[Federal Register Volume 71, Number 232 (Monday, December 4, 2006)]
[Proposed Rules]
[Pages 70325-70330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20400]


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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. 71, No. 232 / Monday, December 4, 2006 / 
Proposed Rules  

[[Page 70325]]



FEDERAL DEPOSIT INSURANCE CORPORATION

5 CFR Part 3201

RIN 3209-AA15


Supplemental Standards of Ethical Conduct for FDIC Employees

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposal would amend existing FDIC ethics regulations 
involving extensions of credit, ownership of stock, and definitions. 
This proposal would implement the Preserving Independence of Financial 
Institution Examinations Act of 2003, which amended sections 212 and 
213 of title 18 of the United States Code. These sections continue 
generally to impose criminal penalties on examiners borrowing from 
banks they have examined, and financial institutions extending a loan 
to anyone who examines or has authority to examine that institution. 
The statutory amendment, however, decriminalizes extensions of credit 
to examiners for credit cards and for primary residential home loans 
from institutions that they examine or have authority to examine if 
these loans are made on the same terms and conditions as are available 
to other cardholders and borrowers and satisfy other criteria contained 
in the statute as amended. Additionally, the proposed regulation would 
clarify and make minor revisions to definitions and restrictions for 
FDIC employees' acquisition, ownership, or control of securities of 
FDIC-insured depository institutions and certain holding companies.

DATES: Comments are invited and must be received on or before January 
3, 2007.

ADDRESSES: You may submit comments, identified by RIN number by any of 
the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting 
comments on the Agency Web site.
     E-mail: [email protected]. Include the RIN number in the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW, 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7 a.m. and 5 p.m.
     Instructions: All submissions received must include the 
agency name and RIN for this rulemaking. All comments received will be 
posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html including any personal information provided.

FOR FURTHER INFORMATION CONTACT: FDIC: Robert J. Fagan, Ethics Program 
Manager, Legal Division, (202) 898-6808; and Michelle Borzillo, 
Counsel, Legal Division, (202) 898-7400.

SUPPLEMENTARY INFORMATION: 

I. Background

    This proposed revised regulation addresses issues involving 
extensions of credit to all FDIC employees, including FDIC employees 
covered by the amended criminal statutes pertaining to examiners, 
members of the FDIC Board of Directors, Division and Office Directors, 
and their direct subordinates, as well as employees in the Corporate 
Employee Program who perform examiner functions (``covered 
employees''). This proposal would also clarify and make minor revisions 
to the provisions governing employee ownership of stock and the 
definitions used in the regulation.
    On December 19, 2003, the President signed Public Law 108-198, the 
Preserving Independence of Financial Institution Examinations Act of 
2003. The bill amended sections 212 and 213 of title 18 of the United 
States Code. These sections continue generally to impose criminal 
penalties on examiners borrowing from banks they examine, and financial 
institutions extending a loan to anyone who examines or has authority 
to examine that institution. The amendment, however, decriminalizes 
extensions of credit to examiners for credit cards and for primary 
residential home loans from institutions that they examine or have 
authority to examine if these loans are made on the same terms and 
conditions as are available to other cardholders and borrowers.
    The amended statute at 18 U.S.C. 212 provides that, subject to the 
exception noted above, any officer, director, or employee of a 
financial institution, who makes or grants any loan or gratuity, to any 
examiner or assistant examiner who examines or has authority to examine 
such bank, branch, agency, organization, corporation, association, or 
institution is subject to criminal penalties.
    Under 18 U.S.C. 213, as amended, any examiner or assistant examiner 
who accepts a loan or gratuity, except for primary residential loans or 
credit cards described in this proposed rule, from any bank, branch, 
agency, organization, corporation, association, or institution examined 
by the examiner or from any person connected with it, is subject to 
criminal penalties and will be disqualified from holding office as an 
examiner.
    On April 7, 2004, based on the statutory amendments, FDIC's Board 
of Directors adopted the Interim Policy on Credit Cards and Home 
Mortgages (``Interim Policy'') pending revisions to the FDIC's existing 
regulation on extensions of credit. The Interim Policy permits 
extensions of credit in the form of home mortgages for primary 
residences and credit cards under certain conditions. This proposed 
amended rule, once finalized, would replace the Interim Policy and 
supersede the current version of 5 CFR 3201.102.\1\
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    \1\ Under the regulation, before being modified by the Interim 
Policy adopted by the FDIC Board of Directors in April 2004, the 
staff responsible for examination of FDIC-insured depository 
institutions were prohibited from obtaining credit from an FDIC-
insured state nonmember bank, any subsidiary of such bank, or any 
person associated with such bank. No exceptions were made for home 
mortgages. An exception was made for credit cards issued outside the 
region or field office of assignment. Corporation officials in top 
management positions were prohibited under the existing regulation 
from entering into financial obligations with an institution over 
which the Corporation had primary Federal supervisory authority and 
its subsidiaries. An employee in the Division of Finance, Division 
of Insurance and Research, Division of Resolutions and 
Receiverships, the Legal Division, or who was a member of a standing 
committee of the Board of Directors, was prohibited from obtaining 
credit from an FDIC-insured depository institution or its subsidiary 
for a period of two years after the employee had participated 
personally and substantially in certain matters affecting the 
institution, its predecessor, successor, or affiliate. An exception 
was made for ordinary credit cards.

