[Federal Register Volume 73, Number 187 (Thursday, September 25, 2008)]
[Rules and Regulations]
[Pages 55432-55435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22327]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 303, 308, and 309

RIN 3064-AD25


Deposit Insurance Requirements After Certain Conversions; 
Definition of ``Corporate Reorganization;'' Optional Conversions 
(``Oakar Transactions''); Additional Grounds for Disapproval of Changes 
in Control; and Disclosure of Certain Supervisory Information

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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[[Page 55433]]

SUMMARY: The FDIC is issuing a final rule that amends certain of its 
regulations by conforming them to Federal statutes amended by the 
Financial Services Regulatory Relief Act of 2006, the Federal Deposit 
Insurance Reform Act of 2005 and the Federal Deposit Insurance Reform 
Conforming Amendments Act of 2005. On January 14, 2008, the FDIC 
adopted, an interim rule and requested public comment on, amendments to 
its regulations to implement such changes. Having received no comments 
on the interim rule, the FDIC is confirming the interim rule as final 
without change.

DATES: Effective September 25, 2008, the interim rule published January 
14, 2008 (73 FR 2143) is confirmed as final without change.

FOR FURTHER INFORMATION CONTACT: Brett A. McCallister, Review Examiner 
(816) 234-8099 x4223, in the Division of Supervision and Consumer 
Protection; or Ryan K. Clougherty, Attorney, (202) 898-3843, Richard 
Bogue, Counsel, (202) 898-3726, or Robert C. Fick, Counsel, (202) 898-
8962, in the Legal Division.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 13, 2006, the President signed into law the Financial 
Services Regulatory Relief Act of 2006 (``FSRRA'').\1\ The stated 
purpose of FSRRA is to reduce regulatory burden and improve 
productivity for financial institutions. Several provisions of FSRRA 
amend statutes that the FDIC has implemented through its Rules and 
Regulations (``Rules'').\2\ Additionally, Congress enacted the Federal 
Deposit Insurance Reform Act of 2005 (``Reform Act'') \3\ and the 
Federal Deposit Insurance Reform Conforming Amendments Act of 2005 
(``Amendments Act''),\4\ which consolidated the two former deposit 
insurance funds into a single deposit insurance fund.
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    \1\ Pub. L. 109-351, 12 STAT. 1966 (Oct. 13, 2006).
    \2\ Chapter III of Title 12 of the Code of Federal Regulations.
    \3\ Pub. L. 109-171, 120 STAT. 9 (Feb. 8, 2006).
    \4\ Pub. L. 109-173, 119 STAT. 3601 (Feb. 15, 2006).
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    In January of 2008, the FDIC adopted an interim rule, and requested 
public comment on, amendments to its rules to conform them to Federal 
statutes as amended by the FSRRA, the Reform Act and the Amendments 
Act. Having received no comments, the FDIC is now issuing a final rule 
that is identical to the interim rule.

II. Regulatory Amendments

A. Deposit Insurance Requirements After Certain Conversions

    Section 5(i)(5) of the Home Owners' Loan Act (``HOLA'') \5\ 
generally authorizes any Federal savings association that was chartered 
and in operation before November 12, 1999 and that had branches in one 
or more states, to convert into one or more national or state banks, 
each of which may encompass one or more of the existing branches. 
Section 608(a) of FSRRA amended section 5(i)(5) of the HOLA to require 
that if such a conversion results in more than one national or state 
bank, each resulting bank must obtain deposit insurance from the FDIC 
pursuant to section 5(a) of the Federal Deposit Insurance Act (``FDI 
Act'').\6\
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    \5\ 12 U.S.C. 1464(i)(5).
    \6\ 12 U.S.C. 1815(a).
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    Subpart B of Part 303 of the FDIC's Rules sets forth the procedures 
for applying for deposit insurance. Section 303.20 describes the scope 
of subpart B to include applications for deposit insurance for, among 
other institutions, proposed depository institutions. The final rule 
amends section 303.20 to expressly confirm the applicability of subpart 
B of Part 303 to banks that result from conversions of Federal savings 
associations under section 5(i)(5) of the HOLA.

