[Federal Register Volume 83, Number 207 (Thursday, October 25, 2018)]
[Proposed Rules]
[Pages 53829-53832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23042]


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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.

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Federal Register / Vol. 83, No. 207 / Thursday, October 25, 2018 / 
Proposed Rules

[[Page 53829]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 350

RIN 3064-AE65


Disclosure of Financial and Other Information by FDIC-Insured 
State Nonmember Banks

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) proposes to 
rescind and remove its regulations relating to the disclosure of 
financial and other information by FDIC-insured state nonmember banks. 
Upon the removal of the regulations, all insured state nonmember banks 
and insured state-licensed branches of foreign banks (collectively, 
``banks'') would no longer be subject to the annual disclosure 
statement requirement found in those regulations. The financial and 
other information that has been subject to disclosure by individual 
banks pursuant to these regulations is publicly available through the 
FDIC's website.

DATES: Comments must be received on or before November 26, 2018.

ADDRESSES: You may submit comments, identified by RIN 3064-AE65, by any 
of the following methods:
     Agency Website: https://www.fdic.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency 
website.
     Email: Comments@fdic.gov. Include the RIN 3064-AE65 on the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery: Comments may be hand-delivered to the guard 
station at the rear of the 550 17th Street NW, building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m.
    Public Inspection: All comments received will be posted without 
change to https://www.fdic.gov/regulations/laws/federal, including any 
personal information provided. Paper copies of public comments may be 
ordered from the FDIC Public Information Center, 3501 North Fairfax 
Drive, Room E-1002, Arlington, VA 22226 by telephone at (877) 275-3342 
or (703) 562-2200.

FOR FURTHER INFORMATION CONTACT: Robert Storch, Chief Accountant, 
Division of Risk Management Supervision, (202) 898-8906 or 
rstorch@fdic.gov; Andrew Overton, Examination Specialist (Bank 
Accounting), Division of Risk Management Supervision, (202) 898-8922 or 
aoverton@fdic.gov; Michael Condon, Counsel, Legal Division, (202) 898-
6536 or mcondon@fdic.gov.

SUPPLEMENTARY INFORMATION: 

I. Policy Objectives

    The policy objective of the proposed rule is to simplify the FDIC's 
regulations by removing unnecessary or redundant regulations. The 
proposed rulemaking rescinds and removes part 350 from the Code of 
Federal Regulations. Technological advancements over the past 30 years 
provide the public with ready access to more extensive and timely 
information on the condition and performance of individual banks, 
obviating the need for the annual disclosure statement requirements in 
part 350.

II. Background

    Part 350 was adopted by the FDIC Board of Directors on December 17, 
1987, and took effect February 1, 1988.\1\ In general, part 350 
requires FDIC-insured state nonmember banks and FDIC-insured state-
licensed branches of foreign banks (collectively, ``banks'') to 
prepare, and make available on request, annual disclosure statements 
consisting of: (1) Required financial data comparable to specified 
schedules in the Consolidated Reports of Condition and Income (Call 
Report) filed for the previous two year-ends; (2) information that the 
FDIC may require of particular banks, which could include disclosure of 
enforcement actions; and (3) other information at a bank's option. Part 
350 also permits the use of certain alternatives to the Call Report as 
a disclosure statement. Part 350 does not apply to the insured state 
savings associations that are supervised by the FDIC.
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    \1\ See 52 FR 49379 (December 31, 1987).
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    The annual disclosure statement for a particular year must be 
prepared, and made available to the public, by March 31 of the 
following year, or the fifth day after an organization's annual report 
covering the year is sent to shareholders, whichever occurs first. 
Banks are required to announce the availability of the disclosure 
statements in lobby notices in each of their offices and in notices of 
annual meetings sent to shareholders.
    In adopting part 350, the FDIC's intent was to improve public 
awareness and understanding of the financial condition of individual 
banks. In the preamble to the December 1987 final rule, the FDIC stated 
that ``improved financial disclosure should reduce the likelihood of 
the market or bank customers overreacting to incomplete information.'' 
The FDIC also said it believed the disclosure requirement ``will 
complement its supervisory efforts and enhance public confidence in the 
banking system.'' With limited resources available for the public to 
gather, analyze, and understand information about the financial 
condition of individual banks before and during the 1980s, the FDIC's 
adoption of part 350 provided the public with an opportunity to obtain 
certain basic bank financial information.
    After the FDIC adopted part 350, the Office of the Comptroller of 
the Currency (OCC) and the Federal Reserve Board (FRB) adopted similar 
disclosure regulations. When initially adopted, the disclosure 
regulations adopted by the FDIC (12 CFR part 350), the FRB (12 CFR 
208.17), and the OCC (12 CFR part 18) were substantially uniform. These 
regulations required institutions to make almost identical information 
available to the public upon request. The former Office of Thrift 
Supervision (OTS) had a similar, but not identical, disclosure 
regulation (12 CFR 562.3). As a result of its review of regulations 
pursuant to Section 303(a) of the Riegle Community Development and 
Regulatory Improvement Act of 1994, the OTS repealed 12 CFR 562.3 as 
unnecessary in 1995.\2\ In 1998, the FRB eliminated 12 CFR 208.17, 
Disclosure of Financial Information by State Member Banks, from its 
regulations on the basis

