[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Proposed Rules]
[Pages 32713-32728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14441]



 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / 
Proposed Rules  

[[Page 32713]]



DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 543, 544, 545, 552, 556, 563, and 575

[No. 96-49]
RIN 1550-AA87


Corporate Governance

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking; request for comment.

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SUMMARY: The Office of Thrift Supervision (OTS or Office) today is 
proposing amendments to its corporate governance regulations and policy 
statements to update, reorganize and substantially streamline them. 
This proposal follows a detailed review of each pertinent regulation 
and policy statement in the Code of Federal Regulations (CFR) to 
determine whether it is necessary, imposes the least possible burden 
consistent with safety and soundness and is written in a clear and 
straightforward manner. Today's proposal is being made pursuant to the 
Regulatory Reinvention Initiative of the Vice President's National 
Performance Review and section 303 of the Riegle Community Development 
and Regulatory Improvement Act of 1994.

DATES: Comments must be received on or before August 26, 1996.

ADDRESSES: Send comments to Manager, Dissemination Branch, Records 
Management and Information Policy, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, D.C. 20552, Attention Docket No. 96-49. These 
submissions may be hand-delivered to 1700 G Street, NW., from 9:00 A.M. 
to 5:00 P.M. on business days; they may be sent by facsimile 
transmission to FAX Number (202) 906-7755. Comments will be available 
for inspection at 1700 G Street, NW., from 9:00 P.M. until 4:00 P.M. on 
business days.

FOR FURTHER INFORMATION CONTACT: David Permut, Counsel (Banking and 
Finance), Business Transactions Division, (202) 906-7505; or Mary Jo 
Johnson, Project Manager, Supervision Policy (202) 906-5739; or Valerie 
J. Lithotomos, Counsel (Banking and Finance), Regulations and 
Legislation Division, (202) 906-6439, Chief Counsel's Office, 1700 G 
Street NW., Washington, D.C. 20552.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background of the Proposal
II. Objectives
    A. Reduce Compliance Costs by Removing Unnecessary Regulations
    B. Provide Maximum Corporate Governance Flexibility for Savings 
Associations
    C. Provide Clear Regulatory Guidance for Frequently Recurring 
Questions
    D. Move the Charter and Model Bylaws Into Application Processing 
Regulatory Handbook
III. Historical Overview of Current Corporate Governance Regulations
IV. Section-by-Section Analysis of the Proposal
V. Proposed Disposition of Corporate Governance Regulations
VI. Request for Comment
VII. Executive Order 12866
VIII. Regulatory Flexibility Act Analysis
IX. Unfunded Mandates Act of 1995
X. Paperwork Reduction Act

I. Background of the Proposal

    In a comprehensive review of the agency's regulations in the spring 
of 1995, OTS identified numerous obsolete or redundant regulations that 
could quickly be repealed. On December 27, 1995, OTS published a final 
rule in the Federal Register repealing eight percent of its 
regulations.1 As part of its review, OTS also identified several 
key areas in its regulations for a more intensive, systematic 
regulatory burden review. Certain areas--lending and investment 
authority, corporate governance, subsidiaries and equity investments, 
and conflicts of interest, corporate opportunity and hazard insurance--
were chosen for intensive review because they are vital to the thrift 
industry, had not been developed on an interagency basis,2 and had 
not been substantially reviewed or amended in recent years.
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    \1\ 60 FR 66866 (December 27, 1995).
    \2\ Interagency regulations are being reviewed through the 
Federal Financial Institutions Examination Counsel.
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    Earlier this year, OTS proposed a comprehensive streamlining of its 
lending and investment regulations.3 Proposals regarding 
subsidiaries and equity investments and conflicts of interest, 
corporate opportunity and hazard insurance will be issued in the near 
future.
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    \3\ 61 FR 1162 (January 17, 1996).
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    Today's proposal presents the results of the review of the charter 
and bylaw regulations (corporate governance). If adopted in final form, 
today's proposal will reduce the number of charter and bylaw 
regulations and policy statements from 33 to 24, a reduction of 27 
percent. In addition, deletion of the charter and model bylaws from the 
CFR will remove 13.5 pages of CFR text. This information will be moved 
to the Application Processing Regulatory Handbook (Handbook).
    This proposal was developed in consultation with those who use the 
regulations on a daily basis: OTS regional staff and representatives of 
the thrift industry. OTS sought specific comments from the thrift 
industry through a focus group composed of representatives of seven 
savings associations and an industry trade association.

II. Objectives

    The overarching goal of OTS' reinvention initiative is to reduce 
regulatory burden on savings associations to the greatest extent 
possible consistent with statutory requirements and safety and 
soundness. In the context of corporate governance, we believe maximum 
burden reduction can be achieved by pursuing four specific objectives.

A. Reduce Compliance Costs by Removing Unnecessary Regulations

    The first objective of the OTS proposal is to remove unnecessary, 
duplicative or outdated regulations affecting the corporate governance 
of Federal thrift institutions. As described in more detail in the 
Background section below, the corporate governance regulations have not 
been thoroughly updated for many years. By eliminating unnecessary 
regulations, OTS hopes to reduce regulatory compliance costs.
    Examples of regulations, or subsections thereof, proposed to be 
removed are Sec. 544.2(b)(4) (Mutual capital certificates), Sec. 544.3 
(Adoption of

[[Page 32714]]

a new Federal charter by a Federal savings association), 
Sec. 544.5(b)(17) (Emergency preparedness), Sec. 544.8 (Old and new 
charters), Sec. 544.9 (Charter B associations), Sec. 552.1 
(Definitions), Sec. 552.2 (Corporate titles), Sec. 552.2-5 (Conversion 
from Federal mutual to Federal stock), Sec. 552.4(b)(3) (Charter 
amendments), Sec. 552.6-2(a) (Requirement that the President shall be a 
director and CEO), and Sec. 552.8 (Savings deposits). All of the above 
regulations, or portions thereof, are being removed because they are 
redundant, outdated or unnecessary.
    Several other sections will have changes made to certain sentences 
or phrases within the section, such as the removal of the need for 
preliminary OTS approval of proposed charter amendments in Secs. 544.1, 
Section 9; 552.3, Section 8; and 575.9, Section 8; and elimination of 
the need for certification by management of the legality of proposed 
charter and bylaw amendments in Secs. 544.2(a)(2)(i), 544.5(c), 
552.4(a)(2)(i), and 552.5(b)(1).

B. Provide Maximum Corporate Governance Flexibility for Savings 
Associations

    OTS is committed to ensuring that Federal savings associations 
operate under state-of-the-art corporate governance procedures. 
Wherever possible, consistent with safety and soundness and fairness to 
shareholders and members, we are seeking to move toward greater 
flexibility. Specific amendments proposed to provide greater 
flexibility include:
     Amending Secs. 544.5(b)(1) and 552.6(a) to provide more 
flexibility for the site of shareholder meetings.
     Modifying Secs. 544.5(b)(5) and 552.6(f)(1) to allow 
proxies to be gathered telephonically or electronically.
     Expanding the list of preapproved charter amendments in 
Secs. 544.2 and 552.4 to enable institutions to adopt supermajority 
voting provisions, to eliminate cumulative voting, and, for mutuals to 
increase the maximum permissible number of votes per member to up to 
1000.
     Replacing the current requirement in Secs. 544.2, 
544.5(c)(2), 552.4 and 552.5(b) that institutions give OTS advance 
notice of their intent to adopt preapproved charter and bylaws 
amendments with an after-the-fact notice.
     Authorize associations to hold their annual shareholders 
meeting 150 days after the close of their fiscal year, instead of the 
current 120 days (Secs. 544.5(b)(1) and 552.6(a)).
     Revising Sec. 544.5(b)(16) to recognize the ``sitting'' 
board of directors rather than the ``authorized'' board of directors 
when determining voting requirements in certain instances.
     Exempt wholly-owned stock associations from various 
requirements such as staggered terms for members of their boards of 
directors (Sec. 552.6-1(b)), notice of shareholder meetings 
(Sec. 552.6(b)), and compilation of shareholder voting lists 
(Sec. 552.6(d)).
     Permit shareholder actions to be taken by unanimous 
written consent in lieu of a formal shareholders meeting 
(Sec. 552.6(h)).
    OTS is continuing to review the laws of various states, and the 
corporate governance approaches followed by the other federal agencies 
that charter depository institutions, for additional innovative 
corporate governance ideas. We welcome further suggestions from 
commenters.
    In particular, OTS requests comment on whether there are aspects of 
the corporate governance structure applicable to national banks that 
would be beneficial for Federal thrifts. The corporate governance 
regulations applicable to Federal thrifts tend to be more detailed than 
those applicable to national banks. To fill in the details, national 
banks are permitted to elect to follow the corporate governance laws of 
the state where the bank's home office is located, the laws of the 
state where the bank's holding company is chartered, Delaware law, or 
the Model Business Corporation Act. The body of law that a national 
bank elects to follow applies only to the extent not inconsistent with 
the corporate governance provisions of the National Bank Act and 
implementing regulations.
    Federal savings associations may benefit from the detail provided 
in OTS's corporate governance regulations. Absence of detail in the 
area of corporate governance can lead to confusion, delay, and 
potential shareholder litigation. Accordingly, OTS's objective has been 
to provide savings associations with a comprehensive set of clear, 
modern, and flexible corporate governance rules. Institutions may apply 
on a case-by-case basis for permission to adopt non-standard charter 
and bylaw provisions.
    Nevertheless, savings associations may benefit from the additional 
option of following state law in lieu of OTS corporate governance 
regulations--except for those regulations that OTS designated as vital 
to safety and soundness or other fundamental policy objectives. OTS 
requests comment on whether this type of state law election would offer 
benefits to savings associations and, if so, a description of those 
benefits.

C. Provide Clear Regulatory Guidance for Frequently Recurring Questions

    A third objective is to clarify certain issues that frequently 
arise regarding the corporate governance regulations. This will reduce 
the number of instances when institutions incur delay or expense 
seeking clarification of ambiguous or incomplete regulatory language. 
Accordingly, OTS proposes to amend:
     Section 544.5(b)(3) and (4) to indicate what rules govern 
adjourned shareholder meetings;
     Sections 544.5(b)(10) and 552.6-1(f) to add a cross 
reference to a definition indicating what constitutes ``cause'' for 
removal of a director;
     Section 544.5(b)(6) to extend privacy rights for 
confidential portions of an institution's books and records, now 
provided for Federal stock institutions at Sec. 552.11(d), to Federal 
mutual associations;
     Section 544.5(b)(13) to give guidance on the procedures 
governing when an institution substitutes a new director nominee for a 
nominee that dies or becomes incapacitated; and
     Section 552.6(d) to give guidance on how stock held in the 
name of fiduciaries should be reflected on voting lists.

