Corporate opportunity.

    Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 1467a, 1817, 1820, 
1828, 1831o, 3806, 5101 et seq., 5412(b)(2)(B); 31 U.S.C. 5318; 42 
U.S.C. 4106.

    Source: 76 FR 49047, Aug. 9, 2011, unless otherwise noted.



                           Subpart A_Accounts



Sec.  163.4  [Reserved]



Sec.  163.5  Securities: Statement of non-insurance.

    Every security issued by a Federal savings association must include 
in its provisions a clear statement that the

[[Page 1082]]

security is not insured by the Federal Deposit Insurance Corporation.



                    Subpart B_Operation and Structure



Sec.  163.27  Advertising.

    No Federal savings association shall use advertising (which includes 
print or broadcast media, displays or signs, stationery, and all other 
promotional materials), or make any representation which is inaccurate 
in any particular or which in any way misrepresents its services, 
contracts, investments, or financial condition.



Sec.  163.33  Directors, officers, and employees.

    (a) Directors--(1) Requirements. The composition of the board of 
directors of a Federal savings association must be in accordance with 
the following requirements:
    (i) A majority of the directors must not be salaried officers or 
employees of the savings association or of any subsidiary thereof.
    (ii) Not more than two of the directors may be members of the same 
immediate family.
    (iii) Not more than one director may be an attorney with a 
particular law firm.
    (2) Prospective application. In the case of an association whose 
board of directors does not conform with any requirement set forth in 
paragraph (a)(1) of this section as of October 5, 1983, this paragraph 
(a) shall not prohibit the uninterrupted service, including re-election 
and re-appointment, of any person serving on the board of directors at 
that date.
    (b) [Reserved]



Sec.  163.36  Tying restriction exception.

    For applicable rules, see regulations of the Board of Governors of 
the Federal Reserve System.



Sec.  163.39  [Reserved]



Sec.  163.47  Pension plans.

    (a) General. No Federal savings association or service corporation 
thereof shall sponsor an employee pension plan which, because of 
unreasonable costs or any other reason, could lead to material financial 
loss or damage to the sponsor. For purposes of this section, an employee 
pension plan is defined in section 3(2) of the Employee Retirement 
Income Security Act of 1974, as amended. The prospective obligation or 
liability of a plan sponsor to each plan participant shall be stated in 
or determinable from the plan, and, for a defined benefit plan, shall 
also be based upon an actuarial estimate of future experience under the 
plan.
    (b) Funding. Actuarial cost methods permitted under the Employee 
Retirement Income Security Act of 1974 and the Internal Revenue Code of 
1954, as amended, shall be used to determine plan funding.
    (c) Plan amendment. A plan may be amended to provide reasonable 
annual cost-of-living increases to retired participants: Provided, That
    (1) Any such increase shall be for a period and amount determined by 
the sponsor's board of directors, but in no event shall it exceed the 
annual increase in the Consumer Price Index published by the Bureau of 
Labor Statistics; and
    (2) No increase shall be granted unless:
    (i) Anticipated charges to net income for future periods have first 
been found by such board of directors to be reasonable and are 
documented by appropriate resolution and supporting analysis; and
    (ii) The increase will not reduce the association's regulatory 
capital below its regulatory capital requirement.
    (d) Termination. The plan shall permit the sponsor's board of 
directors and its successors to terminate such plan. Notice of intent to 
terminate shall be filed with the Office of the Comptroller of the 
Currency (OCC) at least 60 days prior to the proposed termination date.
    (e) Records. Each Federal savings association or service corporation 
maintaining a plan not subject to recordkeeping and reporting 
requirements of the Employee Retirement Income Security Act of 1974, and 
the Internal Revenue Code of 1954, as amended, shall establish and 
maintain records containing the following:
    (1) Plan description;
    (2) Schedule of participants and beneficiaries;

[[Page 1083]]

    (3) Schedule of participants and beneficiaries' rights and 
obligations;
    (4) Plan's financial statements; and
    (5) Except for defined contribution plans, an opinion signed by an 
enrolled actuary (as defined by the Employee Retirement Income Security 
Act of 1974) affirming that actuarial assumptions in the aggregate are 
reasonable, take into account the plan's experience and expectations, 
and represent the actuary's best estimate of the plan's projected 
experiences.

[76 FR 49047, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020]



                   Subpart C_Securities and Borrowings



Sec.  163.74  Mutual capital certificates.

    (a) General. No savings association that is in the mutual form shall 
issue mutual capital certificates pursuant to this section or amend the 
terms of such certificates unless it has obtained written approval of 
the appropriate Federal banking agency. No approval shall be granted 
unless the proposed issuance of the mutual capital certificates and the 
form and manner of filing of the application are in accordance with the 
provisions of this section.
    (b) Eligibility Requirements. The appropriate Federal banking agency 
will consider and process an application for approval of the issuance of 
mutual capital certificates pursuant to this section only if the 
issuance is authorized by applicable law and regulation and is not 
inconsistent with any provision of the applicant's charter, constitution 
or bylaws.
    (c) Application form; supporting information. An application for 
approval of the issuance of mutual capital certificates pursuant to this 
section shall be in the form prescribed by the appropriate Federal 
banking agency. Such application and instructions may be obtained from 
the appropriate Federal banking agency. Information and exhibits shall 
be furnished in support of the application in accordance with such 
instructions, setting forth all of the terms and provisions relating to 
the proposed issue and showing that all of the requirements of this 
section have been or will be met.
    (d) Charter amendment. No application for approval of the issuance 
of mutual capital certificates pursuant to this section may be filed 
unless the amendment to the mutual association's charter, constitution 
or bylaws or other actions conferring such authority shall have been 
approved pursuant to the procedures and requirements set forth in the 
mutual association's charter, constitution or bylaws, or as may 
otherwise be required by applicable law.
    (e) Filing requirements. The application for issuance of mutual 
capital certificates shall be publicly filed with the appropriate 
Federal banking agency.
    (f) Supervisory objection. No application or approval of the 
issuance of mutual capital certificates pursuant to this section shall 
be approved if, in the opinion of the appropriate Federal banking 
agency, the policies, condition, or operation of the applicant afford a 
basis for supervisory objection to the application.
    (g) Limitation on offering period. Following the date of the 
approval of the application by the appropriate Federal banking agency, 
the association shall have an offering period of not more than one year 
in which to complete the sale of the mutual capital certificates issued 
pursuant to this section. The appropriate Federal banking agency may in 
its discretion extend such offering period if a written request showing 
good cause for such extension is filed with it not later than 30 days 
before the expiration of such offering period or any extension thereof.
    (h) Reports. Within 30 days after completion of the sale of mutual 
capital certificates issued pursuant to this section, the association 
shall transmit to the appropriate Federal banking agency a written 
report stating the total dollar amount of securities sold, and the 
amount of net proceeds received by the association, and within 90 days 
it shall transmit a written report stating the number of purchasers.
    (i) Requirements as to mutual capital certificates--(1) Form of 
certificate. Each mutual capital certificate and any governing agreement 
evidencing a mutual capital certificate issued by an association 
pursuant to this section:

[[Page 1084]]

    (i) Shall bear on its face, in bold-face type, the following legend: 
``This security is not a savings account or a deposit and it is not 
insured by the United States or any agency or fund of the United 
States''; and
    (ii) Shall clearly state that the certificate is subject to the 
requirements of Sec.  163.74(i)(2).
    (2) Legal requirements. Mutual capital certificates issued pursuant 
to this section shall:
    (i) Be subordinate to all claims against the association having the 
same priority as savings accounts, savings certificates, debt 
obligations or any higher priority;
    (ii) Not be eligible for use as collateral for any loan made by the 
issuing association;
    (iii) Constitute a claim in liquidation not exceeding the face value 
plus accrued dividends of the certificates, on the general reserves, 
surplus and undivided profits of the association remaining after the 
payment in full of all savings accounts, savings certificates and debt 
obligations;
    (iv) Be entitled to the payment of dividends, which may be fixed, 
variable, participating, or cumulative, or any combination thereof, only 
if, when and as declared by the association's board of directors out of 
funds legally available for that purpose, provided that no dividend may 
be declared or paid without the approval of the appropriate Federal 
banking agency if such payment would cause the association to fail to 
meet its regulatory capital requirements under 12 CFR part 3 if a 
Federal savings association, or 12 CFR part 324 or part 390, subpart Z, 
as applicable, if a state savings association, and provided further that 
no dividend may be paid if such payment would constitute a violation of 
12 U.S.C. 1828(b);
    (v) Not be redeemable, except: where the dollar weighted average 
term of each issue of mutual capital certificates to be redeemed is 
seven years or more and redemption is to be made pursuant to a 
redemption schedule; in the event of a merger, consolidation or 
reorganization approved by the appropriate Federal banking agency; or 
where the funds for redemption are raised by the issuance of mutual 
capital certificates approved pursuant to this section, or in 
conjunction with the issuance of capital stock pursuant to part 192 of 
this chapter: Provided, that mandatory redemption shall not be required; 
that mutual capital certificates shall not be redeemable on the demand 
or at the option of the holder; and that mutual capital certificates 
shall not receive, benefit from, be credited with or otherwise be 
entitled to or due payments in or for redemption if such payments would 
cause the association to fail to meet its regulatory capital 
requirements under 12 CFR part 3 if a Federal savings association, or 12 
CFR part 324 or part 390, subpart Z, as applicable, if a state savings 
association; And Provided further, for the purposes of this paragraph 
(i)(2)(v), the ``dollar weighted average term'' of an issue of mutual 
capital certificates shall be the sum of the products calculated for 
each year that the mutual capital certificates in the issue have been 
redeemed or are scheduled to be redeemed. Each product shall be 
calculated by multiplying the number of years of each mutual capital 
certificate of a given term by a fraction, the numerator of which shall 
be the total dollar amount of each mutual capital certificate in the 
issue with the same term and the denominator of which shall be the total 
dollar amount of mutual capital certificates in the entire issue;
    (vi) Not have preemptive rights;
    (vii) Not have voting rights, except that an association may provide 
for voting rights if:
    (A) The savings association fails to pay dividends for a minimum of 
three consecutive dividend periods, and then the holders of the class or 
classes of mutual capital certificates granted such voting rights, and 
voting as a single class, with one vote for each outstanding 
certificate, may elect by a majority vote a maximum of one-third of the 
association's board of directors, the directors so elected to serve 
until the next annual meeting of the association succeeding the payment 
of all current and past dividends;
    (B) Any merger, consolidation, or reorganization (except in a 
supervisory case) is sought to be authorized, where the issuing 
association is not the survivor, provided that the regulatory

[[Page 1085]]

capital of the resulting association available for payment of any class 
of mutual capital certificate on liquidation is less than the regulatory 
capital available for such class prior to the merger, consolidation, or 
reorganization;
    (C) Action is sought to be authorized which would create any class 
of mutual capital certificates having a preference or priority over an 
outstanding class or classes of mutual capital certificates;
    (D) Any action is sought to be authorized which would adversely 
change the specific terms of any class of mutual capital certificates;
    (E) Action is sought to be authorized which would increase the 
number of a class of mutual capital certificates, or the number of a 
class of mutual capital certificates ranking prior to or on parity with 
another class of mutual capital certificates; or
    (F) Action is sought which would authorize the issuance of an 
additional class or classes of mutual capital certificates without the 
association having met specific financial standards;
    (viii) Not constitute an obligation of the association and shall 
confer no rights which would give rise to any claim of or action for 
default;
    (ix) Not be convertible into any account, security, or interest, 
except that mutual capital certificates may be surrendered in exchange 
for preferred stock issued in connection with the conversion of the 
issuing savings association to the stock form pursuant to part 192 of 
this chapter, provided that the preferred stock shall have substantially 
the same voting rights, designations, preferences and relative, 
participating optional, or other special rights, and qualifications, 
limitations, and restrictions, as the mutual capital certificates 
exchanged for the preferred stock.
    (x) Provide for charging of losses after the exhaustion of all other 
items in the regulatory capital account.

[76 FR 49047, Aug. 9, 2011, as amended at 79 FR 11314, Feb. 28, 2014; 84 
FR 56376, Oct. 22, 2019]



Sec.  163.76  Offers and sales of securities at an office 
of a Federal savings association.

    (a) A Federal saving association may not offer or sell debt or 
equity securities issued by the association or an affiliate of the 
association at an office of the association; except that equity 
securities issued by the association or an affiliate in connection with 
the association's conversion from the mutual to stock form of 
organization in a conversion approved pursuant to part 192 of this 
chapter may be offered and sold at the association's offices: Provided, 
That:
    (1) The OCC does not object on supervisory grounds to the offer and 
sale of the securities at the offices of the association;
    (2) No commissions, bonuses, or comparable payments are paid to any 
employee of the savings association or its affiliates or to any other 
person in connection with the sale of securities at an office of a 
savings association; except that compensation and commissions consistent 
with industry norms may be paid to securities personnel of registered 
broker-dealers;
    (3) No offers or sales are made by tellers or at the teller counter, 
or by comparable persons at comparable locations;
    (4) Sales activity is conducted in a segregated or separately 
identifiable area of the savings association's offices apart from the 
area accessible to the general public for the purposes of making or 
withdrawing deposits;
    (5) Offers and sales are made only by regular, full-time employees 
of the savings association or by securities personnel who are subject to 
supervision by a registered broker-dealer;
    (6) An acknowledgment, in the form set forth in paragraph (c) of 
this section, is signed by any customer to whom the security is sold in 
the savings association's offices prior to the sale of any such 
securities;
    (7) A legend that the security is not a deposit or account and is 
not Federally insured or guaranteed appears conspicuously on the 
security and in all offering documents and advertisements for the 
securities; the legend must state in bold or other prominent type at 
least as large as other textual type

[[Page 1086]]

in the document that ``This security is not a deposit or account and is 
not Federally insured or guaranteed''; and
    (8) The savings association will be in compliance with its current 
capital requirements upon completion of the conversion stock offering.
    (b) Securities sales practices, advertisements, and other sales 
literature used in connection with offers and sales of securities by 
Federal savings associations shall be subject to Sec.  16.32 of this 
chapter.
    (c) Offers and sales of securities of a savings association or its 
affiliates in any office of the savings association must use a one-page, 
unambiguous, certification in substantially the following form:

                          FORM OF CERTIFICATION

    I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS 
NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY [insert name of savings 
association] OR BY THE FEDERAL GOVERNMENT.
    If anyone asserts that this security is Federally insured or 
guaranteed, or is as safe as an insured deposit, I should call the 
Office of the Comptroller of the Currency.
    I further certify that, before purchasing the [description of 
security being offered] of [name of issuer, name of savings association 
and affiliation to issuer (if different)], I received an offering 
circular.
    The offering circular that I received contains disclosure concerning 
the nature of the security being offered and describes the risks 
involved in the investment, including:
    [List briefly the principal risks involved and cross reference 
certain specified pages of the offering circular where a more complete 
description of the risks is made.]

Signature:______________________________________________________________
Date:___________________________________________________________________

    (d) For purposes of this section, an ``office'' of an association 
means any premises used by the association that are identified to the 
public through advertising or signage using the association's name, 
trade name, or logo.

[76 FR 49047, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020]



Sec.  163.80  Borrowing limitations.

    (a) General. Except as the appropriate Federal banking agency 
otherwise may permit by advice in writing, a savings association may 
borrow only in accordance with the provisions of this section.
    (b) Amount of borrowing. A savings association may borrow up to the 
amount authorized by the laws under which the savings association 
operates.
    (c) Security. An association may give security for borrowings 
subject to any requirements imposed by the appropriate Federal banking 
agency or the Federal Deposit Insurance Corporation (FDIC) regarding 
notice of default on borrowings and any FDIC right of first refusal to 
purchase collateral.
    (d) Required statement for all securities evidencing outside 
borrowings. Each security shall bear on its face, in a prominent place, 
the following legend:
    This security is not a savings account or a deposit and it is not 
insured by the United States or any agency or fund of the United States.
    (e) Filing requirements for outside borrowings with maturities in 
excess of one year. (1) Unless the savings association meets its capital 
requirement under 12 CFR part 3 if a Federal savings association or 12 
CFR part 324 or part 390, subpart Z, as applicable, if a state savings 
association it shall, at least ten business days prior to issuance, file 
a notice of intent to issue securities evidencing such borrowings with 
the appropriate OCC licensing office if a Federal savings association, 
or with the appropriate regional director of the FDIC if a state savings 
association. Such notice shall contain a summary of the items of the 
security, including:
    (i) Principal amount of the securities;
    (ii) Anticipated interest rate range and price range at which the 
securities are to be sold;
    (iii) Minimum denomination;
    (iv) Stated and average effective maturity;
    (v) Mandatory and optional prepayment provisions;
    (vi) Description, amount, and maintenance of collateral if any;
    (vii) Trustee provisions if any;
    (viii) Events of default and remedies of default;
    (ix) Any provisions which restrict, conditionally or otherwise, the 
operations of the association.
    (2) The appropriate Federal banking agency shall have 10 business 
days

[[Page 1087]]

after receipt of such filing to object to the issuance of such 
securities. The appropriate Federal banking agency shall object if the 
terms or covenants of the proposed issue place unreasonable burdens on, 
or control over, the operations of the association. If no objection is 
taken, the savings association shall have 120 calendar days within which 
to issue such securities.
    (f) Note accounts. For purposes of this section, note accounts are 
not borrowings.

[76 FR 49047, Aug. 9, 2011, as amended at 79 FR 11314, Feb. 28, 2014; 84 
FR 56376, Oct. 22, 2019; 85 FR 42643, July 14, 2020]

Subparts D-E [Reserved]



                 Subpart F_Financial Management Policies



Sec.  163.170  Examinations and audits; appraisals; establishment 
and maintenance of records.

    (a) Examinations and audits. Each Federal savings association and 
affiliate thereof shall be examined periodically, and may be examined at 
any time, by the OCC, with appraisals when deemed advisable, in 
accordance with general policies from time to time established by the 
OCC. The costs, as computed by the OCC, of any examinations made by it, 
including office analysis, overhead, per diem, travel expense, other 
supervision by the OCC, and other indirect costs, shall be paid by the 
savings associations examined, except that in the case of service 
corporations of Federal savings associations the cost of examinations, 
as determined by the OCC, shall be paid by the service corporations. 
Payments shall be made in accordance with a schedule of annual 
assessments based upon each savings association's total assets and of 
rates for examiner time in amounts determined by the OCC.
    (b) Appraisals. (1) Unless otherwise ordered by the OCC, appraisal 
of real estate by the OCC in connection with any examination or audit of 
a savings association, affiliate, or service corporation shall be made 
by an appraiser, or by appraisers, selected by the OCC. The cost of such 
appraisal shall promptly be paid by such savings association, affiliate, 
or service corporation direct to such appraiser or appraisers upon 
receipt by the savings association, affiliate, or service corporation of 
a statement of such cost as approved by the OCC. A copy of the report of 
each appraisal made by the OCC pursuant to any of the foregoing 
provisions of this section shall be furnished to the savings 
association, affiliate, or service corporation, as appropriate within a 
reasonable time, not to exceed 90 days, following the completion of such 
appraisals and the filing of a report thereof by the appraiser, or 
appraisers, with the OCC.
    (2) The OCC may obtain at any time, at its expense, such appraisals 
of any of the assets, including the security therefore, of a savings 
association, affiliate, or service corporation as the OCC deems 
appropriate.
    (c) Establishment and maintenance of records. To enable the OCC to 
examine Federal savings associations and affiliates and audit savings 
associations, affiliates, and service corporations pursuant to the 
provisions of paragraph (a) of this section, each savings association, 
affiliate, and service corporation shall establish and maintain such 
accounting and other records as will provide an accurate and complete 
record of all business it transacts. This includes, without limitation, 
establishing and maintaining such other records as are required by 
statute or any other regulation to which the savings association, 
affiliate, or service corporation is subject. The documents, files, and 
other material or property comprising said records shall at all times be 
available for such examination and audit wherever any of said records, 
documents, files, material, or property may be.
    (d) Change in location of records. A Federal savings association 
shall not transfer the location of any of its general accounting or 
control records, or the maintenance thereof, from its home office to a 
branch or service office, or from a branch or service office to its home 
office or to another branch or service office unless prior to the date 
of transfer its board of directors has:
    (1) By resolution authorized the transfer or maintenance; and

[[Page 1088]]

    (2) Sent a certified copy of the resolution to the OCC.
    (e) Use of data processing services for maintenance of records. A 
Federal savings association which determines to maintain any of its 
records by means of data processing services shall so notify the OCC in 
writing, at least 90 days prior to the date on which such maintenance of 
records will begin. Such notification shall include identification of 
the records to be maintained by data processing services and a statement 
as to the location at which such records will be maintained. Any 
contract, agreement, or arrangement made by a savings association 
pursuant to which data processing services are to be performed for such 
savings association shall be in writing and shall expressly provide that 
the records to be maintained by such services shall at all times be 
available for examination and audit.



Sec.  163.171  [Reserved]



Sec.  163.172  Financial derivatives.

    (a) Definition. A financial derivative is a financial contract whose 
value depends on the value of one or more underlying assets, indices, or 
reference rates. The most common types of financial derivatives are 
futures, forward contracts, options, and swaps. A mortgage derivative 
security, such as a collateralized mortgage obligation or a real estate 
mortgage investment conduit, is not a financial derivative under this 
section.
    (b) Permissible financial derivatives transactions. A Federal 
savings association may engage in a transaction involving a financial 
derivative if the savings association is authorized to invest in the 
assets underlying the financial derivative, the transaction is safe and 
sound, and the requirements in paragraphs (c) through (e) of this 
section are met. In general, a Federal savings association that engages 
in a transaction involving a financial derivative should do so to reduce 
its risk exposure.
    (c) Board of directors' responsibilities. (1) A Federal savings 
association's board of directors is responsible for effective oversight 
of financial derivatives activities.
    (2) Before a savings association may engage in any transaction 
involving a financial derivative, your board of directors must establish 
written policies and procedures governing authorized financial 
derivatives. The board of directors should review applicable guidance 
issued by the OCC on establishing a sound risk management program.
    (3) The board of directors must periodically review:
    (i) Compliance with the policies and procedures established under 
paragraph (c)(2) of this section; and
    (ii) The adequacy of these policies and procedures to ensure that 
they continue to be appropriate to the nature and scope of the savings 
association's operations and existing market conditions.
    (4) The board of directors must ensure that management establishes 
an adequate system of internal controls for transactions involving 
financial derivatives.
    (d) Management responsibilities. (1) The management of a Federal 
savings association is responsible for daily oversight and management of 
financial derivatives activities. The management of a Federal savings 
association must implement the policies and procedures established by 
the board of directors and must establish a system of internal controls. 
This system of internal controls should, at a minimum, provide for 
periodic reporting to the board of directors and management, segregation 
of duties, and internal review procedures.
    (2) Management must ensure that financial derivatives activities are 
conducted in a safe and sound manner and should review applicable 
guidance issued by the OCC on implementing a sound risk management 
program.
    (e) Recordkeeping requirement. A Federal savings association must 
maintain records adequate to demonstrate compliance with this section 
and with its board of directors' policies and procedures on financial 
derivatives.

[76 FR 49047, Aug. 9, 2011, as amended at 82 FR 8110, Jan. 23, 2017]



Sec.  163.176  Interest-rate-risk-management procedures.

    Federal savings associations shall take the following actions:

[[Page 1089]]

    (a) The board of directors or a committee thereof shall review the 
savings association's interest-rate-risk exposure and devise a policy 
for the savings association's management of that risk.
    (b) The board of directors shall formally adopt a policy for the 
management of interest-rate risk. The management of the savings 
association shall establish guidelines and procedures to ensure that the 
board's policy is successfully implemented.
    (c) The management of the savings association shall periodically 
report to the board of directors regarding implementation of the savings 
association's policy for interest-rate-risk management and shall make 
that information available upon request to the OCC.
    (d) The savings association's board of directors shall review the 
results of operations at least quarterly and shall make such adjustments 
as it considers necessary and appropriate to the policy for interest-
rate-risk management, including adjustments to the authorized acceptable 
level of interest-rate risk.



                     Subpart G_Reporting and Bonding



Sec.  163.180  Suspicious Activity Reports and other reports and statements.

    (a) [Reserved]
    (b) False or misleading statements or omissions. No savings 
association or director, officer, agent, employee, affiliated person, or 
other person participating in the conduct of the affairs of such 
association nor any person filing or seeking approval of any application 
shall knowingly:
    (1) Make any written or oral statement to the appropriate Federal 
banking agency or to an agent, representative or employee of the 
appropriate Federal banking agency that is false or misleading with 
respect to any material fact or omits to state a material fact 
concerning any matter within the jurisdiction of the appropriate Federal 
banking agency or
    (2) Make any such statement or omission to a person or organization 
auditing a savings association or otherwise preparing or reviewing its 
financial statements concerning the accounts, assets, management 
condition, ownership, safety, or soundness, or other affairs of the 
association.
    (c) [Reserved]
    (d) Suspicious Activity Reports--(1) Purpose and scope. This 
paragraph (d) ensures that savings associations and service corporations 
file a Suspicious Activity Report when they detect a known or suspected 
violation of Federal law or a suspicious transaction related to a money 
laundering activity or a violation of the Bank Secrecy Act.
    (2) Definitions. For the purposes of this paragraph (d):
    (i) FinCEN means the Financial Crimes Enforcement Network of the 
Department of the Treasury.
    (ii) Institution-affiliated party means any institution-affiliated 
party as that term is defined in sections 3(u) and 8(b)(9) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(9)).
    (iii) SAR means a Suspicious Activity Report.
    (3) SARs required. A savings association or service corporation 
shall file a SAR with the appropriate Federal law enforcement agencies 
and the Department of the Treasury on the form prescribed by the 
appropriate Federal banking agency and in accordance with the form's 
instructions, by sending a completed SAR to FinCEN in the following 
circumstances:
    (i) Insider abuse involving any amount. Whenever the savings 
association or service corporation detects any known or suspected 
Federal criminal violation, or pattern of criminal violations, committed 
or attempted against the savings association or service corporation or 
involving a transaction or transactions conducted through the savings 
association or service corporation, where the savings association or 
service corporation believes that it was either an actual or potential 
victim of a criminal violation, or series of criminal violations, or 
that it was used to facilitate a criminal transaction, and it has a 
substantial basis for identifying one of its directors, officers, 
employees, agents or other institution-affiliated parties as having 
committed or aided in the commission of a criminal act, regardless of 
the amount involved in the violation.
    (ii) Violations aggregating $5,000 or more where a suspect can be 
identified.