B. Definition of Corporate Reorganization

    Section 606 of the FSRRA made two changes to the Bank Merger Act 
\7\ with respect to mergers that solely involve an insured depository 
institution and one or more of its affiliates (``Affiliate Mergers''). 
First, for Affiliate Mergers, section 606 amended section 18(c)(4) of 
the FDI Act \8\ by eliminating the requirement that the appropriate 
Federal banking agency request competitive factors reports from either 
the other Federal banking agencies or the Attorney General of the 
United States.\9\ Prior to FSRRA the responsible Federal banking agency 
had to request competitive factors reports for Affiliate Mergers. 
Second, section 606 revised section 18(c)(6) of the FDI Act \10\ by 
eliminating the post-approval waiting period for Affiliate Mergers. 
Prior to FSRRA the applicant in an Affiliate Merger had to wait up to 
thirty days after obtaining the agency's approval before it could 
consummate the transaction.
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    \7\ 12 U.S.C. 1828(c).
    \8\ 12 U.S.C. 1828(c)(4).
    \9\ Notwithstanding this change, the responsible Federal banking 
agency retains the ability to request competitive factors reports if 
the circumstances warrant.
    \10\ 12 U.S.C. 1828(c)(6).
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    The FDIC's regulations at 12 CFR 303.61(b), formerly provided a 
definition of ``corporate reorganization'' that identified a class of 
mergers that generally do not raise competitive concerns and, 
therefore, do not require the same level of competitive analysis as 
other mergers subject to the Bank Merger Act. Such mergers are less 
burdensome on applicants. 12 CFR 303.61(b) defined ``corporate 
reorganization'' to include (i) mergers between an insured institution 
and its subsidiary or its holding company and (ii) mergers between 
institutions and entities that were ``commonly-owned.'' Institutions 
were ``commonly-owned'' if more than 50% of the voting stock of each is 
owned by the same entity. The changes made by section 606 of the FSRRA, 
however, indicate that there are no competitive concerns for a class of 
mergers that is broader than the class identified by the FDIC's Rule as 
corporate reorganizations. Specifically, FSRRA indicates that there are 
no competitive concerns for mergers that solely involve an insured 
depository institution and one or more affiliates. While the term 
``corporate reorganization'' is only used in subpart D as one of 
several illustrative examples of the types of mergers covered by the 
Bank Merger Act, the definition could cause confusion as to how it 
relates to Affiliate Mergers.
    The final rule amends the definition of ``corporate 
reorganization'' found at 12 CFR 303.61(b) in order to conform it to 
the changes made by FSRRA and to avoid confusion about the need for 
competitive analyses and post-approval waiting periods for any merger 
that solely involves an insured depository institution and one or more 
of its affiliates.

C. Optional Conversions

    Before it was repealed, the former section 5(d)(3) of the FDI Act 
\11\ generally authorized a member of one insurance fund to merge with 
a member of the other fund without changing the funds that insured the 
deposits of the two institutions. This type of merger was referred to 
as an ``Optional Conversion'' in both section 5(d)(3) of the FDI Act 
and in section 303.63(d) of the FDIC's Rules; it was also commonly 
known as an ``Oakar Transaction.'' Section 303.63(d) of the FDIC's 
Rules formerly required the applicant in an Optional Conversion to 
identify the

[[Page 55434]]

merger as an ``Optional Conversion'' in its application.
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    \11\ 12 U.S.C. 1815(d)(3) (repealed 2006).
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    On March 31, 2006, pursuant to the Reform Act and the Amendments 
Act, the former Savings Association Insurance Fund (``SAIF'') and the 
former Bank Insurance Fund (``BIF'') were consolidated into a single 
fund, the Deposit Insurance Fund. In addition, the Amendments Act 
repealed section 5(d)(3) of the FDI Act effective with the merger of 
the two funds.\12\ Following the consolidation of the two funds into 
one by the Reform Act and the repeal of section 5(d)(3) of the FDI Act 
by the Amendments Act, Optional Conversions are no longer possible. The 
final rule amends section 303.63 by removing paragraph (d) Optional 
conversions. The removed paragraph formerly read as follows:
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    \12\ See section 8(a)(4) of the Amendments Act, Pub. L. 109-173 
(2006).

    (d) Optional conversions. If the proposed merger transaction is 
an optional conversion, the merger application shall include a 
statement that the proposed merger transaction is a transaction 
covered by section 5(d)(3) of the FDI Act (12 U.S.C. 1815(d)(3).

D. Additional Grounds for Disapproval of a Change in Control

    Section 705 of FSRRA amended section 7(j)(7) of the FDI Act \13\ by 
adding an additional ground for the disapproval of a proposed 
acquisition of control of a bank. The additional ground for disapproval 
is if the future prospects of the institution might jeopardize the 
financial stability of the bank or prejudice the interests of the 
depositors of the bank.
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    \13\ 12 U.S.C. 1817(j)(7).
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    Section 308.111 of the FDIC's Rules lists the statutory grounds for 
disapproval of a proposed acquisition of control of an insured state 
nonmember bank. The final rule amends section 308.111(c) to reflect the 
addition of unfavorable future prospects of the institution as a ground 
for disapproval of a proposed acquisition under the FSRRA.

