[Federal Register Volume 63, Number 186 (Friday, September 25, 1998)]
[Rules and Regulations]
[Pages 51272-51275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25633]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 563, 563f and 574

[No. 98-96]
RIN 1550-AB10


Agency Disapproval of Directors and Senior Executive Officers of 
Savings Associations and Savings and Loan Holding Companies

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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

SUMMARY: The Office of Thrift Supervision (OTS) is issuing a final rule 
to amend its regulations implementing section 32 of the Federal Deposit 
Insurance Act (FDIA). This statute requires certain savings 
associations and savings and loan holding companies to provide prior 
notice of the appointment or employment of directors and senior 
executive officers. The final rule will eliminate unnecessary 
regulatory burden, implement changes enacted in the Economic Growth and 
Regulatory Paperwork Reduction Act of 1996 (EGRPRA), and more closely 
conform OTS regulations to those of the other banking agencies as 
required under section 303 of the Community Development and Regulatory 
Improvement Act of 1994 (CDRIA).

EFFECTIVE DATE: September 25, 1998.

FOR FURTHER INFORMATION CONTACT: Frances C. Augello, Senior Counsel, 
Business Transactions Division, Chief Counsel's Office (202) 906-6151; 
Scott Ciardi, Financial Analyst, Corporate Activities Division, (202) 
906-6960; or Mary Jo Johnson, Project Manager, Supervision Policy (202) 
906-5739, Office of Thrift Supervision, 1700 G Street, NW., Washington 
D.C. 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 32 of FDIA 1 requires certain savings 
associations and savings and loan holding companies to notify the OTS 
at least 30 days before adding any individual to the board of directors 
or employing an individual as a senior executive officer. Section 2209 
of the EGRPRA 2 amended section 32 of the FDIA by changing 
the circumstances under which a notice must be filed. Section 2209 also 
provided that the OTS may have as long as 90 days to issue a notice of 
disapproval of the proposed addition of a director or employment of a 
senior executive officer.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 1831i.
    \2\ Pub.L. 104-208, 110 Stat. 3009 (Sept. 30, 1996).
---------------------------------------------------------------------------

    On March 27, 1998 (63 FR 14844), the OTS published a notice of 
proposed rulemaking to: (1) amend its regulations implementing section 
32 of FDIA to reflect the EGRPRA amendments, (2) eliminate unnecessary 
burden, and (3) in accordance with section 303 of the 
CDRIA,3 conform the proposed OTS rule generally to 
regulations that have been promulgated by the Office of the Comptroller 
of the Currency (OCC), the Board of Governors of the Federal Reserve 
System (FRB), and the Federal Deposit Insurance Corporation 
(FDIC).4
---------------------------------------------------------------------------

    \3\ Pub. L. 103-325, 108 Stat. 2215 (Sept. 23, 1994).
    \4\ (OCC) 61 FR 60341 (November 27, 1996); (FRB) 62 FR 9290 
(February 28, 1997); (FDIC) 63 FR 44686 (August 20, 1998).
---------------------------------------------------------------------------

    In addition, the OTS rewrote the proposed rule using plain language 
drafting techniques promoted by the Vice President's National 
Performance Review Initiative and new guidance in the Federal Register 
Document Drafting Handbook (January 1997 edition).

II. Summary of Comments and Description of the Final Rule

    The public comment period on the proposed rule closed on May 26, 
1998. The OTS received two comments on its proposal. Commenters 
included one savings association and one trade association. One 
commenter expressed general support for the proposed rule, including 
the use of plain language, which it noted reduces regulatory burden and 
makes compliance easier. The other commenter also supported the rule, 
and suggested that the rule be clarified to specifically state that an 
individual seeking election to the board of directors of a savings 
association or savings and loan holding company, not

[[Page 51273]]

nominated by management, is not required to provide prior notice or 
obtain a waiver, unless the savings association or savings and loan 
holding company is itself subject to the rule, e.g., it is in troubled 
condition. The OTS has clarified the rule as suggested by the 
commenter, in new Sec. 563.560(b).5
---------------------------------------------------------------------------

    \5\ See proposed Sec. 574.12(b).
---------------------------------------------------------------------------

    The OTS has a regulatory project underway that would reorganize, 
revise and streamline OTS regulations addressing directors, officers 
and employees. These regulations will eventually be consolidated into 
new subparts of part 563. Today's final rule implementing section 32 of 
the FDIA will be included in new subpart H of part 563. Accordingly, 
OTS has re-numbered the proposed provision Secs. 574.10 through 574.18 
to new subpart H provision Secs. 563.550 through 563.590. The final 
rule also includes technical changes to citations to part 574 contained 
in part 563f of OTS regulations. Other than the re-numbering, today's 
final rule is substantially identical to the March proposal.

