[Federal Register Volume 84, Number 52 (Monday, March 18, 2019)]
[Rules and Regulations]
[Pages 9698-9702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04944]


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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: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending 
its regulations by rescinding and removing its regulations entitled 
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 set out in the existing regulations. 
The financial and other information that has been subject to disclosure 
by individual banks under the regulations is publicly available through 
the FDIC's website.

DATES: This rule will be effective April 17, 2019.

FOR FURTHER INFORMATION CONTACT: Robert Storch, Chief Accountant, 
Division of Risk Management Supervision, (202) 898-8906 or 
[email protected]; Andrew Overton, Examination Specialist (Bank 
Accounting), Division of Risk Management Supervision, (202)

[[Page 9699]]

898-8922 or [email protected]; Michael Condon, Counsel, Legal Division, 
(202) 898-6536 or [email protected].

SUPPLEMENTARY INFORMATION:

I. Policy Objectives

    The policy objective of the final rule is to simplify the FDIC's 
regulations by removing unnecessary or redundant regulations. The final 
rule 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 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. 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. 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

[[Page 9700]]

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 of regulatory review.\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.
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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. Comments

    Consistent with the objectives of section 2222 of EGRPRA, on 
October 17, 2018, the FDIC Board authorized publication of a notice of 
proposed rulemaking (NPR) to rescind and remove part 350 from the Code 
of Federal Regulations. The NPR was published in the Federal Register 
on October 25, 2018, with a 30-day comment period.\10\
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    \10\ See 83 FR 53829 (October 25, 2018).
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    The FDIC received nine comments addressing the proposed rescission 
and removal of part 350 from bankers, banking associations, and a 
consultant. The nine commenters fully supported the proposal. One 
additional comment was received from an individual, but it did not 
specifically address the proposed rescission and removal. After 
considering the comments received, the FDIC is adopting as proposed the 
rescission and removal of part 350 from the Code of Federal 
Regulations.

V. Expected Effects

    The 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 
September 30, 2018, there were 3,493 FDIC-insured state nonmember banks 
and insured state-licensed branches of foreign banks that would be 
affected by this final rule.\11\
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    \11\ Data from the September 30, 2018, Call Report and FFIEC 002 
report.
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    The final 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 final 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 a manager, 
each earning the 75th percentile wage for their occupation, the 
estimated annual cost per institution to prepare the material is 
$157.82.\12\ Based on the FDIC's estimation that 15 percent of 
institutions prepare this material, the total annual cost is estimated 
to be $82,695, or approximately 0.0001 percent of noninterest expenses 
for covered institutions.\13\
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    \12\ 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 June 2018. The 75th percentile 
inflation and benefit-adjusted hourly wage of management occupations 
as of June 2018 is $125.21, and for financial analysts is $85.21. 
Assuming the 1.5 hours are equally divided between a manager and an 
analyst, this yields an estimated total annual cost per institution 
of (0.75 * $125.21) + (0.75 * $85.21) = $157.82.
    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 June 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 June 2018, https://www.bls.gov/news.release/pdf/ecec.pdf. 
June 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 December 
14, 2018.
    \13\ This equals 524 * $157.82, i.e., (3,493 * 0.15) * $157.82, 
rounded to the nearest dollar. Noninterest expenses are calculated 
from data reported in the September 30, 2018, Call Report, and 
annualized.
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    In addition to the directly measurable cost savings, another 
potential benefit of the final 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 final rule removes 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.

VI. Alternatives Considered

    The FDIC considered alternatives, but believes that the 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

[[Page 9701]]

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.

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 obviates the need for this collection of information 
pursuant to the PRA, and FDIC will 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 a final regulatory flexibility analysis describing the 
impact of the final rule on small entities.\14\ 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.\15\
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    \14\ 5 U.S.C. 601 et seq.
    \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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    As of September 30, 2018, there are 3,493 FDIC-insured state 
nonmember banks and FDIC-insured state-licensed branches of foreign 
banks.\16\ Of these, 2,689 are considered small entities for the 
purposes of RFA. Thus, the FDIC concludes the proposed rule will affect 
a substantial number of small entities.
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    \16\ Data from the September 30, 2018, Call Report and FFIEC 002 
report.
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    The final 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 final 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 $157.82.\17\ 
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 $63,599, or less than 0.0005 percent of 
noninterest expenses for such institutions.\18\
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    \17\ 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 June 2018. The 75th percentile 
inflation and benefit-adjusted hourly wage of management occupations 
as of June 2018 is $125.21, and for financial analysts is $85.21. 
Assuming the 1.5 hours are equally divided between a manager and an 
analyst, this yields an estimated total annual cost per institution 
of (0.75 * $125.21) + (0.75 * $85.21) = $157.82.
    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 June 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 June 2018, https://www.bls.gov/news.release/pdf/ecec.pdf. 
June 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 December 
14, 2018.
    \18\ This equals 403 * $157.82, i.e., (2,689 * 0.15) * $157.82, 
rounded to the nearest dollar. Noninterest expenses are calculated 
from data reported in the September 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 final 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 final rule removes 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 final 
rule will not have a significant economic impact on a substantial 
number of small entities.

C. Small Business Regulatory Enforcement Fairness Act

    The OMB has determined that the final rule is not a ``major rule'' 
within the meaning of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (SBREFA).\19\ As required by SBREFA, the FDIC will 
submit the final rule and other appropriate reports to Congress and the 
Government Accountability Office for review.
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    \19\ 5 U.S.C. 801 et seq.
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D. 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 final 
rule to rescind part 350 in a simple and straightforward manner.

[[Page 9702]]

E. 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 final rule is consistent with the 
objectives of the EGRPRA review process.

F. Riegle Community Development and Regulatory Improvement Act

    Under section 302(b) of the Riegle Community Development and 
Regulatory Improvement Act, 12 U.S.C. 4802(b), new regulations and 
amendments to regulations prescribed by a Federal banking agency which 
impose additional reporting, disclosures, or other new requirements on 
insured depository institutions shall take effect on the first day of a 
calendar quarter which begins on or after the date on which the 
regulations are published in final form. Because this rule rescission 
does not impose additional reporting, disclosures, or other 
requirements, but rather relieves banks of a disclosure requirement, 
this rule may take effect prior to the start of the next calendar 
quarter.

List of Subjects in 12 CFR Part 350

    Accounting, Banks, Banking, Reporting and recordkeeping 
requirements.

Authority and Issuance

PART 350--[REMOVED AND RESERVED]

0
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 removes and 
reserves 12 CFR part 350.

    Dated at Washington, DC, on March 12, 2019.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2019-04944 Filed 3-15-19; 8:45 am]
BILLING CODE 6714-01-P