E. Disclosure of Certain Supervisory Information

    Section 707 of FSRRA amended section 7(a)(2) of the FDI Act \14\ by 
adding a new subsection (C) that expanded the authority of the Federal 
banking agencies to furnish examination reports and other confidential 
supervisory information to (1) any other Federal and State agencies 
with supervisory or regulatory authority over the depository 
institution or entity, (2) officers, directors and receivers of such 
depository institution or entity, and (3) any other person that the 
Federal banking agency determines to be appropriate.
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    \14\ 12 U.S.C. 1817(a)(2).
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    Part 309 of the FDIC's Rules governs the disclosure of confidential 
information. Paragraph (b)(3) of section 309.6 entitled ``Disclosure of 
exempt records,'' previously authorized the disclosure of exempt 
records to Federal financial institution supervisory agencies and 
certain other agencies.
    Since section 707 of FSRRA authorized additional disclosures of 
certain supervisory information, the final rule amends section 
309.6(b)(3) to add those additional disclosures to the disclosures 
previously authorized.

III. Regulatory Analysis and Procedure

A. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (``GLBA'') \15\ requires 
the FDIC to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. The FDIC invited comments on whether 
the interim rule is clearly stated and effectively organized, and how 
the FDIC might make the text easier to understand. The FDIC received no 
comments addressing how the proposed rule might be changed to reflect 
the requirements of GLBA.
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    \15\ 12 U.S.C. 4809.
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B. Administrative Procedure Act

    The final rule takes effect upon publication in the Federal 
Register. The final rule conforms the FDIC's regulations to several 
statutory provisions that were amended by FSRRA on October 13, 2006 and 
by the Reform Act and the Amendments Act effective on March 31, 2006. 
The statutory amendments made by FSRRA, the Reform Act, and the 
Amendments Act continue in effect. The amendments to the FDIC's 
regulations made by the final rule are identical to those made by the 
interim rule, effective January 14, 2008.
    The amendments to the FDIC's regulations made by the interim rule, 
and adopted in this final rule, generally reflect the language 
contained in the amended statutes without interpretation. The 
amendments made by the final rule effect no substance changes beyond 
those already effected by Federal statute. Although solicitation of 
public comment prior to the effectiveness of these regulatory 
amendments was unnecessary, the FDIC nonetheless requested public 
comment on the interim rule. The FDIC received no comments.

C. Regulatory Flexibility Act

    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 economic impact on a substantial number 
of small entities or prepare an initial regulatory flexibility analysis 
of the proposal and publish the analysis for comment.\16\ However, 
pursuant to section 603(a) of the RFA a regulatory flexibility analysis 
is only required when an agency is required to publish a notice of 
proposed rulemaking for a proposed rule. Since the regulatory 
amendments made by the final rule are effective upon publication in the 
Federal Register, and since no notice of proposed rulemaking is 
required to be published, no regulatory flexibility analysis is 
required.
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    \16\ See 5 U.S.C. 603.
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D. Paperwork Reduction Act

    No new collections of information pursuant to the Paperwork 
Reduction Act \17\ are contained in the final rule.
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    \17\ 44 U.S.C. 3501.
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List of Subjects

12 CFR Part 303

    Administrative practice and procedure, Bank deposit insurance, 
Banks, Banking, Reporting and recordkeeping requirements, Savings 
associations.

12 CFR Part 308

    Administrative practice and procedure, Bank deposit insurance, 
Banks, Banking, Claims, Crime, Equal access to justice, Fraud, 
Investigations, Lawyers, Penalties.

12 CFR Part 309

    Banks, Banking, Credit, Freedom of information, Privacy.

PARTS 303, 308, 309--[AMENDED]

Authority and Issuance

0
For the reasons set forth in the preamble, under the authority of 12 
U.S.C. 1820 G, the interim rule amending parts 303, 308, and 309 of 
Chapter III of the title 12 of the Code of Federal Regulations which 
was published at 73 FR 2143 on January 14, 2008, is adopted as a final 
rule without change.

    By Order of the Board of Directors.

    Dated at Washington, DC, the 18th day of September 2008.

[[Page 55435]]

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E8-22327 Filed 9-24-08; 8:45 am]
BILLING CODE 6714-01-P