[Federal Register Volume 66, Number 217 (Thursday, November 8, 2001)]
[Proposed Rules]
[Pages 56488-56493]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27889]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 66, No. 217 / Thursday, November 8, 2001 / 
Proposed Rules  

[[Page 56488]]



DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 584

[Docket No. 2001-69]
RIN 1550-AB52


Authority for Certain Savings and Loan Holding Companies To 
Engage in Financial Activities

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 revise 
its regulations to clarify what financial activities are authorized for 
certain savings and loan holding companies (SLHCs) after the Gramm-
Leach-Bliley Act (GLBA). Additionally, this proposed rule explains how 
the conditions the Federal Reserve Board (FRB) imposes on financial 
holding companies (FHCs) would apply to those SLHCs, outlines the 
process OTS would use to review activities that are complementary to 
financial activities, and removes certain obsolete and redundant 
provisions.

DATES: Comments must be received by December 10, 2001.

ADDRESSES:
    Mail: Send comments to Regulations Comments, Chief Counsel's 
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552, Attention: Docket No. 2001-69.
    Delivery: Hand deliver comments to the Guard's Desk, East Lobby 
Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, 
Attention: Regulation Comments, Chief Counsel's Office, Docket No. 
2001-69.
    Facsimile: Send facsimile transmissions to FAX Number (202) 906-
6518, Attention: Docket No. 2001-69.
    E-mail: Send e-mail to [email protected], Attention: 
Docket No. 2001-69, and include your name and telephone number.
    Availability of comments: OTS will post comments and the related 
index on the OTS Internet Site at www.ots.treas.gov. In addition, 
interested persons may inspect comments at the Public Reference Room, 
1700 G Street, 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. (Please identify the 
materials you would like to inspect, to assist us in serving you.) We 
schedule appointments on business days between 10 a.m. until 4 p.m. In 
most cases, appointments will be available the next business day 
following the date we receive your request.

FOR FURTHER INFORMATION CONTACT: Donna M. Deale, (202) 906-7488, 
Manager, Holding Company and Affiliate Policy, Office of Supervision 
Policy; Kevin A. Corcoran, (202) 906-6962, Assistant Chief Counsel for 
Business Transactions, Business Transactions Division, Office of Chief 
Counsel; and Sally Warner Watts, (202) 906-7380, Senior Counsel, 
Regulations and Legislation Division, Office of Chief Counsel; Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552. If you 
want to access any of these telephone numbers by text telephone (TTY), 
you may call the toll-free Federal Information Relay Service at 1-800-
877-8339.

SUPPLEMENTARY INFORMATION:

I. Authorizing New Activities as Financial in Nature

A. Statutory Background

    Historically, most SLHCs \1\ were permitted to engage in a wide 
range of activities. Before the enactment of GLBA,\2\ a unitary SLHC 
whose subsidiary thrift was a qualified thrift lender generally could 
operate without activity restrictions. Additionally, a multiple SLHC 
that acquired all, or all but one, of its subsidiary thrifts as a 
result of supervisory acquisitions generally could operate without 
activity restrictions if all of the subsidiary thrifts were qualified 
thrift lenders. These SLHCs have been referred to as ``exempt.'' See 12 
CFR 584.2a. Most all SLHCs qualified as exempt.
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    \1\ An SLHC generally is any company that directly or indirectly 
controls a savings association, or that controls any other company 
that is a savings and loan holding company. See 12 CFR 583.20 and 12 
U.S.C. 1467a(a)(1)(D).
    \2\ Pub. L. 106-102, 113 Stat. 1338 (1999).
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    Under section 10 of the Home Owners' Loan Act (HOLA),\3\ all other 
SLHCs (``nonexempt'' SLHCs) were permitted to engage only in those 
nonbanking activities that were: specified by HOLA; \4\ approved by 
regulation as closely related to banking by FRB; \5\ or authorized by 
regulation on March 5, 1987 for SLHCs to engage in directly.\6\
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    \3\ 12 U.S.C. 1467a.
    \4\ 12 U.S.C. 1467a(c)(2)(A)-(E) & (G).
    \5\ See 12 CFR 225.86(a), which is applicable to SLHCs under 12 
U.S.C. 1467a(c)(2)(F)(i).
    \6\ 12 CFR 584.2-1, which implements 12 U.S.C. 
1467a(c)(2)(F)(ii).
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    GLBA expanded the activities authorized for nonexempt SLHCs to 
include those authorized for FHCs under section 4(k) of the Bank 
Holding Company Act of 1956 (BHCA).\7\ GLBA also curtailed the 
availability of exempt status to only those that meet all of the 
following criteria: \8\
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    \7\ 12 U.S.C. 1843(k).
    \8\ See 12 U.S.C. 1467a(c)(9)(C).
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     It was an SLHC on May 4, 1999, or becomes an SLHC under an 
application pending with OTS on or before that date;
     The SLHC meets and continues to meet the requirements for 
an exempt SLHC; and
     The SLHC continues to control at least one savings 
association (or successor savings association) that it controlled on 
May 4, 1999, or that it acquired under an application pending with OTS 
on or before that date.
    As a result, GLBA in effect redefined the requirements for an 
exempt SLHC. As discussed later, this proposal would modify the 
regulation's definition of an exempt SLHC.
    This rule would affect the SLHCs that do not qualify as exempt. 
These nonexempt SLHCs currently make up less than 15 percent of all 
SLHCs, so most SLHCs would not be affected by this proposed rule. 
However, the universe of nonexempt SLHCs will increase as new SLHCs are 
approved.
    This rule recognizes the authority (under section 10(c)(9) of HOLA) 
for nonexempt SLHCs to engage in the activities that are permissible 
for FHCs under section 4(k) of BHCA, as well as activities already 
permitted for nonexempt SLHCs (under section 10(c)(2) of HOLA).

