[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Rules and Regulations]
[Pages 60179-60185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30112]


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


DEPARTMENT OF THE TREASURY
12 CFR Parts 560, 563, 574, 575, 583, 584

[No. 96-113]
RIN 1550-AB05


Amendments Implementing Economic Growth and Regulatory Paperwork 
Reduction Act

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Interim final rule.

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

SUMMARY: The Office of Thrift Supervision (OTS or Office) is issuing 
this interim final rule to implement provisions of the Economic Growth 
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). Among other 
actions, EGRPRA expanded and clarified federal thrifts' lending and 
investment authority, amended the Qualified Thrift Lender (QTL) test, 
authorized OTS to grant antitying exceptions to savings associations 
that conform to those granted to banks by the Board of Governors of the 
Federal Reserve System (FRB), and modified OTS's oversight authority 
over bank holding companies that own savings associations. Today's 
interim final rule implements these statutory changes. OTS is making 
today's rule effective immediately to enable thrifts to take advantage 
of the expanded flexibility and burden reduction afforded by EGRPRA. 
However, OTS will be accepting comment on any issues raised by these 
newly implemented regulations for the next sixty days.

DATES: This interim rule is effective on November 27, 1996. Comments 
must be received by January 27, 1997.

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. 96-113. 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: William J. Magrini, Senior Project 
Manager, (202) 906-5744, Supervision Policy; Ellen J. Sazzman, Counsel 
(Banking and Finance), (202) 906-7133, or Deborah Dakin, Assistant 
Chief Counsel, (202) 906-6445, Regulations and Legislation Division, 
Chief Counsel's Office. For information about holding company or 
branching issues, contact Kevin A. Corcoran, Assistant Chief Counsel, 
(202) 906-6962, Business Transactions Division, Chief Counsel's Office, 
Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

Summary of Relevant Statutory Changes

    Credit card and education lending: Section 2303(b) of the EGRPRA 
1 amended section 5 of the Home Owners'' Loan Act (HOLA),2 to 
confirm and clarify that federal savings associations may engage in 
credit card lending without a percentage of assets investment 
limitation, as OTS has long maintained. Section 2303(b) also amended 
HOLA section 5 to permit federal thrifts to make education loans 
without investment restriction. Previously, education loans were 
limited to 5% of a thrift's total assets.3
---------------------------------------------------------------------------

    \1\ Pub. L. 104-208, tit. 12, 110 Stat. 3009 (September 30, 
1996).
    \2\ 12 U.S.C. 1464(c)(1).
    \3\ 12 U.S.C. 1464(c)(3)(A). Federal thrifts continue to be 
authorized to make other consumer loans in an amount up to 35% of 
total assets. Credit card loans and education loans do not count 
against this 35% cap. 12 U.S.C. 1464(c)(2)(D).
---------------------------------------------------------------------------

    Commercial lending: Section 2303(c) of EGRPRA also expanded the 
small business and agricultural lending authority of federal thrifts. 
Federal thrifts have long been authorized to make loans secured by 
business or agricultural real estate in amounts up to 400% of 
capital,4 and to make additional secured and unsecured loans to 
businesses and farms in amounts up to 10% of total assets. 5 
EGRPRA left the 400% non-residential real estate lending cap intact, 
but increased the 10% of assets limit to 20% of assets, provided that 
amounts in excess of 10% of assets may only be used for ``small 
business loans'' as that term is defined by the Director of OTS.
---------------------------------------------------------------------------

    \4\ 12 U.S.C. 1464(c)(2)(B).
    \5\ 12 U.S.C. 1464(c)(2)(A).
---------------------------------------------------------------------------

    Qualified Thrift Lender test: Section 2303(e) and (g) of EGRPRA 
amended the QTL test in section 10(m) of the HOLA 6 to provide 
that investments in educational, small business, credit card, and 
credit card account loans are includable without limit for purposes of 
satisfying the QTL test. Under the QTL test, savings associations must 
hold ``qualified thrift investments'' equal to at least 65% of their 
``portfolio assets'' as defined by statute.7 Before EGRPRA, 
``qualified thrift investments'' (QTI) were defined in a manner that 
required every savings association to hold a

[[Page 60180]]

substantial percentage of its assets in mortgage loans and mortgage-
related securities. Section 2303 of EGRPRA expanded the definition of 
QTI . Small business loans, credit card loans, and education loans now 
count as QTI without restriction.8 Consumer loans (other than 
credit cards and education loans) now count as QTI in an amount up to 
20% of portfolio assets.9
---------------------------------------------------------------------------

