[Federal Register Volume 69, Number 58 (Thursday, March 25, 2004)]
[Proposed Rules]
[Pages 15260-15262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6710]


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 Proposed Rules
                                                 Federal Register
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 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.
 
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 

  Federal Register / Vol. 69, No. 58 / Thursday, March 25, 2004 / 
Proposed Rules  

[[Page 15260]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 5

[Docket No. 04-08]
RIN 1557-AC81


Rules, Policies, and Procedures for Corporate Activities; (Annual 
Report on Operating Subsidiaries)

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is issuing 
this proposed rule to assist consumers in identifying national bank 
operating subsidiaries that are subject to OCC supervisory authority. 
These revisions require national banks to file an annual report with 
the OCC that identifies its operating subsidiaries that do business 
directly with consumers and are not functionally regulated as defined 
in section 5(c)(5) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1844(c)(5)). For each operating subsidiary, a national bank 
would be required to provide information including the name of the 
operating subsidiary, location and contact information, and the 
operating subsidiary's lines of business. The OCC will make this 
information available to the public on its Internet Web site.

DATES: Comments on this proposed rule must be received by April 26, 
2004. Comments on the paperwork burden associated with this proposed 
rule under the Paperwork Reduction Act must be received by May 24, 
2004.

ADDRESSES: Please direct your comments to: Office of the Comptroller of 
the Currency, 250 E Street, SW., Public Information Room, Mailstop 1-5, 
Washington, DC 20219, Attention: Docket No. 04-08, fax number (202) 
874-4448; or Internet address: [email protected]. Due to 
delays in paper mail delivery in the Washington, DC area, we encourage 
the submission of comments by fax or e-mail whenever possible. Comments 
may be inspected and photocopied at the OCC's Public Information Room, 
250 E Street, SW., Washington, DC. You can make an appointment to 
inspect comments by calling (202) 874-5043.

FOR FURTHER INFORMATION CONTACT: Stuart E. Feldstein, Assistant 
Director, Legislative and Regulatory Activities, (202) 874-5090, 
Patrick T. Tierney, Attorney, Legislative and Regulatory Activities 
(202) 874-5090, or Tim Driscoll, Project Manager, Supervisory 
Information (202) 874-4410.

SUPPLEMENTARY INFORMATION:
    National banks may conduct aspects of their banking activities 
through operating subsidiaries.\1\ These subsidiaries are corporations, 
limited liability companies, or similar types of business organizations 
where the parent bank owns more than 50 percent of the voting or 
similar type of interest of the operating subsidiary or the parent bank 
otherwise controls the operating subsidiary and no other entity 
controls more than 50 percent of the voting or similar type of interest 
in the subsidiary. Operating subsidiaries are permitted to conduct only 
activities that are permissible for the parent national bank. Operating 
subsidiaries conduct these activities ``subject to the same 
authorization, terms and conditions'' as apply to their parent bank.\2\ 
In essence, operating subsidiaries are a Federally-licensed means by 
which national banks conduct Federally-authorized banking activities. 
As provided in our regulations, State laws apply to operating 
subsidiaries only to the extent that they apply to the parent bank.\3\
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    \1\ See generally, 12 CFR 5.34 (OCC operating subsidiary 
regulation).
    \2\ 12 CFR 5.34(e)(3).
    \3\ 12 CFR 7.4006.
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    Questions recently have arisen about how consumers identify 
entities that are national bank operating subsidiaries, particularly in 
the context of where consumers would direct any complaints about their 
experiences with such an entity. Many national bank operating 
subsidiaries that deal with consumers use a trade name or brand closely 
identified with their parent bank. Some do not, however, and thus some 
consumers may be unsure of the character of the entity and the agency 
responsible for regulating it.
    In order to provide more specific information to consumers, the 
proposal would add a new paragraph (e)(6) to Sec.  5.34 of our 
regulations requiring national banks to file an annual report with the 
OCC containing information about national bank operating subsidiaries 
that are not functionally regulated by other regulators and that do 
business directly with consumers.\4\ The OCC will make this information 
available to the public on its Internet customer service Web site at 
www.occ.treas.gov/customer.htm.
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    \4\ A subsidiary is a ``functionally regulated'' subsidiary if 
it is a broker or dealer that is registered under the Securities 
Exchange Act of 1934; a registered investment adviser, properly 
registered by or on behalf of either the Securities and Exchange 
Commission or any State, with respect to the investment advisory 
activities of such investment adviser and activities incidental to 
such investment advisory activities; an investment company that is 
registered under the Investment Company Act of 1940; an insurance 
company, with respect to insurance activities of the insurance 
company and activities incidental to such insurance activities, that 
is subject to supervision by a State insurance regulator; or an 
entity that is subject to regulation by the Commodity Futures 
Trading Commission, with respect to the commodities activities of 
such entity and activities incidental to such commodities 
activities. See 12 U.S.C. 1844(c)(5)(B)(i)-(v).
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    New 12 CFR 5.34(e)(6) specifies that an operating subsidiary ``does 
business directly with consumers'' if it provides products or services 
to individuals to be used primarily for personal, family, or household 
purposes. We invite comment on whether this definition adequately 
describes the intended scope of coverage of the reporting requirement 
and, if not, the definition the OCC should use.
    The proposal requires a national bank to include in the annual 
report the name and charter number of the parent national bank together 
with each covered operating subsidiary's mailing address and telephone 
number, and if different, its principal place of business. A national 
bank also must indicate the operating subsidiary's lines of business by 
designating the appropriate code as listed in Appendix B (Federal 
Reserve Board Activity Codes) to the General Instructions for filing 
The Report of Changes in Organizational Structure, Form FR Y-10. Form 
FR Y-10 is used regularly by bank holding companies to report 
information on their investments and contains a useful list of 
activities that are familiar to most national banks. If this proposed 
rule is adopted as a

