[Federal Register Volume 62, Number 93 (Wednesday, May 14, 1997)]
[Proposed Rules]
[Pages 26449-26453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12574]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 566

[No. 97-44]
RIN 1550-AA77


Liquidity

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OTS) is proposing to update, 
simplify, and streamline its liquidity regulation. This proposal 
follows a detailed review of the regulation to determine whether it is 
necessary, imposes the least possible burden consistent with statutory 
requirements and safety and soundness, and is written in a clear, 
straightforward manner. Today's proposal is made pursuant to the 
Regulatory Reinvention Initiative of the Vice President's National 
Performance Review and section 303 of the Community Development and 
Regulatory Improvement Act of 1994.

DATES: Comments on this proposed rule must be received on or before 
July 14, 1997.

ADDRESSES: Send comments to Manager, Dissemination Branch, Records 
Management and Information Policy, Office of Thrift Supervision, 1700 G 
Street, NW, Washington, DC 20552, Attention Docket No. 97-44. These 
submission may also be hand delivered to 1700 G Street, NW, from 9:00 
a.m. to 5:00 p.m. on business days; they may be sent by facsimile 
transmission to FAX number (202) 906-7755; or they may be sent by e-
mail: [email protected]. Those commenting by e-mail should 
include their name and telephone number. Comments will be available for 
inspection at 1700 G Street, NW, from 9:00 A.M. until 4:00 P.M. on 
business days.

FOR FURTHER INFORMATION CONTACT: Francis Raue, Program Analyst, (202) 
906-5750, Robyn Dennis, Manager, Thrift Policy, (202) 906-5751, 
Supervision Policy, or Susan Miles, Senior Attorney, (202) 906-6798, 
Karen Osterloh, Assistant Chief Counsel, (202) 906-6639, Regulations 
and Legislation Division, Chief Counsel's Office, Office of Thrift 
Supervision, 1700 G Street, NW, Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background and Objectives of the Proposal

    In a comprehensive review of the agency's regulations in the spring 
of 1995, OTS identified numerous obsolete or redundant regulations that 
could be quickly repealed. OTS also identified several key regulatory 
areas for a more intensive, systematic regulatory burden review. The 
first areas reviewed--lending and investment authority, subsidiaries 
and equity investments, corporate governance, conflicts of interest, 
corporate opportunity and hazard insurance--were selected because they 
have a significant impact on thrift operations, and had not been 
developed on an interagency basis or been comprehensively reviewed for 
many years. OTS has issued comprehensive final regulations in all of 
these areas.1
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    \1\ 61 FR 50951 (September 30, 1996) (Lending and Investment); 
61 FR 66561 (December 18, 1996) (Subsidiaries and Equity 
Investments); 61 FR 60173 (November 27, 1996) (Conflicts of 
Interest, Corporate Opportunity and Hazard Insurance); 61 FR 64007 
(December 3, 1996) (Corporate Governance).
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    Today's proposal is a part of the next phase of OTS's review of its 
regulations. The proposed liquidity rule follows an intensive review of 
the relevant statute and regulation, legal interpretations, and 
requirements of other federal banking agencies. Like other OTS 
reinvention efforts, this proposal was prepared in consultation with 
those who use the regulation on a daily basis, including the agency's 
regional examination staff.
    Both the industry and OTS regulatory staff have consistently cited 
the liquidity requirement and attendant calculations as an unnecessary 
burden. Consequently, the review process has led to a consensus that 
the statutory liquidity requirement no longer serves any useful purpose 
and should be eliminated. The OTS has in the past recommended 
legislative action to repeal this requirement.
    In the interim, OTS has reviewed its current liquidity regulation 
and has identified modifications that would reduce the burden of 
compliance to the maximum extent possible, consistent with the 
requirements of the statute and safety and soundness considerations. 
Specifically, the burden of compliance with the liquidity regulation 
would be decreased by: (1) reducing the liquidity base by excluding 
withdrawable accounts payable in more than one year