[[Page 1090]]

Whenever the savings association or service corporation detects any 
known or suspected Federal criminal violation, or pattern of criminal 
violations, committed or attempted against the savings association or 
service corporation or involving a transaction or transactions conducted 
through the savings association or service corporation and involving or 
aggregating $5,000 or more in funds or other assets, where the savings 
association or service corporation believes that it was either an actual 
or potential victim of a criminal violation or series of criminal 
violations, or that it was used to facilitate a criminal transaction, 
and it has a substantial basis for identifying a possible suspect or 
group of suspects. If it is determined prior to filing this report that 
the identified suspect or group of suspects has used an alias, then 
information regarding the true identity of the suspect or group of 
suspects, as well as alias identifiers, such as drivers' license or 
social security numbers, addresses and telephone numbers, must be 
reported.
    (iii) Violations aggregating $25,000 or more regardless of potential 
suspects. Whenever the savings association or service corporation 
detects any known or suspected Federal criminal violation, or pattern of 
criminal violations, committed or attempted against the savings 
association or service corporation or involving a transaction or 
transactions conducted through the savings association or service 
corporation and involving or aggregating $25,000 or more in funds or 
other assets, where the savings association or service corporation 
believes that it was either an actual or potential victim of a criminal 
violation or series of criminal violations, or that it was used to 
facilitate a criminal transaction, even though there is no substantial 
basis for identifying a possible suspect or group of suspects.
    (iv) Transactions aggregating $5,000 or more that involve potential 
money laundering or violations of the Bank Secrecy Act. Any transaction 
(which for purposes of this paragraph (d)(3)(iv) means a deposit, 
withdrawal, transfer between accounts, exchange of currency, loan, 
extension of credit, purchase or sale of any stock, bond, certificate of 
deposit, or other monetary instrument or investment security, or any 
other payment, transfer, or delivery by, through, or to a financial 
institution, by whatever means effected) conducted or attempted by, at 
or through the savings association or service corporation and involving 
or aggregating $5,000 or more in funds or other assets, if the savings 
association or service corporation knows, suspects, or has reason to 
suspect that:
    (A) The transaction involves funds derived from illegal activities 
or is intended or conducted in order to hide or disguise funds or assets 
derived from illegal activities (including, without limitation, the 
ownership, nature, source, location, or control of such funds or assets) 
as part of a plan to violate or evade any law or regulation or to avoid 
any transaction reporting requirement under Federal law;
    (B) The transaction is designed to evade any regulations promulgated 
under the Bank Secrecy Act; or
    (C) The transaction has no business or apparent lawful purpose or is 
not the sort in which the particular customer would normally be expected 
to engage, and the institution knows of no reasonable explanation for 
the transaction after examining the available facts, including the 
background and possible purpose of the transaction.
    (4) Service corporations. When a service corporation is required to 
file a SAR under paragraph (d)(3) of this section, either the service 
corporation or a savings association that wholly or partially owns the 
service corporation may file the SAR.
    (5) Time for reporting. A savings association or service corporation 
is required to file a SAR no later than 30 calendar days after the date 
of initial detection of facts that may constitute a basis for filing a 
SAR. If no suspect was identified on the date of detection of the 
incident requiring the filing, a savings association or service 
corporation may delay filing a SAR for an additional 30 calendar days to 
identify a suspect. In no case shall reporting be delayed more than 60 
calendar days after the date of initial detection of a reportable 
transaction. In situations

[[Page 1091]]

involving violations requiring immediate attention, such as when a 
reportable violation is ongoing, the savings association or service 
corporation shall immediately notify, by telephone, an appropriate law 
enforcement authority and the appropriate Federal banking agency in 
addition to filing a timely SAR.
    (6) Reports to state and local authorities. A savings association or 
service corporation is encouraged to file a copy of the SAR with state 
and local law enforcement agencies where appropriate.
    (7) Exception. A savings association or service corporation need not 
file a SAR for a robbery or burglary committed or attempted that is 
reported to appropriate law enforcement authorities.
    (8) Retention of records. A savings association or service 
corporation shall maintain a copy of any SAR filed and the original or 
business record equivalent of any supporting documentation for a period 
of five years from the date of the filing of the SAR. Supporting 
documentation shall be identified and maintained by the savings 
association or service corporation as such, and shall be deemed to have 
been filed with the SAR. A savings association or service corporation 
shall make all supporting documentation available to appropriate law 
enforcement agencies upon request. A savings association or service 
corporation shall make all supporting documentation available to the 
appropriate Federal banking agency, FinCEN, or any Federal, state, or 
local law enforcement agency, or any Federal regulatory authority that 
examines the savings association or service corporation for compliance 
with the Bank Secrecy Act, or any state regulatory authority 
administering a state law that requires the savings association or 
service corporation to comply with the Bank Secrecy Act or otherwise 
authorizes the state authority to ensure that the institution complies 
with the Bank Secrecy Act, upon request.
    (9) Notification to board of directors--(i) Generally. Whenever a 
savings association (or a service corporation in which the savings 
association has an ownership interest) files a SAR pursuant to this 
paragraph (d), the management of the savings association or service 
corporation shall promptly notify its board of directors, or a committee 
of directors or executive officers designated by the board of directors 
to receive notice.
    (ii) Suspect is a director or executive officer. If the savings 
association or service corporation files a SAR pursuant to this 
paragraph (d) and the suspect is a director or executive officer, the 
savings association or service corporation may not notify the suspect, 
pursuant to 31 U.S.C. 5318(g)(2), but shall notify all directors who are 
not suspects.
    (10) Compliance. Failure to file a SAR in accordance with this 
section and the instructions may subject the savings association or 
service corporation, its directors, officers, employees, agents, or 
other institution-affiliated parties to supervisory action.
    (11) Obtaining SARs. A savings association or service corporation 
may obtain SARs and the instructions from the appropriate Federal 
banking agency.
    (12) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential, and shall not be 
disclosed except as authorized in this paragraph (d)(12).
    (i) Prohibition on disclosure by savings associations or service 
corporations. No savings association or service corporation, and no 
director, officer, employee, or agent of a savings association or 
service corporation, shall disclose a SAR or any information that would 
reveal the existence of a SAR. Any savings association or service 
corporation, and any director, officer, employee, or agent of any 
savings association or service corporation that is subpoenaed or 
otherwise requested to disclose a SAR, or any information that would 
reveal the existence of a SAR, shall decline to produce the SAR or such 
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and 
shall notify the following of any such request and the response thereto:
    (A) Director, Litigation Division, Office of the Comptroller of the 
Currency or the appropriate FDIC region, as appropriate and
    (B) The Financial Crimes Enforcement Network (FinCEN).
    (ii) Rules of construction. Provided that no person involved in any 
reported

[[Page 1092]]

suspicious transaction is notified that the transaction has been 
reported, paragraph (d)(1) of this section shall not be construed as 
prohibiting:
    (A) The disclosure by a savings association or service corporation, 
or any director, officer, employee or agent of a savings association or 
service corporation of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or the appropriate Federal banking agency or any Federal, 
state, or local law enforcement agency; or any Federal regulatory 
authority that examines the savings association or service corporation 
for compliance with the Bank Secrecy Act, or any state regulatory 
authority administering a state law that requires compliance with the 
Bank Secrecy Act or otherwise authorizes the state authority to ensure 
that the institution complies with the Bank Secrecy Act; or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including, but not limited to, disclosures:
    (i) To another financial institution, or any director, officer, 
employee or agent of a financial institution, for the preparation of a 
joint SAR; or
    (ii) In connection with certain employment references or termination 
notices, to the full extent authorized in 31 U.S.C. 5318(g)(2)(B); or
    (B) The sharing by a savings association or service corporation, or 
any director, officer, employee, or agent of a savings association or 
service corporation, of a SAR, or any information that would reveal the 
existence of a SAR, within the corporate organizational structure of the 
savings association or service corporation, for purposes consistent with 
title II of the Bank Secrecy Act as determined by regulation or in 
guidance.
    (iii) Prohibition on disclosure by the appropriate Federal banking 
agency. The appropriate Federal banking agency will not, and no officer, 
employee or agent of appropriate Federal banking agency shall disclose a 
SAR, or any information that would reveal the existence of a SAR, except 
as necessary to fulfill official duties consistent with title II of the 
Bank Secrecy Act. For purposes of this section, ``official duties'' 
shall not include the disclosure of a SAR, or any information that would 
reveal the existence of a SAR, in response to a request for use in a 
private legal proceeding or in response to a request for disclosure of 
non-public information under 12 CFR 4.33 or 12 CFR part 309, as 
appropriate.
    (iv) Limitation on liability. A savings association or service 
corporation and any director, officer, employee or agent of a savings 
association or service corporation that makes a voluntary disclosure of 
any possible violation of law or regulation to a government agency or 
makes a disclosure pursuant to this section or any other authority, 
including a disclosure made jointly with another institution, shall be 
protected from liability for any such disclosure, or for failure to 
provide notice of such disclosure to any person identified in the 
disclosure, or both, to the full extent provided by 31 U.S.C. 
5318(g)(3).
    (13) Safe harbor. The safe harbor provision of 31 U.S.C. 5318(g), 
which exempts any financial institution that makes a disclosure of any 
possible violation of law or regulation from liability under any law or 
regulation of the United States, or any constitution, law or regulation 
of any state or political subdivision, covers all reports of suspected 
or known criminal violations and suspicious activities to law 
enforcement and financial institution supervisory authorities, including 
supporting documentation, regardless of whether such reports are filed 
pursuant to this paragraph (d), or are filed on a voluntary basis.
    (e) Adjustable-rate mortgage indices--(1) Reporting obligation. Upon 
the request of a Federal Home Loan Bank, all savings associations within 
the jurisdiction of that Federal Home Loan Bank shall report the data 
items set forth in paragraph (e)(2) of this section for the Federal Home 
Loan Bank to use in calculating and publishing an adjustable-rate 
mortgage index.
    (2) Data to be reported. For purposes of paragraph (e)(1) of this 
section, the term ``data items'' means the data items previously 
collected from the monthly Thrift Financial Report or Consolidated 
Reports of Condition and Income, as appropriate, and such data

[[Page 1093]]

items as may be altered, amended, or substituted by the requesting 
Federal Home Loan Bank.
    (3) Applicable indices. For the purpose of this reporting 
requirement, the term ``adjustable-rate mortgage index'' means any of 
the adjustable-rate mortgage indices calculated and published by a 
Federal Home Loan Bank or the Federal Home Loan Bank Board on or before 
August 9, 1989.
    (f) Exemptions. (1) The OCC may grant a Federal savings association 
or service corporation an exemption from the requirements of this 
section. A Federal savings association or service corporation requesting 
an exemption must submit a request in writing to the OCC. In reviewing 
such requests, the OCC will consider whether the exemption is consistent 
with the purposes of the Bank Secrecy Act (if applicable) and safe and 
sound banking, and may consider other appropriate factors. Any exemption 
will apply only as expressly stated in the exemption. (A Federal savings 
association or service corporation requesting an exemption that also 
requires relief from the requirements of applicable regulations issued 
by the Department of the Treasury at 31 CFR chapter X must submit a 
request in writing to both the OCC and FinCEN for approval.)
    (2) The OCC will respond in writing to the Federal savings 
association or service corporation that submits a request pursuant to 
paragraph (f)(1) of this section after considering whether the exemption 
is consistent with the factors in paragraph (f)(1) of this section. Any 
exemption granted by the OCC under paragraph (f)(1) of this section will 
continue for the time specified by the OCC.
    (3) The OCC may extend the period of time or may revoke an exemption 
granted under paragraph (f)(1) of this section. Exemptions or extensions 
may be revoked in the sole discretion of the OCC. Before revoking an 
exemption, the OCC will provide written notice to the Federal savings 
association or service corporation of the OCC's intention to revoke an 
exemption. Such notice will include the basis for the revocation and 
will provide an opportunity for the Federal savings association or 
service corporation to submit a response to the OCC. The OCC will 
consider any response before deciding whether or not to revoke an 
exemption and provide written notice to the Federal savings association 
or service corporation of the OCC's final decision to revoke an 
exemption.
    (4) With respect to requests for exemptions that will also require 
relief from the requirements of applicable regulations issued by the 
Department of the Treasury at 31 CFR chapter X, upon receiving approval 
from both the OCC and FinCEN, the requestor will be relieved of its 
obligations under this section to the extent stated in such approvals.

[76 FR 49047, Aug. 9, 2011, as amended at 82 FR 8111, Jan. 23, 2017; 85 
FR 42643, July 14, 2020; 87 FR 15332, Mar. 18, 2022]



Sec.  163.200  Conflicts of interest.

    If you are a director, officer, or employee of a Federal savings 
association, or have the power to direct its management or policies, or 
otherwise owe a fiduciary duty to a Federal savings association:
    (a) You must not advance your own personal or business interests, or 
those of others with whom you have a personal or business relationship, 
at the expense of the savings association; and
    (b) You must, if you have an interest in a matter or transaction 
before the board of directors:
    (1) Disclose to the board all material nonprivileged information 
relevant to the board's decision on the matter or transaction, 
including:
    (i) The existence, nature and extent of your interests; and
    (ii) The facts known to you as to the matter or transaction under 
consideration;
    (2) Refrain from participating in the board's discussion of the 
matter or transaction; and
    (3) Recuse yourself from voting on the matter or transaction (if you 
are a director).



Sec.  163.201  Corporate opportunity.

    (a) If you are a director or officer of a Federal savings 
association, or have the power to direct its management or policies, or 
otherwise owe a fiduciary duty to a Federal savings association,

[[Page 1094]]

you must not take advantage of corporate opportunities belonging to the 
savings association.
    (b) A corporate opportunity belongs to a Federal savings association 
if:
    (1) The opportunity is within the corporate powers of the savings 
association or a subsidiary of the savings association; and
    (2) The opportunity is of present or potential practical advantage 
to the savings association, either directly or through its subsidiary.
    (c) The OCC will not deem you to have taken advantage of a corporate 
opportunity belonging to the Federal savings association if a 
disinterested and independent majority of the savings association's 
board of directors, after receiving a full and fair presentation of the 
matter, rejected the opportunity as a matter of sound business judgment.



PART 165_PROMPT CORRECTIVE ACTION--Table of Contents



Sec.
165.1-165.7 [Reserved]
165.8 Procedures for reclassifying a Federal savings association based 
          on criteria other than capital.
165.9 Order to dismiss a director or senior executive officer.
165.10 [Reserved]

    Authority: 12 U.S.C. 1831o, 5412(b)(2)(B).

    Source: 76 FR 49065, Aug. 9, 2011, unless otherwise noted.

    Effective Date Note: At 88 FR 89908, Dec. 28, 2023, part 165 was 
removed, effective Apr. 1, 2024.



Sec. Sec.  165.1-165.7  [Reserved]



Sec.  165.8  Procedures for reclassifying a Federal savings association 
based on criteria other than capital.

    (a) Reclassification based on unsafe or unsound condition or 
practice--(1) Issuance of notice of proposed reclassification--(i) 
Grounds for reclassification. (A) Pursuant to 12 CFR 6.4(d), the OCC may 
reclassify a well capitalized Federal savings association as adequately 
capitalized or subject an adequately capitalized or undercapitalized 
institution to the supervisory actions applicable to the next lower 
capital category if:
    (1) The OCC determines that the savings association is in an unsafe 
or unsound condition; or
    (2) The OCC deems the savings association to be engaged in an unsafe 
or unsound practice and not to have corrected the deficiency.
    (B) Any action pursuant to this paragraph (a)(1)(i) shall 
hereinafter be referred to as ``reclassification.''
    (ii) Prior notice to institution. Prior to taking action pursuant to 
12 CFR 6.4(d), the OCC shall issue and serve on the Federal savings 
association a written notice of the OCC's intention to reclassify the 
savings association.
    (2) Contents of notice. A notice of intention to reclassify a 
Federal savings association based on unsafe or unsound condition shall 
include:
    (i) A statement of the savings association's capital measures and 
capital levels and the category to which the savings association would 
be reclassified;
    (ii) The reasons for reclassification of the savings association;
    (iii) The date by which the savings association subject to the 
notice of reclassification may file with the OCC a written appeal of the 
proposed reclassification and a request for a hearing, which shall be at 
least 14 calendar days from the date of service of the notice unless the 
OCC determines that a shorter period is appropriate in light of the 
financial condition of the savings association or other relevant 
circumstances.
    (3) Response to notice of proposed reclassification. A Federal 
savings association may file a written response to a notice of proposed 
reclassification within the time period set by the OCC. The response 
should include:
    (i) An explanation of why the savings association is not in unsafe 
or unsound condition or otherwise should not be reclassified; and
    (ii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
savings association or company regarding the reclassification.
    (4) Failure to file response. Failure by a Federal savings 
association to file, within the specified time period, a

[[Page 1095]]

written response with the OCC to a notice of proposed reclassification 
shall constitute a waiver of the opportunity to respond and shall 
constitute consent to the reclassification.
    (5) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the OCC or its designee under this section. If the Federal 
savings association desires to present oral testimony or witnesses at 
the hearing, the savings association shall include a request to do so 
with the request for an informal hearing. A request to present oral 
testimony or witnesses shall specify the names of the witnesses and the 
general nature of their expected testimony. Failure to request a hearing 
shall constitute a waiver of any right to a hearing, and failure to 
request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (6) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the OCC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the OCC allows further time at the 
request of the Federal savings association. The hearing shall be held in 
Washington, DC or at such other place as may be designated by the OCC, 
before a presiding officer(s) designated by the OCC to conduct the 
hearing.
    (7) Hearing procedures. (i) The Federal savings association shall 
have the right to introduce relevant written materials and to present 
oral argument at the hearing. The savings association may introduce oral 
testimony and present witnesses only if expressly authorized by the OCC 
or the presiding officer(s). Neither the provisions of the 
Administrative Procedure Act (5 U.S.C. 554-557) governing adjudications 
required by statute to be determined on the record nor parts 19 or 109 
of this chapter apply to an informal hearing under this section unless 
the OCC orders that such procedures shall apply.
    (ii) The informal hearing shall be recorded and a transcript 
furnished to the savings association upon request and payment of the 
cost thereof. Witnesses need not be sworn, unless specifically requested 
by a party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (iii) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (8) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
on the reclassification.
    (9) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the OCC will decide whether to reclassify the 
Federal savings association and notify the savings association of the 
OCC's decision.
    (b) Request for rescission of reclassification. Any Federal savings 
association that has been reclassified under this section, may, upon a 
change in circumstances, request in writing that the OCC reconsider the 
reclassification, and may propose that the reclassification be rescinded 
and that any directives issued in connection with the reclassification 
be modified, rescinded, or removed. Unless otherwise ordered by the OCC, 
the savings association shall remain subject to the reclassification and 
to any directives issued in connection with that reclassification while 
such request is pending before the OCC.

[76 FR 49065, Aug. 9, 2011, as amended at 78 FR 62281, Oct. 11, 2013]



Sec.  165.9  Order to dismiss a director or senior executive officer.

    (a) Service of notice. When the OCC issues and serves a directive on 
a Federal savings association pursuant to subpart B of part 6 of this 
chapter requiring the savings association to dismiss any director or 
senior executive officer under section 38(f)(2)(F)(ii) of the FDI Act, 
the OCC shall also serve a copy of the directive, or the relevant 
portions of the directive where appropriate, upon the person to be 
dismissed.

[[Page 1096]]

    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed within 
10 calendar days of the receipt of the directive by the Respondent, 
unless further time is allowed by the OCC at the request of the 
Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement should include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
OCC or its designee under this section. If the Respondent desires to 
present oral testimony or witnesses at the hearing, the Respondent shall 
include a request to do so with the request for an informal hearing. The 
request to present oral testimony or witnesses shall specify the names 
of the witnesses and the general nature of their expected testimony. 
Failure to request a hearing shall constitute a waiver of any right to a 
hearing and failure to request the opportunity to present oral testimony 
or witnesses shall constitute a waiver of any right or opportunity to 
present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the OCC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a Federal savings association to dismiss from office 
any director or senior executive officer, the OCC shall issue an order 
directing an informal hearing to commence no later than 30 days after 
receipt of the request, unless the Respondent requests a later date. The 
hearing shall be held in Washington, DC, or at such other place as may 
be designated by the OCC, before a presiding officer(s) designated by 
the OCC to conduct the hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the OCC or the presiding officer(s). Neither the 
provisions of the Administrative Procedure Act governing adjudications 
required by statute to be determined on the record nor parts 19 or 109 
of this chapter apply to an informal hearing under this section unless 
the OCC orders that such procedures shall apply.
    (2) The informal hearing shall be recorded and a transcript 
furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the Federal savings association would materially strengthen the savings 
association's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the savings association's capital 
level or failure to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the savings association based on supervisory criteria 
other than capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the OCC 
concerning the Respondent's request for reinstatement with the Federal 
savings association.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing has been requested, the OCC shall grant or deny

[[Page 1097]]

the request for reinstatement and notify the Respondent of the OCC's 
decision. If the OCC denies the request for reinstatement, the OCC shall 
set forth in the notification the reasons for the OCC's action.

[76 FR 49065, Aug. 9, 2011, as amended at 78 FR 62281, Oct. 11, 2013]



Sec.  165.10  [Reserved]



PART 168_SECURITY PROCEDURES--Table of Contents



Sec.
168.1 Authority, purpose, and scope.
168.2 Designation of security officer.
168.3 Security program.
168.4 Report.
168.5 Protection of customer information.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1828, 1831p-1, 1881-
1884, 5412(b)(2)(B); 15 U.S.C. 1681s and 1681w; 15 U.S.C. 6801 and 
6805(b)(1).

    Source: 76 FR 49129, Aug. 9, 2011, unless otherwise noted.



Sec.  168.1  Authority, purpose, and scope.

    (a) This part is issued under section 3 of the Bank Protection Act 
of 1968 (12 U.S.C 1882), sections 501 and 505(b)(1) of the Gramm-Leach-
Bliley Act (15 U.S.C. 6801 and 6805(b)(1)), and sections 621 and 628 of 
the Fair Credit Reporting Act (15 U.S.C. 1681s and 1681w). This part is 
applicable to Federal savings associations. It requires each Federal 
savings association to adopt appropriate security procedures to 
discourage robberies, burglaries, and larcenies and to assist in the 
identification and prosecution of persons who commit such acts. Section 
168.5 of this part is applicable to Federal savings associations and 
their subsidiaries (except brokers, dealers, persons providing 
insurance, investment companies, and investment advisers). Section 168.5 
of this part requires covered institutions to establish and implement 
appropriate administrative, technical, and physical safeguards to 
protect the security, confidentiality, and integrity of customer 
information.
    (b) It is the responsibility of a Federal savings association's 
board of directors to comply with this regulation and ensure that a 
written security program for the association's main office and branches 
is developed and implemented.



Sec.  168.2  Designation of security officer.

    Within 30 days after the effective date of insurance of accounts, 
the board of directors of each Federal savings association shall 
designate a security officer who shall have the authority, subject to 
the approval of the board of directors, to develop, within a reasonable 
time but no later than 180 days, and to administer a written security 
program for each of the association's offices.



Sec.  168.3  Security program.

    (a) Contents of security program. The security program shall:
    (1) Establish procedures for opening and closing for business and 
for the safekeeping of all currency, negotiable securities, and similar 
valuables at all times;
    (2) Establish procedures that will assist in identifying persons 
committing crimes against the association and that will preserve 
evidence that may aid in their identification and prosecution. Such 
procedures may include, but are not limited to:
    (i) Maintaining a camera that records activity in the office;
    (ii) Using identification devices, such as prerecorded serial-
numbered bills, or chemical and electronic devices; and
    (iii) Retaining a record of any robbery, burglary, or larceny 
committed against the association;
    (3) Provide for initial and periodic training of officers and 
employees in their responsibilities under the security program and in 
proper employee conduct during and after a burglary, robbery, or 
larceny; and
    (4) Provide for selecting, testing, operating and maintaining 
appropriate security devices, as specified in paragraph (b) of this 
section.
    (b) Security devices. Each savings association shall have, at a 
minimum, the following security devices:
    (1) A means of protecting cash and other liquid assets, such as a 
vault, safe, or other secure space;
    (2) A lighting system for illuminating, during the hours of 
darkness, the area around the vault, if the vault is visible from 
outside the office;
    (3) Tamper-resistant locks on exterior doors and exterior windows 
that may be opened;

[[Page 1098]]

    (4) An alarm system or other appropriate device for promptly 
notifying the nearest responsible law enforcement officers of an 
attempted or perpetrated robbery or burglary; and
    (5) Such other devices as the security officer determines to be 
appropriate, taking into consideration:
    (i) The incidence of crimes against financial institutions in the 
area;
    (ii) The amount of currency and other valuables exposed to robbery, 
burglary, or larceny;
    (iii) The distance of the office from the nearest responsible law 
enforcement officers;
    (iv) The cost of the security devices;
    (v) Other security measures in effect at the office; and
    (vi) The physical characteristics of the structure of the office and 
its surroundings.



Sec.  168.4  Report.

    The security officer for each Federal savings association shall 
report at least annually to the association's board of directors on the 
implementation, administration, and effectiveness of the security 
program.



Sec.  168.5  Protection of customer information.

    Federal savings associations and their subsidiaries (except brokers, 
dealers, persons providing insurance, investment companies, and 
investment advisers) must comply with the Interagency Guidelines 
Establishing Information Security Standards set forth in appendix B to 
part 30 of this chapter. Supplement A to appendix B to part 30 of this 
chapter provides interpretive guidance.

[76 FR 49129, Aug. 9, 2011, as amended at 79 FR 54549, Sept. 11, 2014]



PART 169_PROXIES--Table of Contents



Sec.
169.1 Definitions.
169.2 Form of proxies.
169.3 Holders of proxies.
169.4 Proxy soliciting material.

    Authority: Section 2, 48 Stat. 128, as amended (12 U.S.C. 1462); 
section 3, as added by section 301, 103 Stat. 278 (12 U.S.C. 1462a); 
section 4, as added by section 301, 103 Stat. 280 (12 U.S.C. 1463), 
5412(b)(2)(B).

    Source: 76 FR 49129, Aug. 9, 2011, unless otherwise noted.



Sec.  169.1  Definitions.

    As used in this part:
    (a) Security holder. (1) The term security holder means any person 
having the right to vote in the affairs of a savings association by 
virtue of:
    (i) Ownership of any security of the association or
    (ii) Any indebtedness to the association.
    (2) For purposes of this part, the term security holder shall 
include any account holder having the right to vote in the affairs of a 
mutual savings association.
    (b) Person. The term person includes, in addition to natural 
persons, corporations, partnerships, pension funds, profit-sharing 
funds, trusts, and any other group of associated persons of whatever 
nature.
    (c) Proxy. The term proxy includes every form of authorization by 
which a person is, or may be deemed to be, designated to act for the 
security holder in the exercise of his or her voting rights in the 
affairs of a savings association. Such an authorization may take the 
form of failure to dissent or object.
    (d) Solicit; solicitation. (1) The terms solicit and solicitation 
refer to:
    (i) Any request for a proxy whether or not accompanied by or 
included in a form of proxy;
    (ii) Any request to execute, not execute, or revoke a proxy; or
    (iii) The furnishing of a form of proxy or other communication to 
security holders under circumstances reasonably calculated to result in 
the procurement, withholding, or revocation of a proxy.
    (2) The terms do not apply, however, to the furnishing of a form of 
proxy to a security holder upon the request of such security holder or 
to the performance by any person of ministerial acts on behalf of a 
person soliciting a proxy.



Sec.  169.2  Form of proxies.

    Every form of proxy shall conform to the following requirements:
    (a) The proxy shall be revocable at will by the person giving it. 
The power to revoke may not be conditioned on

[[Page 1099]]

any event or occurrence or be otherwise limited; except that, in the 
case of a proxy relating to capital stock if such proxy is coupled with 
an interest, states such fact on its face, and is valid under the laws 
of the state in which it is to be exercised, such proxy may be made 
irrevocable to the extent permitted by such state law.
    (b) The proxy may not be part of any other document or instrument 
(such as an account card).
    (c) The proxy shall be clearly labeled ``Revocable Proxy'' in 
boldface type (at least as large as 18 point).



Sec.  169.3  Holders of proxies.

    No proxy of a mutual savings association with a term greater than 
eleven months or solicited at the expense of the association may 
designate as holder anyone other than the board of directors [trustees] 
as a whole, or a committee appointed by a majority of such board.



Sec.  169.4  Proxy soliciting material.

    No solicitation of a proxy shall be made by means of any statement, 
form of proxy, notice of meeting, or other communication, written or 
oral, which:
    (a) Solicits any undated or postdated proxy;
    (b) Solicits any proxy that provides that it shall be deemed to be 
dated as of any date subsequent to the date on which it is signed by the 
security holder; or
    (c)(1) Contains any statement that is false or misleading with 
respect to any material fact, or
    (2) Omits to state any material fact:
    (i) Necessary in order to make the statements therein not false or 
misleading or
    (ii) Necessary to correct any statement in any earlier communication 
with respect to the solicitation of a proxy for the same meeting or 
subject matter that has subsequently become false or misleading.

                        PARTS 170	189 [RESERVED]



PART 190_PREEMPTION OF STATE USURY LAWS--Table of Contents



Sec.
190.1 Authority, purpose, and scope.
190.2 Definitions.
190.3 Operation.
190.4 Federally-related residential manufactured housing loans--consumer 
          protection provisions.
190.100 Status of Interpretations issued under Public Law 96-161.
190.101 State criminal usury statutes.

    Authority: 12 U.S.C. 1735f-7a, 5412(b)(2)(B).

    Source: 76 FR 49151, Aug. 9, 2011, unless otherwise noted.



Sec.  190.1  Authority, purpose, and scope.

    (a) Authority. This part contains regulations issued under section 
501 of the Depository Institutions Deregulation and Monetary Control Act 
of 1980, Public Law 96-221, 94 Stat. 161.
    (b) Purpose and scope. The purpose of this permanent preemption of 
state interest-rate ceilings applicable to Federally-related residential 
mortgage loans is to ensure that the availability of such loans is not 
impeded in states having restrictive interest limitations. This part 
applies to loans, mortgages, credit sales, and advances, secured by 
first liens on residential real property, stock in residential 
cooperative housing corporations, or residential manufactured homes as 
defined in Sec.  190.2 of this part.



Sec.  190.2  Definitions.

