[Federal Register Volume 63, Number 71 (Tuesday, April 14, 1998)]
[Proposed Rules]
[Pages 18149-18150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9765]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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  Federal Register / Vol. 63, No. 71 / Tuesday, April 14, 1998 / 
Proposed Rules  

[[Page 18149]]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 544

[No. 98-34]
RIN 1550-AB17


Charter and Bylaws; One Member, One Vote

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OTS) proposes to amend its 
regulations on federal mutual savings association charters. The 
proposed amendment would expand the range of the number of votes a 
federal mutual savings association may allow a member to cast on issues 
requiring action by the members of the association from the current 50 
to 1000 votes to one to 1000 votes per member. This proposal would add 
flexibility to the federal mutual charter, and would in particular 
allow a federal mutual savings association to adopt a charter providing 
for ``one member, one vote.''

DATES: Comments must be received on or before June 15, 1998.

ADDRESSES: Send comments to Manager, Dissemination Branch, Records 
Management and Information Policy, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, D.C. 20552, Attention Docket No. 98-34. These 
submissions may be hand-delivered to 1700 G Street, NW., from 9:00 A.M. 
to 5:00 P.M. on business days; they may be sent by facsimile 
transmission to FAX Number (202) 906-7755; 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: Diana L. Garmus, Director, Corporate 
Activities Division (202/906-5683); David A. Permut, Counsel (Banking 
and Finance) (202/906-7505) or Kevin A. Corcoran, Assistant Chief 
Counsel for Business Transactions (202/906-6962), Business Transactions 
Division, Chief Counsel's Office, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, D.C. 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    Various depository institutions that have expressed interest in 
converting to a federal mutual savings association charter 1 
have asked to retain existing voting procedures following the 
conversion. The OTS has received, for example, inquiries from credit 
unions with membership voting rights of one vote per member, who have 
asked to retain their current voting requirements upon conversion. The 
OTS regulations currently allow a state-chartered savings bank to 
retain certain member rights upon conversion to a federal mutual 
holding company under the OTS Mutual Holding Company 
regulations.2 Today's proposal would provide similar 
flexibility for financial institutions, including federal credit 
unions, that wish to convert to the federal mutual charter.
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    \1\ Section 2(5) of the Home Owners' Loan Act defines ``federal 
savings associations'' to include federal savings associations and 
federal savings banks. Accordingly, references herein to federal 
savings associations include federal savings banks.
    \2\ See 12 CFR 575.5(a) (1997), which describes existing and 
future depositor and borrower membership rights as the same rights 
that were conferred upon depositors and borrowers by the 
reorganizing association.
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    Under the Home Owners' Loan Act (HOLA),3 the OTS may 
charter federal thrifts to provide for the deposit of funds and the 
extension of credit for homes and other goods and services.4 
The OTS has long taken the position that depository institutions should 
be free to operate under whatever charter best suits their business 
needs, consistent with safety and soundness. Federal savings 
associations may operate under a stock charter or mutual charter. 
Within each charter, the OTS permits variations.
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    \3\ 12 U.S.C. 1461 et seq.
    \4\ 12 U.S.C. 1464(a).
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    Federal mutual savings associations have varying voting provisions, 
often based upon when they obtained their charters. The federal charter 
first introduced in 1933 specified that each member received one vote 
for every $100 on deposit, subject to a maximum of 50 votes per member. 
This 50 vote limit corresponded to the maximum allowable deposit 
insurance for one account, $5,000. When deposit insurance limits were 
raised to $40,000 per account, the Federal Home Loan Bank Board 
(``FHLBB''), predecessor to the OTS, began to issue charters with a 
maximum of 400 votes per member, again to correspond to the insurance 
limits. When the statutory deposit insurance limits were increased to 
$100,000 per account in 1980,5 the FHLBB again amended the 
federal mutual charter to allow for 1,000 votes per member.6
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    \5\ Pub. L. 96-221, 94 Stat. 147, March 31, 1980 (Codified at 12 
U.S.C. 1728).
    \6\ See FHLBB Res. No. 83-528, 48 FR 44174 (Sept. 28, 1983).
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II. Proposal

    The purpose of today's proposed regulation is to allow greater 
flexibility in determining the number of votes per member. The 
amendment will permit mutual depository institutions that are 
converting to federal savings associations to retain the one vote per 
member provision in their current charters, and will permit converting 
institutions as well as existing federal mutual savings associations to 
adopt a one vote per member provision.
    Currently, Section 6 of the OTS model federal mutual charter 
7 states that no member may cast more than 1,000 votes. 
Section 544.2, however, permits a federal mutual savings association to 
amend its charter and prescribe the maximum number of votes per member 
to a specific number between 50 and 1000.
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    \7\ 12 CFR 544.1 (1997).
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    The OTS is proposing to amend 12 CFR 544.2(b)(4) to permit 
federally chartered mutual savings associations to set the number of 
votes per member within the range of 1 to 1,000, rather than the 
current range of 50 to 1,000. New federal mutual savings associations 
may include this provision in their initial federal thrift charter. 
Existing federal mutual associations may amend their charters under the 
prescribed regulatory procedures. 8 Specifically, an 
institution would: (i) Obtain a board of directors' resolution adopting 
the

[[Page 18150]]

amendment, (ii) obtain a favorable vote by the members, and (iii) 
notify the OTS of the adoption at least 30 days prior to the effective 
date of the proposed amendment. Unless the OTS notifies the institution 
of its objection to the proposed amendment within that 30 days, the 
amendment is automatically approved.
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    \8\ 12 CFR 544.2(b) (1997).
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III. Solicitation of Comments

    The OTS is asking for comment on the proposal. Specifically, the 
OTS seeks comment on:
     Whether federal mutual savings associations would expect 
to encounter any corporate governance problems if they chose to reduce 
the maximum number of votes per member. For example, would the savings 
association encounter any difficulty in obtaining the necessary votes 
of members to take corporate actions?
     Whether existing federal mutual associations would find 
the added flexibility of an expanded voting requirement useful.
     Whether, and under what circumstances, a one vote per 
member limitation would either entrench or destabilize management.
     Whether by imposing such a limitation, federal 
associations with a higher minimum vote requirement that adopt a lower 
minimum vote requirement could risk legal actions by account holders.
     Whether the proposed revision should be continued as a 
preapproved charter amendment, or whether savings associations that 
seek to adjust the number of votes per member should be required to 
submit an application to the OTS.

IV. Executive Order 12866

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

V. Regulatory Flexibility Act Analysis

    Pursuant to Section 605(b) of the Regulatory Flexibility Act, the 
OTS certifies that this proposal will not have a significant economic 
impact on a substantial number of small entities. Small entities 
utilizing the regulation may be able to retain their existing 
membership rights, which will simplify the process of converting to a 
federal charter and reduce regulatory burden.

VI. 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 expenditures by state, local, and 
tribal governments, in the aggregate, or by the private sector, or $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. The 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 Section 202 of the 
Unfunded Mandates Act.

List of Subjects in 12 CFR Part 544

    Bylaws, Charters, Reporting and recordkeeping requirements, savings 
associations.

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

PART 544--CHARTER AND BYLAWS

    1. The authority citation for part 544 continues to read as 
follows:

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

    2. Section 544.2 is amended by revising the last sentence of 
paragraph (b)(4) to read as follows:


Sec. 544.2  Charter amendments.

* * * * *
    (b) * * *
    (4) * * * [Fill in a number from 1 to 1000.]
* * * * *

    Dated: March 31, 1998.
    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-9765 Filed 4-13-98; 8:45 am]
BILLING CODE 6720-01-P