[[Page 26450]]

from the definition of the term ``net withdrawable accounts''; (2) 
streamlining the calculations used to measure compliance with the 
liquidity requirement; (3) reducing the liquidity requirement from five 
percent of net withdrawable accounts and short-term borrowings to four 
percent; (4) removing the one percent short-term liquidity requirement; 
and (5) expanding the categories of liquid assets that may count toward 
satisfying a savings association's liquidity requirement. In addition, 
a general requirement that thrifts maintain a safe and sound level of 
liquidity would be added to the regulation. Each of these changes is 
discussed in full below.
    OTS believes that these proposed changes will significantly reduce 
regulatory burden with respect to the statutory liquidity requirement. 
While some thrifts may choose to modify their systems to take advantage 
of the new rule, thrifts need not change any systems they have in place 
to comply with the current rule.

II. Historical Overview of Current Liquidity Regulation

A. Statutory Requirement and Current Regulation

    Section 6 of the Home Owners' Loan Act (HOLA) 2 requires 
savings associations to meet a liquidity requirement by holding liquid 
assets in an amount prescribed by the Director of OTS. The Director 
may, by regulation, vary the amount of the liquidity requirement, but 
only within pre-established statutory limits. The requirement must be 
no less than 4 percent and no greater than 10 percent of ``the 
obligation of the institution on withdrawable accounts and borrowings 
payable on demand or with unexpired maturities of one year or less.'' 
3 The law identifies the assets that are suitable for 
liquidity purposes. The Director, however, has express authority to 
issue regulations defining the terms used in the statute and to 
prescribe or limit the extent to which certain assets included on the 
statutory liquidity list may be used to meet the liquidity requirement. 
The Director also has express authority to prescribe the method for 
calculating the liquidity requirement.
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    \2\ 12 U.S.C. 1465.
    \3\ 12 U.S.C. 1465(b)(2).
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    Regulations implementing the Director's authority under section 6 
of the HOLA appear at 12 CFR Part 566. Among other things, these rules 
define liquid assets to include cash and certain securities with 
maturity limitations and marketability requirements that are set out in 
detail.4 The rules currently impose a liquidity requirement 
of 5 percent of an institution's liquidity base and a separate, 
``short-term'' liquidity requirement of 1 percent of the liquidity 
base. The liquidity base is defined as net withdrawable accounts plus 
short-term borrowings. Except for institutions with less than 
$25,000,000 in assets, liquidity requirements are based on the 
``average daily balance'' of the liquidity base during the preceding 
month. Institutions with less than $25,000,000 in assets may calculate 
their liquidity using month-end figures. These requirements are 
discussed more fully in Section III below.
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    \4\ 12 CFR 566.1(g) (1996).
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B. Reasons for Modifying the Current Rule

    When first enacted in 1950, the liquidity statute provided a 
mechanism for regulating the money supply available for housing. That 
purpose was reflected in the statutory text, which provides:

    The purpose of this section is to provide a means for creating 
effective and flexible liquidity in savings association which can be 
increased when mortgage money is plentiful, maintained in easily 
liquidated instruments, and reduced to add to the flow of funds to 
the mortgage market in periods of credit stringency. More flexible 
liquidity will help support sound mortgage credit and a more stable 
supply of such credit.5