    For the purposes of this part, the following definitions apply:
    (a) Loans mean any loans, mortgages, credit sales, or advances.
    (b) Federally-related loans include any loan:
    (1) Made by any lender whose deposits or accounts are insured by any 
agency of the Federal government;
    (2) Made by any lender regulated by any agency of the Federal 
government;
    (3) Made by any lender approved by the Secretary of Housing and 
Urban Development for participation in any mortgage insurance program 
under the National Housing Act;
    (4) Made in whole or in part by the Secretary of Housing and Urban 
Development; insured, guaranteed, supplemented, or assisted in any way 
by the Secretary or any officer or agency of the Federal government, or 
made under or in connection with a housing or urban development program 
administered by the Secretary, or a housing or

[[Page 1100]]

related program administered by any other such officer or agency;
    (5) Eligible for purchase by the Federal National Mortgage 
Association, the Government National Mortgage Association, or the 
Federal Home Loan Mortgage Corporation, or made by any financial 
institution from which the loan could be purchased by the Federal Home 
Loan Mortgage Corporation; or
    (6) Made in whole or in part by any entity which:
    (i) Regularly extends, or arranges for the extension of, credit 
payable by agreement in more than four installments or for which the 
payment of a finance charge is or may be required; and
    (ii) Makes or invests in residential real property loans, including 
loans secured by first liens on residential manufactured homes that 
aggregate more than $1,000,000 per year; except that the latter 
requirement shall not apply to such an entity selling residential 
manufactured homes and providing financing for such sales through loans 
or credit sales secured by first liens on residential manufactured 
homes, if the entity has an arrangement to sell such loans or credit 
sales in whole or in part, or where such loans or credit sales are sold 
in whole or in part, to a lender or other institution otherwise included 
in this section.
    (c) Loans which are secured by first liens on real estate means 
loans on the security of any instrument (whether a mortgage, deed of 
trust, or land contract) which makes the interest in real estate 
(whether in fee, or in a leasehold or subleasehold extending, or 
renewable, automatically or at the option of the holder or the lender, 
for a period of at least 5 years beyond the maturity of the loan) 
specific security for the payment of the obligation secured by the 
instrument: Provided, That the instrument is of such a nature that, in 
the event of default, the real estate described in the instrument could 
be subjected to the satisfaction of the obligation with the same 
priority as a first mortgage of a first deed of trust in the 
jurisdiction where the real estate is located.
    (d) Loans secured by first liens on stock in a residential 
cooperative housing corporation means loans on the security of:
    (1) A first security interest in stock or a membership certificate 
issued to a tenant stockholder or resident member by a cooperative 
housing organization; and
    (2) An assignment of the borrower's interest in the proprietary 
lease or occupancy agreement issued by such organization.
    (e) Loans secured by first liens on residential manufactured homes 
means a loan made pursuant to an agreement by which the party extending 
the credit acquires a security interest in the residential manufactured 
home which will have priority over any conflicting security interest.
    (f) Residential real property means real estate improved or to be 
improved by a structure or structures designed primarily for dwelling, 
as opposed to commercial use.
    (g) Residential manufactured home shall mean a manufactured home as 
defined in the National Manufactured Home Construction and Safety 
Standards Act, 42 U.S.C. 5402(6), which is or will be used as a 
residence.
    (h) State means the several states, Puerto Rico, the District of 
Columbia, Guam, the Trust Territories of the Pacific Islands, the 
Northern Mariana Islands, and the Virgin Islands, except as provided in 
section 501(a)(2)(B) of the Depository Institutions Deregulation and 
Monetary Control Act of 1980, Public Law 96-221, 94 Stat. 161.



Sec.  190.3  Operation.

    (a) The provisions of the constitution or law of any state expressly 
limiting the rate or amount of interest, discount points, finance 
charges, or other charges which may be charged, taken, received, or 
reserved shall not apply to any Federally-related loan:
    (1) Made after March 31, 1980; and
    (2) Secured by a first lien on:
    (i) Residential real property;
    (ii) Stock in a residential cooperative housing corporation when the 
loan is used to finance the acquisition of such stock; or
    (iii) A residential manufactured home: Provided, That the loan so 
secured contains the consumer safeguards required by Sec.  190.4 of this 
part;

[[Page 1101]]

    (b) The provisions of paragraph (a) of this section shall apply to 
loans made in any state on or before the date (after April 1, 1980 and 
prior to April l, 1983) on which the state adopts a law or certifies 
that the voters of such state have voted in favor of any law, 
constitutional or otherwise, which states explicitly and by its terms 
that such state does not want the provisions of paragraph (a) of this 
section to apply with respect to loans made in such state, except that--
    (1) The provisions of paragraph (a) of this section shall apply to 
any loan which is made after such date pursuant to a commitment 
therefore which was entered into during the period beginning on April 1, 
1980, and ending on the date the state takes such action;
    (2) The provisions of paragraph (a) of this section shall apply to 
any rollover of a loan which loan was made, or committed to be made, 
during the period beginning on April 1, 1980, and ending on the date the 
state takes such action, if the mortgage document or loan note provided 
that the interest rate to the original borrower could be changed through 
the use of such a rollover; and
    (3) At any time after the date of adoption of these regulations, any 
state may adopt a provision of law placing limitations on discount 
points or such other charges on any loan described in this part.
    (c) Nothing in this section preempts limitations in state laws on 
prepayment charges, attorneys' fees, late charges or other provisions 
designed to protect borrowers.



Sec.  190.4  Federally-related residential manufactured housing loans--
consumer protection provisions.

    (a) Definitions. As used in this section:
    (1) Prepayment. A ``prepayment'' occurs upon--
    (i) Refinancing or consolidation of the indebtedness;
    (ii) Actual prepayment of the indebtedness by the debtor, whether 
voluntarily or following acceleration of the payment obligation by the 
creditor; or
    (iii) The entry of a judgment for the indebtedness in favor of the 
creditor.
    (2) Actuarial method. The term actuarial method means the method of 
allocating payments made on a debt between the outstanding balance of 
the obligation and the finance charge pursuant to which a payment is 
applied first to the accumulated finance charge and any remainder is 
subtracted from, or any deficiency is added to, the outstanding balance 
of the obligation.
    (3) Precomputed Finance Charge. The term precomputed finance charge 
means interest or a time/price differential as computed by the add-on or 
discount method. Precomputed finance charges do not include loan fees, 
points, finder's fees, or similar charges.
    (4) Creditor. The term creditor means any entity covered by this 
part, including those which regularly extend or arrange for the 
extension of credit and assignees that are creditors under section 
501(a)(1)(C)(v) of the Depository Institutions Deregulation and Monetary 
Control Act of 1980.
    (b) General. (1) The provisions of the constitution or the laws of 
any state expressly limiting the rate or amount of interest, discount 
points, finance charges, or other charges which may be charged, taken, 
received, or reserved shall not apply to any loan, mortgage, credit 
sale, or advance which is secured by a first lien on a residential 
mobile home if a creditor covered by this part complies with the 
consumer protection regulations of this section.
    (2) Relation to state law. (i) In making loans or credit sales 
subject to this section, creditors shall comply with state and Federal 
law in accordance with the following:
    (A) State law regulating matters not covered by this section. When 
state law regulating matters not covered by this section is otherwise 
applicable to a loan or credit sale subject to this section, creditors 
shall comply with such state law provisions.
    (B) State law regulating matters covered by this section. Creditors 
need comply only with the provisions of this section, unless the OCC 
determines that an otherwise applicable state law regulating matters 
covered by this section provides greater protection to consumers. Such 
determinations shall be published in the Federal Register and shall 
operate prospectively.
    (ii) Any interested party may petition the OCC for a determination 
that

[[Page 1102]]

state law requirements are more protective of consumers than the 
provisions of this section. Petitions shall include:
    (A) A copy of the state law to be considered;
    (B) Copies of any relevant judicial, regulatory, or administrative 
interpretations of the state law; and
    (C) An opinion or memorandum from the state Attorney General or 
other appropriate state official having primary enforcement 
responsibilities for the subject state law provision, indicating how the 
state law to be considered offers greater protection to consumers than 
the OCC's regulation.
    (c) Refund of precomputed finance charge. In the event the entire 
indebtedness is prepaid, the unearned portion of the precomputed finance 
charge shall be refunded to the debtor. This refund shall be in an 
amount not less than the amount which would be refunded if the unearned 
precomputed finance charge were calculated in accordance with the 
actuarial method, except that the debtor shall not be entitled to a 
refund which, is less than one dollar. The unearned portion of the 
precomputed finance charge is, at the option of the creditor, either:
    (1) That portion of the precomputed finance charge which is 
allocable to all unexpired payment periods as originally scheduled, or 
if deferred, as deferred. A payment period shall be deemed unexpired if 
prepayment is made within 15 days after the payment period's scheduled 
due date. The unearned precomputed finance charge is the total of that 
which would have been earned for each such period had the loan not been 
precomputed, by applying to unpaid balances of principal, according to 
the actuarial method, an annual percentage rate based on those charges 
which are considered precomputed finance charges in this section, 
assuming that all payments were made as originally scheduled, or as 
deferred, if deferred. The creditor, at its option, may round this 
annual percentage rate to the nearest one-quarter of one percent; or
    (2) The total precomputed finance charge less the earned precomputed 
finance charge. The earned precomputed finance charge shall be 
determined by applying an annual percentage rate based on the total 
precomputed finance charge (as that term is defined in this section), 
under the actuarial method, to the unpaid balances for the actual time 
those balances were unpaid up to the date of prepayment. If a late 
charge or deferral fee has been collected, it shall be treated as a 
payment.
    (d) Prepayment penalties. A debtor may prepay in full or in part the 
unpaid balance of the loan at any time without penalty. The right to 
prepay shall be disclosed in the loan contract in type larger than that 
used for the body of the document.
    (e) Balloon payments--(1) Federal savings associations. Federal 
savings association creditors may enter into agreements with debtors 
which provide for non-amortized and partially-amortized loans on 
residential manufactured homes, and such loans shall be governed by the 
provisions of this section and 12 CFR 560.220 until superseding 
regulations are issued by the Consumer Financial Protection Bureau 
regarding the Alternative Mortgage Transactions Parity Act.
    (2) Other creditors. All other creditors may enter into agreements 
with debtors which provide for non-amortized and partially-amortized 
loans on residential manufactured homes to the extent authorized by 
applicable Federal or state law or regulation.
    (f) Late charges. (1) No late charge may be assessed, imposed, or 
collected unless provided for by written contract between the creditor 
and debtor.
    (2) To the extent that applicable state law does not provide for a 
longer period of time, no late charge may be collected on an installment 
which is paid in full on or before the 15th day after its scheduled or 
deferred due date even though an earlier maturing installment or a late 
charge on an earlier installment may not have been paid in full. For 
purposes of assessing late charges, payments received are deemed to be 
applied first to current installments.
    (3) A late charge may be imposed only once on an installment; 
however, no such charge may be collected for a late installment which 
has been deferred.

[[Page 1103]]

    (4) To the extent that applicable state law does not provide for a 
lower charge or a longer grace period, a late charge on any installment 
not paid in full on or before the 15th day after its scheduled or 
deferred due date may not exceed five percent of the unpaid amount of 
the installment.
    (5) If, at any time after imposition of a late charge, the lender 
provides the borrower with written notice regarding amounts claimed to 
be due but unpaid, the notice shall separately state the total of all 
late charges claimed.
    (6) Interest after the final scheduled maturity date may not exceed 
the maximum rate otherwise allowable under state law for such contracts, 
and if such interest is charged, no separate late charge may be made on 
the final scheduled installment.
    (g) Deferral fees. (1) With respect to mobile home credit 
transactions containing precomputed finance charges, agreements 
providing for deferral of all or part of one or more installments shall 
be in writing, signed by the parties, and
    (i) Provide, to the extent that applicable state law does not 
provide for a lower charge, for a charge not exceeding one percent of 
each installment or part thereof for each month from the date when such 
installment was due to the date when it is agreed to become payable and 
proportionately for a part of each month, counting each day as 1/30th of 
a month;
    (ii) Incorporate by reference the transaction to which the deferral 
applied;
    (iii) Disclose each installment or part thereof in the amount to be 
deferred, the date or dates originally payable, and the date or dates 
agreed to become payable: and
    (iv) Set forth the fact of the deferral charge, the dollar amount of 
the charge for each installment to be deferred, and the total dollar 
amount to be paid by the debtor for the privilege of deferring payment.
    (2) No term of a writing executed by the debtor shall constitute 
authority for a creditor unilaterally to grant a deferral with respect 
to which a charge is to be imposed or collected.
    (3) The deferral period is that period of time in which no payment 
is required or made by reason of the deferral.
    (4) Payments received with respect to deferred installments shall be 
deemed to be applied first to deferred installments.
    (5) A charge may not be collected for the deferral of an installment 
or any part thereof if, with respect to that installment, a refinancing 
or consolidation agreement is concluded by the parties, or a late charge 
has been imposed or collected, unless such late charge is refunded to 
the borrower or credited to the deferral charge.
    (h) Notice before repossession, foreclosure, or acceleration. (1) 
Except in the case of abandonment or other extreme circumstances, no 
action to repossess or foreclose, or to accelerate payment of the entire 
outstanding balance of the obligation, may be taken against the debtor 
until 30 days after the creditor sends the debtor a notice of default in 
the form set forth in paragraph (h)(2) of this section. Such notice 
shall be sent by registered or certified mail with return receipt 
requested. In the case of default on payments, the sum stated in the 
notice may only include payments in default and applicable late or 
deferral charges. If the debtor cures the default within 30 days of the 
postmark of the notice and subsequently defaults a second time, the 
creditor shall again give notice as described in this paragraph (h)(1). 
The debtor is not entitled to notice of default more than twice in any 
one-year period.
    (2) The notice in the following form shall state the nature of the 
default, the action the debtor must take to cure the default, the 
creditor's intended actions upon failure of the debtor to cure the 
default, and the debtor's right to redeem under state law.
    To:
    Date: , 20
    Notice of Default and Right To Cure Default
    Name, address, and telephone number of creditor
    Account number, if any
    Brief identification of credit transaction
    You are now in default on this credit transaction. You have a right 
to correct this default within 30 days from the postmarked date of this 
notice.

[[Page 1104]]

    If you correct the default, you may continue with the contract as 
though you did not default. Your default consists of:
    Describe default alleged
    Cure of default: Within 30 days from the postmarked date of this 
notice, you may cure your default by (describe the acts necessary for 
cure, including, if applicable, the amount of payment required, 
including itemized delinquency or deferral charges).
    Creditor's rights: If you do not correct your default in the time 
allowed, we may exercise our rights against you under the law by 
(describe action creditor intends to take).
    If you have any questions, write (the creditor) at the above address 
or call (creditor's designated employee) at (telephone number) between 
the hours of and on (state days of week).
    If this default was caused by your failure to make a payment or 
payments, and you want to pay by mail, please send a check or money 
order; do not send cash.



Sec.  190.100  Status of Interpretations issued under Public Law 96-161.

    The OCC continues to adhere to the views expressed in the formal 
Interpretations issued under the authority of section 105(c) of Public 
Law 96-161, 93 Stat. 1233 (1979). These interpretations, which relate to 
the temporary preemption of state interest ceilings contained in Public 
Law 96-161, may be found at 45 FR 2840 (Jan. 15, 1980); 45 FR 6165 (Jan. 
25, 1980); 45 FR 8000 (Feb. 6, 1980); 45 FR 15921 (Mar. 12, 1980).



Sec.  190.101  State criminal usury statutes.

    (a) Section 501 provides that ``the provisions of the constitution 
or laws of any state expressly limiting the rate or amount of interest, 
discount points, finance charges, or other charges shall not apply to 
any'' Federally-related loan secured by a first lien on residential real 
property, a residential manufactured home, or all the stock allocated to 
a dwelling unit in a residential housing cooperative. 12 U.S.C. 1735f-7 
note (Supp. IV 1980). The question has arisen as to whether the Federal 
statute preempts a state law which deems it a criminal offense to charge 
interest at a rate in excess of that specified in the state law.
    (b) Section 501 preempts all state laws which expressly limit the 
rate or amount of interest chargeable on a Federally-related residential 
first mortgage. It does not matter whether the statute in question 
imposes criminal or civil sanctions; section 501, by its terms, preempts 
``any'' state law which imposes a ceiling on interest rates. The wording 
of the Federal statute clearly expresses an intent to displace all 
direct state law restraints on interest. Any state law that conflicts 
with this Congressional purpose must yield.



PART 191_PREEMPTION OF STATE DUE-ON-SALE LAWS--Table of Contents



Sec.
191.1 Authority, purpose, and scope.
191.2 Definitions.
191.3 Loans originated by Federal savings associations.
191.4 Loans originated by lenders other than Federal savings 
          associations.
191.5 Limitation on exercise of due-on-sale clauses.
191.6 Interpretations.

    Authority: 12 U.S.C. 1464, 1701j-3, and 5412(b)(2)(B).

    Source: 76 FR 49154, Aug. 9, 2011, unless otherwise noted.



Sec.  191.1  Authority, purpose, and scope.

    (a) Authority. This part contains regulations issued under section 5 
of the Home Owners' Loan Act of 1933, as amended, and under section 341 
of the Garn-St Germain Depository Institutions Act of 1982, Public Law 
97-320, 96 Stat. 1469, 1505-1507.
    (b) Purpose and scope. The purpose of this permanent preemption of 
state prohibitions on the exercise of due-on-sale clauses by all 
lenders, whether Federally- or state-chartered, is to reaffirm the 
authority of Federal savings associations to enforce due-on-sale 
clauses, and to confer on other lenders generally comparable authority 
with respect to the exercise of such clauses. This part applies to all 
real property loans, and all lenders making such loans, as those terms 
are defined in Sec.  191.2 of this part.

[[Page 1105]]



Sec.  191.2  Definitions.

    For the purposes of this part, the following definitions apply:
    (a) Assumed includes transfers of real property subject to a real 
property loan by assumptions, installment land sales contracts, 
wraparound loans, contracts for deed, transfers subject to the mortgage 
or similar lien, and other like transfers. ``Completed credit 
application'' has the same meaning as completed application for credit 
as provided in Sec.  202.2(f) of this title.
    (b) Due-on-sale clause means a contract provision which authorizes 
the lender, at its option, to declare immediately due and payable sums 
secured by the lender's security instrument upon a sale of transfer of 
all or any part of the real property securing the loan without the 
lender's prior written consent. For purposes of this definition, a sale 
or transfer means the conveyance of real property of any right, title or 
interest therein, whether legal or equitable, whether voluntary or 
involuntary, by outright sale, deed, installment sale contract, land 
contract, contract for deed, leasehold interest with a term greater than 
three years, lease-option contract or any other method of conveyance of 
real property interests.
    (c) Federal savings association has the same meaning as provided in 
Sec.  141.11 of this chapter.
    (d) Federal credit union means a credit union chartered under the 
Federal Credit Union Act.
    (e) Home has the same meaning as provided in Sec.  141.14 of this 
chapter.
    (f) Savings association has the same meaning as provided in Sec.  
161.43 of this chapter.
    (g) Lender means a person or government agency making a real 
property loan, including without limitation, individuals, Federal 
savings associations, state-chartered savings associations, national 
banks, state-chartered banks and state-chartered mutual savings banks, 
Federal credit unions, state-chartered credit unions, mortgage banks, 
insurance companies and finance companies which make real property 
loans, manufactured-home retailers who extend credit, agencies of the 
Federal government, any lender approved by the Secretary of Housing and 
Urban Development for participation in any mortgage insurance program 
under the National Housing Act, and any assignee or transferee, in whole 
or part, of any such persons or agencies.
    (h) Loan secured by a lien on real property means a loan on the 
security of any instrument (whether a mortgage, deed or trust, or land 
contract) which makes the interest in real property (whether in fee, or 
in a leasehold or subleasehold) specific security for the payment of the 
obligation secured by the instrument.
    (i) Loan secured by a lien on stock in a residential cooperative 
housing corporation means a loan on the security of:
    (1) A security interest in stock or a membership certificate issued 
to a tenant stockholder or resident member by a cooperative housing 
organization; and
    (2) An assignment of the borrower's interest in the proprietary 
lease or occupancy agreement issued by such organization.
    (j) Loan secured by a lien on a residential manufactured home, 
whether real or personal property, means a loan made pursuant to an 
agreement by which the party extending the credit acquires a security 
interest in the residential manufactured home.
    (k) Loan originated by a Federal savings association or other lender 
means any loan for which the lender makes the first advance of credit 
thereunder, Provided, That such lender then held a beneficial interest 
in the loan, whether as to the whole loan or a portion thereof, and 
whether or not the loan is later held by or transferred to another 
lender.
    (l) Real property loan means any loan, mortgage, advance or credit 
sale secured by a lien on real property, the stock or membership 
certificate allocated to a dwelling unit in a cooperative housing 
corporation, or a residential manufactured home, whether real or 
personal property.
    (m) Residential manufactured home has the same meaning as provided 
in Sec.  190.2(g) of this chapter.
    (n) Reverse mortgage means an instrument that provides for one or 
more payments to a homeowner based on accumulated equity. The lender may 
make payment directly, through the

[[Page 1106]]

purchase of an annuity through an insurance company, or in any other 
manner. The loan may be due either on a specific date or when a 
specified event occurs, such as the sale of the property or the death of 
the borrower.
    (o) State means the several states, Puerto Rico, the District of 
Columbia, Guam, the Trust Territory of the Pacific Islands, the Northern 
Mariana Islands, the Virgin Islands, and American Samoa.
    (p)(1) A window-period loan means a real property loan, not 
originated by a Federal savings association, which was made or assumed 
during a window-period created by state law and subject to that law, 
which loan was recorded, at the time of origination or assumption, 
before October 15, 1982, or within 60 days thereafter (December 14, 
1982).
    (2) The window-period begins on:
    (i) The date a state adopted a law (by means of a constitutional 
provision or statute) prohibiting the unrestricted exercise of due-on-
sale clauses upon outright transfers of property securing loans subject 
to the state law creating the window-period, or the effective date of a 
constitutional or statutory provision so adopted, whichever is later; or
    (ii) The date on which the highest court of the state rendered a 
decision prohibiting such unrestricted exercise (or if the highest court 
has not so decided, the date on which the next highest appellate court 
rendered a decision resulting in a final judgment which applies 
statewide), and ends on the earlier of the date such state law 
prohibition terminated under state law or October 15, 1982.
    (3) Categories of state law which create window-periods by 
prohibiting the unrestricted exercise of due-on-sale clauses upon 
outright transfers of property securing loans subject to such state law 
restrictions include laws or judicial decisions which permit the lender 
to exercise its option under a due-on-sale clause only where:
    (i) The lender's security interest or the likelihood of repayment is 
impaired; or
    (ii) The lender is required to accept an assumption of the existing 
loan without an interest-rate change or with an interest-rate change 
below the market interest rate currently being offered by the lender on 
similar loans secured by similar property at the time of the transfer.



Sec.  191.3  Loans originated by Federal savings associations.

    (a) With regard to any real property loan originated or to be 
originated by a Federal savings association, as a matter of contract 
between it and the borrower, a Federal savings association continues to 
have the power to include a due-on-sale clause in its loan instrument.
    (b) Except as otherwise provided in Sec.  191.5 of this part with 
respect to any such loan made on the security of a home occupied or to 
be occupied by the borrower, exercise by any lender of a due-on-sale 
clause in a loan originated by a Federal savings association shall be 
exclusively governed by the terms of the loan contract, and all rights 
and remedies of the lender and borrower shall at all times be fixed and 
governed by that contract.



Sec.  191.4  Loans originated by lenders other than Federal 
savings associations.

    (a) With regard to any real property loan originated by a lender 
other than a Federal savings association, as a matter of contract 
between it and the borrower, the lender has the power to include a due 
on sale clause in its loan instrument.
    (b) Except as otherwise provided in paragraph (c) of this section 
and Sec.  191.5 of this part, the exercise of due-on-sale clauses in 
loans originated by lenders other than Federal savings associations 
shall be governed exclusively by the terms of the loan contract, and all 
rights and remedies of the lender and the borrower shall be fixed and 
governed by that contract.
    (c)(1) In the case of a window-period loan, the provisions of 
paragraph (b) of this section shall apply only in the case of a sale or 
transfer of the property subject to the real property loan and only if 
such sale or transfer occurs on or after October 15, 1985: Provided, 
That:
    (i) With respect to real property loans originated in a state by 
lenders other than national banks, Federal

[[Page 1107]]

savings associations, and Federal credit unions, a state may otherwise 
regulate such contracts by state law enacted prior to October 16, 1985, 
in which case paragraph (b) of this section shall apply only if such 
state law so provides; and
    (ii) With respect to real property loans originated by national 
banks and Federal credit unions, the OCC or the National Credit Union 
Administration Board, respectively, may otherwise regulate such 
contracts by regulations promulgated prior to October 16, 1985, in which 
case paragraph (b) of this section shall apply only if such regulation 
so provides.
    (2) A lender may not exercise its options pursuant to a due-on-sale 
clause contained in a window-period loan in the case of a sale or 
transfer of property securing such loan where the sale or transfer 
occurred prior to October 15, 1982.
    (d)(1) Prior to the sale or transfer of property securing a window-
period loan subject to the provisions of paragraph (c) of this section.
    (i) Any lender in the business of making real property loans may 
require any successor or transferee of the borrower to supply credit 
information customarily required by the lender in connection with credit 
applications, to complete its customary credit application, and to meet 
customary credit standards applied by such lender, at the date of sale 
or transfer, to the lender's similar loans secured by similar property.
    (ii) Any lender not in the business of making loans may require any 
successor or transferee of the borrower to meet credit standards 
customarily applied by other similarly situated lenders or sellers in 
the geographic market within which the transaction occurs, for similar 
loans secured by similar property, prior to the lender's consent to the 
transfer.
    (2) The lender may exercise a due-on-sale clause in a window-period 
loan if:
    (i) The successor or transferee of the borrower fails to meet the 
lender's credit standards as set forth in paragraphs (b)(1)(i) and 
(b)(1)(ii) of this section; or
    (ii) Upon transfer of the security property and not later than 
fifteen days after written request by the lender, the successor or 
transferee of the borrower fails to provide information requested by the 
lender pursuant to paragraph (d)(1)(i) or (d)(1)(ii) of this section, to 
determine whether such successor or transferee of the borrower meets the 
lender's customary credit standards.
    (3) The lender shall, within thirty days of receipt of a completed 
credit application and any other related information provided by the 
successor or transferee of the borrower, determine whether such 
successor or transferee meets the customary credit standards of the 
lender and provide written notice to the successor or transferee of its 
decision, and the reasons in the event of a disapproval. Failure of the 
lender to provide such notice shall preclude the lender from exercise of 
its due-on-sale clause upon the sale or transfer of the property 
securing the loan.
    (4) The lender's right to exercise a due-on-sale clause pursuant to 
this paragraph (d)(4) is in addition to any other rights afforded the 
lender by state law regulating window-period loans with regard to the 
exercise of due-on-sale clauses and loan assumptions.



Sec.  191.5  Limitation on exercise of due-on-sale clauses.

    (a) General. Except as provided in Sec.  191.4(c) and (d)(4) of this 
part, due-on-sale practices of Federal savings associations and other 
lenders shall be governed exclusively by the OCC's regulations, in 
preemption of and without regard to any limitations imposed by state law 
on either their inclusion or exercise including, without limitation, 
state law prohibitions against restraints on alienation, prohibitions 
against penalties and forfeitures, equitable restrictions and state law 
dealing with equitable transfers.
    (b) Specific limitations. With respect to any loan on the security 
of a home occupied or to be occupied by the borrower,
    (1) A lender shall not (except with regard to a reverse mortgage) 
exercise its option pursuant to a due-on-sale clause upon:

[[Page 1108]]

    (i) The creation of a lien or other encumbrance subordinate to the 
lender's security instrument which does not relate to a transfer of 
rights of occupancy in the property: Provided, That such lien or 
encumbrance is not created pursuant to a contract for deed;
    (ii) The creation of a purchase-money security interest for 
household appliances;
    (iii) A transfer by devise, descent, or operation of law on the 
death of a joint tenant or tenant by the entirety;
    (iv) The granting of a leasehold interest which has a term of three 
years or less and which does not contain an option to purchase (that is, 
either a lease of more than three years or a lease with an option to 
purchase will allow the exercise of a due-on-sale clause);
    (v) A transfer, in which the transferee is a person who occupies or 
will occupy the property, which is:
    (A) A transfer to a relative resulting from the death of the 
borrower;
    (B) A transfer where the spouse or child(ren) becomes an owner of 
the property; or
    (C) A transfer resulting from a decree of dissolution of marriage, 
legal separation agreement, or from an incidental property settlement 
agreement by which the spouse becomes an owner of the property; or
    (vi) A transfer into an inter vivos trust in which the borrower is 
and remains the beneficiary and occupant of the property, unless, as a 
condition precedent to such transfer, the borrower refuses to provide 
the lender with reasonable means acceptable to the lender by which the 
lender will be assured of timely notice of any subsequent transfer of 
the beneficial interest or change in occupancy.
    (2) A lender shall not impose a prepayment penalty or equivalent fee 
when the lender or party acting on behalf of the lender.
    (i) Declares by written notice that the loan is due pursuant to a 
due-on-sale clause or
    (ii) Commences a judicial or nonjudicial foreclosure proceeding to 
enforce a due-on-sale clause or to seek payment in full as a result of 
invoking such clause.
    (3) A lender shall not impose a prepayment penalty or equivalent fee 
when the lender or party acting on behalf of the lender fails to approve 
within 30 days the completed credit application of a qualified 
transferee of the security property to assume the loan in accordance 
with the terms of the loan, and thereafter the borrower transfers the 
security property to such transferee and prepays the loan in full within 
120 days after receipt by the lender of the completed credit 
application. For purposes of this paragraph (b)(3), a qualified 
transferee is a person who qualifies for the loan under the lender's 
applicable underwriting standards and who occupies or will occupy the 
security property.
    (4) A lender waives its option to exercise a due-on-sale clause as 
to a specific transfer if, before the transfer, the lender and the 
existing borrower's prospective successor in interest agree in writing 
that the successor in interest will be obligated under the terms of the 
loan and that interest on sums secured by the lender's security interest 
will be payable at a rate the lender shall request. Upon such agreement 
and resultant waiver, a lender shall release the existing borrower from 
all obligations under the loan instruments, and the lender is deemed to 
have made a new loan to the existing borrower's successor in interest. 
The waiver and release apply to all loans secured by homes occupied by 
borrowers made by a Federal savings association after July 31, 1976, and 
to all loans secured by homes occupied by borrowers made by other 
lenders after the effective date of this regulation.
    (5) Nothing in paragraph (b)(1) of this section shall be construed 
to restrict a lender's right to enforce a due-on-sale clause upon the 
subsequent occurrence of any event which disqualifies a transfer for a 
previously-applicable exception under that paragraph (b)(1).
    (c) Policy considerations. Paragraph (b) of this section does not 
prohibit a lender from requiring, as a condition to an assumption, 
continued maintenance of mortgage insurance by the existing borrower's 
successor in interest, whether by endorsement of the existing policy or 
by entrance into a new contract of insurance.