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[[Page 70326]]

    Additionally, the proposed regulation would clarify and make 
revisions to 5 CFR 3201.103, which restricts FDIC employees' 
acquisition, ownership, or control of securities of FDIC-insured 
depository institutions and certain holding companies. Finally, the 
proposed regulation would make appropriate revisions to the definitions 
in 5 CFR 3201.101.
    In proposing to make these regulatory revisions in part pursuant to 
its rulemaking authority under 18 U.S.C. 212(b), the FDIC has consulted 
with the other Federal financial institution regulatory agencies. In 
addition, the FDIC has determined, with the Office of Government 
Ethics' (OGE) concurrence, that, under 5 CFR 2635.403(a) of the 
executive branch standards of ethical conduct, these proposed revised 
provisions as to FDIC employees, their spouses and minor children, are 
needed so that a reasonable person would not question the impartiality 
and objectivity with which agency programs are administered. Further, 
with respect to the proposed revised restrictions and prohibitions on 
the holding of financial interests (including indebtedness, i.e., 
certain extensions of credit and loans) by the spouses and minor 
children of FDIC employees and covered FDIC employees, the FDIC has 
determined that there is a direct and appropriate nexus between such 
restrictions and prohibitions as applied to spouses and minor children 
and the efficiency of the service.

II. Description of Proposed Amended Sections of the FDIC Ethics 
Regulations

Proposed Amended Section 3201.102--Extensions of Credit and Loans From 
FDIC-Insured Institutions