[[Page 56489]]

B. Approved Activities for Financial Holding Companies

    Section 4(k) of BHCA authorizes enumerated activities that are 
financial in nature. In addition, the statute authorizes FHCs to engage 
in other activities that FRB and the Department of the Treasury 
determine to be financial in nature or incidental to a financial 
activity. The statute also authorizes FHCs to engage in activities that 
FRB determines to be complementary to a financial activity and not a 
substantial safety or soundness risk. Activities permissible for FHCs 
under section 4(k) are generally broader than the activities permitted 
for BHCs, which must be ``closely related to banking.''
    FRB has issued regulations governing nonbanking activities that are 
approved for FHCs under section 4(k) of BHCA. For an activity that is 
not specifically listed in the statute as financial in nature, these 
regulations specify processes for FHCs to obtain a determination that 
the activity is authorized as financial in nature, including an 
activity incidental to a financial activity, or an activity 
complementary to a financial activity. FRB regulations also impose 
conditions on the conduct of certain activities. The following chart 
lists the activities authorized for FHCs under section 4(k) of BHCA and 
the conditions, if any, that FRB imposes.

------------------------------------------------------------------------
  Type of activity authorized by     FRB interpretations and conditions
               BHCA                              on activity
------------------------------------------------------------------------
Activities that are financial in    In addition to the activities that
 nature or incidental to a           are financial in nature as
 financial activity. Sec.            specified in section 4(k)(4), which
 4(k)(1)(A).                         are discussed below, FRB has
                                     approved the following activity as
                                     financial in nature or incidental
                                     to a financial activity:
                                    Acting as finder in bringing
                                     together one or more buyers and
                                     sellers of any product or service
                                     for transactions that the parties
                                     themselves negotiate and
                                     consummate. This activity is
                                     subject to various limitations and
                                     disclosure requirements. (For
                                     example, a finder must distinguish
                                     products and services offered by
                                     the FHC from those offered by a
                                     third party through the finder
                                     service). 12 CFR 225.86(d) (65 FR
                                     80740 and 66 FR 19081).
                                    FRB has proposed the following
                                     activity as financial in nature or
                                     incidental to a financial activity:
                                    Real estate brokerage and real
                                     estate management. (66 FR 307 and
                                     66 FR 12440).
Activities that are complementary   The FRB rule specifies factors it
 to a financial activity and that    will consider in approving a notice
 do not pose a substantial risk to   to engage in a complementary
 the safety and soundness of         activity. 12 CFR 225.89 (66 FR 418-
 depository institutions or the      419).
 financial system generally. Sec.   FRB has proposed to identify the
 4(k)(1)(B).                         following activities as
                                     complementary to a financial
                                     activity:
                                    Data processing activities such as
                                     data storage, general data
                                     processing, and electronic
                                     information portal services. (65 FR
                                     418)
Lending, exchanging, transferring,  The FRB rule cross-references the
 investing for others, or            statute. 12 CFR 225.86(c) (66 FR
 safeguarding money or securities.   418).
 Sec. 4(k)(4)(A).
Insuring, guaranteeing, or          The FRB rule cross-references the
 indemnifying against loss, harm,    statute. 12 CFR 225.86(c) (66 FR
 damage, illness, disability or      418).
 death, or providing and issuing
 annuities, and acting as a
 principal, agent, or broker for
 the foregoing. Sec. 4(k)(4)(B).
Providing financial, investment,    The FRB rule cross-references the
 or economic advisory services.      statute. 12 CFR 225.86(c) (66 FR
 Sec. 4(k)(4)(C).                    418).
Issuing or selling instruments      The FRB rule cross-references the
 representing pools of assets        statute. 12 CFR 225.86(c) (66 FR
 permissible for a bank to control   418).
 directly. Sec. 4(k)(4)(D).
Underwriting, dealing in, or        The FRB rule cross-references the
 making a market in securities.      statute. 12 CFR 225.86(c) (66 FR
 Sec. 4(k)(4)(E).                    418).
 