[[Page 53830]]

that Call Report information for banks had become available through the 
internet.\3\ In 2017, the OCC removed 12 CFR part 18 from its 
regulations, noting that the information it required national banks to 
disclose is contained in other publicly available documents, which 
meant that 12 CFR part 18 is duplicative and unnecessary.\4\
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    \2\ See 60 FR 66866 (December 27, 1995).
    \3\ See 63 FR 37630 (July 13, 1998).
    \4\ See 82 FR 8082 (January 23, 2017).
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    With advancements in information technology since part 350 was 
adopted, including widespread public access to the internet (including 
through public libraries for individuals without their own direct 
personal access to the internet), information about the financial 
condition of individual insured depository institutions is now reliably 
and directly offered to the public through the FDIC's and the Federal 
Financial Institutions Examination Council's (FFIEC) websites. For 
example, information about the financial condition and performance of 
all insured depository institutions is publicly available each quarter 
through the Call Report and the Uniform Bank Performance Report (UBPR). 
In addition, enforcement actions taken by the FDIC are readily 
available to the public from the FDIC's website.
    The Call Report contains an institution's balance sheet, income 
statement, and supplemental schedules that disclose additional details 
about the major categories of assets and liabilities, regulatory 
capital, and other financial information. Since the successful 
deployment of the FFIEC's Central Data Repository (CDR) Public Data 
Distribution (PDD) website,\5\ the public has had ready access to 
financial information for each insured depository institution. The 
public is able to obtain more current Call Report data for individual 
institutions in various formats from the FFIEC's CDR PDD website than 
the financial information available in the annual disclosure statement 
required by part 350. The quarterly Call Report data currently provided 
on this website goes back to the March 31, 2001, report date. 
Individual institution Call Report data generally are posted on this 
website within 24 hours after the data have been submitted to and 
accepted by the CDR.
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    \5\ https://cdr.ffiec.gov/public/ManageFacsimiles.aspx.
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    The UBPR is an analytical tool created for bank supervisory, 
examination, and management purposes that shows the impact of 
management decisions and economic conditions on a bank's performance 
and balance-sheet composition. The content of the UBPR is calculated 
each quarter primarily from Call Report data. UBPRs for individual 
institutions are available to the public via the CDR PDD website. The 
website provides UBPRs from March 31, 2005, to date. An institution's 
UBPR is usually published online within a day after its Call Report has 
been filed with and accepted by the CDR. Online access to an 
institution's UBPR each quarter complements the public's use of the 
institution's Call Report and further expands upon the amount of 
publicly available financial data for an institution beyond the limited 
financial information provided in the annual disclosure statement 
required by part 350. The public is able to easily locate the Call 
Report and the UBPR for a bank through the FDIC BankFind tool, which is 
available on the FDIC's website.\6\
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    \6\ https://research.fdic.gov/bankfind/.
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    In addition, on a monthly basis, the FDIC publishes a press release 
listing the administrative enforcement actions it has taken against 
banks and individuals during the preceding month. Enforcement actions 
taken by the FDIC since 1990 are available to the public on the FDIC's 
website.\7\ Interested parties may also obtain administrative orders 
through the FDIC's Public Information Center.
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    \7\ https://www5.fdic.gov/EDO/index.html.
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III. The Proposal