    The proposed revision to 5 CFR 3201.102 would retain the existing 
general prohibitions on borrowings and disqualification provisions for 
FDIC employees and members of the FDIC Board of Directors. Likewise, 
under the proposed revision, as with the existing version of this 
section a current or contingent financial obligation of an employee's 
spouse or minor child would be considered to be an obligation of the 
employee. However, the proposed rule in a new paragraph (e) would 
authorize the FDIC Ethics Counselor to waive any disqualification under 
this proposed revised section based on a determination with the advice 
of the Legal Division that the waiver is not inconsistent with the 
standards of ethical conduct for employees of the executive branch as 
set forth in 5 CFR part 2635 or otherwise prohibited by law and that, 
under the particular circumstances, application of the prohibition is 
not necessary to avoid the appearance of misuse of position or loss of 
impartiality and objectivity with which the FDIC programs are 
administered.
    The proposed rule, in keeping with the amended statutes at 18 
U.S.C. 212 and 213, would eliminate the current regulatory 
disqualification for FDIC examiners, FDIC Board members, Division and 
Office Directors, and employees in the Corporate Employee Program 
performing examiner duties (defined as ``covered employees'' in Sec.  
3201.101(d)(3) of the proposed rule), who obtain credit cards on terms 
and conditions no more favorable than generally available to other 
borrowers. See new proposed paragraphs (c)(1) and (c)(2) of Sec.  
3201.102. Covered employees assigned to a bank from which they hold a 
credit card would have to inform their supervisor and ethics official 
prior to the examination or other participation in a matter involving 
the bank if any issue exists such as non-current payments, a billing 
dispute, or if negotiating with the bank concerning the debt. In 
certain cases, a disqualification would be required. Under proposed 
paragraph (d)(4) of Sec.  3201.102, covered employees and their spouses 
and minor children are prohibited from applying for or receiving a 
credit card from an institution if the covered employee is assigned or 
about to be assigned to an examination of that institution.
    Under the proposed rule in Sec.  3201.102(c)(3)(ii), 
disqualification would continue to be generally required for 
residential real property loans on a primary residence. However, such 
loans would be permitted in accordance with proposed paragraph 
(c)(2)(ii) of Sec.  3201.102, if the terms and conditions were no more 
favorable than the terms and conditions of loans generally available to 
other similarly situated creditworthy borrowers. Thus, covered FDIC 
employees could obtain such permitted loans, but would need to be 
recused from official participation in any particular matters involving 
the lending institution or person. The proposed rule would also cover 
limitations, restrictions, and the mechanism for waiver of the 
disqualification from participation in an examination or other matter 
in appropriate circumstances, under paragraphs (c)(4), (c)(5), (d) and 
(e) of Sec.  3201.102 as proposed for amendment.
    As previously noted above, a new general waiver would be available 
under the proposed rule in certain circumstances. Specifically, the 
proposed rule in paragraph (e) of Sec.  3201.102 would authorize the 
Ethics Counselor to waive any disqualification based on a determination 
with the advice of the Legal Division that the waiver is not 
inconsistent with the standards of ethical conduct for employees of the 
executive branch as set forth in 5 CFR part 2635 or otherwise 
prohibited by law and that, under the particular circumstances, 
application of the prohibition is not necessary to avoid the appearance 
of misuse of position or loss of impartiality and objectivity with 
which the FDIC programs are administered. A waiver under proposed 
paragraph (e) of Sec.  3201.102 could impose appropriate conditions, 
such as requiring the execution of a written disqualification.
    Under proposed paragraph (c)(5)(i) of Sec.  3201.102, a covered 
FDIC employee would not be prohibited from retaining a loan or 
extension of credit from a State nonmember bank or its subsidiary on 
its original terms if it was obtained prior to FDIC employment or 
reassignment to a covered employee position, or a result of the sale, 
or transfer of the loan or credit extension to, or the conversion or 
merger of the lender into, such a bank (or subsidiary). However, any 
renewal or renegotiation of such a pre-existing loan or credit 
extension would be subject to the prohibitions in paragraphs (c)(3) and 
(c)(4) of Sec.  3201.102 as proposed, subject to an exception noted in 
the following sentence. Under proposed paragraph (c)(5)(ii) of Sec.  
3201.102, a covered employee who experiences financial or other 
hardship unless allowed to renegotiate credit incurred prior to FDIC 
employment or reassignment of duties could submit a request for a 
waiver to his or her supervisor and the Ethics Counselor setting forth 
the reasons for the desired renegotiation and other details. After 
consideration, the employee's supervisor and the Ethics Counselor could 
jointly grant a written waiver of the prohibition based on a finding 
that the renegotiation would not be prohibited by law and that the 
waiver would not result in a loss of impartiality or objectivity or 
misuse of the employee's position.
    Paragraph (d) of Sec.  3201.102 of the proposed rule would also 
prohibit an FDIC employee from directly or indirectly accepting or 
becoming obligated on any extension of credit from an FDIC-insured 
depository

[[Page 70327]]

institution or its subsidiary for a period of two years from the date 
of the employee's last personal and substantial participation in an 
audit, resolution, liquidation, assistance transaction, supervisory 
proceeding, or internal agency deliberation affecting that particular 
institution, its predecessor or successor, or any subsidiary of such 
institution. This prohibition as proposed would not apply to credit 
obtained through the use of a credit card or a residential real 
property loan secured by the principal residence of the employee, 
subject to the same conditions, limitations, disqualification, and 
waiver procedures applicable to covered employees under proposed 
paragraphs (c) and (e) of Sec.  3201.102.