    \6\ 12 U.S.C. 1467a(m).
    \7\ Id., and 12 CFR 563.50-563.52.
    \8\ Previously, small business loans counted as QTI only if 
originated in areas where the credit needs of low and moderate 
income persons were not being met. As discussed above, HOLA section 
5 now imposes a 20%-of-assets cap on small business loans. HOLA 
section 5 does not limit a federal savings association's credit card 
and education loans.
    \9\ The previous limit was 10% of portfolio assets and included 
credit card and educational loans. When computing the new 20% cap, 
consumer loans must still be aggregated with certain other 
categories of loans and investments that are also subject to the 20% 
cap, e.g., loans for the purchase of community service facilities, 
home loans sold into the secondary market, Fannie Mae and Freddie 
Mac stock, and so forth. 12 U.S.C. 1467a(m)(4)(C) (iii) and (iv).
---------------------------------------------------------------------------

    Section 2303(e) of EGRPRA also amended the QTL test to give savings 
associations the option of substituting compliance with the tax code 
``domestic building and loan association'' (DBLA) test for compliance 
with the amended QTL requirements. (The DBLA test appears to be much 
more stringent than the amended QTL test.)
    As a result of the foregoing statutory reforms, savings 
associations will now be able to engage in substantial small business, 
agricultural, credit card, educational, and other consumer lending and 
remain in QTL compliance. In order to implement these changes, section 
2303 of EGRPRA requires the Director of OTS to issue regulations 
defining the terms ``credit card'' and ``small business.''
    Anti-tying exceptions: Section 2216 of EGRPRA amends HOLA section 
5(q) 10 to authorize the OTS Director to issue regulations or 
orders permitting exceptions to the antitying prohibitions established 
in section 5(q) so long as such exceptions are consistent with the 
purposes of section 5(q) and conform to exceptions granted by the FRB 
to banks pursuant to section 106(b) of the Bank Holding Company Act 
(BHCA) Amendments of 1970.11 HOLA section 5(q) prohibits, inter 
alia, a savings association from varying the price charged for a 
product or service (the tying product) based on whether the customer 
obtains an additional product or service (the tied product) offered by 
the association or its service corporation or affiliate unless the 
additional product or service is a loan, discount, deposit or trust 
service (``traditional bank products'). The BHCA contains a similar 
anti-tying provision applicable to banks and authorizes the FRB to 
grant exemptions by regulation or order for commercial banks and their 
affiliates. The FRB has issued various regulatory exceptions in recent 
years. Prior to EGRPRA, the HOLA did not grant similar exemptive 
authority to the OTS.
---------------------------------------------------------------------------

    \10\ 12 U.S.C. 1464(q).
    \11\ 12 U.S.C. 1972.
---------------------------------------------------------------------------

    Bank holding companies: Section 2203 of EGRPRA amends HOLA section 
10 12 to eliminate OTS supervision of holding companies that 
control both a bank and a savings association and are registered as 
bank holding companies with the FRB under the BHCA of 1956.13 
Previously bank holding companies that controlled a savings association 
were supervised by the FRB under the BHCA and also by the OTS under the 
Savings and Loan Holding Company Act. Dual holding companies are no 
longer required to file periodic holding company reports with OTS and 
are no longer subject to OTS examination. OTS, however, will continue 
to regulate the subsidiary savings association, and the FRB must 
consult with the OTS on certain specified matters including a bank 
holding company's acquisition of a savings association, the scope of 
examination of a bank holding company that controls a savings 
association, and the coordination of some enforcement actions.
---------------------------------------------------------------------------

    \12\ 12 U.S.C. 1467a.
    \13\ 12 U.S.C. 1841 et seq.
---------------------------------------------------------------------------

    Branching: Section 2303(f) of EGRPRA amended HOLA section 5(r)(1) 
14 to give federal thrifts greater flexibility in branching by 
allowing federal associations that are not excepted from the 
requirements of section 5(r)(1) pursuant to section 5(r)(2) to meet 
either the Internal Revenue Service's (IRS's) domestic building and 
loan association (DBLA) test 15 or the amended QTL test in order 
to establish, retain, or operate out-of-state branches. Previously, 
non-excepted federal savings associations were required to qualify 
under the IRS DBLA test or at least meet the asset composition 
requirement of that test in order to operate out-of-state branches. 
Section 2303(f) also clarifies the scope of the exemption from the 
foregoing requirements, set forth at section 5(r)(2)(C), when the law 
of the state where the branch is located, or is to be located, would 
permit establishment of the branch if the association was either a 
savings association or savings bank chartered by the state in which its 
home office is located. EGRPRA's branching amendments are self-
implementing and do not require any regulatory revisions.
---------------------------------------------------------------------------

    \14\ 12 U.S.C. 1464(r).
    \15\ 26 U.S.C. 7701(a)(19).
---------------------------------------------------------------------------