[[Page 1109]]



Sec.  191.6  Interpretations.

    The OCC periodically will publish Interpretations under section 341 
of the Garn-St Germain Depository Institutions Act of 1982, Public Law 
97-320, 96 Stat. 1469, 1505-1507, in the Federal Register in response to 
written requests sent to the OCC.



PART 192_CONVERSIONS FROM MUTUAL TO STOCK FORM--Table of Contents



Sec.
192.5 Purpose, prescribed forms, waiver.
192.7 Electronic filing.
192.8 Computation of time.
192.10 Forming a holding company upon conversion.
192.15 Forming a charitable organization upon conversion.
192.20 Acquiring another insured depository institution upon conversion.
192.25 Definitions.

                     Subpart A_Standard Conversions

                           Prior to Conversion

192.100 Preparing for a conversion.
192.105 Information required in business plan.
192.110 Review of business plan by chief executive officer and board of 
          directors.
192.115 Review of business plan by the appropriate Federal banking 
          agency.
192.120 Confidentiality of conversion information.

                           Plan of Conversion

192.125 Adoption of plan of conversion by board of directors.
192.130 Information required in plan of conversion.
192.135 Notifying members of adopted plan of conversion.
192.140 Amendments to plan of conversion.

                           Filing Requirements

192.150 Information required in an application for conversion.
192.155 Filing an application for conversion.
192.160 Request for confidential treatment.
192.165 Amendments to an application for conversion.

           Notice of Filing of Application and Comment Process

192.180 Public notice of an application for conversion.
192.185 Public comment on application for conversion.

             Agency Review of the Application for Conversion

192.200 Review, approval, or denial of application for conversion.
192.205 Court review of final action on application for conversion.

                             Vote by Members

195.225 Approval of plan of conversion by members.
192.230 Members' voting eligibility.
192.235 Notice of members' meeting.
192.240 Submission of documents to the appropriate Federal banking 
          agency after the members' meeting.

                           Proxy Solicitation

192.250 Compliance with proxy solicitation provisions.
192.255 Form of proxy requirements.
192.260 Previously executed proxies.
192.265 Proxies executed under this part.
192.270 Proxy statement requirements.
192.275 Filing revised proxy materials.
192.280 Mailing member's proxy solicitation materials.
192.285 Prohibited solicitations.
192.290 Remedial measures for prohibited solicitations.
192.295 Re-solicitation of proxies.

                            Offering Circular

192.300 Offering circular requirements.
192.305 Distribution of offering circular.
192.310 Filing a post-effective amendment to an offering circular.

                        Offers and Sales of Stock

192.320 Order of priority to purchase conversion shares.
192.325 Timing of offer to sell conversion shares.
192.330 Pricing of conversion shares.
192.335 Procedures for the sale of conversion shares.
192.340 Prohibited sales practices.
192.345 Permissible forms of subscriber payment.
192.350 Interest on payments for conversion shares.
192.355 Subscription rights for eligible account holders and 
          supplemental eligible account holders.
192.360 Officers, directors, and associates as eligible account holders.
192.365 Purchase of conversion shares by other voting members.
192.370 Limits on aggregate purchases by officers, directors, and 
          associates.
192.375 Allocation of oversubscribed conversion shares.
192.380 Purchase of conversion shares by employee stock ownership plan.
192.385 Purchase limitations.
192.390 Community offering of conversion shares.

[[Page 1110]]

192.395 Other conditions for community and public offerings.

                       Completion of the Offering

192.400 Time period for completion of sale of stock.
192.405 Extension of the offering period.

                      Completion of the Conversion

192.420 Time period for completion of the conversion.
192.425 Termination of conversion.
192.430 Charter amendments.
192.435 Corporate existence after conversion.
192.440 Stockholder voting rights after conversion.
192.445 Savings account holder's account after conversion.

                           Liquidation Account

192.450 Liquidation accounts.
192.455 Initial balance of liquidation account.
192.460 Initial balance of liquidation sub-account.
192.465 Retention of voting rights based on liquidation sub-accounts.
192.470 Required adjustments to liquidation sub-accounts.
192.475 Definition of liquidation.
192.480 Effect of liquidation account on net worth.
192.485 Required liquidation account provision in new Federal charter.

                             Post-Conversion

192.500 Permissible management stock benefit plans after conversion.
192.505 Restrictions on the trading of shares by directors, officers, 
          and associates.
192.510 Repurchase of shares after conversion.
192.515 Information to be filed with Federal banking agency prior to 
          repurchase of shares.
192.520 Declaring and paying dividends after the conversion.
192.525 Restrictions on acquisition of shares after conversion.
192.530 Other post-conversion requirements.

                Contributions to Charitable Organizations

192.550 Donating conversion shares or conversion proceeds to a 
          charitable organization.
192.555 Member approval of charitable contributions.
192.560 Limitations on charitable contributions.
192.565 Contents of organizational documents of charitable organization.
192.570 Conflicts of interest among directors.
192.575 Other requirements for charitable organizations.

               Subpart B_Voluntary Supervisory Conversions

192.600 Voluntary supervisory conversions.
192.605 Conducting a voluntary supervisory conversion.
192.610 Member rights in a voluntary supervisory conversion.

                               Eligibility

192.625 Eligibility for a voluntary supervisory conversion.
192.630 Eligibility of State-chartered savings bank for voluntary 
          supervisory conversion.

                     Plan of Supervisory Conversion

192.650 Contents of plan of voluntary supervisory conversion.

              Voluntary Supervisory Conversion Application

192.660 Contents of voluntary supervisory conversion application.

 Appropriate Federal Banking Agency Review of the Voluntary Supervisory 
                         Conversion Application

192.670 Approval of voluntary supervisory conversion application.
192.675 Conditions imposed upon approval of voluntary supervisory 
          conversion application.

                        Offers and Sales of Stock

192.680 Offer and sale of shares in a voluntary supervisory conversion.

                             Post-Conversion

192.690 Restrictions on acquisition of additional shares after voluntary 
          supervisory conversion.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 2901 et seq., 
5412(b)(2)(B); 15 U.S.C. 78c, 78l, 78m, 78n, 78w.

    Source: 85 FR 42643, July 14, 2020, unless otherwise noted.



Sec.  192.5  Purpose, prescribed forms, waiver.

    (a) General. This part governs how a savings association may convert 
from the mutual to the stock form of ownership. Subpart A of this part 
governs standard mutual-to-stock conversions. Subpart B of this part 
governs voluntary supervisory mutual-to-stock conversions. This part 
supersedes all

[[Page 1111]]

inconsistent charter and bylaw provisions of Federal savings 
associations converting to stock form.
    (b) Prescribed forms. A savings association must use the forms 
prescribed under this part and part 16 and provide such information as 
the appropriate Federal banking agency may require under the forms and 
by regulation. The forms required under this part include: Form AC 
(Application for Conversion); Form PS (Proxy Statement); Form OC 
(Offering Circular); Form OF (Order Form); and the applicable form for a 
registration statement under 12 CFR 16.15. Forms AC, PS, OC, and OF are 
available on the website of the Office of the Comptroller of the 
Currency (OCC) at http://www.occ.gov.
    (c) Waivers. The appropriate Federal banking agency may waive any 
requirement of this part or a provision in any prescribed form. To 
obtain a waiver, a savings association must file a written request with 
the appropriate Federal banking agency that:
    (1) Specifies the requirement(s) or provision(s) the savings 
association wants the appropriate Federal banking agency to waive;
    (2) Demonstrates that the waiver is equitable; is not detrimental to 
the savings association, its account holders, or other savings 
associations; and is not contrary to the public interest; and
    (3) Includes an opinion of counsel demonstrating that applicable law 
does not conflict with the waiver of the requirement or provision.
    (d) Financial statements. The form and content of financial 
statements and related financial data in a filing under this part must 
be prepared and presented in accordance with U. S. generally accepted 
accounting principles and other applicable accounting guidance and 
requirements as specified by the OCC in the forms required under 
paragraph (b) of this section.



Sec.  192.7  Electronic filing.

    For Federal savings associations, the OCC encourages the electronic 
filing of all applications, notices, or other documents required by this 
part through http://www.banknet.gov/. The Comptroller's Licensing Manual 
describes the OCC's electronic filing procedures.



Sec.  192.8  Computation of time.

    In computing the period of days, the OCC excludes the day of the act 
or event (e.g., the date an application is received by the OCC) from 
when the period begins to run. When the last day of a time period is a 
Saturday, Sunday, or Federal holiday, the time period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday.



Sec.  192.10  Forming a holding company upon conversion.

    A savings association may convert to the stock form of ownership as 
part of a transaction where the savings association organizes a holding 
company to acquire all of the savings association's shares upon their 
issuance. In this transaction, the savings association's holding company 
will offer rights to purchase its shares instead of the savings 
association's shares. Regulations of the Board of Governors of the 
Federal Reserve System address holding company application requirements.



Sec.  192.15  Forming a charitable organization upon conversion.

    When a savings association converts to the stock form, it may form a 
charitable organization. A savings association's contributions to the 
charitable organization are governed by the requirements of Sec. Sec.  
192.550 through 192.575.



Sec.  192.20  Acquiring another insured depository institution upon conversion.

    When a savings association converts to stock form, it may acquire 
for cash or stock another insured depository institution that is already 
in the stock form of ownership.



Sec.  192.25  Definitions.

    The following definitions apply to this part and the forms 
prescribed under this part:
    Acting in concert has the same meaning as in 12 CFR 5.50(d)(2). The 
rebuttable presumptions of 12 CFR 5.50(f)(2), other than 12 CFR 
5.50(f)(2)(ii)(A) and (B), apply to the share purchase limitations at 
Sec. Sec.  192.355 through 192.395.
    Affiliate of, or a person affiliated with, a specified person is a 
person that directly or indirectly, through one or

[[Page 1112]]

more intermediaries, controls, is controlled by, or is under common 
control with the specified person.
    Appropriate Federal banking agency means appropriate Federal banking 
agency as defined in section 3 of the Federal Deposit Insurance Act (12 
U.S.C. 1813(q)).
    Associate of a person is:
    (1) A corporation or organization (other than a savings association 
or its majority-owned subsidiaries), if the person is a senior officer 
or partner, or beneficially owns, directly or indirectly, 10 percent or 
more of any class of equity securities of the corporation or 
organization.
    (2) A trust or other estate, if the person has a substantial 
beneficial interest in the trust or estate or is a trustee or fiduciary 
of the trust or estate. For purposes of Sec. Sec.  192.370 through 
192.395 and 192.505, a person who has a substantial beneficial interest 
in a savings association's tax-qualified or non-tax-qualified employee 
stock benefit plan, or who is a trustee or a fiduciary of the plan, is 
not an associate of the plan. For the purposes of Sec.  192.370, a 
savings association's tax-qualified employee stock benefit plan is not 
an associate of a person.
    (3) Any person who is related by blood or marriage to such person 
and:
    (i) Who lives in the same home as the person; or
    (ii) Who is the savings association's director or senior officer, or 
a director or senior officer of the savings association's holding 
company or its subsidiary.
    Association members or members are persons who, under applicable 
law, are eligible to vote at the meeting on conversion.
    Community offering means the offer to sell to the members of the 
general public in the savings association's community the securities not 
subscribed for in the subscription offering. The community offering may 
occur concurrently with the subscription offering and any syndicated 
community offering, or upon conclusion of the subscription offering.
    Control (including controlling, controlled by, and under common 
control with) means the direct or indirect power to direct or exercise a 
controlling influence over the management and policies of a person, 
whether through the ownership of voting securities, by contract, or 
otherwise as described in 12 CFR 5.50.
    Demand accounts means non-interest-bearing demand deposits that are 
subject to check or to withdrawal or transfer on negotiable or 
transferable order to the savings association and that are permitted to 
be issued by statute, regulation, or otherwise and are payable on 
demand.
    Eligibility record date is the date for determining eligible account 
holders. The eligibility record date must be at least one year before 
the date a savings association's board of directors adopts the plan of 
conversion.
    Eligible account holders are any persons holding qualifying deposits 
on the eligibility record date.
    Federal savings association means a Federal savings association or 
Federal savings bank chartered under section 5 of the Home Owners' Loan 
Act (HOLA) (12 U.S.C. 1464).
    IRS is the Internal Revenue Service.
    Local community includes:
    (1) Every county, parish, or similar governmental subdivision in 
which a savings association has a home or branch office;
    (2) Each county's, parish's, or subdivision's metropolitan 
statistical area;
    (3) All zip code areas in a savings association's Community 
Reinvestment Act assessment area; and
    (4) Any other area or category that a savings association sets out 
in its plan of conversion, as approved by the appropriate Federal 
banking agency.
    Offer, offer to sell, or offer for sale is an attempt or offer to 
dispose of, or a solicitation of an offer to buy, a security or interest 
in a security for value. Preliminary negotiations or agreements with an 
underwriter, or among underwriters who are or will be in privity of 
contract with a savings association, are not offers, offers to sell, or 
offers for sale.
    Offering circular means the securities offering materials for the 
conversion.
    Person is an individual, a corporation, a partnership, an 
association, a

[[Page 1113]]

joint-stock company, a limited liability company, a trust, an 
unincorporated organization, or a government or political subdivision of 
a government.
    Proxy soliciting material includes a proxy statement, form of proxy, 
or other written or oral communication regarding the conversion.
    Purchase or buy includes every contract to acquire a security or 
interest in a security for value.
    Qualifying deposit is the total balance in an account holder's 
savings accounts at the close of business on the eligibility or 
supplemental eligibility record date. A savings association's plan of 
conversion may provide that only savings accounts with total deposit 
balances of $50 or more will qualify.
    Sale or sell includes every contract to dispose of a security or 
interest in a security for value. An exchange of securities in a merger 
or acquisition approved by the appropriate Federal banking agency is not 
a sale.
    Savings account means any withdrawable account, including a demand 
account, except this term does not mean a tax and loan account, a note 
account, a United States Treasury general account, or a United States 
Treasury time deposit-open account.
    Savings association means a savings association as defined in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)).
    Solicitation and solicit is a request for a proxy, whether or not 
accompanied by or included in a form of proxy; a request to execute, not 
execute, or revoke a proxy; or the furnishing of a form of proxy or 
other communication reasonably calculated to cause a savings 
association's members to procure, withhold, or revoke a proxy. 
Solicitation or solicit does not include providing a form of proxy at 
the unsolicited request of a member, the acts required to mail 
communications for members, or ministerial acts performed on behalf of a 
person soliciting a proxy.
    State means any State of the United States, the District of 
Columbia, any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Trust Territory of the Pacific Islands, the Virgin 
Islands, and the Northern Mariana Islands.
    State savings association means a State savings association as 
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
1813(b)(3)).
    Subscription offering is the offering of shares through 
nontransferable subscription rights to:
    (1) Eligible account holders under Sec.  192.355;
    (2) Tax-qualified employee stock ownership plans under Sec.  
192.380;
    (3) Supplemental eligible account holders under Sec.  192.355; and
    (4) Other voting members under Sec.  192.365.
    Supplemental eligibility record date is the date for determining 
supplemental eligible account holders. The supplemental eligibility 
record date is the last day of the calendar quarter before the 
appropriate Federal banking agency approves a savings association's 
conversion and will only occur if such agency has not approved such 
conversion within 15 months after the eligibility record date.
    Supplemental eligible account holders are any persons, except a 
savings association's officers, directors, and their associates, holding 
qualifying deposits on the supplemental eligibility record date.
    Tax-qualified employee stock benefit plan is any defined benefit 
plan or defined contribution plan, such as an employee stock ownership 
plan, stock bonus plan, profit-sharing plan, or other plan, and a 
related trust, that is qualified under section 401 of the Internal 
Revenue Code (26 U.S.C. 401).
    Underwriter is any person who purchases any securities from a 
savings association with a view to distributing the securities, offers 
or sells securities for a savings association in connection with the 
securities' distribution, or participates or has a direct or indirect 
participation in the direct or indirect underwriting of any such 
undertaking. Underwriter does not include a person whose interest is 
limited to a usual and customary distributor's or seller's commission 
from an underwriter or dealer.

[[Page 1114]]

    Voluntary supervisory conversion is a mutual to stock conversion for 
a savings association that is unable to complete a standard mutual to 
stock conversion under part 192, subpart A, and that meets the 
eligibility requirements of Sec.  192.625.



                     Subpart A_Standard Conversions

                           Prior to Conversion



Sec.  192.100  Preparing for a conversion.

    (a) Meeting with appropriate Federal banking agency prior to passing 
plan. A savings association's board, or a subcommittee of its board, 
must meet, in person or electronically, with the appropriate Federal 
banking agency before the savings association passes its plan of 
conversion. At this meeting the savings association must provide the 
appropriate Federal banking agency with a written strategic plan that 
outlines the objectives of the proposed conversion and the intended use 
of the conversion proceeds.
    (b) Consultation with appropriate Federal banking agency before 
filing application. A savings association also should consult with the 
appropriate Federal banking agency before filing its application for 
conversion. The appropriate Federal banking agency will discuss the 
information that the savings association must include in the application 
for conversion, general issues that it may confront in the conversion 
process, and any other pertinent issues.



Sec.  192.105  Information required in business plan.

    (a) Minimum requirements. Prior to filing an application for 
conversion, a savings association must adopt a business plan reflecting 
its intended plans for deployment of the proposed conversion proceeds. 
The savings association's business plan is required, under Sec.  
192.150, to be included in its application for conversion. At a minimum, 
the business plan must address:
    (1) The savings association's projected operations and activities 
for three years following the conversion. These projections must include 
how the savings association will accomplish the following by the final 
year of the business plan:
    (i) Deploy the conversion proceeds at the converted savings 
association (and holding company, if applicable);
    (ii) What opportunities are available to reasonably achieve its 
planned deployment of conversion proceeds in the proposed market areas; 
and
    (iii) How the deployment will provide a reasonable return on 
investment commensurate with investment risk, investor expectations, and 
industry norms. The savings association must include three years of 
projected financial statements. The business plan must provide that the 
converted savings association must retain at least 50 percent of the net 
conversion proceeds. The appropriate Federal banking agency may require 
that a larger percentage of proceeds remain in the institution.
    (2) The savings association's plan for deploying conversion proceeds 
to meet credit and lending needs in the proposed market areas. The 
appropriate Federal banking agencies strongly discourage business plans 
that provide for a substantial investment in mortgage securities or 
other securities, except as an interim measure to facilitate orderly, 
prudent deployment of proceeds during the three years following the 
conversion or as part of a properly managed leverage strategy.
    (3) The risks associated with the savings association's plan for 
deployment of conversion proceeds, and the effect of this plan on 
management resources, staffing, and facilities.
    (4) The expertise of the savings association's management and board 
of directors, or plans for adequate staffing and controls to prudently 
manage the growth, expansion, new investment, and other operations and 
activities proposed in the business plan.
    (b) Prohibited information. The savings association may not project 
returns of capital or special dividends in any part of the business 
plan. A newly converted company may not plan on stock repurchases in the 
first year of the business plan.



Sec.  192.110  Review of business plan by chief executive officer 
and board of directors.

    (a) Review and approval. A savings association's chief executive 
officer and

[[Page 1115]]

members of the board of directors must review, and at least two-thirds 
of the board of directors must approve, the business plan.
    (b) Certification. A savings association's chief executive officer 
and at least two-thirds of the board of directors must certify that the 
business plan accurately reflects the intended plans for deployment of 
conversion proceeds, and that any new initiatives reflected in the 
business plan are reasonably achievable. The savings association must 
submit these certifications with its business plan, as part of its 
application for conversion under Sec.  192.150.



Sec.  192.115  Review of business plan by the appropriate 
Federal banking agency.

    (a) Agency review. The appropriate Federal banking agency will 
review the savings association's business plan to determine that it 
demonstrates a safe and sound deployment of conversion proceeds, as part 
of its review of the application for conversion. In making its 
determination, the appropriate Federal banking agency will consider how 
the savings association has addressed the applicable factors of Sec.  
192.105. No single factor will be determinative.
    (b) Filing of business plan. A savings association must file its 
business plan as a separate confidential exhibit to the Form AC with the 
appropriate OCC licensing office if it is a Federal savings association, 
or with the appropriate Federal Deposit Insurance Corporation (FDIC) 
region if it is a State savings association. The appropriate Federal 
banking agency may request additional information, if necessary, to 
support its determination under paragraph (a) of this section.
    (c) Operation within business plan. If the appropriate Federal 
banking agency approves a savings association's application for 
conversion and the conversion is completed, the savings association must 
operate within the parameters of its business plan. The savings 
association must obtain the prior written approval of the appropriate 
Federal banking agency for any material deviations from its business 
plan.



Sec.  192.120  Confidentiality of conversion information.

    (a) Permitted disclosure. A savings association may discuss 
information about its conversion with individuals that the savings 
association authorizes to prepare documents for its conversion.
    (b) Confidential information. Except as permitted under paragraph 
(a) of this section, a savings association must keep all information 
about its conversion confidential until its board of directors adopts 
the plan of conversion.
    (c) Violations of confidentiality. If a savings association violates 
this section, the appropriate Federal banking agency may require the 
savings association to take remedial action. For example, the 
appropriate Federal banking agency may require the savings association 
to take any or all of the following actions:
    (1) Publicly announce that the savings association is considering a 
conversion;
    (2) Set an eligibility record date acceptable to the appropriate 
Federal banking agency;
    (3) Limit the subscription rights of any person who violates or aids 
a violation of this section; or
    (4) Any other action to assure that the conversion is fair and 
equitable.

                           Plan of Conversion



Sec.  192.125  Adoption of plan of conversion by board of directors.

    Prior to filing an application for conversion, a savings 
association's board of directors must adopt a plan of conversion that 
conforms to Sec. Sec.  192.320 through 192.485 and 192.505. The savings 
association's board of directors must adopt the plan by at least a two-
thirds vote. Pursuant to Sec.  192.150, the savings association must 
include the plan of conversion in the application for conversion.



Sec.  192.130  Information required in plan of conversion.

    A savings association must include the information included in 
Sec. Sec.  192.320 through 192.485 and 192.505 in its plan of 
conversion. The appropriate Federal banking agency may require the 
savings association to delete or revise any

[[Page 1116]]

provision in its plan of conversion if it determines the provision is 
inequitable; is detrimental to the savings association, its account 
holders, or other savings associations; or is contrary to public 
interest.



Sec.  192.135  Notifying members of adopted plan of conversion.

    (a) Notice. A savings association must promptly notify its members 
that the board of directors adopted a plan of conversion and that a copy 
of the plan is available for the members' inspection in the savings 
association's home office and in its branch offices. The savings 
association must provide this notice by sending to each member a letter, 
through the mail or electronically if the member receives electronic 
communication, or by publishing a notice in the local newspaper in every 
local community where the savings association has an office. The savings 
association also may issue a press release and may make this notice 
available on its website. The appropriate Federal banking agency may 
require broader publication, if necessary, to ensure adequate notice to 
the savings association's members.
    (b) Contents of notice. The savings association may include only the 
following statements and descriptions in the letter, notice, or press 
release.
    (1) The savings association's board of directors adopted a proposed 
plan to convert from a mutual to a stock savings institution.
    (2) The savings association will send its members a proxy statement 
with detailed information on the proposed conversion before the savings 
association convenes a members' meeting to vote on the conversion.
    (3) The savings association's members will have an opportunity to 
approve or disapprove the proposed conversion at a meeting. A majority 
of the eligible votes must approve the conversion.
    (4) The savings association will not vote existing proxies to 
approve or disapprove the conversion. The savings association will 
solicit new proxies for voting on the proposed conversion.
    (5) The appropriate Federal banking agency, and in the case of a 
State-chartered savings association, the appropriate State regulator, 
must approve the conversion before the conversion will be effective. The 
savings association's members will have an opportunity to file written 
comments, including objections and materials supporting the objections, 
with the appropriate Federal banking agency.
    (6) The IRS must issue a favorable tax ruling, or a tax expert must 
issue an appropriate tax opinion, on the tax consequences of the savings 
association's conversion before the appropriate Federal banking agency 
will approve the conversion. The ruling or opinion must indicate the 
conversion will be a tax-free reorganization.
    (7) The appropriate Federal banking agency, and in the case of a 
State-chartered savings association, the appropriate State regulator, 
might not approve the conversion, and the IRS or a tax expert might not 
issue a favorable tax ruling or tax opinion.
    (8) Savings account holders will continue to hold accounts in the 
converted savings association with the same dollar amounts, rates of 
return, and general terms as existing deposits. The FDIC will continue 
to insure the accounts.
    (9) The savings association's conversion will not affect borrowers' 
loans, including the amount, rate, maturity, security, and other 
contractual terms.
    (10) The savings association's business of accepting deposits and 
making loans will continue without interruption.
    (11) The savings association's current management and staff will 
continue to conduct current services for depositors and borrowers under 
current policies and in existing offices.
    (12) The savings association may substantively amend its proposed 
plan of conversion before the members' meeting.
    (13) The savings association may terminate the proposed conversion.
    (14) After the appropriate Federal banking agency, and in the case 
of a State-chartered savings association, the appropriate State 
regulator, approves the proposed conversion, the savings association 
will send proxy materials providing additional information. After the 
savings association sends proxy materials, members may

[[Page 1117]]

telephone or write to the savings association with additional questions.
    (15) The proposed record date for determining the eligible account 
holders who are entitled to receive subscription rights to purchase the 
savings association's shares.
    (16) A brief description of the circumstances under which 
supplemental eligible account holders will receive subscription rights 
to purchase the savings association's shares.
    (17) A brief description of how voting members may participate in 
the conversion.
    (18) A brief description of how directors, officers, and employees 
will participate in the conversion.
    (19) A brief description of the proposed plan of conversion.
    (20) The par value (if any) and approximate number of shares the 
savings association will issue and sell in the conversion.
    (c) Other requirements. (1) The savings association may not solicit 
proxies, provide financial statements, describe the benefits of 
conversion, or estimate the value of its shares upon conversion in the 
letter, notice, or press release.
    (2) If the savings association responds to inquiries about the 
conversion, it may address only the matters listed in paragraph (b) of 
this section.



Sec.  192.140  Amendments to plan of conversion.

    A savings association may amend its plan of conversion before it 
solicits proxies. After the savings association solicits proxies, it may 
amend the plan of conversion only if the appropriate Federal banking 
agency concurs.

                           Filing Requirements



Sec.  192.150  Information required in an application for conversion.

    (a) Required information. A savings association's application for 
conversion must include all of the following information.
    (1) The savings association's plan of conversion.
    (2) Pricing materials meeting the requirements of Sec.  192.200(b).
    (3) Proxy soliciting materials under Sec.  192.270, including:
    (i) A preliminary proxy statement with signed financial statements;
    (ii) A form of proxy meeting the requirements of Sec.  192.255; and
    (iii) Any additional proxy soliciting materials, including press 
releases, personal solicitation instructions, radio or television 
scripts that the savings association plans to use or furnish to its 
members, and a legal opinion indicating that any marketing materials 
comply with all applicable securities laws.
    (4) An offering circular described in Sec.  192.300.
    (5) The documents and information required by Form AC. The savings 
association may obtain Form AC from the appropriate Federal banking 
agency.
    (6) Where indicated, written consents, signed and dated, of any 
accountant, attorney, investment banker, appraiser, or other 
professional who prepared, reviewed, passed upon, or certified any 
statement, report, or valuation for use. See Form AC, instructions.
    (7) The savings association's business plan, submitted as a 
separately bound, confidential exhibit. See Sec.  192.160.
    (8) Any additional information that the appropriate Federal banking 
agency requests.
    (b) Rejection of filing. The appropriate Federal banking agency will 
not accept for filing, and may return, any application for conversion 
that is executed improperly, materially deficient, substantially 
incomplete, or that provides for unreasonable conversion expenses.



Sec.  192.155  Filing an application for conversion.

    A Federal savings association must file Form AC with the appropriate 
OCC licensing office. A State savings association must file its 
application with the appropriate FDIC region.



Sec.  192.160  Request for confidential treatment.

    (a) In general. The appropriate Federal banking agency makes all 
filings under this part available to the public, but may keep portions 
of the application for conversion confidential under paragraph (b) of 
this section.
    (b) Requests for confidential treatment. A savings association may 
request that

[[Page 1118]]

the appropriate Federal banking agency keep portions of the savings 
association's application confidential. To make this request, the 
savings association must clearly designate as ``confidential'' any 
portion of its application for conversion that it deems confidential. 
The savings association must provide a written statement specifying the 
grounds supporting its request for confidentiality. The appropriate 
Federal banking agency will not treat as confidential the portion of a 
savings association's application describing how it plans to meet 
Community Reinvestment Act (CRA) objectives. The CRA portion of a 
savings association's application may not incorporate by reference 
information contained in the confidential portion of the application.
    (c) Determination of confidential treatment. The appropriate Federal 
banking agency will determine whether confidential information must be 
made available to the public under 5 U.S.C. 552 and 12 CFR part 4 or 12 
CFR part 309, as appropriate. The appropriate Federal banking agency 
will advise the savings association before it makes information 
designated as ``confidential'' available to the public.



