[Federal Register Volume 81, Number 177 (Tuesday, September 13, 2016)]
[Proposed Rules]
[Pages 62835-62845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21846]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 81, No. 177 / Tuesday, September 13, 2016 / 
Proposed Rules  

[[Page 62835]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 51

[Docket ID OCC-2016-0017]
RIN 1557-AE07


Receiverships for Uninsured National Banks

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

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
proposing a rule addressing the conduct of receiverships for national 
banks that are not insured by the Federal Deposit Insurance Corporation 
(FDIC) (uninsured banks) and for which the FDIC would not be appointed 
as receiver. The proposed rule would implement the provisions of the 
National Bank Act (NBA) that provide the legal framework for 
receiverships of such institutions.

DATES: Comments must be received no later than November 14, 2016.

ADDRESSES: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments 
through the Federal eRulemaking Portal or email, if possible. Please 
use the title ``Receiverships for Uninsured National Banks'' to 
facilitate the organization and distribution of the comments. You may 
submit comments by any of the following methods:
    Federal eRulemaking Portal--``Regulations.gov'': Go to 
www.regulations.gov. Enter ``Docket ID OCC-2016-0017'' in the Search 
box and click ``Search.'' Click on ``Comment Now'' to submit public 
comments.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: [email protected].
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, mail stop 9W-11, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
mail stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2016-0017'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to 
www.regulations.gov. Enter ``Docket ID OCC-2016-0017'' in the Search 
box and click ``Search.'' Click on ``Open Docket Folder'' on the right 
side of the screen and then ``Comments.'' Comments can be filtered by 
clicking on ``View All'' and then using the filtering tools on the left 
side of the screen.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov. Supporting materials may 
be viewed by clicking on ``Open Docket Folder'' and then clicking on 
``Supporting Documents.'' The docket may be viewed after the close of 
the comment period in the same manner as during the comment period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC. 
For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700 or, for persons who are deaf or hard of hearing, TTY, (202) 649-
5597. Upon arrival, visitors will be required to present valid 
government-issued photo identification and submit to security screening 
in order to inspect and photocopy comments.

FOR FURTHER INFORMATION CONTACT: Mitchell Plave, Special Counsel, 
Legislative and Regulatory Activities Division, (202) 649-5490, or 
Richard Cleva, Senior Counsel, Bank Activities and Structure Division, 
(202) 649-5500, or for persons who are deaf or hard of hearing, TTY, 
(202) 649-5597, Office of the Comptroller of the Currency, 400 7th 
Street SW., Washington, DC 20219.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The proposed rule addresses how the OCC would conduct the 
receivership of an uninsured national bank.\1\ The proposed rule would 
implement the provisions of the NBA that provide the legal framework 
for receiverships for such institutions, 12 U.S.C. 191-200.\2\
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    \1\ Unlike national trust banks, all Federal savings 
associations (FSAs), including FSA trust banks, are required to be 
insured. For this reason, this proposed rule would not apply to 
FSAs, given that receiverships for FSAs would be conducted by the 
FDIC.
    \2\ The proposed rule establishes the basic receivership 
framework, which may be supplemented over time with more detailed 
guidance, for example, concerning the details of the receiver's 
administration of the receivership estate.
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    There are only a small number of uninsured national banks in 
operation today. The OCC, however, retains the authority to grant new 
charters to entities whose business plan does not call for them to 
obtain deposit insurance if the OCC determines that the entities have a 
reasonable chance of succeeding and can operate in a safe and sound 
manner, among other considerations. Although the OCC has not placed an 
uninsured national bank into receivership since the Great Depression, 
there are several reasons to consider articulating a framework for such 
receiverships now. First, since the financial crisis of 2007-2008, 
regulators have undertaken, on both a domestic and coordinated global 
basis, to evaluate, discuss, and maintain preparedness for effective 
governmental responses to critical financial distress. This focus 
highlights the need to consider an appropriate resolution framework for 
entities, such as uninsured national banks, that currently lack such a 
framework. Second, the establishment of a framework for

[[Page 62836]]

receivership for these uninsured institutions would provide clarity to 
market participants about how they will be treated in receivership. The 
proposed rule would set forth a framework the OCC can use should an 
uninsured institution weaken and fail, be it an uninsured trust bank or 
another uninsured special purpose bank.

II. Background

Statutory Authority for Receiverships

    From the beginning of the national banking system in 1863 until the 
creation of the FDIC in 1933, receiverships of national banks were 
conducted by the Comptroller and by a receiver who was appointed by, 
and worked under the direction of, the Comptroller.\3\ The Comptroller 
and receiver had the powers and responsibilities set out in the 
receivership provisions of the NBA and exercised the powers available 
at common law for receivers.\4\ During this time, a substantial body of 
case law developed applying the statutory provisions and common law 
principles to national bank receiverships.
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    \3\ See Earle v. Penn, 178 U.S. 449 (1900); Cook County Nat'l 
Bank v. United States, 107 U.S. 445 (1883).
    \4\ See 12 U.S.C. 191-200.
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    In 1933, the FDIC was established and, among its other 
responsibilities, was designated as the receiver for national banks.\5\ 
As receiver, the FDIC has both the powers available to national bank 
receivers under the NBA and additional powers provided to the FDIC in 
the Federal Deposit Insurance Act (FDIA). When the FDIC serves as 
receiver, it does not operate under the direction of the Comptroller, 
unlike the pre-1933 non-FDIC receivers.\6\ From 1933 through 1989, the 
FDIC was designated to be appointed receiver for national banks 
generally, both insured and uninsured.\7\
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    \5\ See Banking Act of 1933, 73d Cong., 1st Sess., ch. 89, 
section 12B(1), 48 Stat. 172 (1933).
    \6\ See 12 U.S.C. 1821(c)(2)(C).
    \7\ For example, before its amendment in 1989, section 11(c) of 
the FDIA, 12 U.S.C. 1821(c) stated that, whenever the Comptroller 
appointed a receiver for any insured or uninsured national bank or 
Federal branch, the Comptroller ``shall appoint'' the FDIC receiver 
for such closed bank. 12 U.S.C. 1821(c) (1988). Federal branches 
were added to section 1821(c) in 1978 when Federal branches were 
created in the International Banking Act, 12 U.S.C. 3101 et seq.
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    The receivership regime for national banks was significantly 
changed again when Congress adopted the Financial Institutions Reform, 
Recovery and Enforcement Act of 1989 (FIRREA). Among many other 
consequences, the amendments to the FDIA in FIRREA resulted in the FDIC 
being specified as the mandatory receiver only for insured depository 
institutions. Thus, today the FDIC is the required receiver only for an 
insured national (or state) bank.\8\ Congress also subsequently amended 
the receivership appointment provisions of the NBA, 12 U.S.C. 191, to 
provide that the Comptroller may appoint a receiver for any national 
bank and that, if the bank is an insured bank, the receiver must be the 
FDIC.\9\ Post-FIRREA and post-FDICIA, the FDIA no longer expressly 
addresses receiverships of uninsured national banks, and there are no 
statutory limits on the Comptroller's discretion with respect to whom 
to appoint as receiver of an uninsured bank.
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    \8\ Section 11(c)(2)(A)(ii) of the FDIA provides that the FDIC 
``shall'' be appointed receiver, and ``shall'' accept such 
appointment, whenever a receiver is appointed for the purpose of 
liquidation or winding up the affairs of an insured Federal 
depository institution by the appropriate Federal banking agency, 
notwithstanding any other provision of Federal law. 12 U.S.C. 
1821(c)(2)(A)(ii). The term ``Federal depository institution'' 
includes national banks. 12 U.S.C. 1813(c)(4).
    \9\ In 1991, in the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (FDICIA), Congress amended 12 U.S.C. 191 to 
provide that the Comptroller may appoint the FDIC ``as receiver for 
any national banking association.'' Public Law 102-242, section 133, 
105 Stat. 2236, 2271. FDICIA also amended section 191 to set out the 
current grounds for receivership. Prior to the amendment, section 
191 provided that the Comptroller may appoint a receiver for one of 
three grounds previously set out in the statute. In October 1992, 
before the amendment went into effect, Congress revised the language 
to provide that the receiver shall be the FDIC ``if the national 
bank is an insured bank.'' Act of October 28, 1992, Public Law 102-
550, Title XVI, Subtitle A, section 1609, 106 Stat. 4090 (1992).
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    Based on this statutory history, it appears that today, unlike in 
the period between 1933 and 1989, the FDIA would not apply to a 
receivership of an uninsured bank conducted by the OCC, and that such a 
receivership would be governed exclusively by the NBA provisions, the 
common law of receivers, and cases applying the statutes and common law 
to national bank receiverships.\10\ FIRREA and FDICIA greatly expanded 
the FDIC's powers in resolving failed insured depository institutions. 
The OCC believes that those additional powers are not available to the 
OCC as receiver of uninsured banks under the NBA.
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    \10\ While the receivership operations will be governed by the 
NBA provisions, the common law of receivers, and cases applying the 
statutes and common law to national bank receiverships, the grounds 
for appointment of a receiver in the NBA for a national bank, 
including an uninsured bank, incorporate by reference the grounds 
for appointment in the FDIA. See 12 U.S.C. 191(a)(1) (referring to 
12 U.S.C. 1821(c)(5)).
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Uninsured Banks Supervised by the OCC