II. Description of Final Interim Rule

    Section 560.3 Definitions of credit card, credit card 
account.16
---------------------------------------------------------------------------

    \16\ OTS's lending and investment regulations contain a table 
that provides an overview of HOLA's investment authorities. 61 FR 
50951, 50973 (September 30, 1996) (to be codified as 12 CFR 560.30). 
OTS plans to supplement the table in its subsidiaries and equity 
investment rulemaking, which will be published before the end of the 
year. The table also needs to be updated to reflect EGRPRA's 
amendments to the investment limits of HOLA. Rather than amending 
and restating the table twice in several weeks, OTS will restate the 
table once in the subsidiaries rulemaking. At that time, the EGRPRA 
amendments will be reflected in the table. The changes being made 
today, however, are sufficient to authorize savings associations to 
begin using the EGRPRA authorities. Savings associations need not 
await restatement of the table in Part 560.
---------------------------------------------------------------------------

    Section 2303 of EGRPRA requires the OTS Director to issue 
regulations defining the term ``credit card'' in order to enable 
thrifts to apply the newly modified QTL test which permits credit card 
loans to be counted as QTI without restriction pursuant to HOLA section 
10(m). Defining ``credit card'' and ``credit card account'' will also 
give thrifts guidance in exercising their authority to ``invest in, 
sell, or otherwise deal in * * * loans made through credit cards or 
credit card accounts'' pursuant to HOLA section 5(c). As noted above, 
this provision authorizes federal thrifts to engage in credit card 
lending without any percentage of assets investment limitation.17 
It is a well settled principle of statutory construction that generally 
``each part or section [of a statute] should be construed with every 
other part or section so as to produce a harmonious whole.'' 18 
Accordingly, it is appropriate for OTS to consistently define ``credit 
card'' and ``credit card account'' for both section 5(c) and section 
10(m) of the HOLA.
---------------------------------------------------------------------------

    \17\ EGRPRA, section 2303(b), amending HOLA section 5(c), to be 
codified at 5 U.S.C. 1464(c)(1)(T).
    \18\ 2A Sutherland Statutory Construction section 46.05 (5th ed. 
1992).
---------------------------------------------------------------------------

    According to Black's Law Dictionary, a ``credit card'' is ``[a]ny 
card, plate, or other like credit device existing for the purpose of 
obtaining money, property, labor or services on credit.'' 19 The 
regulatory definition of credit card established in today's interim 
rule is based on this plain language definition. OTS seeks comment on 
whether a different definition would be more appropriate.
---------------------------------------------------------------------------

    \19\ Black's Law Dictionary 367 (6th ed. 1990).
---------------------------------------------------------------------------

    OTS has already received some questions regarding whether 
securities backed by credit card accounts and products such as credit 
card debt consolidation loans would fall within

[[Page 60181]]

the confines of ``loans made through credit cards or credit card 
accounts.'' As for securities backed by credit cards, the HOLA itself 
specifies that ``any reference to a loan [herein] * * * includes an 
interest in such a loan. * * * '' 20 Thus, the authorization to 
invest in ``loans made through credit cards'' encompasses investments 
in loan pools that issue securities backed by credit card loans.21 
As for credit card debt consolidation loans, OTS believes that, because 
these loans are made for the purpose of funding credit card 
receivables, they are in economic substance ``credit card loans.'' 
Today's definition of ``credit card account'' therefore includes credit 
card debt consolidation loans and securities backed by credit-card 
accounts and receivables.
---------------------------------------------------------------------------

    \20\ 12 U.S.C. 1464(c)(6)(B).
    \21\ Cf. 12 CFR 560.31(c).
---------------------------------------------------------------------------

    We note that Sec. 560.30 of OTS's regulations, which implements the 
statutory credit card authority, permits federal thrifts to engage in 
the full range of credit card operations authorized by HOLA, but 
provides that OTS reserves the right to establish investment limits on 
a case-by-case basis if an institution's concentration in credit-card-
related loans presents a safety and soundness concern.22
---------------------------------------------------------------------------

    \22\ 12 CFR 560.30, n. 5, 61 FR 50951, 50973 (September 30, 
1996).
---------------------------------------------------------------------------

    Institutions that expand their credit card lending (or their 
consumer, small business, or agricultural lending) pursuant to today's 
rule must do so in a safe and sound manner. Institutions planning any 
significant increase in these types of loans should prepare thorough 
business plans, acquire the necessary personnel and expertise, and 
establish adequate systems to identify and control risks associated 
with these products. OTS will monitor these lending activities, 
utilizing off-site surveillance and the on-site examination process.

