[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41411-41418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15020]



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  Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules 
and Regulations  

[[Page 41411]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 380

RIN 3064-AE25


Record Retention Requirements

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (the ``FDIC'') is 
adopting a final rule that implements section 210(a)(16)(D) of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the 
``Dodd-Frank Act'' or the ``Act''). This statutory provision requires 
the promulgation of a regulation establishing schedules for the 
retention by the FDIC of the records of a covered financial company 
(i.e., a financial company for which the necessary determination has 
been made for the appointment of the FDIC as receiver pursuant to Title 
II of the Dodd-Frank Act) as well as for the records generated or 
maintained by the FDIC that relate to its exercise of its Title II 
orderly liquidation authorities as receiver with respect to such 
covered financial company.

DATES: This final rule is effective on July 27, 2016.

FOR FURTHER INFORMATION CONTACT: Legal Division: Elizabeth Falloon, 
(703) 562-6148; Joanne W. Rose, (703) 562-2175. Division of Resolutions 
and Receiverships: Teresa Franks, (571) 858-8226; James Horgan, (917) 
320-2501; Manuel Ramilo, (571) 858-8227. Office of Complex Financial 
Institutions: Charlton R. Templeton, (202) 898-6774. Federal Deposit 
Insurance Corporation, 550 17th Street NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:
I. Policy Objectives
II. Background
III. Comments to the Proposed Rule
    A. Retention Periods
    B. Reasonably Accessible
    C. Bridge or Subsidiary Records
IV. The Final Rule
    A. General
    B. Section-by-Section Analysis
    1. Scope and Definitions
    2. Inherited Records
    3. Transfer of Records
    4. Receivership Records
    5. Limits of Effect of Determinations With Respect to Records
    6. Duplicate and Transitory Materials
    7. Records of Affiliate; Supervisory Materials
    8. Policies and Procedures
V. Expected Effects of the Final Rule
VI. Alternatives Considered
VII. Regulatory Analysis and Procedure
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Small Business Regulatory Enforcement Fairness Act
    D. Plain Language
    E. The Treasury and General Government Appropriations Act of 
1999

I. Policy Objectives

    In enacting Title II \1\ of the Dodd-Frank Act (``Title II''), 
Congress provided for the appointment of the FDIC as receiver for a 
financial company \2\ in order to conduct an orderly liquidation of the 
financial company if, among other things, resolution of the financial 
company under bankruptcy (or other applicable insolvency regime) would 
have serious adverse effects on U.S. financial stability. Title II 
confers upon the FDIC as the appointed receiver for a financial company 
(after appointment of the receiver, the company is referred to as a 
covered financial company) \3\ certain powers and authorities to 
effectuate an orderly liquidation of the covered financial company in a 
manner that is consistent with the statutory objectives. As part of 
this statutory undertaking, Congress foresaw the necessity for the FDIC 
and the public at large to have access to the records that would 
document the actions of the financial company prior to the FDIC's 
appointment as receiver and the records of the FDIC itself, in its 
receivership role. This regulation implements that statutory mandate in 
a manner promoting consistency and transparency in the maintenance of 
these records.
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    \1\ Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010, Public Law 111-203, 124 Stat. 1376 (2010) and codified at 12 
U.S.C. 5301 et seq. Title II of the Dodd-Frank Act is codified at 12 
U.S.C. 5381-5394.
    \2\ See 12 U.S.C. 5381(a)(11) (defining financial company) and 
the regulations promulgated thereunder.
    \3\ A ``covered financial company'' is a financial company 
(other than an insured depository institution) for which the 
necessary determinations have been made for the appointment of the 
FDIC as receiver. 12 U.S.C. 5381(a)(8).
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II. Background

    Upon appointment of the FDIC as receiver for a financial company, 
the FDIC succeeds to all rights, titles, powers and privileges of the 
financial company, including title to the books and records of the 
financial company.\4\ In addition, the FDIC necessarily will generate 
its own records in connection with its appointment as receiver and in 
connection with exercising the authorities conferred upon it by Title 
II.
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    \4\ 12 U.S.C. 5390(a)(1)(A).
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    Section 210(a)(16)(D) of the Dodd-Frank Act \5\ requires the FDIC 
to prescribe such regulations and establish such retention schedules as 
are necessary to maintain two categories of records: The records of a 
financial company that were in existence at the time the FDIC is 
appointed as its receiver, as well as the records generated by the FDIC 
in connection with its appointment as receiver and in connection with 
its exercise of its orderly liquidation authorities. Section 
210(a)(16)(D) of the Act provides guidance as to the types of records 
that must be retained. Specifically, section 210(a)(16)(D)(i) of the 
Act requires that the FDIC prescribe the regulations and establish 
schedules for retention of these records with due regard for the 
avoidance of duplicative record retention and for the evidentiary needs 
of the FDIC as receiver and for the public. Once such regulations and 
retention schedules are prescribed, section 210(a)(16)(D)(ii) prohibits 
the destruction of records to the extent that they must be retained in 
accordance with the promulgated regulations and retention schedules.
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    \5\ 12 U.S.C. 5390(a)(16)(D).
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    Section 210(a)(16)(D)(iii) of the Act, entitled ``Records 
Defined,'' describes the forms of documentary material addressed in the 
regulation and statute, specifying that any document, book, paper, map, 
photograph, microfiche, microfilm, computer or electronically-created 
record is included. In addition, that section specifies that records 
inherited from the failed company are

