[Federal Register Volume 84, Number 128 (Wednesday, July 3, 2019)]
[Rules and Regulations]
[Pages 31701-31707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13970]


-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

12 CFR Part 265

[Docket No. R-1667]
RIN No. 7100-AF 52


Rules Regarding Delegation of Authority: Delegation of Authority 
to the Secretary of the Board, Director of the Division of Supervision 
of Regulation, and Federal Reserve Banks

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Board is amending its rules regarding delegation of 
authority to delegate to Federal Reserve Banks authority to approve 
certain types of applications, notices, and requests. Under the rule, 
Federal Reserve Banks are delegated authority to waive a requirement to 
file certain applications under the Bank Holding Company Act and the 
Home Owners' Loan Act; grant or deny requests for modifying certain 
commitments; authorize a state member bank to make a public welfare 
investment in accordance with section 9 of the Federal Reserve Act 
under certain circumstances; and approve certain requests, 
applications, and notices relating to international banking operations 
filed pursuant to the Board's Regulation K. The rule also modifies the 
delegation rules by authorizing the Federal Reserve Banks to approve 
applications and notices concerning mergers and acquisitions that do 
not exceed the Board's delegation criteria for competition after 
including deposits of qualifying credit unions weighted at 50 percent 
and deposits of ``commercially active'' thrift institutions weighted in 
most cases at 100 percent. In a limited number of cases, deposits of 
all thrifts would be weighted at 100 percent. To ensure the Board's 
delegation rules are consistent, the rule also revises or rescinds, as 
appropriate, certain existing delegations to the Federal Reserve Banks, 
the Secretary of the Board, and the Director of the Division of 
Supervision and Regulation.

DATES: Effective July 3, 2019.

FOR FURTHER INFORMATION CONTACT: Alison Thro, Assistant General 
Counsel, (202) 452-3236, Scott Tkacz, Senior Counsel, (202) 452-2744, 
or Jonah Kind, Attorney, (202) 452-2045, Legal Division, Susan Motyka, 
Deputy Associate Director, (202) 452-5280, Division of Supervision and 
Regulation, Anthony Iwuji, Manager, (202) 452-3254, Division of 
Consumer and Community Affairs, Board of Governors of the Federal 
Reserve System, 20th Street and C Street NW, Washington, DC 20551.

SUPPLEMENTARY INFORMATION: 

I. Discussion

    Section 11(k) of the Federal Reserve Act provides that the Board, 
by published order or rule, may delegate any of its functions, other 
than those related to rulemaking or principally to monetary and credit 
policies.\1\ Pursuant to this authority, the Board is amending its 
Rules Regarding Delegation of

[[Page 31702]]

Authority (Delegation Rules) \2\ to delegate authority to the Federal 
Reserve Banks (Reserve Banks) to act on certain types of applications, 
notices, and requests. The Board expects that these delegations of 
authority will allow the Federal Reserve System to process such 
applications, notices, and requests in a more efficient and timely 
manner. To ensure the Delegation Rules are consistent, the rule also 
revises or rescinds, as appropriate, certain existing delegations to 
the Reserve Banks, the Secretary of the Board, and the Director of the 
Division of Supervision and Regulation (S&R Director). Each of the 
changes to the Delegation Rules made by this rule are discussed in more 
detail below. Additionally, the Board is revising the Delegation Rules 
to update all references to the ``Division of Banking Supervision and 
Regulation'' to the ``Division of Supervision and Regulation'' to 
reflect the division's name change on December 5, 2016.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 248(k).
    \2\ 12 CFR part 265.
---------------------------------------------------------------------------

A. Waivers of Applications Required by the Bank Holding Company Act and 
the Home Owners' Loan Act

    The Board's regulations provide for the waiver of applications 
required by the Bank Holding Company Act of 1956 (BHC Act) and the Home 
Owners' Loan Act (HOLA) in certain circumstances to avoid duplicative 
review of the same transaction by federal banking agencies. Under Sec.  
225.12(d)(2) of the Board's Regulation Y, applications normally 
required by the BHC Act when a bank holding company seeks to merge with 
another bank holding company or to acquire shares or control of a bank 
may be waived; similarly, under Sec.  238.12(d)(1) of the Board's 
Regulation LL, applications normally required by HOLA when a savings 
and loan holding company seeks to merge with another savings and loan 
holding company or to acquire shares or control of a thrift may be 
waived.\3\ In both cases, an application may not be required from the 
holding company if the proposed transaction is also subject to approval 
by a federal banking regulator under section 18(c) of the Federal 
Deposit Insurance Act (Bank Merger Act) and meets certain other 
criteria.
---------------------------------------------------------------------------

    \3\ 12 CFR 225.12(d)(2) (bank holding company acquisitions); 12 
CFR 238.12(d)(1) (savings and loan holding company acquisitions).
---------------------------------------------------------------------------