Section 560.3  Definitions of Small Business, Small Business Loans

    Section 2303(g) of EGRPRA requires the OTS Director to issue 
regulations defining the term ``small business'' in order to enable 
savings associations to apply the newly modified QTL test which permits 
small business loans to be counted as QTI without restriction pursuant 
to HOLA section 10(m). Section 2303(c) of EGRPRA also directs the OTS 
Director to define the term ``small business loans'' in connection with 
newly amended HOLA section 5(c) which expands federal thrifts'' 
commercial lending authority from 10% to 20% of assets so long as the 
amount in excess of 10% of assets is used solely for small business 
loans. Once again, OTS believes that a consistent definition of small 
business for application of both sections of the HOLA is appropriate to 
promote a harmonious interpretation of the statute.
    In this interim final regulation, OTS is tying its definitions of 
small business and small business loans to the eligibility criteria 
established by the Small Business Administration (SBA) under section 
3(a) of the Small Business Act, 15 U.S.C. 632(a), as implemented by 
SBA's regulations at 13 CFR Part 121. Most lenders and small businesses 
are already familiar with SBA's size eligibility standards. However, 
OTS specifically solicits comment as to whether these SBA standards are 
the most appropriate basis for OTS's definition of small business or 
small business loans for HOLA purposes. OTS specifically solicits 
comment on whether it should, for the sake of simplicity, include a de 
minimis safe harbor providing that any loan to a business with annual 
sales of less than a specified amount will be deemed a small business 
loan, regardless what line of business the borrower conducts.23
---------------------------------------------------------------------------

    \23\ The SBA Reauthorization Act of 1994, 15 U.S.C. 632(a)(C), 
provides that unless specifically authorized by statute, no federal 
agency may prescribe a size standard for categorizing a business 
concern as a small business unless such size standard is made 
subject to public notice and comment, makes certain size 
determinations, and is approved by the SBA Administrator. OTS 
solicits comment regarding whether EGRPRA section 2303(g) 
constitutes a specific authorization within the meaning of 15 U.S.C. 
632(a)(C).
---------------------------------------------------------------------------

Sections 563.50, 563.51, 563.52 Revisions to the QTL Test.

    As discussed above, section 2303 (e) and (g) of EGRPRA amended the 
QTL test in a number of ways to give thrifts greater lending 
flexibility. Investments in educational loans, small business loans, 
and loans made through credit cards and credit card accounts are 
includable as QTI without limit. Consumer loans now count as QTI in an 
amount up to 20% of portfolio assets.
    Rather than codifying these amendments in the existing QTL 
regulations, OTS is removing the QTL provisions from its regulations at 
12 CFR 563.50-52 and relying directly on the provisions of HOLA section 
10(m) to govern this area, except for the two definitions described 
above. These definitions will appear at 12 CFR 560.3.
    This approach is consistent with OTS's effort to streamline its 
regulations and remove duplicative requirements pursuant to section 303 
of the Community Development and Regulatory Improvement Act of 1994 
(CDRIA).24 The QTL provisions of HOLA section 10(m) are very 
detailed, and OTS provides additional QTL guidance in its Thrift 
Activities Handbook (Handbook). OTS believes it is unnecessary to 
reiterate HOLA's statutory QTL provisions in a regulatory format, 
because the combination of HOLA's statutory requirements and relevant 
handbook guidance provide adequate direction to the thrift industry and 
OTS examination staff with respect to QTL compliance. Thus, the only 
regulatory provisions that address QTL will be the two definitions 
described above.
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 4803.
---------------------------------------------------------------------------

Section 563.36 Tying Restrictions

    Section 2216 of EGRPRA authorizes the OTS Director to issue 
regulations or orders permitting exceptions to the anti-tying 
prohibitions established in HOLA section 5(q) provided that such 
exceptions are not contrary to the purposes of that section and conform 
to exceptions granted by the FRB to banks pursuant to section 106(b) of 
the BHCA Amendments. The FRB, by regulation, has created four 
exceptions from the anti-tying provisions of the BHCA Amendments.
    The first FRB regulatory exception provides that a bank holding 
company, bank, or nonbank subsidiary thereof, may vary the 
consideration charged for a traditional bank product on the condition 
or requirement that a customer also obtain a traditional bank product 
from an affiliate.25 HOLA section 5(q) excepts this type of 
activity for savings associations, savings and loan holding companies, 
and their affiliates.26 Accordingly, OTS has determined that a 
regulatory exception for traditional bank products would be duplicative 
of the HOLA and is unnecessary.
---------------------------------------------------------------------------

    \25\ 12 CFR 225.7(b)(1) (1996).
    \26\ HOLA section 5(q)(1)(A) explicitly provides that the tying 
restriction does not apply where the tied product is a traditional 
bank product of the savings association, a service corporation, or 
an affiliate. Section 10(n) of HOLA makes that anti-tying exclusion 
applicable to savings and loan holding companies and affiliates 
thereof. In contrast, the BHCA Amendments provide an exception in 
the case of traditional bank products offered by the bank, but do 
not address traditional bank products offered by bank holding 
companies or nonbank affiliates. See, 12 U.S.C. 1972(1)(B).
---------------------------------------------------------------------------