    As of May 2016, the OCC supervises 52 uninsured banks. Currently, 
all of these institutions are trust banks. The OCC may charter national 
banks whose operations are limited to those of a trust company and 
related activities (national trust bank).\11\ The activities of 
national trust banks are similar to those of trust departments of full-
service banks. But unlike a trust department, they are not part of a 
larger bank that also engages in commercial banking. All but a handful 
of the national trust banks do not engage in the business of receiving 
deposits and instead hold trust funds, which are off-balance sheet 
assets that are not considered to be deposits and are not insured by 
the FDIC.
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    \11\ See, e.g., 12 U.S.C. 27(a); 12 CFR 5.20(l). The OCC also 
charters Federal savings associations. Unlike national trust banks, 
all Federal savings associations are required to be insured.
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    National trust banks typically have few assets on the balance 
sheet, usually composed of cash on deposit with an insured depository 
institution, investment securities, premises and equipment, and 
intangible assets. These banks exercise fiduciary and custody powers, 
do not make loans, do not rely on deposit funding, and consequently 
have simple liquidity management programs. In view of these 
differences, the OCC typically requires these banks to hold capital in 
a specific minimum amount; as a result they hold capital in amounts 
that substantially exceed the ``well capitalized'' standard that 
pertains when national banks calculate their capital pursuant to the 
OCC's rules in 12 CFR part 3.
    The business model of national trust banks is to generate income in 
the form of fees by offering fiduciary and custodial services that 
generally fall into one or more of a few broad categories. Some of 
these national trust banks focus on institutional asset management, 
providing trust and custodial services for investment portfolios of 
pension plans, foundations and endowments, and other entities, often 
with an investment management component. These firms often also offer 
private wealth management and individual retirement savings services. 
These services provided by national trust banks are similar to those 
provided by other non-bank investment management firms.
    A few other national trust banks serve primarily as a fiduciary and 
custodian to facilitate the establishment of Individual Retirement 
Accounts by customers of an affiliated mutual fund complex or broker-
dealer firm. While it is not common, a few national trust banks have 
been established for a special purpose within a larger financial 
company to accomplish a transition or

[[Page 62837]]

other specific purpose over a limited time period, such as facilitating 
a consolidation.
    Some national trust banks provide custodial services. One example 
of this type of service is corporate trust accounts, under which the 
bank performs services for others in connection with their issuance, 
transfer, and registration of debt or equity securities. Other custody 
accounts may be a holding facility for customer securities, where the 
bank assists institutional customers with global settlement and 
safekeeping of the customer's securities.
    Many of the uninsured national trust banks are subsidiaries or 
affiliates of a full-service insured national bank. Another group are 
affiliates of an insured state bank. In these cases where the national 
trust bank is part of a bank holding company, the bank and the company 
have decided for a variety of business reasons to offer some fiduciary 
services to their customers in a separate national trust bank charter. 
National trust banks affiliated with other banks can vary greatly in 
complexity, in the type of fiduciary or custody businesses they engage 
in, and in the amount of assets under management or administration. 
Typically they maintain a few thousand accounts for individuals or 
family trusts containing assets totaling in the range of $10 billion, 
or in other cases maintaining as many as 10,000 corporate custody 
accounts totaling in the range of $20 billion.
    Other uninsured national trust banks are not affiliated with an 
insured depository institution, but are affiliated with an investment 
management firm or other financial services firm. These national trust 
banks provide fiduciary and custody services for customers of the firm. 
National trust banks affiliated with an investment management firm or 
other financial services firm also can vary greatly in complexity, in 
the type of fiduciary or custody businesses they engage in, and in the 
amount of assets under management or administration. While these 
national trust banks may, in exceptional cases, hold as much as $1 
trillion in fiduciary and custodial assets, they more commonly hold 
assets in the $5-$50 billion range across a few thousand accounts.
    Still other national trust banks have no affiliation with a larger 
parent company. These independent firms typically manage a few billion 
dollars in fiduciary and custodial assets across a few thousand 
accounts, while others might be described as boutique trust firms, not 
affiliated with a larger parent company, with a few employees, fewer 
than 500 customers, and $1 billion or less in fiduciary assets.
    The OCC has not appointed a receiver for an uninsured bank since 
shortly after the Congress established the FDIC in response to the 
banking panics of 1930-1933. Because of the fundamentally different 
business model of national trust banks, compared to commercial and 
consumer banks and savings associations noted above, national trust 
banks face very different types of risks. National trust banks 
primarily face operational, compliance, strategic, and reputational 
risks without the credit and liquidity risks that additionally impact 
the solvency of commercial and consumer banks. While any of these risks 
can result in the precipitous failure of a bank or savings association, 
from a historical perspective, trust banks have been more likely to 
decline into a weakened condition, allowing the OCC and the institution 
the time needed to find other solutions for rehabilitating the 
institution or to successfully resolve the institution without the need 
to appoint a receiver.\12\
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    \12\ In some instances, uninsured trust banks enter into 
safeguard agreements with the OCC to facilitate early resolution 
through a sale, merger or liquidation, thereby avoiding the need for 
a receivership. These safeguard agreements are entered into as part 
of the licensing process and concern operations, capital, and 
liquidity.
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    The OCC believes it would nevertheless be beneficial to financial 
market participants and the broader community of regulators for the OCC 
to clarify the receivership framework for uninsured banks. Although the 
OCC conducted 2,762 receiverships pursuant to this framework in the 
years prior to the creation of the FDIC,\13\ and the associated legal 
issues are the subject of a robust body of published judicial 
precedents, the details have not been widely articulated in recent 
jurisprudence or legal commentary. This proposal may also facilitate 
synergies with the ongoing efforts of U.S. and international financial 
regulators since the financial crisis to enhance our readiness to 
respond effectively to the different critical financial distresses that 
could manifest themselves unexpectedly in the diverse types of 
financial firms presently operating in the market.
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    \13\ Annual Report of the Comptroller of the Currency for the 
Year Ended October 31, 1934 at 33 (discussing the status of active 
and closed receiverships under the jurisdiction of the Comptroller 
between 1865 and 1934).
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Other Types of Uninsured National Banks

    The OCC has the authority to charter and supervise special purpose 
banks with operations limited solely to providing fiduciary 
services.\14\ In addition to national trust banks, the OCC also may 
charter other special purpose banks with business models that are 
within the business of banking. The OCC's rules provide that a special 
purpose bank must conduct at least one of the three core banking 
functions, namely receiving deposits, paying checks, or lending 
money.\15\ As part of the agency's initiative on responsible innovation 
in the Federal banking system, the OCC is considering how best to 
implement a regulatory framework that is receptive to responsible 
innovation, such as advances in financial technology.\16\ In 
conjunction with this effort, the OCC is considering whether a special 
purpose charter could be an appropriate entity for the delivery of 
banking services in new ways. For this reason, the OCC requests comment 
on the utility of the receivership structure in the proposed rule for 
receivership of such a special purpose bank.
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    \14\ 12 U.S.C. 27(a); 12 CFR 5.20(e)(1), 5.20(l).
    \15\ 12 CFR 5.20(e)(1).
    \16\ See OCC, Supporting Responsible Innovation in the Federal 
Banking System: An OCC Perspective at 2 (March 2016) available at 
http://www.occ.treas.gov/publications/publications-by-type/other-publications-reports/pub-responsible-innovation-banking-system-occ-perspective.pdf.
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    Question 1. Would application of the NBA's legal framework for 
receiverships of uninsured banks to such innovative special purpose 
banks raise any unique considerations?