[[Page 41412]]

those that were generated or maintained by the covered financial 
company in the course of and necessary to its transaction of business.
    On October 21, 2014, the Board of Directors of the FDIC approved a 
notice of proposed rulemaking entitled ``Record Retention 
Requirements,'' promulgated pursuant to section 210(a)(16)(D) of the 
Dodd-Frank Act. The proposed rule was published in the Federal Register 
on October 24, 2014 with a 60-day comment period that ended on December 
23, 2014.\6\ In keeping with the statutory mandate, the proposed rule 
established retention schedules for both records inherited by the FDIC 
as receiver from the covered financial company and records created by 
the FDIC as receiver for the covered financial company. The retention 
schedule for records inherited from the covered financial company was 
modeled after the treatment of records of a failed insured depository 
institution pursuant to a regulation entitled ``Records of Failed 
Depository Institutions'' \7\ (the ``FDIA records rule''). The FDIA 
records rule addresses the retention of records of failed insured 
depository institutions pursuant to section 11(d)(15)(D) \8\ of the 
Federal Deposit Insurance Act.
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    \6\ 79 FR 63585 (October 24, 2014).
    \7\ 12 CFR 360.11, 78 FR 54373 (September 4, 2013).
    \8\ 12 U.S.C. 1821(d)(15)(D).
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    Generally, the proposed rule required that records inherited from a 
covered financial company that were created less than ten years before 
the appointment of the FDIC as receiver be retained for not less than 6 
years following the date of the appointment of the receiver. Under the 
proposed rule, records created by the FDIC in connection with the 
exercise of its orderly liquidation authority as receiver for a covered 
financial company were required to be maintained at least six years 
following the termination of the receivership, regardless of when they 
were created.

III. Comments to the Proposed Rule

    Two comment letters were submitted in response to the proposed 
rule, both from individuals.

A. Retention Periods

    Both commenters stated that the retention periods in the proposed 
rule were too short, and one of the commenters suggested that all 
records be kept indefinitely for ``analytical purposes.'' The 
requirement in section 210(a)(16)(D)(i) of the Dodd-Frank Act that 
retention schedules be established suggests that Congress expected that 
the FDIC would exercise its discretion to identify some appropriate 
period of time as a minimum period of time to retain records. \9\ The 
periods identified in the proposed rule were based upon the experience 
of the FDIC as receiver for insured depository institutions. Thus, as 
noted in the preamble to the proposed rule, the FDIC prescribed minimum 
retention periods in the proposed rule, recognizing that the FDIC may, 
as it has in the past with regard to the records of failed insured 
depository institutions, retain certain records for longer periods of 
time or even indefinitely for analytical, historical, or other 
purposes. The proposed rule expressly provided for the establishment of 
policies that are consistent with the minimum schedules established in 
the proposed rule. With the changes more fully discussed below, the 
FDIC believes that the minimum retention periods provided in the final 
rule properly fulfill the intent of section 210(a)(16)(D) of the Act 
and comport with prudent record retention principles.
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    \9\ Section 210(a)(16)(D)(ii) of the Act provides that unless 
otherwise required by applicable Federal law or court order, the 
FDIC may not, at any time, destroy any records that it is required 
to retain under Section 210(a)(16)(D)(i) of the Act and the 
regulations promulgated thereunder.
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B. Reasonably Accessible

    One of the commenters objected to the use of the phrase 
``reasonably accessible'' in the definition of ``documentary 
material,'' which forms the basis for the types of materials that 
constitute a record for purposes of the proposed rule. The commenter 
suggested that if a party in litigation is willing to pay for the 
recovery of electronically-stored information, such a record should be 
made available. Unfortunately, this suggestion does not reflect the 
reality of record storage and accessibility.
    A large component of record storage expense is the cost of 
maintaining legacy systems that house records, as well as the cost of 
retrieving and identifying possible relevant information from those 
systems and sources. To comply with the commenter's suggestion, all 
records systems, no matter how out-of-date or incompatible with the 
FDIC's systems, would have to be indefinitely maintained as accessible, 
together with the technological and staffing capacity to use these 
systems to retrieve obsolete records. This indefinite maintenance would 
be attempted on the remote chance that one record, or a portion 
thereof, stored on a legacy system would be requested by a litigant. 
The cost to indefinitely maintain an entire legacy system that could 
house an arguably relevant document would be impossible to calculate 
and to bill to a litigant. The ``reasonably accessible'' discovery 
standard requires maintenance of these systems where it is reasonable 
and practicable to do so. (See discussion on the ``reasonably 
accessible'' discovery standard used in the definition of documentary 
material in the section-by-section analysis.) Accordingly, the term 
``reasonably accessible'' is included in the definition of 
``documentary material'' in the final rule.

C. Bridge or Subsidiary Records

    One of the commenters objected to the exclusion from records of 
documentary material generated or maintained by a bridge financial 
company or a subsidiary or affiliate of a covered financial company. 
This exclusion was included in paragraph (d)(3)(ii) of the proposed 
rule. As required by the statute, the proposed rule addresses only the 
records of a covered financial company and the records of the FDIC as 
receiver of such covered financial company. Retention of the records of 
any other legal entity, including a covered financial company's 
subsidiaries or affiliates, is beyond the scope of the requirements of 
the statute. Although bridge financial company records and subsidiary 
records are not expressly subject to the proposed rule, records 
generated by the FDIC receiver in its oversight of a bridge financial 
company, or records sent to the FDIC receiver by the bridge's 
management and maintained by the FDIC in the course of such oversight 
would be subject to the applicable minimum retention requirements of 
the proposed rule. Accordingly, no change was made to the final rule in 
this respect and the exclusion is found in paragraph (e)(2)(ii) of the 
final rule.

IV. The Final Rule

A. General

    In response to the comment letters and pursuant to internal agency 
consideration, the FDIC made certain changes to the final rule. These 
changes are discussed below.
    The proposed rule has been revised to eliminate the set retention 
period for records created by the FDIC in connection with its 
appointment as receiver for a covered financial company and in 
connection with its exercise of its Title II responsibilities. The 
proposed rule provided for a retention period for these records of not 
less than six years after the date of the termination of the related 
receivership.

