[Federal Register Volume 66, Number 93 (Monday, May 14, 2001)]
[Rules and Regulations]
[Pages 24263-24264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11993]



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 Rules and Regulations
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  Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Rules and 
Regulations  

[[Page 24263]]



FEDERAL HOUSING FINANCE BOARD

12 CFR Part 918

[No. 2001-06]
RIN 3069-AB05


Maintenance of Effort--Minimum Number of Annual Bank Board of 
Directors Meetings

AGENCY: Federal Housing Finance Board.

ACTION: Interim final rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending 
the maintenance of effort provision of its regulations to eliminate the 
three-year averaging requirement and to reduce the required minimum 
number of in-person board of directors meetings that a Federal Home 
Loan Bank (Bank) must hold annually to six meetings.

DATES: The interim final rule shall become effective on May 14, 2001. 
The Finance Board will accept written comments on the interim final 
rule on or before June 13, 2001.

ADDRESSES: Address written comments to Elaine L. Baker, Secretary to 
the Board, by regular mail at the Federal Housing Finance Board, 1777 F 
Street, NW., Washington, DC 20006. Comments will be available for 
inspection at this address.

FOR FURTHER INFORMATION CONTACT: Scott L. Smith, Acting Director, at 
(202) 408-2991, Patricia L. Sweeney, Program Analyst, at (202) 408-
2872, Office of Policy, Research, and Analysis; or Sharon B. Like, 
Senior Attorney-Advisor, at (202) 408-2930, Thomas Hearn, Senior 
Attorney-Advisor, at (202) 408-2976, Office of the General Counsel; or 
by regular mail at the Federal Housing Finance Board, 1777 F Street, 
NW., Washington, DC 20006. A telecommunications device for deaf persons 
(TDD) is available at (202) 408-2579.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

    The Gramm-Leach-Bliley Act (GLB Act) amended section 7(i) of the 
Federal Home Loan Bank Act (Bank Act) (12 U.S.C. 1427(i)) by imposing 
specific limits on annual compensation for the Chairperson, Vice 
Chairperson, and other members of a Bank's board of directors. See GLB 
Act, Sec. 606(b), Pub. L. No. 106-102, 113 Stat. 1338 (Nov. 12, 1999). 
Because the new statutory limits generally would result in most 
directors receiving less compensation than allowed under the then 
existing Finance Board regulation, for safety and soundness reasons, 
the Finance Board included in its interim final rule implementing the 
new statutory limits a requirement that each Bank's board of directors 
continue to maintain its level of oversight of the management of the 
Bank (maintenance of effort standard). The interim final rule further 
required that, consistent with this maintenance of effort standard, 
each Bank's board of directors must hold no fewer in-person meetings in 
any year than it held on average over the immediately preceding three 
years (three-year averaging requirement). See 64 FR 71275 (Dec. 21, 
1999).
    In the SUPPLEMENTARY INFORMATION section of the final rule that 
finalized the interim final rule, the Finance Board recognized that a 
pure averaging requirement incorporates the vagaries of timing into the 
calculation of the minimum meetings requirement for a particular Bank. 
See 65 FR 13663, 13664 (March 14, 2000). For that reason, in order to 
reflect the operational reality at the Banks regarding the average 
number of meetings held over the preceding three years, the Finance 
Board revised the minimum meetings requirement in Sec. 918.7(a) of the 
final rule to the lesser of: (1) nine; or (2) the three-year averaging 
requirement. See id. In addition, Sec. 918.7(b) of the final rule 
clarified that a Bank could apply to the Finance Board for a waiver of 
the minimum meetings requirement pursuant to the procedures of 12 CFR 
part 907. See 12 CFR 918.7(b).