    \5\ 12 U.S.C. 1465(a).
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    Consistent with this purpose, for many years the OTS's predecessor, 
the Federal Home Loan Bank Board, raised the liquidity requirement when 
the supply of money for housing was abundant and lowered the 
requirement when the supply was scarce.
    Over the years, however, this mechanism for ensuring a stable flow 
of housing credit has become obsolete. In recent decades, a vast 
secondary market for home loans has developed. This market has become 
the primary source of funding for home loans. Savings associations, as 
well as other lenders, can now originate home loans without regard to 
whether they themselves have the capacity to hold those loans in 
portfolio.
    Moreover, due largely to the development of the secondary market, 
lenders other than thrifts have become major mortgage lenders. Although 
savings associations are still an important source of housing credit, 
they are no longer the predominant source. For example, in 1975, 
thrifts were responsible for 55 percent of home mortgage originations, 
with mortgage companies originating only 14 percent. Today, those 
percentages are nearly reversed, with thrifts accounting for only 18 
percent of home mortgage originations, while the mortgage companies' 
share has increased to 56 percent. Mortgage companies, commercial banks 
and other lenders, unlike savings associations, are not subject to a 
statutory liquidity requirement.
    Adjusting the amount that savings associations must invest in 
liquid assets is no longer an effective means for regulating or 
ensuring the stable supply of credit for housing. Thrifts, banks, and 
mortgage bankers can obtain steady funding for home loans from the 
secondary market. As a result, the statutory liquidity requirement for 
savings associations no longer serves a useful purpose.
    As indicated above, the statutory liquidity requirement was 
designed as a mechanism for regulating housing credit, not safety and 
soundness. Thus, although adequate liquidity is vital to the safety and 
soundness of depository institutions, the OTS does not rely on the 
statutory liquidity requirement to ascertain whether an institution has 
adequate liquidity for purposes of safety and soundness. The statutory 
requirement is far too rigid and imprecise to be an effective measure 
of liquidity for safety and soundness purposes. Determining a safe 
level of liquidity for any particular institution depends on the 
overall asset/liability structure of the institution, the conditions of 
the markets where the institution operates, the activities of the 
institution's competitors and the requirements of the institution's own 
deposit and loan customers. Through the examination process, the OTS 
carefully reviews the process that an institution uses to allocate its 
assets and structure its liabilities to ensure sufficient liquidity to 
meet its needs and customer demands.
    This is the same general approach that the other banking agencies 
use to examine the institutions they regulate to determine the adequacy 
of liquidity. For example, the Office of the Comptroller of the 
Currency states,

    A sound basis for evaluating funds management requires 
understanding the bank, its customer mix, the nature of its assets 
and liabilities, and its economic and competitive environment. The 
adequacy of a bank's liquidity will vary from bank to bank. In the 
same bank, at different times, similar liquidity positions may be 
adequate or inadequate depending on anticipated need for funds. In 
addition, a liquidity position which is adequate for one bank may be 
insufficient for another bank. Determining the adequacy of a bank's 
liquidity position depends upon an analysis of the bank's

[[Page 26451]]

present and anticipated asset quality, present and future earnings 
capacity, historical funding requirements, current liquidity 
position, anticipated future funding needs, options for reducing 
funding needs or attracting additional funds, and sources of 
funds.6

    \6\ Comptroller's Handbook for National Bank Examiners, section 
405.1, Funds Management-Introduction (March 1990). See, FDIC-DOS 
Manual of Examination Policies, ``Liquidity and Funds Management,'' 
Section II (August 1995); and Commercial Bank Examination Manual, 
section 4020.1 Asset/Liability Management (March 1994).
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    It is important to emphasize that the changes the OTS is proposing 
today are not intended to suggest that the OTS believes that the HOLA's 
prescribed percent ratio of liquid assets to liabilities is ordinarily 
a sufficient level of liquidity. As indicated above, from a safety and 
soundness perspective, the appropriate level of liquidity varies 
significantly from institution to institution depending upon factors 
unique to each institution. Thus, compliance with the statutory 
liquidity requirement does not create a presumption that an institution 
has adequate liquidity for safety and soundness purposes. As indicated 
above, the statutory requirement was established as a means of 
regulating the supply of funds for housing credit, not as a measure of 
safety and soundness. A savings association's management is responsible 
for ensuring that the institution has adequate procedures in place to 
maintain a safe level of liquidity. The OTS will carefully monitor this 
via examinations.