[[Page 41413]]

The change in the final rule requires the FDIC to retain these records 
indefinitely to the extent that there is a present or reasonably 
foreseeable future evidentiary or historical need for them on the part 
of the FDIC or the public, but in no event less than six years from the 
termination of the related receivership. This is in keeping with the 
suggestions of the commenters who objected to the imposition of 
specific retention periods, and is consistent with the statutory 
emphasis on the ``expected evidentiary needs of the Corporation \10\ . 
. . and the public'' as required by section 210(a)(16)(D) of the Act. 
In addition, the paragraph clarifies that in the case of receivership 
records that are subject to a litigation hold, \11\ a Congressional 
subpoena, or that relate to an investigation by Congress, the United 
States Government Accountability Office, or the FDIC's inspector 
general, such records will be retained pursuant to the conditions of 
the hold, subpoena, or investigation.
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    \10\ The Dodd-Frank Act uses the term ``Corporation'' to refer 
to the FDIC.
    \11\ A litigation hold (also known as a ``preservation order'', 
a ``legal hold'' or a ``hold order'') is a stipulation requiring a 
party to preserve all data that may relate to a legal action 
involving that party. When in place, it requires that parties 
preserve records when they learn of pending or imminent litigation, 
or when litigation is reasonably anticipated. This requirement 
ensures that documentary material will be available for the 
litigation's discovery process.
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    Two definitions have been added and appear in the final rule: 
``Inherited records'' in paragraph (b)(2) and ``receivership records'' 
in paragraph (b)(3). Although the proposed rule separately addressed 
these two kinds of records, the wording used to describe these records 
(``records of a covered financial company for which the Corporation is 
appointed receiver'' and ``records of the Corporation as receiver for a 
covered financial company'') was unnecessarily repetitive. The use of 
the defined terms, which are both accurate and descriptive, results in 
more succinct language in the final rule.
    Inherited records may be transferred to a third-party transferee in 
connection with a transfer, acquisition, or sale of a covered financial 
company's assets and liabilities. Paragraph (b)(4) of the proposed rule 
has been slightly expanded in the final rule (and is now paragraph 
(c)(3) of the final rule). The final rule requires that in order for 
the transfer of inherited records to satisfy the record retention 
requirements of the final rule and section 210(a)(16)(D) of the Act, 
the transferee must agree not only to maintain the inherited records 
for at least six years from the date of appointment of the FDIC as 
receiver for the covered financial company, as provided in the proposed 
rule, but must also agree that, prior to the destruction of any such 
inherited records, it will provide the FDIC with notice and the 
opportunity to cause the return of such inherited records to the FDIC.

B. Section-by-Section Analysis

1. Scope and Definitions
    Paragraph (a) sets forth the scope of the final rule. It makes 
clear that the final rule applies to the two categories of records 
addressed by section 210(a)(16)(D) of the Act, i.e., those records of a 
financial company that are inherited by the FDIC upon its appointment 
as receiver for the covered financial company and those records 
generated by the FDIC in connection with its appointment as receiver 
and the exercise of its orderly liquidation authorities.
    Paragraph (b) provides definitions for terms used in the final rule 
that are not otherwise defined in the Dodd-Frank Act. Part 380 of title 
12 of the Code of Federal Regulations concerns the FDIC's orderly 
liquidation authorities conferred by Title II of the Dodd-Frank Act. 
Section 380.1 contains the definition of the term covered financial 
company which is defined as a financial company for which the necessary 
determinations have been made for the FDIC to be appointed receiver and 
the term financial company.\12\ Thus it is unnecessary to include 
definitions of the terms covered financial company and financial 
company in the final rule.
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    \12\ 12 U.S.C. 5381(a)(11).
---------------------------------------------------------------------------

    Paragraph (b) sets forth three definitions. The first is that of 
documentary material. This definition follows closely the text of 
section 210(a)(16)(D)(iii) of the Act and describes the universe of 
forms and formats in which materials subject to the final rule may 
appear, including books, paper, maps, photographs, microfiche, 
microfilm, or writing regardless of physical form or characteristics 
and includes any computer or electronically-created data or file. The 
definition of documentary material included in the final rule is 
slightly different from the definition included in the proposed rule to 
make it clearer that the term documentary material covers material 
regardless of the physical form or characteristics of the material and 
includes any computer or electronically-created data or file.
    The definition of documentary material clarifies that only 
documentary material that is reasonably accessible is included in the 
scope of the final rule. This reflects the policy behind Federal Rule 
of Civil Procedure 26(b)(2)(B), which provides that a party from whom 
discovery is sought need not provide electronically-stored information 
from sources that are not reasonably accessible because of undue cost 
or burden. For example, a party may be excused from restoring 
electronically-stored information from aging back-up tapes in order to 
produce it in response to a discovery request. Thus, the use of the 
phrase ``reasonably accessible'' would align the concept of material 
subject to the final rule with the discovery standard and would protect 
the FDIC as receiver from incurring inordinate expenses associated with 
restoring or maintaining the legacy system of a covered financial 
company in order to extract documentary material from those systems 
that is not otherwise needed by the FDIC to carry out its receivership 
functions.
    Two definitions have been added and appear in the final rule in 
paragraphs (b)(2) and (b)(3): Inherited records and receivership 
records. Although the proposed rule separately addressed these two 
kinds of records, they were described rather than defined (``records of 
a covered financial company for which the Corporation is appointed 
receiver'' and ``records or the Corporation as receiver for a covered 
financial company''). The final rule uses defined terms for conciseness 
and clarity, as discussed above.
2. Inherited Records
    Paragraph (b)(2) of the final rule defines, and addresses the 
retention schedule for, inherited records. Under the final rule the 
term inherited record means documentary material of a covered financial 
company that existed on the date of the appointment of the FDIC as 
receiver for such financial company and was generated or maintained by 
the covered financial company in the course of, and necessary to, the 
transaction of its business. The final rule provides additional 
guidance with respect to determining whether documentary material was 
generated or maintained by the covered financial company in the course 
of, and necessary to, the transaction of its business and therefore 
constitutes an inherited record that is subject to the retention 
requirements of the final rule. The final rule sets forth three factors 
which the FDIC will consider in determining whether documentary 
material, as defined in paragraph (b)(1), was generated or maintained 
by the covered financial company in the course of, and necessary to, 
the transaction of its business.