    The second FRB regulatory exception provides that a bank holding 
company, bank or nonbank subsidiary may vary the consideration charged 
for securities brokerage services on the condition or requirement that 
a customer also obtain a traditional bank product from that

[[Page 60182]]

bank holding company or bank or nonbank subsidiary, or from any 
affiliate of such company.\27\ Once again, HOLA section 5(q) does not 
prohibit this type of activity under any circumstances for savings 
associations, savings and loan holding companies, and their 
affiliates.\28\ Accordingly, OTS has determined that it is unnecessary 
to adopt this second regulatory exception.
---------------------------------------------------------------------------

    \27\ 12 CFR 225.7(b)(2) (1996).
    \28\ As noted in the discussion of the first FRB exception, a 
tying arrangement is not prohibited under HOLA section 5(q) or 10(n) 
where the tied product is a traditional bank product. There is no 
requirement that the tying product be a traditional bank product.
---------------------------------------------------------------------------

    The third FRB regulatory exception relates to tying arrangements 
that do not involve banks. The exception permits bank holding companies 
or nonbank subsidiaries to vary the consideration for any extension of 
credit, lease or sale of property of any kind, or service, on the 
condition or requirement that the customer obtain some additional 
credit, property or service from itself or a nonbank affiliate.\29\ 
This provision is an exception not from any statutory requirement but 
from the FRB's regulation that generally applies the tying restrictions 
applicable to banks to bank holding companies and other affiliates. The 
language applying tying restrictions to savings and loan holding 
companies and their non-thrift affiliates, which appears in HOLA 
section 10(n), differs somewhat from the wording of the FRB's tying 
regulation for bank holding companies and their nonbank affiliates. 
Section 10(n) of the HOLA applies only when a tying arrangement 
involves products of a savings and loan holding company or affiliate, 
and those of an affiliated savings association. Accordingly, tying 
arrangements involving savings and loan holding companies and/or non-
thrift affiliates, but not a savings association, are not restricted 
under HOLA section 10(n). Therefore, OTS has determined that there is 
no need to adopt a regulatory exception that is comparable to the third 
FRB exception.
---------------------------------------------------------------------------

    \29\ 12 CFR 225.7(b)(3) (1996).
---------------------------------------------------------------------------

    The fourth FRB regulatory exception permits banks, bank holding 
companies, or nonbank affiliates to vary the consideration for any 
product or package of products based on a customer's maintenance of a 
combined minimum balance in certain products specified by the company 
varying the consideration (defined as ``eligible products'), if (i) 
that company (if it is a bank) or a bank affiliate of the company 
offers deposits, and all such deposits are eligible products, and (ii) 
balances in deposits count at least as much as non-deposit products 
toward the minimum balance.\30\
---------------------------------------------------------------------------

    \30\ 12 CFR 225.7(b)(4) (1996).
---------------------------------------------------------------------------

    This fourth FRB regulatory exception permits banks to offer 
discounts to customers maintaining a combined minimum balance in 
deposit and non-deposit accounts, including brokerage and mutual fund 
accounts. As such, this regulatory ``safe harbor'' authorizes tying 
arrangements that are currently prohibited for savings associations, 
because the tied products would not necessarily be traditional bank 
products. In addition, savings and loan holding companies or affiliates 
thereof would be prohibited from offering such arrangements where one 
of the products involved was a savings association product (other than 
a traditional bank product).
    Having reviewed this fourth FRB exception, OTS has determined that 
it should promulgate a regulation adopting a comparable ``safe harbor'' 
for savings associations, savings and loan holding companies, and 
affiliates \31\ OTS believes that this exception is not contrary to the 
purposes of HOLA section 5(q), because it would not present the anti-
competitive effects which the HOLA's antitying provisions were intended 
to eliminate. Rather, this safe harbor would enable savings 
associations and their affiliates to offer a greater variety of banking 
products and services to their customers and could potentially enhance 
competition in the market place. Such an exception would also ensure 
parity between savings associations and banks, enabling savings 
associations and banks to offer a comparable range of products and 
services and further enhance competition among financial institutions 
consistent with the purposes of HOLA section 5(q) and the BHCA 
Amendments.
---------------------------------------------------------------------------

    \31\ The exception authority granted to OTS by amended HOLA 
section 5(q) is indirectly applicable to savings and loan holding 
companies and affiliates, because HOLA section 10(n) provides that, 
in connection with transactions involving the products or services 
of a savings and loan holding company or affiliate and those of an 
affiliated savings association, section 5(q) shall apply to savings 
and loan holding companies and their affiliates in the same manner 
as if they were a savings association.
---------------------------------------------------------------------------