Uninsured Federal Branches and Agencies

    In addition to conducting receiverships for uninsured national 
banks, the OCC has statutory authority to appoint and oversee a 
receiver for uninsured Federal branches and agencies (uninsured Federal 
branches).\17\ While there are some powers and functions that overlap 
in conducting receiverships for uninsured banks and Federal branches, 
there are differences that make receiverships for Federal branches more 
complex.
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    \17\ 12 U.S.C. 3102(j).
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    The International Banking Act of 1978 \18\ (IBA) sets forth the 
legal framework for the establishment and operation of federally 
licensed branches and agencies of foreign banks. Under the IBA, a 
receiver appointed by the Comptroller for an uninsured Federal branch 
would exercise the same rights, privileges, powers, and authority in 
conducting the receivership as it would in conducting a receivership 
for an uninsured bank.\19\ As such, with some

[[Page 62838]]

exceptions, the provisions in the NBA for receiverships would generally 
apply to receiverships for Federal branches.\20\ However, the nature of 
an uninsured Federal branch's more typical commercial banking type of 
business model, the overlay of other Federal laws including provisions 
on receiverships in the IBA, and concerns being deliberated currently 
on a global basis among financial regulators about the resolution of 
global systemically important banks make the subject of uninsured 
Federal branch resolutions a more complicated topic.
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    \18\ 12 U.S.C. 3101 et seq.
    \19\ 12 U.S.C. 3102(j).
    \20\ This approach is consistent with the ``national treatment'' 
requirement in the IBA, 12 U.S.C. 3102(b).
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    For this reason, the scope of this proposed rule does not extend to 
receiverships for uninsured Federal branches. The OCC will continue 
reviewing the regulatory and legal issues relating to receiverships for 
Federal branches and will confer with other regulators on these issues. 
The OCC may seek public input on this subject as part of our 
deliberations on the topic in the future.

Cost Implications of OCC Receivership Function

    The OCC's establishment of a receivership framework may also raise 
cost implications for the OCC. In addition to the OCC's costs 
incidental to the selection and supervision of a receiver, and approval 
of claims against the receivership for a share of the receiver's 
liquidating dividends, the receiver for an uninsured national bank 
will, as a matter of necessity, incur administrative costs in 
performing liquidation functions. As discussed below, the NBA provides 
that the receiver's administrative expenses are to be paid first out of 
the assets of the receivership, but there may be circumstances where 
the receiver's administrative expenses exceed those resources.
    The OCC is considering how it might cover these types of costs. One 
approach would be to build resources to defray these costs into our 
structure for collection of assessments from the uninsured institutions 
we supervise, in accordance with 12 CFR part 8. Any change to the OCC's 
assessments would be set forth in a separate notice of proposed 
rulemaking.
    Question 2. The OCC requests comment on alternatives that might be 
implemented to take account of these cost considerations.

III. Proposed Rule and Request for Comment

Overview

    The proposed rule, as described below, incorporates the framework 
set forth in the NBA for the Comptroller to appoint a receiver for an 
uninsured bank, generally under the same grounds for appointment of the 
FDIC as receiver for insured national banks. The uninsured bank may 
challenge the appointment in court, and the NBA affords jurisdiction to 
the appropriate United States district court for this purpose. The OCC 
will provide the public with notice of the appointment, as well as 
instructions for submitting claims against the uninsured bank in 
receivership. The OCC may appoint any person as receiver, including the 
OCC or another government agency.
    The receiver carries out its duties under the direction of the 
Comptroller. Under the NBA, the OCC functions in two capacities. Its 
primary capacity is that of a regulatory agency, in which the OCC 
oversees national banks, Federal savings associations, and Federal 
branches and Federal agencies, supervising them under the charge of 
assuring the safety and soundness of, and compliance with laws and 
regulations, fair access to financial services, and fair treatment of 
customers by, the institutions and other persons subject to its 
jurisdiction.\21\ The OCC is also directed by the NBA to act in a 
receivership capacity, under which the OCC appoints and oversees 
receivers for uninsured banks, thereby facilitating the winding down of 
bank operations, assets, and accounts while minimizing disruptions to 
customers and creditors of the institution. These capacities are 
separate in a way that parallels the separate capacities of the FDIC 
which, in its corporate capacity, serves as the insurer of depository 
institutions and oversees state non-member banks, and, in its 
receivership capacity, oversees the winding down of failed insured 
depository institutions. These two capacities are distinct both 
functionally and legally and reflect different public policy roles. A 
separate legal status attaches to each capacity.\22\ A receiver acting 
under either the NBA in the case of the OCC or the FDIA in the case of 
the FDIC ``step[s] into the shoes of'' the failed institution.\23\
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    \21\ 12 U.S.C. 1.
    \22\ See O'Melveny & Meyers v. FDIC, 512 U.S. 79, 85 (1994) 
(finding that FDIC-Receiver ``steps into the shoes'' of the failed 
institution and is ``not the United States''). The O'Melveny & 
Meyers case concerns a choice of law question in a professional 
malpractice suit brought against the former counsel for the savings 
and loan. The Court concluded that the FDIC as receiver asserts the 
rights of the failed bank in receivership, not of ``FDIC-
Corporate,'' and therefore state law, not Federal common law, 
applies. See also Bullion Services v. Valley State Bank, 50 F.3d 
705, 708-709 (9th Cir. 1995) (noting that, under Federal law, the 
FDIC is empowered to operate to act in two entirely separate and 
distinct capacities) (citations omitted); FDIC v. Fonesca, 795 F.2d 
1102, 1109 (1st Cir. 1986) (stating that `` `Corporate' FDIC and 
`Receiver' FDIC are separate and distinct legal entities''); Jones 
v. FDIC, 748 F.2d 1400, 1402 (10th Cir. 1984) (same).
    \23\ See supra, note 22.
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    Under the ``separate capacities'' doctrine, which has long been 
recognized in litigation involving the FDIC, it is well established 
that the agency, when acting in one capacity, is not liable for claims 
against the agency acting in its other capacity.\24\ As a corollary to 
this doctrine, the assets the agency oversees in the receivership are 
limited to the funds making up the failed bank's estate. For these 
reasons, payment of claims or judgments concerning the receivership are 
made from the receivership estate, not from the agency's operating 
budget and funds.
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    \24\ See Dababneh v. FDIC, 971 F.2d 428, 432 (10th Cir. 1992) 
(``[b]ecause they are discrete legal entities, Corporate FDIC is not 
liable'' for obligations and liabilities of the FDIC as receiver) 
(citations omitted); accord FDIC v. Nichols, 885 F. 2d 633, 636 (9th 
Cir. 1989) (recognizing the corporate-receiver distinction in a case 
involving the purchase of receivership assets by FDIC in its 
corporate capacity); FDIC v. Fonseca, 795 F.2d 1102, 1109 (1st Cir. 
1986) (refusing to address claims asserted against FDIC in its 
corporate capacity that were based on actions taken by the FDIC as 
receiver); Mill Creek Group, Inc. v. FDIC, 136 F. Supp. 2d 36, 48 
(D. Conn. 2001) (finding that FDIC in its corporate capacity could 
not be held liable for breach of a contract entered into by FDIC in 
its receiver capacity).
    The same reasoning has been applied to cases involving the 
former Resolution Trust Corporation. See, e.g., U.S. v. Schroeder, 
86 F.3d 114, 117 (8th Cir. 1996) (stating that it is ``well 
established that the RTC, when acting in one capacity, is not liable 
for claims against the RTC acting in one of its other capacities''); 
see also Howerton v. Designer Homes by Georges, Inc., 950 F.2d 281, 
283 (5th Cir. 1992) (``The RTC, in its corporate capacity, is not 
liable for claims against the RTC in its capacity as conservator or 
receiver.'')
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    The proposed rule reflects this well-established understanding of 
the functional and legal distinctions between the corporate and 
receiver capacities. The proposed rule follows the statutory framework 
under the NBA, under which persons with claims against an uninsured 
bank in receivership would file their claims with the receiver for the 
failed uninsured bank, for review by the OCC. In the event the OCC 
denies the claim, the only remedy available to the claimant is to bring 
a judicial action against the uninsured bank's receivership estate and 
assert the claim de novo. A person is also free to initiate its claim 
by bringing an action against

[[Page 62839]]

the receivership estate in court for adjudication, and then submit the 
judgment to the OCC to participate in ratable dividends of liquidation 
proceeds along with other approved and adjudicated claims.\25\
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    \25\ See First Nat'l Bank of Bethel v. Nat'l Pahquioque Bank, 81 
U.S. 383, 401 (1871).
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    Approved or adjudicated claims are paid solely out of the assets of 
the uninsured bank in receivership. As described in the proposed rule, 
the receiver liquidates the assets of the uninsured bank, with court 
approval, and pays the proceeds into an account as directed by the OCC. 
The categories of claims and the priority thereof for payment are set 
out in the proposed rule. The proposed rule also clarifies certain 
powers held by the receiver, and describes the receiver's duties in 
winding up the affairs of the uninsured bank.