II. Analysis of Interim Final Rule

    Since the maintenance of effort standard was adopted, the Finance 
Board has received several requests from Banks for waivers under 
Sec. 918.7(b) to hold fewer annual in-person board of directors 
meetings than mandated by their three-year averaging requirement. Two 
Banks, in particular, have argued that they would be able to more 
efficiently and effectively conduct their business by holding only six 
annual in-person board meetings. The Banks indicated that they would be 
able to continue to maintain their level of oversight over the 
management of the Banks by conducting more business at fewer, but 
longer, board meetings, and/or placing greater reliance on board 
committees for the conduct of board business. The Banks noted that the 
three-year averaging requirement creates a standard that varies among 
the Banks. For example, one Bank, based on its three-year averaging 
requirement, already holds only six in-person board meetings annually.
    Based on the experience with the minimum meetings requirement over 
the past year, the Finance Board is persuaded that the three-year 
averaging requirement should be eliminated from Sec. 918.7(a)(2). In 
addition, based on the Banks' arguments that they can operate more 
efficiently and effectively, while continuing to maintain their level 
of oversight of the management of the Bank, with six annual in-person 
board meetings, the Finance Board is persuaded that it would be 
reasonable to reduce the minimum of nine meetings in Sec. 918.7(a)(1) 
to six meetings.\1\
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    \1\ Of course, a Bank's board may, in its discretion, continue 
to consider its three-year average, along with other factors, in 
determining it annual number of meetings, provided that number is no 
less than six.
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    The Finance Board also surveyed the number of board of directors 
meetings held in 1999 by 12 bank holding companies with total assets 
ranging from $11.0 billion to $99.8 billion, four thrift institution 
holding companies with total assets ranging from $35 billion to $186.5 
billion, and two housing Government-Sponsored Enterprises (GSEs)--the 
Federal National Mortgage Association (Fannie Mae) and the Federal Home 
Loan Mortgage Corporation (Freddie Mac)--with total assets of $575.2 
billion and $386.7 billion, respectively. In 1999, the total assets of 
the 12 Banks ranged from $24.4 billion to $115.9 billion. The number of 
directors on the boards of the financial institution holding companies, 
Fannie Mae and Freddie Mac generally ranged from 14 to 18, which is

[[Page 24264]]

comparable in size to the number of directors serving on the boards of 
the Banks. For only two of the bank holding companies, the board was 
comprised of 12 directors, and for a third bank holding company, the 
board was comprised of 21 directors. The number of board meetings for 
the bank holding companies ranged from 4 to 12, averaging 7.33 meetings 
in 1999. The number of board meetings for the thrift institution 
holding companies ranged from 4 to 9, averaging 7.00 meetings in 1999. 
Fannie Mae held 8 board meetings in 1999, and Freddie Mac held 5 board 
meetings in 1999.
    In short, requiring at least six in-person Bank board of directors 
meetings in any year is within the range of the number of annual board 
meetings held by financial institution holding companies and other 
housing GSEs. Providing the boards of the Banks with greater discretion 
in determining the number of board meetings to hold annually also is 
consistent with the GLB Act's emphasis on devolving governance issues 
to the Banks.
    Although the interim final rule reduces the minimum meetings 
requirement, Sec. 918.7(a) still requires the board of directors of a 
Bank to continue to maintain its level of oversight of the management 
of the Bank, notwithstanding the limits on annual directors' 
compensation established by section 7(i) of the Bank Act. See 12 U.S.C. 
1427(i). Therefore, if a Bank's board intends to hold fewer annual in-
person board meetings than it has held in past years, it would be in 
the board's best interest to document how it will continue to meet the 
maintenance of effort standard and its fiduciary duties regarding the 
Bank's safety and soundness.
    The interim final rule also removes the waiver provision of 
Sec. 918.7(b), since the right to seek a waiver generally of Finance 
Board regulatory provisions is already provided for in 12 CFR part 907.

III. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required for this 
interim final rule, the provisions of the Regulatory Flexibility Act, 5 
U.S.C. 601 et seq., do not apply.

IV. Notice and Public Participation

    Because of the exigency of the Banks setting their schedules of 
board of directors meetings for 2001, the Finance Board finds for good 
cause that the notice and public comment procedure required by the 
Administrative Procedure Act is impracticable, unnecessary, or contrary 
to the public interest in this instance. See 5 U.S.C. 553(b)(B). The 
Finance Board welcomes written comments on this interim final rule.

V. Paperwork Reduction Act

    This interim final rule does not contain any collections of 
information pursuant to the Paperwork Reduction Act of 1995. See 44 
U.S.C. 601 et seq. Therefore, the Finance Board has not submitted any 
information to the Office of Management and Budget for review.

List of Subjects in 12 CFR Part 918

    Federal home loan banks, Reporting and recordkeeping requirements, 
Wages.

    Accordingly, the Finance Board hereby amends title 12, chapter IX, 
part 918, Code of Federal Regulations, as follows:
    1. The authority citation for part 918 continues to read as 
follows:

    Authority: 12 U.S.C. 1422b(a), and 1427.


    2. Revise Sec. 918.7 to read as follows:


Sec. 918.7  Maintenance of effort.

    Notwithstanding the limits on annual directors' compensation 
established by section 7(i) of the Act, as amended, the board of 
directors of each Bank shall continue to maintain its level of 
oversight of the management of the Bank. In maintaining its level of 
oversight, the board of directors of a Bank shall hold at least six in-
person meetings in any year.

    Dated: May 2, 2001.

    By the Board of Directors of the Federal Housing Finance Board.
Allan I. Mendelowitz,
Chairman.
[FR Doc. 01-11993 Filed 5-11-01; 8:45 am]
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