    If a transaction satisfies each of the criteria for a waiver under 
the Board's rules, an acquiring holding company seeking a waiver must 
provide notice of the transaction to the appropriate Reserve Bank at 
least 10 days prior to consummation.\4\ Under the Board's waiver rules, 
the holding company would not need to submit an application under the 
BHC Act or HOLA unless it is informed by the Reserve Bank within 10 
days after the notice is submitted that an application is required.\5\ 
The Reserve Banks currently do not have delegated authority to act on a 
notice submitted by an acquiring holding company in connection with a 
waiver. However, the Board has determined that it would be appropriate 
for the Reserve Banks to act on waiver notices. Accordingly, the Board 
is amending the Delegation Rules to delegate authority to the Reserve 
Banks to inform an acquiring holding company that an application is 
required under the BHC Act or HOLA after receiving notice regarding a 
waiver, in accordance with Sec.  225.12(d)(2) or Sec.  238.12(d)(1).\6\
---------------------------------------------------------------------------

    \4\ 12 CFR 225.12(d)(2)(v); 12 CFR 238.11(d)(1)(vi).
    \5\ 12 CFR 225.12(d)(2)(vi); 12 CFR 238.11(d)(1)(vii). Unlike 
Regulation Y, Regulation LL states that the acquiring savings and 
loan holding company may be informed by either the Reserve Bank or 
the Board that an application is required.
    \6\ In connection with reviewing a notice of a waiver, a Reserve 
Bank may, in its discretion, inform an acquiring holding company 
before the end of the 10-day notice period that the Reserve Bank 
does not intend to recommend that the Board take action to require 
the filing of an application under the BHC Act or HOLA.
---------------------------------------------------------------------------

B. Requests To Relieve or Modify Commitments

    In connection with applications, notices, and requests submitted 
pursuant to various banking statutes over which the Federal Reserve has 
jurisdiction, persons may provide commitments to the Board or a Reserve 
Bank. Commitments are deemed to be conditions imposed in writing by the 
Board and may be enforced under applicable law.
    The Board has previously delegated authority to the S&R Director to 
grant or deny requests to relieve or modify, including to extend the 
time for performing, any commitment relied upon by the Board or a 
Reserve Bank in acting upon an application or notice required by the 
BHC Act, the Bank Merger Act, the Change in Bank Control Act of 1978, 
the Federal Reserve Act, the International Banking Act, the Federal 
Deposit Insurance Act, or HOLA (Banking Statutes).\7\ The Board has 
determined that it would be appropriate for Reserve Banks to act on 
requests to relieve or modify commitments upon which the Reserve Bank 
relied in acting on a filing submitted pursuant to one or more of the 
Banking Statutes. Accordingly, the Board is revising its Delegation 
Rules to permit the Reserve Banks to grant or deny requests to relieve 
or modify (including extending the time for performing) such 
commitments, so long as the relief or modification would not be 
inconsistent with, or result in an evasion of, the provisions of the 
Reserve Bank's original action and the requests do not raise 
significant legal, supervisory, or policy issues. In acting on such 
requests, the Reserve Bank may take into account changed circumstances 
and good faith efforts to fulfill the commitments. No changes are being 
made to the Board's existing delegation of authority to the S&R 
Director to grant or deny requests to relieve or modify commitments 
made to the Board.
---------------------------------------------------------------------------

    \7\ 12 CFR 265.7(a)(2).
---------------------------------------------------------------------------

C. Public Welfare Investments

    Section 9(23) of the Federal Reserve Act permits state member 
banks, subject to certain limits and other conditions, to make 
investments which are designed primarily to promote the public welfare 
(Public Welfare Investments).\8\ Under the Board's Regulation H, a 
state member bank must obtain prior approval before making a Public 
Welfare Investment if the bank or the proposed investment does not 
satisfy criteria relating to, among other things, the condition of the 
bank and the nature of the investment.\9\
---------------------------------------------------------------------------

    \8\ 12 U.S.C. 338a.
    \9\ 12 CFR 208.22(d). Public Welfare Investments by state member 
banks that do not require prior approval are subject to a 30-day 
post notice procedure. 12 CFR 208.22(c).
---------------------------------------------------------------------------

    The Board previously has delegated to the Reserve Banks authority 
to approve a Public Welfare Investment that meets the conditions of 
Sec.  208.22(b)(1)-(3), (b)(5), and (b)(7) of Regulation H, if the bank 
has at least an overall rating of ``3'' as of its most recent consumer 
compliance examination and the bank's Public Welfare Investments do not 
in the aggregate exceed 10 percent of the bank's capital and 
surplus.\10\ In addition, the Board previously has delegated to the S&R 
Director authority

[[Page 31703]]

to approve a Public Welfare Investment under certain other 
circumstances.\11\
---------------------------------------------------------------------------

