[Federal Register Volume 72, Number 74 (Wednesday, April 18, 2007)]
[Rules and Regulations]
[Pages 19375-19380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7377]



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  Federal Register / Vol. 72, No. 74 / Wednesday, April 18, 2007 / 
Rules and Regulations  

[[Page 19375]]



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: Final rule.

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SUMMARY: The FDIC is finalizing the proposed rule to amend existing 
FDIC ethics regulations involving extensions of credit, ownership of 
stock, and definitions. It implements 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 final rule clarifies and makes 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: The final rule is effective May 18, 2007.

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

    On December 4, 2006, the FDIC published a notice of proposed 
rulemaking to amend 5 CFR part 3201, entitled ``Supplemental Standards 
of Ethical Conduct for FDIC Employees.'' The FDIC is adopting the 
proposed rule as final. It 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 final rule 
also clarifies and makes 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 final 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 final rule 
replaces the Interim Policy and supersedes 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 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.
---------------------------------------------------------------------------

    Additionally, the final rule clarifies and makes 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 final rule makes appropriate 
revisions to the definitions in 5 CFR 3201.101.
    In making 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 Office of Government Ethics 
(OGE) concurrence, that, under 5 CFR 2635.403(a) of the executive 
branch standards of ethical conduct, these

[[Page 19376]]

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 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. Comments on the Proposed Rule

    The FDIC received one comment on the proposed rule. The commenter 
addressed only the use of plain language and did not comment on the 
substance of the rule. The commenter offered several plain language 
suggestions which the commenter believes would make the rule easier to 
read and understand.
    The FDIC has considered these comments and opted to finalize the 
rule as proposed without change for the following reasons. The rule 
restates and codifies the FDIC's longstanding interim policy that was 
well-known and understood by FDIC employees and the FDIC's ethics 
officials. The rule applies only to FDIC employees--it does not apply 
to non-FDIC employees and therefore has no impact on the public. 
Additionally, OGE concurred in the proposed rule prior to its 
publication as required by 5 CFR 2635.105 entitled ``Supplemental 
Agency Regulations'', and is also concurring in the final rule.
    The commenter found it confusing that the proposed rule used two 
different terms to refer to FDIC employees: ``covered employees'' and 
``FDIC employees.'' This use of two different terms is intentional. The 
term ``covered employee'' is defined in Sec.  3201.101(d)(3) and 
includes employees occupying certain identified positions within the 
FDIC, while other provisions of the rule apply to all ``FDIC 
employees.'' The regulation uses the different terms to distinguish 
between the provisions that apply only to ``covered employees'' from 
the provisions that apply to all ``FDIC employees.''
    For example, the final rule restates the general rule that all 
``FDIC employees'' are prohibited from participating in an examination, 
audit, visitation, review, or investigation, or any other particular 
matter involving an FDIC-insured institution, subsidiary or other 
person with whom that employee has an outstanding extension of credit. 
``Covered employees'' under the final rule may obtain a waiver from 
that general prohibition under the conditions and circumstances 
specified in the final rule. ``Covered employees'' are more restricted 
than all ``FDIC employees.''

