[Federal Register Volume 66, Number 83 (Monday, April 30, 2001)]
[Proposed Rules]
[Pages 21288-21290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-10618]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 502

[No. OTS-2001-30]
RIN 1550-AB47


Assessments and Fees

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 
amend its assessments rule to more accurately reflect the increased 
costs of supervising 3-, 4-, and 5-rated institutions. OTS proposes to 
set the condition component of its assessments regulation at 50 percent 
of the size component for 3-rated institutions, and 100 percent of the 
size component for 4- and 5-rated institutions.

DATES: Comments must be received on or before May 30, 2001.

[[Page 21289]]


ADDRESSES: Mail: Send comments to Regulation Comments, 
Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, 
NW., Washington, DC 20552, Attention Docket No. 2001-30.
    Delivery: Hand deliver comments to the Guard's Desk, East 
Lobby Entrance, 1700 G Street, NW., from 9:00 a.m. to 4:00 p.m. on 
business days, Attention Regulation Comments, Chief Counsel's Office, 
Docket No. 2001-30.
    Facsimiles: Send facsimile transmissions to FAX Number 
(202) 906-6518, Attention Docket No. 2001-30.
    E-Mail: Send e-mails to ``[email protected]'', 
Attention Docket No. 2001-30, and include your name and telephone 
number.
    Public Inspection: Comments and the related index will also 
be posted on the OTS Internet Site at ``www.ots.treas.gov''. In 
addition, interested persons may inspect comments at the Public 
Reference Room, 1700 G St. NW., by appointment. To make an appointment 
for access, call (202) 906-5922, send an e-mail to 
[email protected], or send a facsimile transmission to 
(202) 906-7755. (Prior notice identifying the materials you will be 
requesting will assist us in serving you.) Appointments will be 
scheduled on business days between 10:00 a.m. and 4:00 p.m. In most 
cases, appointments will be available the next business day following 
the date a request is received.

SUPPLEMENTARY INFORMATION:

I. Description of Proposed Rule

    OTS is charged with examining, regulating, and providing for the 
safe and sound operation of savings associations.\1\ OTS funds its 
operations through assessments on savings associations and through 
other fees. The Home Owners' Loan Act (HOLA) specifically authorizes 
the Director to assess such fees to fund its direct and indirect 
expenses, as the Director deems necessary or appropriate.\2\
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    \1\ 12 U.S.C. 1463(a).
    \2\ 12 U.S.C. 1467(k). See also 12 U.S.C. 1462a, 1463, 
1467(a), 1467a.
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    Under 12 CFR part 502, OTS determines each institution's assessment 
by adding together three components reflecting the size, condition and 
complexity of an institution. OTS computes the size component by 
multiplying an institution's total assets (as reported on the Thrift 
Financial Report (TFR)) by the applicable assessment rate. The 
condition component is a percentage of the size component and is 
imposed on institutions that have a 3-, 4-, or 5-composite rating under 
the Uniform Financial Institutions Rating System (UFIRS) (also referred 
to as the CAMELS rating system).\3\ OTS imposes a complexity component 
if: (1) A thrift administers more than $1 billion in trust assets; (2) 
the outstanding balance of assets fully or partially covered by 
recourse obligations or direct credit substitutes exceeds $1 billion; 
or (3) the thrift services over $1 billion of loans for others. OTS 
calculates the complexity component by multiplying set rates times the 
amounts by which an association exceeds each particular threshold.
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    \3\ The UFIRS rating system was developed jointly by all of the 
Federal banking regulators in an effort to establish a uniform 
system using standard criteria and definitions for rating in six 
different rating areas: capital, assets, management, earnings, 
liquidity, and sensitivity to market risk. See 61 FR 67021 
(December 19, 1996). UFIRS is an effective supervisory tool for 
evaluating the soundness of financial institutions on a uniform 
basis, and for identify those institutions requiring special 
supervisory attention or concern.
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    Today's proposed rule would revise how OTS calculates the condition 
component. Under the current rules, the condition component equals 25 
percent of the thrift's size component for 3-rated institutions, and 50 
percent of the thrift's size component for 4- or 5-rated 
institutions.\4\ This premium was designed to reflect the greater 
supervisory resources demanded by these lower-rated institutions.
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    \4\ OTS has assessed a 50 percent premium on 4- and 5-rated 
institutions since 1990. 55 FR 34519 (August 23, 1990). OTS began to 
impose a 25 percent premium on 3-rated institutions in 1998. 63 FR 
65663 (November 30, 1998).
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    OTS data shows that there is a significant increase in the 
supervisory demands on the regulator once an institution's rating moves 
to a ``3,'' and an even greater increase when a thrift's rating moves 
to a ``4'' or a ``5.'' OTS experience since 1998, when it last adjusted 
this component, has shown that the current premium for these 
institutions does not adequately compensate OTS for the additional 
demands on its resources given the substantial level of supervision 
required by these institutions. Accordingly, OTS proposes to raise the 
condition component to 50 percent for 3-rated institutions and 100 
percent for 4- and 5-rated institutions.\5\
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    \5\ OCC has proposed a similar increase to its surcharge on 3-, 
4- and 5-rated national banks. See 66 FR 17821 (April 4, 
2001).
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    OTS plans to expeditiously publish a final rule in this proceeding. 
OTS anticipates that the final rule will be effective for the July 31, 
2001 semi-annual assessment.