    Accordingly OTS is adding a new regulatory antitying exception at 
12 CFR 563.36 that conforms to the FRB's ``safe harbor'' for combined 
balance discounts. This safe harbor permits savings associations and 
their affiliates to offer discounts to customers maintaining certain 
combined minimum balance accounts.\32\ In addition to this exception, 
OTS may permit other exceptions under HOLA section 5(q) on a case-by-
case basis upon determination that the exception is not contrary to the 
purposes of HOLA section 5(q), it conforms to an exception granted by 
the FRB, and it is consistent with safe and sound practices.
---------------------------------------------------------------------------

    \32\ The interim final rule does not require that all products 
offered pursuant to the safe harbor must be separately available for 
purchase. Although this condition currently appears in the FRB safe 
harbor, 12 CFR 225.7(c)(1)(1996), the FRB has specifically proposed 
to eliminate this condition. 61 FR at 47264. OTS will reexamine this 
issue if the FRB's final rule does not eliminate the condition.
---------------------------------------------------------------------------

    OTS also solicits comment as to whether the agency should adopt 
regulatory revisions parallel to those proposed, but not yet adopted, 
by the FRB on September 6, 1996.\33\ The FRB proposal would rescind the 
provision in its current regulations that extends the tying 
prohibitions to bank holding companies and their nonbank 
affiliates.\34\ As noted above, the FRB already permits bank holding 
companies and their nonbank affiliates to offer discounts on products 
conditioned on a customer's purchase of another product, provided none 
of the tied products are those of a bank affiliate. The FRB proposal 
would, in effect, rescind this proviso, allowing bank holding companies 
to tie their discounts to the purchase of bank products, provided no 
anti-trust violations result. The proposal would also enable bank 
holding companies and their nonbank affiliates to engage in tying 
practices other than discounting. For example, the availability of a 
product could be conditioned on the purchase of another product, again 
provided no anti-trust violation occurs.
---------------------------------------------------------------------------

    \33\ See, 61 FR 47242 (September 6, 1996).
    \34\ Other aspects of the FRB's proposal need not be discussed 
here because they concern practices not prohibited for savings 
associations and their affiliates.
---------------------------------------------------------------------------

    OTS requests comment on whether savings and loan holding companies 
and their non-bank affiliates should also be completely exempted from 
the tying restrictions. As noted above, the provision of law applying 
the tying restriction to savings and loan holding companies is 
statutory, not regulatory (as is the case for bank holding companies). 
Thus, OTS also requests comment on whether it would have legal 
authority to grant a complete exemption from HOLA section 10(n).

Sections 574.1, 574.2, 574.3, 575.2, 583.20, 584.2a Holding Company 
Regulatory Revisions

    Section 2203 of EGRPRA exempts bank holding companies that control 
savings associations from HOLA section 10, thereby eliminating OTS 
supervision of holding companies that control both

[[Page 60183]]

a bank and a thrift and are registered as a bank holding company with 
the FRB under the BHCA of 1956. OTS is making technical changes to its 
acquisition of control and holding company regulations to conform to 
EGRPRA's amendments to the Savings and Loan Holding Company Act. OTS 
has added an exception to its acquisition of control regulations to 
clarify that where a person acquires control of a bank holding company 
and the person is required to file a change of control notice with the 
FRB, no change of control notice is required to be filed with OTS. In 
addition, OTS is making minor revisions to the Mutual Holding Company 
regulations to reflect its position that section 2203 of EGRPRA does 
not affect OTS's authority to regulate mutual holding companies, 
including mutual holding companies that have acquired a bank. OTS has 
reached this conclusion for two reasons. First, although section 2203 
of EGRPRA excepts bank holding companies from the definition of 
``savings and loan holding company'' in section 10 of HOLA, section 
10(o) of the HOLA, pertaining to mutual holding companies, refers to 
``mutual holding companies'' rather than mutual savings and loan 
holding companies. Second, OTS is the chartering authority for federal 
mutual holding companies under section 10(o), and section 10(o) 
provides for a unique relationship between depositors of the subsidiary 
association and the mutual holding company.