                                    In addition, an FRB rule states that
                                     a bank or thrift or U.S. branch or
                                     agency of a foreign bank may make
                                     an intra-day extension of credit to
                                     a securities affiliate that is
                                     engaged in these activities, only
                                     at market rates. A foreign bank
                                     that is an FHC or is treated as an
                                     FHC must comply with sections 23A
                                     and 23B of the FRA when a U.S.
                                     branch or agency of the foreign
                                     bank and such a securities
                                     affiliate engage in certain
                                     transactions. 12 CFR 225.4(g).
Any activities that FRB determined  Activities that FRB authorized by
 was closely related to banking on   regulation by November 12, 1999,
 or before November 12, 1999, Sec.   are listed at 12 CFR 225.28,\9\
 4(k)(4)(F).                         referenced by 12 CFR 225.86(a)(1)
                                     (66 FR 418).
 
                                    Activities that FRB approved by
                                     order by November 12, 1999, are
                                     listed at 12 CFR 225.86(a)(2) (66
                                     FR 418). These activities include:
                                     providing administrative services
                                     to mutual funds, owning shares of a
                                     securities exchange, acting as a
                                     certification authority for digital
                                     signatures, providing employment
                                     histories to third parties,
                                     providing check cashing and wire
                                     transmission services, providing
                                     notary public services and other
                                     specified services in connection
                                     with offering banking services, and
                                     abstracting real estate titles.
Any activity that FRB determined    Activities that FRB authorized by
 to be usual in connection with      regulation by November 12, 1999,
 the transaction of banking or       are listed at 12 CFR 211.5(d) These
 other financial operations abroad   activities are subject to the terms
 by November 12, 1999. Sec.          and conditions in part 211, and FRB
 4(k)(4)(C).                         interpretations in effect on that
                                     date. 12 CFR 225.86(a)(1) (66 FR
                                     418). These activities also
                                     include, subject to various
                                     conditions, providing management
                                     consulting, operating a travel
                                     agency, and sponsoring a mutual
                                     fund. 12 CFR 225.86(b) (66 FR 418).

[[Page 56490]]

 
Merchant banking investment         Authorized merchant banking
 activities conducted by certain     activities are described in FRB and
 types of securities affiliates.     Treasury rules at 12 CFR part 225,
 Sec. 4(k)(4)(H).                    subpart J, and part 1500 (66 FR
                                     8466-8493). These rules describe
                                     permissible investments, the
                                     conditions imposed on investments,
                                     limitations on managing or
                                     operating a portfolio company,
                                     holding periods for merchant
                                     banking investments, provisions
                                     addressing investments in private
                                     equity funds, and risk management
                                     and recordkeeping policies. See
                                     also 12 CFR 225.86(c) (66 FR 418).
Lending, exchanging, transferring,  The FRB and Treasury interim rules
 investing for others, or            list the activities from the
 safeguarding financial assets       statute and the factors they will
 other than money or securities;.    consider in approving requests for
Providing any device or other        specific activities. 12 CFR
 instrumentality for transferring    225.86(e)(1) and 1501.2(a) (66 FR
 money or other financial assets;.   260-261).
Arranging, effecting, or
 facilitating financial
 transactions for account of third
 parties. Sec. 4(k)(5).
------------------------------------------------------------------------