II. Comment Solicitation

    Under the current regulation and the proposed rule, the condition 
component is set at a percentage of the size component, which reflects 
total assets reported on the TFR. Currently, OTS does not directly 
consider the complexity of an institution's operations in its 
calculation of the condition component.\6\ It is concerned that the 
complex off-balance sheet portfolio of an institution with a 3-, 4- or 
5-rating may impose significantly greater demands on the agency's 
supervisory resources. Accordingly, OTS specifically seeks comment 
whether it should consider the complexity of an institution's 
operations in its calculation of the condition component. OTS also 
seeks comment on how it should calculate the assessment if it elects to 
factor complexity into the condition component. Should OTS, for 
example, multiply the amount of the existing complexity component by 50 
or 100 percent, or use some other calculation?
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    \6\ As noted above, however, OTS does separately consider the 
complexity of an institution's operations under the complexity 
component.
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    OTS also seeks comment on all other aspects of this rule. In 
addition, section 722 of the Gramm-Leach-Bliley Act requires federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. OTS also invites your comments 
on how to make this proposed rule easier to understand. For example:
    Do we clearly state the requirements in the rule? If not, how could 
the rule be more clearly stated?
    Does the rule contain technical language or jargon that is not 
clear? If so, what language requires clarification?
    Would a different format make the rule easier to understand? If so, 
what changes to the format would make the rule easier to understand?
    What else could we do to make the rule easier to understand?

III. Executive Order 12866

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

IV. Regulatory Flexibility Act Analysis

    Under section 605(b) of the Regulatory Flexibility Act of 1980,\7\ 
OTS has evaluated the effects this proposed rulemaking would have on 
small businesses, small organizations, and small governmental 
jurisdictions. As required, OTS has prepared the

[[Page 21290]]

following initial regulatory flexibility analysis.
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    \7\ 5 U.S.C. 605(b).
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A. Reasons for and Objectives of the Proposed Rule; Legal Basis for the 
Proposed Rule

    OTS funds its operations through assessments on savings 
associations and through other fees. The Director of OTS is authorized 
by the HOLA to impose assessments.\8\ OTS is specifically authorized to 
assess such fees to fund the direct and indirect expenses of OTS, as 
the Director deems necessary or appropriate. 12 U.S.C. 1467(k).
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    \8\ 12 U.S.C. 1462a, 1463, 1467, 1467a.
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    As described above, OTS has found that there is significant 
increase in supervisory demands on the agency when an institution's 
rating moves to a ``3'' rating, and an even greater increase when a 
thrift's rating moves to a ``4'' or a ``5'' rating. Accordingly, the 
current OTS assessments regulation imposes a premium on these 
institutions to reflect the increased supervision costs.
    OTS experience since 1998, when it last revised its condition 
component, has shown that the current premium for 3-, 4-, and 5-rated 
institutions does not adequately compensate it for the additional 
demands on its resources. Therefore, OTS is attempting, through this 
proposed rulemaking, to more closely associate its costs and 
assessments.