III. Description of Proposal

    The OTS proposes the following amendments to 12 CFR Part 566:

A. Excluding Accounts With Unexpired Maturities Exceeding One Year From 
the Definition of ``Net Withdrawable Accounts''

    A savings association must maintain liquid assets of not less than 
a stated percentage of the amount of its liquidity base. The regulation 
defines the term ``liquidity base'' as net withdrawable accounts plus 
short-term borrowings. 12 CFR 566.1(c). The term ``net withdrawable 
accounts'' is defined to mean, with certain exclusions, all 
withdrawable accounts less the unpaid balance of all loans secured by 
such accounts. 12 CFR 566.1(d). Short term borrowings are generally 
defined as borrowings where any portion of the principal is payable on 
demand or in one year or less. 12 CFR 566.1(e).
    The OTS proposes to change the regulation's definition of the term 
``net withdrawable accounts'' to exclude accounts with unexpired 
maturities exceeding one year, and to delete the word ``all'' from the 
phrase ``all withdrawable accounts'' in the first part of the 
definition.
    The effect of changing the ``net withdrawable accounts'' definition 
will be to reduce a savings association's liquidity base by the amount 
of its outstanding savings accounts payable in more than one year, and 
to reduce the association's liquid asset requirement accordingly. The 
OTS believes that this proposed reduced liquid asset requirement is 
warranted and appropriate to the purpose of the liquidity statute. This 
change is consistent with the regulation's present exclusion from the 
liquidity base of borrowings payable in more than one year.

B. Streamlining the Average Balance Calculations of Liquid Assets and 
Liquidity Base

    Under the current rule, for every calendar month, every savings 
association (other than certain small institutions and mutual 
institutions that are discussed below) must calculate its average daily 
balance of its liquid assets and liquidity base. This requires the 
calculation of the institution's liquid assets and liquidity base as of 
the close of each business day, from which the daily average balance of 
liquid assets and liquidity base for each month is computed. The OTS 
proposes to amend the regulation to require that while institutions 
must continually satisfy their liquidity requirements, the liquidity 
base must be calculated only on the last day of the preceding calendar 
quarter. This eliminates the necessity for savings associations to 
determine average daily balances for each month.
    This change is consistent with other OTS regulations, including the 
loans-to-one-borrower rule and the capital rule, that use a quarter-end 
calculation to measure compliance with an ongoing requirement.
    The current rule permits a savings association with less than $25 
million in total assets at the beginning of a fiscal year, by 
resolution of its board of directors, to compute its liquid asset 
requirement as a percentage of its liquidity base at the end of the 
preceding calendar month (rather than as a percentage of the average 
daily balance of its liquidity base during the preceding calendar 
month). 12 CFR 566.2(b). Because the proposed rule would base the 
liquidity requirement on the institution's liquidity base at the end of 
the preceding quarter, the exception for small institutions would be 
more burdensome than the proposal. Accordingly, the OTS proposes to 
eliminate this provision.
    The current rule also contains a provision that grants mutual 
savings banks an alternative election for satisfying the liquidity 
requirement. 12 CFR 566.2(e). Although in prior years the election 
permitted such institutions to maintain a lower percentage of liquid 
assets than other savings associations, the election is currently no 
more lenient than the requirement for all savings associations, and 
would be more burdensome than the proposal. Therefore this provision 
would also be eliminated.

C. Reducing the Liquid Asset Requirement From Five to Four Percent and 
Removing the One Percent Short-term Requirement

    The OTS proposes to reduce the liquidity requirement from five 
percent of an institution's liquidity base to four percent. The four 
percent floor is the lowest the OTS may prescribe under section 6(b)(2) 
of the HOLA.7 As noted above, this change would minimize the 
regulatory burden associated with the statutory liquidity requirement, 
and is not intended to suggest that OTS considers four percent 
liquidity sufficient for most institutions. The OTS is aware that most 
savings associations maintain more than four percent liquidity in order 
to operate in a safe and sound manner. The OTS will continue to require 
a savings association to maintain a level of liquidity that is prudent 
given its particular circumstances. The OTS also encourages 
institutions to diversify their investments in qualifying liquid 
assets. Unsafe and unsound concentrations may occur in a securities 
portfolio, as well as in a loan portfolio.
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    \7\ 12 U.S.C. 1465(b)(2).
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    Section 566.2(a) also requires a savings association, other than a 
mutual savings bank, to maintain an average daily balance of short-term 
liquid assets 8 of not less than one percent of the average 
daily balance of its liquidity base during the preceding calendar 
month. The original intent of this provision was to require savings 
associations to have sufficient short-term, easily convertible assets 
that may be used to meet a portion of the liquidity requirement. With 
the expansion of the secondary mortgage