III. Disposition of Existing Regulations

    The following chart gives an overview of the changes made to former 
Sec. 574.9.

----------------------------------------------------------------------------------------------------------------
          Revised provision                   Former provision                         Comments
----------------------------------------------------------------------------------------------------------------
Sec.  563.550........................  .............................  Added.
Sec.  563.555........................  Sec.  574.9(a)...............  Modified.
Sec.  563.560........................  Sec.  574.9(b), (c)(3) and     Significantly modified.
                                        (d)(1)(ii).
                                       Sec.  574.9(c)(1) and (2)....  Deleted.
Sec.  563.565........................  Sec.  574.9(d)(1)............  Modified.
Sec.  563.570........................  Sec.  574.9(d)(1) and (2)....  Modified and added.
Sec.  563.575........................  Sec.  574.9(d)(3) and (4)....  Significantly modified.
                                       Sec.  574.9(d)(5)............  Deleted.
Sec.  563.580........................  Sec.  574.9(d)(6)............  Modified.
Sec.  563.585........................  Sec.  574.9(b)(2), (d)(7) and  Significantly modified.
                                        (d)(9).
Sec.  563.590........................  Sec.  574.9(d)(8)............  Modified.
----------------------------------------------------------------------------------------------------------------

IV. Executive Order 12866

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

V. Regulatory Flexibility Act

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

VI. Paperwork Reduction Act

    There are no new information collection requirements contained in 
this final rule. The information collection requirements contained in 
this final rule are the same as those required in the form Interagency 
Notice of Change in Director and Senior Executive Officer,6 
which has been previously submitted to and approved by the Office of 
Management and Budget for review in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)) under OMB Control No. 1550-
0047.
---------------------------------------------------------------------------

    \6\ OTS Form 1624.
---------------------------------------------------------------------------

VII. 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, 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. The OTS has determined that 
the final rule will not result in expenditures by state, local, and 
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.

VIII. Effective Date

    Section 302 of the CDRIA requires that regulations that impose 
additional reporting, disclosure, or other new requirements take effect 
on the first day of the calendar quarter following publication of the 
rule unless, among other things, the agency determines, for good cause, 
that the regulations should become effective before that date. The OTS 
believes that an immediate effective date is appropriate since the 
final rule relieves existing regulatory burdens on savings associations 
and savings and loan holding companies. Further, the OTS believes that 
CDRIA does not apply because this final rule imposes no new burdens 
immediately on existing savings associations or savings and loan 
holding companies. For these reasons, the OTS believes that an 
immediate effective date is appropriate for this final rule.
    Section 553(d) of the Administrative Procedure Act (APA) requires 
an agency to publish a substantive rule at least 30 days before its 
effective date. Section 553(d) of the APA permits waiver of the 30-day 
delayed effective date requirement for, inter alia, good cause or where 
a rule relieves a regulatory restriction. The OTS further finds that 
the 30-day delayed effective date requirement may be waived because 
this final rule relieves regulatory restrictions on savings 
associations and savings and loan holding companies.

List of Subjects

12 CFR Part 563

    Accounting, Advertising, Conflict of interests, Crime, Currency, 
Holding companies, Investments, Reporting and recordkeeping 
requirements, Savings associations, Securities, Surety bonds.

12 CFR Part 563f

    Antitrust, Holding companies, Reporting and recordkeeping 
requirements, Savings associations.

12 CFR Part 574

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

[[Page 51274]]

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

PART 563--OPERATIONS

    1. The authority citation for part 563 is revised to read as 
follows:

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1820, 1828, 1831i, 3806; 42 U.S.C. 4106.

    2. Subpart H, consisting of Secs. 563.550 through 563.590, is added 
to part 563 to read as follows:

Subpart H--Notice of Change of Director or Senior Executive Officer

Sec.
563.550  What does this subpart do?
563.555  What definitions apply to this subpart?
563.560  Who must give prior notice?
563.565  What procedures govern the filing of my notice?
563.570  What information must I include in my notice?
563.575  What procedures govern OTS review of my notice for 
completeness?
563.580  What standards and procedures will govern OTS review of the 
substance of my notice?
563.585  When may a proposed director or senior executive officer 
begin service?
563.590  When will the OTS waive the prior notice requirement?

Subpart H--Notice of Change of Director or Senior Executive Officer


Sec. 563.550  What does this subpart do?

    This subpart implements 12 U.S.C. 1831i, which requires certain 
savings associations and savings and loan holding companies to notify 
the OTS before appointing or employing directors and senior executive 
officers.