    \10\ 12 CFR 265.11(e)(12). The Board also previously has 
delegated to the Reserve Banks authority to approve, with the 
concurrence of the Director of the Division of Consumer and 
Community Affairs (DCCA Director), a Public Welfare Investment by a 
state member bank having an overall rating of ``4'' or ``5'' as of 
its most recent consumer compliance examination, if the investment 
meets the conditions of Sec.  208.22(b)(1)-(3), (b)(5), and (b)(7) 
of Regulation H and the bank's Public Welfare Investments do not in 
the aggregate exceed 10 percent of the bank's capital and surplus. 
This delegation was authorized in connection with the Board's 
approval on February 18, 1999, of the request by California Center 
Bank, Los Angeles, California, to make certain public welfare 
investments.
    \11\ Specifically, the Board delegated to the S&R Director 
authority to approve Public Welfare Investments that are included in 
the list of permissible investments listed in 12 CFR 208.22(b)(1) 
and that involve a state member bank that (1) has a composite ``3,'' 
``4,'' or ``5'' composite rating under the CAMELS rating system, (2) 
is less than adequately capitalized, (3) is subject to a written 
agreement, cease and desist order, capital directive, prompt 
corrective action directive, or memorandum of understanding, or (4) 
proposes an investment that exposes the bank to liability beyond the 
amount of the proposed investment. This delegation was authorized in 
connection with the Board's approval on February 18, 1999, of the 
request by California Center Bank, Los Angeles, California, to make 
certain public welfare investments.
---------------------------------------------------------------------------

    The Board has determined that it would be appropriate for the 
Reserve Banks to act on certain proposals by a state member bank to 
make a Public Welfare Investment. Accordingly, the Board is revising 
the Delegation Rules to authorize the Reserve Banks to approve a Public 
Welfare Investment that is in accordance with the requirements of 
section 9(23) of the Federal Reserve Act, if the proposal raises no 
significant legal, supervisory, or policy issues. Under the revised 
Delegation Rules, the S&R Director would generally have delegated 
authority to approve a Public Welfare Investment proposal that raises 
significant legal, supervisory, or policy issues; however, any proposal 
that does not satisfy Sec.  208.22(b)(1) of Regulation H would require 
Board action.\12\ In addition, the delegations expressly authorize the 
Reserve Banks and the S&R Director to determine, in connection with 
approving a Public Welfare Investment under their delegated authority, 
that the aggregate amount of a state member bank's Public Welfare 
Investments will not pose a significant risk to the deposit insurance 
fund in accordance with section 9(23) of the Federal Reserve Act. The 
delegations in this final rule supersede the Board's prior delegations 
of authority to the Reserve Banks and the S&R Director to approve 
Public Welfare Investments.
---------------------------------------------------------------------------

    \12\ 12 CFR 208.22(b)(1).
---------------------------------------------------------------------------

D. Proposals Under Subparts A and B of Regulation K

    The Board's Regulation K sets forth rules regarding international 
banking operations. Subpart A of the regulation sets out rules 
governing the international and foreign activities of U.S. banking 
organizations, including procedures for establishing foreign branches 
and Edge and agreement corporations to engage in international banking, 
and for investing in foreign organizations. Subpart B sets out rules 
governing the activities of foreign banking organizations in the United 
States. Subparts A and B include numerous application and notice 
requirements for banking organizations that propose to engage in 
certain activities, open offices, or make or retain certain investments 
or acquisitions. The Board previously has delegated authority to the 
Secretary of the Board, the General Counsel, the S&R Director, and the 
Reserve Banks to act on certain applications, notices, and requests 
under both subparts A and B of Regulation K.
    The Board has determined that it would be appropriate for the 
Reserve Banks to act on a number of applications, notices, and requests 
submitted pursuant to subparts A and B of Regulation K. Accordingly, 
the Board is revising the Delegation Rules to permit the Reserve Banks 
to act on certain proposals submitted pursuant to Regulation K. 
Generally, the authority under this new delegation is limited to 
proposals that do not raise significant legal, supervisory, or policy 
issues. The Board is also revising certain existing delegations of 
authority to the S&R Director, rescinding certain existing delegations 
to the Secretary of the Board, and reordering certain existing 
delegations to the Reserve Banks that appear in the Delegation Rules.
    With respect to subpart A of Regulation K, concerning the foreign 
activities of U.S. banking organizations, the revisions to the 
Delegation Rules provide new authority and expand upon existing 
delegations of authority for the Reserve Banks to act on various 
proposals filed under that subpart. Reserve Banks will have delegated 
authority to act on proposals concerning the establishment of a foreign 
branch by a state member bank or an Edge corporation; the acquisition 
by a foreign branch of a member bank of all of the shares of a company 
that engages in activities in which the member bank is permitted to 
engage or that are incidental to the activities of the foreign branch; 
the amendment by an Edge corporation of its articles of association or 
charter; a foreign institution's acquisition of a majority of the 
shares of an Edge corporation; the acquisition of control of an Edge 
corporation; investments by a member bank in the stock of an agreement 
corporation; the extension of time within which an investor must divest 
of investments in entities engaged in impermissible activities or 
interests acquired to prevent a loss upon a debt previously contracted 
in good faith; investments made by a member bank in a foreign country; 
a member bank's engaging in underwriting, distribution, or dealing of 
equity securities outside the United States; the use of internal 
hedging models for determining compliance with investment limits; and a 
member bank's engaging in futures commission merchant activities on an 
mutual exchange or clearinghouse that requires members to guarantee or 
otherwise contract to cover losses suffered by the other members.
    With respect to subpart B of Regulation K, concerning the 
activities of foreign banking organizations in the United States, the 
revisions to the Delegation Rules also delegate new authority and 
expand upon existing delegations of authority for Reserve Banks to act 
on proposals filed under that subpart concerning the establishment of 
certain permanent or temporary U.S. offices.

