[Federal Register Volume 61, Number 233 (Tuesday, December 3, 1996)]
[Rules and Regulations]
[Pages 64007-64021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30262]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 233 / Tuesday, December 3, 1996 / 
Rules and Regulations  

[[Page 64007]]



DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

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

[No. 96-112]
RIN 1550-AA87


Corporate Governance

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS or Office) is today 
issuing a final rule amending its corporate governance regulations and 
policy statements to update, reorganize and substantially streamline 
them.
    This final rule 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 final rule is issued pursuant to 
the Regulatory Reinvention Initiative of the Vice President's National 
Performance Review (Reinvention Initiative) and section 303 of the 
Riegle Community Development and Regulatory Improvement Act of 1994 
(CDRIA) which requires OTS and the other Federal banking agencies to 
review, streamline, and modify regulations and policies to improve 
efficiency, reduce unnecessary costs, and remove inconsistent, 
outmoded, and duplicative requirements.

EFFECTIVE DATE: January 1, 1997.

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
II.  Summary of Comments and Description of the Final Rule
    A.  General Discussion of the Comments
    B.  Section-by-Section Analysis
III.  Disposition of Corporate Governance Regulations
IV.  Administrative Procedure Act
V.  Paperwork Reduction Act of 1995
VI.  Executive Order 12866
VII.  Regulatory Flexibility Act Analysis
VIII.  Unfunded Mandates Act of 1995
IX.  Effective Date

I. Background

    In a comprehensive review of its regulations, beginning in the 
spring of 1995, pursuant to the Vice President's Reinvention Initiative 
and section 303 of CDRIA,1 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.2 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,3 and had not been substantially reviewed or amended in 
recent years.
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    \1\ 12 U.S.C. 4803(a)(1).
    \2\ 60 FR 66866 (December 27, 1995).
    \3\ 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 4 and, subsequently, OTS 
published a final lending and investment rule on September 30, 
1996.5 Proposals regarding subsidiaries and equity investments 
6 and conflicts of interest, corporate opportunity and hazard 
insurance 7 were also issued this summer. The final rule regarding 
conflicts of interest, corporate opportunity and hazard insurance was 
published in the Federal Register on November 27, 1996. The final rule 
regarding subsidiaries and equity investments is imminent.
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    \4\ 61 FR 1162 (January 17, 1996).
    \5\ 61 FR 50951 (September 30, 1996).
    \6\ 61 FR 29976 (June 13, 1996).
    \7\ 61 FR 30190 (June 14, 1996).
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    On June 25, 1996, OTS also issued a notice of proposed rulemaking 
to streamline its charter and bylaw regulations (corporate 
governance).8 The proposal resulted from an intensive review by 
OTS staff. OTS also sought industry input regarding staff's initial 
recommendations through an industry focus group meeting among 
representatives of seven savings associations and an industry trade 
association.
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    \8\ 61 FR 32713 (June 25, 1996).
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    Today's final rule is quite similar to the proposal. It reduces the 
number of charter and bylaw regulations and policy statements from 33 
to 21, a reduction of 36 percent. In addition, deletion of the model 
bylaws from the CFR will remove 10 pages of CFR text. This information 
will be moved to the Application Processing Regulatory Handbook 
(Handbook) as guidance. The Handbook is sent to all OTS regulated 
institutions and is available to the public. The model bylaws will also 
be available through PUBLIFAX at (202) 906-5660 and from fee service 
providers on CD Rom.
    The general tenor of the changes being made today can be summarized 
in three points. First, we are removing a number of duplicative or 
outdated corporate governance regulations. By clearing out the 
deadwood, OTS hopes to reduce compliance costs. Second, we are updating 
the regulations to reflect modern trends toward greater flexibility in 
corporate governance. Third, we are adding clarifying language to 
various regulations to respond to frequently recurring corporate 
governance questions asked by institutions. Taken together, these 
changes should significantly reduce regulatory burden. This final rule 
is the first major update of the corporate governance regulations in 
over a decade.9
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    \9\ For an extensive discussion of the history of the current 
and previous corporate governance regulations, see the discussion in 
the proposal. 61 FR 32713, 32715 (June 25, 1996).

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[[Page 64008]]

II. Summary of Comments and Description of the Final Rule

A. General Discussion of the Comments

    The public comment period on the June 25 proposal closed on August 
26, 1996. Seven commenters responded. Three savings associations, one 
savings and loan holding company on behalf of its affiliated savings 
associations, one financial institutions trade group, one law firm, and 
one private citizen submitted comments. The comments were generally 
favorable. Specific comments addressing various sections are discussed, 
where appropriate, in the section-by-section analysis below.

B. Section-by-Section Analysis

1. Existing Corporate Governance Sections
a. Part 544--Charter and Bylaws

Section 544.1  Federal Mutual Charter

    This section contains the required charter for Federal mutual 
associations. In its proposed rulemaking, OTS solicited comment on 
alternative proposals. One option was to move the mutual charter (as 
well as the charter for stock associations and the model bylaws for 
both) from the regulations to the Handbook. The other option was to 
retain the charters (and model bylaws) in the regulations, but update 
them.
    Most commenters responded to this aspect of the proposal. Only one 
commenter generally supported moving the charters and bylaws to the 
Handbook. Four commenters expressed concern that moving the charters 
and model bylaws into the Handbook would remove the opportunity for 
notice and comment under the Administrative Procedure Act (APA) when 
changes are made to these documents. One commenter stated that 
weakening the APA requirements will jeopardize the mutual charter and 
enhance the possibility of hostile activity against mutuals by takeover 
interests. One commenter stated that if the OTS believes that reasons 
of safety and soundness warrant maintaining regulatory requirements 
over the forms of charters and bylaws, then those requirements should 
remain in the CFR. After considering these comments, OTS has decided to 
retain the charters in the CFR and to amend them, as proposed. As for 
the model bylaws, however, OTS is moving them to the Handbook because 
the model bylaws are intended to serve only as guidance to 
institutions. Critical bylaw issues are addressed in the regulations 
described below. These regulations, rather than the model bylaws, will 
serve as binding norms. Any institution which adopts the model bylaws 
will be deemed to comply with the regulations.
    The changes to the mutual charter are as follows:
    Section 1. Corporate Title. Section 1 establishes the corporate 
title of the Federal association. The words ``hereby chartered'' are 
removed as unnecessary verbiage.
    Section 2. Office. This section designates the location of the 
association's home office. The section is being revised to indicate 
that the street address of the home office need not be stated in the 
charter. It is sufficient to indicate the city and state where the home 
office is located.
    Section 6. Members. This section identifies the association's 
members and describes their rights. OTS is streamlining this section by 
moving the third and fourth sentences 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, is removed 
because it also appears in the bylaws. The seventh and eighth 
sentences, dealing with quorums, is moved to the bylaws because matters 
regarding member meetings are more fully and appropriately 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'' are removed, and a single 
sentence is added to the introductory instructions indicating that 
institutions may substitute the term ``trustee'' for the term 
``director'' where appropriate. Similar changes are 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 addressing staggered terms for 
directors) are moved to the bylaw section dealing with directors. The 
fourth sentence (regarding vacancies on the board) is moved to the 
bylaw section on resignations, removals and (newly added) vacancies. 
The last sentence, in brackets, is also 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 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 are removed as unnecessary verbiage. Section 9 is also revised to 
reflect the fact that ``preapproved'' charter amendments (Sec. 544.2) 
will now be truly preapproved. Institutions are no longer required to 
submit these amendments to OTS for ``preliminary'' approval. (See 
discussion of Sec. 544.2 below.)
    Finally, the signature blocks of the charter are 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 removing, 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 reduce regulatory burden. In addition, paragraph 
(b) is revised to indicate that preapproved charter amendments no 
longer require advance submissions to OTS. Instead, preapproved 
amendments are now deemed approved when adopted by the institution and 
must simply be filed with OTS within 30 days after adoption.
    A new preapproved charter amendment is 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 enables 
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. One commenter suggested 
removing the cap entirely, but the OTS has determined that the existing 
cap has worked well in preventing unauthorized changes of