    Under section 2222 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (EGRPRA),\8\ the FDIC is required to conduct a 
review at least once every 10 years to identify any outdated or 
otherwise unnecessary regulations. As part of the EGRPRA review 
completed in 2017, part 350 was included in the third EGRPRA Federal 
Register notice.\9\ The FDIC did not receive any comments on this 
regulation in response to that notice. Nevertheless, upon review, the 
FDIC has determined that part 350 is outdated and no longer necessary 
and therefore should be eliminated. Part 350 places a burden on insured 
state nonmember banks and insured state-licensed branches of foreign 
banks by requiring them to prepare an annual disclosure statement and 
make available to the public a potentially unlimited number of copies 
of these statements. This burden was justified in the past because 
disclosure statements were an effective means for the public to obtain 
information concerning a bank's financial condition. However, with 
widespread public access to the internet where more extensive and 
timely financial information about individual banks, as well as 
administrative enforcement actions, can be readily obtained, the 
incremental burden on banks of providing an annual disclosure statement 
in accordance with a regulation that has become outdated is no longer 
justified. Furthermore, because part 350 does not apply to insured 
state savings associations, for which the FDIC became the primary 
federal regulatory agency in 2011, the proposal would eliminate a 
difference in the regulatory requirements and resulting regulatory 
burden imposed on insured state nonmember banks and insured state-
licensed branches of foreign banks compared to insured state savings 
associations. Finally, because regulations similar to part 350 have 
been rescinded by the FRB and the OCC (as well as the former OTS), the 
preparation and availability of annual disclosure statements are no 
longer required by the other federal banking agencies for the 
institutions under their supervision. Consistent with the objectives of 
section 2222 of EGRPRA, the FDIC is requesting public comment on the 
proposed removal of part 350 from the Code of Federal Regulations.
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    \8\ Public Law 104-208 (1996), codified at 12 U.S.C. 3311.
    \9\ See 80 FR 32046 (June 5, 2015).
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IV. Expected Effects

    The proposed removal of the requirement that each FDIC-insured 
state nonmember bank and insured state-licensed branch of a foreign 
bank prepare, and make available on request, annual disclosure 
statements will lessen the burden the FDIC imposes on these 
institutions. As of June 30, 2018, there were 3,534 FDIC-insured state 
nonmember banks and insured state-licensed branches of foreign banks 
that would be affected by this proposal.
    The proposed rule is expected to reduce recordkeeping, reporting, 
and disclosure requirements for FDIC-insured state nonmember banks and 
insured state-licensed branches of foreign banks. As discussed in 
Section III: The Proposal, part 350 requires institutions to prepare an 
annual disclosure statement and make it available to the public. By 
removing part 350, the proposed rule will remove this disclosure 
burden. The FDIC assumes that 15 percent of the institutions covered by 
part 350 provide a management discussion and analysis in their annual 
disclosure statement, and estimates that preparing this material takes 
each institution 1.5 hours. Assuming the time spent preparing the 
material is divided equally between a financial analyst and

[[Page 53831]]

a manager, each earning the 75th percentile wage for their occupation, 
the estimated annual cost per institution to prepare the material is 
$156.45.\10\ Based on the FDIC's estimation that 15 percent of 
institutions prepare this material, the total annual cost is estimated 
to be $82,919, or approximately 0.0001 percent of noninterest expenses 
for covered institutions.\11\
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    \10\ The annual cost per institution is estimated using the 75th 
percentile hourly wage for financial analysts and management 
occupations in the depository credit intermediation industry as of 
May 2017. This hourly wage is adjusted for inflation, and grossed-up 
to include benefits, through March 2018. The 75th percentile 
inflation and benefit-adjusted hourly wage of management occupations 
as of March 2018 is $124.13, and for financial analysts is $84.47. 
Assuming the 1.5 hours are equally divided between a manager and an 
analyst, this yields a total cost of (0.75 * $124.13) + (0.75 * 
$84.47) = $156.45.
    Hourly wages are from the Bureau of Labor Statistics (BLS) May 
2017 National Industry-Specific Occupational Employment and Wage 
Estimates, https://www.bls.gov/oes/current/oessrci.htm. Wages are 
adjusted for inflation through March 2018 using the Seasonally 
Adjusted All-items Consumer Price Index for All Urban Consumers, 
https://data.bls.gov/PDQWeb/cu. The hourly wages are grossed-up to 
include benefits based on Employer Cost for Employee Compensation 
data as of March 2018, https://www.bls.gov/news.release/pdf/ecec.pdf. March 2018 is the latest available period of Employer Cost 
for Employee Compensation data. The data on hourly wages, inflation, 
and employer cost for employee compensation was extracted on June 
15, 2018.
    \11\ This equals 530 * $156.45, i.e., (3,534 * 0.15) * $156.45, 
rounded to the nearest dollar. Noninterest expenses are calculated 
from data reported in the June 30, 2018, Call Report, and 
annualized.
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    In addition to the directly measurable cost savings, another 
potential benefit of the proposed rule is that it frees up institution 
staff time that would otherwise have been spent complying with part 
350. Theoretically, time previously spent complying with part 350 may 
now be spent on another task of higher value to the institution. This 
potential effect is difficult to accurately estimate with available 
information, but it is likely to be small given that the disclosure 
burden imposed by part 350 is a relatively small percentage of 
noninterest expenses.
    The proposed rule does remove a disclosure requirement for affected 
institutions; however, the FDIC believes that the reduction will not 
have material effects for customers, investors, or counterparties. As 
discussed in Section III: The Proposal, extensive and timely financial 
information about individual banks, as well as administrative 
enforcement actions, can be readily obtained by the public on the 
internet. Therefore, the FDIC believes that removal of this disclosure 
requirement will not have substantive effects on financial market 
participants.