Section-by-Section Analysis

    Proposed Sec.  51.1 identifies the purpose and scope of the 
proposed rule and clarifies that the proposal would apply to 
receiverships conducted by the OCC under the NBA for national banks 
that are not insured by the FDIC. The proposed rule does not extend to 
receiverships for uninsured Federal branches, although elements of the 
framework may be similar for uninsured Federal branch receiverships, 
which would also be resolved under provisions of the NBA. Proposed 
Sec.  51.2 is based on 12 U.S.C. 191 and 192 and concerns appointment 
of a receiver. The proposed rule sets out the Comptroller's authority 
to appoint any person, including the OCC or another government agency, 
as receiver for an uninsured bank and provides that the receiver 
performs its duties subject to the approval and direction of the 
Comptroller.\26\ If the Comptroller were to appoint the OCC as 
receiver, the OCC would act in a receivership capacity with respect to 
the uninsured bank in receivership, rather than in the OCC's 
supervisory capacity. As discussed above, this dual capacity (OCC as 
supervisor versus OCC as receivership sponsor for an uninsured bank) 
recognizes that, while the NBA makes the receivership oversight and 
claims review functions of the Comptroller part of the OCC's 
responsibilities, the receivership oversight role is unique and 
distinct from the OCC's role as a Federal regulatory agency and 
supervisor of national banks and Federal savings associations. This is 
comparable to the dual capacity of the FDIC's receivership function for 
insured depository institutions pursuant to the FDIA.
---------------------------------------------------------------------------

    \26\ But see 12 U.S.C. 1821(c)(6) (Comptroller may appoint the 
FDIC as conservator or receiver and the FDIC has discretion to 
accept such appointment); id. at Sec.  1821(c)(2)(C) (FDIC ``not 
subject to any other agency'' when acting as conservator or 
receiver''). Read together, these provisions likely mean that the 
provision in Sec.  51.2 concerning oversight of the receiver by the 
Comptroller would not apply to the FDIC acting as conservator or 
receiver for an uninsured institution, should the Comptroller 
appoint the FDIC and the FDIC accept such an appointment.
---------------------------------------------------------------------------

    Proposed Sec.  51.2 also provides that the Comptroller may require 
the receiver to post a bond or other security and the receiver may hire 
staff and professional advisors, with the approval of the Comptroller, 
if needed to carry out the receivership. This section also identifies 
the grounds for appointment of a receiver for an uninsured bank and 
notes that uninsured banks may seek judicial review of the appointment, 
pursuant to 12 U.S.C. 191.
    Proposed Sec.  51.3 provides that the OCC would provide notice to 
the public of the appointment of a receiver for the uninsured bank. The 
proposed rule specifies that one component of this notice will include 
publication in a newspaper of general circulation selected by the OCC 
for three consecutive months, as required by 12 U.S.C. 193. As a 
component of the OCC's notice to the public about the receivership, the 
OCC would also provide instructions for creditors and other claimants 
seeking to submit claims with the receiver for the uninsured bank.
    The OCC believes that the purpose of section 193 may be better 
served by publication through means other than publication in a 
newspaper. For example, the OCC could provide direct notice to 
customers and creditors of the uninsured bank, to the extent the 
uninsured bank's records included current contact information. The OCC 
could also arrange to provide notice through electronic channels that 
customers would typically use to contact the uninsured bank, such as 
the uninsured bank's Web site. The OCC believes that an effective set 
of notice protocols would best be established on a case-by-case basis, 
in light of a specific uninsured bank's fiduciary and custodial 
activities, the types of customers served by the bank, coordination 
with other notice protocols under way for any related entity that is 
also undergoing resolution activity, and similar factors.
    Question 3. The OCC invites comment on the appropriate types of, 
and channels for, notices of receiverships, as well as how frequently 
to provide these notices. Commenters are also invited to address 
whether customized notice should be provided in addition to the 
requirement for newspaper publication, which would apply in every case.
    Proposed Sec.  51.4 addresses the submission of claims to the 
receiver for an uninsured bank. Under proposed Sec.  51.4(a), a person 
with a claim against the receivership may submit a claim to the OCC, 
which would consider the claim and make a determination concerning its 
validity and approved amount. This process reflects the provisions in 
12 U.S.C. 193 and 194 regarding presentation of claims and payment of 
dividends on claims that are proved to the satisfaction of the 
Comptroller. Proposed Sec.  51.4 also provides that the Comptroller 
would establish a deadline for filing claims with the receiver, which 
could not be earlier than 30 days after the three-month publication of 
notice required by proposed Sec.  51.3. This provision reflects NBA 
case law that permitted the Comptroller to establish a date for filing 
claims against the receiver for a failed bank, before this 
responsibility shifted to the FDIC.\27\
---------------------------------------------------------------------------

    \27\ See Queenan v. Mays, 90 F.2d 525, 531 (10th Cir. 1937).
---------------------------------------------------------------------------

    Proposed Sec.  51.4(b) clarifies that persons with claims against 
an uninsured bank in receivership may present their claims to a court 
of competent jurisdiction for adjudication, in addition to, or as an 
alternative to, filing a claim with the OCC. If successful in court, 
such persons would be required to submit a copy of the final judgment 
to the OCC to participate in ratable dividends of liquidation proceeds 
along with claims against the bank in receivership submitted to, and 
approved by, the OCC. The proposed rule requires submission of a copy 
of the court's final judgment to the OCC. This provision is based on 12 
U.S.C. 193 and 194.
    In this regard, the receivership regime established by the NBA 
differs somewhat from the approach set out in other resolution regimes, 
such as the bankruptcy provisions of the United States Code and the 
receivership provisions of the FDIA. Under those resolution regimes, 
creditors and claimants must generally submit their claims to the 
receivership estate for centralized administration and disposition, and 
claims that are not submitted by the claims deadline are barred from 
any participation in liquidation payments. The NBA provisions are 
different in that claimants are provided the opportunity to submit 
claims to the OCC for evaluation, but are not foreclosed from pursuing 
judicial resolution by filing litigation (or continuing a pre-existing

[[Page 62840]]

lawsuit) in a court of competent jurisdiction against the uninsured 
bank in receivership.
    The claims filing deadline established by the Comptroller pursuant 
to proposed Sec.  51.4(a) is the date by which claimants seeking review 
under the OCC's claims process must make their submission. 
Nevertheless, a claimant that has not made a submission to the OCC by 
the deadline is not barred from initiating judicial claims against the 
uninsured bank in receivership solely by virtue of missing the claims 
deadline.\28\
---------------------------------------------------------------------------

    \28\ See First Nat'l Bank of Bethel v. Nat'l Pahquioque Bank, 81 
U.S. 383, 401 (1871); Queenan, 90 F.2d at 531. As noted above, it is 
incumbent on a claimant that pursues the judicial route and 
ultimately obtains judicial relief to submit the final judicial 
determination and award to the OCC, in order to participate in the 
OCC's periodic ratable dividends of liquidation proceeds of the 
receivership estate. Except with respect to a valid and enforceable 
security interest in specific property of the uninsured bank 
established as part of a final judicial determination, there are no 
assets or funds available to a successful judicial claimant other 
than the ratable dividend process set out in 12 U.S.C. 194 and 
described in proposed Sec.  51.8.
---------------------------------------------------------------------------