[[Page 64009]]

control of mutual associations. For example, if an institution had no 
cap on votes, an investor with more than 10% of the deposits in the 
institution conceivably could exercise control over the institution 
without regulatory approval. OTS believes it is appropriate for the 
voting rights of mutuals to be distributed broadly across the 
membership base.
    OTS also is removing 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 may still choose to issue MCCs, provided the 
institution makes any necessary amendments to its charter and bylaws 
(which are no longer preapproved) and follows the procedures 
specified at 12 CFR 563.74.
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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 is conformed to the wording 
of the corresponding stock charter section at Sec. 552.4(d). No 
substantive change results. Paragraph (c) is also amended to remove the 
delegation of authority to the Chief Counsel to execute reissued 
charters. This change was 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 repealed. Corresponding changes are 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 is made to paragraph (a) to 
conform its language regarding procedures for bylaw amendments to 
similar language that appears in Sec. 544.5(b)(16).
    Paragraph (b)(1) contains the annual meeting requirements for 
Federal mutual associations. This paragraph is 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 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 Home 
Owners' Loan Act (HOLA). As proposed, OTS is clarifying that voting 
capital means all FDIC-insured deposits held by a savings association. 
In response to a comment, OTS has also added a phrase to indicate that 
voting capital will be determined as of the voting record date.
    Paragraphs (b)(3) and (4), which discuss notice requirements for 
meetings of members and the fixing of the record date for determining 
which members are entitled to vote, respectively, are amended to 
indicate the circumstances under which adjournment of a meeting of 
members requires the issuance of new notices and the fixing of a new 
record date. These are frequently asked questions.
    OTS also proposed a new paragraph (b)(5), to be titled ``Member 
Quorum.'' 11 This paragraph, which is being added as proposed, 
contains certain quorum provisions previously 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. The 
new paragraph also clarifies, in response to a comment, that the 
directors are elected by a plurality of votes in an election of 
directors.
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    \11\ All subsequent paragraphs will be renumbered accordingly. 
However, only those paragraphs being substantively changed are 
discussed herein.
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    Current paragraph (b)(5), on voting by proxy, is moved to (b)(6) 
and is 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 proposed to describe 
voting procedures applicable to joint accounts and accounts held by 
fiduciaries on behalf of others. These procedures will be included in 
the model bylaws being moved to the Handbook, rather than in the 
regulations. Moreover, the procedures will be slightly modified, in 
response to a comment, to clarify that Individual Retirement Accounts 
and Keogh accounts may be voted by an institution if no other 
instructions are received. In addition, the procedures governing joint 
voting of shares will be modified to parallel the provisions of the 
stock bylaws, also in response to a comment.
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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, becomes (b)(7). In addition, the 
paragraph is amended to reflect the relocation of Sec. 545.131 to Part 
544, and to 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, 
becomes (b)(8). In addition, the paragraph is amended to clarify that 
the bylaws must specify the precise number of directors (rather than a 
range). This number is 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. One commenter requested that the 
OTS allow a range of directors, as some state codes allow. OTS has 
determined, however, that specificity is needed in the bylaws to 
determine quorum requirements. Paragraph (b)(8) also contains three 
provisions being moved from section seven of the charter. One provision 
requires that directors be members of their association; a second 
provision, modified in response to a comment, allows, but does not 
require that directors serve staggered terms; and a third provision 
permits state savings banks that convert to Federal mutual

[[Page 64010]]

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, becomes (b)(10). In 
addition, a sentence on the removal of officers is added to answer a 
frequently asked question. The sentence states: ``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, becomes (b)(11). A cross reference to the definition of 
``cause,'' which appears elsewhere in the regulations, is added in 
response to a frequently asked question concerning the circumstances 
under which shareholders can remove directors for ``cause.'' Paragraph 
(b)(11) is also expanded to authorize boards of directors to fill 
vacancies under the flexible rules that now apply to stock 
associations.
    Current paragraph (b)(12), discussing execution of instruments, is 
removed in its entirety. OTS has determined that this is not an item 
that it needs to regulate. For guidance purposes, however, current 
provisions in the model bylaws on the execution of instruments will 
remain.
    Current paragraph (b)(13), discussing procedures for nominating 
directors, is expanded to clarify the scope of the requirement that the 
names of nominees be posted at least 15 days before an election, under 
certain circumstances. New language confirms that the 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)(15), discussing the corporate seal, is 
removed in its entirety. OTS has determined this is not an area it 
needs to regulate. Current provisions in the model bylaws remain, for 
guidance purposes.
    Current paragraph (b)(16), which sets forth procedures for amending 
the bylaws, becomes (b)(15) and is 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 specifies 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, becomes (b)(16) 
and is amended to remove the reference to provisions regarding 
``emergency preparedness.'' Emergency preparedness provisions will also 
no longer be part of the model bylaws.
    Paragraphs (c)(1) and (c)(2) discuss the filing procedures for 
bylaw amendments. OTS proposed to remove the requirement that 
applications for bylaw amendments contain certifications that the 
proposed amendments comport with all laws. As noted above in the 
discussion on 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 
reduce regulatory burden. Accordingly, the certification requirement is 
dropped. In addition, paragraph (c)(1) is revised to indicate that the 
model bylaws can now be found in the Handbook, which is available from 
OTS. The current appendix to part 544, which contains the model bylaws, 
is removed. Subsection (c)(1)(ii) has been redesignated as (c)(1)(i)(B) 
and modified to indicate OTS considers proposed bylaw amendments 
regarding indemnification, conflicts of interest, and limitations on 
director or officer liability to raise significant issues of law or 
policy and, thus, require OTS review. A new subparagraph is added to 
explain the application process for amendments raising issues of law or 
policy.
    Paragraph (c)(1)(iii) is revised to indicate that the model bylaws, 
if adopted verbatim, are effective when adopted and must simply be 
filed with OTS within 30 days after adoption. This change was 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.
    A new paragraph (c)(3) is added to allow mutuals to adopt 
additional corporate governance procedures to the extent such 
procedures: (i) Are not inconsistent with the HOLA, applicable Federal 
statutes and regulations, OTS policies, or safety and soundness; and 
(ii) do not touch upon certain key areas, such as OTS policies and 
regulations on indemnification, conflict of interest, limitation of 
director or officer liability, or other matters of safety and 
soundness. Subject to these qualifications, this new provision allows 
Federal mutual associations to designate, en bloc or on a piecemeal 
basis, any of the corporate governance procedures from the laws of the 
state where the main office of the institution is located.\13\ No 
preapproval is necessary if all provisions in question meet the 
applicable criteria; instead an institution must submit notice of the 
provisions it has chosen to the OTS Regional Office within 30 days of 
adoption. All commenters who addressed this issue were in favor of the 
more flexible corporate governance structure.
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    \13\ We note, however, that silence in a particular area in a 
state's law may not, for these purposes, be construed as authorizing 
adoption of procedures in that area. It should also be noted that 
when adopting provisions from any of the alternative sources, a 
mutual may adopt only provisions of state law specifically intended 
for mutual institutions and a stock institution may adopt only 
provisions intended for stock corporations.
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    Paragraph (d), which addresses the effective date of all other 
bylaw amendments (i.e., amendments that are not preapproved or do not 
meet the standards just described), is amended to comport with a 
similar provision for Federal stock associations. The change is 
intended to clarify the circumstances under which an amendment may be 
rejected by OTS, by cross referencing the standards that appear in 
paragraph (c)(1).

