[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Proposed Rules]
[Pages 7725-7727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4019]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AB92


Resolution and Receivership Rules

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking and request for comments.

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SUMMARY: As part of the FDIC's systematic review of its regulations and 
written policies under section 303(a) of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (CDRIA) the FDIC is 
proposing to amend its regulation addressing ``least cost resolutions'' 
to correct a typographical error. The provisions of the regulation 
relating to the security interests of Federal Home Loan Banks (Banks) 
in FDIC-administered receiverships, is being removed because of its 
limited applicability and the federal statutory protections provided to 
the Banks make it unnecessary to continue to address the issues 
contained therein by regulation. To the extent specific issues arise 
regarding the Banks' extensions of credit or security interests in 
FDIC-administered receiverships, they can be addressed on a case by 
case basis within the existing statutory structure.

DATES: Comments must be submitted on or before April 21, 1997.

ADDRESSES: Send written comments to the Office of the Executive 
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, 
N.W., Washington, D.C., 20429. Comments may be hand-delivered to Room 
F-400, 1776 F Street, N.W. 20429, on business days between 8:30 a.m. 
and 4:30 p.m.; sent by facsimile: (202) 898-3838; or by Internet: 
C[email protected]. Comments may be inspected and photocopied in the 
FDIC Public Information Center, Room 100, 801 17th Street, N.W., 
Washington, D.C. 20429, between 9:00 a.m. and 4:30 p.m. on business 
days.

FOR FURTHER INFORMATION CONTACT: Mitchell Glassman, Deputy Director, 
Division of Resolutions and Receiverships, (202) 898-6525; Rodney D. 
Ray, Counsel, Legal Division, (202) 898-3556; Catherine A. Ribnick, 
Counsel, Legal Division, (202) 736-0117, Federal Deposit Insurance 
Corporation, Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

Background

    As part of the FDIC's review of its regulations pursuant to section 
303 of CDRIA, the FDIC reviewed its receivership regulations to assure 
that there was a need for their continued existence. If it was 
determined that a regulation should be retained, it also was reviewed 
for accuracy and clarity. As part of the review process, the FDIC 
determined that Sec. 360.1 should be retained but amended to correct a 
typographical error. It was determined that Sec. 360.2 should be 
removed because the regulation is of limited applicability and 
addresses only the concerns of a discrete and limited group of secured 
creditors, whose interests are already

[[Page 7726]]

addressed by federal statutes. Additionally, the regulation was the 
product of an increasing number of liquidating receiverships 
precipitated by the nation's thrift crisis, which has since subsided, 
making it unnecessary to continue to address the issues contained 
therein by regulation.

I. Section 360.1  Least-Cost Resolution

    Section 13(c)(4)(E)(i) of the Federal Deposit Insurance Act (FDI 
Act) (12 U.S.C. 1823(c)(4)(E)(i)) generally prohibits the FDIC, after 
August 31, 1994, from taking any action directly or indirectly, with 
respect to a depository institution which would have the effect of 
increasing losses to any deposit insurance fund by protecting the 
institution's uninsured depositors or other creditors. Section 360.1 
was promulgated in compliance with the statutory mandate, contained in 
section 13(c)(4)(E)(ii) of the FDI Act (12 U.S.C. 1823(c)(4)(E)(ii)), 
that the FDIC issue regulations implementing clause (i) not later than 
January 1, 1994. Because the regulation was issued pursuant to statute, 
it is being retained.
    Upon review, however, an erroneous statutory citation was 
discovered in Sec. 360.1(b) and the regulation is being amended to 
change the reference from ``12 U.S.C. 13(c)(4)(A)'' to ``12 U.S.C. 
1823(c)(4)(A)''.