D. Move the Charters and Model Bylaws Into Application Processing 
Regulation Handbook

    OTS is proposing to move the charters for Federal stock and mutual 
savings associations, found at Secs. 544.1, 552.3 and 575.9, to the 
Handbook. We are also proposing to move the model bylaws, found in 
appendices to Parts 544 and 552, to the Handbook. The Office of the 
Comptroller of the Currency (OCC) and the National Credit Union 
Administration (NCUA) follow a similar practice.
    Placing the savings association charters and bylaws in the Handbook 
may offer two advantages. First, by eliminating nonessential items from 
the regulations, the regulations may become easier to use. Second, OTS 
would have more flexibility to update and modernize the charters and 
bylaws from time to time, because notice and comment rulemaking would 
not be required to effect changes. We recognize, however, that making 
changes without notice and comment rulemaking could also be viewed as a 
disadvantage. Moreover, placing the charters and bylaws in the Handbook 
may make them less accessible.

[[Page 32715]]

Accordingly, we request specific comment on this proposed change.

III. Historical Overview of Current Corporate Governance 
Regulations

    Before 1982, the corporate governance of Federal savings 
associations was primarily concerned with Federal mutual savings and 
loan associations, the only type of corporate charter available from 
the chartering authority, the Federal Home Loan Bank Board (FHLBB), 
predecessor to OTS. The Home Owners' Loan Act (HOLA) 4 only 
permitted the chartering of Federal mutual savings and loan 
associations.5
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    \4\ 12 U.S.C. 1461-1470.
    \5\ Section 5(a) of the HOLA, 12 U.S.C. 1464(a), contains the 
statutory authority for the OTS to issue charters for Federal thrift 
institutions.
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    In 1982, Congress enacted the Garn-St Germain Depository 
Institutions Act (DIA),6 which broadened the types of charters and 
organizational options available to Federal savings associations. The 
DIA authorized the creation of new Federally chartered stock 
institutions, either as Federal savings banks or Federal savings and 
loan associations, and permitted state-chartered savings banks to 
convert to a Federal charter without requiring them to surrender their 
FDIC insurance in favor of FSLIC insurance of accounts.
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    \6\ Pub. L. 97-320, 96 Stat. 1469, October 15, 1982.
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    In response to the DIA, the FHLBB amended its corporate governance 
regulations (1983 Rulemaking) 7 to create a single Federal mutual 
charter and a single Federal stock charter. The same basic charter was 
available both to savings banks and to savings and loan associations, 
with minor differences. Before the 1983 Rulemaking, Federally-chartered 
thrifts had operated under a plethora of charters, including Charter S, 
Charter T, Charter B, Charter B (Revised), Charter N, Charter N 
(Revised), Charter L and Charter K (Revised). Some Federal associations 
continue to operate under those charters. It is important to note that 
today's proposed rulemaking does not require any institution to change 
its current charter. After adoption of a final regulation, institutions 
may retain their existing charters or amend their charters to conform 
to the new provisions.
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    \7\ 48 FR 44174 (September 28, 1983).
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    In 1985, the FHLBB concluded that with the new structural options 
available to Federal savings associations, a number of important 
matters regarding the corporate governance of those associations were 
either not adequately addressed, not covered in codified form or were 
distributed in a piecemeal fashion throughout the regulations. The 
FHLBB conducted an extensive review of the Model Business Corporation 
Act, the corporate codes of Delaware, California, New York and Florida, 
then presented a proposal for updating the corporate governance 
regulations. Because the proposal was extensive, it was broken into 
four parts,8 published over a two year period, with comments 
sought on all sections before a final regulation was to be promulgated. 
Only one section, however, the proposal on revisions to Receiverships 
and Conservatorships, was enacted in final form before the priorities 
of the FHLBB and external circumstances changed. The savings and loan 
crisis had begun and the extensive revisions to corporate governance 
were set aside for future consideration.
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    \8\ Part I-50 FR 38832 (September 13, 1985); Part II-50 FR 52482 
(December 24, 1985); and Part III and IV-52 FR 25870 (July 9, 1987).
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    In 1989, the FHLBB's regulatory and chartering authority was 
assumed by the newly established OTS. A number of the corporate 
governance issues were ultimately addressed in the form of legal 
opinions or approved amendments to charters and bylaws. These changes, 
however, were confined to considerably more narrow subject areas than 
the FHLBB proposal envisioned.
    Thus, today's proposal, if adopted in final form, will be the first 
major update of the corporate governance regulations in over a decade.

IV. Section-by-Section Analysis of the Proposal

A. Part 544--Charter and Bylaws

Section 544.1  Federal Mutual Charter

    This section contains the required charter for Federal mutual 
associations. As indicated above, OTS proposes to move this charter (as 
well as the charter for stock associations and the model bylaws for 
both) from the regulations to the Handbook. Thus, OTS proposes to amend 
Sec. 544.1 to reference the Handbook. OTS also proposes to update the 
charter.
    So that the reader can understand what is being proposed, we have 
set forth the changes proposed for the charter in the regulatory text, 
and discuss them below.9
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    \9\ For drafting purposes, the changes to the charter have been 
designated as Alternative Two in the regulatory text.
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    Section 1. Corporate Title. Section 1 establishes the corporate 
title of the Federal association. The words ``hereby chartered'' will 
be removed as unnecessary verbiage.
    Section 6. Members. This section identifies the association's 
members and describes their rights. OTS proposes to streamline this 
section by moving the third and fourth sentences to introductory 
instructions in the Handbook or, if the charter is retained in 
Sec. 544.1, to the introductory paragraph of the regulation. These two 
sentences instruct institutions that wish to adopt the charter, but are 
currently operating under old charters conferring membership rights on 
borrowers, to grandfather the membership rights of their existing 
borrowers.
    The sixth sentence of section 6, dealing with proxies, will be 
removed because it already appears in the bylaws. The seventh and 
eighth sentences, dealing with quorums, will be moved to the bylaws 
because matters regarding member meetings are more fully addressed 
there.
    Section 7. Directors. This section provides that a Federal mutual 
association may have from 5 to 15 directors. To further streamline the 
charter, bracketed references to ``trustees'' will be removed, and a 
single sentence will be added to the introductory instructions 
indicating that institutions may substitute the term ``trustee'' for 
the term ``director'' where appropriate. Similar changes will be made 
throughout the charter and the model bylaws for mutual associations.
    The third and fifth sentences (providing that directors shall be 
members of the association and requiring staggered terms for directors) 
will be moved to the bylaw section dealing with directors. The fourth 
sentence (regarding vacancies on the board) will be moved to the bylaw 
section on resignations, removals and (newly added) vacancies. The last 
sentence, in brackets, will also be moved to the bylaw section on 
directors. This sentence authorizes state savings banks that convert to 
Federal mutual associations to grandfather their existing provisions 
for electing directors for a limited period of time. OTS believes each 
of these matters is more appropriately addressed in the bylaws, where 
related issues are already addressed. Presenting related requirements 
in a single place should make the charter and bylaws more user 
friendly.
    Section 9. Amendment of charter. Section 9 describes the procedures 
for amending the association's charter. References to Secs. 544.2 or 
544.3 will be removed as unnecessary verbiage. Section 9 will also be 
revised to reflect the fact that ``preapproved'' charter amendments 
(Sec. 544.2) will now be truly preapproved. Institutions will no longer 
be required to submit these amendments to OTS for ``preliminary'' 
approval. (See discussion of Sec. 544.2 below.)

[[Page 32716]]

    Finally, the signature blocks of the charter will be modified to 
include a date to clarify when a charter is effective.

Section 544.2  Charter Amendments

    Paragraphs (a) and (b) describe the filing requirements for 
amending Federal mutual charters. OTS is proposing to remove, from 
paragraphs (a)(2)(i) and (ii), the requirement that institutions 
certify that amendments they propose are permissible under all 
applicable laws. This certification is unnecessary because the legality 
of a proposed amendment is reviewed by OTS staff as part of the 
application process and its deletion will also reduce regulatory 
burden. In addition, paragraph (b) will be revised to indicate that 
preapproved charter amendments will no longer require advance 
submissions to OTS. Instead, preapproved amendments will be deemed 
approved when adopted by the institution and must simply be filed with 
OTS within 30 days after adoption.
    A new preapproved charter amendment will be added to Sec. 544.2 
that authorizes Federal mutual associations to amend their charters to 
raise the cap on the maximum number of votes any member can cast up to 
1,000. Mutual charters generally authorize depositors to cast one vote 
for every $100 of deposits, subject to a cap that has historically 
tracked the limit on deposit insurance. Thus, 1,000 votes is the 
standard cap under the current mutual charter (Sec. 544.1). However, 
many institutions operate under charters adopted before the cap was 
raised to 1,000. Making the 1,000 cap a preapproved amendment will 
enable institutions to update their cap without filing an application 
and paying an application fee. This is the most frequently requested 
amendment for Federal mutual associations.
    OTS also proposes to remove from Sec. 544.2 an obsolete preapproved 
amendment authorizing institutions to issue Mutual Capital Certificates 
(MCCs). Institutions generally no longer issue MCCs.10 Elimination 
of outdated matter such as this should make the regulations less 
confusing and easier to use.
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    \10\ An institution could still choose to issue MCCs after 
Sec. 544.2 is modified, provided the institution makes any necessary 
amendments to its charter and bylaws (which would no longer be 
preapproved) and follows the procedures specified at 12 CFR 563.74. 
Paragraph (d) of Sec. 563.74 will be amended to reflect removal of 
the preapproved amendment for MCCs.
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    Paragraph 544.2(c) details the procedures an institution must 
follow when it wants OTS to reissue its charter to reflect amendments 
to the charter. The wording of this section will be conformed to the 
wording of the corresponding stock charter section at Sec. 552.4(d). No 
substantive change will result. Paragraph (c) is also being amended to 
remove the delegation of authority to the Chief Counsel to execute 
reissued charters. This change is being proposed as part of a 
continuing effort to remove delegations from the regulations. Delegated 
authority to execute reissued charters will be preserved via an 
internal OTS document.

Section 544.3  Adoption of a New Federal Charter by a Federal Savings 
Association

    This section details the procedures that a Federal mutual savings 
and loan association would use to amend its charter to read in the form 
of a Federal mutual savings bank, or vice versa. This section has 
become obsolete. Today, the charters for both types of institution are 
identical, except for a possible difference in corporate title. A 
simple corporate title change can be used to redesignate an institution 
as a ``savings bank'' or ``savings and loan association.'' Thus, 
Sec. 544.3 is being repealed. Corresponding changes will be made to 
Secs. 543.1(b) and 543.14.