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

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

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. As proposed 
Sec. 544.9, which affects very few institutions, is moved from the 
regulations into the Handbook. The authority of Charter B associations 
to invest in consumer loans and corporate debt securities is governed 
by current Federal statutory limits, not section 10 of their charter.

Section 544.8  Communication Between Members of a Federal Mutual 
Savings Association

    OTS proposed 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

[[Page 64011]]

matters. Accordingly, current Sec. 545.131 becomes new Sec. 544.8.
Appendix to Part 544
    As indicated above, OTS proposed to eliminate the appendix to part 
544, which contained the model bylaws. These bylaws are moved to the 
Handbook, with changes to be made to conform the model bylaws to the 
amendments to the bylaws regulations described above. The revised 
Handbook will be available from OTS in the near future, as well as 
through fee services on CD ROM. The revised model bylaws are already 
available through PUBLIFAX at (202) 906-5660.
b. Part 552--Incorporation, Organization, and Conversion of Federal 
Stock Associations

Section 552.2  Corporate Title

    OTS proposed to remove this section, which merely reminds 
institutions that Sec. 543.1 regarding corporate titles for Federal 
associations applies to Federal stock associations. Section 543.1, as 
currently written, clearly governs corporate titles for all Federal 
associations. Accordingly, Sec. 552.2 is removed.

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, proposed 
to, and does, remove this section.

Section 552.3  Charters for Federal Stock Associations

    This section contains the required charter for Federal stock 
associations. For the reasons stated above in the discussion of 
Sec. 544.1, OTS has decided not to move the charter into the Handbook. 
OTS will make the following changes to the Federal stock charter, as 
proposed:
    Section 2. Office. This section designates the location of the 
association's home office. The section is being revised to indicate 
that the street address of the home office need not be stated in the 
charter. It is sufficient to indicate the city and state where the home 
office is located.
    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 have been made. First, the section is 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 is revised to 
reflect more current accounting terminology. The term ``retained 
earnings'' is substituted for ``surplus,'' and the phrase ``common 
stock or paid-in capital accounts'' is substituted for ``stated 
capital.''
    Third, the second paragraph is revised to clarify that a Federal 
stock association 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 is 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 has made a technical amendment to this section to 
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 revised to 
indicate that preapproved charter amendments become effective once they 
have been approved by the association's board of directors and 
shareholders, without any need for ``preliminary approval'' or any 
additional approval from OTS. (See discussion below of Sec. 552.4.)
    In addition, OTS proposed to clarify the general rule that charter 
amendments require approval by only a majority of the votes eligible to 
be cast at a shareholders' meeting. Language is 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 are modified to 
include a date to indicate 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 has made 
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 are no longer 
required to certify that proposed amendments comport with all 
applicable laws.
    Paragraph (b) sets forth a list of preapproved charter amendments. 
OTS has added descriptive titles to each of the preapproved amendments. 
The titles correspond, when applicable, to the titles of similar 
preapproved charter provisions for Federal mutual associations. 
Paragraph (b) is also revised to indicate that preapproved charter 
amendments are effective 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, is removed 
for the same reasons described above with regard to Sec. 544.3.14
---------------------------------------------------------------------------

    \14\ 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, becomes 
(b)(3). Additional nonsubstantive changes have been 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, becomes (b)(4) and includes the same changes to section 5 of the 
charter as were discussed above for section 552.3. In addition, the 
reference to the Resolution Trust Corporation is deleted, because that 
agency no longer exists.
    A new preapproved charter amendment is 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 filing an application.
    Paragraph (c) states OTS policy on antitakeover provisions in 
charter amendments. OTS proposed 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

[[Page 64012]]

least equal to the highest percentage that would be required to take 
any action under the antitakeover provision. While several commenters 
objected to this clarification, OTS notes that 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. Accordingly, the proposed changes 
have been made.

Section 552.5  Bylaws

    This section presents the requirements for the bylaws of a Federal 
stock association. A technical amendment is made to paragraph (a) to 
confirm that shareholder votes to approve bylaw amendments must occur 
``at a legal meeting'' 15 of shareholders.
---------------------------------------------------------------------------

    \15\ A ``legal meeting'' means a duly constituted meeting of the 
institution.
---------------------------------------------------------------------------

    Paragraph (b) discusses the application and notice procedures 
applicable to bylaw amendments. This paragraph is amended to remove the 
requirement that associations certify that bylaw amendments comport 
with applicable law. Revisions are also 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) also 
indicates that the model bylaws will be in the revised Handbook and 
made available by OTS. Subsection (b)(1)(iii) is also modified, in the 
same way the corresponding mutual subsection is modified, to indicate 
to those contemplating bylaw changes, that OTS considers amendments 
regarding indemnification, conflicts of interest, and limitations on 
director or officer liability to raise significant issues requiring OTS 
review. A new subparagraph is added to explain the application process 
for such issues of law or policy.
    A new paragraph (b)(3) is added to allow the adoption of additional 
corporate governance procedures to the extent such procedures: (i) Are 
not inconsistent with the Home Owner's Loan Act, applicable Federal 
statutes and regulations, OTS policies, or safety and soundness 
concerns; and (ii) do not touch upon certain key areas, such as OTS 
policies and regulations on indemnification, conflict of interest, 
limitation of director or officer liability, or other matters of safety 
and soundness. Subject to these qualifications, this new provision 
allows Federal stock associations to designate, en bloc or on a 
piecemeal basis, any of the corporate governance procedures from: the 
laws of the state where the main office of the institution is located; 
the laws of the state where the institution's holding company, if any, 
is located; Delaware General Corporation Law; or the Model Business 
Corporation Act.16 No preapproval is necessary if all provisions 
in question meet the applicable criteria; instead an institution must 
submit to the OTS Regional Office the provisions it has chosen within 
30 days of adoption. All commenters who addressed this issue were 
generally in favor of the more flexible corporate governance structure.
---------------------------------------------------------------------------

    \16\ We note, however, that silence in a particular area in a 
state's law or in the Model Business Corporation Act may not, for 
these purposes, be construed as authorizing adoption of procedures 
in that area. It should also be noted that when adopting provisions 
from any of the alternative sources, a stock institution may adopt 
only provisions state law intended for stock institutions and a 
mutual institution may adopt only provisions intended for a mutual 
corporation.
---------------------------------------------------------------------------

    OTS proposed 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). Accordingly, the 
paragraph is added as proposed.