[[Page 41414]]

    The first factor is whether the documentary material was generated 
or maintained in accordance with the covered financial company's own 
practices and procedures (including the document retention policies of 
the covered financial company) or pursuant to standards established by 
the covered financial company's regulators. In general, a company's own 
policies and procedures will reflect the significance of its records to 
its business and regulatory requirements and the importance of 
documentary material generated or maintained by the company. Thus, the 
FDIC will consider whether documentary material was created or 
maintained in accordance with the covered financial company's own 
practices and procedures (including its document retention policies) 
when determining whether specific documentary material is an inherited 
record for the purposes of section 210(a)(16)(D) of the Act and the 
final rule. Likewise, the FDIC will consider whether documentary 
material was generated or maintained pursuant to standards imposed by 
the covered financial company's regulators when determining whether 
specific documentary material is an inherited record for the purposes 
of section 210(a)(16)(D) of the Act and the final rule.
    The second factor is whether the documentary material is necessary 
for the FDIC to carry out its obligations as receiver for the covered 
financial company. This inquiry would permit the classification of 
documentary material as an inherited record if it is necessary for the 
FDIC to maintain such documentary material in order to carry out its 
functions as receiver for the covered financial company, for example, 
where the documentary material is necessary in order for the FDIC to 
(i) transfer the covered financial company's assets or liabilities, 
(ii) assume or repudiate the covered financial company's contracts, 
(iii) determine claims against the receivership of the covered 
financial company, or (iv) collect obligations owed to the covered 
financial company.
    The third factor is whether there is a present or reasonably 
foreseeable evidentiary need for such documentary material by the FDIC 
as receiver for the covered financial company or the public. The 
wording of this factor closely follows the wording of section 
210(a)(16)(D)(i)(II) of the Dodd-Frank Act. That section emphasizes 
that the FDIC must retain documentary materials that have evidentiary 
value to the FDIC as receiver and to the public. The final rule 
reflects this statutory direction and makes it clear that in making any 
determination of future evidentiary value a ``reasonably foreseeable'' 
standard should be applied.
    Paragraph (c)(1) of the final rule establishes the record retention 
schedule for inherited records. The time period included in the final 
rule is modeled on the time period contained in the FDIA statutory 
provision and the FDIA records rule.\13\ Under the final rule, the FDIC 
shall retain any inherited record of a covered financial company that 
was created fewer than ten years before the date of the appointment of 
the FDIC as receiver for the covered financial company for a period of 
no less than six years from the date of such appointment, provided 
however that an inherited record shall be retained indefinitely so long 
as it is (i) subject to a litigation hold imposed by the FDIC, (ii) 
subject to a Congressional subpoena or relates to an ongoing 
investigation by Congress, the United States Government Accountability 
Office, or the FDIC's Inspector General, or (iii) an inherited record 
that the FDIC has determined is necessary for a present or reasonably 
foreseeable evidentiary need of the FDIC or the public. Therefore, 
similar to the FDIA final rule, paragraph (c)(1) of the final rule 
expressly provides that the FDIC will maintain inherited records 
subject to a litigation hold imposed by the FDIC in order to ensure 
retention of documentary material that is relevant to ongoing 
litigation matters. The final rule goes farther than the FDIA records 
rule, however, by expressly requiring the indefinite maintenance of 
inherited records subject to a Congressional subpoena or that relate to 
an ongoing investigation by Congress, the United States Government 
Accountability Office, or the FDIC's Office of Inspector General; or 
that otherwise have been deemed by the FDIC as necessary for a present 
or reasonably foreseeable evidentiary need of the FDIC or the public.
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    \13\ The FDIC has been required to retain records inherited from 
failed insured depository institutions for a minimum of six years 
since the enactment of the FDIA provision which was added to the 
Federal Deposit Insurance Act by section 212(a) of the Financial 
Institutions Reform, Recovery, and Enforcement Act (FIRREA) in 1989 
(Pub. L. 101-73).
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    Paragraph (c)(2) provides a non-exclusive list of examples of 
material that would constitute inherited records to provide additional 
guidance and clarity with respect to the sorts of documentary material 
that are subject to the retention requirements of the final rule. 
Included examples are correspondence; tax forms; accounting forms and 
related work papers; internal audits; inventories; board of directors 
or committee meeting minutes; personnel files and employee benefits 
information; general ledger and financial reports; financial data; 
litigation files; loan documents including records relating to 
intercompany debt; contracts and agreements to which the covered 
financial company was a party; customer accounts and transactions; 
qualified financial contracts and related information; and reports or 
other records of subsidiaries or affiliates of the covered financial 
company that were provided to the covered financial company.
3. Transfer of Records
    Paragraph (c)(3) of the final rule addresses the transfer of 
inherited records to a third party (including a bridge financial 
company) that acquires assets or liabilities of the covered financial 
company from the FDIC as receiver for the covered financial company. In 
a resolution of a covered financial company, the FDIC may transfer 
inherited records to the custody of a third party, including a bridge 
financial company, in connection with the transfer, acquisition, or 
sale of assets or liabilities of the covered financial company to such 
third party. Paragraph (c)(3) of the final rule provides that such a 
transfer will satisfy the records retention obligations under paragraph 
(c)(1) and section 210(a)(16)(D) of the Act so long as the transferee 
agrees, in writing, that it will maintain the inherited records for at 
least six years from the date of the appointment of the FDIC as 
receiver for the covered financial company unless otherwise notified in 
writing by the FDIC. In addition, the third party must agree that prior 
to the destruction of any such inherited records it will provide the 
FDIC with notice and the opportunity to cause return of such inherited 
records to the FDIC as receiver. The final rule differs from the 
proposed rule in that it adds the language emphasizing that prior to 
the destruction of any transferred records such transferee will be 
required to give the FDIC the opportunity to cause the return of such 
records to the FDIC as receiver.
4. Receivership Records
    In fulfilling its duties and responsibilities as receiver for a 
covered financial company pursuant to Title II of the Dodd-Frank Act, 
the FDIC itself would generate, receive, and maintain documentary 
material in connection with and after its appointment as receiver, 
records that would be separate and apart from the inherited records. 
Section 210(a)(16)(D) of the Act