[[Page 15261]]

final rule, a copy of the activities list will be made available on the 
OCC's Internet Web site at www.occ.treas.gov and at www.banknet.gov.
    The OCC invites comment on whether reference to this list of 
activities for identifying operating subsidiary lines of business is 
convenient for national banks or whether there are other methods that 
would be less burdensome.
    We also invite comment on whether the information requested is 
adequate to apprise consumers of the information they need to identify 
the company as a national bank operating subsidiary. Commenters also 
are invited to address whether national banks should report information 
on operating subsidiaries that are functionally regulated by other 
regulators, and with respect to those subsidiaries, whether, and if so, 
how best to direct consumers to the appropriate regulator(s) for the 
particular ``functionally regulated'' company.
    The proposal requires a national bank to prepare its report on an 
annual basis as of each March 31st and to file the report with the OCC 
by July 1st of that year. If the proposal is adopted as a final rule, 
these dates may be adjusted in order to assure that first report is 
received as soon as practicable in 2004, allowing adequate time for 
compliance. A national bank may file its report electronically with the 
OCC by consulting the filing requirements at www.banknet.gov.

Request for Comments

    The OCC welcomes comments on any aspect of this proposal, 
particularly, those issues specifically noted in this preamble.

Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec. 
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking 
agencies to use plain language in all proposed and final rules 
published after January 1, 2000. We invite your comments on how to make 
the proposal easier to understand. For example:
     Have we organized the material to suit your 
needs? If not, how could this material be better organized?
     Are the requirements in the proposal clearly 
stated? If not, how could the regulation be more clearly stated?
     Does the proposal contain language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of 
sections, use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
     What else could we do to make the regulation 
easier to understand?

Community Bank Comment Request

    In addition, we invite your comments on the impact of this proposal 
on community banks. The OCC recognizes that community banks operate 
with more limited resources than larger institutions and may present a 
different risk profile. Thus, the OCC specifically requests comments on 
the impact of the proposal on community banks' current resources and 
available personnel with the requisite expertise, and whether the goals 
of the proposal could be achieved, for community banks, through an 
alternative approach.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
OCC certifies that this proposal will not have a significant economic 
impact on a substantial number of small entities. The proposal would 
require national banks to report information that should be readily 
available to the banks. National banks that are part of a bank holding 
company structure are already reporting some or all of the information 
requested in a substantially similar manner. The economic impact upon 
national banks of this proposed rule is estimated to be negligible, 
thus the proposal will not have a significant impact on a substantial 
number of small entities.

Executive Order 12866

    The OCC has determined that this proposed 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 consider a 
reasonable number of regulatory alternatives before promulgating a 
rule. The OCC has determined that the proposal 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, the 
proposal is not subject to section 202 of the Unfunded Mandates Act.