V. Alternatives

    The FDIC considered alternatives to the proposed rule, but believes 
that the proposed rescission and removal of part 350 represents the 
most appropriate option. In particular, the FDIC considered whether to 
(1) retain the existing disclosure statement requirement, but to extend 
it to the insured state savings associations now supervised by the 
FDIC, (2) require that disclosure statements be updated quarterly 
instead of annually, and/or (3) require the inclusion in disclosure 
statements of either the entire Call Report (excluding a limited number 
of items accorded confidential treatment) or financial data comparable 
to a greater number of specified Call Report schedules. However, with 
the timely public availability of each institution's quarterly Call 
Report and UBPR via the FDIC's and the FFIEC's websites, and with the 
public disclosure of information about enforcement actions taken by the 
FDIC routinely made available on the FDIC's website, the FDIC believes 
any extension of part 350 to other institutions, increase in the 
frequency of disclosure, increase in the scope of disclosure, or 
combination of these alternatives, imposes additional cost without any 
corresponding public benefit in terms of access to financial and other 
information on institutions. Moreover, the FDIC is not aware of any 
difficulties encountered by the public in obtaining current financial 
and enforcement action information on institutions supervised by the 
FRB and the OCC (and those institutions previously supervised by the 
OTS) via public websites since these agencies eliminated their 
respective disclosure statement requirements.

VI. Request for Comments

    The FDIC invites comments on all aspects of this proposed 
rulemaking. In particular, the FDIC requests comments on the following 
questions:
    1. Should part 350 be retained in whole or in part? Please 
substantiate your response.
    2. What negative impacts, if any, can you foresee in the FDIC's 
proposal to rescind part 350 and remove it from the Code of Federal 
Regulations?

VII. Regulatory Analysis and Procedure

A. The Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA) (44 U.S.C. 3501-3521), the FDIC may not conduct or 
sponsor, and the respondent is not required to respond to, an 
information collection unless it displays a currently valid Office of 
Management and Budget (OMB) control number. Part 350 is currently an 
approved information collection with OMB Control No. 3064-0090. 
Removing part 350 will obviate the need for this collection of 
information pursuant to the PRA, and FDIC would seek to discontinue its 
use.

B. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a rulemaking, an agency prepare and make available for 
public comment an initial regulatory flexibility analysis describing 
the impact of the proposed rule on small entities.\12\ A regulatory 
flexibility analysis is not required; however, if the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. The U.S. Small Business 
Administration (SBA) has defined ``small entities'' to include banking 
organizations with total assets less than or equal to $550 million.\13\
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    \12\ 5 U.S.C. 601 et seq.
    \13\ 13 CFR 121.201 (as amended, effective December 2, 2014).
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    As of June 30, 2018, there are 3,534 FDIC-insured state nonmember 
banks and FDIC-insured state-licensed branches of foreign banks.\14\ Of 
these, 2,725 are considered small entities for the purposes of RFA.\15\ 
Thus, the FDIC concludes the proposed rule will affect a substantial 
number of small entities.
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    \14\ Data from the June 2018 Call Report and FFIEC 002 report.
    \15\ The SBA defines a small banking organization as having $550 
million or less in assets, where an organization's ``assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See 13 CFR 121.201 
(as amended, effective December 2, 2014). In its determination, the 
``SBA counts the receipts, employees, or other measure of size of 
the concern whose size is at issue and all of its domestic and 
foreign affiliates.'' See 13 CFR 121.103. Following these 
regulations, the FDIC uses a covered entity's affiliated and 
acquired assets, averaged over the preceding four quarters, to 
determine whether the covered entity is ``small'' for the purposes 
of RFA.
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    The proposed rule is expected to reduce recordkeeping, reporting, 
and disclosure requirements for small FDIC-supervised banks. As 
discussed in Section III: The Proposal, part 350 requires institutions 
to prepare an annual disclosure statement and make it available to the 
public. By removing part 350, the proposed rule will remove this 
disclosure burden. As discussed in Section IV: Expected Effects, the 
FDIC estimates the annual cost per institution to prepare the material 
is $156.45.\16\

[[Page 53832]]