[[Page 26452]]

market and the resultant increase in the sources and amount of funds 
available for mortgages, the one percent short-term liquid asset 
requirement is no longer necessary. Accordingly, the OTS proposes to 
eliminate the requirement.
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    \8\ This term is currently defined at Sec. 566.1(h)(1996). These 
assets include cash and liquid assets with short maturities, such as 
government obligations that will mature in 12 months or less, and 
corporate debt obligations that will mature in six months or less. 
The removal of the requirement will also eliminate the need for this 
definition.
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D. Expanding the Categories of Liquid Assets That Count Toward 
Satisfaction of the Liquidity Requirement

    Under sections 6(b)(1)(C)(vi) and (vii) of the HOLA,9 as 
added in 1989 by the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (FIRREA),10 certain mortgage-related 
securities and mortgage loans now qualify as liquid assets to the 
extent approved by the Director of the OTS. The first category consists 
of mortgage-related securities that are defined in section 3(a)(41) of 
the Securities Exchange Act of 1934. The second category consists of 
mortgage loans on the security of a first lien on residential real 
property, if the mortgage loans qualify as backing for mortgage-backed 
securities issued by the Federal National Mortgage Association or the 
Federal Home Loan Mortgage Corporation or are guaranteed by the 
Government National Mortgage Association. The qualifying mortgage-
related securities and mortgage loans must have one year or less 
remaining until maturity, or be subject to an agreement (including a 
repurchase agreement, put option, right of redemption, or takeout 
commitment) that requires another person to purchase the securities 
within a period that does not exceed one year. In addition, the person 
that agrees to purchase the securities must be an insured depository 
institution (as defined in section 3 of the Federal Deposit Insurance 
Act) that is in compliance with applicable capital standards, a primary 
dealer in United States Government securities, or a broker or dealer 
registered under the Securities Exchange Act of 1934.
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    \9\ 12 U.S.C. 1465(b)(1)(C)(vi), (vii).
    \10\ Pub. L. 101-73, 103 Stat. 183, 313-314 (1989).
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    The OTS liquidity regulation has never been amended to reflect the 
foregoing FIRREA provision. The OTS proposes to update the liquidity 
regulation to reflect this statutory provision.

 E. Adding a General Safety and Soundness Requirement

    The OTS also proposes to add a general requirement that savings 
associations must maintain a safe and sound level of liquidity at all 
times. This is not a new position. The minimum level of liquidity 
required by the statutory liquidity provision does not necessarily 
constitute a safe level of liquidity. As explained above, savings 
associations have always been required to maintain a safe level of 
liquidity and the statutory liquidity provision has not been viewed as 
indicative of what constitutes a safe level of liquidity.
    The OTS views the statutory liquidity provision as a rigid and 
imprecise measure of the sufficiency of an institution's liquidity. For 
this reason, the OTS is seeking to reduce the burden imposed by the 
rigid statutory formula, while making clear that the statutory 
liquidity requirement and its implementing regulations do not 
constitute a safe harbor for demonstrating a safe and sound level of 
liquidity. As indicated above, safety and soundness determinations must 
be made on a case-by-case basis in light of the particular 
circumstances of each institution.

IV. Request for Comment

    Comments are sought on all aspects of this proposed rulemaking.