Proposed Amended Section 3201.103--Prohibition on Acquisition, 
Ownership or Control of Securities of FDIC-Insured Depository 
Institutions and Certain Holding Companies

    In addition, this proposed rule would amend 5 CFR 3201.103, which 
generally provides in paragraph (a), with certain exceptions set forth 
in paragraph (b), that no FDIC employee, spouse of an employee, or 
minor child of an employee may acquire, own, or control, directly or 
indirectly, a security of an FDIC-insured depository institution or its 
affiliate. The existing regulation at 5 CFR 3201.103(b) provides six 
exceptions to that general prohibition: (1) Acquiring, owning, or 
controlling securities of certain bank holding companies or their 
nonbank subsidiaries that are publicly traded, not primarily engaged in 
banking, and exempt from the Bank Holding Company Act; (2) acquiring, 
owning, or controlling securities of certain nonfinancial savings 
association holding companies; (3) retaining securities of an FDIC-
insured depository institution or affiliate if retention was permitted 
under 12 CFR part 336 prior to a certain date, prior to employment with 
the FDIC, or when the securities were acquired by a spouse prior to his 
or her marriage to the employee; (4) acquiring, owning, or controlling 
securities of an FDIC-insured depository institution or affiliate if 
acquired by inheritance, gift, stock split, involuntary stock dividend, 
merger, acquisition, or other change in corporate ownership, exercise 
of preemptive right, or otherwise without specific intent to acquire 
it, or if acquired by a spouse or minor child as part of a compensation 
package from their employer, subject to certain disclosure and 
disqualification requirements; (5) acquiring, owning, or controlling an 
interest in certain publicly traded or publicly available investment 
funds; and (6) using an FDIC-insured depository institution or 
affiliate as a custodian or trustee of accounts containing tax-deferred 
retirement funds. The proposed amendment would narrow the scope of 
these prohibitions and generally clarify the prohibitions of this 
section.
    The proposed amendment at Sec.  3201.103(a) would narrow the scope 
of the general prohibition concerning ownership and control of a 
security by FDIC employees, spouses and their minor children by 
removing the prohibitions on ownership of securities with respect to 
insured depository institution affiliates, other than certain holding 
companies. The reason for proposing to eliminate other affiliates from 
the prohibition is that the potential for a conflict of interest is 
generally only present when there is ownership or control of a company 
that in turn has control of an insured depository institution. 
Affiliates other than holding companies do not own, and generally do 
not control, an insured depository institution that is their parent or 
sister organization.
    The proposed amendment to Sec.  3201.103 would generally prohibit 
ownership of a security of, in addition to an FDIC-insured bank or 
savings association; a bank holding company that is subject to 
supervision by the Federal Reserve Board (FRB); a savings and loan 
holding company that is subject to supervision by the Office of Thrift 
Supervision (OTS); a financial holding company that is subject to 
supervision by the FRB; and a company that (i) owns or controls an 
FDIC-insured bank or savings association, (ii) is not an FRB-supervised 
bank holding company, an OTS-supervised savings and loan holding 
company, nor an FRB-supervised financial holding company, and (iii) 
either is primarily engaged in banking or is not publicly traded on a 
U.S. securities exchange. These categories, in appropriate cases, cover 
companies that control industrial banks.
    The proposed amendment of Sec.  3201.103 would also create in 
paragraph (b)(1), a specific exception for acquisition, ownership, or 
control of securities of a unitary thrift holding company. In addition, 
the proposed amendment of the section would reorganize the descriptions 
of the prohibited securities and exceptions. The intent of the 
reorganization proposed is to make this section clearer and more 
useable. The proposed amendment would retain in revised paragraphs (b) 
and (c) the other existing exceptions, limitations, and divestiture 
requirements of Sec.  3201.103. Moreover, in a new paragraph (d) of 
this section, the proposed rule would add a provision for written 
waiver in appropriate circumstances by the Ethics Counselor, with Legal 
Division advice and legal clearance, of any provision of the section 
that is identical to the proposed Sec.  3201.102(e) waiver provision 
discussed above.

Proposed Amended Section 3201.101(d)--General Section; Definitions

    Finally, the definitional section at paragraph (d) of Sec.  
3201.101 would be amended to add and revise certain useful definitions 
and delete others (``assisted entity'' and ``assuming entity'') that 
would no longer be used.
    The term ``covered employees'' would be expanded to include 
employees whose duties and responsibilities include the examination of 
a financial institution or participation in the examination of any 
financial institution. The FDIC is republishing all the definitions in 
the paragraph, including those not proposed for revision, for ease of 
reference.

Request for Comments

    The FDIC welcomes comments on all aspects of this proposal.

Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) requires that each Federal 
agency either certify that a proposed rule would not, if adopted in 
final form, have a significant impact on a substantial number of small 
entities or prepare an initial regulatory flexibility analysis (IRFA) 
of the proposal and publish the analysis for comment. See 5 U.S.C. 603, 
605. The Small Business Administration (SBA) defines small banks as 
those with less than $165 million in assets. The proposed rule 
decriminalizes under certain circumstances extensions of credit to FDIC 
examiners for credit cards and for primary residential home loans from 
institutions that they examine and clarifies certain restrictions on 
the acquisition, ownership, or control of securities of FDIC-insured 
depository institutions and certain holding companies on the part of 
FDIC employees. The proposed rule does not impose any obligations or 
restrictions on depository institutions, including small depository 
institutions. On this basis, the FDIC certifies pursuant to 5 U.S.C. 
605(b) that this proposed rule, if it is adopted in final form, will 
not have a significant impact on a substantial number of small 
entities. Commenters are nevertheless invited to provide the FDIC with 
any information they may have about the likely quantitative effects of 
the proposal.

[[Page 70328]]

Paperwork Reduction Act

    The FDIC has determined that this proposed rule does not involve a 
collection of information pursuant to the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

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 FDIC to use 
plain language in all proposed and final rules published after January 
1, 2000. Therefore, the FDIC specifically invites your comments on how 
to make this 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 proposed guidelines and 
regulations clearly stated? If not, how could the guidelines and 
regulations be more clearly stated?
     Do the proposed guidelines and regulations 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 guidelines and regulations 
easier to understand? If so, what changes to the format would make them 
easier to understand?
     What else could we do to make the guidelines and 
regulations easier to understand?

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the proposed rule will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

List of Subjects in 5 CFR Part 3201

    Conflict of interests, Ethical conduct, Extensions of credit and 
loans from FDIC-insured depository institutions, Government employees, 
Prohibitions on ownership of securities of FDIC-insured depository 
institutions.

    For the reasons set forth in the preamble, the Board of Directors 
of the FDIC, with the concurrence of OGE, proposes to amend part 3201 
of title 5 of the Code of Federal Regulations as follows:

PART 3201--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES 
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

    1. The authority citation for 5 CFR part 3201 is revised to read as 
follows:

    Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government 
Act of 1978); 12 U.S.C. 1819(a), 1822; 18 U.S.C. 212, 213; 26 U.S.C. 
1043; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as 
modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5 
CFR 2635.105, 2635.403, 2635.502, 2635.803.
    2. Paragraph (d) of Sec.  3201.101 is revised to read as follows:


Sec.  3201.101  General.

* * * * *
    (d) Definitions.
    For purposes of this part, the following definitions apply:
    (1) Affiliate, as defined in 12 U.S.C. 1841(k), means any company 
that controls, is controlled by, or is under common control with 
another company.
    (2) Appropriate director means the head of a Washington office or 
division or the highest ranking official assigned to a regional office 
in each division or the Ethics Counselor.
    (3) Covered employee means:
    (i) Members of the FDIC Board of Directors and any employee 
required to file a public or confidential financial disclosure under 5 
CFR part 2634 who holds a position immediately subordinate to such 
Board member;
    (ii) The director of any Washington division or office and the 
director of any regional office, and any employee required to file a 
public or confidential financial disclosure report under 5 CFR part 
2634 who holds a position immediately subordinate to such director;
    (iii) An FDIC examiner;
    (iv) Any other FDIC employee whose duties and responsibilities 
include the examination of or the participation in the examination of 
any financial institution;
    (v) Any other FDIC employee whose duties and responsibilities, as 
determined by the Chairman or Ethics Counselor after notice to the 
employee, require application of the prohibition on borrowing contained 
in Sec.  3201.102 to ensure public confidence that the FDIC's programs 
are conducted impartially and objectively.
    (4) Employee means an officer or employee, other than a special 
Government employee, of the Corporation, including a member of the 
Board of Directors appointed under the authority of 12 U.S.C. 
1812(a)(1)(C). For purposes of 5 CFR part 2635 and Sec. Sec.  3201.103 
and 3201.104, employee includes any individual who, pursuant to a 
contract or any other arrangement, performs functions or activities of 
the Corporation, under the direct supervision of an officer or employee 
of the Corporation.
    (5) Ethics Counselor means an officer or employee who is designated 
by the head of the agency to coordinate and manage the agency's ethics 
program, and includes the Corporation's Alternate Ethics Counselor.
    (6) Security includes an interest in debt or equity instruments. 
The term includes, without limitation, a secured or unsecured bond, 
debenture, note, securitized assets, commercial paper, and all types of 
preferred and common stock. The term includes an interest or right in a 
security, whether current or contingent, a beneficial or legal interest 
derived from a trust, the right to acquire or dispose of any long or 
short position, an interest convertible into a security, and an option, 
right, warrant, put, or call with respect to a security. The term 
security does not include a deposit account.
    (7) State nonmember bank means any State bank as defined in 12 
U.S.C. 1813(e) that is not a member of the Federal Reserve System.
    (8) Subsidiary, as defined in 12 U.S.C. 1813(w), means any company 
that is owned or controlled directly or indirectly by another company.
    3. Section 3201.102 is revised to read as follows:


Sec.  3201.102  Extensions of credit and loans from FDIC-insured 
institutions.

    (a) Credit subject to this section. The prohibition, 
disqualification, and retention provisions of this section apply to a 
current or contingent financial obligation of the employee. For 
purposes of this section, a current or contingent financial obligation 
of an employee's spouse or minor child is considered to be an 
obligation of the employee.
    (b) Disqualification applicable to FDIC employees generally. Except 
as provided in this section:
    (1) No FDIC employee may participate in an examination, audit, 
visitation, review, or investigation, or any other particular matter 
involving an FDIC-insured institution, subsidiary or other person with 
whom the employee has an outstanding extension of credit.
    (2) For employees, other than covered employees as defined in Sec.  
3201.101(d)(3), disqualification is not required if the credit was 
extended through the use of a credit card on the same terms and 
conditions as are offered to the general public.

[[Page 70329]]

    (3) The Comptroller of the Currency and the Director of the Office 
of Thrift Supervision shall be disqualified from any matter pending 
before the FDIC Board of Directors to the same extent as an FDIC 
employee subject to paragraph (c) of this section.
    (c) Prohibited borrowing by covered employees. (1) Prohibition on 
covered employee borrowing. Except as provided below, no covered 
employee shall, directly or indirectly, accept or become obligated on a 
loan or extension of credit, whether current or contingent, from any 
FDIC-insured State nonmember bank or its subsidiary or from an officer, 
director, or employee, of any FDIC-insured State nonmember bank or its 
subsidiary.
    (2) Exceptions: (i) Credit Cards. A covered employee (or spouse or 
minor child of a covered employee) may obtain and hold a credit card 
account established under an open end consumer credit plan and issued 
by an FDIC-insured State nonmember bank or its subsidiary subject to 
the following conditions:
    (A) The cardholder must satisfy all financial requirements for the 
credit card account that are generally applicable to all applicants for 
the same type of credit card account; and
    (B) The terms and conditions applicable with respect to the account 
and any credit extended to the cardholder under the account are no more 
favorable generally to the cardholder than the terms and conditions 
that are generally applicable to credit card accounts offered by the 
same bank (or the same subsidiary) to other cardholders in comparable 
circumstances under open end consumer credit plans.
    (ii) Loans secured primarily by principal residence. A covered 
employee (or a spouse or minor child of a covered employee) may obtain 
and hold a loan from an FDIC-insured State nonmember bank or its 
subsidiary subject to the following conditions:
    (A) The loan is secured by residential real property that is the 
principal residence of the borrower. The borrower may retain the loan 
if the residential real property ceases to be the principal residence. 
However, any subsequent renewal or renegotiation of the original terms 
of such a loan must meet the requirements of this paragraph;
    (B) The borrower may not apply for the loan while the covered 
employee participates in any examination, the review of any 
application, or any other supervisory or regulatory or other particular 
matter directly affecting the State nonmember bank or its subsidiaries;
    (C) The borrower must satisfy all financial requirements for the 
loan that are generally applicable to all applicants for the same type 
of residential real property loan; and
    (D) The terms and conditions applicable with respect to the loan 
and any credit extended to the borrower under the loan are no more 
favorable generally to the borrower than the terms and conditions that 
are generally applicable to residential real property loans offered by 
the same State nonmember bank or the same subsidiary to other borrowers 
in comparable circumstances for residential real property loans.
    (3) Disqualification of covered employees. A covered employee shall 
not participate in an examination, audit, visitation, review, or 
investigation, or other particular matter involving an FDIC-insured 
depository institution or other person with whom the covered employee 
has an outstanding extension of credit, or with whom the covered 
employee is negotiating an extension of credit.
    (i) Payment dispute, delinquency, or other significant matter 
concerning credit card debt. Disqualification is not required if the 
credit is extended through the use of a credit card. However, 
disqualification will be required when a covered employee is delinquent 
on payments, has a billing dispute, is negotiating with the 
institution, or has any other significant issue regarding the credit 
