[Federal Register Volume 65, Number 232 (Friday, December 1, 2000)]
[Proposed Rules]
[Pages 75196-75198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30600]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 8

[Docket No. 00-29]
RIN 1557-AB90


Assessment of Fees; National Banks; District of Columbia Banks

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) proposes 
to amend its assessment regulation to clarify that the OCC has 
authority to charge a national bank when the OCC conducts a special 
examination of a third party that provides services to the bank. The 
proposal applies in the same way to a District of Columbia bank and to 
a Federal branch or agency.

DATES: Comments must be received by January 2, 2001.

ADDRESSES: Please direct your comments to: Communications Division, 
Office of the Comptroller of the Currency, 250 E Street, SW., Third 
Floor, Washington, DC 20219, Attention: Docket No. 00-29; Fax number 
(202) 874-5274 or Internet address: [email protected]. 
Comments may be inspected and photocopied at the OCC's Public Reference 
Room, 250 E Street, SW., Washington, DC, between 9 a.m. and 5 p.m. on 
business days. You can make an appointment to inspect comments by 
calling (202) 874-5043.

FOR FURTHER INFORMATION CONTACT: Mitchell E. Plave, Senior Attorney, 
Legislative and Regulatory Activities Division, (202) 874-5090.

[[Page 75197]]


SUPPLEMENTARY INFORMATION:

I. Background and Discussion of Proposal

    The OCC charters, regulates, and supervises more than 2,300 
national banks and 58 Federal branches and agencies of foreign banks in 
the United States, accounting for nearly 60 percent of the nation's 
banking assets. Its mission is to ensure a safe, sound, and competitive 
national banking system that supports the citizens, communities, and 
economy of the United States.
    The OCC funds the activities it undertakes to carry out this 
mission through assessments and fees charged to the banks it 
supervises. The National Bank Act authorizes the OCC to collect 
``assessments, fees, or other charges as necessary or appropriate to 
carry out the responsibilities of the office of the Comptroller.'' 12 
U.S.C. 482 (Supp. 1999). The statute requires that our charges ``be set 
to meet the Comptroller's expenses in carrying out authorized 
activities.'' Id. Under part 8, the OCC currently assesses national 
banks, District of Columbia banks, and Federal branches and agencies 
according to a formula based on factors that include a bank's size, 
condition, and whether it is the ``lead'' bank or ``non-lead'' bank 
among national banks in a holding company.\1\ The OCC also has the 
authority to assess a fee for special examinations and investigations 
of these banks. 12 CFR 8.6(a).
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    \1\ A ``lead bank'' is the largest national bank controlled by a 
company, based on a comparison of the total assets held by each 
national bank controlled by that company as reported in each bank's 
Call Report. 12 CFR 8.2(a)(6)(ii)(A).
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    In its current form, section 8.6(a) refers only to fees for a 
special examination of a national bank, a District of Columbia bank, or 
an affiliate of either.\2\ It does not reflect the OCC's authority to 
assess a national bank in connection with special examinations of any 
of the bank's service providers. The Bank Service Company Act provides 
that entities that perform services for national banks (or for other 
entities supervised by the OCC, including subsidiaries subject to 
examination by the OCC) ``shall be subject to regulation and 
examination by [the OCC] to the same extent as if such services were 
being performed by the bank itself on its own premises.'' \3\
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    \2\ 12 CFR 8.6(a) also permits the OCC to assess a fee for 
fiduciary examinations and examinations made pursuant to 12 CFR part 
5.
    \3\ 12 U.S.C. 1867(c).
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    While banks historically have used third parties to perform certain 
activities--payment processing, for example--some banks are entering 
new lines of business or introducing novel and potentially high-risk 
new products, relying substantially on third party service providers to 
enable the bank to participate in or to conduct those activities. These 
include, for instance, certain types of credit card programs, sub-prime 
lending, check cashing, and other specialized types of lending. In many 
instances, the interest of the service provider in transactions it 
originates is significantly greater than that of the bank. This 
increased reliance on service providers will result in an increased 
need for the OCC to examine or investigate third party service 
providers in order to evaluate the effect that third-party activities 
and relationships have on the safety and soundness of the bank.\4\
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    \4\ The OCC has recently noted the risks that may be associated 
with using service providers in a recent Advisory Letter and urged 
national banks to focus on conducting proper due diligence before 
entering into third party arrangements and on maintaining effective 
oversight and controls during the third party relationship. See OCC 
Advisory Letter No. 2000-9, ``Third Party Risk,'' August 29, 2000.
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    The OCC would charge a special examination or investigation fee 
when examination or investigation of the activities of a third party 
service provider is warranted by the high risk or unusual or novel 
nature of the activities conducted by the service provider for the 
bank, or when the OCC believes that the bank has insufficient systems, 
controls, or personnel to adequately monitor, measure, and control the 
risks associated with the activity. Thus, for example, the OCC would 
not impose the fee in the case of examinations of service providers 
that provide servicing and processing for a bank's ongoing transactions 
with its customers. The OCC also would plan to inform the bank, when 
commencing a special examination or investigation or expanding another 
examination, when we expect to charge a special examination or 
investigation fee. \5\
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    \5\ In light of this proposal, national banks using third party 
service providers should consider including provisions in their 
contractual arrangements with such service providers obligating the 
providers to indemnify or reimburse the bank for any assessments 
levied on the bank in connection with an examination of the 
provider.
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    Accordingly, we propose to amend our regulation to make explicit 
our authority to assess a national bank (or other entity supervised by 
the OCC) for an examination or investigation of any of its service 
providers.\6\ The assessment authority extends to District of Columbia 
banks and to Federal branches and agencies as well as to national 
banks. In addition, the proposal permits the OCC to impose the 
assessment if we examine or investigate third party providers of 
services to subsidiaries subject to examination by the OCC. The 
proposal amends section 8.6(a) to state that the OCC may assess a 
national bank, a District of Columbia bank, or a Federal branch or 
agency, a fee for the examination or investigation of an entity that 
performs services for the institution or its subsidiary that is subject 
to OCC examination and regulation pursuant to the Bank Service Company 
Act (12 U.S.C. 1867(c)). The fees for special exams and investigations 
would be based on an hourly rate, with the hourly rate provided each 
year by the OCC in its Notice of Comptroller of the Currency Fees 
(Notice of Fees). \7\
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    \6\ The special investigations covered by Sec. 8.6 includes 
investigations brought under 12 CFR part 19.
    \7\ See 12 CFR 8.8.
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    We also propose to amend section 8.6(a) to clarify that fees may be 
charged for conducting special examinations and investigations of 
Federal branches and agencies of foreign banks or their affiliates. 
Federal branches and agencies are subject to the same ``duties, 
restrictions, penalties, liabilities, conditions, and limitations'' 
that apply to national banks, except as otherwise specifically provided 
by statute. \8\ Current section 8.6 does not address the assessment of 
a fee for the special examination or investigation of Federal branches 
and agencies or their affiliates. Proposed section 8.6 makes our 
authority to assess such a fee explicit. The amount of these fees would 
be provided in the Notice of Fees.
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    \8\ 12 U.S.C. 3102(b).
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    Finally, the title of part 8 would be amended to more accurately 
reflect the scope of the regulation. While part 8 includes Federal 
branches and agencies within the scope of the rule, only national banks 
and District of Columbia banks are listed in the title. The proposal 
removes from the title references to the types of regulated entities 
covered by the regulation.

II. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires federal agencies 
either to certify that a proposed rule would not, if adopted in final 
form, have a significant impact on a substantial number of small 
entities or to prepare an initial regulatory flexibility analysis 
(IRFA) of the proposal and publish the analysis for comment. See 5 
U.S.C. 603, 605. On the basis of the information currently available, 
the OCC is of the opinion that this proposal, if it is adopted in final 
form, is unlikely to have a significant impact on a substantial number 
of small entities, within the meaning of those

[[Page 75198]]

terms as used in the RFA. As previously noted, a national bank would be 
assessed a fee for the examination or investigation of its service 
provider only when the examination or investigation is warranted by the 
high risk or unusual or novel nature of the activities conducted by the 
service provider for the bank or when the OCC believes that the bank 
has insufficient systems, controls, or personnel to adequately monitor, 
measure, and control the risks associated with the activity. As a 
result, the OCC believes that the fees will not be imposed on a 
substantial number of small entities. Commenters are invited to provide 
the OCC with any information they may have about the likely 
quantitative effects of the proposal.

III. Executive Order 12866

    The OCC has determined that this proposal is not a significant 
regulatory action under Executive Order 12866.

IV. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency 
prepare a budgetary impact statement before promulgating any rule 
likely to result in a Federal mandate that may result in the 
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. The OCC has determined that the proposed rule will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of $100 million or more in any one year. Accordingly, this 
rulemaking is not subject to section 202 of the Unfunded Mandates Act.

List of Subjects in 12 CFR Part 8

    National banks.

Authority and Issuance

    For reasons set forth in the preamble, the OCC proposes to amend 
part 8 of Chapter I of title 12 of the Code of Federal Regulations as 
follows:

PART 8--ASSESSMENT OF FEES

    1. The authority citation for part 8 is revised to read as follows:

    Authority: 12 U.S.C. 93a, 481, 482, 1867, 3102, and 3108; 15 
U.S.C. 78c and 78l; and 26 D.C. Code 102.

    2. The title of part 8 is revised to read as set forth above.
    3. Section 8.6 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec. 8.6  Fees for special examinations and investigations.

    (a) Fees. Pursuant to the authority contained in 12 U.S.C. 481 and 
482, the Office of the Comptroller of the Currency assesses a fee for:
    (1) Examining the fiduciary activities of national and District of 
Columbia banks and related entities;
    (2) Conducting special examinations and investigations of national 
banks, District of Columbia banks, and Federal branches or Federal 
agencies of foreign banks;
    (3) Conducting special examinations and investigations of any 
entity subject to regulation and examination by the OCC pursuant to the 
Bank Service Company Act (12 U.S.C. 1867(c));
    (4) Conducting special examinations and investigations of 
affiliates of national banks, District of Columbia banks, and Federal 
branches or Federal agencies of foreign banks; and
    (5) Conducting examinations and investigations made pursuant to 12 
CFR Part 5, Rules, Policies, and Procedures for Corporate Activities.
* * * * *

    Dated: October 18, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-30600 Filed 11-30-00; 8:45 am]
BILLING CODE 4810-33-P