[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10392]


[[Page Unknown]]

[Federal Register: May 2, 1994]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 5

[Docket No. 94-06]
RIN 1557-AB27

 

Rules, Policies and Procedures for Corporate Activities: Merger, 
Consolidation, Purchase and Assumption

AGENCY: Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
adopting final procedures for national banks to follow in merging or 
consolidating with Federal savings associations. This action is 
necessary because the Federal Deposit Insurance Corporation Improvement 
Act of 1991 (FDICIA), which authorized national bank mergers and 
consolidations with Federal Savings associations, did not establish 
procedures for such transactions. To the extent appropriate, the 
procedures imposed here parallel the statutory and regulatory 
procedures governing mergers and consolidations between national banks 
and state-chartered financial institutions.

EFFECTIVE DATE: This rule is effective on May 2, 1994.

FOR FURTHER INFORMATION CONTACT: Jerome L. Edelstein, Senior Counsel, 
Corporate Organization and Resolutions Division, (202) 874-5300; Nancy 
Cody, National Bank Examiner/Senior Analyst, Bank Organization and 
Structure, (202) 874-5060, 250 E St. SW., Washington, DC 20219.

SUPPLEMENTARY INFORMATION:

Background

    Sections 501(a) and 502(b) of title V of the FDICIA, Public Law 
102-242, amended the National Bank Act, at 12 U.S.C. 215c, and the 
Federal Deposit Insurance Corporation Act (FDI Act), at 12 U.S.C. 
1815(d)(3), to authorize national banks, subject to certain 
limitations, to acquire or be acquired by Federal savings associations. 
Acquisitions, within the meaning of title V, include mergers and 
consolidations in addition to purchase and assumption transactions. 
Title V clearly authorizes national banks to merge or consolidate with 
Federal savings associations if the transaction meets the requirements 
set forth in title V.
    The authority to merge or consolidate with Federal savings 
associations, granted in Title V of FDICIA, supplements long-standing 
national bank authority to merge or consolidate with other national 
banks or with state chartered financial institutions, including savings 
associations. National banks also have had the authority to engage in 
purchase and assumption transactions with both Federal and state 
chartered depository institutions, including savings associations.
    The existing statutes permitting national bank consolidations and 
mergers provide procedures for such activities including, under Federal 
law at 12 U.S.C. 214(a), 214a, 215, and 215a, specific procedures for 
shareholder approval and dissenter's rights for mergers and 
consolidations between national banks and with state chartered banking 
institutions. The FDICIA did not address such matters for mergers and 
consolidations between national banks and Federal savings associations. 
Thus, there is significant uncertainty about procedures for national 
banks merging or consolidating with Federal savings associations.

Purpose

    To address the uncertainty, the OCC, on November 3, 1992, published 
an interim rule with request for comment. That rule established 
procedures for national banks to merge or consolidate with Federal 
savings associations (57 FR 49639). The interim rule, to the extent 
appropriate, applied the statutory procedures for mergers and 
consolidations between national banks and with state-chartered banking 
institutions. The preamble to the interim rule as published at 57 FR 
49639-49642 provided a complete explanation. In summary, these 
procedures addressed:

--Approval by the board of directors of each institution proposing to 
engage in such a merger or consolidation;
--Notice to and approval by the shareholders of such institutions;
--Rights of shareholders who dissent from the proposed transaction and 
procedures for valuing their shares; and
--Succession of the resulting institution to all property and rights of 
the consolidating or merging institutions.

    In addition, the interim rule made various technical changes to 12 
CFR Sec. 5.33 governing merger, consolidation, and purchase and 
assumption transactions by national banks. These changes make it clear 
that the provisions also apply to mergers and consolidations between 
national banks and Federal savings associations. These provisions 
include:

--The requirement that all participating depository institutions file 
relevant proxy material or information with the OCC;
--The application of the OCC's policy on name changes when the 
resulting bank selects a new title; and
--The OCC's option to examine any institution proposing to merge into 
or be consolidated with a national bank and to charge the applicants a 
fee for the examination.

    Another change clarifies the authority of national banks to 
temporarily retain nonconforming assets acquired in a merger or 
consolidation with another depository institution.
    The interim rule also provides that the OCC has no approval 
authority over a merger or consolidation transaction where the 
resulting institution is not a national bank. It requires a national 
bank to notify the OCC when it intends to be merged or consolidated 
into a depository institution with a different type of charter.
    This final rule, adopted by the OCC pursuant to its authority under 
the National Bank Act, including 12 U.S.C. 93a and 215c, finalizes the 
interim rule. There is one change between the final rule and the 
interim rule. The change, which addresses a national bank's retention 
of nonconforming assets acquired in a merger or consolidation with 
another banking institution, is discussed below.