E. Competition

    Section 3 of the BHC Act and certain other statutes administered by 
the Board concerning mergers and acquisitions prohibit the Board from 
approving proposals involving the formation of a holding company, the 
merger of holding companies, or the acquisition or merger of insured 
depository institutions that would result in a monopoly or would be in 
furtherance of an attempt to monopolize the business of banking in any 
relevant market.\13\ These statutes also prohibit the Board from 
approving proposals that would substantially lessen competition or tend 
to create a monopoly in any banking market, unless the Board finds that 
the anticompetitive effects of the proposal are clearly outweighed in 
the public interest by the probable effect of the proposal in meeting 
the convenience and needs of the community to be served.\14\
---------------------------------------------------------------------------

    \13\ See 12 U.S.C. 1842(c)(1)(A) (BHC Act); 12 U.S.C. 
1828(c)(5)(A) (Bank Merger Act); 12 U.S.C. 1467a(e)(2)(A) (HOLA). 
Section 4 of the BHC Act requires the Board to consider whether a 
proposal by a bank holding company to acquire a savings and loan 
holding company or a savings association would result in increased 
competition or decreased or unfair competition. 12 U.S.C. 
1843(j)(2)(A).
    \14\ See 12 U.S.C. 1842(c)(1)(B) (BHC Act); 12 U.S.C. 
1828(c)(5)(B) (Bank Merger Act); 12 U.S.C. 1467a(e)(2)(B) (HOLA).
---------------------------------------------------------------------------

    The Board previously has delegated authority to the Reserve Banks 
to approve a proposal involving the formation of a bank holding 
company, the merger of bank holding companies or banks, or the 
acquisition of a bank holding company or insured depository 
institution, provided the proposal satisfies the Board's delegation 
criteria.\15\ In 2011, by order, the Board

[[Page 31704]]

extended the delegation to include savings and loan holding companies 
in the same manner that the delegation applies to bank holding 
companies.\16\ With respect to competitive factors, the Board's 
delegation criteria require the Board to act on any such proposal 
which, upon consummation, would result in the control by a banking 
organization of over 35 percent of total deposits in any relevant 
banking market or result in a highly concentrated banking market for 
deposits, as measured by the Herfindahl-Hirschman Index (HHI),\17\ if 
the proposed transaction also would increase the HHI by at least 200 
points.\18\ Currently, in determining whether a proposal satisfies the 
Board's delegation criteria for competition in each relevant banking 
market for both relative deposit market share and market concentration 
for deposits, the deposits of any credit unions in the market are 
excluded, and, except for certain applications described below filed 
under HOLA, the deposits of all thrift institutions in the market are 
included on a 50 percent weighted basis.\19\
---------------------------------------------------------------------------

    \15\ 12 CFR 265.11(c)(11).
    \16\ See, Order Delegating Certain Actions Relating to Savings 
and Loan Holding Companies (August 12, 2011) available at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20110812a.htm.
    \17\ Under the Department of Justice Bank Merger Competitive 
Review guidelines, a market is considered highly concentrated if the 
post-merger HHI exceeds 1800. The Department of Justice generally 
does not challenge a bank merger or acquisition (in the absence of 
other factors indicating anticompetitive effects) unless the post-
merger HHI is at least 1800 and the merger or acquisition increases 
the HHI by more than 200 points.
    \18\ 12 CFR 265.11(c)(11)(v).
    \19\ The standard inclusion of thrift deposits at 50 percent 
weight in the initial competitive analysis reflects thrifts' 
generally limited lending to small businesses relative to commercial 
banks.
---------------------------------------------------------------------------

    In analyzing the competitive effects of a merger or acquisition 
proposal, the Board previously has indicated that certain thrift 
institutions have become, or have the potential to become, significant 
competitors to commercial banks.\20\ In some cases involving the 
formation of a bank holding company, the acquisition by a bank holding 
company of a depository institution, the merger of a bank holding 
company with another holding company, or the merger of a bank with 
another depository institution, the Board has included the deposits of 
certain thrift institutions in a given market on a 100 percent weighted 
basis, rather than the standard 50 percent weighting, when competition 
from those thrift institutions closely approximated competition from a 
commercial bank.\21\ Such thrifts are referred to as ``commercially 
active thrifts.''
---------------------------------------------------------------------------

    \20\ See, e.g., Midwest Financial Group, 75 Federal Reserve 
Bulletin 386 (1989); National City Corporation, 70 Federal Reserve 
Bulletin 743 (1984).
    \21\ The Board has found that a commercially active thrift 
closely approximates competition from a commercial bank when the 
thrift is a significant commercial lender in the market and offers a 
broad range of consumer, mortgage, and other banking products 
typically offered by commercial banks. See, e.g., KeyCorp, FRB Order 
No. 2016-12 (July 12, 2016); River Valley Bancorp, FRB Order No. 
2012-10 (October 17, 2012); Regions Financial Corporation, 93 
Federal Reserve Bulletin C16 (2007); and Banknorth Group, Inc., 
supra. See also Banknorth Group, Inc., 75 Federal Reserve Bulletin 
703 (1989).
---------------------------------------------------------------------------