[[Page 41415]]

specifically requires that the FDIC develop policies to maintain the 
documents and records of the FDIC generated in exercising its 
authorities under Title II to assure that receivership records would be 
available for review following the exercise of the extraordinary 
authority granted to the FDIC under Title II. Paragraph (b)(3) sets 
forth the definition of receivership records. Receivership records are 
defined to include documentary material that is generated or maintained 
by the FDIC in accordance with the policies and procedures of the FDIC 
(including the document retention policies of the FDIC) that relates to 
the FDIC's appointment as receiver for a covered financial company or 
the exercise of its authorities as receiver for the covered financial 
company under Title II. Receivership records would include documentary 
material generated or maintained by the FDIC as receiver with respect 
to its appointment under section 202 of the Dodd-Frank Act,\14\ as well 
as documentary material generated or maintained by the FDIC as receiver 
for a covered financial company in connection with the exercise of its 
orderly liquidation authorities. This definition makes it clear that 
only documentary material that is related to the duties and functions 
of the FDIC as receiver and the exercise of its orderly liquidation 
authorities is subject to the retention requirements of section 
210(a)(16)(d) of the Dodd-Frank Act.
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    \14\ 12 U.S.C. 5382.
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    To be a receivership record the documentary material must be 
generated or maintained in accordance with policies and procedures of 
the FDIC, including the record retention policies and procedures of the 
FDIC. The FDIC will look to its internal procedures and guidance for 
generating and maintaining all of its own records, including corporate 
and bank receivership records, and use them as a guideline to determine 
whether documentary material generated or maintained as receiver for a 
covered financial company comport with these procedures and, thus, 
constitute receivership records under the final rule. Like private 
companies and other governmental organizations, the FDIC has 
established protocols for the efficient and effective generation and 
maintenance of files, records, and non-record documentary materials. 
These protocols reflect the importance of these materials and their 
relevance to the work of the FDIC.
    Paragraph (d)(1) of the final rule sets forth the retention 
requirements for the receivership records described in paragraph 
(b)(3). The final rule clarifies that receivership records are likely 
to be valuable and consequential, given the significance of an orderly 
liquidation under Title II. Thus, the final rule emphasizes that 
receivership records, those records generated and maintained by the 
FDIC as it conducts a receivership, shall be retained indefinitely for 
as long as there is a present or reasonably foreseeable future 
evidentiary or historical need for them. In addition, the final rule 
sets a minimum retention standard during which, in effect, evidentiary 
need is conclusively presumed. That minimum period is a six-year 
minimum retention period for all receivership records measured from the 
termination of the receivership. In the case of a three-year 
receivership,\15\ that would establish a minimum retention period of 
nine years.
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    \15\ See 12 U.S.C. 5382(d) (providing for a three-year initial 
time limit on receivership authority, subject to extensions as 
provided in that section).
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    Receivership records that are subject to a litigation hold by the 
FDIC or are subject to a Congressional subpoena or relate to an ongoing 
investigation by Congress, the United States Government Accountability 
Office or the FDIC's Office of Inspector General will be retained 
pursuant to the conditions of such subpoena, hold, or investigation 
under paragraph (d)(1) of the final rule.
    Paragraph (d)(2) makes it clear that receivership records are those 
that are generated or maintained by the FDIC as receiver in connection 
with a Title II orderly liquidation and do not include the inherited 
records generated or maintained by the financial company which are 
addressed in paragraph (c) of the final rule.
    Paragraph (d)(3) of the final rule sets forth a non-exclusive list 
of examples of receivership records in order to provide additional 
guidance and clarity with respect to the types of documentary material 
that are subject to the retention requirements of the final rule. 
Included examples are: Correspondence; tax forms; accounting forms and 
related work papers; inventories; contracts and other information 
relating to the management and disposition of the assets of the covered 
financial company; documentary material relating to the appointment of 
the FDIC as receiver; administrative records and other information 
relating to administrative proceedings; pleadings and similar documents 
in civil litigation, criminal restitution, forfeiture litigation, and 
all other litigation matters in which the FDIC as receiver is a party; 
the charter and formation documents of a bridge financial company; 
contracts, other documents and information relating to the role of the 
FDIC as receiver in overseeing the operations of the bridge financial 
company; reports or other records of the bridge financial company and 
its subsidiaries or affiliates that were provided to the FDIC as 
receiver; and documentary material relating to the administration, 
determination, and payment of claims by the FDIC as receiver.
5. Limits of Effect of Determinations With Respect to Records
    Paragraph (e) of the final rule applies to any documentary material 
that falls within the scope of the retention requirements of the final 
rule as that scope is described in paragraphs (c) and (d). Paragraph 
(e)(1) of the final rule makes clear that the FDIC's designation of 
documentary material as inherited records or receivership records 
pursuant to paragraph (c) or (d) is solely for the purpose of 
identifying documentary material subject to the retention requirements 
of section 210(a)(16)(D) of the Act and the final rule has no effect on 
whether the documentary material is discoverable or admissible in any 
court, tribunal, or other adjudicative proceeding, nor on whether such 
material is subject to release under the Freedom of Information 
Act,\16\ the Privacy Act of 1974,\17\ or other law or court order. 
Thus, whether specific documentary material is an inherited record or a 
receivership record pursuant to the final rule does not alter its 
status under evidentiary rules such as the Federal Rules of Evidence 
(``FRE''). For example, FRE 803(1) provides that ``records of regularly 
conducted activity'' (business record) are not excluded from evidence 
by the rule against hearsay, regardless of whether the declarant is 
available as a witness. If certain documentary material meets the 
requirements of a business record pursuant to FRE 803(1), then whether 
or not the FDIC determines that specific documentary material 
constitutes an inherited record or a receivership record pursuant to 
the final rule will not affect the determination of whether the 
documentary material is a business record under FRE 803(1). In 
addition, whether specific material is or is not designated as an 
inherited record or a receivership record for purposes of section 
210(a)(16)(D) of the Act and the final rule does not determine whether 
it is subject to a litigation hold or a request

