[Federal Register Volume 66, Number 120 (Thursday, June 21, 2001)]
[Rules and Regulations]
[Pages 33157-33159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15654]



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  Federal Register / Vol. 66, No. 120 / Thursday, June 21, 2001 / Rules 
and Regulations  

[[Page 33157]]



DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 502

[No. 2001-44]
RIN 1550-AB47


Assessments and Fees

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is amending its 
assessments rule to more accurately reflect the increased costs of 
supervising 3-, 4-, and 5-rated institutions. As amended, OTS will 
compute the condition component of a savings association's assessment 
at 50 percent of the size component for 3-rated institutions, and 100 
percent of the size component for 4- and 5-rated institutions.

EFFECTIVE DATE: July 23, 2001.

FOR FURTHER INFORMATION CONTACT: Karen Osterloh, Assistant Chief 
Counsel, (202) 906-6639, Regulations and Legislation Division, Chief 
Counsel's Office; or William Brady, Director, Planning & Budget, (202) 
906-7408, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    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 (Dec. 19, 
1996). UFIRS is an effective supervisory tool for evaluating the 
soundness of financial institutions on a uniform basis, and for 
identifying those institutions requiring special supervisory 
attention or concern.
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    On April 30, 2001, OTS published a proposed rule revising the 
condition component. 66 FR 21288 (Apr. 30, 2001). Under the existing 
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\ Based on the higher amount 
of supervisory resources demanded by 3-, 4- and 5-rated institutions, 
OTS proposed to raise the condition component to 50 percent for 3-rated 
institutions and 100 percent for 4- and 5-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 (Aug. 23, 1990). OTS began to 
impose a 25 percent premium on 3-rated institutions in 1998. 63 FR 
65663 (Nov. 30, 1998).
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II. Analysis of the Comments

    The comment period on the proposed rule closed on May 30, 2001. OTS 
received one comment from a trade association.
    The commenter urged OTS to carefully consider whether the revised 
assessment structure will push the OTS regulated industry toward other 
federal or state charters. OTS does not believe that the final rule 
will have this effect. Over 90 percent of the thrift industry is 1- or 
2-rated or has not received an initial rating. This final rule should 
benefit these institutions because their assessments will be reduced as 
OTS recaptures more of its supervisory costs from low rated thrifts.
    Admittedly, the assessments for 3-,
4-, and 5-rated institutions will increase commensurate with their need 
for increased supervision. However, the assessment of a premium on such 
institutions is consistent with the assessments imposed by other 
banking regulators.\5\ Moreover, our experience under the current rule 
indicates that the risk-adjusted premiums for 3-,
4- and 5-rated institutions have not resulted in significant defections 
to other charters.
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    \5\ Recently, the Office of the Comptroller of the Currency 
issued a final rule imposing a similar premium on 3-, 4- and 5-rated 
national banks. See 66 FR 29890 (Jun. 1, 2001).
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    The commenter also encouraged OTS to address its budget issues in a 
comprehensive fashion. While a wholesale review of these issues is 
beyond the scope of this rulemaking, OTS believes that this rule will 
enhance OTS budgetary efforts. In particular, this rule will permit OTS 
assessment revenues to automatically expand (or contract) in direct 
response to the supervisory demands imposed by an increased (or 
decreased) number of lower rated institutions.
    OTS specifically sought comment whether it should consider the 
complexity of an institution's operations in its calculation of the 
condition component. The commenter urged OTS not to make such changes 
to the existing rule. The final rule does not make any changes in this 
area.

III. Effective Date

    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (CDRIA) states that OTS rules that impose new

[[Page 33158]]

requirements must take effect on the first day of a calendar quarter 
that begins on or after the date of publication of the rule. 12 U.S.C. 
4802. A related provision, section 553 of the Administrative Procedure 
Act (APA), states that a rule may not be made effective less than 30 
days after publication. 5 U.S.C. 553(d). Under either statute, OTS may 
make a rule effective on a different date, if it finds good cause.
    Working together, the APA and CDRIA provisions would delay the 
effective date of this final rule until October 1, 2001, and OTS would 
be unable to use the revised calculation method for the July 31, 2001 
assessment. OTS believes that this would lead to an inequitable result 
since 1- and 2-rated institutions would be required to subsidize the 
extra supervisory costs of 3-, 4- and 5-rated institutions for yet 
another assessment period.
    Moreover, OTS does not believe that an October 1, 2001 effective 
date would further the purposes of CDRIA. CDRIA ensures that depository 
institutions will be regularly informed of new rules with which they 
must comply. CDRIA also ensures that depository institutions must make 
operational changes only four times, rather than sporadically, during a 
calendar year.\6\ Since savings associations are not required to take 
any action to comply with this new rule, OTS does not believe that it 
is necessary to apply the CDRIA effective date provisions. For these 
reasons, OTS finds that there is good cause to make this rule effective 
on a date other than the first date of a calendar quarter. Consistent 
with the APA, this rule will become effective thirty days after 
publication.
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    \6\ See H. Rep. No. 103-252, p. 168 (1994).
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IV. Executive Order 12866

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

V. Regulatory Flexibility Act Analysis

    Under section 605(b) of the Regulatory Flexibility Act of 1980,\7\ 
OTS has evaluated the effects this final rule will have on small 
businesses, small organizations, and small governmental jurisdictions. 
As required, OTS has prepared the following final 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 rule; Legal basis for the 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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    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 has amended its rules to more 
closely associate its costs with its assessments.

B. Effect of the final rule on small savings associations

    The final rule may affect small savings associations. The final 
rule, however, does not affect small businesses, small organizations 
other than small savings associations, or 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 final rule imposes 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 will assess this premium regardless 
of the institution's size. Based on OTS most recent data, 37 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 
final rule, this institution's semi-annual assessment will be $23,256--
an increase of $3,876. Other 3-rated small savings associations will 
see their assessments increase by lesser amounts depending on their 
asset size.
    Based on OTS most recent data, 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 final 
rule, this institution's semi-annual assessment will be $31,008--an 
increase of $7,752. Other 4- and 5-rated institutions will see their 
assessments increase by lesser amounts depending on their asset size.

C. Significant Issues Raised in Response to Initial Regulatory 
Flexibility Analysis and Changes Made to Minimize Burden

    OTS did not receive any significant comments in response to the 
Initial Regulatory Flexibility Analysis and has made no changes in the 
final rule.

D. Significant Alternatives to the Final Rule

    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 has increased 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 provides an incentive for those institutions to 
improve their condition and their ratings. OTS also believes that the 
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.

E. Other matters

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

[[Page 33159]]

VI. 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 
final 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 amends 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.

------------------------------------------------------------------------
                                                 Then your condition
       If your component  rating is:                component is:
------------------------------------------------------------------------
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: June 13, 2001.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 01-15654 Filed 6-20-01; 8:45 am]
BILLING CODE 6720-01-P