    The Board also has found that certain credit unions can serve as 
competitors to commercial banks in a relevant banking market. The Board 
has included certain credit unions in its competitive analysis when the 
credit unions offer consumer banking products, operate street-level 
branches, and have broad membership criteria.\22\ Credit unions which 
meet these criteria are referred to as ``qualifying credit unions.'' 
Generally, the Board has included the deposits of qualifying credit 
unions at a 50 percent weight in its analysis, which reflects credit 
unions' relatively low levels of commercial and small business lending 
relative to commercial banks. However, the Board has only considered 
deposits of qualifying credit unions as a factor that can mitigate the 
anti-competitive effects of a proposal.
---------------------------------------------------------------------------

    \22\ See, e.g., Central Bancompany, Inc., FRB Order No. 2017-03 
(February 8, 2017); Chemical Financial Corporation, FRB Order No. 
2015-13 (April 20, 2015); Mitsubishi UFJ Financial Group, Inc., FRB 
Order No. 2012-12 (November 14, 2012); and Old National Bancorp, FRB 
Order No. 2012-9 (August 30, 2012).
---------------------------------------------------------------------------

    The Board has determined that it would be appropriate for the 
Reserve Banks to act on proposals involving the formation of a bank 
holding company, the acquisition by a bank holding company of a 
depository institution, the merger of a bank holding company with 
another holding company, or the merger of a bank with another 
depository institution that satisfy the Board's delegation criteria for 
each affected banking market after the market deposits of commercially 
active thrift institutions at 100 percent weight and qualifying credit 
unions at 50 percent weight are included in the initial competitive 
analysis. Accordingly, the Board is revising the Delegation Rules to 
permit the Reserve Banks to act upon such proposals, provided the 
proposals also satisfy the Board's other criteria for delegated action. 
In so doing, the Board has also determined that it would be appropriate 
to clarify that its delegation criteria for competition apply to 
proposals requiring the Board's prior approval under the Bank Merger 
Act and to proposals involving the acquisition of a thrift by a bank 
holding company pursuant to section 4 of the BHC Act.
    For proposals filed pursuant to HOLA involving the formation of a 
savings and loan holding company, the merger of savings and loan 
holding companies, or the acquisition by a savings and loan holding 
company of a thrift, a modified calculation for relative market share 
and market concentration for deposits will be used to determine whether 
the proposal satisfies the Board's delegation criteria for competition. 
In these cases, the deposits of all thrift institutions in the relevant 
banking markets will be weighted at 100 percent in the calculation 
because both before and after consummation of the proposal, the 
depository institutions involved in the transaction are thrift 
institutions. Therefore, all thrift institutions in those banking 
markets compete directly with the involved depository institutions. In 
these cases, the deposits of all banks in the markets are included at 
100 percent weight, because all banks are considered to compete 
directly with thrift institutions.
    The Board has determined that it would be appropriate to codify the 
Board's previous delegation to the Reserve Banks concerning proposals 
involving the formation or acquisition of a savings and loan holding 
company, the merger of savings and loan holding companies, or the 
acquisition by a savings and loan holding company of a thrift by 
authorizing the Reserve Banks to act on proposals that satisfy the 
Board's delegation criteria for each affected banking market, and to 
include the market deposits of all thrift institutions at 100 percent 
weight in this analysis. In so doing, the Board has also determined 
that it would be appropriate to modify this delegation to allow the 
Reserve Banks to act on such proposals if the proposal would satisfy 
the Board's delegation criteria for each affected banking market after 
the market deposits of qualifying credit unions at 50 percent weight 
are included in the initial competitive analysis.
    In all cases, the concurrence of the Board's Division of Research 
and Statistics will be necessary in order for the Reserve Bank to 
include the market deposits of commercially active thrifts and 
qualifying credit unions the higher weights, to ensure that such 
determinations are consistent with Board precedent.
    The delegations in this final rule supersede the Board's prior 
delegations of authority to the Reserve Banks to approve merger or 
acquisition proposals

[[Page 31705]]

involving savings and loan holding companies.

III. Regulatory Analysis

    These amendments relate solely to the agency's organization, 
procedure, or practice. Accordingly, the provisions of the 
Administrative Procedure Act (APA) regarding notice of proposed 
rulemaking and opportunity for public participation are not 
applicable.\23\
---------------------------------------------------------------------------

    \23\ 5 U.S.C. 553(b)(A).
---------------------------------------------------------------------------

    Because no notice of proposed rulemaking is required to be issued, 
or has been issued, in connection with this rule, it is not a ``rule'' 
for purposes of the Regulatory Flexibility Act, and that act, 
therefore, does not apply.\24\
---------------------------------------------------------------------------

    \24\ See 5 U.S.C. 601(2).
---------------------------------------------------------------------------

    In accordance with the Paperwork Reduction Act of 1995 (PRA),\25\ 
the Board may not conduct or sponsor, and a respondent is not required 
to respond to, an information collection unless it displays a currently 
valid Office of Management and Budget control number. The Board has 
reviewed the proposed rule and has determined that it contains no 
collections of information as defined in the PRA.
---------------------------------------------------------------------------

    \25\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    Section 722 of the Gramm-Leach-Bliley Act \26\ requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The Board has sought to present this 
rule in a simple and straightforward manner.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 4809.
---------------------------------------------------------------------------

    This rule is not a ``substantive rule'' for the purposes of the 
APA; as such, the act does not require the Board to delay the effective 
date of the rule.\27\ Accordingly, the amendments are effective July 3, 
2019.
---------------------------------------------------------------------------

    \27\ See 5 U.S.C. 553(d).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 265

    Authority delegations (Government agencies), Banks, banking.