Section 544.5  Federal Mutual Savings Association Bylaws

    This section describes the requirements for the bylaws of a Federal 
mutual association. A nonsubstantive change will be made to paragraph 
(a) to conform its language regarding procedures for bylaw amendments 
to similar language that appears later in Sec. 544.5(b)(16).
    Paragraph (b)(1) contains the annual meeting requirements for 
Federal mutual associations. This paragraph will be amended to allow 
meetings not only at the main office, but also at any other convenient 
place the board of directors may designate, and to permit the 
association to hold its annual meeting within 150 days of the end of 
the association's fiscal year. The current requirement is 120 days. 
Both changes will provide additional flexibility for Federal mutual 
associations.
    Paragraph (b)(2) addresses special meetings of members. It 
provides, inter alia, that the holders of ten percent or more of a 
mutual association's voting capital may call a special meeting. 
Institutions frequently ask for clarification of the meaning of 
``voting capital,'' since the term is no longer defined by the HOLA. 
OTS proposes to clarify that voting capital means all FDIC-insured 
deposits held by a savings association.
    Paragraphs (b) (3) and (4), which discuss notice requirements for 
meetings of members and the fixing of the record date for determining 
what members are entitled to vote, respectively, will be amended to 
indicate the circumstances under which adjournment of a meeting of 
members will require the issuance of new notices and the fixing of a 
new record date. These are also frequently asked questions.
    OTS is also proposing a new paragraph (b)(5), to be titled ``Member 
Quorum.'' 11 This paragraph will contain certain quorum provisions 
currently found in the charter (as discussed above), as well as 
clarification of what items of business may be considered at a meeting 
held after adjournment. The agency believes that quorum issues are more 
appropriately addressed in the bylaws, where other rules governing 
member meetings already appear.
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    \11\ All subsequent paragraphs will be renumbered accordingly. 
However, only those paragraphs being substantively changed are 
discussed below.
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    Current paragraph (b)(5), on voting by proxy, will become (b)(6) 
and will be amended to permit proxies to be given telephonically or 
electronically as long as the holder uses a procedure for verifying the 
identity of the member.12 Telephonic and electronic proxies enable 
institutions to gather proxies and conduct corporate business more 
rapidly and have become an accepted part of corporate democracy. In 
addition, in response to frequent questions, OTS proposes to describe 
voting procedures applicable to joint accounts and accounts held by 
fiduciaries on behalf of others.
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    \12\ One example of a verification procedure is for the 
institution receiving the proxy by facsimile to compare the 
signature on the proxy to a signature that the institution has on 
file.
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    Current paragraph (b)(6), which references Sec. 545.131 regarding 
communication with other members, will become (b)(7). In addition, the 
paragraph will be amended to reflect the relocation of Sec. 545.131 to 
Part 544, and will extend the privacy rights now guaranteed to 
depositors of Federal stock institutions (Sec. 552.11(d)) to the 
depositors of Federal mutual institutions. The privacy rights of the 
members of mutual institutions will not prevent the internal use of 
member information by those institutions.
    Current paragraph (b)(7), regarding the number of directors, will 
become (b)(8). In addition, the paragraph will be amended to clarify 
that the bylaws must specify the precise number of directors (rather 
than a range). This number is

[[Page 32717]]

chosen by the institution within the range specified in the charter and 
may be changed by the institution from time to time by amending its 
bylaws. Paragraph (b)(8) will also contain three provisions being moved 
from section seven of the charter. One provision requires that 
directors be members of their association; a second provision requires 
that directors serve staggered terms; and a third provision permits 
state savings banks that convert to Federal mutual associations to 
grandfather their method of electing directors for a limited time.
    Current paragraph (b)(9), which addresses the duties of officers, 
employees and agents and their indemnification, will become (b)(10). In 
addition, a sentence on the removal of officers will be added to answer 
a frequently asked question. The sentence will state: ``Any officer may 
be removed by the board of directors with or without cause, but such 
removal, other than for cause, shall be without prejudice to the 
contractual rights, if any, of the person so removed.''
    Current paragraph (b)(10), on the resignation or removal of 
directors, will become (b)(11). A cross reference to the definition of 
``cause,'' which appears elsewhere in the regulations, will be added in 
response to a frequently asked question concerning the circumstances 
under which shareholders can remove directors for ``cause''. Paragraph 
(b)(11) will also be expanded to authorize boards of directors to fill 
vacancies under the current flexible rules that now apply to stock 
associations.
    Current paragraph (b)(13), discussing procedures for nominating 
directors, will become (b)(14) and will be expanded to clarify the 
requirement that the names of nominees be posted at least 15 days 
before an election, under certain circumstances. New language will 
confirm that this requirement does not apply to a nominee substituted 
as a result of death or other incapacity of another nominee. From time 
to time, institutions have sought clarification on this issue.
    Current paragraph (b)(16), which sets forth procedures for amending 
the bylaws, will become (b)(17) and will be amended to make it easier 
for a board that fails to meet its quorum requirement solely due to 
vacancies on the board to amend its bylaws. The new language will 
specify that, in the absence of a quorum due solely to vacancies, the 
affirmative vote of a majority of the sitting board may amend the 
bylaws.
    Current paragraph (b)(17), on miscellaneous topics, will become 
(b)(18) and will be amended to remove the reference to provisions 
regarding ``emergency preparedness.'' Emergency preparedness provisions 
are no longer part of the model bylaws.
    Paragraphs (c)(1) and (c)(2) discuss the filing procedures for 
bylaw amendments. OTS proposes to remove the requirement that 
applications for bylaw amendments contain certifications that the 
proposed amendments comport with all laws. As noted above when 
discussing charter amendments, the certification requirement is 
unnecessary because the legality of proposed amendments are reviewed by 
OTS staff as part of the application process and its deletion will also 
reduce regulatory burden. In addition, consistent with the proposal to 
move the model bylaws out of the regulations, paragraph (c)(1) will be 
revised to indicate that the model bylaws can be found in the Handbook 
available from OTS. The current appendix to part 544, which contains 
the model bylaws, will be removed.
    Paragraph (c)(2) will also be revised to indicate that the model 
bylaws, if adopted verbatim, are approved when adopted and must simply 
be filed with OTS within 30 days after adoption. This change is 
proposed because OTS has determined that over 90 percent of the bylaws 
applications filed in recent years are for standard provisions that do 
not require agency review.
    Paragraph (d), which addresses the effective date of all other 
bylaw amendments, will be amended to comport with a similar provision 
for Federal stock associations. The provision is intended to clarify 
the circumstances under which an amendment may be rejected by OTS, by 
cross referencing the current standards which appear in paragraph 
(c)(1).

Section 544.8  References to Old and New Charters; Rules Applicable to 
Trustees of Federal Mutual Savings Banks

    OTS proposes to remove this section, which indicates that trustees 
will be treated as if they are directors for purposes of the 
regulations. The same point will be made in the introductory 
instructions to the charter and model bylaws. It does not need to be 
repeated here.

Section 544.9  Obsolete Charter Provision for Charter B Associations.

    This section provides that institutions that still operate under 
the old Charter B are not bound by section 10 of that charter. Section 
10 of Charter B purports to limit the authority of an institution to 
invest in consumer loans and corporate debt securities. OTS proposes to 
move Sec. 544.9, which affects very few institutions, from the 
regulations into Handbook guidance.

Section 544.8  Communication Between Members of a Federal Mutual 
Savings Association (Proposed)

    OTS proposes to move the rules governing communications between 
members of Federal mutual associations, which now appear in 
Sec. 545.131, to part 544. This is where users of the regulations would 
most likely look for guidance on such matters. Accordingly, current 
Sec. 545.131 will become new Sec. 544.8.

Appendix to Part 544

    As indicated above, OTS proposes to eliminate the appendix to part 
544, which contains the model bylaws. Instead, these bylaws will be 
moved to the Handbook, with changes being made to conform the model 
bylaws to the amendments to the bylaws regulations described above.

B. Part 552--Incorporation, Organization, and Conversion of Federal 
Stock Associations

Section 552.2  Corporate Title

    OTS proposes to remove this section, which merely reminds 
institutions that Sec. 543.1 regarding corporate titles for Federal 
associations applies to Federal stock associations. There is no need 
for this provision. Current Sec. 543.1, as currently written, clearly 
governs corporate titles for all Federal associations.

Section 552.2-5  Conversion From Federal Mutual to Federal Stock 
Charter

    This section authorizes Federal mutual associations to convert to 
Federal stock associations and provides for issuance of a stock charter 
upon completion of the conversion. These matters are also covered, in 
greater detail, by OTS conversion regulations. OTS, therefore, proposes 
to remove this section.

Section 552.3  Charters for Federal Stock Associations

    This section contains the required charter for Federal stock 
associations. For the reasons indicated above in the discussion of 
Sec. 544.1, OTS proposes to move the stock charter out of the 
regulations and into the Handbook. Section 552.3 will thus be revised 
to reference the charter as it appears in the Handbook. OTS proposes to 
update the Federal stock charter with the following changes:
    Section 2. Office. This section describes the location of the home 
office of the Federal stock association. The

[[Page 32718]]

word ``in'' will be deleted and replaced by the word ``at.'' This is a 
purely technical amendment.
    Section 5. Capital stock. Section 5 describes the rules governing 
the capital stock of a Federal stock association, including the types 
of stock it may issue, the consideration to be paid, and voting rights. 
Several changes are proposed. First, the charter will be amended to 
permit the issuance of ``no par'' stock. The decision whether stock 
should have a stated par value is a matter of internal corporate 
governance that raises no supervisory or safety and soundness issues.
    Second, the final sentence of the first paragraph will be revised 
to reflect more current accounting terminology. The term ``retained 
earnings'' will be substituted for ``surplus,'' and the phrase ``common 
stock or paid-in capital accounts'' will be substituted for ``stated 
capital.''
    Third, the second paragraph will be revised to clarify that Federal 
stock associations may issue stock to officers, directors, and 
controlling persons in connection with its initial organization, 
without a shareholder vote.
    Fourth, the second sentence of the third paragraph will be revised 
to clarify that a Federal stock charter may be amended to eliminate 
cumulative voting.
    Section 7. Directors. This section specifies that the number of 
directors of a stock association shall be fixed in the bylaws and shall 
not be fewer than five nor more than fifteen. However, provision is 
made for the Director of OTS to approve a larger or smaller board of 
directors. OTS proposes a technical amendment to this section that will 
specify that approval of a larger or smaller board can be given either 
by the Director ``or his or her delegate.''
    Section 8. Amendment of charter. Section 8 describes the procedure 
for amending an association's charter. This section is being revised to 
indicate that preapproved charter amendments will be effective once 
they have been approved by the association's board of directors and 
shareholders, without any need for ``preliminary approval'' or any 
other form of approval from OTS. (See discussion below of Sec. 552.4.) 
In addition, OTS proposes to elaborate on the general rule that charter 
amendments require approval by only a majority of the votes eligible to 
be cast at a shareholders' meeting. Clarifying language will be added 
indicating that this general rule does not apply in those instances 
where an association's charter specifies that a supermajority vote is 
required. (See discussion of Sec. 552.4 below.)
    Finally, the signature blocks of the charter will be modified to 
include a date to clarify when a charter is effective.