C. This  Rule--Approved Activities for Nonexempt SLHCs
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    \9\ FRB has proposed to revise this regulation listing 
previously authorized data processing activities to cover more 
extensive activities, similar to the coverage afforded under 
Sec. 225.86(d)(1), and to increase the percentage of a company's 
revenues that may be derived from data processing. (65 FR 80387-
80388).
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    This rule would revise OTS regulations to reflect the authority 
under GLBA for nonexempt SLHCs to engage in financial activities that 
are permissible for FHCs. OTS is proposing a number of amendments to 
current part 584. Specifically, the rule would revise the heading of 
the part to more accurately reflect its content, redesignate all 
existing sections as a new subpart A, revise these provisions as 
described below, and add a new subpart B.
1. Amendments to Subpart A
Permitted Activities (Sec. 584.2)
    Current Sec. 584.2 lists the activities expressly permitted by 
statute for nonexempt SLHCs. This proposed rule would revise Sec. 584.2 
to explicitly recognize the authority of SLHCs to engage in activities 
permissible for FHCs as financial in nature, incidental to a financial 
activity, or complementary to a financial activity. (In this preamble, 
these three types of activities are referenced as ``financial 
activities''). This proposed rule is consistent with a 2001 OTS opinion 
that states that nonexempt savings and loan holding companies may 
engage in the activities permissible for financial holding companies 
under section 4(k) of BHCA.\10\
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    \10\ See Op. Chief Counsel, April 11, 2001, available on OTS's 
web site, www.ots.treas.gov.
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Exempt SLHCs (Sec. 584.2a)
    This proposed rule would revise Sec. 584.2a, which describes the 
qualifications for ``exempt'' SLHCs, to incorporate the qualifying 
conditions contained in section 10(c)(9) of HOLA. In addition, the rule 
would remove obsolete regulatory text from this section. Paragraphs 
(a)(2), (b), (c), and (d) are unnecessary, because they have very 
limited applicability and merely repeat the statute.
2. New Subpart B
Purpose (Sec. 584.100)
    New subpart B would specify the procedures, conditions, and 
restrictions that apply to nonexempt SLHCs engaging in financial 
activities permissible for FHCs. This subpart would not apply to exempt 
SLHCs.
FHC Activities Approved for Nonexempt SLHCs (Sec. 584.110)
    This section would state that a nonexempt SLHC may engage in 
financial activities that FRB permits for FHCs, as implemented by FRB 
by order or regulation.\11\ The proposed rule also would provide that 
OTS may prescribe limitations on these activities in a policy 
directive, supervisory directive, order, or regulation. OTS might 
exercise this authority, for example, if it had significant supervisory 
concerns about a particular holding company's conduct of the activity 
and the potential impact on its subsidiary savings association, or if 
some aspect of the activity raised significant concerns for the thrift 
industry in general.
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    \11\ See 12 CFR 225.86. The FRB regulations on permissible 
activities for FHCs generally are found at 12 CFR part 225, subpart 
I. Many of the other sections of part 225--such as those dealing 
with how to qualify as a financial holding company, the consequences 
of failing to continue to meet requirements for financial holding 
company status, or the notice regarding new activities--are not 
applicable to SLHCs.
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Applicability of FRB Conditions and Terminology (Sec. 584.120)
    Generally, the rule would provide that a nonexempt SLHC must comply 
with the conditions imposed by FRB on an FHC that conducts that 
activity.\12\ FRB permits an FHC to choose to conduct an activity under 
any applicable authority of section 4 of BHCA. An FHC's conduct of the 
activity is subject only to the procedures and limitations imposed 
under the chosen source of authority.\13\ Under this proposed rule, a 
nonexempt SLHC would similarly be permitted to choose the source of 
authority under which it will act and would be required to comply with 
all procedures and limitations imposed on the activity under the chosen 
source of authority. See proposed Sec. 584.2(d).\14\
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    \12\ The rule would provide guidance on how SLHCs would comply 
with the FRB's regulations on merchant banking that limit the 
aggregate value of certain merchant banking investments to a 
percentage of the financial holding company's Tier 1 capital. The 
rule states that Tier 1 capital means the SLHC's GAAP consolidated 
capital less GAAP consolidated intangible assets.
    \13\ 66 FR 406 (Jan. 3, 2001).
    \14\ These procedures may, for example, include the notice 
procedures at 12 CFR 584.2-1(c) (activities permissible as of March 
5, 1987) or the application procedures under 12 CFR 584.2-2 
(permissible bank holding company activities).
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    For example, a nonexempt SLHC that engages in underwriting, dealing 
in, or making a market in certain government securities could invoke 
either section 4(c)(8) or section 4(k)(4)(E) of BHCA as its statutory 
authority. If the SLHC invoked section 4(c)(8) of BHCA, the SLHC 
generally would be subject to revenue and other restrictions applicable 
to the bank holding companies \15\ and would be required to file a 
notice under Sec. 584.2-2. Those restrictions would not apply if the 
SLHC chose to act under section 4(k)(4)(E) of BHCA to conduct the 
identical activity, nor does section 4(k)(E) impose any other 
restrictions.
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    \15\ 12 CFR 225.28(b)(8).
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    Most activities authorized under existing Secs. 584-2-1 and 584.2-2 
are also authorized under section 4(k) of BHCA. OTS expects that most 
SLHCs will elect to conduct the activities under section 4(k) of BHCA 
because these activities will be subject to fewer procedural 
requirements.