    The NBA's receivership provisions are like the receivership regime 
established by the FDIC under the FDIA, however, in that the avenue 
available to a party whose claim has been denied by the FDIC or OCC 
performing the agencies' receivership claims functions is to file (or 
continue) a de novo judicial action asserting the facts and legal 
theory of the claim against the receivership of the bank. The NBA does 
not contemplate or support anything in the nature of further action by 
the claimant in an administrative or judicial forum against the OCC 
seeking review of the claim determination.
    The OCC believes that the proposed claims process offers many 
claimants advantages over other methods of claims resolution. In 
particular, for customers of the institution, and for holders of 
receivables and other contractual credit claims against the uninsured 
bank, the extent and validity of the claim will frequently be clear 
from the books and records of the bank, account statements provided to 
customers, and similar documents. The claims process provides an 
efficient way for identification, in a timely way, of the largest group 
of claimants who will be eligible to participate in ratable 
distributions of liquidation dividends, as described in proposed Sec.  
51.8. The OCC's public notices of the receivership will provide 
claimants with information on how to obtain more detailed instructions 
for submitting claims to the OCC and on disposition of claims.
    If a claimant asserts that a claim incorporates a valid and 
enforceable security interest in assets of the uninsured bank, the OCC 
believes that it may be in that claimant's interest to apprise the OCC 
of that claim through the claims process. While the NBA does not 
restrict the holder of a valid security interest in uninsured bank 
assets from enforcing that interest through applicable state law, 
making the OCC aware of the claim and presenting an opportunity for it 
to be evaluated creates an opportunity to explore whether the 
receivership estate might negotiate an arrangement that would provide 
the claimant the value of the security interest in a more efficient 
way. Also, if it turns out that a portion of the claim remains 
unsecured, the claimant will have presented their claim to the OCC, and 
would participate in ratable dividends if the OCC approved the claim. 
For these reasons, the OCC has included language in proposed Sec.  
51.4(a) referring equally to secured and unsecured claims.
    Proposed Sec.  51.4(c) provides that if a person with a claim 
against an uninsured bank in receivership also has an obligation owed 
to the bank, the claim and obligation will be set off against each 
other and only the net balance remaining after set-off will be 
considered as a claim. To this end, proposed Sec.  51.4(a) also 
includes language referring to claims for set-off. The right of set-off 
where parties have mutual obligations has long been recognized as an 
equitable principle.\29\ Well-settled case law has held that a 
receivership creditor's or other claimant's equitable right to a set-
off is not precluded by the ratable distribution requirement of the 
NBA, provided such set-off is otherwise legally valid.\30\ If, after 
set-off, an amount is owed to the creditor, the creditor may file a 
claim for the net amount remaining as any other unsecured creditor. 
Conversely, if, after set-off, an amount is owed to the bank, the 
creditor does not have a claim and the net amount remaining is an asset 
of the uninsured bank, which the receiver may obtain in connection with 
marshalling the assets (as further described in proposed Sec.  
51.7(a)).
---------------------------------------------------------------------------

    \29\ Scammon v. Kimball, 92 U.S. 362 (1876); Blount v. Windley, 
95 U.S. 173 (1877), 177; Carr v. Hamilton, 129 U.S. 252 (1889).
    \30\ See Scott v. Armstrong, 146 U.S. 499, 510 (1892); 
InterFirst Bank of Abilene, N.A. v. FDIC, 777 F.2d 1092, 1095-1096 
(5th Cir. 1985); FDIC v. Mademoiselle of California, 379 F.2d 660, 
663 (9th Cir. 1967).
---------------------------------------------------------------------------

    Question 4. The OCC requests comment on whether there are 
additional characteristics of set-offs or other situations in which 
set-off may arise that should be included in the rule.
    Proposed Sec.  51.5 sets out the order of priorities for payment of 
administrative expenses of the receiver and claims against the 
uninsured bank in receivership. Under this section, the OCC would pay 
these expenses and claims in the following order: (1) Administrative 
expenses of the receiver; (2) unsecured creditors, including secured 
creditors to the extent their claim exceeds their valid and enforceable 
security interest; (3) creditors of the uninsured bank, if any, whose 
claims are subordinated to general creditor claims; and (4) 
shareholders of the uninsured bank. The order is based on case law and, 
in the case of the first priority for administrative expenses, on 12 
U.S.C. 196.\31\
---------------------------------------------------------------------------

    \31\ See Ticonic Nat'l Bank v. Sprague, 303 U.S. 406, 410-411 
(1938); Merrill v. Nat'l Bank of Jacksonville, 173 U.S. 131, 146 
(1899); Scott v. Armstrong, 146 U.S. 499, 510 (1892); Bell v. 
Hanover Nat'l Bank, 57 F. 821, 822 (C.C.S.D.N.Y. 1893).
---------------------------------------------------------------------------

    A creditor or other claimant with a security interest that was 
valid and enforceable as to its terms prior to the appointment of the 
receiver is entitled to exercise that security interest, outside the 
priority of distributions set out in the proposed rule.\32\ If the 
collateral value exceeds the amount of the claim as it was immediately 
prior to the receiver's appointment, the surplus remains an asset of 
the uninsured bank, and the receiver may obtain it in connection with 
marshalling the assets (as further described in proposed Sec.  
51.7(a)).\33\
---------------------------------------------------------------------------

    \32\ Ticonic Nat'l Bank v. Sprague, 303 U.S. 406, 410-411 
(1938); Bell v. Hanover Nat'l Bank, 57 F. 821, 822 (C.C.S.D.N.Y. 
1893).
    \33\ Bell v. Hanover Nat'l Bank, 57 F. 821, 822 (C.C.S.D.N.Y. 
1893).
---------------------------------------------------------------------------

    Liens arising from judicial determinations after the initiation of 
the receivership, as well as contractual liens that are triggered due 
to the appointment of a receiver or other post-appointment events, are 
not enforceable. This is because recognition of these liens would 
afford these claimants a priority that is not recognized under the 
established legal priorities described in proposed Sec.  51.5. 
Similarly, a secured creditor is not entitled to a priority 
distribution of any portion of the claim that is not covered by the 
value of the collateral, because the creditor is in the position of an 
unsecured creditor for that portion of the claim, and must participate 
in ratable liquidation distributions on par with other unsecured 
creditors.\34\
---------------------------------------------------------------------------

    \34\ Merrill v. Nat'l Bank of Jacksonville, 173 U.S. 131, 146 
(1899).
---------------------------------------------------------------------------

    Assets held by the uninsured bank in a fiduciary or custodial 
capacity, as

[[Page 62841]]