Sec. 563.555  What definitions apply to this subpart?

    The following definitions apply to this subpart:
    Director means an individual who serves on the board of directors 
of a savings association or savings and loan holding company. This term 
does not include an advisory director who:
    (1) Is not elected by the shareholders;
    (2) Is not authorized to vote on any matters before the board of 
directors or any committee of the board of directors;
    (3) Provides only general policy advice to the board of directors 
or any committee of the board of directors; and
    (4) Has not been identified by the OTS in writing as an individual 
who performs the functions of a director, or who exercises significant 
influence over, or participates in, major policymaking decisions of the 
board of directors.
    Senior executive officer means an individual who holds the title or 
performs the function of one or more of the following positions 
(without regard to title, salary, or compensation): president, chief 
executive officer, chief operating officer, chief financial officer, 
chief lending officer, or chief investment officer. Senior executive 
officer also includes any other person identified by the OTS in writing 
as an individual who exercises significant influence over, or 
participates in, major policymaking decisions, whether or not hired as 
an employee.
    Troubled condition means:
    (1) A savings association that has a composite rating of 4 or 5, as 
defined in Sec. 516.3(c) of this chapter;
    (2) A savings and loan holding company that has an unsatisfactory 
rating under the OTS's holding company rating system, or that is 
informed in writing by the OTS that it has an adverse effect on its 
subsidiary savings association;
    (3) A savings association or savings and loan holding company that 
is subject to a capital directive, a cease-and-desist order, a consent 
order, a formal written agreement, or a prompt corrective action 
directive relating to the safety and soundness or financial viability 
of the savings association, unless otherwise informed in writing by the 
OTS; or
    (4) A savings association or savings and loan holding company that 
is informed in writing by the OTS that it is in troubled condition 
based on information available to the OTS.


Sec. 563.560  Who must give prior notice?

    (a) Savings association or savings and loan holding company. Except 
as provided under Sec. 563.590, you must notify the OTS at least 30 
days before adding or replacing any member of your board of directors, 
employing any person as a senior executive officer, or changing the 
responsibilities of any senior executive officer so that the person 
would assume a different senior executive position if:
    (1) You are a savings association and at least one of the following 
circumstances apply:
    (i) You do not comply with all minimum capital requirements under 
part 567 of this chapter;
    (ii) You are in troubled condition; or
    (iii) The OTS has notified you, in connection with its review of a 
capital restoration plan required under section 38 of the Federal 
Deposit Insurance Act or part 565 of this chapter or otherwise, that a 
notice is required under this subpart; or
    (2) You are a savings and loan holding company and you are in 
troubled condition.
    (b) Notice by individual. If you are an individual seeking election 
to the board of directors of a savings association or savings and loan 
holding company described in paragraph (a) of this section, and have 
not been nominated by management, you must either provide the prior 
notice required under paragraph (a) of this section or follow the 
process under Sec. 563.590(b).


Sec. 563.565  What procedures govern the filing of my notice?

    The procedures found in Sec. 516.1 of this chapter govern the 
filing of your notice under Sec. 563.560.


Sec. 563.570  What information must I include in my notice?

    (a) Content requirements. Your notice must include:
    (1) The information required under 12 U.S.C. 1817(j)(6)(A), and the 
information prescribed in the Interagency Notice of Change in Director 
or Senior Executive Officer and the Interagency Biographical and 
Financial Report which are available from OTS headquarters at the 
address in part 516 of this chapter; or from any OTS regional office;
    (2) Legible fingerprints of the proposed director or senior 
executive officer. You are not required to file fingerprints if, within 
three years prior to the date of submission of the notice, the proposed 
director or senior executive officer provided legible fingerprints as 
part of a notice filed with the OTS under 12 U.S.C. 1831i; and
    (3) Such other information required by the OTS.
    (b) Modification of content requirements. The OTS may require or 
accept other information in place of the content requirements in 
paragraph (a) of this section.


Sec. 563.575  What procedures govern OTS review of my notice for 
completeness?

    The OTS will first review your notice to determine whether it is 
complete.
    (a) If your notice is complete, the OTS will notify you in writing 
of the date that the OTS received the complete notice.
    (b) If your notice is not complete, the OTS will notify you in 
writing what additional information you need to submit, why we need the 
information, and when you must submit it. You must, within the 
specified time period, provide additional information or request that 
the OTS suspend processing of the notice. If you fail to act within the 
specified time period, the OTS may treat the notice as withdrawn

[[Page 51275]]

or may review the application based on the information provided.


Sec. 563.580  What standards and procedures will govern OTS review of 
the substance of my notice?