Sec.  192.165  Amendments to an application for conversion.

    To amend its application for conversion, a savings association must:
    (a) File an amendment with an appropriate facing sheet;
    (b) Number each amendment consecutively;
    (c) Respond to all issues raised by the appropriate Federal banking 
agency; and
    (d) Demonstrate that the amendment conforms to all applicable 
regulations.

           Notice of Filing of Application and Comment Process



Sec.  192.180  Public notice of an application for conversion.

    (a) In general. A Federal savings association must publish a public 
notice of the application in accordance with the procedures in 12 CFR 
5.8. The Federal savings association must simultaneously prominently 
post the notice in its home office and all branch offices and may also 
make this notice available on its website.
    (b) Additional notice. If the appropriate Federal banking agency 
does not accept a savings association's application for conversion under 
Sec.  192.200 and requires the savings association to file a new 
application, the savings association must publish and post a new notice 
and allow an additional 30 calendar days for comment.



Sec.  192.185  Public comment on application for conversion.

    Commenters may submit comments on a Federal savings association's 
application in accordance with the procedures in 12 CFR 5.10.

             Agency Review of the Application for Conversion



Sec.  192.200  Review, approval, or denial of application for conversion.

    (a) Standards for review of application. The appropriate Federal 
banking agency may approve an application for conversion only if:
    (1) The conversion complies with this part;
    (2) The savings association will meet its regulatory capital 
requirements under 12 CFR part 3 or part 324, as applicable, after the 
conversion; and
    (3) The conversion will not result in a taxable reorganization under 
the Internal Revenue Code of 1986, as amended.
    (b) Standards for review of appraisal. The appropriate Federal 
banking agency will review the appraisal required by Sec.  192.150(a)(2) 
in determining whether to approve the application. The appropriate 
Federal banking agency will review the appraisal under the following 
requirements.
    (1) Independent persons experienced and expert in corporate 
appraisal, and acceptable to the appropriate Federal banking agency, 
must prepare the appraisal report.
    (2) An affiliate of the appraiser may serve as an underwriter or 
selling agent, if the savings association ensures that the appraiser is 
separate from the underwriter or selling agent affiliate and the 
underwriter or selling agent affiliate does not make recommendations or 
affect the appraisal.

[[Page 1119]]

    (3) The appraiser may not receive any fee in connection with the 
conversion other than for appraisal services.
    (4) The appraisal report must include a complete and detailed 
description of the elements of the appraisal, a justification for the 
appraisal methodology, and sufficient support for the conclusions.
    (5) If the appraisal is based on a capitalization of the savings 
association's pro forma income, it must indicate the basis for 
determining the income to be derived from the sale of shares, and 
demonstrate that the earnings multiple used is appropriate, including 
future earnings growth assumptions.
    (6) If the appraisal is based on a comparison of the savings 
association's shares with outstanding shares of existing stock 
associations, the existing stock associations must be reasonably 
comparable in size, market area, competitive conditions, risk profile, 
profit history, and expected future earnings.
    (7) The appropriate Federal banking agency may decline to process 
the application for conversion and deem it materially deficient or 
substantially incomplete if the initial appraisal report is materially 
deficient or substantially incomplete.
    (8) A savings association may not represent or imply that the 
appropriate Federal banking agency approved the appraisal.
    (c) Compliance with the Community Reinvestment Act. The appropriate 
Federal banking agency will review the savings association's compliance 
record under 12 CFR part 195 and its business plan to determine how the 
savings association will serve the convenience and needs of its 
communities after the conversion.
    (1) Based on this review, the appropriate Federal banking agency may 
approve the application, deny the application, or approve the 
application on the condition that the savings association will improve 
its CRA performance or that the savings association will address the 
particular credit or lending needs of the communities that it will 
serve.
    (2) The appropriate Federal banking agency may deny the application 
if the savings association's business plan does not demonstrate that its 
proposed use of conversion proceeds will help the savings association to 
meet the credit and lending needs of the communities that it will serve.
    (d) Additional information. The appropriate Federal banking agency 
may request that a savings association amend its application if further 
explanation is necessary, material is missing, or material needs 
correction.
    (e) Denial of application. The appropriate Federal banking agency 
will deny an application if the application does not meet the 
requirements of this subpart, unless the appropriate Federal banking 
agency waives the requirement under Sec.  192.5(c).



Sec.  192.205  Court review of final action on application for conversion.

    (a) In general. Any person aggrieved by the appropriate Federal 
banking agency's final action on a savings association's application for 
conversion may ask the court of appeals of the United States for the 
circuit in which the principal office or residence of such person is 
located, or the U.S. Court of Appeals for the District of Columbia 
Circuit, to review the action under 12 U.S.C. 1464(i)(2)(B).
    (b) Filing procedures. To obtain court review of the action, this 
statute requires the aggrieved person to file a written petition 
requesting that the court modify, terminate, or set aside the final 
appropriate Federal banking agency action. The aggrieved person must 
file the petition with the court within the later of 30 calendar days 
after the appropriate Federal agency publishes notice of its final 
action in the Federal Register or 30 calendar days after the savings 
association mails the proxy statement to its members under Sec.  
192.235.

                             Vote by Members



Sec.  192.225  Approval of plan of conversion by members.

    (a) In general. After the appropriate Federal banking agency 
approves a plan of conversion, the savings association must submit the 
plan of conversion to its members for approval. The savings association 
must obtain this approval at a meeting of its members, which may be a 
special or annual meeting, unless the savings association is

[[Page 1120]]

State-chartered and State law requires approval via an annual meeting.
    (b) Approval. The savings association's members must approve the 
plan of conversion by a majority of the total outstanding votes, unless 
the savings association is State-chartered and State law prescribes a 
higher percentage.
    (c) Voting method. Savings association members may vote in person or 
by proxy.
    (d) Notification to non-voting members. The savings association may 
notify eligible account holders or supplemental eligible account holders 
who are not voting members of its proposed conversion. The savings 
association may include only the information in Sec.  192.135 in its 
notice.



Sec.  192.230  Members' voting eligibility.

    A savings association determines members' eligibility to vote by 
setting a voting record date. The savings association must set a voting 
record date that is not more than 60 calendar days nor less than 20 
calendar days before its meeting, unless the savings association is 
State-chartered and State law requires a different voting record date.



Sec.  192.235  Notice of members' meeting.

    (a) In general. A savings association must notify its members of the 
meeting to consider its conversion by sending the members a proxy 
statement cleared by the appropriate Federal banking agency.
    (b) Timing of notice. The savings association must notify its 
members 20 to 45 calendar days before the meeting, unless the savings 
association is State-chartered and State law requires a different notice 
period.
    (c) Notice to beneficial account holders. The savings association 
must also notify each beneficial holder of an account held in a 
fiduciary capacity:
    (1) If the savings association is a Federal savings association, and 
the name of the beneficial holder is disclosed on the savings 
association's records; or
    (2) If the savings association is a State-chartered savings 
association and the beneficial holder possesses voting rights under 
State law.



Sec.  192.240  Submission of documents to the appropriate Federal 
banking agency after the members' meeting.

    (a) Filings after members' meeting. Promptly after the members' 
meeting, a savings association must file all of the following 
information with the appropriate OCC licensing office, if the savings 
association is Federally-chartered, and with the appropriate FDIC region 
if the savings association is State-chartered.
    (1) A certified copy of each adopted resolution on the conversion.
    (2) The total votes eligible to be cast.
    (3) The total votes represented in person or by proxy.
    (4) The total votes cast in favor of and against each matter.
    (5) The percentage of votes necessary to approve each matter.
    (6) An opinion of counsel that the savings association conducted the 
members' meeting in compliance with all applicable State or Federal laws 
and regulations.
    (b) Filing after conversion. Promptly after completion of the 
conversion, the savings association must submit an opinion of counsel 
that it complied with all laws applicable to the conversion.

                           Proxy Solicitation



Sec.  192.250  Compliance with proxy solicitation provisions.

    (a) Savings association compliance. A savings association must 
comply with these proxy solicitation provisions when it provides proxy 
solicitation material to members for the meeting to vote on the plan of 
conversion.
    (b) Member compliance. Members of the savings association must 
comply with these proxy solicitation provisions when they provide proxy 
solicitation materials to members for the meeting to vote on the 
conversion, pursuant to Sec.  192.280, except where:
    (1) The member solicits 50 people or fewer and does not solicit 
proxies on the savings association's behalf; or
    (2) The member solicits proxies through newspaper advertisements 
after the savings association's board of directors adopts the plan of 
conversion. Any newspaper advertisements may include only the following 
information:

[[Page 1121]]

    (i) The name of the savings association;
    (ii) The reason for the advertisement;
    (iii) The proposal or proposals to be voted upon;
    (iv) Where a member may obtain a copy of the proxy solicitation 
material; and
    (v) A request for the savings association's members to vote at the 
meeting.



Sec.  192.255  Form of proxy requirements.

    The form of proxy must include all of the following:
    (a) A statement in bold face type stating that management is 
soliciting the proxy.
    (b) Blank spaces where the member must date and sign the proxy.
    (c) Clear and impartial identification of each matter or group of 
related matters that members will vote upon. The savings association 
must include any proposed charitable contribution as an item to be voted 
on separately.
    (d) The phrase ``Revocable Proxy'' in bold face type (at least 18 
point).
    (e) A description of any charter or State law requirement that 
restricts or conditions votes by proxy.
    (f) An acknowledgment that the member received a proxy statement 
before he or she signed the form of proxy.
    (g) The date, time, and the place of the meeting, when available.
    (h) A way for the member to specify by ballot whether he or she 
approves or disapproves of each matter that members will vote upon.
    (i) A statement that management will vote the proxy in accordance 
with the member's specifications.
    (j) A statement in bold face type indicating how management will 
vote the proxy if the member does not specify a choice for a matter.



Sec.  192.260  Previously executed proxies.

    A savings association may not use previously executed proxies for 
the plan of conversion vote. If members consider the plan of conversion 
at an annual meeting, the savings association may vote proxies obtained 
through other proxy solicitations only on matters not related to the 
plan of conversion.



Sec.  192.265  Proxies executed under this part.

    A savings association may vote a proxy obtained under this part on 
matters that are incidental to the conduct of the meeting. The savings 
association may not vote a proxy obtained under this subpart at any 
meeting other than the meeting (or any adjournment of the meeting) to 
vote on the plan of conversion.



Sec.  192.270  Proxy statement requirements.

    (a) Content requirements. A savings association must prepare its 
proxy statement in compliance with this part and Form PS.
    (b) Other requirements. (1) The appropriate Federal banking agency 
will review the proxy solicitation material when it reviews the 
application for conversion and will clear the proxy solicitation 
material.
    (2) The savings association must provide a cleared written proxy 
statement to its members before or at the same time it provides any 
other soliciting material. The savings association must mail cleared 
proxy solicitation material to its members within 10 calendar days after 
the appropriate Federal banking agency clears the solicitation.



Sec.  192.275  Filing revised proxy materials.

    (a) In general. A savings association must file revised proxy 
solicitation materials as an amendment to its application for 
conversion. The proxy solicitation materials must be in the form in 
which it furnished the materials to its members.
    (b) Content of filing. To revise its proxy solicitation materials, 
the savings association must file:
    (1) Its revised proxy materials as required by Form PS;
    (2) Its revised form of proxy, if applicable;
    (3) Any additional proxy solicitation material subject to Sec.  
192.270; and
    (4) A copy of the revised proxy solicitation materials marked to 
clearly indicate changes from the prior filing.
    (c) When to file. The savings association must file no later than 
the date that it sends or gives the proxy solicitation material to its 
members. The

[[Page 1122]]

savings association must indicate the date that it will release the 
materials.
    (d) Material not required to be filed. Unless requested by the 
appropriate Federal banking agency, the savings association does not 
have to file copies of replies to inquiries from its members or copies 
of communications that merely request members to sign and return proxy 
forms.



Sec.  192.280  Mailing member's proxy solicitation materials.

    (a) In general. A savings association must mail the member's cleared 
proxy solicitation material if:
    (1) The savings association's board of directors adopted a plan of 
conversion;
    (2) A member requests in writing that the savings association mail 
the proxy solicitation material;
    (3) The appropriate Federal banking agency has cleared the member's 
proxy solicitation; and
    (4) The member agrees to defray the savings association's reasonable 
expenses.
    (b) Required information. As soon as practicable after the savings 
association receives a request under paragraph (a) of this section, it 
must mail or otherwise furnish the following information to the member:
    (1) The approximate number of members that the savings association 
solicited or will solicit, or the approximate number of members of any 
group of account holders that the member designates; and
    (2) The estimated cost of mailing the proxy solicitation material 
for the member.
    (c) Timing. The savings association must mail cleared proxy 
solicitation material to the designated members promptly after the 
member furnishes the materials, envelopes (or other containers), and 
postage (or payment for postage) to the savings association.
    (d) Content. The savings association is not responsible for the 
content of a member's proxy solicitation material.
    (e) Sharing of proxy material. A member may furnish other members 
its own proxy solicitation material, cleared by the appropriate Federal 
banking agency, subject to the rules in this section.



Sec.  192.285  Prohibited solicitations.

    (a) False or misleading statements. (1) No one may use proxy 
solicitation material for the members' meeting if the material contains 
any statement which, considering the time and the circumstances of the 
statement:
    (i) Is false or misleading with respect to any material fact;
    (ii) Omits any material fact that is necessary to make the 
statements not false or misleading; or
    (iii) Omits any material fact that is necessary to correct a 
statement in an earlier communication that has become false or 
misleading.
    (2) No one may represent or imply that the appropriate Federal 
banking agency determined that the proxy solicitation material is 
accurate, complete, not false or not misleading, or passed upon the 
merits of or approved any proposal.
    (b) Other prohibited solicitations. No person may solicit:
    (1) An undated or post-dated proxy;
    (2) A proxy that states it will be dated after the date it is signed 
by a member;
    (3) A proxy that is not revocable at will by the member; or
    (4) A proxy that is part of another document or instrument.



Sec.  192.290  Remedial measures for prohibited solicitations.

    (a) In general. If a solicitation violates Sec.  192.285, the 
appropriate Federal banking agency may require remedial measures, 
including:
    (1) Correction of the violation by a retraction and a new 
solicitation;
    (2) Rescheduling the members' meeting; or
    (3) Any other actions necessary to ensure a fair vote.
    (b) Other action. The appropriate Federal banking agency also may 
bring an enforcement action against the violator.



Sec.  192.295  Re-solicitation of proxies.

    If a savings association amends its application for conversion, the 
appropriate Federal banking agency may require the savings association 
to re-solicit proxies for its members' meeting as a condition of 
approval of the amendment.

[[Page 1123]]

                            Offering Circular



Sec.  192.300  Offering circular requirements.

    (a) Content and filing requirements. A savings association must 
prepare and file its offering circular in compliance with this part, 
Form OC, and the applicable SEC registration statement form required 
under 12 CFR 16.15. A Federal savings association must file its offering 
circular with the appropriate OCC licensing office and a State savings 
association must file its offering circular with the appropriate FDIC 
region. If filing an amendment, the savings association also must comply 
with Sec. Sec.  192.155 and 192.165.
    (b) Member approval. A savings association must condition its stock 
offering upon member approval of its plan of conversion.
    (c) Agency review. The appropriate Federal banking agency will 
review the offering circular and may comment on the included disclosures 
and financial statements. The appropriate Federal banking agency will 
not approve the adequacy or accuracy of the offering circular or the 
disclosures.
    (d) Revised filings. A savings association must file any revised 
offering circular, final offering circular, and any post-effective 
amendment to the final offering circular in accordance with the 
procedures in Sec. Sec.  192.155 and 192.165.
    (e) Request for effectiveness. After a savings association 
satisfactorily addresses the appropriate Federal banking agency's 
comments, the savings association must request that the appropriate 
Federal banking agency declare the offering circular effective for a 
time period. The time period may not exceed the maximum time period for 
the completion of the sale of all of the savings association's shares 
under Sec.  192.400.



Sec.  192.305  Distribution of offering circular.

    (a) Preliminary offering circular. A savings association may 
distribute a preliminary offering circular at the same time as or after 
it mails the proxy statement to its members.
    (b) Early distribution prohibited. A savings association may not 
distribute a final offering circular for stock issued in the transaction 
until after the appropriate Federal banking agency declares the offering 
circular effective or the Securities and Exchange Commission declares 
the registration statement for the offering circular effective. The 
savings association must have the offering circular delivered in 
accordance with this part.
    (c) Effective offering circular. A savings association must 
distribute a final offering circular for stock issued in the transaction 
to persons listed in its plan of conversion within 10 calendar days 
after the appropriate Federal banking agency declares the offering 
circular effective or the Securities and Exchange Commission declares 
the registration statement for the offering circular effective.



Sec.  192.310  Filing a post-effective amendment to an offering circular.

    (a) In general. A savings association must file a post-effective 
amendment to the offering circular with the appropriate Federal banking 
agency or have its proposed stock holding company file a post-effective 
amendment to its registration statement for the offering circular with 
the Securities and Exchange Commission, when a material event or change 
of circumstances occurs.
    (b) Timing of delivery. After the appropriate Federal banking agency 
or the Securities and Exchange Commission declares the post-effective 
amendment effective, the savings association must immediately have the 
amendment to the offering circular delivered to each person who 
subscribed for or ordered shares in the offering.
    (c) Content. The post-effective amendment must indicate that each 
person may increase, decrease, or rescind their subscription or order.
    (d) Post-effective offering period. The post-effective offering 
period must remain open no less than 10 calendar days nor more than 20 
calendar days, unless the appropriate Federal banking agency approves a 
longer rescission period.

[[Page 1124]]

                        Offers and Sales of Stock



Sec.  192.320  Order of priority to purchase conversion shares.

    A savings association must offer to sell its shares in the following 
order:
    (a) Eligible account holders.
    (b) Tax-qualified employee stock ownership plans.
    (c) Supplemental eligible account holders.
    (d) Other voting members who have subscription rights.
    (e) The savings association's community, its community and the 
general public, or the general public.



Sec.  192.325  Timing of offer to sell conversion shares.

    (a) In general. A savings association may offer to sell its 
conversion shares after the appropriate Federal banking agency approves 
the conversion, clears the proxy statement, and declares the offering 
circular effective.
    (b) Timing. The offer may commence at the same time the savings 
association starts the proxy solicitation of its members.



Sec.  192.330  Pricing of conversion shares.

    (a) In general. A savings association must sell its conversion 
shares at a uniform price per share and at a total price that is equal 
to the estimated pro forma market value of its shares after the 
conversion.
    (b) Maximum price. The maximum price must be no more than 15 percent 
above the midpoint of the estimated price range in the savings 
association's offering circular.
    (c) Minimum price. The minimum price must be no more than 15 percent 
below the midpoint of the estimated price range in the savings 
association's offering circular.
    (d) Increase in price. If the appropriate Federal banking agency 
permits, the savings association may increase the maximum price of 
conversion shares sold. The maximum price, as adjusted, must be no more 
than 15 percent above the maximum price computed under paragraph (b) of 
this section.
    (e) Price range. The maximum price must be between $5 and $50 per 
share.
    (f) Inclusion in preliminary offering circular. The savings 
association must include the estimated price in any preliminary offering 
circular.



Sec.  192.335  Procedures for the sale of conversion shares.

    (a) Distribution of order forms. A savings association must 
distribute order forms to all eligible account holders, supplemental 
eligible account holders, and other voting members to enable them to 
subscribe for the conversion shares they are permitted under the plan of 
conversion. The savings association may either send the order forms with 
its offering circular or after the savings association distributes its 
offering circular.
    (b) Sale of shares. A savings association may sell its conversion 
shares in a community offering, a public offering, or both. The savings 
association may begin the community offering, the public offering, or 
both at any time during the subscription offering or upon conclusion of 
the subscription offering.
    (c) Underwriting commissions and fees. A savings association may pay 
underwriting commissions (including underwriting discounts). The 
appropriate Federal banking agency may object to the payment of 
unreasonable commissions. The savings association may reimburse an 
underwriter for accountable expenses in a subscription offering if the 
public offering is limited. If no public offering occurs, the savings 
association may pay an underwriter a consulting fee. The appropriate 
Federal banking agency may object to the payment of unreasonable 
consulting fees.
    (d) Sequence of order fulfillment. If a savings association conducts 
the community offering, the public offering, or both at the same time as 
the subscription offering, the savings association must fill all 
subscription orders first.
    (e) Preparation of order form. A savings association must prepare 
its order form in compliance with this part and Form OF.



Sec.  192.340  Prohibited sales practices.

    (a) Offers, sales, or purchases of conversion shares. In connection 
with offers, sales, or purchases of conversion shares under this part, a 
savings association and its directors, officers, agents, or employees 
may not:

[[Page 1125]]

    (1) Employ any device, scheme, or artifice to defraud;
    (2) Obtain money or property by means of any untrue statement of a 
material fact or any omission of a material fact necessary to make the 
statements, in light of the circumstances under which they were made, 
not misleading; or
    (3) Engage in any act, transaction, practice, or course of business 
that operates or would operate as a fraud or deceit upon a purchaser or 
seller.
    (b) Conversion. During the conversion, no person may:
    (1) Transfer, or enter into any agreement or understanding to 
transfer, the legal or beneficial ownership of subscription rights for 
the savings association's conversion shares or the underlying securities 
to the account of another;
    (2) Make any offer, or any announcement of an offer, to purchase any 
of the savings association's conversion shares from anyone but the 
savings association; or
    (3) Knowingly acquire more than the maximum purchase allowable under 
the savings association's plan of conversion.
    (c) Exceptions. The restrictions in paragraphs (b)(1) and (2) of 
this section do not apply to offers for more than 10 percent of any 
class of conversion shares by:
    (1) An underwriter or a selling group, acting on the savings 
association's behalf, that makes the offer with a view toward public 
resale; or
    (2) One or more of the savings association's tax-qualified employee 
stock ownership plans so long as the plan or plans do not beneficially 
own more than 25 percent of any class of the savings association's 
equity securities in the aggregate.
    (d) Violations. Any person found to have violated the restrictions 
in paragraph (a) or (b) of this section may become subject to an 
enforcement action, civil money penalties, criminal prosecution, or 
other legal action.



Sec.  192.345  Permissible forms of subscriber payment.

    (a) In general. A subscriber may purchase conversion shares with 
cash, by a withdrawal from a savings account, or a withdrawal from a 
certificate of deposit. If a subscriber purchases shares by a withdrawal 
from a certificate of deposit, the savings association may not assess a 
penalty for the withdrawal.
    (b) Prohibition. A savings association may not extend credit to any 
person to purchase the savings association's conversion shares.



Sec.  192.350  Interest on payments for conversion shares.

    (a) In general. A savings association must pay interest from the 
date the savings association receives a payment for conversion shares 
until the date the savings association completes or terminates the 
conversion. The savings association must pay interest at no less than 
its passbook rate for amounts paid in cash, check, or money order.
    (b) Interest on withdrawals from savings accounts. If a subscriber 
withdraws money from a savings account to purchase conversion shares, 
the savings association must pay interest on the payment until the 
savings association completes or terminates the conversion as if the 
withdrawn amount remained in the account.
    (c) Interest on withdrawals from certificates of deposit. If a 
depositor fails to maintain the applicable minimum balance requirement 
because he or she withdraws money from a certificate of deposit to 
purchase conversion shares, the savings association may cancel the 
certificate and pay interest at no less than its passbook rate on any 
remaining balance.



Sec.  192.355  Subscription rights for eligible account holders 
and supplemental eligible account holders.

    (a) Eligible account holders. A savings association must give each 
eligible account holder subscription rights to purchase conversion 
shares in an amount equal to the greater of:
    (1) The maximum purchase limitation established for the community 
offering or the public offering under Sec.  192.395;
    (2) One-tenth of one percent of the total stock offering; or
    (3) Fifteen times the following number: The total number of 
conversion shares that the savings association will

[[Page 1126]]

issue, multiplied by the following fraction. The numerator is the total 
qualifying deposit of the eligible account holder. The denominator is 
the total qualifying deposits of all eligible account holders. The 
savings association must round down the product of this multiplied 
fraction to the next whole number.
    (b) Supplemental eligible account holders. The savings association 
must give subscription rights to purchase shares to each supplemental 
eligible account holder in the same amount as described in paragraph (a) 
of this section, except that the savings association must compute the 
fraction described in paragraph (a)(3) of this section as follows: The 
numerator is the total qualifying deposit of the supplemental eligible 
account holder. The denominator is the total qualifying deposits of all 
supplemental eligible account holders.



Sec.  192.360  Officers, directors, and associates as eligible account holders.

    A savings association's officers, directors, and their associates 
may be eligible account holders. However, if an officer, director, or 
his or her associate receives subscription rights based on increased 
deposits in the year before the eligibility record date, the savings 
association must subordinate subscription rights for these deposits to 
subscription rights exercised by other eligible account holders.



Sec.  192.365  Purchase of conversion shares by other voting members.

    (a) In general. A savings association must give rights to purchase 
its conversion shares in the conversion to voting members who are 
neither eligible account holders nor supplemental eligible account 
holders. The savings association must allocate rights to each voting 
member that are equal to the greater of:
    (1) The maximum purchase limitation established for the community 
offering and the public offering under Sec.  192.395; or
    (2) One-tenth of one percent of the total stock offering.
    (b) Subordination of voting rights. The savings association must 
subordinate the voting members' rights to the rights of eligible account 
holders, tax-qualified employee stock ownership plans, and supplemental 
eligible account holders.



Sec.  192.370  Limits on aggregate purchases by officers, directors, 
and associates.

    (a) In general. When a savings association converts, its officers, 
directors, and their associates may not purchase, in the aggregate, more 
than the following percentage of the savings association's total stock 
offering:

                      Table 1 to Sec.   192.370(a)
------------------------------------------------------------------------
                                                            Officer and
                                                             director
                    Institution size                         purchases
                                                             (percent)
------------------------------------------------------------------------
$50,000,000 or less.....................................              35
$50,000,001-100,000,000.................................              34
$100,000,001-150,000,000................................              33
$150,000,001-200,000,000................................              32
$200,000,001-250,000,000................................              31
$250,000,001-300,000,000................................              30
$300,000,001-350,000,000................................              29
$350,000,001-400,000,000................................              28
$400,000,001-450,000,000................................              27
$450,000,001-500,000,000................................              26
Over $500,000,000.......................................              25
------------------------------------------------------------------------

    (b) Exception. The purchase limitations in this section do not apply 
to shares held in tax-qualified employee stock benefit plans that are 
attributable to the savings association's officers, directors, and their 
associates.



Sec.  192.375  Allocation of oversubscribed conversion shares.

    (a) Eligible account holders. If a savings association's conversion 
shares are oversubscribed by its eligible account holders, the savings 
association must allocate shares among the eligible account holders so 
that each, to the extent possible, may purchase 100 shares.
    (b) Supplemental eligible account holders. If a savings 
association's conversion shares are oversubscribed by its supplemental 
eligible account holders, the savings association must allocate shares 
among the supplemental eligible account holders so that each, to the 
extent possible, may purchase 100 shares.
    (c) Eligible and supplemental eligible account holders. If a person 
is an eligible account holder and a supplemental

[[Page 1127]]

eligible account holder, the savings association must include the 
eligible account holder's allocation in determining the number of 
conversion shares that the savings association may allocate to the 
person as a supplemental eligible account holder.
    (d) Additional allocations. For conversion shares that the savings 
association does not allocate under paragraphs (a) and (b) of this 
section, the savings association must allocate the shares among the 
eligible or supplemental eligible account holders equitably, based on 
the amounts of qualifying deposits. The savings association must 
describe this method of allocation in its plan of conversion.
    (e) Oversubscription. If shares remain after the savings association 
has allocated shares as provided in paragraphs (a) and (b) of this 
section, and if the savings association's voting members oversubscribe, 
the savings association must allocate its conversion shares among those 
members equitably. The savings association must describe the method of 
allocation in its plan of conversion.



Sec.  192.380  Purchase of conversion shares by employee stock ownership plan.

    (a) In general. A savings association's tax-qualified employee stock 
ownership plan may purchase up to 10 percent of the total offering of 
the savings association's conversion shares.
    (b) Revised stock valuation range. If the appropriate Federal 
banking agency approves a revised stock valuation range as described in 
Sec.  192.330(e), and the final conversion stock valuation range exceeds 
the former maximum stock offering range, a savings association may 
allocate conversion shares to its tax-qualified employee stock ownership 
plan, up to the 10 percent limit in paragraph (a) of this section.
    (c) Open market purchase. If a savings association's tax-qualified 
employee stock ownership plan is not able to or chooses not to purchase 
stock in the offering, it may, with prior appropriate Federal banking 
agency approval and appropriate disclosure in the savings association's 
offering circular, purchase stock in the open market, or purchase 
authorized but unissued conversion shares.
    (d) Charitable organizations. A savings association may include 
stock contributed to a charitable organization in the conversion in the 
calculation of the total offering of conversion shares under paragraphs 
(a) and (b) of this section, unless the appropriate Federal banking 
agency objects on supervisory grounds.