Based on the FDIC's estimation that 15 percent of institutions prepare 
this material, the total annual cost for small FDIC-supervised 
institutions is estimated to be $63,988, or less than 0.0005 percent of 
noninterest expenses for such institutions.\17\
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    \16\ The annual cost per institution is estimated using the 75th 
percentile hourly wage for financial analysts and management 
occupations in the depository credit intermediation industry as of 
May 2017. This hourly wage is adjusted for inflation, and grossed-up 
to include benefits, through March 2018. The 75th percentile 
inflation and benefit-adjusted hourly wage of management occupations 
as of March 2018 is $124.13, and for financial analysts is $84.47. 
Assuming the 1.5 hours are equally divided between a manager and an 
analyst, this yields a total cost of (0.75 * $124.13) + (0.75 * 
$84.47) = $156.45.
    Hourly wages are from the Bureau of Labor Statistics (BLS) May 
2017 National Industry-Specific Occupational Employment and Wage 
Estimates, https://www.bls.gov/oes/current/oessrci.htm. Wages are 
adjusted for inflation through March 2018 using the Seasonally 
Adjusted All-items Consumer Price Index for All Urban Consumers, 
https://data.bls.gov/PDQWeb/cu. The hourly wages are grossed-up to 
include benefits based on Employer Cost for Employee Compensation 
data as of March 2018, https://www.bls.gov/news.release/pdf/ecec.pdf. March 2018 is the latest available period of Employer Cost 
for Employee Compensation data. The data on hourly wages, inflation, 
and employer cost for employee compensation was extracted on June 
15, 2018.
    \17\ This equals 409 * $156.45, i.e., (2,725 * 0.15) * $156.45, 
rounded to the nearest dollar. Noninterest expenses are calculated 
from data reported in the June 30, 2018, Call Report, and 
annualized.
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    Also as described in Section IV above, in addition to the directly 
measurable cost savings, another potential benefit of the proposed rule 
is that it frees up institution staff time that would otherwise have 
been spent complying with part 350. While this potential effect is 
difficult to accurately estimate with available information, it is 
likely to be small given that the disclosure burden imposed by part 350 
is a relatively small percentage of noninterest expenses for small 
FDIC-supervised institutions.
    The proposed rule does remove a disclosure requirement for affected 
institutions; however, the FDIC believes that the reduction will not 
have material effects for customers, investors, or counterparties. As 
discussed in Section III: The Proposal, extensive and timely financial 
information about individual banks, as well as administrative 
enforcement actions, can be readily obtained by the public on the 
internet. Therefore, the FDIC believes that removal of this disclosure 
requirement with have not substantive effects on financial market 
participants.
    Based on the information above, the FDIC certifies that the 
proposed rule will not have a significant economic impact on a 
substantial number of small entities.
    The FDIC invites comments on all aspects of the supporting 
information provided in this RFA section. In particular, would this 
proposal have any significant effects on small entities that the FDIC 
has not identified?

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809, requires each Federal banking agency 
to use plain language in all of its proposed and final rules published 
after January 1, 2000. As a Federal banking agency subject to the 
provisions of this section, the FDIC has sought to present the proposed 
rule to rescind part 350 in a simple and straightforward manner. The 
FDIC invites comments on whether the proposal is clearly stated and 
effectively organized, and how the FDIC might make the proposal easier 
to understand.

D. The Economic Growth and Regulatory Paperwork Reduction Act

    Under section 2222 of EGRPRA, the FDIC is required to conduct a 
review at least once every 10 years to identify any outdated or 
otherwise unnecessary regulations. The FDIC completed its most recent 
comprehensive review of its regulations under EGRPRA in 2017 and did 
not receive any comments from the public concerning part 350. The 
burden reduction evidenced in this notice of proposed rulemaking is 
consistent with the objectives of the EGRPRA review process.

List of Subjects in 12 CFR Part 350

    Accounting, Banks, banking, Reporting and recordkeeping 
requirements.

    For the reasons stated in the preamble, and under the authority of 
12 U.S.C. 1817(a)(1), 1819 ``Seventh'' and ``Tenth,'' the Board of 
Directors of the Federal Deposit Insurance Corporation proposes to 
remove 12 CFR part 350.

PART 350--DISCLOSURE OF FINANCIAL AND OTHER INFORMATION BY FDIC-
INSURED STATE NONMEMBER BANKS

0
1. Part 350--[Removed and Reserved]
    Remove and reserve part 350 consisting of Sec. Sec.  350.1 through 
350.12.

    Dated at Washington, DC, on October 17, 2018.
    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2018-23042 Filed 10-24-18; 8:45 am]
 BILLING CODE P