identified on the bank's books and records, are not general assets of 
the bank. Section 51.8(b) of the proposed rule states this, for the 
absence of doubt. In the same vein, the claim of the customer to 
fiduciary or custodial assets is separate from, and not subject to, the 
priority set out in proposed Sec.  51.5. Fiduciary and custodial 
customers of the bank have direct claims on those assets pursuant to 
their fiduciary or custodial account contracts. However, the priority 
of a fiduciary or custodial customer's other claims against the bank, 
if any, would remain subject to the priority described in proposed 
Sec.  51.5. For example, a fiduciary customer's claim for a refund of 
prepaid investment management fees that were attributable to periods 
after the receiver returned the fiduciary assets to the customer, 
generally would be an unsecured claim covered by proposed Sec.  
51.5(b). The claims process described in Sec.  51.4(b) of the proposed 
rule is available to a fiduciary customer, for both a direct claim on 
fiduciary assets, as well as a receivership claim for an obligation of 
the bank.
    Question 5. The OCC requests comment on whether there are other 
Federal statutes regarding specific types of claims that may be 
applicable to a receivership of an uninsured bank under the NBA and 
that would give certain claims a different priority, such as claims 
owed to the Federal government.
    Proposed Sec.  51.6 provides that all administrative expenses of 
the receiver for an uninsured bank will be paid out of the assets of 
the receivership before payment of claims against the receivership. 
This reflects the requirements in 12 U.S.C. 196. The proposed rule also 
states that receivership expenses would include pre-receivership and 
post-receivership obligations that the receiver determines are 
necessary and appropriate to facilitate the orderly liquidation or 
other resolution of the uninsured bank in receivership. To further 
illustrate the kinds of expenses that section 196 affords a first 
priority claim on the uninsured bank's receivership assets, proposed 
Sec.  51.6 enumerates examples of such administrative expenses, such as 
wages and salaries of employees, expenses for professional services, 
contractual rent pursuant to an existing lease or rental agreement, and 
payments to third-party or affiliated service providers, when the 
receiver determines these expenses are of benefit to the receivership.
    Proposed Sec.  51.7 contains provisions describing the powers and 
duties of the receiver and the disposition of fiduciary and custodial 
accounts. As described in proposed Sec.  51.7, the receiver would take 
over the assets and operation of the uninsured bank, take action to 
realize on debts owed to the uninsured bank, sell the property of the 
bank, and liquidate the assets of the uninsured bank for payment of 
claims against the receivership. Proposed Sec.  51.7(a)(1)-(5) lists 
some of the major powers and duties for the receiver set out in 12 
U.S.C. 192 and clarified by the courts, including taking possession of 
the books and records of the bank, collecting on debts and claims owed 
to the bank, selling or compromising bad or doubtful debts (with court 
approval), and selling the bank's real and personal property (also with 
court approval).
    Proposed Sec.  51.7(b) provides for the receiver to close the 
uninsured bank's fiduciary and custodial appointments, or transfer such 
accounts to a successor fiduciary or custodian under 12 CFR 9.16 or 
other applicable Federal law. The uninsured banks currently in 
existence focus on fiduciary and custodial services, so this function 
of the receiver would be of primary importance. This provision 
recognizes that the receiver's power to wind up the affairs of the 
uninsured bank in receivership, acting with court approval to make 
disposition of bank assets, should properly encompass the power to 
transfer fiduciary or custodial appointments and any associated assets 
in appropriate circumstances.
    Transfer of fiduciary appointments may occur under the terms of the 
instrument creating the relationship, if it provides for transfer, or 
under a fiduciary transfer statute, if one is applicable. The OCC 
believes there are strong public policy interests in endeavoring to 
replace fiduciaries and custodians expeditiously, without an 
interruption in service to their customers, if transfer can be arranged 
to a qualified successor, maintaining the same duties and standards of 
care with respect to the customers that previously pertained to their 
accounts at the uninsured bank in receivership. The alternative, given 
that the uninsured bank must be wound down and cannot provide services 
in the future, is to stop managing and reinvesting the customer's 
assets, stop responding to directions to transfer or receive assets in 
custody, close the accounts, and seek instructions from the account 
holders or the courts regarding return of associated assets. For 
institutional customers, this is likely to cause significant 
interruption of the intricate machinery of their financial operations. 
For individuals, it can potentially result in loss of asset value in 
adverse markets, or loss of income due to foregone reinvestments.
    Across the United States, there are disparate and often conflicting 
legal rules restricting or conditioning transfers of an appointment of 
a fiduciary for a beneficiary residing within the state. Depending on 
the geographic area across which the uninsured bank has established 
fiduciary relationships with its customers, and the standardization of 
its fiduciary account agreements or appointing instruments, it may be 
practicable for the receiver to transition an uninsured bank's 
fiduciary and custody accounts to a qualified successor through the 
mechanisms provided by applicable local law. On the other hand, if 
faced with dispersed customers, diverse account agreements or 
appointments of different vintage, or even the absence of an applicable 
law of transfer for customers in certain states, reliance on these 
methods may be so cumbersome as to effectively prevent accomplishment 
of the transfers in a timely way.
    In order to address these potential problems, the OCC, relying on 
the support of existing case law, is including language in the proposed 
rule to make it clear that the uninsured bank receiver's power under 12 
U.S.C. 192 to sell, with court approval, the real and personal property 
of the bank includes the power to transfer the bank's fiduciary 
accounts and related assets, subject to the approval of the court 
exercising jurisdiction over the receiver's efforts to transfer the 
bank's assets. The proposed rule is consistent with case law 
recognizing that a receiver for a national bank may properly arrange 
asset purchase and liability assumption transactions to move the 
business of a failed bank to a successor on an integrated basis, as 
part of the power to transfer assets, as well as analogous case law 
concerning the transfer of fiduciary and custodial assets by the FDIC, 
acting as receiver of failed insured depository institutions.\35\
---------------------------------------------------------------------------

    \35\ See NCNB Texas National Bank v. Cowden, 895 F.2d 1488 (5th 
Cir. 1990) (holding that the FDIC, as receiver of insolvent bank, 
had authority to transfer fiduciary appointments to bridge bank 
prior to the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989).
---------------------------------------------------------------------------

    Proposed Sec.  51.7(c) incorporates, in general terms, the powers, 
duties, and responsibilities of receivers for national banks under the 
NBA and under judicial precedents determining the authorities and 
responsibilities of receivers for national banks. Examples of these 
powers include: (1) The authority to repudiate certain contracts, 
including: (a) Purely executory contracts, upon

[[Page 62842]]

determining that the contracts would be unduly burdensome or 
unprofitable for the receivership estate,\36\ (b) contracts that 
involve fraud or misrepresentation,\37\ and (c) in limited cases, non-
executory contracts that are contrary to public policy; \38\ (2) the 
authority to recover fraudulent transfers; \39\ and (3) the authority 
to enforce collection of notes from debtors and collateral, regardless 
of the existence of side arrangements that would otherwise defeat the 
collectability of such notes.\40\
---------------------------------------------------------------------------

    \36\ Bank One Texas v. Prudential Life Ins. Co., 878 F. Supp. 
943, 964-66 (N.D. Tex. 1995).
    \37\ A. Corbin, Corbin on Contracts Sec.  228 at 320 (1952) 
(addressing contracts voidable for fraud, duress, or mistake).
    \38\ Cf. Fidelity Deposit Co. of Md. v. Conner, 973 F.2d 1236, 
1241 (5th Cir. 1992).
    \39\ See Peters v. Bain, 133 U.S. 670 (1890) (applying state 
substantive law to determine whether to void a transfer); Rogers v. 
Marchant, 91 F.2d 660, 663 (4th Cir. 1937).
    \40\ D'Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 458 
(1942). A. Corbin, Corbin on Contracts, Sec.  228 at 320 (1952) 
(addressing contracts voidable for fraud duress or mistake).
---------------------------------------------------------------------------