V. Paperwork Reduction Act

    The OTS invites comments on:
    (1) Whether the proposed collection of information contained in 
this notice of proposed rulemaking is necessary for the proper 
performance of the agency's functions, including whether the 
information has practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed information collection;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (4) Ways to minimize the burden of the information collection 
including the use of automated collection techniques or other forms of 
information technology.
    Recordkeepers are not required to respond to this collection of 
information unless it displays a currently valid OMB control number.
    The recordkeeping requirements contained in this notice of proposed 
rulemaking have been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on all aspects of this information collection 
should be sent to the Office of Management and Budget, Paperwork 
Reduction Project (1550), Washington, D.C. 20503 with copies to the 
OTS, 1700 G Street, NW., Washington, D.C. 20552.
    The recordkeeping requirements contained in this notice of proposed 
rulemaking are found at 12 CFR 566.4. The information is needed by the 
OTS in order to ensure that associations comply with a statutory 
liquidity requirement. The likely recordkeepers are OTS-regulated 
savings associations.
    Estimated number of recordkeepers: 1,372.
    Estimated average annual burden hours per recordkeeper: 2.
    Estimated total annual recordkeeping burden: 2,744.
    Start-up costs to recordkeepers: None.
    Records are to be maintained in accordance with basic business 
practices, but not less than a period of three years.

VI. Executive Order 12866

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

VII. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub. 
L. 96-354, 5 U.S.C. 601), the OTS certifies that this regulation will 
not have a significant economic impact on a substantial number of small 
entities. It reduces the liquidity requirement from 5 percent to 4 
percent, which should increase all savings associations' abilities to 
manage their assets. Additionally, the proposed regulation should ease 
the administrative burden of calculating compliance with liquidity 
requirements for all savings associations, including small savings 
associations.

VIII. Unfunded Mandates Act of 1995

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

[[Page 26453]]

List of Subjects in 12 CFR Part 566

    Liquidity, Reporting and recordkeeping requirements, Savings 
associations.

    Accordingly, the Office of Thrift Supervision hereby proposes to 
amend part 566, chapter V, title 12, Code of Federal Regulations, as 
set forth below:

PART 566--LIQUIDITY

    1. The authority section for part 566 continues to read as follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1465, 1467a; 15 
U.S.C. 1691, 1691a.

    2. Section 566.1 is amended by revising paragraphs (d) and (g)(8), 
by adding paragraphs (g)(12) and (g)(13), and by removing paragraph (h) 
to read as follows:


Sec. 566.1  Definitions.

* * * * *
    (d) Net withdrawable accounts. The term net withdrawable accounts 
means withdrawable accounts having unexpired maturities not exceeding 
one year, less the unpaid balance of all loans secured by such 
accounts, but not including tax and loan accounts, note accounts, 
accounts to the extent that security has been given upon them pursuant 
to any applicable regulations, U.S. Treasury General Accounts, or U.S. 
Time Deposit Open Accounts.
* * * * *
    (g) * * *
    (8) Shares or certificates in any open-end management investment 
company registered with the Securities and Exchange Commission under 
the Investment Company Act of 1940, while the portfolio of such company 
is restricted by its investment policy, changeable only by vote of the 
shareholders, to investments described in the other provisions of 
paragraphs (g)(1) through (g)(7), (g)(9), (g)(12), and (g)(13) of this 
section.
* * * * *
    (12) Mortgage-related securities as described in 12 U.S.C. 
1465(b)(1)(C)(vi).
    (13) Mortgage loans on the security of a first lien on residential 
real property as described in 12 U.S.C. 1465(b)(1)(C)(vii).
    3. Section 566.2 is amended by removing paragraphs (b), (c), and 
(e), by redesignating paragraph (a) as paragraph (b) and paragraph (d) 
as paragraph (c), by adding a new paragraph (a), by revising newly 
designated paragraph (b), and by removing the phrase ``paragraph (a)'' 
where it appears in newly designated paragraph (c) and adding in lieu 
thereof the phrase ``paragraph (b)'' to read as follows:


Sec. 566.2  Requirements.

    (a) Safety and soundness. Each savings association must maintain 
sufficient liquidity to ensure its safe and sound operation.
    (b) Liquidity. Except as otherwise provided in paragraph (c) of 
this section, each savings association shall maintain liquid assets of 
not less than 4 percent of the amount of its liquidity base at the end 
of the preceding calendar quarter.
* * * * *
    Dated: May 7, 1997.

By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 97-12574 Filed 5-13-97; 8:45 am]
BILLING CODE 6720-01-P