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, is amended in two 
respects. First, the requirement that shareholder meetings be held in 
the state of an association's principal place of business is removed. 
Instead, associations may 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 is 
extended from 120 to 150 days of the end of the association's fiscal 
year. These are the same changes made for Federal mutual associations 
(Sec. 544.5(b)(1)).
    Paragraph (b) states the notice requirements for shareholder 
meetings. This paragraph is amended to waive the shareholder notice 
requirements for wholly-owned institutions.
    Paragraph (d)(1), which addresses access to shareholder lists, is 
revised to clarify that shareholder lists are available only to 
shareholders ``of record'' and their agents. In addition, the paragraph 
is amended to waive its application to wholly-owned institutions.
    Paragraph (e), regarding shareholder quorum requirements, is 
amended to confirm that, whenever a quorum is present, the affirmative 
vote of the majority of shares entitled to vote at shareholder meetings 
shall constitute an act of the shareholders, absent a supermajority 
voting requirement. The amended paragraph also clarifies, in response 
to a comment, that directors are elected by a plurality of votes in an 
election of directors.
    Paragraph (f), which addresses proxies, is 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. Subparagraph 
(f)(3), which addresses cumulative voting, is removed, but remains in 
the model bylaws as guidance for any association that continues to use 
cumulative voting. In addition, OTS is not adding paragraph (f)(4) as 
proposed. Instead, the proposed language, which describes voting 
procedures applicable to stock held by fiduciaries on behalf of others 
and stock held jointly, will be included in the model bylaws in the 
Handbook, rather than in the regulations. The language will be modified 
as described in the corresponding section of the Federal mutual bylaws.
    A new paragraph (h) is 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) is 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 is 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 rationale for 
this position is explained in the corresponding section for Federal 
mutual associations. The number is selected by the institution within a 
range prescribed in the charter. OTS also proposed to amend paragraph 
(b) to exempt wholly-owned stock associations from the requirement that 
their directors be elected to staggered terms. In response to a 
comment, OTS

[[Page 64013]]

has decided to allow any association to elect not to have a staggered 
board.
    Paragraph (c), regarding regular meetings of the board, is 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, is 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, is retitled 
``Resignation or removal of directors'' to conform to the title for the 
same provision for Federal mutual associations. In addition, the 
paragraph is 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'' is added to answer a frequently asked question.
    Paragraph (k), on age limitations for directors, is revised to 
indicate that any age limitation provision must conform to applicable 
Federal law, rules, or regulations. These rules would include laws such 
as the Age Discrimination in Employment Act and the Employee Retirement 
Income Security Act (ERISA).

Section 552.6-2  Officers

    This section addresses corporate governance matters involving 
officers. Paragraph (a) is 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.
    Paragraph (c), on age limitations for officers, is revised to 
indicate that any age limitation on service by officers must conform to 
applicable Federal law, rules, or regulations.

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 proposed to remove this 
section from the regulations. The provisions of this section are either 
self-evident or addressed 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. Accordingly, 
Sec. 522.8 is removed as proposed.

Section 552.11  Books and Records

    This section describes a Federal stock association's obligations 
with respect to books and records. Paragraph (b) is 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 has moved 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 bylaw regulations described above. In addition, 
OTS proposed 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. This change will also be made. As indicated above, a 
revised Handbook will be available from OTS. The revised model bylaws 
are already available through PUBLIFAX at (202) 906-5660.
c. Part 575--Mutual 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. The following changes are made to the charter:
    Section 1. Corporate Title. Section 1 contains the corporate title 
of the Federal mutual holding company. The words ``hereby chartered'' 
are deleted as unnecessary verbiage.
    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, are 
removed because these matters are now covered by the bylaw requirements 
applicable to mutual holding companies. As a result of this change, 
proxy and quorum issues are now 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, OTS has 
made technical changes to conform the wording of this section to the 
corresponding section of the charter for Federal mutual associations.
    Section 8. Amendment of charter. Section 8 describes the procedures 
for amending the mutual holding company's charter. These procedures are 
modified 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) is updated to conform to the changes 
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 is amended 
to indicate that the model bylaws may be found in a revised Handbook to 
be made available from OTS.
    A technical amendment is 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 is changed to reflect the 
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 is amended to delete cross 
references to sections being removed by this final rule.

Section 543.14  Continuity of Existence

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

Section 556.1  Directors

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

[[Page 64014]]

Section 556.17  Effect of Loan Participation on Status of Borrowing 
Members

    This policy statement 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. As 
proposed, this policy statement is moved from the regulations into 
Handbook guidance. One commenter requested clarification on borrower 
membership if a loan is sold when the servicing rights are retained by 
the selling association. Retention of servicing rights, without more, 
will not cause the loan to be deemed to be owned by the selling 
association. Thus, such borrowers would not have voting or ownership 
rights in the selling association.

III. Disposition of Corporate Governance Regulations

    The following chart gives an overview of the changes made to 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.                    
Sec.  544.1, Section 2....................  Revised for clarification   
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 raising the cap  
                                             to 1,000 votes.            
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.                     
New Sec.  544.5(b)(5).....................  Added new paragraph on      
                                             member quorum and          
                                             clarified.                 
Sec.  544.5(b) (5) through (11)...........  Redesignated (b) (6) to     
                                             (12).                      
Sec.  544.5(b)(6).........................  Amended to add privacy      
                                             rights.                    
Sec.  544.5(b)(7).........................  Amended for clarification.  
Sec.  544.5(b)(9).........................  Amended.                    
Sec.  544.5(b)(10)........................  Amended to add guidance on  
                                             vacancies.                 
Sec.  544.5(b)(12)........................  Removed.                    
Sec.  544.5(b)(13)........................  Amended to add guidance on  
                                             nominee substitution.      
Sec.  544.5(b)(15)........................  Removed.                    
Sec.  544.5(b)(16)........................  Revised for clarification.  
Sec.  544.5(b)(17)........................  Amended to delete emergency 
                                             preparedness.              
Sec.  544.5(c)............................  Eliminated need for         
                                             management certification.  
Sec.  544.5(c)(1)(ii).....................  New paragraph added to      
                                             explain application        
                                             process.                   
Sec.  544.5(c)(1)(iii)....................  Eliminated need for prior   
                                             notice requirement.        
Sec.  544.5(c)(3).........................  New paragraph to provide    
                                             alternative corporate      
                                             governance procedures.     
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.                    
Sec.  552.3, Section 2....................  Revised for clarity.        
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).....................  Added 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).....................  New paragraph added to      
                                             explain application        
                                             process.                   
Sec.  552.5(b)(1)(iii)....................  Eliminated need for prior   
                                             notice requirement.        
Sec.  552.5(b)(3).........................  New paragraph to provide    
                                             alternative corporate      
                                             governance procedures.     
Sec.  552.5(d)............................  Added new paragraph for     
                                             clarification.             
Sec.  552.6(a)............................  Amended for flexibility;    
                                             changed annual meeting     
                                             date.                      
Sec.  552.6(b)............................  Amended shareholder meeting 
                                             requirements.              
Sec.  552.6(d)............................  Amended for clarification.  
Sec.  552.6(e)............................  Amended to add guidance on  
                                             certain voting             
                                             requirements.              
Sec.  552.6(f)(1).........................  Amended for flexibility.    
Sec.  552.6(f)(3).........................  Removed.                    
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. 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.                    
Sec.  552.11(b)...........................  Amended for clarification.  
Part 552 Appendix.........................  Conformed to proposed       
                                             changes and moved to       
                                             Handbook.                  
Sec.  556.1...............................  Removed.                    
Sec.  556.17..............................  Moved to Handbook.          
Sec.  575.9...............................  Amended.                    
Sec.  575.9 Section 8.....................  Removed need for preliminary
                                             approval.                  
Sec.  575.9 (a)(2) and (a)(4).............  Amended.                    
------------------------------------------------------------------------