Sec.  192.385  Purchase limitations.

    (a) In general. A savings association may limit the number of shares 
that any person, group of associated persons, or persons otherwise 
acting in concert, may subscribe to up to five percent of the total 
stock sold.
    (b) Modification of purchase limit. If a savings association sets a 
limit of five percent under paragraph (a) of this section, the savings 
association may modify that limit with appropriate Federal banking 
agency approval to provide that any person, group of associated persons, 
or persons otherwise acting in concert subscribing for five percent, may 
purchase between five and 10 percent as long as the aggregate amount 
that the subscribers purchase does not exceed 10 percent of the total 
stock offering.
    (c) Minimum purchase. A savings association may require persons 
exercising subscription rights to purchase a minimum number of 
conversion shares. The minimum number of shares must equal the lesser of 
the number of shares obtained by a $500 subscription or 25 shares.
    (d) Aggregation. In setting purchase limitations under this section, 
a savings association may not aggregate conversion shares attributed to 
a person in the savings association's tax-qualified employee stock 
ownership plan with shares purchased directly by, or otherwise 
attributable to, that person.



Sec.  192.390  Community offering of conversion shares.

    (a) Purchase preference in subscription offering. In a subscription 
offering, a savings association may give a purchase preference to 
eligible account holders, supplemental eligible account

[[Page 1128]]

holders, and voting members residing in its local community.
    (b) Purchase preference in community offering. In a community 
offering, a savings association must give a purchase preference to 
natural persons residing in its local community.



Sec.  192.395  Other conditions for community and public offerings.

    A savings association must offer and sell its stock to achieve a 
widespread distribution of the stock. If a savings association offers 
shares in a community offering, a public offering, or both, it must 
first fill orders for its stock up to a maximum of two percent of the 
conversion stock on a basis that will promote a widespread distribution 
of stock. The savings association must allocate any remaining shares on 
an equal number of shares per order basis until it fills all orders.

                       Completion of the Offering



Sec.  192.400  Time period for completion of sale of stock.

    A savings association must complete all sales of its stock within 45 
calendar days after the last day of the subscription period, unless the 
offering is extended under Sec.  192.405.



Sec.  192.405  Extension of the offering period.

    (a) In general. A savings association must submit a request in 
writing to the appropriate Federal banking agency for an extension of 
any offering period. The appropriate Federal banking agency will not 
grant any single extension of more than 90 calendar days.
    (b) Post-effective amendment to offering circular. If the 
appropriate Federal banking agency grants a savings association's 
request for an extension of time, the savings association must provide a 
post-effective amendment to the offering circular under Sec.  192.310 to 
each person who subscribed for or ordered stock. The amendment must 
indicate that the appropriate Federal banking agency extended the 
offering period and that each person who subscribed for or ordered stock 
may increase, decrease, or rescind their subscription or order within 
the time remaining in the extension period.  

                      Completion of the Conversion



Sec.  192.420  Time period for completion of conversion.

    In its plan of conversion, a savings association must set a date by 
which the conversion must be completed. This date must not be more than 
24 months from the date that the savings association's members approve 
the plan of conversion. The date, once set, may not be extended by the 
savings association or by the appropriate Federal banking agency. The 
savings association must terminate the conversion if it is not completed 
by that date. The conversion is complete on the date that the savings 
association accepts the offers for its stock.



Sec.  192.425  Termination of conversion.

    A conversion may be terminated by:
    (a) A savings association's members failing to approve the 
conversion at its members' meeting;
    (b) A savings association before its members' meeting; or
    (c) A savings association after the members' meeting, but only if 
the appropriate Federal banking agency concurs.



Sec.  192.430  Charter amendments.

    (a) Conversion from Federally-chartered mutual savings association 
or savings bank to Federally-chartered stock savings association or 
savings bank. If the savings association is a Federally-chartered mutual 
savings association or savings bank and it converts to a Federally-
chartered stock savings association or savings bank, it must apply to 
the OCC to amend its charter and bylaws consistent with 12 CFR 5.22, as 
part of the savings association's application for conversion. The 
savings association may only include OCC pre-approved anti-takeover 
provisions in its amended charter and bylaws. See 12 CFR 5.22(g)(7).
    (b) Conversion from Federally-chartered mutual savings association 
or savings bank to State-chartered stock savings association or savings 
bank. If the savings association is a Federally-chartered mutual savings 
association or savings

[[Page 1129]]

bank and is converting to a State-chartered stock savings association 
under this part, the savings association must surrender its charter to 
the OCC for cancellation promptly after the State issues its new State 
stock charter. The savings association must promptly file a copy of its 
new State stock charter with the FDIC.
    (c) Conversion from State-chartered mutual savings association or 
savings bank to Federally State-chartered stock savings association or 
savings bank. If the savings association is a State-chartered mutual 
savings association or savings bank, and is converting to a Federally 
chartered stock savings association or savings bank, it must apply to 
the OCC for a new charter and bylaws consistent with 12 CFR 5.22. The 
savings association may only include OCC pre-approved anti-takeover 
provisions in its charter and bylaws. See 12 CFR 5.22(g)(7).
    (d) Priority of accounts. In any conversion described in this 
section that involves a mutual holding company, the charter of each 
resulting subsidiary savings association of the holding company must 
contain the following provision:

    In any situation in which the priority of the accounts of the 
association is in controversy, all such accounts must, to the extent of 
their withdrawable value, be debts of the association having the same 
priority as the claims of general creditors of the association not 
having priority (other than any priority arising or resulting from 
consensual subordination) over other general creditors of the 
association.

    (e) Liquidation account. The savings association's new or amended 
charter must require the savings association to establish and maintain a 
liquidation account for eligible and supplemental eligible account 
holders under Sec.  192.450.



Sec.  192.435  Corporate existence after conversion.

    A savings association's corporate existence will continue following 
its conversion, unless it converts to a State-chartered stock savings 
association and State law prescribes otherwise.



Sec.  192.440  Stockholder voting rights after conversion.

    A savings association must provide its stockholders with exclusive 
voting rights, except as provided in Sec.  192.445(c).



Sec.  192.445  Savings account holder's account after conversion.

    (a) In general. The savings association must provide each savings 
account holder, without payment, a withdrawable savings account or 
accounts in the same amount and under the same terms and conditions as 
their accounts before the conversion.
    (b) Liquidation account. The savings association must provide a 
liquidation account for each eligible and supplemental eligible account 
holder under Sec.  192.450.
    (c) Voting rights. If the savings association is State-chartered and 
State law requires the savings association to provide voting rights to 
savings account holders or borrowers, the charter must:
    (1) Limit these voting rights to the minimum required by State law; 
and
    (2) Require the savings association to solicit proxies from the 
savings account holders and borrowers in the same manner that the 
savings association solicits proxies from its stockholders.

                           Liquidation Account



Sec.  192.450  Liquidation accounts.

    (a) In general. A liquidation account represents the potential 
interest of eligible account holders and supplemental eligible account 
holders in the savings association's net worth at the time of 
conversion. A savings association must maintain a sub-account to reflect 
the interest of each account holder.
    (b) Distribution of liquidation. Before a savings association may 
provide a liquidation distribution to common stockholders, it must give 
a liquidation distribution to those eligible account holders and 
supplemental eligible account holders who hold savings accounts from the 
time of conversion until liquidation.
    (c) Recording of liquidation account in financial statements. A 
savings association may not record the liquidation account in its 
financial statements. The

[[Page 1130]]

savings association must disclose the liquidation account in the 
footnotes to the savings association's financial statements.



Sec.  192.455  Initial balance of liquidation account.

    The initial balance of the liquidation account is the savings 
association's net worth in the statement of financial condition included 
in the final offering circular.



Sec.  192.460  Initial balance of liquidation sub-account.

    (a) General rule. (1) A savings association must calculate the 
initial liquidation sub-account balance of each eligible and 
supplemental eligible account holder at the time of the conversion.
    (2) The initial liquidation sub-account balance for a savings 
account held by an eligible account holder, for a savings account not 
held by the eligible account holder on the supplemental eligibility 
record date, is calculated by multiplying the initial liquidation 
account balance by the following fraction: The numerator is the 
qualifying deposit in the savings account on the eligibility record date 
and the denominator is the calculation in paragraph (a)(5) of this 
section.
    (3) The initial liquidation sub-account balance for a savings 
account held by a supplemental eligible account holder, for a savings 
account not held by the supplemental eligible account holder on the 
eligibility record date, is calculated by multiplying the initial 
liquidation account balance by the following fraction: The numerator is 
the qualifying deposit in the savings account on the supplemental 
eligibility record date and the denominator is the calculation in 
paragraph (a)(5) of this section.
    (4) For a savings account held on both the eligibility record date 
and the supplemental eligibility record date, the amount of the 
qualifying deposit for calculating the initial liquidation sub-account 
is the higher account balance of the savings account on either the 
eligibility record date or the supplemental eligibility record date. The 
initial liquidation sub-account balance is calculated by multiplying the 
liquidation account balance by the following fraction: The numerator is 
the higher amount of the qualifying deposit in the savings account on 
either the eligibility record date or the supplemental eligibility 
record date and the denominator is the calculation in paragraph (a)(5) 
of this section.
    (5) The denominator for calculating the initial liquidation sub-
account balance of each eligible and supplemental eligible account 
holder is the sum of the numerator calculations in paragraphs (a)(2) 
through (4) of this section.
    (b) Balance increases and decreases. A savings association must not 
increase the initial liquidation and sub-account balances. It must 
decrease the initial liquidation account and the sub-account balances 
under Sec.  192.470 as depositors reduce or close their savings 
accounts.



Sec.  192.465  Retention of voting rights based on liquidation sub-accounts.

    Eligible account holders or supplemental eligible account holders do 
not retain any voting rights based on their liquidation sub-accounts.



Sec.  192.470  Required adjustments to liquidation sub-accounts.

    (a) Reductions. (1) A savings association must reduce the balance of 
an eligible account holder's or supplemental eligible account holder's 
liquidation sub-account if the deposit balance in the account holder's 
savings account at the close of business on any annual closing date, 
which for purposes of this section is the savings association's fiscal 
year end, falls below the lesser of:
    (i) The deposit balance in the account holder's savings account as 
of the relevant eligibility record date; or
    (ii) The deposit balance in the account holder's savings account as 
of its lowest balance as of any subsequent annual closing date.
    (2) The reduction in the account holder's liquidation sub-account 
from its balance at the time of conversion must be proportionate to the 
reduction in the account holder's savings account from its balance at 
the time of conversion.
    (b) Prohibition on increases. If a savings association reduces the 
balance of a liquidation sub-account, it may not

[[Page 1131]]

subsequently increase it if the deposit balance increases.
    (c) Liquidation account adjustments. A savings association is not 
required to adjust the liquidation account and sub-account balances at 
each annual closing date if the savings association maintains sufficient 
records to make the computations if a liquidation subsequently occurs.
    (d) Maintenance of liquidation sub-account. A savings association 
must maintain the liquidation sub-account for each account holder as 
long as the account holder maintains an account with the same social 
security number.
    (e) Complete liquidation. If there is a complete liquidation, the 
savings association must provide the account holder of a liquidation 
sub-account with a liquidation distribution in the amount of the account 
holder's remaining liquidation sub-account balance.



Sec.  192.475  Definition of liquidation.

    (a) In general. A liquidation is a sale of a savings association's 
assets and settlement of its liabilities with the intent to cease 
operations and close. Upon liquidation, a savings association must 
return its charter to the governmental agency that issued it. The 
government agency must cancel the savings association's charter.
    (b) Other transactions. A merger, consolidation, or similar 
combination or transaction with another depository institution, is not a 
liquidation. If a savings association is involved in such a transaction, 
the surviving institution must assume the liquidation account.



Sec.  192.480  Effect of liquidation account on net worth.

    The liquidation account does not affect a savings association's net 
worth.



Sec.  192.485  Required liquidation account provision in new Federal charter.

    If a savings association converts to Federal stock form, it must 
include the following provision in its new charter: ``Liquidation 
Account. Under appropriate Federal banking agency regulations, the 
association must establish and maintain a liquidation account for the 
benefit of its savings account holders as of ______. If the association 
undergoes a complete liquidation, it must comply with appropriate 
Federal banking agency regulations with respect to the amount and 
priorities on liquidation of each of the savings account holder's 
interests in the liquidation account. A savings account holder's 
interest in the liquidation account does not entitle the savings account 
holder to any voting rights.''

                             Post-Conversion



Sec.  192.500  Permissible management stock benefit plans after conversion.

    (a) In general. During the 12 months after its conversion, a savings 
association may implement a stock option plan (Option Plan), an employee 
stock ownership plan or other tax-qualified employee stock benefit plan 
(collectively, ESOP), and a management recognition plan (MRP), provided 
that the savings association meets all of the following requirements:
    (1) The savings association discloses the plans in its proxy 
statement and offering circular and indicates in its offering circular 
that there will be a separate shareholder vote on the Option Plan and 
the MRP at least six months after the conversion. No shareholder vote is 
required to implement the ESOP. The savings association's ESOP must be 
tax-qualified.
    (2) The savings association's Option Plan does not encompass more 
than 10 percent of the number of shares that the savings association 
issued in the conversion.
    (3)(i) The savings association's ESOP and MRP do not encompass, in 
the aggregate, more than 10 percent of the number of shares that the 
savings association issued in the conversion. If the savings association 
has tangible capital of 10 percent or more following the conversion, the 
appropriate Federal banking agency may permit the ESOP and MRP to 
encompass, in the aggregate, up to 12 percent of the number of shares 
issued in the conversion; and
    (ii) The savings association's MRP does not encompass more than 
three percent of the number of shares that the savings association 
issued in the conversion. If the savings association has tangible 
capital of 10 percent or more after the conversion, the appropriate 
Federal banking agency may

[[Page 1132]]

permit the MRP to encompass up to four percent of the number of shares 
that the savings association issued in the conversion.
    (4) No individual receives more than 25 percent of the shares under 
any plan.
    (5) The savings association's directors who are not officers of the 
savings association do not receive more than five percent of the shares 
of the MRP or Option Plan individually, or 30 percent of any such plan 
in the aggregate.
    (6) The savings association's shareholders approve each of the 
Option Plan and the MRP by a majority of the total votes eligible to be 
cast at a duly called meeting before the savings association establishes 
or implements the plan. The savings association may not hold this 
meeting until six months after its conversion.
    (7) When the savings association distributes proxies or related 
material to shareholders in connection with the vote on a plan, the 
savings association states that the plan complies with the appropriate 
Federal banking agency's regulations and that the appropriate Federal 
banking agency does not endorse or approve the plan in any way. The 
savings association may not make any written or oral representations to 
the contrary.
    (8) The savings association does not grant stock options at less 
than the market price at the time of grant.
    (9) The savings association does not fund the Option Plan or the MRP 
at the time of the conversion.
    (10) The savings association's plan does not begin to vest earlier 
than one year after shareholders approve the plan, and does not vest at 
a rate exceeding 20 percent per year.
    (11) The savings association's plan permits accelerated vesting only 
for disability or death, or if the savings association undergoes a 
change of control.
    (12) The savings association's plan provides that its executive 
officers or directors must exercise or forfeit their options in the 
event the institution becomes critically undercapitalized (as defined in 
12 CFR 6.4 or 324.403, as applicable), is subject to appropriate Federal 
banking agency enforcement action, or receives a capital directive under 
12 CFR part 6, subpart B or 12 CFR 308.201, as applicable.
    (13) The savings association files a copy of the proposed Option 
Plan or MRP with the appropriate Federal banking agency and certify to 
such agency that the plan approved by the shareholders is the same plan 
that the savings association filed with, and disclosed in, the proxy 
materials distributed to shareholders in connection with the vote on the 
plan.
    (14) The savings association files the plan and the certification 
with the appropriate Federal banking agency within five calendar days 
after its shareholders approve the plan.
    (b) Stock splits or other adjustments. The savings association may 
provide dividend equivalent rights or dividend adjustment rights to 
allow for stock splits or other adjustments to its stock in the ESOP, 
MRP, and Option Plan.
    (c) Plans implemented more than 12 months after conversion. The 
restrictions in paragraph (a) of this section do not apply to plans 
implemented more than 12 months after the conversion, provided that 
materials pertaining to any shareholder vote regarding such plans are 
not distributed within the 12 months after the conversion. If a plan 
adopted in conformity with paragraph (a) of this section is amended more 
than 12 months following the conversion, shareholders must ratify any 
material deviations to the requirements in paragraph (a).



Sec.  192.505  Restrictions on the trading of shares by directors, 
officers, and associates.

    (a) Sales restriction. Directors and officers who purchase 
conversion shares may not sell the shares for one year after the date of 
purchase, except that in the event of the death of the officer or 
director, the successor in interest may sell the shares.
    (b) Notice of sales restriction on stock certificate. The savings 
association must include notice of the restriction described in 
paragraph (a) of this section on each certificate of stock that a 
director or officer purchases during the conversion or receives in 
connection with a stock dividend, stock split, or otherwise with respect 
to such restricted shares.

[[Page 1133]]

    (c) Stock purchase restrictions. For three years after the 
conversion, the savings association's officers, directors, and their 
associates may purchase the savings association's stock only from a 
broker or dealer registered with the Securities and Exchange Commission. 
However, the savings association's officers, directors, and their 
associates may engage in a negotiated transaction involving more than 
one percent of the savings association's outstanding stock, and may 
purchase stock through any of the savings association's management or 
employee stock benefit plans.
    (d) Communication of restrictions with transfer agent. The savings 
association must instruct its stock transfer agent about the transfer 
restrictions in this section.



Sec.  192.510  Repurchase of shares after conversion.

    (a) Repurchases during first year after conversion. A savings 
association may not repurchase its shares in the first year after the 
conversion except:
    (1) In extraordinary circumstances, a savings association may make 
open market repurchases of up to five percent of its outstanding stock 
in the first year after the conversion if the savings association files 
a notice under Sec.  192.515(a) and the appropriate Federal banking 
agency does not disapprove the repurchase. The appropriate Federal 
banking agency will not approve such repurchases unless the repurchase 
meets the standards in Sec.  192.515(c), and the repurchase is 
consistent with paragraph (c) of this section.
    (2) A savings association may repurchase qualifying shares of a 
director or conduct an appropriate Federal banking agency-approved 
repurchase pursuant to an offer made to all shareholders of the savings 
association.
    (3) Repurchases to fund management recognition plans that have been 
ratified by shareholders do not count toward the repurchase limitations 
in this section. Repurchases in the first year to fund such plans 
require prior written notification to the appropriate Federal banking 
agency.
    (4) Purchases to fund tax qualified employee stock benefit plans do 
not count toward the repurchase limitations in this section.
    (b) Repurchases following first year after conversion. After the 
first year, a savings association may repurchase its shares, subject to 
all other applicable regulatory and supervisory restrictions and 
paragraph (c) of this section.
    (c) Restrictions on all repurchases. All stock repurchases are 
subject to the following restrictions.
    (1) A savings association may not repurchase its shares if the 
repurchase will reduce the savings association's regulatory capital 
below the amount required for its liquidation account under Sec.  
192.450. The savings association must comply with the capital 
distribution requirements at 12 CFR 5.55.
    (2) The restrictions on share repurchases apply to a charitable 
organization under Sec.  192.550. A savings association must aggregate 
purchases of shares by the charitable organization with the savings 
association's repurchases.



Sec.  192.515  Information to be filed with Federal banking agency 
prior to repurchase of shares.

    (a) Notice requirement. To repurchase stock in the first year 
following conversion, other than repurchases under Sec.  192.510(a)(3) 
or (4), a savings association must file a written notice with the 
appropriate OCC licensing office if Federally chartered, and with the 
appropriate FDIC region if State-chartered. The savings association must 
provide the following information:
    (1) The proposed repurchase program;
    (2) The effect of the repurchases on the savings association's 
regulatory capital; and
    (3) The purpose of the repurchases and, if applicable, an 
explanation of the extraordinary circumstances necessitating the 
repurchases.
    (b) Filing of notice. A Federal savings association must file its 
notice with the appropriate OCC licensing office, and a State savings 
association must file its notice with the appropriate regional director 
of the FDIC, at least 10 calendar days before the savings association 
begins its repurchase program.
    (c) Agency review. A savings association may not repurchase its 
shares if

[[Page 1134]]

the appropriate Federal banking agency objects to the repurchase 
program. The appropriate Federal banking agency will not object to a 
repurchase program if:
    (1) The repurchase program will not adversely affect the savings 
association's financial condition;
    (2) The savings association submits sufficient information to 
evaluate the proposed repurchases;
    (3) The savings association demonstrates extraordinary circumstances 
and a compelling and valid business purpose for the share repurchases; 
and
    (4) The repurchase program would not be contrary to other applicable 
regulations.



Sec.  192.520  Declaring and paying dividends after the conversion.

    A savings association may declare or pay a dividend on its shares 
after the conversion if:
    (a) The dividend will not reduce the savings association's 
regulatory capital below the amount required for the liquidation account 
under Sec.  192.450;
    (b) The savings association complies with all capital requirements 
under 12 CFR part 3 after it declares or pays dividends;
    (c) The savings association complies with the capital distribution 
requirements under 12 CFR 5.55; and
    (d) The savings association does not return any capital, other than 
ordinary dividends, to purchasers during the term of the business plan 
submitted with the conversion.



Sec.  192.525  Restrictions on acquisition of shares after conversion.

    (a) Prior agency approval. For three years after conversion, no 
person may, directly or indirectly, acquire or offer to acquire the 
beneficial ownership of more than 10 percent of any class of the savings 
association's equity securities without the appropriate Federal banking 
agency's prior written approval. If a person violates this prohibition, 
the savings association may not permit the person to vote shares in 
excess of 10 percent, and may not count the shares in excess of 10 
percent in any shareholder vote.
    (b) Beneficial ownership. A person acquires beneficial ownership of 
more than 10 percent of a class of shares when he or she holds any 
combination of the savings association's stock or revocable or 
irrevocable proxies under circumstances that give rise to a conclusive 
control determination or rebuttable control determination under 12 CFR 
5.50. The appropriate Federal banking agency will presume that a person 
has acquired shares if the acquiror entered into a binding written 
agreement for the transfer of shares. For purposes of this section, an 
offer is made when it is communicated. An offer does not include non-
binding expressions of understanding or letters of intent regarding the 
terms of a potential acquisition.
    (c) Exceptions. Notwithstanding the restrictions in this section:
    (1) Paragraphs (a) and (b) of this section do not apply to any offer 
with a view toward public resale made exclusively to the savings 
association, to the underwriters, or to a selling group acting on the 
savings association's behalf.
    (2) Unless the appropriate Federal banking agency objects in 
writing, any person may offer or announce an offer to acquire up to one 
percent of any class of shares. In computing the one percent limit, the 
person must include all of his or her acquisitions of the same class of 
shares during the prior 12 months.
    (3) A corporation whose ownership is, or will be, substantially the 
same as the savings association's ownership may acquire or offer to 
acquire more than 10 percent of the savings association's common stock, 
if it makes the offer or acquisition more than one year after the 
savings association's conversion.
    (4) One or more of the savings association's tax-qualified employee 
stock benefit plans may acquire the savings association's shares, if the 
plan or plans do not beneficially own more than 25 percent of any class 
of the savings association's shares in the aggregate.
    (5) An acquiror does not have to file a separate application to 
obtain the appropriate Federal banking agency's approval under paragraph 
(a) of this section if the acquiror files an application

[[Page 1135]]

under 12 CFR 5.50 that specifically addresses the criteria listed under 
paragraph (d) of this section and the savings association does not 
oppose the proposed acquisition.
    (d) Factors for agency denial. The appropriate Federal banking 
agency may deny an application under paragraph (a) of this section if 
the proposed acquisition:
    (1) Is contrary to the purposes of this part;
    (2) Is manipulative or deceptive;
    (3) Subverts the fairness of the conversion;
    (4) Is likely to injure the savings association;
    (5) Is inconsistent with the savings association's plan to meet the 
credit and lending needs of its proposed market area;
    (6) Otherwise violates laws or regulations; or
    (7) Does not prudently deploy the savings association's conversion 
proceeds.



Sec.  192.530  Other post-conversion requirements.

    After a savings association converts, it must:
    (a) Promptly register its shares under the Securities Exchange Act 
of 1934 (15 U.S.C. 78a-78jj, as amended). The savings association may 
not deregister the shares for three years.
    (b) Encourage and assist a market maker to establish and to maintain 
a market for its shares. A market maker for a security is a dealer who:
    (1) Regularly publishes bona fide competitive bid and offer 
quotations for the security in a recognized inter-dealer quotation 
system;
    (2) Furnishes bona fide competitive bid and offer quotations for the 
security on request; or
    (3) May effect transactions for the security in reasonable 
quantities at quoted prices with other brokers or dealers.
    (c) Use its best efforts to list its shares on a national or 
regional securities exchange or on the National Association of 
Securities Dealers Automated Quotation system.
    (d) File all post-conversion reports that the appropriate Federal 
banking agency requires.

                Contributions to Charitable Organizations



Sec.  192.550  Donating conversion shares or conversion proceeds 
to a charitable organization.

    A savings association may contribute some of its conversion shares 
or proceeds to a charitable organization if:
    (a) The savings association's plan of conversion provides for the 
proposed contribution;
    (b) The savings association's members approve the proposed 
contribution; and
    (c) The IRS either has approved, or approves within two years after 
formation, the charitable organization as a tax-exempt charitable 
organization under the Internal Revenue Code.



Sec.  192.555  Member approval of charitable contributions.

    At the meeting to consider the conversion, a savings association's 
members must separately approve, by a majority of the total eligible 
votes, a charitable contribution of conversion shares or proceeds. If 
the savings association is in mutual holding company form and adding a 
charitable contribution as part of a second step stock conversion, the 
savings association must also have its minority shareholders separately 
approve the charitable contribution by a majority of their total 
eligible votes.



Sec.  192.560  Limitations on charitable contributions.

    A savings association may contribute a reasonable amount of 
conversion shares or proceeds to a charitable organization if such 
contribution will not exceed limits for charitable deductions under the 
Internal Revenue Code and the appropriate Federal banking agency does 
not object on supervisory grounds. If the savings association is well-
capitalized, the appropriate Federal banking agency generally will not 
object if the savings association contributes an aggregate amount of 
eight percent or less of the conversion shares or proceeds.

[[Page 1136]]



Sec.  192.565  Contents of organizational documents of charitable organization.

    The charitable organization's charter (or trust agreement) and gift 
instrument must provide that:
    (a) The charitable organization's primary purpose is to serve and 
make grants in the savings association's local community;
    (b) As long as the charitable organization controls shares, it must 
vote those shares in the same ratio as all other shares voted on each 
proposal considered by the savings association's shareholders;
    (c) For at least five years after its organization, one seat on the 
charitable organization's board of directors (or board of trustees) is 
reserved for an independent director (or trustee) from the savings 
association's local community. This director may not be an officer, 
director, or employee of the savings association or of an affiliate of 
the savings association, and should have experience with local community 
charitable organizations and grant making; and
    (d) For at least five years after its organization, one seat on the 
charitable organization's board of directors (or board of trustees) is 
reserved for a director from the savings association's board of 
directors or the board of directors of an acquiror or resulting 
institution in the event of a merger or acquisition of the savings 
association.



Sec.  192.570  Conflicts of interest among directors.

    (a) In general. A person is subject to 12 CFR 163.200 if that 
person:
    (1) Is a director, officer, or employee of the savings association; 
has the power to direct the savings association's management or 
policies; or otherwise owes a fiduciary duty to the savings association 
(for example, holding company directors); and
    (2) Will serve as an officer, director, or employee of the 
charitable organization. See Form AC for further information on 
operating plans and conflict of interest plans.
    (b) Identification and recusal of directors. Before the savings 
association's board of directors may adopt a plan of conversion that 
includes a charitable organization, the savings association must 
identify its directors that will serve on the charitable organization's 
board. These directors may not participate in the board's discussions 
concerning contributions to the charitable organization, and may not 
vote on the matter.



Sec.  192.575  Other requirements for charitable organizations.

    (a) Charter and gift instrument requirements. The charitable 
organization's charter (or trust agreement) and the gift instrument for 
the contribution must provide that:
    (1) The appropriate Federal banking agency may examine the 
charitable organization at the charitable organization's expense;
    (2) The charitable organization must comply with all supervisory 
directives that the appropriate Federal banking agency imposes;
    (3) The charitable organization must operate according to written 
policies adopted by its board of directors (or board of trustees), 
including a conflict of interest policy;
    (4) The charitable organization must not engage in self-dealing; and
    (5) The charitable organization must comply with all laws necessary 
to maintain its tax-exempt status under the Internal Revenue Code.
    (b) Stock certificate requirement. The savings association must 
include the following legend in the stock certificates of shares that 
the savings association contributes to the charitable organization or 
that the charitable organization otherwise acquires: ``The board of 
directors must consider the shares that this stock certificate 
represents as voted in the same ratio as all other shares voted on each 
proposal considered by the shareholders, as long as the shares are 
controlled by the charitable organization.''
    (c) Voting ratio. As long as the charitable organization controls 
shares, the savings association must consider those shares as voted in 
the same ratio as all of the shares voted on each proposal considered by 
the savings association's shareholders.