II. Section 360.2  Federal Home Loan Banks as Secured Creditors

    Section 360.2 was originally promulgated by the Federal Home Loan 
Bank Board (FHLBB) on April 27, 1989.1 At the time, the FHLBB 
recognized that the incidence of liquidating receivership (liquidating 
receivership or liquidating receiverships) insurance actions was 
increasing. Against this background, the FHLBB determined that the 
regulation was needed, among other reasons, to set forth expressly the 
Banks' rights regarding collateral securing Federal Home Loan Bank 
(Bank) advances in situations where a receiver was appointed, not to 
effect a purchase and assumption agreement, but to liquidate the 
institution's assets over time, accompanied by a Federal Savings and 
Loan Insurance Corporation (FSLIC) deposit insurance payment of the 
deposit accounts.2 The regulation was subsequently transferred to 
the FDIC, pursuant to section 402(a) of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) Pub. L. 101-73, 
103 Stat. 183 (1989), when the FHLBB and FSLIC were abolished. Since 
its transfer on August 9, 1989, the regulation has remained unchanged.
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    \1\ The regulation was originally designated 12 CFR 569c.8-1.
    \2\ See 54 FR 19155 (May 4, 1989).
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    The section implements and amplifies upon the priority accorded to 
the Banks' security interests in section 306(d) of the Competitive 
Equality Banking Act of 1987, Pub. L. 100-86, 101 Stat. 552 (CEBA) 
(1988) (section 10(e), footnote 1, of the Federal Home Loan Bank Act 
(FHLB Act) (12 U.S.C. 1430(e), footnote 1).3 Section 360.2(a) 
requires the receiver to recognize the priority of any security 
interest held by a Bank for a loan to a member or its affiliate, when 
the member is placed in receivership.4 The remaining paragraphs, 
(b) through (e), address issues related to the Banks' security 
interests and collateral, which were not addressed in CEBA.
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    \3\ Section 10(e), footnote 1, provides: Notwithstanding any 
other provision of law, any security interest granted to a Federal 
Home Loan Bank by any member of any Federal Home Loan Bank or any 
affiliate of any such member shall be entitled to priority over the 
claims and rights of any party (including any receiver, conservator, 
trustee, or similar party having rights of a lien creditor) other 
than claims and rights that
    (1) Would be entitled to priority under otherwise applicable 
law; and
    (2) Are held by actual bona fide purchasers for value or by 
actual parties that were secured by actual perfected security 
interests.
    \4\ The paragraph essentially tracks section 306(d) of CEBA but 
adds ``whether such security interest is in specifically designated 
assets or a blanket interest in all assets or categories of 
assets''.
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    In addition to the priority accorded the Banks' security interests 
by CEBA, other federal statutory provisions were enacted subsequent to 
promulgation of the regulation which provide the Banks' extensions of 
credit and security interests additional receivership protections. For 
example, an amendment contained in section 212(a) of FIRREA excepted 
the Banks' extensions of credit or security interests from FIRREA's 
detailed provisions addressing contracts entered into before a 
receiver's or conservator's appointment.5 Additionally, section 
141(b) of the Federal Deposit Insurance Corporation Improvement Act of 
1991 (FDICIA) excepted the Banks' extensions of credit or security 
interests from section 11(d)(5) (12 U.S.C. 1821(d)(5)) of the 
receivership claims process.6
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    \5\ Section 212(a) of FIRREA amended section 11(c) through (j) 
of the FDI Act (12 U.S.C. 1821(c)-(j)). In the process, it added 
section 11(e)(13) (12 U.S.C. 1821(e)(13)) to the FDI Act, which 
states:
    No provision of this subsection shall apply with respect to:
    (A) Any extension of credit from any Federal home loan bank or 
Federal Reserve bank to any insured depository institution; or
    (B) Any security interest in the assets of the institution 
securing any such extension of credit.
    \6\ Section 141(b) of FDICIA amended section 11(d)(5)(D) (12 
U.S.C. 1821(d)(5)(D)) of the FDI Act to add section 11(d)(5)(D)(iii) 
(12 U.S.C. 1821(d)(5)(D)(iii)), which states:
    No provision of this paragraph shall apply with respect to:
    (I) Any extension of credit from any Federal home loan bank or 
Federal Reserve bank to any institution described in paragraph 
(3)(A); or
    (II) Any security interest in the assets of the institution 
securing any such extension of credit.
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    Based upon a review of the section and its history, it appears that 
the section is of limited applicability because the FHLBB intended for 
it to address issues related solely to the Banks' security interests in 
liquidating receiverships. Since the regulation was promulgated, 
Congress also has conferred significantly more benefits upon the Banks 
than are enjoyed by most other secured creditors in FDIC-administered 
receiverships. Finally, the section was the product of an increasing 
number of institutions being placed in liquidating receiverships in the 
late 1980's, when the nation was confronted with a crisis in the thrift 
industry, which has since subsided. Therefore, the Board of Directors 
has determined that there is insufficient justification for the 
section's continued existence and that the matters addressed therein 
can be adequately addressed on a case by case basis within the existing 
statutory structure. Although the regulation is being removed as part 
of the CDRIA process, however, the FDIC intends to continue to assist 
the Banks with the resolution of specific issues regarding their 
extensions of credit or security interests, on a case by case basis, as 
the need arises.

Paperwork Reduction Act

    No collections of information pursuant to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501 et. seq.) are contained in this 
notice. Consequently, no information has been submitted to the Office 
of Management and Budget for review.

Regulatory Flexibility Act

    The Board of Directors certifies that the proposed rule does not 
have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.). The Board of Directors action is being taken to correct a 
statutory citation in an existing regulation and to remove a section of 
the regulation addressing certain aspects of secured claims held by 
Banks in FDIC-administered receiverships. The Banks are not within the 
Regulatory Flexibility Act's definition of ``small entities''. 
Accordingly, the Act's requirements

[[Page 7727]]

regarding an initial and final regulatory flexibility analysis are 
inapplicable.

List of Subjects in 12 CFR Part 360

    Savings associations.

    For the reasons set out in the preamble, part 360 of chapter III of 
title 12 of the Code of Federal Regulations is proposed to be amended 
as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

    1. The authority citation for part 360 continues to read as 
follows:

    Authority: 12 U.S.C. 1821(d)(11), 1821(e)(8)(D)(i), 1823(c)(4); 
Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.

    2. Section 360.1 is amended by revising paragraph (b) to read as 
follows:


Sec. 360.1  Least-cost resolution.

* * * * *
    (b) Purchase and assumption transactions. Subject to the 
requirement of section 13(c)(4)(A) of the FDI Act (12 U.S.C. 
1823(c)(4)(A)), paragraph (a) of this section shall not be construed as 
prohibiting the FDIC from allowing any person who acquires any assets 
or assumes any liabilities of any insured depository institution, for 
which the FDIC has been appointed conservator or receiver, to acquire 
uninsured deposit liabilities of such institution as long as the 
applicable insurance fund does not incur any loss with respect to such 
uninsured deposit liabilities in an amount greater than the loss which 
would have been incurred with respect to such liabilities if the 
institution had been liquidated.


Sec. 360.2  [Removed and reserved]

    3. Section 360.2 is removed and reserved.

    By order of the Board of Directors.

    Dated at Washington, D.C., this 4th day of February, 1997.

Federal Deposit Insurance Corporation
Jerry L. Langley,
Executive Secretary.
[FR Doc. 97-4019 Filed 2-19-97; 8:45 am]
BILLING CODE 6714-01-P