[Federal Register Volume 61, Number 220 (Wednesday, November 13, 1996)]
[Proposed Rules]
[Pages 58144-58145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28989]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 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.
 
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 

  Federal Register / Vol. 61, No. 220 / Wednesday, November 13, 1996 / 
Proposed Rules  

[[Page 58144]]



DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 575

[No. 96-105]
RIN 1550-AB04


Mutual Savings and Loan Holding Companies

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OTS), is issuing this 
advance notice of proposed rulemaking to solicit comments on amending 
the regulations regarding Mutual Savings and Loan Holding Companies to 
permit the establishment of a mutual holding company (``MHC'') 
structure that includes an intermediate stock holding company. The OTS 
will consider the comments received in determining whether to proceed 
with the development of a proposed rule to permit the formation of 
intermediate stock holding companies by MHCS. The OTS solicits comments 
on the specific questions set forth below and on all aspects of 
permitting MHCs to form intermediate holding companies.

DATES: Comments must be received on or before December 13, 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. 96-105. 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 A.M. until 4:00 P.M. on 
business days.

FOR FURTHER INFORMATION CONTACT: James H. Underwood, Special Counsel 
(202/906-7354), Dwight C. Smith, Deputy Chief Counsel (202/906-6990), 
Business Transactions Division, Chief Counsel's Office; Gary Masters, 
Financial Analyst (202/906-6729), Corporate Activities Division, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, D.C. 20552.

SUPPLEMENTARY INFORMATION: The OTS has received several inquiries from 
MHCs and mutual savings associations contemplating conversion to stock 
and reorganization into MHC form concerning whether an MHC can form an 
intermediate state-chartered stock holding company to hold the stock of 
its insured savings association subsidiary. The MHC would hold at least 
a majority of the stock of the intermediate holding company. The 
intermediate holding company could issue a minority of its shares of 
stock to the public and would hold 100% of the stock of the insured 
savings association subsidiary. The intermediate holding company would 
be a state-chartered corporation, unlike the MHC, which has a federal 
charter.
    Under current mutual holding company regulations (12 CFR part 575), 
a mutual savings association may reorganize into a MHC by forming a 
stock savings association which assumes the liabilities and assets of 
the mutual savings association and issues at least a majority of its 
stock to the MHC. Depositors of the mutual association continue to 
maintain a deposit-creditor relationship with the stock savings 
association subsidiary while retaining their other indicia of 
ownership, eq., voting rights, liquidation rights, with the MHC. The 
stock savings association subsidiary may issue up to 49 percent of its 
shares to the public.
    In a previous legal opinion, the OTS' staff declined to concur with 
a request to permit the formation of a multi-tier mutual holding 
company structure. Upon further consideration of this issue, the OTS 
has determined to solicit comments from the public on whether Section 
10(o) of the Home Owners Loan Act and the regulations promulgated 
thereunder should be read to permit the formation of a multi-tier 
mutual holding company structure, and if so, what restrictions should 
apply to such a structure.
    Entities interested in forming multi-tier MHCs have indicated that 
the primary purpose is to permit the intermediate stock holding 
company, which would issue shares to minority stock holders, to engage 
in a stock repurchase program without the potential negative tax 
consequences that would ensue if such a program were engaged in by the 
insured savings association subsidiary. Under the current MHC 
regulations, 12 CFR 575.11(c), a savings association subsidiary is 
permitted to engage in a stock repurchase program subject to certain 
restrictions. It is the OTS' current view that the current repurchase 
restrictions at Sec. 575.11(c) would apply to the intermediate holding 
company.
    Entities seeking to form a multi-tier mutual holding company 
structure also have suggested other reasons for its creation: the 
presence of an intermediate stock holding company would facilitate 
acquisitions; and the intermediate holding company may have greater 
powers than the MHC.

Questions on Which Comment is Sought

    The OTS is hereby requesting comment during a 30-day comment period 
on the following questions and issues:
    (1) Assuming the mutual holding company statute and the OTS' 
implementing regulations can be read to permit the formation of an 
intermediate stock holding company, should that holding company be 
subject to the same activities limitations as a MHC or may it be 
treated as a unitary savings and loan holding company?
    (2) The MHC regulations impose various restrictions and limitations 
on the MHC and the savings association subsidiary of the MHC. These 
limitations include restrictions on pledges of the subsidiary savings 
association's stock by a MHC, waiver of dividends, and limitations on 
indemnification and employment contracts. It is not clear that these 
restrictions would be directly applicable to the intermediate stock 
holding company. Should these restrictions be applicable to an 
intermediate stock holding company in the same manner in which they are 
applicable to the MHC? Commenters should discuss any reasons for not 
applying the restrictions and the consequences of such.
    (3) Should the intermediate stock holding company be required to 
obtain the approval of the OTS prior to issuing any debt or equity 
security to any person other than its parent MHC? Should a subsidiary 
stock thrift be able to issue minority voting stock or other

[[Page 58145]]

classes of securities? If so, under what circumstances? How should any 
such stock be treated in a conversion of the MHC to stock form?
    (4) The OTS is the sole chartering authority for MHCs that are 
subject to part 575. Since both the parent MHC and the savings 
association subsidiary of an intermediate holding company are chartered 
by the OTS as special limited purpose corporations, to what extent 
should the charter and bylaws (and any amendments) of the intermediate 
holding company be subject to review and approval by the OTS? Should 
the OTS require that provisions of the intermediate company's charter 
be consistent with the Federal MHC charter?
    (5) The savings association subsidiary of a MHC is subject to 
various restrictions on stock issuances, including a requirement that 
all stock issuances generally be structured in a manner that is similar 
to a stock conversion offering under 12 CFR part 563b. Should these 
restrictions also be applicable to the intermediate holding company? If 
not, why not? Should all other provisions of 12 CFR part 575 governing 
minority stock issuances be applicable to minority stock issuances by 
intermediate holding companies? If not, why not?
    (6) What are the consequences to the MHC of permitting the 
intermediate holding company to retain capital generated by the savings 
association subsidiary?
    (7) Other than permitting stock repurchases and, perhaps, 
facilitating acquisitions and expanding the powers in the MHC 
structure, are there other reasons for creating a multi-tier structure? 
Commenters should identify any additional potential benefits of a 
multi-tier holding company structure and address any necessary 
regulatory changes that would facilitate the use of the multi-tier 
structure consistent with the MHC statute.

    Dated: November 1, 1996.

    By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-28989 Filed 11-12-96; 8:45 am]
BILLING CODE 6720-01-P