    The OTS will disapprove a notice if, pursuant to the standard set 
forth in 12 U.S.C. 1831i(e), the OTS finds that the competence, 
experience, character, or integrity of the proposed director or senior 
executive officer indicates that it would not be in the best interests 
of the depositors of the savings association or of the public to permit 
the individual to be employed by, or associated with, the savings 
association or savings and loan holding company. If the OTS disapproves 
a notice, it will issue a written notice that explains why the OTS 
disapproved the notice. The OTS will send the notice to the savings 
association or savings and loan holding company and the individual.


Sec. 563.585  When may a proposed director or senior executive officer 
begin service?

    (a) A proposed director or senior executive officer may begin 
service 30 days after the date the OTS receives all required 
information, unless:
    (1) The OTS notifies you that it has disapproved the notice; or
    (2) The OTS extends the 30-day period for an additional period not 
to exceed 60 days. If the OTS extends the 30-day period, it will notify 
you in writing that the period has been extended, and will state the 
reason for the extension. The proposed director or senior executive 
officer may begin service upon expiration of the extended period, 
unless the OTS notifies you that it has disapproved the notice during 
the extended period.
    (b) Notwithstanding paragraph (a) of this section, a proposed 
director or senior executive officer may begin service after the OTS 
notifies you, in writing, of its intention not to disapprove the 
notice.


Sec. 563.590  When will the OTS waive the prior notice requirement?

    (a) Waiver request. (1) An individual may serve as a director or 
senior executive officer before filing a notice under this subpart if 
the OTS issues a written finding that:
    (i) Delay would threaten the safety or soundness of the savings 
association;
    (ii) Delay would not be in the public interest; or
    (iii) Other extraordinary circumstances exist that justify waiver 
of prior notice.
    (2) If the OTS grants a waiver, you must file a notice under this 
subpart within the time period specified by the OTS.
    (b) Automatic waiver. An individual may serve as a director before 
filing a notice under this subpart, if the individual was not nominated 
by management and the individual submits a notice under this subpart 
within seven days after election as a director.
    (c) Subsequent OTS action. The OTS may disapprove a notice within 
30 days after the OTS issues a waiver under paragraph (a) of this 
section or within 30 days after the election of an individual who has 
filed a notice and is serving pursuant to an automatic waiver under 
paragraph (b) of this section.

PART 563f--MANAGEMENT OFFICIAL INTERLOCKS

    3. The authority citation for part 563f continues to read as 
follows:

    Authority: 12 U.S.C. 3201-3208.

    4. Section 563f.2 is amended by revising paragraph (l)(1)(iii) to 
read as follows:


Sec. 563f.2  Definitions.

* * * * *
    (l) Management official. (1) * * *
    (iii) A senior executive officer as that term is defined in 
Sec. 563.555 of this chapter;
* * * * *
    5. Section 563f.5 is amended by revising paragraphs (b)(2)(i) and 
(b)(2)(ii) to read as follows:


Sec. 563f.5  Regulatory Standards exemption.

* * * * *
    (b) * * *
    (2) * * *
    (i) That official is permitted by OTS to serve as a director or 
senior executive officer of that institution pursuant to Sec. 563.585 
of this chapter; and
    (ii) The institution had operated for less than two years, was not 
in compliance with minimum capital requirements, or otherwise was in 
``troubled condition'' as defined in Sec. 563.555 of this chapter at 
the time the service under Sec. 563.585 of this chapter was permitted.
* * * * *
    6. Section 563f.6 is amended by revising paragraphs (b)(1) and 
(b)(2) to read as follows:


Sec. 563f.6  Management Consignment exemption.

* * * * *
    (b) * * *
    (1) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(3) of 
this section if that official is permitted by the OTS to serve as a 
director or senior executive officer of that institution pursuant to 
Sec. 563.585 of this chapter and the institution had operated for less 
than two years at the time the service under Sec. 563.585 of this 
chapter was permitted; and
    (2) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(4) of 
this section if that official is permitted by the OTS to serve as a 
director or senior executive officer of that institution pursuant to 
Sec. 563.585 of this chapter and the institution was not in compliance 
with minimum capital requirements or otherwise was in ``troubled 
condition'' as defined under Sec. 563.555 of this chapter at the time 
service under Sec. 563.585 of this chapter was permitted.
* * * * *

PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS

    7. The authority citation for part 574 is revised to read as 
follows:

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


Sec. 574.9  [Removed]

    8. Section 574.9 is removed.

    Dated: September 18, 1998.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-25633 Filed 9-24-98; 8:45 am]
BILLING CODE 6720-01-U