Authority and Issuance

0
For the reasons stated in the Supplementary Information, the Board of 
Governors of the Federal Reserve System amends 12 CFR part 265 as 
follows:

PART 265--RULES REGARDING DELEGATION OF AUTHORITY

0
1. The authority citation for part 265 continues to read as follows:

    Authority: 12 U.S.C. 248(i) and (k).


0
2. In part 265, remove all references to ``Director of the Division of 
Banking Supervision and Regulation'' and add in their place ``Director 
of the Division of Supervision and Regulation''.


Sec.  265.5   [Amended]

0
3. In Sec.  265.5 remove and reserve paragraphs (d)(1) and (3).

0
4. In Sec.  265.7 revise the section heading and paragraphs (d)(1) and 
(3); remove and reserve paragraphs (d)(4) and (5), (7), and (9) through 
(13); and add paragraph (e)(7).
    The revisions and addition read as follows:


Sec.  265.7  Functions delegated to Director of Division of Supervision 
and Regulation

* * * * *
    (d) * * *
    (1) Foreign bank reports. To require submission of a report of 
condition respecting any foreign bank in which a member bank holds 
stock acquired under Sec.  211.8(b) of Regulation K (12 CFR part 211), 
pursuant to section 25 of the Federal Reserve Act (12 U.S.C. 602).
* * * * *
    (3) With the concurrence of the General Counsel, to approve 
applications, notices, exemption requests, waivers and suspensions, and 
other related matters under Regulation K (12 CFR part 211), where such 
matters do not raise any significant legal, supervisory, or policy 
issues.
* * * * *
    (e) * * *
    (7) Public welfare investments. (i) To permit a state member bank 
to make a public welfare investment in accordance with paragraph 23 of 
section 9 of the Federal Reserve Act (12 U.S.C. 338a) in any case in 
which the appropriate Reserve Bank does not have delegated authority to 
act, unless the proposal does not satisfy 12 CFR 208.22(b)(1). In 
acting on such requests, the Director shall consult with the directors 
of other interested divisions where appropriate; and
    (ii) To determine, in connection with acting on a proposal pursuant 
to delegated authority as set forth in paragraph (e)(7)(i) of this 
section, that the aggregate amount of a state member bank's public 
welfare investments will not pose a significant risk to the deposit 
insurance fund in accordance with paragraph 23 of section 9 of the 
Federal Reserve Act (12 U.S.C. 338a).
* * * * *

0
5. In Sec.  265.11:
0
a. Revise paragraph (a)(10);
0
b. Add paragraph (a)(17;
0
c. Revise the paragraph (c) subject heading and paragraph (c)(11)(v);
0
d. Add paragraph (c)(12);
0
e. Revise paragraphs (d)(1) through (8) and (10) through (12);
0
f. Add paragraphs (d)(13) through (15); and
0
g. Revise paragraph (e)(12).
    The revisions and addition read as follows:


Sec.  265.11  Functions delegated to Federal Reserve Banks.

* * * * *
    (a) * * *
    (10) Regulation K; divestiture of impermissible interests. To 
extend the time within which an investor, under Sec.  211.8(e) and (f) 
of Regulation K (12 CFR part 211), must divest of investments in 
entities engaged in impermissible activities or interests acquired to 
prevent a loss upon a debt previously contracted in good faith.
    * * *
    (17) Modification of commitments. To grant or deny requests for 
relieving or modifying (including extending the time for performing) a 
commitment relied upon by the Reserve Bank in taking any action under 
the Bank Holding Company Act, the Bank Merger Act, the Change in Bank 
Control Act of 1978, the Federal Reserve Act, the International Banking 
Act, the Federal Deposit Insurance Act, or the Home Owners' Loan Act, 
so long as the requests do not raise any significant legal, 
supervisory, or policy issues. In acting on such requests, the Reserve 
Bank may take into account changed circumstances and good faith efforts 
to fulfill the commitments, and shall consult with Board staff as 
appropriate. The Reserve Bank may not take any action that would be 
inconsistent with or result in an evasion of the provisions of the 
original action.
* * * * *
    (c) Holding companies; change in bank control; mergers. * * *
    (11) * * *
    (v)(A) With respect to holding company formations, acquisitions or 
mergers of holding companies, or acquisitions or mergers of insured 
depository institutions, except as set forth in paragraph (c)(11)(v)(B) 
of this section, upon consummation, the proposal would result in the 
control by a banking organization of over 35 percent of total deposits 
in banking offices in the relevant geographic market or an increase of 
at least 200 points in the Herfindahl-Hirschman Index (HHI) for 
deposits in a highly concentrated market (a market with a post-merger 
HHI of at least 1800) when including:
    (1) All thrift deposits at 50 percent weight, except for deposits 
of thrifts determined by the Reserve Bank, with the concurrence of the 
Board's Division of Research and Statistics, to be commercially active, 
which are included at 100 percent weight; and
    (2) The deposits of credit unions determined by the Reserve Bank, 
with