[[Page 56491]]

    This proposed rule would prohibit a nonexempt SLHC from engaging in 
permissible activities in a way that would deviate from FRB conditions, 
unless it obtains prior written approval from OTS. Permitting SLHCs to 
deviate from FRB conditions in limited cases is consistent with OTS's 
position that the conditions imposed on an activity by FRB under 
section 4(c)(8) of BHCA do not necessarily apply to SLHCs.\16\ An SLHC 
seeking approval for a deviation from FRB conditions would have to 
provide sufficient information for OTS to determine that: (1) Any 
deviation is not material; (2) FRB conditions should not apply to SLHCs 
generally; or (3) there is good cause not to apply the conditions. We 
request comment on the procedure for an SLHC to obtain OTS approval of 
a deviation from FRB conditions and the standards that OTS should apply 
to review requests for approval.\17\
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    \16\ See Op. Chief Counsel, March 14, 1990 (in considering an 
SLHC's application to engage in underwriting of government 
obligations and municipal revenue bonds and commercial paper, OTS 
would not be bound by the FRB's conditions but would likely consider 
the FRB's underlying concerns); Op. Chief Counsel, December 3, 1990 
(in considering an SLHC's application to engage in asset allocation 
services, OTS determined that the FRB's concerns could be met 
without FRB conditions).
    \17\ In addition to FRB conditions, a nonexempt multiple SLHC 
must comply with statutory restrictions on ownership of voting 
shares in a company engaged in activities other than the activities 
specified in section 10(c)(2) of HOLA. Specifically, section 
10(e)(1)(A)(iii) of HOLA provides that a multiple SLHC may not 
acquire more than 5 percent of the voting stock of a company, other 
than a subsidiary, that engages in activities other than those 
listed in 12 U.S.C. 1467a(c)(2). 12 U.S.C. 1467a(e)(1)(A)(iii). See 
12 CFR 584.4. OTS concludes that this restriction applies to 
activities described under section 4(k) of BHCA if the activities 
are not also described in section 10(c)(2) of HOLA.
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SLHC Notice Requirements (Sec. 584.130)
    Generally, FRB requires an FHC to notify it only after the FHC 
commences an activity under section 4(k) of BHCA for the first time. 
That notice is required by statute.\18\ There is no similar statutory 
notice requirement for SLHCs. OTS believes that it generally can obtain 
sufficient information regarding SLHC activities through existing 
reports and through the examination process. These reports already 
provide for notice of new activities in a timely fashion.\19\ OTS sees 
no need to impose an additional type of subsequent notice for the 
nonexempt SLHCs affected by this rule. Accordingly, this rule would not 
generally require an SLHC to notify OTS when it engages in a 
permissible activity.
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    \18\ 12 U.S.C. 1843(k)(6) and 66 FR 418-19 (Jan. 3, 2001) (to be 
codified at 12 CFR 225.87).
    \19\ Under authority of 12 CFR 584.1(e), each SLHC files an 
Annual/Current Report (H-(b)(11)) within 45 days after the end of 
each quarter to identify any changes, including new business 
activities, that have occurred since filing of its annual report at 
the close of its fiscal year.
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    In accordance with section 4(j) of BHCA,\20\ an FHC is required to 
notify FRB before the FHC commences activities that are complementary 
to a financial activity. FRB reviews these notices based on the facts 
of each case, regardless of whether FRB has approved a similar activity 
for another FHC. FRB considers the following:
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    \20\ 12 U.S.C. 1843(j).
---------------------------------------------------------------------------