card debt. The covered employee must notify his or her supervisor and 
deputy ethics counselor of a dispute in writing.
    (ii) Primary residence mortgage loan. Disqualification will be 
required if the covered employee is negotiating for, has an application 
pending for, or enters into a primary residence mortgage loan. This 
disqualification will cease when the loan is sold, even if the loan 
originator retains the loan servicing.
    (4) Other limitations on covered employees. (i) A covered employee 
shall not accept or become obligated on an otherwise permissible loan 
if the disqualification arising from the credit relationship would 
materially impair the covered employee's ability to participate in 
matters that are central to the performance of the covered employee's 
official duties, or if the covered employee has been advised of an 
assignment to handle a matter involving that institution.
    (ii) Covered employees to whom the prohibitions in this section 
apply may not apply for a credit card or primary residence mortgage 
loan from a State nonmember bank or subsidiary that the covered 
employee is assigned to examine or participate in a matter involving 
that institution, or if such an assignment is imminent.
    (5) Pre-existing credit. (i) This section does not prohibit a 
covered employee, or any FDIC employee who becomes a covered employee 
as a result of any reassignment of duties or position, from retaining a 
loan or extension of credit from a State nonmember bank or its 
subsidiary on its original terms if the loan or extension of credit was 
incurred prior to employment by the FDIC or as a result of the sale or 
transfer of a loan or credit to a State nonmember bank or its 
subsidiary or the conversion or merger of the lender into a State 
nonmember bank or its subsidiary. Any renewal or renegotiation of a 
pre-existing loan or extension of credit will be treated as a new loan 
or extension of credit subject to the prohibitions at paragraphs (c)(3) 
and (c)(4) of this section.
    (ii) A covered employee may request that an exception be made to 
the prohibitions to permit renegotiation of a pre-existing loan or 
extension of credit. If a covered employee would experience financial 
or other hardship unless allowed to renegotiate a pre-existing loan or 
extension of credit, the covered employee may submit a written request 
to his or her supervisor and to the Ethics Counselor, describing the 
reasons for renegotiation, the original and the proposed terms and 
conditions, including whether the financial institution makes such 
terms generally available to the public, and any attempts by the 
covered employee to move the loan to a non-prohibited source. After 
consideration of the request, the covered employee's supervisor and the 
Ethics Counselor jointly may grant the waiver upon a finding that 
renegotiation is not prohibited by law, and that the waiver does not 
result in a loss of impartiality or objectivity or in misuse of the 
employee's position. To be effective, the waiver must be in writing.
    (d) Two-year prohibition on acceptance of credit from an FDIC-
insured depository institution. An FDIC employee shall not, directly or 
indirectly, accept or become obligated on any extension of credit from 
an FDIC-insured depository institution or its subsidiary for a period 
of two years from the date of the employee's last personal and 
substantial participation in an audit, resolution, liquidation, 
assistance transactions, supervisory proceeding, or internal agency 
deliberation affecting that particular institution, its predecessor or 
successor, or any subsidiary of such institution. This prohibition does 
not apply to credit obtained through the use of a

[[Page 70330]]

credit card or a residential real property loan secured by the 
principal residence of the employee, subject to the same conditions, 
limitations, disqualification, and waiver procedures applicable to 
covered employees under paragraphs (c) and (e) of this section.
    (e) Waiver. The Ethics Counselor may grant a written waiver from 
any provision of this section based on a determination made with the 
advice and legal clearance of the Legal Division that the waiver is not 
inconsistent with part 2635 of this title or otherwise prohibited by 
law, and that, under the particular circumstances, application of the 
prohibition is not necessary to avoid the appearance of misuse of 
position or loss of impartiality, or otherwise to ensure confidence in 
the impartiality and objectivity with which the FDIC's programs are 
administered. A waiver under this paragraph may impose appropriate 
conditions, such as requiring execution of a written disqualification.
    4. Section 3201.103 is revised to read as follows:


Sec.  3201.103  Prohibition on acquisition, ownership, or control of 
securities of FDIC-insured depository institutions and certain holding 
companies.