Section 552.4  Charter Amendments

    Paragraphs (a) and (b) set forth the filing requirements for 
amendments to Federal stock charters. In paragraph (a), OTS is 
proposing to make the same changes regarding certification requirements 
as discussed above in connection with the corresponding provisions for 
mutual associations (Sec. 544.2(a)). Thus, stock associations will no 
longer be required to certify that proposed amendments comport with all 
applicable laws.
    Paragraph (b) sets forth a list of preapproved charter amendments. 
OTS proposes to add descriptive titles to each of the preapproved 
amendments. The titles will correspond to the titles to similar 
preapproved charter provisions for Federal mutual associations. 
Paragraph (b) will also be revised to indicate that preapproved charter 
amendments are approved when adopted and must simply be filed with OTS 
within 30 days after adoption.
    Paragraph (b)(3), which contains a preapproved amendment for 
institutions that wish to change from a Federal stock savings and loan 
association charter to a Federal stock savings bank charter, will be 
removed for the same reasons described above with regard to 
Sec. 544.3.13
---------------------------------------------------------------------------

    \13\ Subsequent paragraphs will be renumbered accordingly. 
However, only those paragraphs being substantively changed are 
discussed below.
---------------------------------------------------------------------------

    Current paragraph (b)(4), which permits changes to the authorized 
number of shares and the par or stated value of such shares, will 
become (b)(3). Additional nonsubstantive changes will be made to 
clarify the language of this provision.
    Current paragraph (b)(5), which permits institutions to modify 
section 5 of the charter so as to authorize the issuance of preferred 
stock, will become (b)(4) and will include the same changes to section 
5 of the charter as were discussed above. In addition, the reference to 
the Resolution Trust Corporation will be deleted, because that agency 
no longer exists.
    A new preapproved charter amendment will be added, as new paragraph 
(b)(6), to authorize institutions to prohibit cumulative voting for 
directors. The standard charter for Federal stock associations provides 
for cumulative voting for directors. Federal associations frequently 
apply to amend their charters to prohibit cumulative voting, and OTS 
routinely approves these applications. Adding this provision to the 
list of preapproved amendments will save associations that wish to make 
this change the time and expense of an application.
    Paragraph (c) states OTS policy on antitakeover provisions in 
charter amendments. OTS proposes to expand this provision to state the 
two basic standards OTS uses when reviewing proposed antitakeover 
amendments. First, the proposed amendment must be consistent with 
applicable statutes, regulations and OTS policies. Second, such 
amendments must be adopted by a percentage of the shareholder vote at 
least equal to the highest percentage that would be required to take 
any action under the antitakeover provision. These are not new 
standards; OTS already employs them when reviewing antitakeover 
amendments. Stating these standards in the regulations will enable 
institutions to present applications that conform to OTS requirements, 
thereby saving them time and expense.

Section 552.5  Bylaws

    This section presents the requirements for the bylaws of a Federal 
stock association. A technical amendment will be made to paragraph (a) 
to confirm that shareholder votes to approve bylaw amendments must 
occur ``at a legal meeting'' of shareholders.
    Paragraph (b) discusses the application and notice procedures 
applicable to bylaw amendments. This paragraph will be amended to 
remove the requirement that associations certify that bylaw amendments 
comport with applicable law. Revisions will also be made to indicate 
that the model bylaws, if adopted verbatim, are approved when adopted 
and must simply be filed with OTS within 30 days after adoption. 
Paragraph (b) will also indicate that the model bylaws are in the 
Handbook and are available from any Regional Office.
    OTS proposes to add a new paragraph (d) confirming that the 
authority of a Federal stock association to engage in any transaction 
is determined by the association's charter and bylaws in effect at the 
time of the transaction. Subsequent amendments do not retroactively 
affect this determination. A similar regulatory provision is already in 
effect for Federal mutual associations (Sec. 544.6).

Section 552.6  Shareholders

    This section contains certain corporate governance requirements 
regarding shareholder meetings. Paragraph (a), which contains rules 
regarding the time and place of shareholder meetings, will be amended 
in two respects. First, the requirement

[[Page 32719]]

that shareholders meetings be held in the state of an association's 
principal place of business is being removed. Instead, associations 
will be able to hold shareholder meetings at any convenient place the 
board of directors designates. Second, the time frame within which an 
association must hold its annual shareholders meeting will be extended 
from 120 to 150 days of the end of the association's fiscal year. These 
are the same changes being proposed for Federal mutual associations 
(Sec. 544.5(b)(1)).
    Paragraph (b) states the notice requirements for shareholder 
meetings. This paragraph will be amended to waive the shareholder 
notice requirements for wholly-owned institutions.
    Paragraph (d)(1), which addresses access to shareholder lists, will 
be revised to clarify that shareholder lists are available only to 
shareholders ``of record'' and their agents, and that the lists must 
contain the names of beneficial owners that are furnished to the 
association under the rules of the Securities and Exchange Commission. 
In addition, the paragraph will be amended to waive its application to 
wholly-owned institutions.
    Paragraph (e), regarding shareholder quorum requirements, will be 
amended to confirm that, whenever a quorum is present, the affirmative 
vote of the majority of shares entitled to vote at a shareholders 
meeting shall constitute an act of the shareholders, absent a 
supermajority voting requirement.
    Paragraph (f), which addresses proxies, will be amended in the same 
manner as the Federal mutual bylaws at Sec. 544.5(b)(6) to allow 
proxies to be gathered electronically or telephonically. In addition, 
in response to frequent questions, paragraph (f) will be expanded to 
describe voting procedures applicable to stock held by fiduciaries on 
behalf of others and stock held jointly.
    A new paragraph (h) will also be added confirming that, if an 
association's bylaws so provide, shareholder action may be taken by 
unanimous written consent in lieu of a shareholder meeting. At times, 
this may allow associations to obtain shareholder approval more rapidly 
and with less expense.

Section 552.6-1  Board of Directors

    This section addresses corporate governance matters involving 
directors. Paragraph (a) will be amended to provide that Directors need 
not be stockholders unless the bylaws so require.
    Paragraph (b) sets forth the number and term of directors. This 
paragraph will be amended to clarify that the bylaws of a Federal stock 
association must specify an exact number of positions on an 
association's board of directors, not simply a range. The number is 
selected by the institution within a range prescribed in the charter. 
OTS also proposes to amend paragraph (b) to exempt wholly-owned stock 
associations from the requirement that their directors be elected to 
staggered terms.
    Paragraph (c), regarding regular meetings of the board, will be 
expanded to confirm that the board of directors has authority to 
determine the place, frequency, time, and notice procedures for its 
meetings. These matters need not be specified in the bylaws.
    Paragraph (e), which covers director vacancies, will be amended to 
clarify that a director appointed to fill a vacancy may serve ``only'' 
until the next election of directors. This is not a substantive change. 
The word ``only'' is being added for emphasis and clarity.
    Paragraph (f), concerning removal of directors, will be retitled 
``Resignation or removal of directors'' to conform to the title for the 
same provision for Federal mutual associations. In addition, the 
paragraph will be amended to confirm, as is already the case, that 
shareholders may remove a director in the midst of his or her term 
``only'' for cause. A cross reference to the existing regulatory 
definition of ``cause'' will also be added to answer a frequently asked 
question.
    Paragraph (k), on age limitations for directors, will be revised to 
indicate that any age limitation provision must conform to applicable 
Federal law, rules, or regulations, such as the Age Discrimination in 
Employment Act.

Section 552.6-2  Officers

    This section addresses corporate governance matters involving 
officers. Paragraph (a) will be amended to remove the requirement that 
the president always be a director and that either the president or the 
chair of the board of directors always be the chief executive officer.
    In paragraph (b), which addresses removal of officers, the cross 
reference to OTS employment contract regulation will be updated.
    Paragraph (c), on age limitations for officers, will be revised to 
indicate that any age limitation on service by officers must conform to 
applicable Federal law, rules, or regulations, such as the Age 
Discrimination in Employment Act.

Section 552.8  Savings Deposits

    This section contains instructions to Federal stock associations 
regarding the types of savings deposits they may accept, preservation 
of those accounts when a former mutual association adopts a stock 
charter, rights of account holders in the event of liquidation, and 
forms of certificates to use for accounts. OTS proposes to remove this 
section from the regulations. The provisions of this section are either 
self evident or covered by other statutes and regulations and general 
contract law. Under the conversion regulations, all converting mutual 
institutions are required to notify their accountholders that all the 
rights they enjoyed as accountholders, except voting and ownership of 
the institution, carry over to the converting association.

Section 552.11  Books and Records

    This section describes a Federal stock association's obligations 
with respect to books and records. Paragraph (b) will be amended to 
make clear that shareholders' inspection rights extend only to 
nonconfidential portions of an institution's books and records.

Appendix to Part 552

    As indicated above, OTS proposes to move the model bylaws for 
Federal stock associations, which currently appear in the appendix to 
Part 552, into the Handbook. Changes will be made to conform the model 
bylaws to the amendments to the bylaws regulations described above. In 
addition, OTS proposes to modify the model bylaws to indicate that 
procedures other than Robert's Rules of Order may be used for 
shareholder meetings, as long as the board of directors adopts 
alternative written procedures.

C. Part 575--Mutual Savings and Loan Holding Companies

Section 575.9  Charters and Bylaws for Mutual Holding Companies and 
Their Savings Association Subsidiaries

    This section describes the required charter and bylaws for Federal 
mutual holding companies. Paragraph (a)(1) contains the prescribed 
charter. This paragraph will be amended to indicate that the charter 
will appear in the Handbook and will be available from any Regional 
Office. In addition, the following changes will be made to the charter:
    Section 1. Corporate Title. Section 1 contains the corporate title 
of the Federal mutual holding company. The words ``hereby chartered'' 
will be deleted as unnecessary verbiage.

[[Page 32720]]

    Section 5. Members. This section identifies the mutual holding 
company's members and defines their rights. The sixth, seventh, and 
eighth sentences of this section, addressing proxies and quorums, will 
be removed because these matters either are covered or will be covered 
(once today's amendments are made) by the bylaw requirements applicable 
to mutual holding companies. As a result of this change, proxy and 
quorum issues will be addressed in a single place in the corporate 
documents of mutual holding companies.
    Section 6. Directors. This section provides that a Federal mutual 
holding company may have from 5 to 15 directors. In addition to 
technical changes made to conform the wording of this section to the 
corresponding section of the charter for Federal mutual associations, 
OTS also proposes to remove the requirement that directors be members 
of the association and the requirement that the terms of directors be 
staggered.
    Section 8. Amendment of charter. Section 8 describes the procedures 
for amending the mutual holding company's charter. These procedures 
will be streamlined to indicate that preapproved charter amendments are 
effective once approved by members of the mutual holding company. Other 
amendments will continue to require advance OTS approval.
    Paragraph (a)(2) of Sec. 575.9 provides that mutual holding 
companies may adopt the same preapproved charter amendments as are 
specified for mutual savings associations, subject to certain specified 
exclusions. Paragraph (a)(2) will be updated to conform to the changes 
being proposed for the list of preapproved charter amendments for 
mutual associations.
    Paragraph (a)(4) specifies that Federal mutual holding companies 
shall be subject to the same rules regarding bylaws as apply to Federal 
mutual associations, with certain exceptions. This paragraph will be 
amended to indicate that the model bylaws may be found in the Handbook, 
available from OTS Regional Offices.
    A technical amendment will be made to paragraph (a)(5), which 
requires mutual holding companies to make their charter and bylaws 
available to members. The cross reference to Sec. 545.131 will be 
changed to reflect the proposed movement of this section to Part 544.

D. Miscellaneous Technical Changes

Section 543.1(b)  Title Change

    This section prescribes the rules for corporate titles for Federal 
savings associations. This section will be amended to delete cross 
references to sections being removed by this proposal.