III. The Final Rule

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

    The revision to 5 CFR 3201.102 retains the existing general 
prohibitions on borrowings and disqualification provisions for FDIC 
employees and members of the FDIC Board of Directors. Likewise, a 
current or contingent financial obligation of an employee's spouse or 
minor child is considered to be an obligation of the employee. However, 
the final rule in a new paragraph (e) authorizes the FDIC Ethics 
Counselor to waive any disqualification under this 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 final rule, in keeping with the amended statutes at 18 U.S.C. 
212 and 213, eliminates the current regulatory disqualification for 
FDIC examiners, FDIC Board members, Division and Office Directors, and 
their immediate subordinates, and employees in the Corporate Employee 
Program performing examiner duties (defined as ``covered employees'' in 
Sec.  3201.101(d)(3) of the rule), who obtain credit cards on terms and 
conditions no more favorable than generally available to other 
borrowers. See new paragraphs (c)(1) and (c)(2) of Sec.  3201.102. 
Covered employees assigned to a bank from which they hold a credit card 
must 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 will be required. Under 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 Sec.  3201.102(c)(3)(ii), disqualification will continue to 
be generally required for residential real property loans on a primary 
residence. However, such loans are permitted in accordance with 
paragraph (c)(2)(ii) of Sec.  3201.102, if the terms and conditions are 
no more favorable than the terms and conditions of loans generally 
available to other similarly situated creditworthy borrowers. Thus, 
covered FDIC employees can obtain such permitted loans, but will need 
to be recused from official participation in any particular matters 
involving the lending institution or person. The final rule also covers 
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 amended.
    As previously noted above, a new general waiver will be available 
under the final rule in certain circumstances. Specifically, paragraph 
(e) of Sec.  3201.102 authorizes the Ethics Counselor to waive any 
provision 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 paragraph (e) of Sec.  3201.102 could 
impose appropriate conditions, such as requiring the execution of a 
written disqualification.
    Under paragraph (c)(5)(i) of Sec.  3201.102, a covered FDIC 
employee is not 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 is subject to the 
prohibitions in paragraphs (c)(3) and (c)(4) of Sec.  3201.102, subject 
to an exception noted in the following sentence. Under paragraph 
(c)(5)(ii) of

[[Page 19377]]

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 final rule also prohibits an 
FDIC employee (other than examiners who are covered by the statutory 
prohibition under 18 U.S.C. 212 and 213) from directly or indirectly 
accepting or becoming 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 
transaction, 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 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 Sec.  3201.102.

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

    In addition, this final rule amends 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 final rule narrows the scope of these 
prohibitions and generally clarifies the prohibitions of this section.
    Revised Sec.  3201.103(a) as revised narrows 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 eliminating 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.
    Section 3201.103 as revised generally prohibits 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.
    Section 3201.103 as revised also creates in paragraph (b)(1), a 
specific exception for acquisition, ownership, or control of securities 
of a unitary thrift holding company. In addition, the final rule 
reorganizes the descriptions of the prohibited securities and 
exceptions. The intent of the reorganization is to make this section 
clearer and more useable. The final rule retains 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 final rule adds 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 Sec.  3201.102(e) waiver provision discussed above.

Section 3201.101(d)--General Section; Definitions

    Finally, the definitional section at paragraph (d) of Sec.  
3201.101 is amended to add and revise certain useful definitions and 
delete others (``assisted entity'' and ``assuming entity'') that are no 
longer used.
    The term ``covered employees'' is 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 being revised, for ease of 
reference.

Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) requires that each Federal 
agency either certify that a final rule would not have a significant 
impact on a substantial number of small entities. 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 final rule implements 
the statutory decriminalization under certain circumstances of 
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 final rule 
does not impose any obligations or restrictions

[[Page 19378]]

on depository institutions, including small depository institutions. On 
this basis, the FDIC certifies pursuant to 5 U.S.C. 605(b) that this 
final rule will not have a significant impact on a substantial number 
of small entities.

Paperwork Reduction Act

    The FDIC has determined that the final 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.).

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

    The FDIC has determined that the final 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).

Small Business Regulatory Enforcement Fairness Act

    The final rule relates to agency management or personnel, and the 
final rule is therefore not covered by the Small Business Regulatory 
Enforcement Fairness Act of 1996 (``SBREFA'') (5 U.S.C. 801 et seq.). 5 
U.S.C. 804(3)(B).

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.

0
For the reasons set forth in the preamble, the Board of Directors of 
the FDIC, with the concurrence of OGE, amends 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

0
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.


0
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.

0
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.
    (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.

[[Page 19379]]

    (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 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

[[Page 19380]]

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.

0
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 20th day of March, 2007.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Approved: April 10, 2007.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. E7-7377 Filed 4-17-07; 8:45 am]
BILLING CODE 6714-01-P