III. Administrative Procedure Act

    OTS has determined that advance notice and comment ordinarily 
mandated by the Administrative Procedure Act (APA), 5 U.S.C. 553(b), 
are not required in this interim final rulemaking. The APA authorizes 
agencies to waive notice and comment procedures when the agency ``for 
good cause finds * * * that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' \35\ 
OTS for good cause finds that notice and comment procedures for this 
rulemaking are impracticable and contrary to the public interest 
because they would delay implementation of EGRPRA's expanded lending, 
investment, and other authorities for thrifts. In addition, advance 
public notice and comment are unnecessary and contrary to the public 
interest because the interim rule substantially restates the provisions 
of the statute or makes technical revisions to OTS regulations and 
reduces regulatory burden.
---------------------------------------------------------------------------

    \35\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------

    OTS also has determined that the 30-day delay of effectiveness 
provisions of the APA may be waived in this rulemaking. Section 553(d) 
of the APA permits waiver of the 30 day delayed effective date 
requirement for, inter alia, good cause or where a rule relieves a 
restriction. OTS finds that good cause exists for the same reasons 
stated above. OTS further finds that the 30-day delayed effective date 
requirement may be waived because this interim final rule relieves 
various lending, investment, and tying restrictions for thrifts and 
merely conforms OTS regulations to EGRPRA's statutory changes.
    Accordingly, the interim final rule will be immediately effective 
upon publication in the Federal Register. Nevertheless, OTS seeks the 
benefit of public comment. Accordingly, OTS invites interested persons 
to submit comments during the 60-day comment period. OTS will revise 
the interim final rule as appropriate based on these comments.

IV. Paperwork Reduction Act of 1995

    This interim final rule does not impose any collections of 
information on savings associations. As such, the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.) does not apply.

V. Executive Order 12866

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

VI. Regulatory Flexibility Act Analysis

    Because no notice of proposed rulemaking is required for this rule, 
the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. 
do not apply. The interim final rule does not impose any additional 
burdens or requirements upon small entities and reduces burdens on all 
savings associations. The regulatory amendments implement statutory 
changes to the HOLA that relieve various lending, investment, and tying 
restrictions on thrifts and otherwise conform OTS regulations to 
EGRPRA. Accordingly, a regulatory flexibility analysis is not required.

VII. Unfunded Mandates Act of 1995

    OTS has determined that the requirements of this interim final 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, Pub. L. 104-4, 
109 Stat. 48 (1995).

VIII. Effective Date

    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (CDRIA), 12 U.S.C. 4802, requires that new 
regulations and amendments to regulations that impose additional 
reporting, disclosures, or other new requirements take effect on the 
first date of the calendar quarter following publication of the rule 
unless, among other things, the agency determines, for good cause, that 
the regulations should become effective on a day other than the first 
day of the next quarter. OTS believes that an immediate effective date 
is appropriate since the interim rule relieves regulatory burden on 
savings associations. This immediate effective date will permit savings 
associations to begin exercising their expanding lending, investment, 
and other authorities pursuant to the amended HOLA. OTS does not 
anticipate that the immediate application of the rules will present a 
hardship to institutions. Indeed OTS believes that CDRIA does not apply 
to this interim rule because it imposes no new burden on thrifts. For 
these reasons, OTS has determined that an immediate effective date is 
appropriate for this interim final rule.

List of Subjects

12 CFR Part 560

    Consumer protection, Investments, Manufactured homes, Mortgages, 
Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 563

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

12 CFR Part 574

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

12 CFR Part 575

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

12 CFR Part 583

    Holding companies, Savings associations.

[[Page 60184]]

12 CFR Part 584

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

    Accordingly, the Office of Thrift Supervision hereby amends title 
12, chapter V of the Code of Federal Regulations as set forth below.

PART 560--LENDING AND INVESTMENT

    1. The authority citation for part 560 is revised to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1701j-3, 
1828, 3803, 3806; 42 U.S.C. 4106.

    2. Section 560.3 is amended by revising the introductory text and 
by adding four definitions in alphabetical order to read as follows:


Sec. 560.3  Definitions.

    For purposes of this part and any determination under 12 U.S.C. 
1467a:
* * * * *
    Credit card is a card, plate or other credit device that allows the 
holder to purchase goods or obtain services or cash by charging them to 
a previously established line of credit with the issuer of the card, 
plate or device.
    Credit card account is a credit account established in conjunction 
with the issuance of, or the extension of credit through, a credit 
card. This term includes loans made to consolidate credit card debt, 
including credit card debt held by other lenders, and participation 
certificates, securities and similar instruments secured by credit card 
receivables.
* * * * *
    Small business includes a small business concern or entity as 
defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a), 
and implemented by the regulations of the Small Business Administration 
at 13 CFR Part 121.
    Small business loans includes any loan to a small business concern 
or entity as defined by section 3(a) of the Small Business Act, 15 
U.S.C. 632(a), and implemented by the regulations of the Small Business 
Administration at 13 CFR Part 121.

PART 563--OPERATIONS

    3. 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.

    4. Section 563.36 is added to read as follows:


Sec. 563.36  Tying restriction exception.