IV. Administrative Procedure Act

    This final rule results from the notice of proposed rulemaking OTS 
published on June 25, 1996. In addition to the regulatory language 
proposed in that notice, OTS is today deleting several bylaw 
regulations previously located in Part 544 and Part 552, as described

[[Page 64015]]

above. Pursuant to section 553(b) of the Administrative Procedure Act, 
OTS hereby finds that good cause exists not to publish the deletions 
for public notice and comment. The bylaw regulations deleted by this 
final rule are either unnecessary or are deleted as a result of moving 
the model bylaws into the Handbook. Also, deleting these regulations 
reduces regulatory burden. Thus, notice and opportunity to comment are 
unnecessary.

V. Paperwork Reduction Act of 1995

    The reporting requirements contained in this final rule have been 
submitted to and approved by the Office of Management and Budget under 
OMB Control Nos. 1550-0017 and 1550-0018, in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the 
collection of information should be sent to the Office of Management 
and Budget, Paperwork Reduction Project (1550), Washington, DC 20503, 
with copies to OTS, 1700 G Street, NW., Washington, DC 20552.
    Respondents are not required to respond to the foregoing collection 
of information unless it displays a currently valid OMB control number.

VI. Executive Order 12866

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

VII. Regulatory Flexibility Act Analysis

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

VIII. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
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 this preamble 
and the preamble of the proposal, this final rule reduces regulatory 
burden and updates, reorganizes and substantially streamlines corporate 
governance regulations and policy statements. OTS has determined that 
the final rule will not result in expenditures by state, local, or 
tribal governments or by the private sector of $100 million or more. 
Accordingly, a budgetary impact statement is not required under section 
202 of the Unfunded Mandates Act of 1995.

IX. Effective Date

    Two statutes affect the effective date of OTS regulations. Section 
302 of CDRIA delays the effective date of regulations promulgated by 
the Federal banking agencies that impose additional reporting, 
disclosure, or new requirements to the first day of the first calendar 
quarter following publication of the final rule. CDRIA does not apply 
to this final rule because it imposes no new burden. It reduces 
regulatory burden in the corporate governance area and provides 
additional flexibility to both stock and mutual institutions. The 
second statute, the Administrative Procedure Act 17 (APA), 
generally requires a 30-day delay in effective date for final rules. 
The APA provides that an agency may waive this delay where a regulation 
relieves regulatory restrictions. Here, because this rule reduces 
regulatory burden, the OTS believes there is good cause to waive the 
normal 30-day delay of effective date. This will make the effective 
date of this final rule the first day of the first calendar quarter 
following publication of the final rule.
---------------------------------------------------------------------------

    \17\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

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, 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 575

    Administrative practice and procedure, Capital, Holding companies, 
Reporting and recordkeeping requirements, Savings associations, 
Securities.
    Accordingly, the Office of Thrift Supervision amends 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.

    5. Section 544.1 is amended by revising the introductory text, and 
sections 1, 2, 6, 7 and 9 and the signature blocks at the end of the 
charter to 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 of this Part, if such provisions are specifically 
requested. A charter for a Federal mutual savings bank shall substitute 
the term ``savings bank'' for ``association.'' The term ``trustee'' may 
be substituted for the term ``director.'' Associations adopting this 
charter with existing borrower members must grandfather those borrower 
members who were members as of the date of issuance of the new charter 
by the Office. Such borrowers shall have one vote for the period of 
time such borrowings are in existence.

Federal Mutual Charter

    Section 1. Corporate title. The full corporate title of the 
Federal savings association is ______.
    Section 2. Office. The home office shall be located in ______ 
[city, state].
* * * * *
    Section 6. Members. All holders of the association's savings, 
demand, or other authorized accounts are members of the association. 
In the consideration of all

[[Page 64016]]

questions requiring action by the members of the association, each 
holder of an account shall be permitted to cast one vote for each 
$100, or fraction thereof, of the withdrawal value of the member's 
account. No member, however, shall cast more than 1000 votes. All 
accounts shall be nonassessable.
    Section 7. Directors. The association shall be under the 
direction of a board of directors. The authorized number of 
directors shall not be fewer than five nor more than fifteen 
persons, as fixed in the association's bylaws, except that the 
number of directors may be decreased to a number less than five or 
increased to a number greater than fifteen with the prior approval 
of the Director of the Office or his or her delegate.
* * * * *
    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, and 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 revising paragraph (a)(2), the third 
sentence of the introductory text to paragraph (b), paragraph (b)(4), 
and paragraph (c) to read as follows:


Sec. 544.2  Charter amendments.

    (a) * * *
    (2) Form of filing--(i) Application requirement. If the proposed 
charter amendment would: render more difficult or discourage a merger, 
proxy contest, the assumption of control by a mutual account holder of 
the association, or the removal of incumbent management; or involve a 
significant issue of law or policy; then, the association shall file 
the proposed amendment and obtain the prior approval of the OTS.
    (ii) Notice requirement. If the proposed charter amendment does not 
involve a provision that would be covered by paragraph (a)(2)(i) of 
this section and is permissible under all applicable laws, rules and 
regulations, then the association shall submit the proposed amendment 
to the OTS, at least 30 days prior to the effective date of the 
proposed charter amendment.
    (b) * * * In addition, notwithstanding anything in paragraph (a) of 
this section to the contrary, the following charter amendments, 
including the adoption of the Federal mutual charter as set forth in 
Sec. 544.1 of this part, shall be effective and deemed approved at the 
time of adoption, if adopted without change and filed with OTS, within 
30 days after adoption, provided the association follows the 
requirements of its charter in adopting such amendments:
* * * * *
    (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.]
    (c) Reissuance of charter. A Federal mutual savings association 
that has amended its charter may apply to have its charter, including 
the amendments, reissued by the Office. Such request for reissuance 
should be filed in accordance with Sec. 516.1(c) of this chapter and, 
contain signatures required under Sec. 544.1 of this part, together 
with such supporting documents as may be needed to demonstrate that the 
amendments were properly adopted.


