[Federal Register Volume 66, Number 89 (Tuesday, May 8, 2001)]
[Rules and Regulations]
[Pages 23151-23153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11572]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 8

[Docket No. 01-08]
RIN 1557-AB90


Assessment of Fees

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

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
amending 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 
rule applies in the same way to Federal branches and agencies and 
District of Columbia banks.

EFFECTIVE DATE: June 7, 2001.

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

SUPPLEMENTARY INFORMATION:

Background

    The OCC charters, regulates, and supervises more than 2,200 
national banks, accounting for nearly 60 percent of the nation's 
banking assets, as well as 58 Federal branches and agencies of foreign 
banks in the United States. 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 of our regulations, the OCC currently 
assesses national banks and Federal branches and agencies according to 
a formula based on factors that include a bank's asset size, its 
condition, and whether it is the ``lead'' bank or ``non-lead'' bank \1\ 
among national banks in a holding company.\2\ 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).
    \2\ Independent trust banks are also assessed based on the 
amount of trust assets those banks manage. See 65 FR 75859 (December 
5, 2000).
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    In its current form, section 8.6(a) refers only to fees for a 
special examination of a national bank or its affiliate.\3\ 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 performance of 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.'' 
\4\
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    \3\ 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.
    \4\ 12 U.S.C. 1867(c). Thus, as would be the case if the 
activity were performed by the bank itself, the OCC's authority to 
examine the activity does not lapse if the activity is not being 
conducted at the same time the OCC undertakes an examination.
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    Banks historically have used third parties to perform certain 
activities--payment processing, for example. Some banks, however, have 
recently entered new lines of business or introduced novel, and 
potentially high-risk, 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 service provider's interest 
in, and connection with, these transactions are significantly greater 
than that of the bank. The bank may nonetheless be exposed to higher 
than normal levels of risk. 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.\5\
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    \5\ 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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    On December 1, 2000,\6\ we proposed to amend 12 CFR 8.6 to make 
clear our authority to assess banks for our

[[Page 23152]]

supervision of third party servicers. We also proposed to clarify our 
authority to charge Federal branches and agencies a fee for conducting 
special examinations. For the reasons described in the following 
discussion, we adopt the rule substantially as proposed, with a 
clarification suggested by one commenter.
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    \6\ 65 FR 75196 (December 1, 2000).
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Proposed Rule and Comments Received

    The proposal stated that the OCC may charge a special examination 
or investigation fee to national banks when examination or 
investigation of the activities of a third party service provider is 
warranted by the high risk or unusual 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. The proposed rule also applied to Federal branches and 
agencies. In addition, the proposal permitted 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 OCC received two comments on this proposal. The first, from a 
trade association for community banks, suggested that the OCC identify 
in advance, in the final rule, those instances in which OCC would 
conduct special examinations and investigations. The commenter 
suggested that this approach would provide more predictability as to 
when the OCC would charge the fee that was proposed.
    The circumstances under which the OCC will conduct special 
examinations or investigations of third parties may differ. 
Accordingly, the OCC is unable to identify in advance every situation 
that may warrant use of this authority or imposition of a fee on the 
bank. The final rule addresses this issue highlighted by the commenter, 
however, by describing the factors the OCC will consider in determining 
whether to impose fees for examination of a bank's third party service 
providers. In addition, the OCC will provide banks with notice before 
we begin a special examination of a service provider for which the fee 
will be imposed.\7\
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    \7\ Banks may indemnify themselves against this cost by 
including in their contractual arrangements with service providers 
terms that obligate the service provider to reimburse the bank in 
the event the OCC conducts an examination or investigation of the 
service provider and charges the bank the fee described here.
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    The second commenter, a trade association for check cashing 
centers, suggested that the proposal might discourage relationships 
between their members and national banks. The commenter noted that 
check cashing organizations serve local communities by making funds 
available to consumers quickly. This rulemaking does not address the 
merits of the check cashing business. We note that the Bank Service 
Company Act provides pre-existing authority for the OCC to examine 
check cashers that have entered into particular relationships with 
national banks. The final rule does not alter the nature or extent of 
that oversight. Rather, it clarifies the OCC's authority to assess 
banks for OCC's examination of third parties so that the cost 
associated with examining them is borne principally by the banks with 
whom they have relationships, rather than by the national banking 
system as a whole.

Final Rule

    The final rule amends section 8.6(a) to state that the OCC may 
assess a national 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 and 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 will 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).\8\ The final rule also states that the factors the OCC will 
consider in determining whether imposition of a fee for examination of 
a bank's third party service providers is warranted are (1) the high 
risk or unusual nature of the activities conducted by the service 
provider for the banks; (2) the significance to the bank's operations 
and income of the activities conducted by the service provider for the 
banks; and (3) the extent to which the bank has sufficient systems, 
controls, and personnel to adequately monitor, measure, and control 
risks arising from activities conducted by the service provider for the 
bank.
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    \8\ See 12 CFR 8.8.
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    The final rule also amends section 8.6(a) to clarify that the OCC 
may charge a fee 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 national banks, except as otherwise specifically provided by 
statute.\9\ 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. The final rule amends section 8.6 to 
make our authority to assess such a fee explicit. The OCC will state 
the amount of these fees in the Notice of Fees.
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    \9\ 12 U.S.C. 3102(b).
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    The final rule amends the title of part 8 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 final rule 
removes from the title references to the types of regulated entities 
covered by the regulation.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires federal agencies to 
certify that a final rule will not have a significant impact on a 
substantial number of small entities. See 5 U.S.C. 603, 605. On the 
basis of the information currently available, the OCC is of the opinion 
that this final rule is unlikely to have a significant impact on a 
substantial number of small entities, within the meaning of those 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 when the examination or investigation is warranted by the 
level of 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.

Executive Order 12866

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

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

[[Page 23153]]

consider a reasonable number of regulatory alternatives before 
promulgating a rule. The OCC 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 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 amends 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 heading 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 an entity 
with respect to its performance of activities described in section 7(c) 
of the Bank Service Company Act (12 U.S.C. 1867(c)), if the OCC 
determines that assessment of the fee is warranted with regard to a 
particular bank because of the high risk or unusual nature of the 
activities performed; the significance to the bank's operations and 
income of the activities performed; or the extent to which the bank has 
sufficient systems, controls, and personnel to adequately monitor, 
measure, and control risks arising from such activities;
    (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: April 26, 2001.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 01-11572 Filed 5-7-01; 8:45 am]
BILLING CODE 4810-33-P