[[Page 41416]]

under the Freedom of Information Act, the Privacy Act, or any other 
law.
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    \16\ 5 U.S.C. 552.
    \17\ 5 U.S.C. 552a.
---------------------------------------------------------------------------

    Paragraph (e)(1) also clarifies that any designation made by the 
FDIC under the final rule will not prevent full compliance with any 
applicable legal or regulatory requirement or court order that 
establishes particular requirements with respect to certain records, 
such as a requirement that specific records be preserved, maintained, 
destroyed, or kept under seal.
6. Duplicate and Transitory Materials
    Paragraph (e)(2) of the final rule lists three categories of 
documentary material that are excluded from the definition of inherited 
records and receivership records and thus will not be subject to the 
retention requirements of section 210(a)(16)(D) of the Act and the 
final rule. The first category includes duplicate copies, as required 
by the mandate in section 210(a)(16)(D)(I) of the Act to accord due 
regard to the avoidance of duplicative record retention. Also in the 
first category is documentary material such as reference materials, 
drafts of documents that are superseded by later drafts or revisions, 
documentary material provided to the FDIC by other parties in concluded 
litigation for which all appeals have expired, transitory information 
including routine system messages or system-generated log files, notes 
and other material of a personal nature, or other documentary material 
not routinely maintained under the standard record retention policies 
and procedures of the FDIC. The term ``transitory information'' or 
``transitory record'' is commonly used in record retention systems to 
describe records of temporary usefulness required only for a limited 
period of time for the completion of an action by an employee or 
official and that are not essential to the fulfillment of statutory 
obligations or the documentation of government or business 
functions.\18\
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    \18\ For example, the Texas Administrative Code, title 13, 
Chapter 6, Section 6.91 (2005) provides that transitory information 
are records of temporary usefulness that are not an integral part of 
a records series of an agency, that are not regularly filed within 
an agency's recordkeeping system, and that are required only for a 
limited period of time for the completion of an action by an 
official or employee of the agency or in the preparation of an on-
going records series. According to the Texas Administrative Code, 
transitory records are not essential to the fulfillment of statutory 
obligations or to the documentation of agency functions. The 
National Archives and Records Administration (NARA) Bulletin 2013-02 
(August 29, 2013), Guidance on a New Approach to Managing Email 
Records provides that agencies must determine whether end users may 
delete non-record, transitory, or personal email from their 
accounts. The Sedona Conference Commentary on Information Governance 
(December 2013) refers to the defensible deletion of transitory, 
non-substantive or non-record content. A World Health Organisation 
publication refers to the need to differentiate between records of 
substantive, fixed-term and transitory value. Deserno, Ineke and 
Kynaston, Donna, A Records Management Program that Works for 
Archives, The Information Management Journal, May/June 2005.
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7. Records of Affiliate; Supervisory Materials
    The second category of exclusions from the final rule encompasses 
documentary material generated or maintained by a bridge financial 
company \19\ or by a subsidiary or affiliate of a covered financial 
company. The exclusion of this documentary material emphasizes the 
separate legal status of the covered financial company and its 
subsidiaries and of the FDIC as receiver and any bridge financial 
company the FDIC may organize for the purpose of resolving a covered 
financial company. The final rule addresses only inherited records and 
receivership records. Information provided to the FDIC in connection 
with the formation or oversight of the bridge financial company or by a 
covered financial company's subsidiaries or affiliates would be within 
the scope of the regulation; however, documentary material generated or 
maintained by a bridge financial company or a covered financial 
company's subsidiaries or affiliates in the ordinary course of business 
that is not provided to the FDIC would fall outside the scope of the 
retention requirements of this final rule.
---------------------------------------------------------------------------

    \19\ This term is defined in 12 U.S.C. 5381(a)(3) and 12 CFR 
380.1.
---------------------------------------------------------------------------

    The third category of exclusions from the scope of the final rule 
and section 210(a)(16)(D) of the Act is non-publicly available 
supervisory information and operating or condition reports that were 
prepared by, on behalf of, or at the requirement of any agency 
responsible for the supervision or regulation of the covered financial 
company or its subsidiaries. This is consistent with the federal common 
law bank examination privilege, many state statutes, and the FDIC's 
long-standing policy that reports of examination or other confidential 
supervisory correspondence or information prepared by FDIC examiners or 
for the use of the FDIC and other regulatory agencies with respect to a 
financial company or an insured depository institution or other 
regulated subsidiary of a financial company belong exclusively to such 
regulators and not to the institution, even though institutions may 
retain copies.
8. Policies and Procedures
    Paragraph (f) of the final rule provides that the FDIC may 
establish policies and procedures with respect to the retention of 
inherited records and receivership records that are consistent with the 
final rule. It is expected that these policies and procedures will 
address specific matters related to the capture, processing, and 
storage of inherited records such as collecting computer hard drives, 
email databases, and backup and disaster recovery tapes, as well as 
establishing standard policies with respect to the retention of 
receivership records by the FDIC in its own files, information systems, 
and databases.