     Whether the activity is complementary to an identified 
financial activity;
     Whether the proposed activity would pose a substantial 
risk to the safety or soundness of depository institutions or the 
financial system generally; and
     Whether the proposal could be expected to produce benefits 
to the public that outweigh possible adverse effects.\21\
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    \21\ See 12 CFR 225.89.
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    Because section 4(j) requires a case-by-case approach in 
authorizing complementary activities, OTS proposes to require a 
nonexempt SLHC to notify OTS before commencing an activity that is 
complementary to a financial activity. OTS would process these notices 
under the standard treatment procedures in part 516, subparts A and E. 
The rule would require an SLHC to submit the same information as that 
required by FRB.\22\ This would enable OTS to review the proposed 
activity for consistency with FRB approved complementary activities and 
for supervisory concerns. If OTS determined that the proposed activity 
is not an FRB-approved complementary activity, it would have the 
information necessary to assist the SLHC in obtaining FRB approval of 
the activity.
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    \22\ Id.
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D. Procedural Matters

    OTS plans to publish a final rule expeditiously. Accordingly, OTS 
has prescribed a 30-day comment period.
    Section 722 of GLBA requires federal banking agencies to use 
``plain language'' in all proposed and final rules published after 
January 1, 2000. 12 U.S.C. 4809. New subpart B uses plain language. We 
invite comment on whether there are additional changes OTS can make so 
that the provisions added are easier to understand.

II. Findings and Certifications

A. Paperwork Reduction Act

    OTS invites comment on:
    (1) Whether the collections of information contained in this 
proposed rule are necessary for the proper performance of OTS's 
functions, including whether the information has practical utility;
    (2) Whether the estimate of the burden of the proposed information 
collection is accurate;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (4) Ways to minimize the burden of the information collection on 
respondents, including the use of automated collection techniques or 
other forms of information technology; and
    (5) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    An agency may not conduct or sponsor and respondents are not 
required to respond to collections of information unless they display a 
currently valid Office of Management and Budget (OMB) control number.
    The information collections requirements contained in this proposed 
rule have been submitted to OMB in accordance with the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3507(d). OTS will use any comments 
received to develop new burden estimates. Send comments on these 
information collections, referring to OTS Docket No. 2001-  , OMB No. 
1550-0063, to OTS and OMB at these addresses: by mail to Information 
Collection Comments, Chief Counsel's Office, Office of Thrift 
Supervision, 1700 G Street, NW., Washington DC 20552, or by e-mail to 
[email protected]; by mail to Alexander Hunt, 
Attention: 1550-0063, Office of Information and Regulatory Affairs, 
Office of Management and Budget, New Executive Office Building, 
Washington DC 20503, or by e-mail to [email protected].
    OTS needs the information required under Sec. 584.120 to decide 
whether to grant a request from an SLHC for approval to deviate from 
FRB conditions. OTS needs information required under Sec. 584.130 to 
make a determination whether an SLHC's proposed complementary 
activities are consistent with FRB approvals of complementary 
activities. The likely respondents are savings and loan holding 
companies that are not exempt SLHCs under Sec. 584.2a that want to 
engage in financial activities authorized under section 4(k) of HOLA. 
There are existing information collections associated with Secs. 584.2-
1, 584.2-2,

[[Page 56492]]

and 584.9. Since this rule increases the number of nonexempt SLHCs, OTS 
is increasing the burden estimate slightly for the existing 
collections. OTS estimates the total burden for the five sections as 97 
hours, as described below:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Annual
                                                     Number of       Number of    Average annual  disclosure and
         Rule section                Subject        respondents    responses per   burden hours    recordkeeping
                                                                    respondent     per response       burden
----------------------------------------------------------------------------------------------------------------
584.2-1, 584.2-2..............  Filings for pre-              10               1               2              20
                                 1987 approved
                                 and bank
                                 holding co.
                                 activities.
584.9.........................  Application for                1               1               2               2
                                 approval of
                                 convicted
                                 person's
                                 participation.
584.120.......................  Applicability of              10               1               5              50
                                 conditions.
584.130.......................  Notice of                      5               1               5              25
                                 complementary
                                 activity.
----------------------------------------------------------------------------------------------------------------