    Proposed Sec.  51.7(d) requires the receiver to make periodic 
reports to the OCC concerning the status and proceedings of the 
receivership.
    Proposed Sec.  51.8 contains provisions regarding the payment of 
dividends on claims against the uninsured bank and the distribution of 
any remaining proceeds to shareholders. This section provides that, 
after administrative expenses of the receivership have been paid, the 
OCC would make ratable dividends from available receivership funds 
based on the priority of claims in proposed Sec.  51.5, for claims that 
have been proved to the OCC's satisfaction or adjudicated in a court of 
competent jurisdiction, as provided in 12 U.S.C. 194. The OCC would 
make payment of dividends, if any, periodically, at the discretion of 
the OCC, as the receiver liquidates the assets of the uninsured bank.
    The proposed rule's inclusion of the ``ratable dividend'' 
requirement is designed to incorporate the associated standards about 
the proper application of this statutory directive, which the judiciary 
has articulated over the years. The ratable dividend requirement 
directs the OCC to make distributions on OCC-approved claims and 
judicial awards on an equal footing, determining the amount of each 
creditor's claim as it stands at the point of insolvency. As one 
example, a court's award of interest on an unpaid debt to the date of a 
judgment rendered in the plaintiff's favor after the receiver was 
appointed does not increase the amount of the plaintiff's claim for 
purposes of making ratable dividends. As another example, the ratable 
dividend requirement generally restricts claims against the bank 
receivership for debts that were not due and owing at the appointment 
of the receiver, and arose for the first time as a consequence of the 
appointment or a post-appointment event.
    The OCC requests comment on alternatives to the proposed rule's 
approach to distributing dividends, under which the OCC would exercise 
its discretion under section 194 to determine the timing of the 
distributions on established claims. One alternative would be to 
refrain from paying any dividends until all claims have been submitted 
and validated, with final allowed claim amounts established. This 
approach presents the possibility that proven claims may be delayed for 
a significant amount of time pending more protracted resolution of 
other claims. For example, if there is ongoing litigation against the 
bank regarding a claim, this waiting period rule would mean no 
dividends would be made to any claimants, even those with well-
established claims, until after the litigation is finally resolved.
    Another option would be to allow ongoing dividends on proven 
claims, subject to the receiver's retaining a percentage of the funds 
on hand at the time of the distribution as a pool of dividends for 
catch-up distributions to a successful plaintiff later. The OCC 
believes it would be appropriate, under such an approach, for the rule 
to incorporate a mechanism to balance the interests of established 
claimants in current payment against the interests in future relief to 
others asserting more protracted claims. The OCC also has an interest 
in being able to seek termination of a receivership after an 
appropriate period, in light of the assets that are realistically 
available, the prospects of success by plaintiffs asserting additional 
claims, and similar factors. Accordingly, the rule might commit the OCC 
to reserve a minimum of 12 percent of funds on hand at the time of 
distribution during the first year a distribution is made, and reduce 
this required minimum reserve to 8 percent 12 months later, 4 percent 
after the next 12 months, and eliminate the reserve requirement beyond 
that.
    Question 6. The OCC invites comment on these alternatives for 
making ratable distributions in accordance with section 194.
    Proposed Sec.  51.8(a)(2) recognizes the basic legal premise under 
the NBA receivership provisions and judicial interpretations thereof 
that any dividend payments to creditors and other claimants of an 
uninsured bank will be made solely from receivership funds, if any, 
paid to the OCC by the receiver after payment of the expenses of the 
receiver. This provision is also consistent with the established 
dichotomy of the OCC's supervisory and receivership capacities in the 
NBA, as discussed earlier.
    Proposed Sec.  51.8(b) similarly recognizes that assets held by an 
uninsured bank in a fiduciary or custodial capacity, as designated on 
the bank's books and records, are not part of the bank's general assets 
and liabilities held in connection with its other business, and will 
not be considered a source for payment for unrelated claims of 
creditors and other claimants. This provision is intended to make clear 
that the receiver will segregate identified fiduciary and custodial 
assets and either transfer those assets to other fiduciaries or 
custodians as described in connection with proposed Sec.  51.7(b), or 
close the accounts and endeavor to make the associated assets available 
to the accountholders or their representatives through other means.
    Proposed Sec.  51.8(d) provides that, after all administrative 
expenses and claims have been paid in full, any remaining proceeds 
would be paid to shareholders in proportion to their stock ownership, 
also as provided in 12 U.S.C. 194.
    Proposed Sec.  51.9 contains provisions for termination of 
receiverships in which there are assets remaining after all 
administrative expenses and all claims had been paid. This is the 
scenario addressed by 12 U.S.C. 197. In such a case, section 197 
requires the Comptroller to call a meeting of the shareholders of the 
bank at which the shareholders would decide whether to continue 
oversight by the Comptroller, or whether to end the receivership and 
appoint a liquidating agent to continue the liquidation of the 
remaining assets, under the direction of the board of directors and 
shareholders, as in a liquidation that had commenced under 12 U.S.C. 
181.
    There may be other circumstances under which termination would take 
place, such as when there are no receivership assets remaining after 
completion of receivership activities. Under this scenario, the 
receiver for an uninsured bank has liquidated all of the bank's assets, 
closed or transferred all fiduciary accounts to a successor fiduciary, 
paid all administrative expenses, and either paid creditor claims in 
full and distributed the remaining proceeds to shareholders, as 
provided in Sec.  51.8(c), or made ratable dividends of all remaining 
proceeds to

[[Page 62843]]

creditors as provided in Sec.  51.8(a), but no additional assets remain 
in the estate. Under these circumstances, the provisions in 12 U.S.C. 
197 for termination would not apply.
    Question 7. The OCC requests comment on whether the rule should 
provide termination procedures for receiverships that are outside the 
circumstances addressed in 12 U.S.C. 197.

V. Regulatory Analysis

A. Paperwork Reduction Act

    Under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501 et 
seq.), the OCC may not conduct or sponsor, and, notwithstanding any 
other provision of law, a person is not required to respond to, an 
information collection unless the information collection displays a 
valid Office of Management and Budget (OMB) control number. The 
proposed rule contains no information collection requirements under the 
PRA.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires that, in connection with a rulemaking, an agency 
prepare and make available for public comment a regulatory flexibility 
analysis that describes the impact of the rule on small entities. 
However, the regulatory flexibility analysis otherwise required under 
the RFA is not required if an agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities (defined in regulations promulgated by the Small Business 
Administration (SBA) to include commercial banks and savings 
institutions, and trust companies, with assets of $550 million or less 
and $38.5 million or less, respectively) and publishes its 
certification and a brief explanatory statement in the Federal Register 
together with the rule.
    The OCC currently supervises approximately 1,032 small entities. 
The scope of the proposed rule extends to uninsured banks. The maximum 
number of OCC-supervised small uninsured banks that could be subject to 
the receivership framework described in the proposal is approximately 
18.\41\ Accordingly, the OCC certifies that the proposed rule will not 
have a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \41\ Consistent with the General Principles of Affiliation 13 
CFR 121.103(a), the OCC counts the assets of affiliated financial 
institutions when determining if we should classify an institution 
we supervise as a small entity. We used December 31, 2015, to 
determine size because a financial institution's assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year. See footnote 8 of the 
U.S. SBA's Table of Size Standards.
---------------------------------------------------------------------------

OCC Unfunded Mandates Reform Act of 1995 Determination
    The OCC has analyzed the proposed rule under the factors in the 
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this 
analysis, the OCC considered whether the proposed rule includes a 
Federal mandate that may result in the expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted annually for inflation). As 
detailed in the SUPPLEMENTARY INFORMATION, the OCC currently supervises 
52 uninsured banks, all of which are uninsured trust banks, and has not 
appointed a receiver for an uninsured bank since 1933. Unlike 
commercial and consumer banks and savings associations, which generally 
face credit and liquidity risks, national trust banks primarily face 
operational, reputational, and strategic risks. While any of these 
risks could result in the precipitous failure of a bank or savings 
association, from a historical perspective, trust banks have been more 
likely to decline into a weakened condition, allowing the OCC and the 
institution the time needed to find other solutions for rehabilitating 
the institution or to successfully resolve the institution without the 
need to appoint a receiver. Given that we believe the OCC is unlikely 
to place an uninsured trust bank into receivership, the OCC concludes 
that the proposed rule will not result in an expenditure of $100 
million or more by state, local, and tribal governments, or by the 
private sector, in any one year.

List of Subjects in 12 CFR Part 51

    Administrative practice and procedure, Banks, Banking, National 
banks, Procedural rules, Receiverships, Authority, and Issuance.


0
For the reasons set forth in the preamble and under the authority of 12 
U.S.C. 16, 93a, 191-200, 481, 482, 1831c, and 1867 the Office of the 
Comptroller of the Currency proposes to add a new part 51 to chapter I 
of title 12, Code of Federal Regulations as follows:

PART 51--RECEIVERSHIPS FOR UNINSURED NATIONAL BANKS

Sec.
51.1 Purpose and scope.
51.2 Appointment of receiver.
51.3 Notice of appointment of receiver.
51.4 Claims.
51.5 Order of priorities.
51.6 Administrative expenses of receiver.
51.7 Powers and duties of receiver; disposition of fiduciary and 
custodial assets.
51.8 Payment of claims and dividends to shareholders.
51.9 Termination of receivership.

    Authority:  12 U.S.C. 16, 93a, 191-200, 481, 482, 1831c, and 
1867.


Sec.  51.1  Purpose and scope.

    (a) Purpose. This part sets out procedures for receiverships of 
national banks conducted by the Office of the Comptroller of the 
Currency (OCC) under the receivership provisions of the National Bank 
Act (NBA). These receivership provisions apply to national banks that 
are not insured by the Federal Deposit Insurance Corporation (FDIC).
    (b) Scope. This part applies to the appointment of a receiver for 
uninsured national banks (uninsured banks) and the operation of a 
receivership after appointment of a receiver for an uninsured bank 
under 12 U.S.C. 191.\1\
---------------------------------------------------------------------------

    \1\ This part does not apply to receiverships for uninsured 
Federal branches or uninsured Federal agencies.
---------------------------------------------------------------------------


Sec.  51.2  Appointment of receiver.

    (a) In general. The Comptroller of the Currency (Comptroller) may 
appoint any person, including the OCC or another government agency, as 
receiver for an uninsured bank. The receiver performs its duties under 
the direction of the Comptroller and serves at the will of the 
Comptroller. The Comptroller may require the receiver to post a bond or 
other security. The receiver, with the approval of the Comptroller, may 
employ such staff and enter into contracts for professional services as 
are necessary to carry out the receivership.
    (b) Grounds for appointment. The Comptroller may appoint a receiver 
for an uninsured bank based on any of the grounds specified in 12 
U.S.C. 191(a).
    (c) Judicial review. If the Comptroller appoints a receiver for an 
uninsured bank, the bank may seek judicial review of the appointment as 
provided in 12 U.S.C. 191(b).