Section 543.14  Continuity of Existence

    This section, which confirms that the corporate existence of 
converting associations continues, notwithstanding the conversion, will 
be amended to delete a cross reference to a section being removed by 
this proposal.

Section 556.1  Directors

    This section, which describes OTS policy on the number of directors 
necessary for a quorum and the directors' power to fill vacancies, will 
be removed because both subjects are thoroughly covered by the bylaws 
regulations.

Section 556.17  Effect of Loan Participation on Status of Borrowing 
Members

    This section provides guidance regarding various issues that arise 
when determining the identity of the borrowing members of a Federal 
mutual savings association. For example, this section indicates that 
sale of a whole loan by a savings association to a third party 
terminates the borrower's membership rights in the association. OTS 
proposes to move this policy statement from the regulations into 
Handbook guidance.

V. Proposed Disposition of Corporate Governance Regulations

    The following chart displays the changes being proposed for OTS's 
corporate governance regulations.

--------------------------------------------------------------------------------------------------------------------------------------------------------
           Original provision                                                                Comment                                                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.  543.1(b).........................  Amended to delete references.                                                                                  
Sec.  543.14...........................  Amended to delete references.                                                                                  
Sec.  544.1............................  Amended and moved to Handbook.                                                                                 
Sec.  544.1, Section 6.................  Moved portion to Sec.  544.5 for clarification.                                                                
Sec.  544.1, Section 7.................  Moved portion to Sec.  544.5 for clarification.                                                                
Sec.  544.1, Section 9.................  Removed need for preliminary approval.                                                                         
Sec.  544.2(a)(2)......................  Eliminated need for management certification.                                                                  
Sec.  544.2(b).........................  Eliminated need for prior notice requirement.                                                                  
Sec.  544.2(b)(4)......................  Removed existing paragraph and added new preapproved amendment.                                                
Sec.  544.2(c).........................  Removed delegation.                                                                                            
Sec.  544.3............................  Removed.                                                                                                       
Sec.  544.5(a).........................  Revised for clarification.                                                                                     
Sec.  544.5(b) (1) and (2).............  Amended for flexibility; changed annual meeting date.                                                          
Sec.  544.5(b) (3) and (4).............  Adjournment provisions added.                                                                                  
Sec.  544.5(b) (5) through (17)........  Redesignated (b) (6) to (18)                                                                                   
Sec.  544.5(b)(6)......................  Amended to add privacy rights.                                                                                 
Sec.  544.5(b)(10).....................  Amended to add guidance on vacancies.                                                                          
Sec.  544.5(b)(13).....................  Amended to add guidance on nominee substitution.                                                               
Sec.  544.5(b)(16).....................  Revised for clarification.                                                                                     
Sec.  544.5(b)(17).....................  Removed.                                                                                                       
Sec.  544.5(c).........................  Eliminated need for management certification.                                                                  
Sec.  544.5(c)(1)......................  Eliminated need for prior notice requirement.                                                                  
Sec.  544.5(d).........................  Reduced filing requirement.                                                                                    
Sec.  544.8............................  Removed.                                                                                                       
Sec.  544.9............................  Removed.                                                                                                       
Part 544 Appendix......................  Conformed to proposed changes and moved to Handbook.                                                           
Sec.  545.131..........................  Moved to Part 544.                                                                                             
Sec.  552.1............................  Removed.                                                                                                       
Sec.  552.2............................  Removed.                                                                                                       
Sec.  552.2-5..........................  Removed.                                                                                                       
Sec.  552.3............................  Amended and moved to Handbook.                                                                                 

[[Page 32721]]

                                                                                                                                                        
Sec.  552.3 Section 8..................  Removed need for preliminary approval.                                                                         
Sec.  552.4(a)(2)......................  Eliminated need for management certification.                                                                  
Sec.  552.4(b).........................  Eliminated need for prior notice requirement.                                                                  
Sec.  552.4(b)(3)......................  Removed.                                                                                                       
Sec.  552.4(b) (4) through (6).........  Redesignated (b) (3) to (5).                                                                                   
New Sec.  552.4(b)(6)..................  Add new preapproved amendment.                                                                                 
Sec.  552.4(c).........................  Amended for clarification.                                                                                     
Sec.  552.5(b).........................  Eliminated need for management certification.                                                                  
Sec.  552.5(b)(1)(ii)..................  Eliminated need for prior notice requirement.                                                                  
Sec.  552.5(c).........................  Reduced filing requirement.                                                                                    
Sec.  552.6(a).........................  Amended for flexibility; changed annual meeting date.                                                          
Sec.  552.6(b).........................  Amended shareholder meeting requirements.                                                                      
Sec.  552.6(d).........................  Amended to add guidance on voting lists.                                                                       
Sec.  552.6(e).........................  Amended to add guidance on certain voting requirements.                                                        
Sec.  552.6(f)(1)......................  Amended for flexibility.                                                                                       
New Sec.  552.6(f)(4)..................  Added section on shares held by others.                                                                        
New Sec.  552.6(h).....................  Added section on informal action.                                                                              
Sec.  552.6-1(a).......................  Amended for flexibility.                                                                                       
Sec.  552.6-1(b).......................  Removed necessity for staggered board of directors if wholly owned. Also amended to specify number of          
                                          directors.                                                                                                    
Sec.  552.6-1(f).......................  Amended to clarify where ``cause'' is defined.                                                                 
Sec.  552.6-1(k).......................  Amended to add guidance.                                                                                       
Sec.  552.6-2(a).......................  Amended to remove provision requiring president to be a director.                                              
Sec.  552.8............................  Removed.                                                                                                       
Part 552 Appendix......................  Conformed to proposed changes and moved to Handbook.                                                           
Sec.  556.1............................  Removed.                                                                                                       
Sec.  556.17...........................  Moved to Handbook.                                                                                             
Sec.  563.74(d)........................  Amended to conform to earlier change.                                                                          
Sec.  575.9............................  Amended and moved to Handbook.                                                                                 
Sec.  575.9 Section 8..................  Removed need for preliminary approval.                                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------



VI. Request for Comment

    OTS invites comment on all aspects of the proposal. Specific areas 
that OTS requests for comments are as follows:

--Whether to move the charters and model bylaws from the regulations to 
OTS's Handbook.
--Whether OTS should exempt associations that are wholly-owned from the 
requirement that the board of directors be elected in staggered 
elections; also whether a staggered board of directors should be 
required if the association is not wholly owned.
--Whether OTS should adopt a practice similar to the OCC of permitting 
institutions to elect to adopt, en bloc, the corporate governance 
procedures authorized by any of the following: the laws of the state 
where the main office of the bank is located, the laws of the state 
where the bank's holding company, if any, is located, Delaware General 
Corporation Law, or The Model Business Corporation Act. As indicated 
above, any such election would likely be subject to certain exclusions, 
as is the case for national banks, for Federal laws considered vital to 
safety and soundness or other important policy objectives. Commenters 
supporting the election option are asked to specify how the option 
would benefit savings associations.

VII. Executive Order 12866

    The Director of OTS has determined that this proposed rule does not 
constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866.

VIII. Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS 
certifies that this proposal will not have a significant economic 
impact on a substantial number of small entities. The proposal does not 
impose any additional burdens or requirements upon small entities and 
lowers several paperwork and other burdens on all savings associations.

IX. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
federal mandate that may result in expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, Section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. As discussed in the preamble, 
this proposed rule reduces regulatory burden and updates, reorganizes 
and substantially streamlines corporate governance regulations and 
policy statements. OTS has determined that the proposed rule will not 
result in expenditures by state, local, or tribal governments or by the 
private sector of $100 million or more. Accordingly, this rulemaking is 
not subject to section 202 of the Unfunded Mandates Act.
    OTS has determined that the requirements of this proposed rule will 
not result in expenditures by State, local, and tribal governments, or 
by the private sector, of more than $100 million in any one year. 
Accordingly, a budgetary impact statement is not required under section 
202 of the Unfunded Mandates Act of 1995.

X. Paperwork Reduction Act

    This proposed regulation changes the timing of the submission of a 
notice to OTS when an institution proposes to amend its charter or 
bylaws with OTS preapproved amendments. Currently, this notice is 
required before the institution adopts the amendment. Under the 
proposal, the institution will file the notice after adopting the 
preapproved amendment. The reporting burden for this notice remains 
unchanged.
    Comments are invited on (i) whether the existing approved 
collections of

[[Page 32722]]

information (OMB Control Nos. 1550-0017 and 1550-0018) are necessary 
for the proper performance of the functions of the agency, including 
whether the information shall have practical utility, (ii) the accuracy 
of the estimate of the burden of the collection of information, (iii) 
ways to enhance the quality of the information collected, (iv) ways to 
minimize the burden of the collection of information on respondents, 
including the use of automated collection techniques or other forms of 
information technology.

List of Subjects

12 CFR Parts 543 and 544

    Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 545

    Accounting, Consumer protection, Credit, Electronic Funds 
transfers, Investments, Manufactured homes, Mortgages, Reporting and 
recordkeeping requirements, Savings associations.

12 CFR Part 552

    Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 556

    Savings associations.

12 CFR Part 563

    Accounting, Advertising, Crime, Currency, Flood insurance, 
Investments, Mortgages, Reporting and recordkeeping requirements, 
Savings associations, Securities, Surety bonds.

12 CFR Part 575

    Administrative practice and procedure, Capital, Holding companies, 
Reporting and recordkeeping requirements, Savings associations, 
Securities.

    Accordingly, the Office of Thrift Supervision proposes to amend 
chapter V, title 12, Code of Federal Regulations, as set forth below.

PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL 
MUTUAL ASSOCIATIONS

    1. The authority citation for part 543 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et 
seq.


Sec. 543.1  [Amended]

    2. Section 543.1 is amended in paragraph (b) by removing the phrase 
``, only pursuant to a charter change under Sec. 544.3 or Sec. 552.4 of 
this chapter''.


Sec. 543.14  [Amended]

    3. Section 543.14 is amended by removing the phrase ``or under 
Sec. 544.3 of this chapter''.

PART 544--CHARTER AND BYLAWS

    4. The authority citation for part 544 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et 
seq.

ALTERNATIVE ONE

    5. Section 544.1 is revised to read as follows:


Sec. 544.1  Federal mutual charter.

    The Federal mutual charter may be found in the Application 
Processing Regulatory Handbook, available from any Regional Office of 
OTS. (See Sec. 516.1(b) of this chapter.) Each Federal mutual 
association's charter, including any amendments thereto, constitutes 
conditions imposed in writing by the agency in connection with the 
granting of an application and a written agreement entered into with 
the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

    5a. Section 544.1 is amended by:
    a. Revising the introductory text preceding the Federal Mutual 
Charter;
    b. Removing in section 1 of the Federal Mutual Charter the phrase 
``hereby chartered'';
    c. Transferring the third and fourth sentences of section 6 of the 
charter, appearing in brackets, to the end of the introductory text of 
Sec. 544.1 and by removing the brackets;
    d. Removing the last three sentences of section 6 of the charter;
    e. Removing the third, fourth, and fifth sentences of the first 
paragraph, and all of the second paragraph of section 7 of the charter;
    f. Removing the word ``[Trustees]'' in the heading and the words 
``[trustee]'' and ``[trustees]'' where they appear in the text of 
section 7 of the charter; and
    g. Revising section 9 of the charter.
    The revisions read as follows:


Sec. 544.1  Federal mutual charter.

