[Federal Register Volume 66, Number 138 (Wednesday, July 18, 2001)]
[Rules and Regulations]
[Pages 37406-37407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17871]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 506, 560, 563, 566, and 584

[No. 2001-51]
RIN 1550-AB42


Liquidity

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is adopting as final an 
interim rule that removed the regulation that required a savings 
association to maintain an average daily balance of liquid assets of at 
least four percent of its liquidity base, and retained a provision 
requiring a savings association to maintain sufficient liquidity to 
ensure its safe and sound operation. The interim rule implemented the 
statutory repeal of the percentage liquidity requirement.

DATES: Effective July 18, 2001.

FOR FURTHER INFORMATION CONTACT: Josephine Battle, Program Analyst 
Trainee, Office of Corporate Governance and Controls, Office of 
Supervision Policy, (202) 906-6870; or Sally Warner Watts, Counsel 
(Banking and Finance), Regulations and Legislation Division, Office of 
Chief Counsel, (202) 906-7380, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552. Persons wishing to access any of 
these telephone numbers by text telephone (TTY) may call the toll-free 
Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

Background

    Section 1201 of the Financial Regulatory Relief and Economic 
Efficiency Act of 2000 (Pub. L. 106-569, 114 Stat. 2944) repealed the 
statutory liquidity requirement for savings associations. See section 6 
of the Home Owners' Loan Act (HOLA), 12 U.S.C. 1465 (1994). OTS 
published an interim rule implementing this repeal on March 15, 2001 
(66 FR 15015). The interim rule removed part 566, which implemented the 
percentage of assets liquidity requirement of section 6 of the HOLA. 
The interim rule also moved a general requirement that each savings 
association must maintain sufficient liquidity to ensure safe and sound 
operations from part 566 to Sec. 563.161 and made a few conforming 
changes.

[[Page 37407]]

Discussion of Comments

    OTS received three public comments: one from a trade association 
and two from savings associations. The trade association strongly 
supported the interim rule, noting that the repeal of the percentage 
requirement will enable savings associations to manage their liquidity 
risk in a more efficient manner. It also supported the retention of a 
requirement that savings associations and their service corporations 
maintain sufficient liquidity to assure safe and sound operation. The 
trade association observed that it is not necessary to describe in a 
regulation the types of investments OTS will consider in measuring 
compliance with this requirement. It did request, however, that OTS 
make conforming changes to the Thrift Financial Report form and 
instructions. On February 26, 2001, OTS published the March 2001 Thrift 
Financial Report changes, which included removal of the entry for 
regulatory liquidity ratio, on its website.
    The two savings associations also praised the elimination of the 
percentage requirement. However, they requested clarification of 
whether OTS considers available capacity to borrow from the Federal 
Home Loan Bank (with same-day access to advances) as a source of 
liquidity when evaluating whether an institution has ``sufficient 
liquidity.'' OTS does consider the availability of access to borrowed 
money to meet liquidity needs in assessing the adequacy of a savings 
association's management of liquidity. See OTS Thrift Activities 
Handbook, Section 530, at pages 530.5 and 530.10 (November 1999). OTS 
also recognizes FHLB advances as a traditional source of such 
borrowings for savings associations. In addition, OTS acknowledges that 
the FHLB system has consistently played an important role in assisting 
the thrift industry to manage its short- and long-term liquidity needs. 
OTS Thrift Activities Handbook, at page 530.11. However, certain 
wholesale borrowings, including Federal Home Loan Bank advances, if not 
properly evaluated and prudently managed, may significantly increase an 
institution's sensitivity to interest rate and liquidity risks. 
Accordingly, savings associations should be fully informed of the risks 
of these borrowings before engaging in such transactions and should 
review these risks on an ongoing basis. See OTS Regulatory Bulletin 34, 
Examiner Guidance on Wholesale Borrowings (June 8, 2001).

Findings and Certifications

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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires OTS to prepare 
Regulatory Flexibility Analyses if the agency must publish a general 
notice of proposed rulemaking. 5 U.S.C. 603 and 604. In issuing the 
interim rule, OTS concluded, for good cause, that it was not necessary 
to publish a notice of proposed rulemaking. Accordingly, OTS concludes 
that the RFA does not require a final regulatory flexibility analysis 
of this rule.
    Nevertheless, OTS has considered the likely impact of this rule and 
finds that the rule will not have a significant impact on a substantial 
number of small entities or create any additional burden on small 
entities under the RFA. The final rule imposes no new requirements and 
makes only burden reducing, clarifying, and technical conforming 
amendments to current OTS regulations.

Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMA) 
applies only when an agency issues a general notice of proposed 
rulemaking or when it publishes a final rule for which a general notice 
of proposed rulemaking was published. 2 U.S.C. 1532. In issuing the 
interim rule, OTS determined, for good cause, that it was not required 
to publish a proposed rule. Accordingly, OTS concludes that the UMA 
does not require OTS to conduct an unfunded mandates analysis of this 
final rule.
    Moreover, OTS finds that this final rule will not 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. 
Rather, the rule imposes no new requirements and makes only burden 
reducing, clarifying, and technical conforming amendments to current 
OTS regulations. Accordingly, OTS has not prepared a budgetary impact 
statement for this rule or specifically addressed the regulatory 
alternatives considered.

Effective Date

    For the reasons stated in the interim rule, published on March 15, 
2001 (66 FR 15016-15017), OTS is making this final rule effective 
immediately.

List of Subjects

12 CFR Part 506

    Reporting and recordkeeping requirements.

12 CFR Part 560

    Consumer protection, Investments, Manufactured homes, Mortgages, 
Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 563

    Accounting, Advertising, Crime, Currency, Investments, Reporting 
and recordkeeping requirements, Savings associations, Securities, 
Surety bonds.

12 CFR Part 566

    Liquidity, Reporting and recordkeeping requirements, Savings 
associations.

12 CFR Part 584

    Administrative practice and procedure, Holding companies, Reporting 
and recordkeeping requirements, Savings associations, Securities.

    Accordingly, the Office of Thrift Supervision adopts as final, 
without change, the interim rule published on March 15, 2001 at 66 FR 
15015, amending parts 506, 560, 563, 566, and 584 in Title 12, Chapter 
V, Code of Federal Regulations.

    Dated: July 11, 2001.
Ellen Seidman,
Director.
[FR Doc. 01-17871 Filed 7-17-01; 8:45 am]
BILLING CODE 6720-01-P