Sec.  51.3  Notice of appointment of receiver.

    Upon appointment of a receiver for an uninsured bank, the OCC will 
provide notice to the public of the receivership, including by 
publication in a newspaper of general circulation for three consecutive 
months. The notice of the receivership will provide instructions for 
creditors and other claimants seeking to submit claims with the 
receiver for the uninsured bank.

[[Page 62844]]

Sec.  51.4  Claims.

    (a) Submission of claims for consideration by the OCC. (1) Persons 
who have claims against the receivership for an uninsured bank may 
present such claims, along with supporting documentation, for 
consideration by the OCC. The OCC will determine the validity and 
approve the amounts of such claims.
    (2) The OCC will establish a date by which any person seeking to 
present a claim against the uninsured bank for consideration by the OCC 
must present their claim for determination. The deadline for filing 
such claims will not be less than 30 days after the end of the three-
month notice period in Sec.  51.3.
    (3) The OCC will allow any claim against the uninsured bank 
received on or before the deadline for presenting claims if such claim 
is established to the OCC's satisfaction by the information on the 
uninsured bank's books and records or otherwise submitted. The OCC may 
disallow any portion of any claim by a creditor or claim of a security, 
preference, set-off, or priority which is not established to the 
satisfaction of the OCC.
    (b) Submission of claims to a court. Persons with claims against an 
uninsured bank in receivership may present their claims to a court of 
competent jurisdiction for adjudication. Such persons must submit a 
copy of any final judgment received from the court to the OCC, to 
participate in ratable dividends along with other proved claims.
    (c) Right of set-off. If a person with a claim against an uninsured 
bank in receivership also has an obligation owed to the bank, the claim 
and obligation will be set off against each other and only the net 
balance remaining after set-off shall be considered as a claim, 
provided such set-off is otherwise legally valid.


Sec.  51.5  Order of priorities.

    The OCC will pay receivership expenses and proved claims against 
the uninsured bank in receivership in the following order of priority:
    (a) Administrative expenses of the receiver;
    (b) Unsecured creditors of the uninsured bank, including secured 
creditors to the extent their claim exceeds their valid and enforceable 
security interest;
    (c) Creditors of the uninsured bank, if any, whose claims are 
subordinated to general creditor claims; and
    (d) Shareholders of the uninsured bank.


Sec.  51.6  Administrative expenses of receiver.

    (a) Priority of administrative expenses. All administrative 
expenses of the receiver for an uninsured bank shall be paid out of the 
assets of the bank in receivership before payment of claims against the 
receivership.
    (b) Scope of administrative expenses. Administrative expenses of 
the receiver for an uninsured bank include those expenses incurred by 
the receiver in maintaining banking operations during the receivership, 
to preserve assets of the uninsured bank, while liquidating or 
otherwise resolving the affairs of the uninsured bank. Such expenses 
include pre-receivership and post-receivership obligations that the 
receiver determines are necessary and appropriate to facilitate the 
orderly liquidation or other resolution of the uninsured bank in 
receivership.
    (c) Types of administrative expenses. Administrative expenses for 
the receiver of an uninsured bank include:
    (1) Salaries, costs, and other expenses of the receiver and its 
staff, and costs of contracts entered into by the receiver for 
professional services relating to performing receivership duties; and
    (2) Expenses necessary for the operation of the uninsured bank, 
including wages and salaries of employees, expenses for professional 
services, contractual rent pursuant to an existing lease or rental 
agreement, and payments to third-party or affiliated service providers, 
that in the opinion of the receiver are of benefit to the receivership, 
until the date the receiver repudiates, terminates, cancels, or 
otherwise discontinues the applicable contract.


Sec.  51.7  Powers and duties of receiver; disposition of fiduciary and 
custodial accounts.

    (a) Marshalling of assets. In resolving the affairs of an uninsured 
bank in receivership, the receiver:
    (1) Takes possession of the books, records and other property and 
assets of the uninsured bank, including the value of collateral pledged 
by the uninsured bank to the extent it exceeds valid and enforceable 
security interests of a claimant;
    (2) Collects all debts, dues and claims belonging to the uninsured 
bank, including claims remaining after set-off;
    (3) Sells or compromises all bad or doubtful debts, subject to 
approval by a court of competent jurisdiction;
    (4) Sells the real and personal property of the uninsured bank, 
subject to approval by a court of competent jurisdiction, on such terms 
as the court shall direct; and
    (5) Deposits all receivership funds collected from the liquidation 
of the uninsured bank in an account designated by the OCC.
    (b) Disposition of fiduciary and custodial accounts. The receiver 
for an uninsured bank closes the bank's fiduciary and custodial 
appointments and accounts or transfers some or all of such accounts to 
successor fiduciaries and custodians, in accordance with 12 CFR 9.16, 
and other applicable Federal law.
    (c) Other powers. The receiver for an uninsured bank may exercise 
other rights, privileges, and powers authorized for receivers of 
national banks under the NBA and the common law of receiverships as 
applied by the courts to receiverships of national banks conducted 
under the NBA.
    (d) Reports to OCC. The receiver for an uninsured bank shall make 
periodic reports to the OCC on the status and proceedings of the 
receivership.
    (e) Receiver subject to removal; modification of fees. (1) The 
Comptroller may remove and replace the receiver for an uninsured bank 
if, in the Comptroller's discretion, the receiver is not conducting the 
receivership in accordance with applicable Federal laws or regulations 
or fails to comply with decisions of the Comptroller with respect to 
the conduct of the receivership or claims against the receivership.
    (2) The Comptroller may reduce the fees of the receiver for an 
uninsured bank if, in the Comptroller's discretion, the Comptroller 
finds the performance of the receiver to be deficient, or the fees of 
the receiver to be excessive, unreasonable, or beyond the scope of the 
work assigned to the receiver.


Sec.  51.8  Payment of claims and dividends to shareholders.

    (a) Claims. (1) After the administrative expenses of the 
receivership have been paid, the OCC shall make ratable dividends from 
time to time of available receivership funds according to the priority 
described in Sec.  51.5, based on the claims that have been proved to 
the OCC's satisfaction or adjudicated in a court of competent 
jurisdiction.
    (2) Dividend payments to creditors and other claimants of an 
uninsured bank will be made solely from receivership funds, if any, 
paid to the OCC by the receiver after payment of the expenses of the 
receiver.
    (b) Fiduciary and custodial assets. Assets held by an uninsured 
bank in a fiduciary or custodial capacity, as designated on the bank's 
books and records, will not be considered as part of the bank's general 
assets and

[[Page 62845]]

liabilities held in connection with its other business, and will not be 
considered a source for payment of unrelated claims of creditors and 
other claimants.
    (c) Timing of dividends. The payment of dividends, if any, under 
paragraph (a) of this section, on proved or adjudicated claims will be 
made periodically, at the discretion of the OCC, as the receiver 
liquidates the assets of the uninsured bank.
    (d) Distribution to shareholders. After all administrative expenses 
of the receiver and proved claims of creditors of the uninsured bank 
have been paid in full, to the extent there are receivership assets to 
make such payments, any remaining proceeds shall be paid to the 
shareholders, or their legal representatives, in proportion to their 
stock ownership.


Sec.  51.9  Termination of receivership.

    If there are assets remaining after full payment of the expenses of 
the receiver and all claims of creditors for an uninsured bank and all 
fiduciary accounts of the bank have been closed or transferred to a 
successor fiduciary and fiduciary powers surrendered, the Comptroller 
shall call a meeting of the shareholders of the uninsured bank, as 
provided in 12 U.S.C. 197, for the shareholders to decide the manner in 
which the liquidation will continue. The liquidation may continue by:
    (a) Continuing the receivership of the uninsured bank under the 
direction of the Comptroller; or
    (b) Ending the receivership and oversight by the Comptroller and 
replacing the receiver with a liquidating agent to proceed to liquidate 
the remaining assets of the uninsured bank for the benefit of the 
shareholders, as set out in 12 U.S.C. 197.

    Dated: September 2, 2016.
Thomas J. Curry,
Comptroller of the Currency.
[FR Doc. 2016-21846 Filed 9-12-16; 8:45 am]
BILLING CODE P