[[Page 31706]]

the concurrence of the Board's Division of Research and Statistics, to 
offer consumer banking products, operate street-level branches, and 
have broad membership criteria in the relevant geographic market, which 
are included at 50 percent weight; or
    (B) With respect to the formation of a savings and loan holding 
company, the merger of savings and loan holding companies, or the 
acquisition by a savings and loan holding company of a savings 
association, upon consummation, the proposal would result in the 
control by a banking organization of over 35 percent of total deposits 
in banking offices in the relevant geographic market or an increase of 
at least 200 points in the HHI for deposits in a highly concentrated 
market (a market with a post-merger HHI of at least 1800) when 
including:
    (1) All thrift deposits at 100 percent weight; and
    (2) The deposits of credit unions determined by the Reserve Bank, 
with the concurrence of the Board's Division of Research and 
Statistics, to offer consumer banking products, operate street-level 
branches, and have broad membership criteria in the relevant geographic 
market, which are included at 50 percent weight; or
* * * * *
    (12) Waivers. (i) To inform an acquiring bank holding company, in 
connection with a notice submitted by the bank holding company pursuant 
to 12 CFR 225.12(d)(2), that an application under 12 CFR 225.11 is 
required.
    (ii) To inform an acquiring savings and loan holding company, in 
connection with a notice submitted by the savings and loan holding 
company pursuant to 12 CFR 238.12(d)(1), that an application under 12 
CFR 238.11 is required.
    (d) * * *
    (1) Member bank, Edge or agreement corporation establishing foreign 
branch. With regard to a prior notice to establish a branch in a 
foreign country under Sec.  211.3 of Regulation K (12 CFR part 211)--
    (i) To waive the notice period if immediate action is required and 
there is no significant legal, supervisory, or policy issue;
    (ii) To suspend the notice period;
    (iii) To determine not to object to the notice, provided that no 
significant legal, supervisory, or policy issue is raised by the 
proposal; or
    (iv) To require the notificant to file an application for the 
Board's specific consent.
    (2) Acquisitions by a foreign branch. To approve, under Sec.  
211.4(a)(8) of Regulation K (12 CFR part 211), a proposal by a foreign 
branch of a member bank to acquire all of the shares of a company that 
engages solely in activities in which the member bank is permitted to 
engage or that are incidental to the activities of the foreign branch, 
provided that no significant legal, supervisory, or policy issue is 
raised.
    (3) Application to establish Edge corporation. To approve the 
application by a U.S. banking organization to establish an Edge 
corporation under section 25A of the Federal Reserve Act (12 U.S.C. 
611) and Sec.  211.5 of the Board's Regulation K (12 CFR part 211) if 
all of the following criteria are met:
    (i) The U.S. banking organization meets the capital adequacy 
guidelines and is otherwise in satisfactory condition;
    (ii) The proposed Edge corporation will be a wholly-owned 
subsidiary of a single banking organization; and
    (iii) No significant legal, supervisory, or policy issues are 
raised by the proposal.
    (4) Issuance of permit to Edge corporation and amendments to 
articles of association and charter. To issue to an Edge corporation 
under section 25A of the Federal Reserve Act (12 U.S.C. 614) and Sec.  
211.5 of Regulation K (12 CFR part 211) a permit to commence business 
and to approve amendments to the articles of association and charter of 
an Edge corporation.
    (5) Investments in Edge and agreement corporations. To approve, 
pursuant to 211.5(a)(3) of Regulation K (12 CFR part 211) an 
application by a member bank to invest more than 10 percent of its 
capital and surplus in the aggregate amount of stock held in in all 
Edge or agreement corporations; provided that--
    (i) The member bank's total investment, including retained earnings 
of the Edge and agreement corporation, does not exceed 20 percent of 
the bank's capital and surplus and would not exceed that level as a 
result of the proposal; and
    (ii) The proposal raises no significant legal, supervisory, or 
policy issues.
    (6) Foreign ownership of an Edge corporation. To approve, under 
Sec.  211.5(d) of Regulation K (12 CFR part 211), a foreign 
institution's acquisition, directly or indirectly, of a majority of the 
shares of the capital stock of an Edge corporation, provided that no 
significant legal, supervisory, or policy issue is raised.
    (7) Change in control of an Edge corporation. With regard to a 
notice to acquire, directly or indirectly, 25 percent or more of the 
voting securities, or to otherwise acquire control, of an Edge 
corporation, under Sec.  211.5(e) of Regulation K (12 CFR part 211)-
    (i) to waive the notice period if immediate action is required and 
no significant legal, supervisory, or policy issue is raised;
    (ii) To extend the notice period;
    (iii) To determine not to object to the notice if no significant 
legal, supervisory, or policy issue is raised; or
    (iv) To require the notificant to file an application for the 
Board's specific consent.
    (8) Granting specific consent. To grant prior specific consent to 
an investor for
    (i) A long range investment plan, under Sec.  211.9(a)(4) of 
Regulation K (12 CFR part 211), and
    (ii) An investment in its first subsidiary or its first joint 
venture, under Sec.  211.9(a)(5) of Regulation K (12 CFR part 211), 
where such investment does not exceed the general consent limitations 
under Sec.  211.9(b) of Regulation K (12 CFR part 211).
* * * * *
    (10) Authority under prior-notice procedures. (i) With regard to a 
prior notice to make an investment under Sec.  211.9(f) of Regulation K 
(12 CFR part 211)--
    (A) To waive the notice period if immediate action is required and 
there is no significant legal, supervisory, or policy issue raised;
    (B) To suspend the notice period;
    (C) To determine not to object to the notice if there is no 
significant legal, supervisory, or policy issue raised; or
    (D) To require the notificant to file an application for the 
Board's specific consent.
    (ii) With regard to a prior notice of a foreign bank to establish 
certain U.S. offices under Sec.  211.24(a)(2)(i) of Regulation K (12 
CFR part 211)--
    (A) To waive the notice period if immediate action is required and 
there is no significant legal, supervisory, or policy issue raised;
    (B) To suspend the notice period;
    (C) To determine not to object to the notice if there is no 
significant legal, supervisory, or policy issue raised; or
    (D) To require the notificant to file an application for the 
Board's specific consent.
    (11) Activities usual in connection with banking or other financial 
operations abroad. (i) To approve a prior notice, under Sec.  
211.10(a)(14) of Regulation K (12 CFR part 211), to engage in 
underwriting and distribution of equity securities outside the United 
States, provided that the proposal raises no significant legal, 
supervisory, or policy issue.