Sec. 544.3  [Removed]

    7. Section 544.3 is removed.
    8. Section 544.5 is amended by:
    a. Revising 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 separate new sentence at the end of each of paragraphs 
(b)(2), (b)(3) and (b)(4);
    e. Removing paragraphs (b)(12) and (b)(15);
    f. Redesignating paragraphs (b)(5) through (b)(11) as paragraphs 
(b)(6) through (b)(12), and paragraphs (b)(16) and (b)(17) as 
paragraphs (b)(15) and (b)(16), respectively;
    g. Adding a new paragraph (b)(5);
    h. Revising newly designated paragraphs (b)(6), (b)(7), (b)(8) and 
the second sentence of paragraph (b)(10)(i);
    i. Adding a sentence at the end of newly designated paragraph 
(b)(10)(ii);
    j. Revising newly designated paragraph (b)(11), the last sentence 
of paragraph (b)(13), and newly designated paragraphs (b)(15), and 
(b)(16);
    k. Redesignating paragraphs (c)(1) introductory text, (c)(1)(i) 
through (c)(1)(iii), and (c)(1) concluding text as paragraphs (c)(1)(i) 
introductory text, (c)(1)(i)(A) through (c)(1)(i)(C) and (c)(1)(iii), 
respectively, adding a new paragraph (c)(1)(ii), revising newly 
designated paragraph (c)(1)(i) introductory text, revising newly 
designated paragraph (c)(1)(i)(B), and by revising newly designated 
paragraph (c)(1)(iii); and
    l. Revising paragraph (c)(2), adding a new paragraph (c)(3), and 
revising the last sentence of paragraph (d).
    The additions and revisions read as follows:


Sec. 544.5  Federal mutual savings association bylaws.

    (a) General. A Federal mutual savings association shall operate 
under bylaws that contain provisions that comply with all requirements 
specified by the OTS in this section and that are not otherwise 
inconsistent with the provisions of this section, the association's 
charter, and all other applicable laws, rules, and regulations provided 
that, a bylaw provision inconsistent with the provisions of this 
section may be adopted with the approval of the OTS. Bylaws may be 
adopted, amended or repealed by a majority of the votes cast by the 
members at a legal meeting or a majority of the association's board of 
directors. The bylaws for a Federal mutual savings bank shall 
substitute the term ``savings bank'' for ``association''. The term 
``trustee'' shall be substituted for the term ``director''.
    (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 as of the voting record date.
    (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, unless 
otherwise required by regulation. At any adjourned meeting, any 
business may be transacted that might have been transacted at the 
meeting as originally called. Members present at a duly constituted 
meeting may continue to transact business until adjournment.

[[Page 64017]]

    (6) Voting by proxy. Procedures shall be established for voting at 
any annual or special meeting of the members by proxy pursuant to the 
rules and regulations of the Office, including the placing of such 
proxies on file with the secretary of the association, for 
verification, prior to the convening of such meeting. Proxies may be 
given telephonically or electronically as long as the holder uses a 
procedure for verifying the identity of the member. All proxies with a 
term greater than eleven months or solicited at the expense of the 
association must run to the board of directors as a whole, or to a 
committee appointed by a majority of such board.
    (7) Communications between members. Provisions relating to 
communications between members shall be consistent with Sec. 544.8 of 
this part. 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 may be elected for periods of one to three 
years and until their successors are elected and qualified, but if a 
staggered board is chosen, provision shall be made for the election of 
approximately one-third or one-half of the board each year, as 
appropriate. State-chartered savings banks converting to Federal 
savings banks may include alternative provisions for the election and 
term of office of directors so long as such provisions are authorized 
by the 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) Officers, employees, and agents. (i) * * * The officers of the 
association shall consist of a president, one or more vice presidents, 
a secretary, and a treasurer or comptroller, each of whom shall be 
elected annually by the board of directors. * * *
    (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.
* * * * *
    (13) * * * However, if such provision is made for prior submission 
of nominations by a member, then the bylaws must provide for a 
nominating committee, which, except in the case of a nominee 
substituted as a result of death or other incapacity, must submit 
nominations to the secretary and have such nominations similarly posted 
at least 15 days prior to the date of the annual meeting.
* * * * *
    (15) Amendment. Bylaws may include any provision for their 
amendment that would be consistent with applicable law, rules, and 
regulations and adequately addresses its subject and purpose.
    (i) Amendments shall be effective:
    (A) After approval by a majority vote of the authorized board, or 
by a majority of the vote cast by the members of the association at a 
legal meeting; and
    (B) After receipt of any applicable regulatory approval.
    (ii) 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.
    (16) Miscellaneous. The bylaws may also address the subject of age 
limitations for directors or officers as long as they are consistent 
with applicable Federal law, rules or regulations, and any other 
subjects necessary or appropriate for effective operation of the 
association.
    (c) Form of filing--(1) Application requirement. (i) Any bylaw 
amendment shall be submitted to the OTS if it would:
* * * * *
    (B) Involve a significant issue of law or policy, including 
indemnification, conflicts of interest, and limitations on director or 
officer liability; or
* * * * *
    (ii) Applications submitted under paragraph (c)(1)(i) of this 
section shall be subject to the applications processing procedures set 
forth at Sec. 516.2 of this chapter.
    (iii) For purposes of this paragraph (c), bylaw provisions that 
adopt the language of the model bylaws set forth in OTS's Application 
Processing Handbook, if adopted without change, and filed within 30 
days after adoption, are effective upon adoption.
    (2) Filing requirement. If the proposed bylaw amendment does not 
involve a provision that would be covered by paragraph (c)(1) or (c)(3) 
of this section, then the association shall submit the amendment to the 
OTS at least 30 days prior to the date the bylaw amendment is to be 
adopted by the association.
    (3) Corporate governance procedures. A Federal mutual association 
may elect to follow the corporate governance procedures of the laws of 
the state where the main office of the institution is located, provided 
that such procedures may be elected only to the extent not inconsistent 
with applicable Federal statutes, regulations, and safety and 
soundness, and such procedures are not of the type described in 
paragraph (c)(1) of this section. If this election is selected, a 
Federal mutual association shall designate in its bylaws the provision 
or provisions from the body of law selected for its corporate 
governance procedures, and shall file a copy of such bylaws, which are 
effective upon adoption, within 30 days after adoption. The submission 
shall indicate, where not obvious, why the bylaw provisions meet the 
requirements stated in paragraph (c)(1) of this section.
    (d) Effectiveness. * * *  This automatic effective date does not 
apply if, prior to the expiration of such 30-day period, the OTS 
notifies the association that such amendment is rejected or that such 
amendment requires an application to be filed pursuant to paragraph 
(c)(1) of this section.


Secs. 544.8-544.9   [Removed]

    9. Sections 544.8 and 544.9 are removed.

Appendix to Part 544 [Removed]

    10. The Appendix to Part 544 is removed.

[[Page 64018]]

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.

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. 552.1-552.2   [Removed]

    14. Sections 552.1 and 552.2 are removed.


Sec. 552.2-5   [Removed]

    15. Section 552.2-5 is removed.
    16. Section 552.3 is amended in the Federal Stock Charter by:
    a. revising Section 2;
    b. revising, in Section 5, the first and last sentences in the 
first paragraph, the second paragraph, and the second sentence of the 
third paragraph;
    c. revising Section 7;
    d. revising Section 8;
    e. revising the signature blocks at the end of the charter.
    The revisions read as follows:


Sec. 552.3   Charters for Federal stock associations.