    (a) Safe harbor for combined-balance discounts. A savings and loan 
holding company or any savings association or any affiliate of either 
may vary the consideration for any product or package of products based 
on a customer's maintaining a combined minimum balance in certain 
products specified by the company varying the consideration (eligible 
products), if:
    (1) That company (if it is a savings association) or a savings 
association affiliate of that company (if it is not a savings 
association) offers deposits, and all such deposits are eligible 
products; and
    (2) Balances in deposits count at least as much as non-deposit 
products toward the minimum balance.
    (b) Limitations on exception. This exception shall terminate upon a 
finding by the OTS that the arrangement is resulting in anti-
competitive practices. The eligibility of a savings and loan holding 
company or savings association or affiliate of either to operate under 
this exception shall terminate upon a finding by the OTS that its 
exercise of this authority is resulting in anti-competitive practices.


Secs. 563.50, 563.51, 563.52  [Removed]

    5. Sections 563.50, 563.51, and 563.52 are removed.

PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS

    6. The authority citation for part 574 continues to read as 
follows:

    Authority: 12 U.S.C. 1467a, 1817, 1831i.

    7. Section 574.1 is revised to read as follows:


Sec. 574.1  Scope of part.

    The purpose of this part is to implement the provisions of the 
Change in Bank Control Act, 12 U.S.C.1817(j) (``Control Act'), and the 
Savings and Loan Holding Company Act, 12 U.S.C. 1467a (``Holding 
Company Act''), relating to acquisitions and changes in control of 
savings associations that are organized in stock form and savings and 
loan holding companies thereof.


Sec. 574.2  [Amended]

    8. Section 574.2 is amended by revising paragraph (q)(2)(ii) and by 
adding paragraph (q)(3) to read as follows:


Sec. 574.2  Definitions.

* * * * *
    (q) * * *
    (2) * * *
    (ii) Is a testamentary trust; and
    (3) A bank holding company that is registered under, and subject 
to, the Bank Holding Company Act of 1956, or any company directly or 
indirectly controlled by such company (other than a savings 
association).
* * * * *
    9. Section 574.3 is amended by:
    a. In paragraph (c)(1)(ii), removing the period at the end of the 
paragraph and adding a semicolon in its place;
    b. Redesignating paragraphs (c)(1)(iii) through (c)(1)(vii) as 
paragraphs (c)(1)(iv) through (c)(1)(viii);
    c. Adding paragraph (c)(1)(iii);
    d. Revising paragraph (c)(2)(i);
    e. Redesignating paragraphs (c)(2)(iv) and (c)(2)(v) as paragraphs 
(c)(2)(v) and (c)(2)(vi) and by adding a new paragraph (c)(2)(iv); and
    f. In newly designated paragraph (c)(2)(v), removing the period at 
the end of the paragraph and adding ``; and'' in its place.
    The additions and revisions read as follows:


Sec. 574.3  Acquisition of control of savings associations.

* * * * *
    (c) Exempt transactions. (1) * * *
    (iii) Control of a savings association acquired by a bank holding 
company that is registered under and subject to, the Bank Holding 
Company Act of 1956, or any company controlled by such bank holding 
company;
* * * * *
    (2) * * *
    (i) Transactions which are exempt pursuant to paragraphs 
(c)(1)(iii), (c)(1)(iv), (c)(1)(v), and (c)(1)(vi) of this section;
* * * * *
    (iv) Transactions for which a change of control notice must be 
submitted to the Board of Governors of the Federal Reserve System 
pursuant to the Change in Bank Control Act, 12 U.S.C. 1817(j);
* * * * *

PART 575--MUTUAL HOLDING COMPANIES

    10. The heading for part 575 is revised as set forth above.
    11. The authority citation for part 575 continues to read as 
follows:

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

    12. Section 575.2 is amended by revising paragraph (h) to read as 
follows:


Sec. 575.2  Definitions.

* * * * *

[[Page 60185]]

    (h) The term mutual holding company means a mutual holding company 
organized under this part.
* * * * *

PART 583--DEFINITIONS

    13. The authority citation for part 583 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.

    14. Section 583.20 is amended by revising paragraph (b)(2) and by 
adding paragraph (c) to read as follows:


Sec. 583.20  Savings and loan holding company.

* * * * *
    (b) * * *
    (2) Is a testamentary trust; and
    (c) A bank holding company that is registered under, and subject 
to, the Bank Holding Company Act of 1956, or any company directly or 
indirectly controlled by such company (other than a savings 
association).

PART 584--REGULATED ACTIVITIES

    15. The authority citation for part 584 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.


Sec. 584.2a  [Amended]

    16. Section 584.2a is amended by removing paragraph (e).

    Dated: November 20, 1996.

    By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-30112 Filed 11-26-96; 8:45 am]
BILLING CODE 6720-01-P