[[Page 31707]]

    (ii) To approve a prior notice, under Sec.  211.10(a)(15) of 
Regulation K (12 CFR part 211), to engage in dealing in equity 
securities outside the United States, provided that the proposal raises 
no significant legal, supervisory, or policy issue.
    (iii) To approve a prior notice, under Sec.  211.10(a)(15)(iv)(B) 
of Regulation K (12 CFR part 211), to use internal hedging models, 
provided that the proposal raises no significant legal, supervisory, or 
policy issue.
    (iv) To approve a prior notice, under Sec.  211.10(a)(18) of 
Regulation K (12 CFR part 211), to engage in futures commission 
merchant activities on an mutual exchange or clearinghouse that 
requires members to guarantee or otherwise contract to cover losses 
suffered by the other members, provided that the Board has previously 
approved the exchange, the application is on the same terms and 
conditions on which the Board based its approval of the exchange, and 
no significant legal, supervisory, or policy issue is raised.
    (12) Change in foreign bank home state. With respect to a foreign 
bank's change of home state under Sec.  211.22(b) of Regulation K (12 
CFR part 211) and provided no significant legal, supervisory, or policy 
issue is raised--
    (i) To waive the notice period; or
    (ii) To determine not to object to the notice.
    (13) Waiver of 30-day prior notification period. To waive the 30-
day prior notification period with respect to a foreign bank's change 
of home state under Sec.  211.22(c)(1) of Regulation K (12 CFR part 
211).
    (14) Offices of foreign banks. (i) To approve the establishment of 
a branch, agency, commercial lending company, or representative office 
by a foreign bank in the United States, pursuant to Sec.  211.24(a)(1) 
of Regulation K (12 CFR part 211), if the Board has already determined 
that the foreign bank is subject to consolidated comprehensive 
supervision and provided that the application raises no significant 
legal, supervisory, or policy issue.
    (ii) To allow a foreign bank to establish a temporary office of a 
branch or agency, pursuant to Sec.  211.24(a)(5) of Regulation K (12 
CFR part 211), provided there is no direct public access to such office 
and no significant legal, supervisory, or policy issue is raised.
    (15) Agreement with foreign bank concerning deposits of out-of-
home-state branch. To enter into an agreement or undertaking with a 
foreign bank that it shall receive only such deposits at its out-of-
home-state branch as would be permissible for an Edge corporation under 
section 5 of the International Banking Act (12 U.S.C. 3103).
    (e) * * *
    (12) Public welfare investments. (i) To permit a state member bank 
to make a public welfare investment in accordance with paragraph 23 of 
section 9 of the Federal Reserve Act (12 U.S.C. 338a), provided that 
the proposal satisfies 12 CFR 208.22(b)(1) and no significant legal, 
supervisory, or policy issue is raised; and
    (ii) To determine, in connection with acting on a proposal pursuant 
to delegated authority as set forth in paragraph (e)(12)(i) of this 
section, that the aggregate amount of a state member bank's public 
welfare investments will not pose a significant risk to the deposit 
insurance fund in accordance with paragraph 23 of section 9 of the 
Federal Reserve Act (12 U.S.C. 338a).
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, June 26, 2019.
Ann Misback,
Secretary of the Board.
[FR Doc. 2019-13970 Filed 7-2-19; 8:45 am]
 BILLING CODE 6210-02-P