    (a) Prohibition on acquisition, ownership, or control. Except as 
provided in paragraph (b) of this section, no employee, spouse of an 
employee, or minor child of an employee may acquire, own, or control, 
directly or indirectly, a security of any of the following:
    (1) A bank or savings association that is insured by the Federal 
Deposit Insurance Corporation (FDIC);
    (2) A bank holding company that is subject to supervision by the 
Federal Reserve Board (FRB);
    (3) A savings and loan holding company that is subject to 
supervision by the Office of Thrift Supervision (OTS);
    (4) A financial holding company that is subject to FRB supervision; 
or
    (5) A company that:
    (i) Owns or controls an FDIC-insured bank or savings association;
    (ii) Is neither an FRB-supervised bank holding company, an OTS-
supervised savings and loan holding company, nor an FRB-supervised 
financial holding company; and
    (iii) Is either primarily engaged in banking or not publicly traded 
on a U.S. securities exchange.
    (b) Exceptions. Notwithstanding the prohibitions of paragraph (a) 
of this section, but subject to the limitations of paragraph (c) of 
this section, an employee, or the spouse or minor child of an employee, 
may do any or all of the following:
    (1) Acquire, own, or control the securities of a unitary thrift 
holding company (i.e., a savings and loan holding company that is 
subject to OTS supervision but whose principal business is neither 
banking nor activities closely related to banking);
    (2) Own or control a security of an entity described in paragraph 
(a) of this section if the security was permitted to be retained by the 
employee under 12 CFR part 336 prior to May 25, 1995, was obtained 
prior to commencement of employment with the Corporation, or was 
acquired by a spouse prior to marriage to the employee;
    (3) Own, or control a security of an entity described in paragraph 
(a) of this section if:
    (i) The security was acquired by inheritance, gift, stock-split, 
involuntary stock dividend, merger, acquisition, or other change in 
corporate ownership, exercise of preemptive right, or otherwise without 
specific intent to acquire the security, or, by an employee's spouse or 
minor child as part of a compensation package in connection with his or 
her employment;
    (ii) The employee makes full, written disclosure on FDIC form 2410/
07 to the Ethics Counselor within 30 days of the commencement of 
employment or the acquisition of the interest; and
    (iii) The employee is disqualified in accordance with 5 CFR part 
2635, subpart D, from participating in any particular matter that 
affects his or her financial interests, or that of his or her spouse or 
minor child;
    (4) Acquire, own, or control an interest in a publicly traded or 
publicly available investment fund provided that, upon initial or 
subsequent investment by the employee (excluding ordinary dividend 
reinvestment), the fund does not have invested, or indicate in its 
prospectus the intent to invest, more than 30 percent of its assets in 
the securities of one or more entities described in paragraph (a) of 
this section and the employee neither exercises control nor has the 
ability to exercise control over the financial interests held in the 
fund; and
    (5) Use an FDIC-insured depository institution or an affiliate of 
an FDIC-insured depository institution as custodian or trustee of 
accounts containing tax-deferred retirement funds.
    (c) Divestiture. Based upon a determination of substantial conflict 
under 5 CFR 2635.403(b), the Ethics Counselor may require an employee, 
or the spouse or minor child of an employee, to divest a security he or 
she is otherwise authorized to acquire, own, control, or use under 
paragraph (b) of this section.
    (d) Waiver. The Ethics Counselor may grant a written waiver from 
any provision of this section based on a determination made with the 
advice and legal clearance of the Legal Division that the waiver is not 
inconsistent with part 2635 of this title or otherwise prohibited by 
law, and that, under the particular circumstances, application of the 
prohibition is not necessary to avoid the appearance of misuse of 
position or loss of impartiality, or otherwise to ensure confidence in 
the impartiality and objectivity with which the FDIC's programs are 
administered. A waiver under this paragraph may impose appropriate 
conditions, such as requiring execution of a written disqualification.

    By order of the Board of Directors.
    Dated at Washington, DC, this 6th day of October, 2005.
Federal Deposit Insurance Corporation.

Robert E. Feldman,
Executive Secretary.

    Approved: November 27th, 2006.
Robert I. Cusick,
Director, Office of Government Ethics.
 [FR Doc. E6-20400 Filed 11-28-06; 4:06 pm]
BILLING CODE 6714-01-P