Comments on the Interim Rule

    The OCC received four comment letters on the interim rule--three 
filed on behalf of banks and one filed by the Federal Home Loan Bank of 
Atlanta (FHLB).
    The comment filed by the FHLB concerned Sec. 5.33(b)(8) of the 
interim rule, which states that the OCC may permit a national bank to 
acquire nonconforming assets through merger (or consolidation) and 
retain and carry those assets until they can be divested. The FHLB was 
concerned that FHLB stock would have to be divested although the 
resulting national bank intended to become an FHLB member. Subject to 
OCC approval, a national bank may retain FHLB stock while it takes 
actions necessary to become an FHLB member. The interim rule did not 
require divestiture of FHLB stock under these circumstances.
    Nevertheless, the OCC agrees that there could be confusion 
regarding this requirement. Therefore, in this final rule, the OCC has 
revised Sec. 5.33(b)(8) to reflect that the OCC may approve a national 
bank to hold nonconforming assets for a reasonable time until such 
assets can be made to conform.
    One bank commenter was concerned that the interim rule 
unintentionally required shareholder approval for branch purchases and 
sales between national banks and Federal savings associations. The 
commenter's concern arises because Sec. 5.33(b)(1) of the interim rule 
indicates the term merger refers to a merger, consolidation, or 
purchase and assumption, unless the context indicates otherwise. The 
provision addressing shareholder approval requirements, 12 CFR 5.33(c), 
however, specifically refers to mergers and consolidations, thus in 
context, clearly indicating that the general definition of the term 
``merger'' is inapplicable and that the shareholder approval provision 
does not apply to branch purchases and sales. The OCC believes that 
Sec. 5.33 (b)(1) and (c) are sufficiently clear and, therefore, is 
adopting these provisions without change.
    The two other bank commenters raised issues beyond the scope of 
this rulemaking. One bank commenter dealt with the time period for 
processing applications for mergers, consolidations, and purchase and 
assumption transactions between national banks and various types of 
banking institutions in light of certain provisions of the FDICIA. The 
interim rule specifically did not address the scope or applicability of 
the statutory timeframes; consequently, the OCC does not believe that 
it is appropriate to address those issues in this final rule.
    The other bank commenter dealt with procedures to affect mergers 
and consolidations between national banks and mutual savings 
associations. As stated, the purpose of the interim rule was simply to 
apply existing statutory and regulatory procedures governing certain 
national bank mergers and consolidations to mergers and consolidations 
between national banks and Federal savings associations. The OCC will 
continue to process applications where mutual savings associations 
convert to the stock form of organization and subsequently merge or 
consolidate with, or convert into a national bank.

Reasons for Immediate Effective Date

    Because statutory law currently authorizes mergers and 
consolidations between national banks and Federal savings associations, 
and because the procedures in this final rule are already in effect, 
the OCC finds that a delay in implementation is unnecessary. Moreover, 
the OCC has made only one change from the interim rule. That change, 
regarding retention of nonconforming assets, relieves a restriction. 
Thus, this final rule is being adopted effective immediately.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
Comptroller of the Currency certifies that this final rule will not 
have a significant economic impact on a substantial number of small 
entities. This final rule imposes only minimal costs on national banks, 
regardless of size.

Executive Order 12866

    It has been has determined that this document is not a significant 
regulatory action as defined in Executive Order 12866.

List of Subjects in 12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Securities.

Authority and Issuance

    Accordingly, the interim rule amending 12 CFR part 5, published at 
57 FR 49639-49644 on November 3, 1992, is adopted as a final rule with 
the following change:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

    1. The authority citation for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 93a.

    2. In Sec. 5.33, paragraph (b)(8) is revised to read as follows:


Sec. 5.33  Merger, consolidation, purchase and assumption.

* * * * *
    (b) * * *
    (8) Nonconforming assets. A national bank seeking to acquire and 
retain nonconforming assets in a merger shall identify those assets as 
required by the OCC's merger application. OCC, in its discretion, may 
permit the bank to retain the assets for a reasonable time to allow it 
to dispose of or conform the assets. Retention may be subject to 
conditions and an OCC determination of the carrying value of the 
retained assets.
* * * * *
    Dated: April 25, 1994.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 94-10392 Filed 4-29-94; 8:45 am]
BILLING CODE 4810-33-P