V. Expected Effects of the Final Rule

    Immediately following the FDIC's appointment as receiver of a 
covered financial company pursuant to Title II of the Dodd-Frank Act, 
the FDIC's retention determinations and collections must begin with 
respect to both the records of the covered financial company and the 
FDIC's own records. The final rule will provide transparency and 
consistency with respect to these determinations and will ensure that 
records of a financial company that fails in a manner that would 
present systemic risk (absent the exercise of the Title II orderly 
liquidation authority), as well as the records generated in connection 
with the orderly liquidation of that financial company under Title II 
of the Dodd-Frank Act, will be available for as long as there is a 
reasonably foreseeable evidentiary need for such records. At the same 
time, the application of the factors described in the final rule will 
appropriately limit the costs of the maintenance of documentary 
material that is not covered by the statute.

VI. Alternatives Considered

    The FDIC considered a range of alternatives from requiring 
permanent retention of all documentary material to providing for clear 
dates upon which records could be destroyed. The permanent retention of 
all documentary material is impractical, if not impossible. The FDIC 
deemed it important to include a broad definition of documentary 
material that could be considered inherited records or receivership 
record for the purpose of the final rule in light of the rapidly 
changing nature, forms, and format of data. At the same time, this 
explosion of data and changes in form and media make it important to 
differentiate between meaningful data and irrelevant information. In 
addition, as formats change the difficulty and expense of retrieving 
useful information becomes more complex. Accordingly, the FDIC 
identified factors that could be used to

[[Page 41417]]

determine what documentary material comprised meaningful records that 
should be retained. At the same time, a hard-and-fast date for 
destruction is inappropriate where it is possible that some documentary 
material may have evidentiary significance longer than a specified time 
period. Accordingly, the final rule adopts a flexible determination 
that takes into account the nature of the records and their likely 
evidentiary value.

VII. Regulatory Analysis and Procedure

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., 
requires that each Federal agency either certify that a rule will not 
have any significant economic impact on a substantial number of small 
entities or prepare an initial regulatory flexibility analysis of the 
rule and publish the analysis for comment. For purposes of the RFA 
analysis or certification, financial institutions with total assets of 
$550 million or less are considered to be ``small entities.'' The FDIC 
hereby certifies pursuant to 5 U.S.C. 605(b) that the final rule, if 
adopted, will not have a significant economic impact on a substantial 
number of small entities. The final rule refines the definition of the 
term ``records'' under section 210(a)(16)(D) of the Dodd-Frank Act and 
establishes retention schedules that the FDIC must use in connection 
with its retention of inherited records and receivership. Accordingly, 
the final rule affects only the internal operations of the FDIC and 
there will be no significant economic impact on a substantial number of 
small entities as a result of this final rule.

B. Paperwork Reduction Act

    No new collections of information within the meaning of the 
Paperwork Reduction Act, 44 U.S.C. 3501, et seq., are contained in the 
final rule as it addresses only the FDIC's obligation to maintain 
certain records.

C. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the final 
rule is not a major rule within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), which provides 
for agencies to report rules to Congress and for Congress to review 
such rules.\20\ As required by SBREFA, the FDIC will file the 
appropriate reports with Congress and the Government Accountability 
Office so that the final rule may be reviewed.
---------------------------------------------------------------------------

    \20\ Public Law 104-121, 110 Stat. 857.
---------------------------------------------------------------------------

D. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471), requires the Federal banking agencies to use plain 
language in all proposed and final rules published after January 1, 
2000. The FDIC has presented the final rule in a simple and 
straightforward manner.

E. 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.\21\
---------------------------------------------------------------------------

    \21\ Public Law 105-277, 112 Stat. 2681.
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 380

    Financial companies, Holding companies, Insurance companies, 
Records and records retention.

Authority and Issuance

    For the reasons set forth in the preamble, the Federal Deposit 
Insurance Corporation amends 12 CFR part 380 as follows:

PART 380--ORDERLY LIQUIDATION AUTHORITY

0
1. The authority citation for part 380 is revised to read as follows:

    Authority:  12 U.S.C. 5389; 12 U.S.C. 5390(s)(3); 12 U.S.C. 
5390(b)(1)(C); 12 U.S.C. 5390(a)(7)(D); 12 U.S.C. 5381(b); 12 U.S.C. 
5390(r); 12 U.S.C. 5390(a)(16)(D).


0
2. Add Sec.  380.14 to read as follows:


Sec.  380.14  Record retention requirements.

    (a) Scope. 12 U.S.C. 5390(a)(16)(D) requires that the Corporation 
establish retention schedules for the maintenance of certain documents 
and records of a covered financial company for which the Corporation 
has been appointed receiver and certain documents and records generated 
by the Corporation as receiver for a covered financial company in 
connection with the exercise of its authorities under Title II of the 
Dodd-Frank Act, 12 U.S.C. 5381 through 5397. This section addresses 
retention of those two categories of documents and records.
    (b) Definitions. For the purposes of this section, the following 
terms shall have the following meanings:
    (1) Documentary material. The term documentary material means any 
reasonably accessible document, book, paper, map, photograph, 
microfiche, microfilm, or writing regardless of physical form or 
characteristics and includes any computer or electronically-created 
data or file.
    (2) Inherited record. The term inherited record means documentary 
material of a covered financial company, provided that such documentary 
material existed on the date of the appointment of the Corporation as 
receiver for such covered financial company and was generated or 
maintained by the covered financial company in the course of, and 
necessary to, the transaction of its business. The determination of 
whether documentary material was generated or maintained by the covered 
financial company in the course of, and necessary to, the transaction 
of its business shall be based on an analysis of the following factors;
    (i) Whether such documentary material was generated or maintained 
in accordance with the covered financial company's own practices and 
procedures (including the document retention policies of the covered 
financial company) or pursuant to standards established by the covered 
financial company's regulators;
    (ii) Whether such documentary material is necessary for the 
Corporation to carry out its obligations as receiver for the covered 
financial company; and
    (iii) Whether there is a present or reasonably foreseeable 
evidentiary need for such documentary material by the Corporation as 
receiver for the covered financial company or the public.
    (3) Receivership record. The term receivership record means 
documentary material generated or maintained by the Corporation in 
accordance with the policies and procedures of the Corporation 
(including the document retention policies of the Corporation) that 
relates to the Corporation's appointment as receiver for a covered 
financial company or the exercise of its authorities as receiver for 
the covered financial company under 12 U.S.C. 5381 through 5397.
    (c) Inherited records.--(1) Retention schedule for inherited 
records. The Corporation shall retain any inherited record of a covered 
financial company that was created fewer than ten years before the date 
of the appointment of the Corporation as receiver for the covered 
financial company for a period of no less than six years from the date 
of such appointment, provided however that an inherited record shall be 
retained indefinitely so long as it is:
    (i) Subject to a litigation hold imposed by the Corporation;