* * * * *

Federal Stock Charter

* * * * *
    Section 2. Office. The home office shall be located in ______ 
[city, state].
* * * * *
    Section 5. Capital stock. The total number of shares of all 
classes of the capital stock that the association has the authority 
to issue is ______, all of which shall be common stock of par [or if 
no par is specified then shares shall have a stated] value of ______ 
per share. * * *  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.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association 
from the mutual to stock form of capitalization, no shares of 
capital stock (including shares issuable upon conversion, exchange, 
or exercise of other securities) shall be issued, directly or 
indirectly, to officers, directors, or controlling persons of the 
association other than as part of a general public offering or as 
qualifying shares to a director, unless the issuance or the plan 
under which they would be issued has been approved by a majority of 
the total votes eligible to be cast at a legal meeting.
    * * * Each holder of shares of common stock shall be entitled to 
one vote for each share held by such holder, except as to the 
cumulation of votes for the election of directors, unless the 
charter provides that there shall be no such cumulative voting. * * 
*
* * * * *
    Section 7. Directors. The association shall be under the 
direction of a board of directors. The authorized number of 
directors, as stated in the association's bylaws, shall not be fewer 
than five nor more than fifteen except when a greater or lesser 
number is approved by the Director of the Office, or his or her 
delegate.
    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 proposed by the board of 
directors of the association, approved by the shareholders by a 
majority of the votes eligible to be cast at a legal meeting, unless 
a higher vote is otherwise required, and approved or preapproved by 
the Office.
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. revising paragraph (a)(2);
    c. revising the last sentence of the introductory text of paragraph 
(b);
    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 revising 
the introductory text;
    h. revising the first and last sentences of the first paragraph in 
Section 5 of newly designated paragraph (b)(4);
    i. revising the first sentence of the second paragraph in Section 5 
of newly designated paragraph (b)(4);
    j. revising the introductory text of the third paragraph in Section 
5 of newly designated paragraph (b)(4);
    k. amending newly designated paragraph (b)(4) by revising paragraph 
(ii) of the third paragraph in Section 5;
    l. amending newly designated paragraph (b)(4) by revising the last 
sentence of paragraph A. of the fourth paragraph in Section 5;
    m. redesignating paragraph (b)(6) as paragraph (b)(5) and revising 
it;
    n. adding a new paragraph (b)(6);
    o. adding a heading to paragraph (b)(8); and
    p. revising paragraph (c);
    The additions and revisions read as follows:


Sec. 552.4  Charter amendments.

    (a) * * *
    (2) Form of filing--(i) Application requirement. If the proposed 
charter amendment would render more difficult or discourage a merger, 
tender offer, or proxy contest, the assumption of control by a holder 
of a block of the association's stock, the removal of incumbent 
management, or involve a significant issue of law or policy, the 
association shall file the proposed amendment and shall obtain the 
prior approval of the OTS; and
    (ii) Notice requirement. If the proposed charter amendment does not 
involve a provision that would be covered by paragraph (a)(2)(i) of 
this section and such amendment is permissible under all applicable 
laws, rules or regulations, then the association shall submit the 
proposed amendments to the OTS, at least 30 days prior to the date the 
proposed charter amendment is to be mailed for consideration by the 
association's shareholders.
    (b) * * * In addition, the following charter amendments, including 
the adoption of the Federal stock charter as set forth in Sec. 552.3 of 
this part, shall be approved at the time of adoption, if adopted 
without change and filed with OTS within 30 days after adoption, 
provided the association follows the requirements of its charter in 
adopting such amendments:
    (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. The total number of shares of all classes of capital 
stock that the association has the authority to issue is ______, of 
which ______ shall be common stock of par [or if no par value is 
specified the stated] value of ______ per share and of which [list 
the number of each class of preferred and the par or if no par value 
is specified the stated value per share of each such class]. * * * 
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

[[Page 64019]]

as a stock dividend shall be deemed to be the consideration for 
their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association 
from the mutual to the stock form of capitalization, no shares of 
capital stock (including shares issuable upon conversion, exchange, 
or exercise of other securities) shall be issued, directly or 
indirectly, to officers, directors, or controlling persons of the 
association other than as part of a general public offering or as 
qualifying shares to a director, unless their issuance or the plan 
under which they would be issued has been approved by a majority of 
the total votes eligible to be cast at a legal meeting. * * *
    Nothing contained in this section 5 (or in any supplementary 
sections hereto) shall entitle the holders of any class of a series 
of capital stock to vote as a separate class or series or to more 
than one vote per share, except as to the cumulation of votes for 
the election of directors, unless the charter otherwise provides 
that there shall be no such cumulative voting: Provided, That this 
restriction on voting separately by class or series shall not apply:
* * * * *
    (ii) To any provision that would require the holders of 
preferred stock, voting as a class or series, to approve the merger 
or consolidation of the association with another corporation or the 
sale, lease, or conveyance (other than by mortgage or pledge) of 
properties or business in exchange for securities of a corporation 
other than the association if the preferred stock is exchanged for 
securities of such other corporation: Provided, That no provision 
may require such approval for transactions undertaken with the 
assistance or pursuant to the direction of the Office or the Federal 
Deposit Insurance Corporation;
* * * * *
    A. Common stock. * * * Each holder of shares of the common stock 
shall be entitled to one vote for each share held by each holder, 
except as to the cumulation of votes for the election of directors, 
unless the charter otherwise provides that there shall be no such 
cumulative voting.
* * * * *
    (5) Limitations on subsequent issuances. A Federal stock 
association may amend its charter to require shareholder approval of 
the issuance or reservation of common stock or securities convertible 
into common stock under circumstances which would require shareholder 
approval under the rules of the New York or American Stock Exchange if 
the shares were then listed on the New York or American Stock Exchange.
    (6) Cumulative voting. A Federal stock association may amend its 
charter by substituting the following sentence for the second sentence 
in the third paragraph of Section 5: ``Each holder of shares of common 
stock 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) Anti-takeover provisions following mutual to stock conversion. 
* * *
    (c) Anti-takeover provisions. The Office may grant approval to a 
charter amendment not listed in paragraph (b) of this section regarding 
the acquisition by any person or persons of its equity securities 
provided that the association shall file as part of its application for 
approval an opinion, acceptable to the OTS, of counsel independent from 
the association that the proposed charter provision would be permitted 
to be adopted by a corporation chartered by the state in which the 
principal office of the association is located. Any such provision must 
be consistent with applicable statutes, regulations, and OTS policies. 
Further, any such provision that would have the effect of rendering 
more difficult a change in control of the association and would require 
for any corporate action (other than the removal of directors) the 
affirmative vote of a larger percentage of shareholders than is 
required by this Part, 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. redesignating paragraphs (b)(1) introductory text, (b)(1)(i), 
(b)(1)(ii), and (b)(1) concluding text as paragraphs (b)(1)(i) 
introductory text, (b)(1)(i)(A), (b)(1)(i)(B), and (b)(1)(iii), 
respectively, adding a new paragraph (b)(1)(ii), and by revising newly 
designated paragraphs (b)(1)(i) introductory text, (b)(1)(i)(B) and 
(b)(1)(iii);
    c. revising paragraph (b)(2);
    d. adding a new paragraph (b)(3); and
    e. adding a new 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. * * *
    (b) * * * (1) Application requirement. (i) Any bylaw amendment 
shall be submitted to the OTS for approval if it would:
* * * * *
    (B) Be inconsistent with Secs. 552.6, 552.6-1, 552.6-2, and 552.6-3 
of this part, with applicable laws, rules, regulations or the 
association's charter or involve a significant issue of law or policy, 
including indemnification, conflicts of interest, and limitations on 
director or officer liability.
    (ii) Applications submitted under paragraph (b)(1)(i) of this 
section shall be subject to the applications processing procedures set 
forth at Sec. 516.2 of this chapter.
    (iii) Bylaw provisions that adopt the language of the model bylaws 
set forth in the OTS's Application Processing Handbook, if adopted 
without change, and filed with OTS within 30 days after adoption, are 
effective upon adoption.
    (2) Filing requirement. If the proposed bylaw amendment does not 
involve a provision that would be covered by paragraph (b)(1) or (b)(3) 
of this section and is permissible under all applicable laws, rules, or 
regulations, then the association shall submit the amendment to the OTS 
at least 30 days prior to the date the bylaw amendment is to be adopted 
by the association.
    (3) Corporate governance procedures. A Federal stock association 
may elect to follow the corporate governance procedures of: The laws of 
the state where the main office of the association is located; the laws 
of the state where the association's holding company, if any, is 
incorporated or chartered; Delaware General Corporation law; or The 
Model Business Corporation Act, provided that such procedures may be 
elected to the extent not inconsistent with applicable Federal statutes 
and regulations and safety and soundness, and such procedures are not 
of the type described in paragraph (b)(1) of this section. If this 
election is selected, a Federal stock association shall designate in 
its bylaws the provision or provisions from the body or bodies of law 
selected for its corporate governance procedures, and shall file a copy 
of such bylaws, which are effective upon adoption, within 30 days after 
adoption. The submission shall indicate, where not obvious, why the 
bylaw provisions meet the requirements stated in paragraph (b)(1) of 
this section.
* * * * *
    (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. revising the first and last sentences in paragraph (a);
    b. adding a sentence at the end of paragraph (b);