[[Page 1137]]

    (d) Filing requirement. After the savings association completes its 
stock offering, it must submit copies of the following documents to the 
appropriate OCC licensing office if it is a Federal savings association 
or with the appropriate FDIC region if it is a State savings 
association:
    (1) The charitable organization's charter and bylaws (or trust 
agreement);
    (2) The charitable organization's operating plan (within six months 
after the savings association's stock offering);
    (3) The charitable organization's conflict of interest policy; and
    (4) The gift instrument for the contributions of either stock or 
cash to the charitable organization.



               Subpart B_Voluntary Supervisory Conversions



Sec.  192.600  Voluntary supervisory conversions.

    (a) In general. A savings association must comply with this subpart 
and part 16 to engage in a voluntary supervisory conversion. This 
subpart applies to all voluntary supervisory conversions under sections 
5(i)(1), (i)(2), and (p) of HOLA, 12 U.S.C. 1464(i)(1), (i)(2), and (p).
    (b) Application of subpart A. Subpart A of this part also applies to 
a voluntary supervisory conversion, unless a requirement is clearly 
inapplicable.



Sec.  192.605  Conducting a voluntary supervisory conversion.

    A savings association may conduct a voluntary supervisory conversion 
through one of the following methods:
    (a) A savings association may sell its shares or the shares of a 
holding company to the public under the requirements of subpart A of 
this part.
    (b) A savings association may convert to stock form by merging into 
an interim Federal- or State-chartered stock association.
    (c) A savings association may sell its shares directly to an 
acquiror, who may be a person, company, depository institution, or 
depository institution holding company.
    (d) A savings association may merge or consolidate with an existing 
or newly created depository institution. The merger or consolidation 
must be authorized by, and is subject to, other applicable laws and 
regulations.



Sec.  192.610  Member rights in a voluntary supervisory conversion.

    Savings association members do not have the right to approve or 
participate in a voluntary supervisory conversion, and will not have any 
legal or beneficial ownership interests in the converted association, 
unless the appropriate Federal banking agency provides otherwise. 
Savings association members may have interests in a liquidation account, 
if one is established.

                               Eligibility



Sec.  192.625  Eligibility for a voluntary supervisory conversion.

    (a) Eligibility. An insured savings association may be eligible to 
convert under this subpart B if:
    (1) The savings association is significantly undercapitalized (or 
undercapitalized and a standard conversion that would make the savings 
association adequately capitalized is not feasible) and the savings 
association will be a viable entity following the conversion;
    (2) Severe financial conditions threaten the savings association's 
stability and a conversion is likely to improve its financial condition;
    (3) The FDIC will assist the savings association under section 13 of 
the Federal Deposit Insurance Act, 12 U.S.C. 1823; or
    (4) The savings association is in receivership and a conversion will 
assist the savings association.
    (b) Requirements for viability after conversion. The savings 
association will be a viable entity following the conversion if it 
satisfies all of the following:
    (1) The savings association will be adequately capitalized as a 
result of the conversion;
    (2) The savings association, its proposed conversion, and its 
acquiror(s) comply with applicable supervisory policies;
    (3) The transaction is in the savings association's best interest, 
and the best interest of the Deposit Insurance Fund and the public; and

[[Page 1138]]

    (4) The transaction will not injure or be detrimental to the savings 
association, the Deposit Insurance Fund, or the public interest.



Sec.  192.630  Eligibility of State-chartered savings bank 
for voluntary supervisory conversion.

    A State-chartered savings bank may be eligible to convert to a 
Federal stock savings bank under this subpart if:
    (a) The FDIC certifies under section 5(o)(2)(C) of the HOLA that 
severe financial conditions threaten the savings bank's stability and 
that the voluntary supervisory conversion is likely to improve its 
financial condition; or
    (b) The savings bank meets the following conditions:
    (1) The savings bank's liabilities exceed its assets, as calculated 
under generally accepted accounting principles, assuming the savings 
bank is a going concern; and
    (2) The savings bank will issue a sufficient amount of permanent 
capital stock to meet its applicable FDIC capital requirement 
immediately upon completion of the conversion, or the FDIC determines 
that the savings bank will achieve an acceptable capital level within an 
acceptable time period.

                     Plan of Supervisory Conversion



Sec.  192.650  Contents of plan of voluntary supervisory conversion.

    A majority of the board of directors of the savings association must 
adopt a plan of voluntary supervisory conversion. The savings 
association must include all of the following information in its plan of 
voluntary supervisory conversion.
    (a) The savings association's name and address.
    (b) A complete description of the proposed voluntary supervisory 
conversion transaction that also describes plans for any liquidation 
account.
    (c) Certified copies of all resolutions relating to the conversion 
adopted by the board of directors of the savings association.

              Voluntary Supervisory Conversion Application



Sec.  192.660  Contents of voluntary supervisory conversion application.

    A savings association must include all of the following information 
and documents in a voluntary supervisory conversion application to the 
appropriate OCC licensing office if it is a Federal savings association 
and to the appropriate FDIC region if it is a State savings association 
under this subpart:
    (a) Eligibility. (1) Evidence establishing that the savings 
association meets the eligibility requirements under Sec.  192.625 or 
Sec.  192.630.
    (2) An opinion of qualified, independent counsel or an independent, 
certified public accountant regarding the tax consequences of the 
conversion, or an IRS ruling indicating that the transaction qualifies 
as a tax-free reorganization.
    (3) An opinion of independent counsel indicating that applicable 
State law authorizes the voluntary supervisory conversion, if the 
conversion involves a State-chartered savings association converting to 
State stock form.
    (b) Plan of conversion. A plan of voluntary supervisory conversion 
that complies with Sec.  192.650.
    (c) Business plan. A business plan that complies with Sec.  192.105, 
when required by the appropriate Federal banking agency.
    (d) Financial data. (1) The savings association's most recent 
audited financial statements and Consolidated Reports of Condition and 
Income or Call Report, as appropriate. The savings association must 
explain how its current capital levels make the savings association 
eligible to engage in a voluntary supervisory conversion under Sec.  
192.625 or Sec.  192.630.
    (2) A description of the savings association's estimated conversion 
expenses.
    (3) Evidence supporting the value of any non-cash asset 
contributions. Appraisals must be acceptable to the appropriate Federal 
banking agency and the non-cash assets must meet all other appropriate 
Federal banking agency policy guidelines.

[[Page 1139]]

    (4) Pro forma financial statements that reflect the effects of the 
transaction. The savings association must identify its tangible, core, 
and risk-based capital levels and show the adjustments necessary to 
compute the capital levels. The savings association must prepare its pro 
forma statements in conformance with the appropriate Federal banking 
agency's regulations and the applicable accounting requirements.
    (5) A statement describing the aggregate number and percentage of 
shares that each director, officer, and any affiliates or associates of 
the director or officer will purchase.
    (e) Proposed documents. (1) The savings association's proposed 
charter and bylaws.
    (2) The savings association's proposed stock certificate form.
    (3) Any securities offering circular and other securities disclosure 
materials to be used in connection with the proposed voluntary 
supervisory conversion.
    (f) Agreements. (1) A copy of any agreements between the savings 
association and proposed purchasers.
    (2) A copy and description of all existing and proposed employment 
contracts. The savings association must describe the term, salary, and 
severance provisions of the contract, the identity and background of the 
officer or employee to be employed, and the amount of any conversion 
shares to be purchased by the officer or employee or his or her 
affiliates or associates.
    (g) Related filings and applications. (1) All filings required under 
the securities offering rules of 12 CFR parts 16 and 192.
    (2) Any required Change in Bank Control Act notice and rebuttal of 
control submissions under 12 U.S.C. 1817(j) and 12 CFR 5.50, or copies 
of any Holding Company Act applications, including prior-conduct 
certifications listed under the appropriate Federal banking agency's 
regulatory guidance.
    (3) A subordinated debt application, if applicable.
    (4) Applications for permission to organize a stock association and 
for approval of a merger, if applicable, and a copy of any application 
for FDIC insurance of accounts, if applicable.
    (5) A statement describing any other applications required under 
Federal or State banking laws for all transactions related to the 
conversion, copies of all dispositive documents issued by regulatory 
authorities relating to the applications, and, if requested by the 
appropriate Federal banking agency, copies of the applications and 
related documents.
    (h) Other information. (1) A statement indicating the role each 
director, officer, and affiliate of the savings association or associate 
of the director or officer will have after the conversion.
    (2) Any additional information requested by the OCC, as authorized 
by law.
    (i) Waiver request. A description of any of the features of the 
savings association's application that do not conform to the 
requirements of this subpart, including any request for waiver of these 
requirements.

 Appropriate Federal Banking Agency Review of the Voluntary Supervisory 
                         Conversion Application



Sec.  192.670  Approval of voluntary supervisory conversion application.

    The appropriate Federal banking agency will generally approve a 
savings association's application to engage in a voluntary supervisory 
conversion unless it determines:
    (a) The savings association does not meet the eligibility 
requirements for a voluntary supervisory conversion under Sec.  192.625 
or Sec.  192.630 or because the proceeds from the sale of conversion 
stock, less the expenses of the conversion, would be insufficient to 
satisfy any applicable viability requirement;
    (b) The transaction is detrimental to or would cause potential 
injury to the savings association or the Deposit Insurance Fund or is 
contrary to the public interest;
    (c) The savings association or its acquiror, or the controlling 
parties or directors and officers of the savings association or its 
acquiror, have engaged in unsafe or unsound practices in connection with 
the voluntary supervisory conversion; or

[[Page 1140]]

    (d) The savings association fails to justify an employment contract 
incidental to the conversion, or the employment contract will be an 
unsafe or unsound practice or represent a sale of control. In a 
voluntary supervisory conversion, the appropriate Federal banking agency 
generally will not approve employment contracts of more than one year 
for existing management.



Sec.  192.675  Conditions imposed upon approval of voluntary supervisory 
conversion application.

    (a) Required condition. The appropriate Federal banking agency will 
condition approval of a voluntary supervisory conversion application on 
all of the following.
    (1) The savings association must complete the conversion stock sale 
within three months after the appropriate Federal banking agency 
approves the application. The appropriate Federal banking agency may 
grant an extension for good cause.
    (2) The savings association must comply with all filing requirements 
of this part, and 12 CFR part 16.
    (3) The savings association must submit an opinion of independent 
legal counsel indicating that the sale of its shares complies with all 
applicable State securities law requirements.
    (4) The savings association must comply with all applicable laws, 
rules, and regulations.
    (5) The savings association must satisfy any other requirements or 
conditions the appropriate Federal banking agency may impose.
    (b) Discretionary conditions. The appropriate Federal banking agency 
may condition approval of a voluntary supervisory application for 
conversion on either of the following:
    (1) The savings association must satisfy any conditions and 
restrictions the appropriate Federal banking agency imposes to prevent 
unsafe or unsound practices, to protect the Deposit Insurance Fund and 
the public interest, and to prevent potential injury or detriment to the 
savings association before and after the conversion. The appropriate 
Federal banking agency may impose these conditions and restrictions on 
the savings association (before and after the conversion) or, as 
appropriate, the savings association's acquiror, controlling parties, or 
its directors and officers; or
    (2) The savings association must infuse a larger amount of capital, 
if necessary, for safety and soundness reasons.

                        Offers and Sales of Stock



Sec.  192.680  Offer and sale of shares in a voluntary supervisory conversion.

    If a savings association converts under this subpart, it must offer 
and sell its shares in accordance with the applicable requirements of 12 
CFR parts 16 and 192.

                             Post-Conversion



Sec.  192.690  Restrictions on acquisition of additional shares 
after voluntary supervisory conversion.

    For three years after the completion of a voluntary supervisory 
conversion, neither the savings association nor its controlling 
shareholder(s) may acquire shares from minority shareholders without the 
appropriate Federal banking agency's prior approval.

                        PARTS 193	199 [RESERVED]

[[Page 1141]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 1143]]



                    Table of CFR Titles and Chapters




                     (Revised as of January 1, 2024)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--599)
        VI  National Capital Planning Commission (Parts 600--699)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
         X  Department of the Treasury (Parts 1000--1099)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Department of Housing and Urban Development (Parts 
                2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)

[[Page 1144]]

     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
      XXIX  Department of Labor (Parts 2900--2999)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
     XXXVI  Office of National Drug Control Policy, Executive 
                Office of the President (Parts 3600--3699)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)
       LIX  Gulf Coast Ecosystem Restoration Council (Parts 5900--
                5999)
        LX  Federal Communications Commission (Parts 6000--6099)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
        IV  Office of Personnel Management and Office of the 
                Director of National Intelligence (Parts 1400--
                1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)

[[Page 1145]]

      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  U.S. International Development Finance Corporation 
                (Parts 4300--4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
     XXXVI  Department of Homeland Security (Parts 4600--4699)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)

[[Page 1146]]

    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)
    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
    XCVIII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)
         C  National Council on Disability (Parts 10000--10049)
        CI  National Mediation Board (Parts 10100--10199)
       CII  U.S. Office of Special Counsel (Parts 10200--10299)
       CII  U.S. Office of Special Counsel (Parts 10300--10399)
       CIV  Office of the Intellectual Property Enforcement 
                Coordinator (Part 10400--10499)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--199)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)

[[Page 1147]]

      VIII  Agricultural Marketing Service (Federal Grain 
                Inspection Service, Fair Trade Practices Program), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  [Reserved]
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  [Reserved]
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]

[[Page 1148]]

      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)
         L  Rural Business-Cooperative Service, and Rural 
                Utilities Service, Department of Agriculture 
                (Parts 5000--5099)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Agricultural Marketing Service (Fair Trade Practices 
                Program), Department of Agriculture (Parts 200--
                299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  [Reserved]
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  (Parts 900--999)[Reserved]

[[Page 1149]]

         X  Consumer Financial Protection Bureau (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research, Department of the 
                Treasury (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)

[[Page 1150]]

      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  National Technical Information Service, Department of 
                Commerce (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
        XV  Office of the Under-Secretary for Economic Affairs, 
                Department of Commerce (Parts 1500--1599)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399) [Reserved]

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599) [Reserved]

[[Page 1151]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  United States Agency for Global Media (Parts 500--599)
       VII  U.S. International Development Finance Corporation 
                (Parts 700--799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 1152]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799) 
                [Reserved]
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]

[[Page 1153]]

        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--899)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900--999)
        VI  Office of the Assistant Secretary, Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--799)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)

[[Page 1154]]

        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance

[[Page 1155]]

         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of Investment Security, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Department of Defense, Defense Logistics Agency (Parts 
                1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army, Department 
                of Defense (Parts 200--399)
        IV  Great Lakes St. Lawrence Seaway Development 
                Corporation, Department of Transportation (Parts 
                400--499)

[[Page 1156]]

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Career, Technical, and Adult Education, 
                Department of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599) 
                [Reserved]
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799) 
                [Reserved]
            Subtitle C--Regulations Relating to Education
        XI  [Reserved]
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)

[[Page 1157]]

       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  National Institute of Standards and Technology, 
                Department of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)
        IX  Federal Permitting Improvement Steering Council (Part 
                1900)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
 Chapters 
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
 Chapters 
  103--104  (Parts 103-001--104-099) [Reserved]

[[Page 1158]]

       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
 Chapters 
  129--200  [Reserved]
            Subtitle D--Federal Acquisition Supply Chain Security
       201  Federal Acquisition Security Council (Parts 201-1--
                201-99).
            Subtitle E [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
 Chapters 
   II--III  [Reserved]
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--699)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1099)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)

[[Page 1159]]

        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
        IX  Denali Commission (Parts 900--999)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Administration for Children and Families, Department 
                of Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission of Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Parts 2300--2399)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)

[[Page 1160]]

       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)
         V  The First Responder Network Authority (Parts 500--599)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)

[[Page 1161]]

        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199) [Reserved]
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

[[Page 1162]]

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

[[Page 1163]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of January 1, 2024)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     5, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, VIII, IX, X, XI; 9, 
                                                  II
Agricultural Research Service                     7, V
Agriculture, Department of                        2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, VIII, IX, X, XI; 9, 
                                                  II
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force, Department of                          32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 1164]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI; 38, II
Army, Department of                               32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
  Federal Acquisition Regulation                  48, 19
Career, Technical, and Adult Education, Office    34, IV
     of
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazard Investigation Board    40, VI
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X, XIII
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce, Department of                           2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Affairs, Office of the Under-          15, XV
       Secretary for
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II; 37, IV
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Technical Information Service          15, XI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Secretary of Commerce, Office of                15, Subtitle A
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I
Defense, Department of                            2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III; 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I

[[Page 1165]]

  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy, Department of                             32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Denali Commission                                 45, IX
Disability, National Council on                   5, C; 34, XII
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Office of the Under-Secretary   15, XV
     for
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Career, Technical, and Adult Education, Office  34, IV
       of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Policy, National Commission for        1, IV
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99
  National Drug Control Policy, Office of         2, XXXVI; 21, III
  National Security Council                       32, XXI; 47, II
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
     States
[[Page 1166]]

Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Acquisition Security Council              41, 201
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 2, LX; 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        5, CIII; 29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Permitting Improvement Steering Council   40, IX
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission of                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5

[[Page 1167]]

  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Great Lakes St. Lawrence Seaway Development       33, IV
     Corporation
Gulf Coast Ecosystem Restoration Council          2, LIX; 40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X, XIII
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 5, XXXVI; 6, I; 8, 
                                                  I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Independent Counsel, Offices of                   28, VI
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II

[[Page 1168]]

Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Intellectual Property Enforcement Coordinator,    5, CIV
     Office of
Inter-American Foundation                         5, LXIII; 22, X
Interior, Department of                           2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Safety and Environmental Enforcement, Bureau    30, II
       of
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Development Finance Corporation,    5, XXXIII; 22, VII
     U.S.
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice, Department of                            2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Independent Counsel, Offices of                 28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor, Department of                              2, XXIX; 5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Federal Acquisition Regulation                  48, 29

[[Page 1169]]

  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I, VI
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Libraries and Information Science, National       45, XVII
     Commission on
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV, VI
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           2, XXXVI; 21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Geospatial-Intelligence Agency           32, I
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II; 37, IV
National Intelligence, Office of Director of      5, IV; 32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          5, CI; 29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI; 47, II

[[Page 1170]]

National Technical Information Service            15, XI
National Telecommunications and Information       15, XXIII; 47, III, IV, V
     Administration
National Transportation Safety Board              49, VIII
Natural Resource Revenue, Office of               30, XII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy, Department of                               32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, IV, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Contracts, Department of Labor             41, 50
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Safety and Environmental Enforcement, Bureau of   30, II
Science and Technology Policy, Office of          32, XXIV; 47, II
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State, Department of                              2, VI; 22, I; 28, XI

[[Page 1171]]

  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Tennessee Valley Authority                        5, LXIX; 18, XIII
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Great Lakes St. Lawrence Seaway Development     33, IV
       Corporation
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury, Department of the                       2, X; 5, XXI; 12, XV; 17, 
                                                  IV; 31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
Truman, Harry S. Scholarship Foundation           45, XVIII
United States Agency for Global Media             22, V
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
U.S. Office of Special Counsel                    5, CII
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs, Department of                   2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I, VII
World Agricultural Outlook Board                  7, XXXVIII

[[Page 1173]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2019 are enumerated in the following list. Entries indicate the 
nature of the changes effected. Page numbers refer to Federal Register 
pages. The user should consult the entries for chapters, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.govinfo.gov. For changes to this volume of the 
CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 
1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. 
The ``List of CFR Sections Affected 1986-2000'' is available at 
www.govinfo.gov.

                                  2019

12 CFR
                                                                   84 FR
                                                                    Page
Chapter I
1.2 (a)(2) revised..................................................4237
1.2 Regulation at 84 FR 4237 eff. date delayed to 7-1-19...........11879
1.2 (a) revised....................................................61792
1.2 Correction: (a)(1)(ii) and (2)(ii) amended.....................69297
3.1 (a) revised....................................................35248
3.1 (f)(1)(ii) removed.............................................56374
3.1 (f)(5) added...................................................59263
3.2 Amended....................................4237, 35248, 59263, 61792
3.2 Amended; eff. 4-1-20...........................................68031
3.2 Regulation at 84 FR 4237 eff. date delayed to 7-1-19...........11879
3.10 (c)(3)(ii)(A) amended..........................................4238
3.10 Regulation at 84 FR 4238 eff. date delayed to 7-1-19..........11879
3.10 (c)(4)(ii)(H) revised.........................................35248
3.10 (a)(5), (c) introductory text, and (4)(i) introductory text 
        revised....................................................59264
3.10 (a) revised...................................................61792
3.11 (a)(2)(i), (iv), (3)(i), and Table 1 revised..................35249
3.11 (b)(1) introductory text and (ii) revised.....................59265
3.12 Added.........................................................61792
3.20 (d)(3) amended.................................................4238
3.20 Regulation at 84 FR 4238 eff. date delayed to 7-1-19..........11879
3.20 (b)(4), (c)(1)(viii), (2), (d)(2), and (5) revised............35249
3.21 Revised; eff. 4-1-20..........................................35249
3.21 Regulation at 84 FR 35249 eff. date revised as 1-1-20.........61804
3.22 (c) footnote 23 amended........................................4238
3.22 Regulation at 84 FR 4238 eff. date delayed to 7-1-19..........11879
3.22 (a)(1), (c), (d), (g), and (h) revised; eff. 4-1-20...........35250
3.22 (b)(2)(ii) introductory text revised..........................59265
3.22 (f) revised...................................................61793
3.22 Regulation at 84 FR 35250 eff. date revised as 1-1-20.........61804
3.32 (b), (d)(2), (3)(ii), (j), (k), and (l) revised...............35254
3.34 (c) revised...................................................35255
3.35 (b)(3)(ii), (4)(ii), (c)(3)(ii), and (4)(ii) revised..........35255
3.36 (c) revised...................................................35255
3.37 (b)(2)(i) revised.............................................35256
3.38 (e)(2) revised................................................35256
3.42 (j)(2)(ii)(A) revised.........................................35256
3.52 (b)(1) and (4) revised........................................35256
3.61 Revised.......................................................35256
3.63 Table 5 amended................................................4238
3.63 Regulation at 84 FR 4238 eff. date delayed to 7-1-19..........11879
3.63 Table 3 and Table 8 revised...................................35256
3.63 (d) and (e) added.............................................59265

[[Page 1174]]

3.100 (b)(1) revised; (b)(2) removed; (b)(3) redesignated as new 
        (b)(2).....................................................59265
3.124 (a) and (b)(2) amended........................................4238
3.124 Regulation at 84 FR 4238 eff. date delayed to 7-1-19.........11879
3.131 (d)(2) revised...............................................35258
3.133 (b)(3)(ii) and (c)(3)(ii) revised............................35258
3.152 (b)(5) and (6) revised.......................................35258
3.172 (d)(2) revised...............................................59265
3.173 Table 2, Table 3, and Table 5 amended.........................4238
3.173 Regulation at 84 FR 4238 eff. date delayed to 7-1-19.........11879
3.173 Heading and (a)(2) revised...................................59265
3.202 (b) amended..................................................35258
3.210 (b)(2)(ii) revised...........................................35258
3.300 (b) and (d) removed; eff. 4-1-20.............................35258
3.300 (f) added....................................................61807
3.300 Regulation at 84 FR 35258 eff. date revised as 1-1-20........61804
3.301 Added.........................................................4239
3.301 Regulation at 84 FR 4239 eff. date delayed to 7-1-19.........11879
3 Appendix A removed...............................................56374
3 Appendix B removed...............................................56374
5.3 (e)(2) revised..................................................4240
5.3 Regulation at 84 FR 4240 eff. date delayed to 7-1-19...........11879
5.3 (e) revised....................................................61793
5.3 Correction: (e)(1)(ii), (2)(i), and (ii) amended...............69297
5.37 (c)(3)(ii) revised.............................................4240
5.37 Regulation at 84 FR 4240 eff. date delayed to 7-1-19..........11879
5.37 (c)(3) revised................................................61794
5.37 Correction: (c)(3)(i)(B), (ii)(A), and (B) amended............69297
5.58 (h)(2) revised................................................61794
5.58 Correction: (h)(2) revised; (h)(3) added......................69297
6.1 (f)(1) removed.................................................56374
6.2 Footnotes 30 through 35 removed................................56374
6.4 (b) removed; (c), (d), and (e) redesignated as new (b), (c), 
        and (d); heading, new (b) introductory text, and (1) 
        revised....................................................61794
8.2 (a) introductory text, table, (1), (2), (3), (6)(i), (ii)(A), 
        (B), (b)(1), (3), (4)(i), (c) heading, (1), (2), (3)(iii), 
        (vi), (viii), and (4) amended; (a)(5), (b)(3), and (d) 
        revised....................................................43478
8.6 (b), (c)(1), (i), (ii), (2), (3)(v), and (vii) amended; (a) 
        introductory text, (1), (3), and (c)(1)(iii) revised.......43479
8.7 (a) and (b) revised; undesignated text following (b) removed 
                                                                   43479
8.8 Heading and (b) revised........................................43479
9 Notification.....................................................71735
19 Technical correction.............................................6313
22.2 (h) through (m) redesignated as (i), (j), (l), (m), (o), and 
        (p); new (h), new (k), and new (n) added....................4969
22.3 (c) added......................................................4970
23.2 (b)(2) revised.................................................4240
23.2 Regulation at 84 FR 4240 eff. date delayed to 7-1-19..........11879
23.2 (b) revised...................................................61794
23.2 Correction: (b)(1)(ii), (2)(i), and (ii) amended..............69297
24.2 (b)(2) revised.................................................4240
24.2 Regulation at 84 FR 4240 eff. date delayed to 7-1-19..........11879
24.2 (b) revised...................................................61795
24.2 Correction: (b)(1)(ii), (2)(i), and (ii) amended..............69298
25.12 (u)(1) revised...............................................71740
26.3 (c) amended...................................................54471
32.2 (c)(2) revised.................................................4240
32.2 Regulation at 84 FR 4240 eff. date delayed to 7-1-19..........11879
32.2 (c) revised...................................................61795
32.2 Correction: (c)(1)(ii), (2)(i), and (ii) amended..............69298
34.42 (f) revised; (k) through (n) redesignated as (l) through 
        (o); new (k) added.........................................53597
34.43 (a)(1) and (d)(3) revised; (a)(12) and (13) amended; (a)(14) 
        added......................................................53597
34.43 (b) revised..................................................53597
34.44 (c), (d), and (e) redesignated as (d), (e), and (f); new (c) 
        added......................................................53597
34.61--34.62 (Subpart D) Appendix A amended........................56374
34.81 Amended...............................................56374, 61795
34.81 Correction: Amended..........................................69298

[[Page 1175]]

34.82 (a) and (b) revised; (d) and (e) added.......................56375
34.82 Correction: (b)(5) amended...................................64193
34.82 Technical correction.........................................71735
34.83 Heading, (a) introductory text, (3) introductory text, 
        (i)(B), and (ii) revised; (b) redesignated as (c); (a)(5) 
        and new (b) added; (a)(4) and new (c) amended..............56375
34.85 Amended......................................................56375
34.86 Revised......................................................56375
34.87 Removed......................................................56376
34.201--34.203 (Subpart G) Appendix C amended......................58015
44.1 (c) revised...................................................35019
44.2 (r) revised...................................................35019
44.2 Revised.......................................................62093
44.3 (e)(5) through (13) redesignated as (e)(6) through (14); 
        (d)(10) through (13) and new (e)(5) added; (b), (d)(3), 
        (8), (9), new (e)(11), new (12), and new (14) revised......62095
44.4 Revised.......................................................62096
44.5 (b) and (c)(1) introductory text revised; (c)(4) added........62098
44.6 (e)(3) revised; (e)(4) and (6) removed; (e)(5) redesignated 
        as new (e)(4)..............................................62099
44.10 (d)(9)(iii) revised..........................................35020
44.10 (c)(7)(ii) and (8)(i)(A) revised.............................62099
44.11 (a)(6) revised...............................................35020
44.11 (c) revised..................................................62099
44.12 Second (e)(2)(vi) redesignated as (e)(2)(vii)................62100
44.13 (a), (b)(3), (4), and (c) revised............................62100
44.14 (a)(2)(ii)(B) revised........................................62101
44.20 (a), (b) introductory text, (c), (d), (e) introductory text, 
        and (f)(2) revised; (g), (h), and (i) added................62101
44 Appendix A revised..............................................62102
44 Appendix B removed..............................................62104
44 Appendix Z added (temporary)....................................62104
45.1 (h) added; interim.............................................9948
46 Heading revised.................................................54475
46.2 Amended.......................................................54475
46.3 (b) and (c) revised; (d) removed..............................54476
46.4 (a)(2) amended................................................54476
46.5 Heading, (a), and (b) revised; introductory text amended; (e) 
        added......................................................54476
46.6 (a)(2) and (c)(2) amended.....................................54476
46.6 (a)(2) amended................................................56376
46.7 (a) revised; (b) removed; (c) redesignated as new (b).........54476
46.8 (c)(3) and (d)(1) amended......................................4240
46.8 Regulation at 84 FR 4240 eff. date delayed to 7-1-19..........11879
46.8 (a)(2) removed; (a)(1), (i), and (ii) redesignated as (a) 
        introductory text, (1), and (2); (a) introductory text 
        revised; (b) amended.......................................54476
50.1 Revised.......................................................59266
50.3 Regulation at 83 FR 44454 confirmed...........................25978
50.3 Amended.......................................................59266
50.10 (a) revised..................................................59268
50.20 Regulation at 83 FR 44454 confirmed..........................25978
50.30 (a) revised; (c) and (d) added...............................59268
50.50 Revised......................................................59269
52 Added...........................................................29050
101 Added..........................................................24005
109 Technical correction............................................6313
109 Notification...................................................71735
160.3 Amended......................................................61795
160.100 Amended....................................................56376
160.101 Appendix A amended.........................................56376
160.172 Removed....................................................56376
161.55 (c) amended.................................................56376
163.74 (i)(2)(iv) and (v) amended..................................56376
163.80 (e)(1) introductory text amended............................56376
167 Removed........................................................56376
192.500 (a)(3)(iii) added..........................................61796
195.12 (u)(1) revised..............................................71740