Paperwork Reduction Act

    The information collection requirements contained in this proposal 
have been submitted to OMB for review and approval in accordance with 
the Paperwork Reduction Act of 1995. This proposal will increase 
paperwork burden for respondents by adding certain reporting 
requirements. The information collection requirements are contained in 
12 CFR 5.34(e)(6) which requires each national bank to file an annual 
report on its operating subsidiaries.
    The OCC estimates burden for this information collection as 
follows:
    Number of Respondents: 2,100.
    Number of Responses: 1 per year.
    Estimated Time per Response: 3 hours.
    Total Estimated Annual Burden: 6,300 burden hours.
    The OCC invites comments on:
    (1) Whether the collection of information contained in the proposal 
is necessary for the proper performance of the OCC's functions, 
including whether the information collection has practical utility;
    (2) The accuracy of the OCC's estimate of the burden of the 
information collection, including the validity of the methodology and 
assumptions used;
    (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.
    Comments should be sent to John Ference or Camille Dixon, Office of 
the Comptroller of the Currency, Legislative and Regulatory Activities 
Division, Attention: 1557-AROS, 250 E Street, SW., Mailstop 8-4, 
Washington, DC 20219. Due to delays in paper mail in the Washington 
area, commenters are encouraged to submit their comments by fax to 
(202) 874-4889 or by e-mail to [email protected]. Comments 
should also be sent to Joseph F. Lackey, Jr., Desk Officer, Office of 
Information and Regulatory Affairs, Attention: 1557-AROS, Office of 
Management and

[[Page 15262]]

Budget, Room 10235, Washington, DC 20503. Comments may also be sent by 
e-mail to [email protected].

Executive Order 13132

    The OCC has determined that this proposal does not have any 
Federalism implications, as required by Executive Order 13132.

List of Subjects in 12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the preamble, part 5 of chapter I of 
title 12 of the Code of Federal Regulations are proposed to be amended 
as follows:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

    1. The authority citation for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 93a; 215a-2; 215a-3; and section 
5136A of the Revised Statutes (12 U.S.C. 24a).

    2. In Sec.  5.34, a new paragraph (e)(6) is added to read as 
follows:


Sec.  5.34  Operating subsidiaries.

* * * * *
    (e)(6) Annual Report on Operating Subsidiaries--(i) Filing 
requirement. Each national bank shall prepare and file with the OCC an 
Annual Report on Operating Subsidiaries containing the information set 
forth in paragraph (e)(6)(ii) of this section for each of its operating 
subsidiaries that:
    (A) Is not functionally regulated within the meaning of section 
5(c)(5) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 
1844(c)(5)); and
    (B) Does business directly with consumers in the United States. An 
operating subsidiary ``does business directly with consumers'' if it 
provides products or services to individuals to be used primarily for 
personal, family, or household purposes.
    (ii) Information required. The Annual Report on Operating 
Subsidiaries must contain the following information for each covered 
operating subsidiary listed:
    (A) The name and charter number of the parent national bank;
    (B) The name, mailing address (which shall include the street 
address or post office box, city, state, and zip code), and telephone 
number of the operating subsidiary;
    (C) The principal place of business of the operating subsidiary, if 
different from the address provided pursuant to paragraph 
(e)(6)(ii)(B); and
    (D) The lines of business in which the operating subsidiary is 
engaged by designating the appropriate code contained in Appendix B 
(Federal Reserve Board Activity Codes) to the General Instructions for 
filing The Report of Changes in Organizational Structure, Form FR Y-10, 
a copy of which is set forth on the OCC's Web site. If the operating 
subsidiary is engaged in an activity not set forth in this list, the 
national bank shall use the code 0000 and provide a brief description 
of the activity.
    (iii) Filing time frames and availability of information. Each 
national bank's Annual Report on Operating Subsidiaries shall contain 
information current as of March 31 of the year in which the report is 
filed. The national bank shall submit its report to the OCC on or 
before July 1, 2004, and on or before July 1 of each year thereafter. 
The national bank may submit the Annual Report on Operating 
Subsidiaries electronically on the form prescribed by the OCC. The OCC 
will make available to the public the information contained in the 
Annual Report on Operating Subsidiaries on its Internet Web site at 
http://www.occ.treas.gov.

    Dated: March 19, 2004.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 04-6710 Filed 3-24-04; 8:45 am]
BILLING CODE 4810-33-P