    A Federal mutual savings association shall have a charter in the 
following form, which may include any of the additional provisions set 
forth in Sec. 544.2, if such provisions are specifically requested. A 
charter for a Federal mutual savings bank shall substitute the term 
``savings bank'' for ``association.'' The term ``trustees'' may be 
substituted for the term ``directors.''
* * * * *
    Section 9. Amendment of charter. Adoption of any preapproved 
charter amendment shall 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 Office prior to approval by the members at a legal 
meeting. Any amendment, addition, alteration, change, or repeal so 
acted upon and approved shall be effective upon filing with the 
Office in accordance with regulatory procedures.

Attest:----------------------------------------------------------------
Secretary of the Association

By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association

Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision

By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision

Effective Date:--------------------------------------------------------

    6. Section 544.2 is amended by:
    a. Removing in paragraphs (a)(2)(i) and (a)(2)(ii), the phrase 
``along with a certification that the proposed'' and by adding in lieu 
thereof the phrase, ``provided such'';
    b. Removing the phrase ``filing with the OTS'' in the third 
sentence of paragraph (b), and by adding in lieu thereof the phrase 
``adoption, if adopted without change and filed with OTS, within 30 
days after adoption'';
    c. Revising paragraph (b)(4); and
    d. Removing the word ``shall'' in the second sentence of paragraph 
(c), and by adding in lieu thereof the phrase ``should be filed in 
accordance with Sec. 516.1(c) of this chapter and'' and by removing the 
last sentence of paragraph (c).
    The revisions read as follows:


Sec. 544.2  Charter amendments.

* * * * *
    (b) * * *
    (4) Maximum number of votes. A Federal mutual savings association 
may amend its charter by substituting (__________) votes per member in 
section 6. [Fill in a number from 50 to 1000.]
* * * * *


Sec. 544.3  [Removed]

    7. Section 544.3 is removed.
    8. Section 544.5 is amended by:
    a. Adding, between the words ``majority'' and ``of'' in the second 
sentence of paragraph (a), the phrase ``of the votes cast by the 
members at a legal meeting or a majority'', and by adding two new 
sentences at the end of paragraph (a);
    b. Removing the words ``[trustee]'' and ``[trustees]'' wherever 
they appear in paragraph (b);
    c. Revising the second sentence of paragraph (b)(1);
    d. Adding a sentence at the end of paragraph (b)(2);

[[Page 32723]]

    e. Adding a sentence at the end of paragraph (b)(3);
    f. Adding a sentence at the end of paragraph (b)(4);
    g. Redesignating paragraphs (b)(5) through (b)(17) as paragraphs 
(b)(6) through (b)(18), respectively;
    h. Adding a new paragraph (b)(5);
    i. Adding to newly designated paragraph (b)(6), a sentence between 
the first and second sentences, and three new sentences at the end;
    j. Revising newly designated paragraph (b)(7);
    k. Revising newly designated paragraph (b)(8);
    l. Adding after the word ``treasurer'' in newly designated 
paragraph (b)(10)(i), the words ``or comptroller'';
    m. Adding a sentence at the end of newly designated paragraph 
(b)(10)(ii);
    n. Revising newly designated paragraph (b)(11);
    o. Adding, between the words ``secretary'' and ``and'' in the 
second sentence of newly designated paragraph (b)(14), the phrase ``, 
except in the case of a nominee substituted as a result of death or 
other incapacity,'';
    p. Removing, in the first sentence of newly designated paragraph 
(b)(17), the phrase ``pursuant to Sec. 544.5 of the Office's 
regulations, as long as any such amendment'', and by adding in lieu 
thereof the word ``that'', and by adding a sentence at the end of 
paragraph (b)(17);
    q. Removing, in newly designated paragraph (b)(18), the phrase 
``emergency preparedness,'';
    r. Removing in paragraph (c)(1) introductory text, the phrase 
``along with a certification that the proposed'', and by adding in lieu 
thereof the phrase ``, provided such'';
    s. Removing, in the concluding text of paragraph (c)(1), the phrase 
``shall be deemed to comply with the requirements of this section'', 
and by adding in lieu thereof the phrase ``, if adopted without change, 
and filed within 30 days after adoption, are effective upon adoption'';
    t. Amending the heading of paragraph (c)(2) by removing the word 
``Notice'', and by adding in lieu thereof the word ``Filing'', and by 
removing, in paragraph (c)(2), the phrase ``together with a 
certification'', and by adding in lieu thereof the word ``provided''; 
and
    u. Removing, in the second sentence of paragraph (d), the phrase 
``raises a significant issue of law or policy'', and by adding in lieu 
thereof the phrase ``requires an application to be filed pursuant to 
paragraph (c)(1) of this section'',.
    The additions and revisions read as follows:


Sec. 544.5  Federal mutual savings association bylaws.

    (a) * * * The bylaws for a Federal mutual savings bank may 
substitute the term ``savings bank'' for ``association.'' The term 
``trustees'' may be substituted for the term ``directors.''
    (b) * * *
    (1) * * * Such meeting shall be held, as designated by its board of 
directors, at a location within the state that constitutes the 
principal place of business of the association, or at any other 
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. * * *
    (2) * * * For purposes of this section, ``voting capital'' means 
FDIC-insured deposits.
    (3) * * * When any meeting is adjourned for 30 days or more, notice 
of the adjournment and reconvening of the meeting shall be given as in 
the case of the original meeting.
    (4) * * * The same determination shall apply to any adjourned 
meeting.
    (5) Member quorum. Any number of members present and voting, 
represented in person or by proxy, at a regular or special meeting of 
the members shall constitute a quorum. A majority of all votes cast at 
any meeting of the members shall determine any question. At any 
adjourned meeting any business may be transacted which might have been 
transacted at the meeting as originally called. Members present at a 
duly constituted meeting may continue to transact business until 
adjournment.
    (6) * * * Proxies may be given telephonically or electronically as 
long as the holder uses a procedure for verifying the identity of the 
member. * * * Accounts held by an administrator, executor, guardian, 
conservator or receiver may be voted in person or by proxy by such 
person. Accounts held by a trustee may be voted by such trustee either 
in person or by proxy, in accordance with the terms of the trust 
agreement, but no trustee shall be entitled to vote accounts without a 
transfer of such accounts into the trustee name. Joint accounts shall 
be entitled to no more than 1,000 votes, split as the joint owners may 
agree, in writing.
    (7) Communications between members. Provisions relating to 
communications between members shall be consistent with Sec. 544.8 of 
the Office's regulations. No member, however, shall have the right to 
inspect or copy any portion of any books or records of a Federal mutual 
savings association containing:
    (i) A list of depositors in or borrowers from such association;
    (ii) Their addresses;
    (iii) Individual deposit or loan balances or records; or
    (iv) Any data from which such information could be reasonably 
constructed.
    (8) Number of directors, membership. The bylaws shall set forth a 
specific number of directors, not a range. The number of directors 
shall be not fewer than five nor more than fifteen, unless a higher or 
lower number has been authorized by the Director of the Office or his 
or her designee. Each director of the association shall be a member of 
the association. Directors shall be elected for periods of three years 
and until their successors are elected and qualified, but provision 
shall be made for the election of approximately one-third of the board 
each year. [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 
Office, and provide for compliance with the standard provisions of this 
section no later than six years after the conversion to a Federal 
savings association.]
* * * * *
    (10) * * *
    (ii) * * * Any officer may be removed by the board of directors 
with or without cause, but such removal, other than for cause, shall be 
without prejudice to the contractual rights, if any, of the person so 
removed.
* * * * *
    (11) Vacancies, resignation or removal of directors. Members of the 
association shall elect directors by ballot: Provided, that in the 
event of a vacancy on the board, the board of directors may, by their 
affirmative vote, fill such vacancy, even if the remaining directors 
constitute less than a quorum. A director elected to fill a vacancy 
shall be elected to serve only until the next election of directors by 
the members. The bylaws shall set out the procedure for the resignation 
of a director, which shall be by written notice or by any other 
procedure established in the bylaws. Directors may be removed only for 
cause as defined in Sec. 563.39 of this chapter, by a vote of the 
holders of a majority of the shares then entitled to vote at an 
election of directors.
* * * * *
    (17) * * * 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.
* * * * *

[[Page 32724]]

Secs. 544.8 and 544.9   [Removed]

    9. Sections 544.8 and 544.9 are removed.

ALTERNATIVE ONE

    10. The Appendix to Part 544 is revised to read as follows:

Appendix to Part 544--Model Bylaws for Mutual Savings Associations

    The Federal mutual bylaws may be found in the Application 
Processing Regulatory Handbook, available from any Regional Office 
of OTS (see Sec. 516.1(b) of this chapter). Each Federal mutual 
association's bylaws, including any amendments thereto, constitutes 
conditions imposed in writing by the agency in connection with the 
granting of an application and a written agreement entered into with 
the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

    10a. The Appendix to Part 544 is amended by:
    a. Removing section 18;
    b. Removing the words ``[trustee]'', ``[trustees]'', and 
``[Trustees]'' wherever they appear in the appendix;
    c. Adding introductory text between the heading of the appendix and 
Section 1;
    d. Amending the first sentence of Section 1 by removing the phrase 
``at (insert date and time within 120 days'', and by adding in lieu 
thereof the phrase ``or at any other convenient place the board of 
directors may designate, at (insert date and time within 150 days'';
    e. Amending Section 2 by adding a sentence between the second and 
third sentences and by revising the last sentence;
    f. Amending Section 3 by removing paragraph (b) and the paragraph 
designation (a), by removing the word ``annual'' wherever it appears in 
Section 3, and by adding a sentence at the end of Section 3;
    g. Adding a sentence at the end of Section 4;
    h. Redesignating Sections 5 through 17 as Sections 6 through 18, 
respectively, and adding a new Section 5;
    i. Adding to newly designated Section 6, a sentence between the 
first and second sentences, and three new sentences at the end;
    j. Adding new text at the end of newly designated Section 7;
    k. Revising newly designated Section 8;
    l. Amending newly designated Section 10 by adding the phrase ``or 
comptroller'' in the first sentence of the first paragraph, between the 
word ``treasurer'' and the colon and at the end of the sentence, and by 
adding a sentence at the end of the first paragraph;
    m. Amending newly designated Section 11 by revising the heading, 
adding two sentences at the beginning of the first paragraph following 
the heading, and adding the phrase ``as defined in the regulations in 
Sec. 563.39 of this chapter'' after the word ``cause'' in the second 
paragraph;
    n. Amending newly designated Section 14 by adding the phrase ``, 
except in the case of a nominee substituted as a result of death or 
other incapacity'' at the end of the second and third sentences;
    o. Amending newly designated Section 17 by adding a new sentence at 
the end of the section; and
    p. Amending newly designated Section 18 by adding one sentence of 
introductory text preceding paragraph (a), and by removing the phrase 
``of at least ____________________ (must be in accordance with ERISA)'' 
in paragraph (b).
    The additions and revisions read as follows:

Appendix to Part 544--Model Bylaws for Mutual Savings Associations

    The bylaws for a Federal mutual savings bank may substitute the 
term ``savings bank'' for ``association.'' The term ``trustees'' may 
be substituted for the term ``directors.''
* * * * *
    2. * * * For purposes of this section, ``capital'' means FDIC-
insured deposits. Annual and special meetings shall be conducted in 
accordance with the most current edition of Robert's Rules of Order 
or any other set of procedures agreed to by the board of directors.
    3. * * * When any meeting is adjourned for 30 days or more, 
notice of the adjournment shall be given as in the case of the 
original meeting.
    4. * * * The same determination shall apply to any adjourned 
meeting.
    5. Member quorum. Any number of members present and voting, 
represented in person or by proxy, at a regular or special meeting 
of the members shall constitute a quorum. A majority of all votes 
cast at any meeting of the members shall determine any question. At 
any adjourned meeting any business may be transacted which might 
have been transacted at the meeting as originally called. Members 
present at a duly constituted meeting may continue to transact 
business until adjournment.
    6. * * * Proxies may be given telephonically or electronically 
as long as the holder uses a procedure for verifying the identity of 
the member. * * * Accounts held by an administrator, executor, 
guardian, conservator or receiver may be voted in person or by proxy 
by such person. Accounts held by a trustee may be voted by such 
trustee either in person or by proxy, in accordance with the terms 
of the trust agreement, but no trustee shall be entitled to vote 
accounts without a transfer of such accounts into the trustee name. 
Joint accounts shall be entitled to no more than 1,000 votes, split 
as the joint owners may agree, in writing.
    7. * * * No member, however, shall have the right to inspect or 
copy any portion of any books or records of a Federal mutual savings 
association containing:
    (i) A list of depositors in or borrowers from such association;
    (ii) Their addresses;
    (iii) Individual deposit or loan balances or records; or
    (iv) Any data from which such information could be reasonably 
constructed.
    8. Number of directors, membership. The number of directors 
shall be ________ [not fewer than five nor more than fifteen], 
except where authorized by the Director of the Office or his or her 
designee. Each director of the association shall be a member of the 
association. Directors shall be elected for periods of three years 
and until their successors are elected and qualified, but provision 
shall be made for the election of approximately one-third of the 
board each year. [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 Office, and provide for compliance with the 
standard provisions of this section no later than six years after 
the conversion to a Federal savings association.]
* * * * *
    10. * * * Any officer may be removed by the board of directors 
with or without cause, but such removal, other than for cause, shall 
be without prejudice to the contractual rights, if any, of the 
person so removed.
* * * * *
    11. Vacancies, resignation, or removal of directors. Members of 
the association shall elect directors by ballot: Provided, that in 
the event of a vacancy on the board, the board of directors may, by 
their affirmative vote, fill such vacancy, even if the remaining 
directors constitute less than a quorum. A director elected to fill 
a vacancy shall be elected to serve only until the next election of 
directors by the members. * * *
* * * * *
    17. * * * 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.
    18. Age limitations. [Bylaws on age limitations must comply with 
all Federal laws, such as the Age Discrimination in Employment Act 
and the Employee Retirement Income Security Act.] (a) * * *
* * * * *

PART 545--OPERATIONS

    11. The authority citation for part 545 continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.


Sec. 545.131  [Redesignated as Sec. 544.8]

    12. Section 545.131 is redesignated as Sec. 544.8.

[[Page 32725]]

PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL 
STOCK ASSOCIATIONS

    13. The authority citation for part 552 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.


Secs. 552.1 and 552.2  [Removed]

    14. Sections 552.1 and 552.2 are removed.


Sec. 552.2-5  [Removed]

    15. Section 552.2-5 is removed.

ALTERNATIVE ONE

    16. Section 552.3 is revised to read as follows:


Sec. 552.3  Charters for Federal stock associations.

    The Federal stock charter may be found in the Application 
Processing Regulatory Handbook, available from any Regional Office of 
OTS. (see Sec. 516.1(b) of this chapter.) Each Federal stock 
association's charter, including any amendments thereto, constitutes 
conditions imposed in writing by the agency in connection with the 
granting of an application and a written agreement entered into with 
the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

    16a. Section 552.3 is amended in the Federal Stock Charter by:
    a. Removing, in Section 2, the word ``in'', and by adding in lieu 
thereof the word ``at'';
    b. Amending Section 5 by adding between the words ``or'' and 
``stated'' appearing in brackets in the first sentence, the phrase ``if 
no par is specified then shares shall have a'', by revising the last 
sentence in the first paragraph;
    c. Amending Section 5 by removing in the first sentence of the 
second paragraph the phrases ``issuable in'' and ``common stock'', and 
by adding in lieu thereof the phrases ``issued in the initial 
organization of the association or'' and ``capital stock'', 
respectively;
    d. Amending Section 5 by adding the phrase ``, unless the charter 
otherwise provides that there shall be no such cumulative voting'' at 
the end of the second sentence in the third paragraph;
    e. Amending Section 7 by adding the phrase ``, or his or her 
delegate'' at the end of the last sentence; and
    f. Revising Section 8.
    The revisions read as follows:


Sec. 552.3  Charters for Federal stock associations.

* * * * *

Federal Stock Charter

* * * * *
    Section 5. * * * 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 shall be deemed to be the consideration for 
their issuance.
* * * * *
    Section 8. Amendment of charter. Except as provided in Section 
5, no amendment, addition, alteration, change or repeal of this 
charter shall be made, unless such is first proposed by the board of 
directors of the association, then approved by the Office, provided 
that preapproved charter amendments shall be effective after such 
preapproved amendment has been approved by the board of directors 
and by the shareholders at a legal meeting. Amendments shall be 
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. Any amendment, addition, alteration, change, or repeal so 
acted upon shall be effective upon filing with the Office in 
accordance with regulatory procedures.

Attest:----------------------------------------------------------------
Secretary of the Association

By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association

Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision

By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision

Effective Date:--------------------------------------------------------

    17. Section 552.4 is amended by:
    a. Removing at the end of paragraph (a)(1) the semicolon and the 
word ``and'', and by adding in lieu thereof a period;
    b. Removing in paragraph (a)(2)(i) the phrase ``with a 
certification that the proposed'' and in paragraph (a)(2)(ii) the 
phrase ``, together with a certification that the'', and by adding in 
both places the phrase ``, provided such'';
    c. Removing the phrase ``filing with the OTS'' in the second 
sentence of paragraph (b) introductory text, and by adding in lieu 
thereof the phrase ``adoption, if adopted without change and filed with 
OTS, within 30 days after adoption'';
    d. Adding headings to paragraphs (b)(1) and (b)(2);
    e. Removing paragraph (b)(3);
    f. Redesignating paragraph (b)(4) as paragraph (b)(3) and revising 
it;
    g. Redesignating paragraph (b)(5) as paragraph (b)(4) and adding a 
paragraph heading, and revising the introductory text;
    h. Amending newly redesignated paragraph (b)(4) in Section 5 by 
adding between the words ``or'' and ``stated'' appearing in brackets in 
the first sentence, the phrase ``if no par value is specified the'', 
and by revising the last sentence in the first paragraph;
    i. Amending paragraph (b)(4) in Section 5 by removing in the first 
sentence of the second paragraph the phrase ``issuable in'' and by 
adding in lieu thereof the phrase ``issued in the initial organization 
of the association or'';
    j. Amending paragraph (b)(4) in Section 5 by adding the phrase ``, 
unless the charter otherwise provides that there shall be no such 
cumulative voting'' in the introductory text of the third paragraph 
between the words ``directors:'' and ``Provided'';
    k. Amending paragraph (b)(4) in paragraph (ii) of the third 
paragraph of Section 5 by removing the phrase ``, the Federal Deposit 
Insurance Corporation, or the Resolution Trust Corporation'', and by 
adding in lieu thereof the phrase ``or the Federal Deposit Insurance 
Corporation'';
    l. Amending paragraph (b)(4) in paragraph A. of the fourth 
paragraph by adding the phrase ``, unless the charter otherwise 
provides that there shall be no such cumulative voting'' at the end of 
the second sentence;
    m. Redesignating paragraph (b)(6) as paragraph (b)(5), adding a 
heading, and removing the phrase ``Amend the charter of a Federal stock 
association'', and by adding in lieu thereof the phrase ``A Federal 
stock association may amend its charter'';
    n. Adding a new paragraph (b)(6);
    o. Adding a heading to paragraph (b)(8); and
    p. Amending paragraph (c) by removing the word ``preliminary'' 
wherever it appears, and by adding a second sentence.
    The additions and revisions read as follows:


Sec. 552.4  Charter amendments.

* * * * *
    (b) * * *
    (1) Title change. * * *
    (2) Home office. * * *
    (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. * * * 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 shall be deemed to be the consideration for 
their issuance.
* * * * *

[[Page 32726]]

    (5) Limitations on subsequent issuances. * * *
    (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 shall be entitled to one vote for each share held by such holder 
and there shall be no right to cumulate votes in an election of 
directors.''
* * * * *
    (8) Antitakeover provisions following conversion. * * *
    (c) * * * Any such provision must be consistent with applicable 
statutes, regulations, and OTS policies; and Provided Further, that any 
such provision having the effect of rendering more difficult a change 
in control of the association which requires 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, shall 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.
* * * * *
    18. Section 552.5 is amended by:
    a. Revising the second sentence of paragraph (a);
    b. Removing, in paragraphs (b)(1) introductory text and (b)(2), the 
phrase ``together with a certification'', and by adding in lieu thereof 
the word ``provided'';
    c. Removing, in the concluding text of paragraph (b)(1), the phrase 
``shall be deemed to comply with the requirements of this section'', 
and by adding in lieu thereof the phrase'', if adopted without change, 
and filed within 30 days after adoption, are effective upon adoption'';
    d. Amending the heading of paragraph (b)(2) by removing the word 
``Notice'', and by adding in lieu thereof the word ``Filing''; and
    e. Adding paragraph (d).
    The additions and revisions read as follows:


Sec. 552.5  Bylaws.

    (a) * * * 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. * * *
* * * * *
    (d) Effect of subsequent charter or bylaw change. Notwithstanding 
any subsequent change to its charter or bylaws, the authority of a 
Federal stock association to engage in any transaction shall be 
determined only by the association's charter or bylaws then in effect, 
unless otherwise provided by Federal law or regulation.
    19. Section 552.6 is amended by:
    a. Removing in paragraph (a) the number ``120'', and by adding in 
lieu thereof the number ``150'', and by adding the phrase ``, or at any 
other convenient place the board of directors may designate'' at the 
end of the paragraph;
    b. Adding a sentence at the end of paragraph (b);
    c. Revising paragraph (d)(1);
    d. Adding a sentence at the end of paragraph (e);
    e. Adding two sentences after the first sentence in paragraph 
(f)(1);
    f. Adding paragraph (f)(4); and
    g. Adding paragraph (h).
    The additions and revisions read as follows:


Sec. 552.6  Shareholders.