[[Page 64020]]

    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. removing paragraph (f)(3); and
    g. adding paragraph (h).
    The additions and revisions read as follows:


Sec. 552.6  Shareholders.

    (a) Shareholder meetings. An annual meeting of the shareholders of 
the association for the election of directors and for the transaction 
of any other business of the association shall be held annually within 
150 days after the end of the association's fiscal year. * * * All 
annual and special meetings of shareholders shall be held at such place 
as the board of directors may determine in the state in which the 
association has its principal place of business, or at any other 
convenient place the board of directors may designate.
    (b) * * * Notwithstanding anything in this section, however, a 
Federal stock association that is wholly owned shall not be subject to 
the shareholder 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, 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 shareholder 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 stockholders 
entitled to examine such list or transfer books or to vote at any 
meeting of stockholders. Notwithstanding anything in this section, 
however, a Federal stock association that is wholly owned 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. Directors, however, are 
elected by a plurality of the votes cast at an election of directors.
    (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 shareholder. A proxy may designate as 
holder a corporation, partnership or company as defined in Part 574 of 
this chapter, or other person. * * *
* * * * *
    (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 after the first sentence in paragraph (c);
    d. revising the second sentence of paragraph (e);
    e. revising the heading of paragraph (f) and paragraph (f)(1); and
    f. revising 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. 
Directors shall be elected for a term of one to three years and until 
their successors are elected and qualified. If a staggered board is 
chosen, the directors shall be divided into two or three classes as 
nearly equal in number as possible and one class shall be elected by 
ballot annually. In the case of a converting or newly chartered 
association where all directors shall be elected at the first election 
of directors, if a staggered board is chosen, the terms shall be 
staggered in length from one to three years.
    (c) * * * The board of directors shall determine the place, 
frequency, time and procedure for notice of such meetings.
* * * * *
    (e) * * * A director elected to fill a vacancy shall be elected to 
serve only until the next election of directors by the shareholders. * 
* *
    (f) Removal or resignation of directors. (1) At a meeting of 
shareholders called expressly for that purpose, any director 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. Associations may provide for procedures 
regarding resignations in the bylaws.
* * * * *
    (k) Age limitation on directors. A Federal association may provide 
a bylaw on age limitation for directors. Bylaws on age limitations must 
comply with all Federal laws, rules and regulations.
    21. Section 552.6-2 is amended by revising the first and fifth 
sentences of paragraph (a); by removing the third and fourth sentences 
of paragraph (a), and revising paragraph (c) to read as follows:


Sec. 552.6-2  Officers.

    (a) Positions. The officers of the association shall be a 
president, one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom shall be elected by the board of directors. * 
* * The offices of the secretary and treasurer or comptroller may be 
held by the same person and the vice president may also be either the 
secretary or the treasurer or comptroller. * * *
* * * * *
    (c) Age limitation on officers. A Federal association may provide a 
bylaw on age limitation for officers. Bylaws on age limitations must 
comply with all Federal laws, rules, and regulations.


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) between the words 
``times,'' and ``its'' in the first sentence.

Appendix to Part 552 [Removed]

    24. The Appendix to part 552 is removed.

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 and 556.17  [Removed]

    26. Sections 556.1 and 556.17 are removed.

[[Page 64021]]

PART 575--MUTUAL HOLDING COMPANIES

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

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

    28. Section 575.9 is amended by:
    a. revising Section 1 of the Charter in paragraph (a)(1);
    b. removing, in Section 5 of the Charter in paragraph (a)(1), the 
sixth, seventh, and eighth sentences in the last paragraph;
    c. revising Section 6 of the Charter in paragraph (a)(1);
    d. revising Section 8 of the Charter in paragraph (a)(1);
    e. revising the signature blocks at the end of the Charter in 
paragraph (a)(1);
    f. revising paragraph (a)(2);
    g. revising the last sentence of paragraph (a)(4); and
    h. revising the last sentence of paragraph (a)(5).
    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 1: Corporate title. The name of the mutual holding 
company is ______ (the ``Mutual Company'').
* * * * *
    Section 6. Directors. The Mutual Company shall be under the 
direction of a board of directors. The authorized number of 
directors shall not be fewer than five nor more than fifteen, as 
fixed in the Mutual Company's bylaws, except that the number of 
directors may be decreased to a number less than five or increased 
to a number greater than fifteen with the prior approval of the 
Director of the Office or his or her delegate.
* * * * *
    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 and 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:--------------------------------------------------------

    (2) Charter amendments. The rules and regulations set forth in 
Sec. 544.2 of this chapter regarding charter amendments and reissuances 
of charters (including delegations and filing instructions) shall be 
applicable to mutual holding companies to the same extent as if mutual 
holding companies were Federal mutual savings associations, except 
that, with respect to the pre-approved charter amendments set forth in 
Sec. 544.2 of this chapter, Secs. 544.2(b)(1) and (b)(3) of this 
chapter shall not apply to mutual holding companies, and mutual holding 
companies changing their corporate title pursuant to Sec. 544.2(b)(2) 
of this chapter shall be required to comply with Sec. 575.9(a)(3) of 
this part as well as Sec. 543.1(b) of this chapter.
* * * * *
    (4) * * * The model bylaws for Federal mutual savings associations 
set forth in the OTS Applications Processing Handbook shall also serve 
as the model bylaws for mutual holding companies, except that the term 
``association'' each time it appears therein shall be replaced with the 
term ``Mutual Company''; section 11(e) (extending leniency to borrowing 
members) and section 11(f) (rejection of applications for accounts or 
membership) shall be removed and the remaining paragraphs of section 11 
redesignated accordingly.
    (5) * * * Mutual holding companies shall also be subject to the 
provisions of Sec. 544.8 of this chapter.
* * * * *
    Dated: November 20, 1996.

    By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-30262 Filed 12-2-96; 8:45 am]
BILLING CODE 6720-01-U