                                  2020

12 CFR
                                                                   85 FR
                                                                    Page
Chapter I
3 Authority citation revised................................20393, 22928
3 Notification.....................................................17721
3 Policy statement.................................................64003
3.2 Amended............................................4362, 4577, 42640
3.2 Amended; interim...............................................20393
3.2 Regulation at 85 FR 20393 eff. date confirmed..................68243
3.10 (c)(4)(ii)(A) through (C) revised..............................4401

[[Page 1176]]

3.10 (c)(4)(ii) introductory text revised; (c)(4)(ii)(J) added......4577
3.10 Correction: (c)(4)(ii)(A), (B)(1) introductory text, (i), 
        (C)(2)(i), and (H) amended; (c)(4)(ii)(B)(2)(i) and (ii) 
        revised....................................................57959
3.11 (a)(2)(i) revised; interim....................................15915
3.11 Regulation at 85 FR 15915 confirmed...........................63428
3.12 (a)(4) added; interim.........................................77359
3.32 (f) revised....................................................4402
3.32 (a)(1)(iii) added; interim....................................20393
3.32 Correction: (f)(1) revised....................................57959
3.32 Regulation at 85 FR 20393 eff. date confirmed.................68243
3.34 Revised........................................................4402
3.35 (a)(3) and (c)(3)(iii) added; (b)(4)(i) revised................4404
3.37 (c)(3)(iii), (iv)(A), (C), (4)(i)(B) introductory text, and 
        (1) revised.................................................4404
3.37 Correction: (c)(2)(i)(B) amended..............................57959
3.131 (e)(3)(viii) added; interim..................................20393
3.131 Regulation at 85 FR 20393 eff. date confirmed................68243
3.132 (b)(2)(ii)(3) through (5), (c) heading, (1), (2), (5) 
        through (8), (d)(10)(i), and (e)(6)(viii) revised; 
        (b)(2)(ii)(A)(6), (7), (c)(9) through (11) added; 
        (e)(5)(i)(A), (C), (H), and (6)(i)(B) amended; (e)(5)(ii) 
        Table 3 redesignated as (e)(5)(ii) Table 4..................4405
3.132 Correction: (c)(8)(iii) and (iv) amended; (c)(9)(ii)(A)(1) 
        and (iv)(A)(3) revised.....................................57959
3.133 (a), (b)(1) through (3), (4)(i), (c)(1) through (3), (4)(i), 
        and (d) revised.............................................4411
3.133 Correction: (d)(4), (5), (6) introductory text, and (i) 
        through (iii) revised......................................57960
3.134 (d)(3) amended................................................4405
3.173 Table 13 amended..............................................4413
3.202 (1) introductory text and (i) amended.........................4405
3.210 (e)(1) amended................................................4405
3.300 (g) and (h) added.............................................4414
3.301 (a)(1), (2), (b)(1), and (c)(1) introductory text revised; 
        (c)(3) and (4) redesignated as (e) and (f); (d), (e) 
        heading, and (f) heading added; (f) introductory text 
        amended; new (f)(i) and new (ii) redesignated as (f)(1) 
        and (2); interim...........................................17732
3.301 Correction: (b)(1), (c)(2) introductory text, (d) 
        introductory text, and (2)(ii) introductory text amended 
                                                                   29841
3.301 Revised......................................................61586
3.302 Added; interim...............................................16236
3.302 Regulation at 85 FR 16236 eff. date confirmed................68243
3.303 Added........................................................22928
3.303 (d) added....................................................22937
3.304 Added; interim...............................................32988
3.305 Added; interim...............................................20393
3.305 Regulation at 85 FR 20393 eff. date confirmed................68243
3.601 (b) revised..................................................42640
3.701 (f)(1)(vi) amended; eff. 1-11-21.............................80434
4.5 (a) amended; eff. 4-1-21.......................................83726
4.6 (d) added; interim.............................................77359
4.7 (d) added; interim.............................................77359
4.14 (a)(9) amended................................................42640
4.34 (c)(2) amended................................................42640
4.37 (a)(2)(ii) amended............................................42640
5 Authority citation revised.......................................80434
5.2 (b) and (c) amended; eff. 1-11-21..............................80434
5.3 Revised; eff. 1-11-21..........................................80434
5.4 (a) through (e) amended; (f) revised; (g) added; eff. 1-11-21 
                                                                   80435
5.5 (a) revised; eff. 1-11-21......................................80436
5.7 (b) redesignated as (c); new (b) added; eff. 1-11-21...........80436
5.8 (a) through (e), (g) introductory text, and (1) amended; eff. 
        1-11-21....................................................80436
5.9 (b) and (c) amended; eff. 1-11-21..............................80436
5.10 (b)(2)(i), (ii), (3) heading, and (3) amended; eff. 1-11-21 
                                                                   80436
5.11 (a), (c), (d)(1), (e), (f), (g)(1), (2), (h), (i)(1), and (2) 
        amended; eff. 1-11-21......................................80436
5.12 Amended; eff. 1-11-21.........................................80436
5.13 (a) introductory text, (b)(1), (3), (c), (d), (f), and (g) 
        amended; (a)(2) and (h) revised; (i) added; eff. 1-11-21 
                                                                   80436

[[Page 1177]]

5.20 (d)(7), (8), (i)(3), and (5) as (d)(8), (9), (i)(4), and (6); 
        (b), (d)(2), (8), (9), (e)(1)(ii)(A), (iii) introductory 
        text, (3), (g)(4)(ii), (h)(1)(i), (2), (3)(i), (5)(i), 
        (ii), (iii), (7), (i)(1), (2), new (4), new (5), new 
        (6)(i), new (ii)(A), new (B), new (iii), new (iv), new 
        (iii), (j)(2), (k)(1), (2), (l)(1), and (2) amended; 
        (j)(1) revised; new (i)(3) added; eff. 1-11-21.............80437
5.20 (e)(2) revised................................................80437
5.21 (j)(2)(i)(A) and (ii) amended; (j)(2)(i)(C) added; interim....31948
5.21 (d), (e) introductory text, form, (g)(1), and (2) amended; 
        (f)(2), (g) introductory text, (1), (i), and (j) revised; 
        (f)(3) added; eff. 1-11-21.................................80437
5.21 (j)(2)(i)(C) and (3)(ii) amended; eff. 4-1-21.................83726
5.22 (k)(1) revised; (l)(3) and (8) amended; interim...............31948
5.22 (d), (e) introductory text, form, (g)(1), (6), (h), (i), 
        (j)(4), (m)(1), and (2) amended; (f)(2), (g) introductory 
        text, (4), (7), (j)(2), (3), (k)(1) through (7), (l)(1) 
        through (10), and (n) revised; (f)(3) added; eff. 1-11-21 
                                                                   80440
5.22 (j)(2)(ii) revised; (k)(1)(ii)(B) amended; eff. 4-1-21........83726
5.23 (d)(2)(ii)(A) removed; (d)(2)(ii)(B) through (K), (iv), and 
        (v) redesignated as (d)(2)(ii)(A) through (J), (v), and 
        (vi); (b)(2), (ii) introductory text, (c), (d)(1), (2)(i), 
        new (ii)(D), new (F), new (I), new (J), (iii), new (vi), 
        (e), (f)(1), and (g) amended; new (d)(2)(ii)(K), new (L), 
        and new (iv) added; (d)(4) revised; eff. 1-11-21...........80445
5.24 (e)(2)(i) removed; (e)(2)(ii) through (x), (4), and (5) as 
        (e)(2)(i) through (ix)(b), (5), and (6); (c)(1), (2), (d), 
        (e)(1), (2) introductory text, (e)(2)(iv), (ix), new 
        (viii), new (ix), new (6), (3), (f), and (i) amended; new 
        (e)(2)(x), new (xi), new (4) added; (h) revised; eff. 1-
        11-21......................................................80446
5.25 Heading, (b), (c), (d)(1), (2), (3)(i), (ii) introductory 
        text, and (4) amended; eff. 1-11-21........................80446
5.26 (a), (b)(2) through (4), (e)(1)(ii), (iii), (2)(i) 
        introductory text, (B), (E), (ii), and (iii)(B) amended; 
        (e)(2)(i)(C), (3), and (6) revised; eff. 1-11-21...........80446
5.30 (b), (c)(2), (3), (d)(2), (3), (5), (f)(1), (4), (6), (g), 
        (h)(1), (4), and (j) amended; (d)(1)(i) and (iii) revised; 
        eff. 1-11-21...............................................80447
5.30 (d)(1)(i) and (iii) amended; eff. 4-1-21......................83726
5.31 (a), (b), (c)(2), (3), (d)(1), (2), (f)(1)(i), (iii), 
        (2)(ii), (iii) introductory text, (i), (g)(2), (j) 
        heading, (2), and (k)(2)(ii) amended; (j)(3) added; eff. 
        1-11-21....................................................80447
5.32 (c), (d)(1), (2)(i), (e), (f), (h)(1), and (2) amended eff. 
        1-11-21....................................................80447
5.33 Revised eff. 1-11-21..........................................80447
5.34 (a), (c), (e)(1)(i)(B), (2)(i)(C), (ii) introductory text, 
        (A), (B), (iii)(B), (3), (4)(i), and (ii) amended; 
        (e)(2)(ii)(C) added; (e)(7) removed; (e)(5) and (6) 
        redesignated as (f) and (g); (d), (e)(2)(i)(A), and new 
        (f) revised; eff. 1-11-21..................................80455
5.35 Heading, (f)(2)(ii)(A), and (i) revised; (a), (b), (d)(2) 
        through (4), (d)(6), (f)(2)(ii)(B), (g)(2), and (4) 
        amended; eff. 1-11-21......................................80458
5.36 (g) through (i) redesignated as (h) through (j); (a), (b), 
        (e)(1), new (g) added; (e)(1) and new (h)(1) amended; (c), 
        (e) introductory text, (2) through (4), (f), new (i), and 
        new (j) revised; eff. 1-11-21..............................80458
5.37 (a), (d)(1)(i), (3)(i), (4), and (5) amended; (c) removed; 
        eff. 1-11-21...............................................80459
5.38 (d) removed; (e)(5) through (7) redesignated as (f) through 
        (h); (e)(2)(iii)(C) added; (a), (b), (e)(2)(i)(C), (iii) 
        introductory text, (A), (B), (iv)(B), (3), (4)(i), and new 
        (h) amended; (e)(2)(i)(A) and new (f) revised; eff. 1-11-
        21.........................................................80459

[[Page 1178]]

5.39 (d)(2), (11), (12), and (h)(5)(ii) removed; (d)(3) through 
        (10) redesignated as (d)(2) through (9); (a), (h)(5)(i), 
        and (i) revised; (b), (d)(1), (e)(1) introductory text, 
        (ii), (f)(1), (3), (h)(2), (5) introductory text, (vi), 
        (6), (j)(1)(i), (ii), (2), and (k) amended; eff. 1-11-21 
                                                                   80461
5.40 (a), (b), (c)(1), (2)(i), (ii), (3), and (4) amended; eff. 1-
        11-21......................................................80462
5.42 (d)(1), (2), and (4) amended; (d)(3) revised; eff. 1-11-21....80462
5.43 Added; eff. 1-11-21...........................................80462
5.45 (b), (e)(1), (f)(3), (g)(1) introductory text, (2)(iii), 
        (4)(i) introductory text, (C), (h), (5), and (i) amended; 
        eff. 1-11-21...............................................80463
5.46 (b), (g)(2), (i)(1) introductory text, (3)(i) introductory 
        text, (4), (5), (6)(i), (ii), (j), and (k) amended; 
        (g)(1)(ii), (h), and (i)(2) revised; eff. 1-11-21..........80463
5.47 (d)(3)(ii)(D) added; (b), (d)(1)(ii), (iv)(B), (vi), (vii), 
        (2) introductory text, (3)(ii)(C), and (e) amended; (c), 
        (f), (g), and (h) revised; eff. 1-11-21....................80464
5.48 (b), (e)(1), (2)(i), (3)(i) introductory text, (ii), (iii), 
        (4) through (6), and (f)(2)(ii) amended; eff. 1-11-21......80465
5.50 (d)(6) and (7) as redesignated as (d)(7) and (8); new (d)(6) 
        added; (d)(8) and (f)(3)(iv) removed; (b), (c)(2)(iii), 
        (3)(v)(B), (d)(1)(ii), (5), new (7), (f)(2)(i), (ii) 
        introductory text, (D), (E), (iii)(A), (vii), (viii), 
        (3)(i)(A), (ii)(A) through (C), (iii) introductory text, 
        (5) heading, (g)(1) introductory text, (h), (i)(1)(i), 
        (1)(ii), (iii), (3)(i), (4)(ii), and (5) amended; (f)(6) 
        and (g)(2)(i) revised; eff. 1-11-21........................80465
5.51 (c)(4), (7)(ii), (d) introductory text, (e)(1), (6)(i)(C), 
        (1)(D)(2), (i)(E), (8), (f)(1), (3), and (4) amended; (a) 
        revised; eff. 1-11-21......................................80466
5.52 (c)(1) and (2) amended; eff. 1-11-21..........................80466
5.53 (c)(2)(ii) and (d)(3)(i)(A) amended; eff. 1-11-21.............80466
5.55 (d)(2) removed; (d)(3) and (h)(1) through (3) redesignated as 
        new (d)(2) as (h)(1)(i) through (iii); new (d)(3), (h)(1) 
        introductory text, and (2) added; (b), (d)(4), and 
        (h)(1)(iii) amended; (e), (f), (g), and (h) introductory 
        text revised; eff. 1-11-21.................................80466
5.56 (d)(1)(i)(F), (G), (2)(i), (ii), (e)(1) introductory text, 
        (2), and (i) amended; (b) and (h) revised; (d)(1)(i)(H) 
        added; eff. 1-11-21........................................80467
5.58 (f)(2) and (g) through (i) redesignated as (f)(3) and (h) 
        through (j); new (f)(2) and new (g) added; (d)(3) removed; 
        (a), (e)(1), new (h) heading, new introductory text, new 
        (1), and new (i)(3) amended; (d)(2), (e) introductory 
        text, (2) through (4), (f)(1), new (3), and new (j) 
        revised; eff. 1-11-21......................................80468
5.59 (a), (b) introductory text, (d)(2), (e)(1), (2), (4), (9), 
        (f)(6)(i), (g)(1) through (3), (h)(1)(i) introductory 
        text, (ii), (2)(i), (3), and (ii)(B) amended; 
        (h)(2)(ii)(A) revised; eff. 1-11-21........................80469
5.62 Amended; eff. 1-11-21.........................................80469
5.64 (c)(2)(i), (iii), and (3) amended; (d) removed; eff. 1-11-21 
                                                                   80469
5.66 Revised; eff. 1-11-21.........................................80469
5.67 Revised; eff. 1-11-21.........................................80470
5.70 (c)(1)(iv), (v), (d)(1), and (2) introductory text amended; 
        (d)(3) added; eff. 1-11-21.................................80470
6.4 Correction: (b) removed; (c) through (e) redesignated as new 
        (b) through (d); heading, (a), new (b) introductory text, 
        and new (1) revised........................................10968
6.4 (b)(2)(iv)(B) and (3)(iv)(B) revised; interim..................32989
7 Authority citation revised.......................................83726
7.1000 Redesignated as 7.1024; new section added; eff. 4-1-21......83726
7.1001 Removed; interim............................................31949
7.1001 Correction: added...........................................35374
7.1002 Revised; eff. 4-1-21........................................83727
7.1003 (a) heading revised; (a) and (b) amended; (c) added; eff. 
        4-1-21.....................................................83727
7.1004 Revised; eff. 4-1-21........................................83727
7.1005 Removed; eff. 4-1-21........................................83728

[[Page 1179]]

7.1006 Heading and section amended; eff. 4-1-21....................83728
7.1009 Removed; eff. 4-1-21........................................83728
7.1010 Revised; eff. 4-1-21........................................83728
7.1012 (c)(1) and (2)(vi) amended; eff. 4-1-21.....................83728
7.1015 Revised; eff. 4-1-21........................................83728
7.1016 Heading, (a), (b)(1) introductory text, (iv), and (2)(i) 
        revised; (b)(1)(iii)(B), (C), (2)(ii), (iii), (3), and (4) 
        amended; eff. 4-1-21.......................................83728
7.1021 Revised; eff. 4-1-21........................................83729
7.1022 (d) and (e) amended; eff. 4-1-21............................83729
7.1023 (c) and (d) amended; eff. 4-1-21............................83729
7.1024 Redesignated from 7.1000; eff. 4-1-21.......................83727
7.1024 (c)(2)(i), (ii), (d), and (e) amended; eff. 4-1-21..........83729
7.1025 Added; eff. 4-1-21..........................................83729
7.1026 Added; eff. 4-1-21..........................................83730
7.1027 Added; eff. 4-1-21..........................................83731
7.1028 Added; eff. 4-1-21..........................................83732
7.1029 Added; eff. 4-1-21..........................................83732
7.1030 Added; eff. 4-1-21..........................................83732
7.1031 Added.......................................................68747
7.2000--7.2025 (Subpart B) Heading revised; eff. 4-1-21............83733
7.2000 (c) redesignated as (d); new (c) added; heading, (a), and 
        new (d) revised; section amended; eff. 4-1-21..............83733
7.2001 Correction: removed.........................................35374
7.2001 Added; eff. 4-1-21..........................................83733
7.2002 Heading revised; section amended; eff. 4-1-21...............83734
7.2003 Revised; interim............................................31949
7.2003 Revised; eff. 4-1-21........................................83734
7.2004 Heading revised; eff. 4-1-21................................83734
7.2005 Heading and (a) heading revised; (c)(3)(ii) amended; eff. 
        4-1-21.....................................................83734
7.2006 Heading revised; section amended; eff. 4-1-21...............83734
7.2007 Heading revised; (a) and (b) amended; eff. 4-1-21...........83735
7.2008 (c) amended; eff. 1-11-21...................................80470
7.2008 Heading and (a) revised; (b) amended; eff. 4-1-21...........83735
7.2009 Heading revised; section amended; eff. 4-1-21...............83735
7.2010 Heading revised; section amended; eff. 4-1-21...............83735
7.2011 Heading revised; eff. 4-1-21................................83735
7.2012 Revised; eff. 4-1-21........................................83735
7.2013 Heading revised; eff. 4-1-21................................83735
7.2014 Revised; eff. 4-1-21........................................83735
7.2015 Heading revised; eff. 4-1-21................................83735
7.2016 Heading revised; (a) and (b) redesignated as (a)(1) and 
        (2); (a) heading and new (b) added; eff. 4-1-21............83735
7.2017 Removed; eff. 4-1-21........................................83735
7.2018 Removed; eff. 4-1-21........................................83735
7.2019 Heading revised; eff. 4-1-21................................83736
7.2020 Removed; eff. 4-1-21........................................83736
7.2021 Heading revised; eff. 4-1-21................................83736
7.2022 Heading revised; section amended; eff. 4-1-21...............83736
7.2023 Heading revised; eff. 4-1-21................................83736
7.2024 (a) and (c) amended; eff. 4-1-21............................83736
7.2025 Added; eff. 4-1-21..........................................83736
7.3000--7.3001 (Subpart C) Heading revised; eff. 4-1-21............83736
7.3000 Revised; eff. 4-1-21........................................83736
7.3001 (a)(1), (c) introductory text, and (3) amended; eff. 4-1-21
                                                                   83737
7.4001 (e) added...................................................33536
7.4003 Removed; eff. 4-1-21........................................83737
7.4004 Removed; eff. 4-1-21........................................83737
7.4005 Removed; eff. 4-1-21........................................83737
7.5001 Revised; eff. 4-1-21........................................83737
8.2 (a)(5) and (b)(3) redesignated as (a)(5)(i) and (b)(3)(i); 
        (a)(5)(ii) and (b)(3)(ii) added; interim; eff. until 10-
        15-20......................................................37734
9 Order............................................................16887
9.18 (b)(4)(iv); interim...........................................16892
9.18 (b)(5)(iii) revised; interim..................................49232
11.3 (a)(1)(i) and (ii) amended....................................42640
16.15 (e) amended..................................................42641
16.17 (a), (b), and (f) amended....................................42641
16.30 (a) amended..................................................42641
19 Notification....................................................86795
19.241 Amended.....................................................42641
19.242 Introductory text and (b) amended...........................42641
19.243 (a)(1) introductory text, (vi), (vii), (3), (b)(2), (c)(1) 
        introductory text, and (3) through (6) amended.............42641

[[Page 1180]]

19.244 Heading revised; (a) introductory text, (1), and (b) 
        amended....................................................42641
19.245 Heading, (a), (b) introductory text, (1), (2), and (c) 
        amended....................................................42641
19.246 (a) and (b) amended.........................................42642
23.6 Amended.......................................................42642
25 Authority citation revised......................................34792
25.01--25.03 (Subpart A) Revised...................................34792
25.04--25.08 (Subpart B) Revised...................................34792
25.09 (Subpart C) Revised..........................................34792
25.10--25.20 (Subpart D) Added.....................................34792
25.21--25.30 (Subpart E) Added.....................................34804
25.31--25.35 (Subpart F) Redesignated from 25.61--25.65 (Subpart 
        E).........................................................34804
25.32 (a) revised..................................................34808
25.33 (b)(2) amended...............................................34808
25.61--25.65 (Subpart E) Redesignated as 25.31--25.35 (Subpart F) 
                                                                   34804
25 Appendix A revised..............................................34808
25 Appendix B revised..............................................34809
25 Appendix C added; eff. through 1-1-24...........................34809
26.6 (b)(4) amended................................................42642
32.2 (cc) and (dd) revised.........................................42642
32.7 Heading, (a), and (d) revised.................................42642
32.7 (a)(4) and (5) added..........................................61810
32.9 (b)(1)(iii) revised; (b)(1)(iv) added..........................4414
34.43 (f) added; interim (temporary)...............................21317
34.43 (f) revised (temporary)......................................65671
34.83 Correction: (a)(3)(i) introductory text amended..............43422
34.201--34.203 (Subpart G) Appendix C amended......................79387
44.6 (f) added.....................................................46496
44.10 (c)(1), (3)(i), (8), (10) heading, (i), (11), and (d)(6) 
        revised; (c)(15) through (18) and (d)(11) added............46496
44.12 (b)(1)(ii), (4), (c)(1), (d), and (e) revised; (b)(5) added 
                                                                   46500
44.13 (d) added....................................................46502
44.14 (a)(2)(i), (ii)(C), and (c) revised; (a)(2)(iii), (iv), (v), 
        and (3) added..............................................46502
44.20 (a), (d) heading, (1), and (e) introductory text revised.....46502
44.20 Correction: instruction amended to (d)(1) introductory text 
        revised....................................................60355
45.1 (e)(6) and (7) revised; interim...............................39468
45.1 (e)(6), (7), and (h) introductory text revised; (h)(1) and 
        (3) through (5) added......................................39771
45.9 (h) added.....................................................39772
45.10 (a) revised..................................................39772
45.11 Revised......................................................39772
50.3 Amended; interim..............................................26841
50.3 Regulation at 85 FR 26841 eff. date confirmed.................68243
50.34 Added; interim...............................................26841
50.34 Regulation at 85 FR 26841 eff. date confirmed................68243
52.5 Added; interim................................................77359
108.6 (d) amended..................................................42642
108.7 (c) and (d) amended..........................................42642
108.13 (c) amended.................................................42643
109 Notification...................................................86795
112.4 Amended......................................................42643
141.2 Removed......................................................42643
141.8 Removed......................................................42643
141.15 Removed.....................................................42643
141.16 Removed.....................................................42643
141.18 Removed.....................................................42643
141.19 Removed.....................................................42643
141.27 Removed.....................................................42643
141.28 Removed.....................................................42643
145.121 Removed; eff. 4-1-21.......................................83737
160.1 (a) amended..................................................42643
160.50 Removed; eff. 4-1-21........................................83737
160.60 (b)(3) amended..............................................42643
160.110 (d) added..................................................33536
160.120 Removed; eff. 4-1-21.......................................83737
161.3 Removed......................................................42643
161.6 Removed......................................................42643
161.26 Removed.....................................................42643
161.27 Removed.....................................................42643
161.28 Removed.....................................................42643
161.29 Removed.....................................................42643
161.30 Removed.....................................................42643
161.31 Removed.....................................................42643
161.37 Amended.....................................................42643
161.39 Removed.....................................................42643
161.45 Removed.....................................................42643
161.50 Revised.....................................................42643
161.51 Removed.....................................................42643
163.39 Removed.....................................................42643
163.47 (d) amended.................................................42643
163.76 (b) and (c) amended.........................................42643
163.80 (c) amended.................................................42643
163.180 (d)(12)(i)(A) amended; (d)(12)(i)(A) redesignated as 
        (d)(12)(i) introductory text...............................42643

[[Page 1181]]

192 Revised........................................................42643
195 Removed........................................................34834
195.11 (a) revised.................................................42661

                                  2021

12 CFR
                                                                   86 FR
                                                                    Page
Chapter I
3.2 Amended..........................................................724
3.10 (c) revised; (d) redesignated as (e); new (d) added.............725
3.20 (c)(3), (d)(4), footnotes 11 through 15, 16, and 17 through 
        20 redesignated as (c)(3)(i), (d)(4)(i), footnotes 1 
        through 5, 7, and 8 through 11; (c)(3)(ii) and (d)(4)(ii) 
        added; interim.............................................15080
3.22 (c), (f), and (h) revised.......................................728
3.121 (c) amended....................................................731
3.132 (c)(7)(iii) and (iv) amended...................................731
3.304 (a) introductory text and (e) amended..........................731
4.81--4.83 (Subpart F) Added........................................9260
5.33 Correction: Amended............................................1255
5.47 (j) added; interim............................................15080
5.58 Correction: (g)(i) through (v) redesignated as (g)(1) through 
        (5); new (g)(1) amended.....................................1255
7.1031 Removed.....................................................42686
9.18 (b)(5)(iii)(C)(4) revised.....................................28241
25 Revised; eff. 1-1-22............................................71339
34.201--34.203 (Subpart G) Appendix C amended......................67845
43 Determination...................................................71810
50.1 (a) and (b)(1) introductory text revised.......................9207
50.2 (b) redesignated as (c) and revised; new (b) added.............9207
50.3 Amended........................................................9207
50.22 (b)(1) revised................................................9209
50.30 (b)(3) revised................................................9209
50.31 (a)(1) introductory text, (2) introductory text, and (4) 
        revised.....................................................9209
50.32 Amended.......................................................9209
50.100--50.109 (Subpart K) Added; nomenclature change...............9209
50.105 (b) revised..................................................9209
50.110 (Subpart L) Added; nomenclature change.......................9209
50.120 (Subpart M) Added............................................9210
53 Added; eff. 4-1-22..............................................66442

                                  2022

12 CFR
                                                                   87 FR
                                                                    Page
Chapter I
14 Appendix A revised..............................................27483
19 Notification.....................................................1657
21 Authority citation revised......................................15332
21.11 (m) added....................................................15332
22 Guidance........................................................32826
22 Technical correction............................................36213
34.201--34.203 (Subpart G) Appendix C amended......................63665
109 Notification....................................................1657
163 Authority citation revised.....................................15332
163.180 (f) added..................................................15332

                                  2023

12 CFR
                                                                   88 FR
                                                                    Page
Chapter I
3.405 Amended; eff. 4-1-24.........................................89842
4.8 Added; eff. 4-1-24.............................................89842
6.3 (b)(3) amended; eff. 4-1-24....................................89842
6.4 (d)(1) and (2) amended; eff. 4-1-24............................89842
6.5 (a)(1), (2), and (b) amended; eff. 4-1-24......................89842
6.6 (b) amended; eff. 4-1-24.......................................89842
19 Notification......................................................289
19 Revised; eff. 4-1-24............................................89843
24 Appendix 1 amended..............................................64360
30 Policy statement................................................25479
34.201--34.203 (Subpart G) Appendix C amended......................83313
108 Removed; eff. 4-1-24...........................................89908
109 Notification.....................................................289
109 Removed; eff. 4-1-24...........................................89908
112 Removed; eff. 4-1-24...........................................89908
150.570 Amended; eff. 4-1-24.......................................89908
165 Removed; eff. 4-1-24...........................................89908


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