B. 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.

C. Regulatory Flexibility Act

    In accordance with section 605(b) of the Regulatory Flexibility Act 
(RFA), the Director of OTS has certified that this proposed rule will 
not have a significant impact on a substantial number of small entities 
within the meaning of the RFA. 5 U.S.C. 603.
    In overseeing SLHCs that engage in activities that are permitted 
for FHCs under section 4(k) of BHCA, OTS proposes to impose only 
minimal notice and approval requirements. These requirements assure 
that if a nonexempt SLHC of any size chooses to engage in newly 
authorized activities, it would comply with statutory requirements. 
These requirements apply only when an SLHC plans to engage in 
complementary activities or plans to deviate from conditions FRB 
imposes on a particular section 4(k) activity. These procedural 
requirements are minor, are comparable to FRB requirements applicable 
to financial holding companies, and should not be burdensome for small 
SLHCs.

D. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMA) 
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. 2 
U.S.C. 1532. OTS has determined that this proposed rule would not have 
such an impact. Rather, the rule would clarify that nonexempt SLHCs 
have broader authority to engage in nonbanking activities than are 
specified under current regulations. Accordingly, OTS has not prepared 
a budgetary impact statement for this rule or specifically addressed 
the regulatory alternatives considered.

List of Subjects in 12 CFR Part 584

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

    For the reasons stated in the preamble, the Office of Thrift 
Supervision proposes to amend 12 CFR part 584 as follows:

PART 584--SAVINGS AND LOAN HOLDING COMPANIES

    1. Revise the heading of part 584 to read as shown above.
    2. The authority citation for part 584 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.

    3. Add a heading for subpart A before Sec. 584.1 to read as 
follows:

Subpart A--General

    4. In Sec. 584.2, revise the heading of the section, redesignate 
paragraph (c) as paragraph (e), and add new paragraphs (c) and (d) to 
read as follows:


Sec. 584.2  Activities.

* * * * *
    (c) Financial holding company activities. In addition to the 
activities permitted under paragraph (b) of this section, a savings and 
loan holding company may engage in activities that are permissible for 
financial holding companies as financial in nature, incidental to a 
financial activity, or complementary to a financial activity. Subpart B 
of this part describes the procedures, conditions, and restrictions 
that apply to these activities.
    (d) Election. If a savings and loan holding company may conduct an 
activity under more than one authority described in this part, it must 
comply only with the procedures and limitations imposed under the 
authority it elects to use.
* * * * *
    5. Revise Sec. 584.2a to read as follows:


Sec. 584.2a  Exempt savings and loan holding companies.

    (a) General requirements. A savings and loan holding company is 
exempt from the activity limitations at Sec. 584.2(b) of this part if 
it satisfies all of the following requirements:
    (1) It was a savings and loan holding company on May 4, 1999, or 
became a savings and loan holding company after that date under an 
application pending with OTS on or before that date;
    (2) It meets and continues to meet the following requirements:
    (i) The savings and loan holding company (or its subsidiary) 
controls only one savings association and that savings association is a 
qualified thrift lender; or
    (ii) The savings and loan holding company (or its subsidiary) 
controls more than one savings association; all (or all but one) of the 
savings associations were acquired in an acquisition under section 
13(c) or 13(k) of the FDIA or section 408(m) of the National Housing 
Act, as in effect immediately before August 9, 1989; and all of the 
savings associations are qualified thrift lenders; and
    (3) It continues to control at least one savings association (or a 
successor) that it controlled on May 4, 1999 or acquired under an 
application pending with OTS on or before that date.
    (b) Failure to satisfy QTL requirements. Any company that controls 
a savings association that should have become or ceases to be a 
qualified thrift lender, except a savings association that requalified 
as a qualified thrift lender pursuant to section 10(m)(3)(D) of the 
Home Owners' Loan Act, must register as and be deemed to be a bank 
holding company within one year after the date on which the savings 
association fails to qualify as a qualified thrift lender. In

[[Page 56493]]

such a case, the company is subject to the Bank Holding Company Act, 
section 8 of the Federal Deposit Insurance Act, and other statutes 
applicable to bank holding companies in the same manner and to the same 
extent as if the company were a bank holding company and the savings 
association were a bank, as those terms are defined in the Bank Holding 
Company Act.
    6. Add a new subpart B after Sec. 584.9 to read as follows:
Subpart B--Activities That are Financial in Nature
Sec.
584.100   What does this subpart do?
584.110   May I engage in activities permissible for financial 
holding companies?
584.120   Is my ability to engage in permissible activities subject 
to any conditions or restrictions?
584.130   Must I notify OTS when I engage in permissible activities?