[[Page 41418]]

    (ii) Subject to a Congressional subpoena or relates to an ongoing 
investigation by Congress, the United States Government Accountability 
Office, or the Corporation's Inspector General; or
    (iii) An inherited record that the Corporation has determined is 
necessary for a present or reasonably foreseeable future evidentiary 
need of the Corporation or the public.
    (2) Examples. Examples of inherited records include, without 
limitation: Correspondence; tax forms, accounting forms, and related 
work papers; internal audits; inventories; board of directors or 
committee meeting minutes; personnel files and employee benefits 
information; general ledger and financial reports; financial data; 
litigation files; loan documents including records relating to 
intercompany debt; contracts and agreements to which the covered 
financial company was a party; customer accounts and transactions; 
qualified financial contracts and related information; and reports or 
other records of subsidiaries or affiliates of the covered financial 
company that were provided to the covered financial company.
    (3) Transfer of an inherited record to an acquirer of assets or 
liabilities of a covered financial company. If the Corporation 
transfers an inherited record of a covered financial company to a third 
party (including a bridge financial company) in connection with the 
acquisition of assets or liabilities of the covered financial company 
by such third party, the record retention requirements of 12 U.S.C. 
5390(a)(16)(D) and paragraph (c)(1) of this section shall be satisfied 
if the third party agrees, in writing, that:
    (i) It will maintain the inherited record for at least six years 
from the date of the appointment of the Corporation as receiver for the 
covered financial company unless otherwise notified in writing by the 
Corporation; and
    (ii) Prior to destruction of such inherited record it will provide 
the Corporation with notice and the opportunity to cause the inherited 
record to be returned to the Corporation.
    (d) Receivership records--(1) Retention schedule for receivership 
records. (i) A receivership record shall be retained indefinitely to 
the extent that there is a present or reasonably foreseeable future 
evidentiary or historical need for such receivership record.
    (ii) A receivership record that is subject to a litigation hold 
imposed by the Corporation, is subject to a Congressional subpoena, or 
relates to an ongoing investigation by Congress, the United States 
Government Accountability Office, or the Corporation's Office of 
Inspector General shall be retained pursuant to the conditions of such 
hold, subpoena, or investigation.
    (iii) In no event shall a receivership record be retained by the 
Corporation for a period of less than six years following the 
termination of the receivership to which it relates.
    (2) Not included in receivership records. Receivership records do 
not include inherited records.
    (3) Examples. Examples of receivership records include, without 
limitation: Correspondence; tax forms, accounting forms and related 
work papers; inventories; contracts and other information relating to 
the management and disposition of the assets of the covered financial 
company; documentary material relating to the appointment of the 
Corporation as receiver; administrative records and other information 
relating to administrative proceedings; pleadings and similar documents 
in civil litigation, criminal restitution, forfeiture litigation, and 
all other litigation matters in which the Corporation as receiver is a 
party; the charter and formation documents of a bridge financial 
company; contracts, other documents, and information relating to the 
role of the Corporation as receiver in overseeing the operations of the 
bridge financial company; reports or other records of the bridge 
financial company and its subsidiaries or affiliates that were provided 
to the Corporation as receiver; and documentary material relating to 
the administration, determination, and payment of claims by the 
Corporation as receiver.
    (e) General provisions. With respect to any documentary material 
described in paragraphs (c) and (d) of this section, the following 
applies:
    (1) Impact on discoverability, admissibility, or release; 
compliance with court orders. The Corporation's determination that 
documentary material must be maintained pursuant to 12 U.S.C. 
5390(a)(16)(D) and this section shall not bear on the discoverability 
or admissibility of such documentary material in any court, tribunal, 
or other adjudicative proceeding nor on whether such documentary 
material is subject to release under the Freedom of Information Act, 5 
U.S.C. 552, the Privacy Act of 1974, 5 U.S.C. 552a, or any other law. 
The Corporation shall comply with any applicable court order concerning 
mandatory retention or destruction of any documentary material subject 
to this section.
    (2) Exclusions. Documentary material is not an inherited record nor 
a receivership record and is not subject to the record retention 
requirements of section 12 U.S.C. 5390(a)(16)(D) and this section if it 
is:
    (i) A duplicate copy of retained documentary material, reference 
material, a draft of a document that is superseded by later drafts or 
revisions, documentary material provided to the Corporation by other 
parties in concluded litigation for which all appeals have expired, 
transitory information including routine system messages and system-
generated log files, notes and other material of a personal nature, or 
other documentary material not routinely maintained under the standard 
record retention policies and procedures of the Corporation;
    (ii) Documentary material generated or maintained by a bridge 
financial company, or by a subsidiary or affiliate of a covered 
financial company, that was not provided to the covered financial 
company or to the Corporation as receiver; or
    (iii) Non-publicly available confidential supervisory information 
or operating or condition reports prepared by, on behalf of, or at the 
requirement of any agency responsible for the regulation or supervision 
of financial companies or their subsidiaries.
    (f) Policies and procedures. The Corporation may establish policies 
and procedures with respect to the retention of inherited records and 
receivership records that are consistent with this section.

    Dated at Washington, DC, this 21st day of June, 2016.

    By order of the Board of Directors.

    Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2016-15020 Filed 6-24-16; 8:45 am]
 BILLING CODE 6714-01-P