B. Effect of the Proposed Rule on Small Savings Associations

    The proposed rule could affect small savings associations. The 
proposal would have no effect on small businesses or small 
organizations other than small savings associations, and would not 
affect small governmental jurisdictions. Small savings associations are 
generally defined, for Regulatory Flexibility Act purposes, as those 
with assets under $100 million.\9\
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    \9\ 13 CFR 121.201 Division H (1998).
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    As discussed above, the proposed rule would impose a premium equal 
to 50 percent of an association's size component for each 3-rated 
association, and a 100 percent of an association's size component on 
each 4- or 5-rated institution. OTS would assess this premium 
regardless of the institution's size. As of April 10, 2001, 43 savings 
associations were 3-rated and had assets under $100 million. Currently, 
the semi-annual assessment for a 3-rated institution with $100 million 
in assets is $19,380, exclusive of any complexity component. Under the 
proposed rule, this institution's semi-annual assessment would be 
$23,256--an increase of $3,876. Other 3-rated small savings 
associations would see their assessments increase a lesser amount 
depending on their asset size.
    As of April 10, 2001, six institutions were 4- or 5-rated and had 
assets under $100 million. Currently, the semi-annual assessment for a 
4- or 5-rated institution with $100 million in assets is $23,256, 
exclusive of any complexity component. Under the proposed rule, this 
institution's semi-annual assessment would be $31,008--an increase of 
$7,752. Other 4- and 5-rated institutions would see their assessments 
increase a lesser amount depending on their asset size.

C. Alternatives

    As discussed earlier, 3-, 4- and 5-rated savings associations 
require more supervisory attention than 1- or 2-rated associations. 
Therefore, OTS has three alternatives: impose extra assessments on all 
3-, 4- and 5-rated associations; impose extra assessments on some sub-
category of 3-, 4- and 5-rated institutions; or require 1- and 2-rated 
institutions to subsidize these extra supervisory costs of 3-, 4- and 
5-rated institutions.
    OTS believes it is most equitable to match assessments with OTS's 
supervisory costs as far as possible. Therefore, it proposes to 
increase the amount of the condition component for 3-, 4-, and 5-rated 
associations. OTS believes that requiring these institutions to pay for 
their extra supervisory costs would provide an incentive for those 
institutions to improve their condition and their ratings. OTS also 
believes that the proposed condition component best accomplishes OTS's 
objective of closely tailoring assessment rates to OTS's increased 
costs in supervising 3-, 4- and 5-rated institutions.

D. Other Matters

    The proposed rule would impose no reporting, recordkeeping, or 
other compliance requirements. Assessments would continue to be based 
on Thrift Financial Reports that savings associations otherwise must 
file with OTS. OTS would continue to use its current collection 
procedures. Therefore, the proposed rule would impose no new or 
additional reporting, recordkeeping, or compliance requirements.
    There are no federal rules that duplicate, overlap, or conflict 
with this proposed rule.

V. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (Unfunded Mandates Act), requires an agency to 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. 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 502

    Assessments, Federal home loan banks, Reporting and recordkeeping 
requirements, Savings associations.

    Accordingly, the Office of Thrift Supervision proposes to amend 
part 502, chapter V, title 12, Code of Federal Regulations as set forth 
below.

PART 502--ASSESSMENTS AND FEES

    1. The authority citation for part 502 continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1467, 1467a.
    2. Section 502.20 is revised to read as follows:


Sec. 502.20  How does OTS determine my condition component?

    OTS uses the following chart to determine your condition component.

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                                                 Then your condition
       If your component rating is:                 component is:
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1 or 2....................................  Zero.
3.........................................  50 percent of your size
                                             component.
4 or 5....................................  100 percent of your size
                                             component.
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    Dated: April 20, 2001.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 01-10618 Filed 4-27-01; 8:45 am]
BILLING CODE 6720-01-U