Sec. 584.100  What does this subpart do?

    This subpart addresses how savings and loan holding companies 
(SLHCs) (``you'') may engage in activities that are permissible for 
financial holding companies under section 4(k) of the Bank Holding 
Company Act of 1956 (BHCA) (12 U.S.C. 1843(k)). SLHCs that are exempt 
under Sec. 584.2a are not subject to this subpart.


Sec. 584.110  May I engage in activities permissible for financial 
holding companies?

    You may engage in activities that are permissible for financial 
holding companies as financial in nature, incidental to a financial 
activity, or complementary to a financial activity. The Federal Reserve 
Board (FRB) specifies these activities in regulations and orders. See 
12 CFR 225.86. Collectively, this subpart refers to these activities as 
``permissible activities.'' OTS may limit permissible activities by 
policy directive, supervisory directive, order, or regulation.


Sec. 584.120  Is my ability to engage in permissible activities subject 
to any conditions or restrictions?

    (a) General. If you engage in a permissible activity, you must 
comply with the conditions that FRB imposes by regulation or order on a 
financial holding company's exercise of the activity, except as 
provided in paragraph (c) of this section.
    (b) FRB terminology. In applying capital limitations in FRB 
regulations and orders, the term ``Tier 1 capital of the financial 
holding company'' means your GAAP consolidated capital less your GAAP 
consolidated intangible assets.
    (c) Deviation from FRB conditions. You must not engage in a 
permissible activity in a way that would deviate from FRB conditions 
unless you obtain prior written approval from OTS. To obtain such 
approval, you must submit information to OTS under the standard 
treatment processing procedures of subparts A and E of part 516 of this 
chapter. This information must be sufficient to demonstrate that:
    (1) Any deviation from FRB conditions is not material;
    (2) The conditions do not apply to SLHCs generally; or
    (3) There is good cause not to apply the conditions in your case.


Sec. 584.130  Must I notify OTS when I engage in permissible 
activities?

    (a) Type of activity requiring notice. You are not required to 
notify OTS (except as specified in Sec. 584.120(c)) when you engage in 
a permissible activity other than an activity that is complementary to 
a financial activity.
    (b) When notice is required. You must notify OTS in writing before 
you commence an activity, either directly or indirectly, that is 
complementary to a financial activity. You must file this notice under 
the standard treatment procedures of subparts A and E of part 516 of 
this chapter.
    (c) Contents of notice. Your notice must:
    (1) Identify and define the proposed complementary activity, 
specifically describing what the activity would involve and how you 
would conduct the activity;
    (2) Describe the FRB approval of a complementary activity under 
which this activity would be permissible;
    (3) Identify the financial activity that the proposed activity 
would complement, and provide detailed information sufficient to 
support a finding that the proposed activity is complementary to the 
identified financial activity;
    (4) Describe the scope and relative size of the proposed activity, 
as measured by the percentage of the projected revenues that you will 
derive from the activity and the size of assets associated with the 
activity;
    (5) Discuss the risks that the activity may pose to the safety and 
soundness of your subsidiary savings associations and to the financial 
system generally;
    (6) Describe the potential adverse effects, including potential 
conflicts of interest, decreased or unfair competition, or other risks, 
that the activity could raise, and explain the measures you propose to 
take to address those potential effects;
    (7) Describe the potential benefits to the public, such as greater 
convenience, increased competition, or gains in efficiency, that you 
expect the proposal to produce; and
    (8) Provide any information about your financial and managerial 
resources and any other information that OTS requests.
    (d) Factors OTS will consider. (1) Whether the proposed activity is 
consistent with an activity that FRB has approved as complementary; and
    (2) Whether there are supervisory reasons not to permit you to 
engage in the proposed activity.

    Dated: October 31, 2001.

    By the Office of Thrift Supervision.
 Ellen Seidman,
Director.
[FR Doc. 01-27889 Filed 11-7-01; 8:45 am]
BILLING CODE 6720-01-P