* * * * *
    (b) * * * Notwithstanding anything in this section, however, a 
Federal stock association that is wholly owned shall not be subject to 
the stockholder notice requirement.
* * * * *
    (d) Voting lists. (1) 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 shall make a complete list of 
the stockholders of record entitled to vote at such meeting, or any 
adjournments thereof, including the names of beneficial owners 
furnished to the association pursuant to the rules of the Securities 
Exchange Commission, arranged in alphabetical order, with the address 
and the number of shares held by each. This list of shareholders shall 
be kept on file at the home office of the association and shall be 
subject to inspection by any stockholder of record or the stockholder's 
agent during the entire time of the meeting. The original stock 
transfer book shall constitute prima facie evidence of the shareholders 
entitled to examine such list or transfer books or to vote at any 
meeting of shareholders. Notwithstanding anything in this section, 
however, a Federal stock association that is wholly owned shall not be 
subject to the voting list requirements.
* * * * *
    (e) * * * 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 shall 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.
    (f) Shareholder voting (1) * * * Proxies may be given 
telephonically or electronically as long as the holder uses a procedure 
for verifying the identity of the stockholder. Notwithstanding part 569 
of this chapter, a proxy may designate as holder a corporation, 
partnership, company as defined in part 574 of this chapter, or other 
person. * * *
* * * * *
    (4) Shares held by others. Shares held by an administrator, 
executor, guardian, conservator or receiver may be voted in person or 
by proxy by such person. Stock standing in the name of a trustee may be 
voted by such trustee either in person or by proxy, but only in 
accordance with the terms of the trust agreement.
* * * * *
    (h) 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.
    20. Section 552.6-1 is amended by:
    a. Adding a sentence at the end of paragraph (a);
    b. Revising paragraph (b);
    c. Adding a sentence at the end of paragraph (c);
    d. Adding the word ``only'' in paragraph (e) between the words 
``serve'' and ``until'' in the second sentence;
    e. Revising the heading of paragraph (f), adding the word ``only'' 
between the words ``removed'' and ``for'' and the words ``as defined in 
Sec. 563.39 of this chapter,'' after the word ``cause'' in the first 
sentence of paragraph (f)(1), and adding a sentence at the end of 
paragraph (f)(1); and
    f. Adding a sentence at the end of paragraph (k).
    The additions and revisions read as follows:


Sec. 552.6-1  Board of directors.

    (a) * * * Directors need not be stockholders unless the bylaws so 
require.
    (b) Number and term. The bylaws shall set forth a specific number 
of directors, not a range. The number of directors shall be not fewer 
than five nor more than fifteen, unless a higher or lower number has 
been authorized by the Director of the Office or his or her delegate. 
The directors shall be divided

[[Page 32727]]

into three classes as nearly equal in number as possible. The members 
of each class shall be elected for a term of three years and until 
their successors are elected and qualified. One class shall be elected 
by ballot annually, except in the case of a converting or newly 
chartered association where all directors shall be elected at the first 
election of directors for terms which shall be staggered in length from 
one to three years. Notwithstanding anything in this section, however, 
a Federal stock association that is wholly owned shall not be subject 
to the staggered board requirement.
    (c) * * * The board of directors shall determine the place, 
frequency, time and procedure for notice of such meetings.
* * * * *
    (f) Removal or resignation of directors. (1) * * * Associations may 
provide for procedures regarding resignations in the bylaws.
* * * * *
    (k) * * * [Bylaws on age limitations must comply with all Federal 
laws, such as the Age Discrimination in Employment Act and the Employee 
Retirement Income Security Act.]
    21. Section 552.6-2 is amended by:
    a. Adding in paragraph (a) the phrase ``or comptroller'' after the 
word ``treasurer'' in the first and fifth sentences, and by removing 
the third and fourth sentences; and
    b. Adding a sentence at the end of paragraph (c).
    The additions read as follows:


Sec. 552.6-2   Officers.

* * * * *
    (c) * * * [Bylaws on age limitations must comply with all Federal 
laws, such as the Age Discrimination in Employment Act and the Employee 
Retirement Income Security Act.]


Sec. 552.8   [Removed]

    22. Section 552.8 is removed.


Sec. 552.11   [Amended]

    23. Section 552.11 is amended by adding the phrase 
``nonconfidential portions of'' in paragraph (b) introductory text 
between the words ``times,'' and ``its'' in the first sentence.

ALTERNATIVE ONE

    24. The Appendix to part 552 is revised to read as follows:

Appendix to Part 552--Model Bylaws for Stock Associations

    The Federal stock bylaws may be found in the Application 
Processing Regulatory Handbook, available from any Regional Office 
of OTS. (See Sec. 516.1(b) of this chapter.) Each Federal stock 
association's bylaws, including any amendments thereto, constitutes 
conditions imposed in writing by the agency in connection with the 
granting of an application and a written agreement entered into with 
the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

    24a. The Appendix to Part 552 is amended:
    a. In Article II, Section 1, by removing the phrase ``place in the 
State in which the principal place of business of the association is 
located'', and by adding in lieu thereof the phrase ``convenient 
place'';
    b. In Article II, Section 2, by removing the number ``120'' 
wherever it appears, and by adding in lieu thereof the number ``150'';
    c. In Article II, Section 4, by adding at the end of the first 
sentence the phrase ``or the board of directors adopts another 
procedure for the conduct of meetings'';
    d. In Article II, Section 5, by removing the number ``10'' in the 
first sentence, and by adding in lieu thereof the number ``20'';
    e. In Article II, Section 7, by removing the word ``shareholders'' 
in the first sentence and adding the phrase ``stockholders of record'' 
in lieu thereof, adding at the end of the first sentence the phrase ``, 
including the names of beneficial owners furnished pursuant to the 
rules of the Securities and Exchange Commission'', removing in the 
second and third sentences the words ``any shareholder'' and adding in 
lieu thereof the phrase ``any stockholders of record or the 
stockholder's agent'', and removing in the fourth sentence the phrase 
``shareholders entitled'' and adding in lieu thereof the phrase 
``stockholders of record entitled'';
    f. In Article II, Section 8, by adding a sentence at the end;
    g. In Article II, Section 9, by adding a sentence after the first 
sentence;
    h. In Article III, Section 3, by adding two sentences at the end;
    i. In Article III, Section 11, by adding in the second sentence, 
the word ``only'' between the words ``serve'' and ``until'';
    j. In Article III, Section 14, by adding in the first sentence, the 
word ``only'' between the words ``removed'' and ``for'' and the words 
``as defined in the regulations in Sec. 563.39 of this chapter'' after 
the word ``cause'';
    k. In Article V, Section 1, by adding, in first, and fifth 
sentences, the phrase ``or comptroller'' after the word ``treasurer'' 
each place it appears, and removing the third and fourth sentences; and
    l. In Article XI, by adding a sentence at the end.
    The additions read as follows:

Appendix to Part 552--Model Bylaws for Stock Associations

* * * * *

Article II--Shareholders

* * * * *
    Section 8. 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 shall 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.
    Section 9. Proxies. * * * Proxies may be given telephonically or 
electronically as long as the holder uses a procedure for verifying 
the identity of the stockholder. * * *
* * * * *

Article III--Board of Directors

* * * * *
    Section 3. Regular Meetings. * * * Directors may participate in 
a meeting by means of a conference telephone or similar 
communications device through which all persons participating can 
hear each other at the same time. Participation by such means shall 
constitute presence in person for all purposes.
* * * * *

Article XI--Amendments

    * * * When an association fails to meet its quorum requirement, 
solely due to vacancies on the board, then the affirmative vote of a 
majority of the sitting board will be required to amend the bylaws.

PART 556--STATEMENTS OF POLICY

    25. The authority citation for part 556 continues to read as 
follows:

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1464, 1701j-3; 15 U.S.C. 
1693-1693r.


Secs. 556.1, 556.17   [Removed]

    26. Sections 556.1 and 556.17 are removed.

PART 563--OPERATIONS

    27. The authority citation for part 563 continues to read as 
follows:

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1828, 3806; 42 U.S.C. 4106.

    28. Section 563.74 is amended by revising paragraph (d) to read as 
follows:


Sec. 563.74   Mutual capital certificates.

* * * * *
    (d) Charter amendment. No application for approval of the issuance 
of mutual capital certificates pursuant to this section may be filed 
unless the mutual association amends its charter to authorize issuance, 
or as may otherwise be required by applicable law.
* * * * *

[[Page 32728]]

PART 575--MUTUAL SAVINGS AND LOAN HOLDING COMPANIES

    29. The authority citation for part 575 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.

ALTERNATIVE ONE

    30. Section 575.9(a)(1) is revised to read as follows:


Sec. 575.9   Charters and bylaws for mutual holding companies and their 
savings association subsidiaries.

    (a) * * * (1) Charter. The Federal mutual holding company charter 
may be found in the Application Processing Regulatory Handbook, 
available from any Regional Office of OTS. (See Sec. 516.1(b) of this 
chapter). Each Federal mutual holding company's charter, including any 
amendments thereto, constitutes conditions imposed in writing by the 
agency in connection with the granting of an application and a written 
agreement entered into with the agency within the meaning of 12 U.S.C. 
1818(b).
* * * * *

ALTERNATIVE TWO

    30a. Section 575.9 is amended by:
    a. Removing, in Section 1 of the Charter in paragraph (a)(1), the 
phrase ``hereby chartered'';
    b. Removing, in Section 5 of the Charter in paragraph (a)(1), the 
sixth, seventh, and eighth sentences in the last paragraph;
    c. Removing, in Section 6 of the Charter in paragraph (a)(1), the 
word ``OTS'' in the second sentence, and by adding in lieu thereof the 
phrase ``the Director of the Office or his or her delegate'', and by 
removing the third, fourth and fifth sentences;
    d. Revising Section 8 of the Charter in paragraph (a)(1);
    e. Removing in paragraph (a)(2) the phrase ``references to 
`association' in the text of the mutual capital certificate charter 
provision in Sec. 544.2(b)(4) shall be replaced with references to the 
`Mutual Company','' and
    f. Removing the number ``545.131'' in paragraph (a)(5), and by 
adding in lieu thereof the number ``544.8''.
    The revisions read as follows:


Sec. 575.9  Charters and bylaws for mutual holding companies and their 
savings association subsidiaries.

    (a) Charters and bylaws for mutual holding companies--(1) Charters. 
* * *

CHARTER

* * * * *
    Section 8. Amendment. Adoption of any preapproved charter 
amendment shall 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 Office prior to approval by the members at a legal 
meeting. Any amendment, addition, alteration, change, or repeal so 
acted upon and approved shall be effective upon filing with the 
Office in accordance with regulatory procedures.

Attest:----------------------------------------------------------------
Secretary of the Association

By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association

Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision

By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision

Effective Date:--------------------------------------------------------
* * * * *
    Dated: May 31, 1996.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 96-14441 Filed 6-24-96; 8:45 am]
BILLING CODE 6720-01-P