[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
[Proposed Rules]
[Pages 52827-52834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20770]
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 390
RIN 3064-AF15
Removal of Transferred OTS Regulations Regarding Accounting
Requirements for State Savings Associations
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In order to streamline Federal Deposit Insurance Corporation
(FDIC) regulations, the FDIC proposes to rescind and remove from the
Code of Federal Regulations rules entitled Accounting Requirements
(part 390, subpart T) that were transferred to the FDIC from the Office
of Thrift Supervision (OTS) on July 21, 2011, in connection with the
implementation of Title III of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act). The proposed rule would
rescind and remove part 390, subpart T (including the Appendix to 12
CFR 390.384) because the financial statement and disclosure
requirements set forth in part 390, subpart T are substantially similar
to, although more detailed than, otherwise applicable financial
statement form and content requirements and disclosure requirements
that a State savings
[[Page 52828]]
association must satisfy under federal banking or securities laws or
regulations.
DATES: Comments must be received on or before November 4, 2019.
ADDRESSES: You may submit comments by any of the following methods:
FDIC Website: https://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the agency
website.
Email: [email protected]. Include RIN 3064-AF15 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 to FDIC: Comments may be hand-delivered to
the guard station at the rear of the 550 17th Street building (located
on F Street) on business days between 7 a.m. and 5 p.m.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Please include your name, affiliation, address, email address, and
telephone number(s) in your comment. All statements received, including
attachments and other supporting materials, are part of the public
record and are subject to public disclosure. You should submit only
information that you wish to make publicly available.
Please note: All comments received will be posted generally without
change to https://www.fdic.gov/regulations/laws/federal/, including any
personal information provided.
FOR FURTHER INFORMATION CONTACT: Maureen Loviglio, Senior Staff
Accountant, Division of Risk Management Supervision, (202) 898-6777,
[email protected]; Suzanne Dawley, Counsel, Legal Division, (202) 898-
6509, [email protected].
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The policy objectives of the proposed rule are twofold. The first
is to simplify the FDIC's regulations by removing unnecessary
regulations, or realigning existing regulations in order to improve the
public's understanding and to improve the ease of reference. The second
is to promote parity between State savings associations and State
nonmember banks by making both classes of institutions subject to the
same accounting requirements. Thus, as further detailed in this
section, the FDIC proposes to rescind and remove from the Code of
Federal Regulations rules entitled Accounting Requirements (part 390,
subpart T) applicable to State savings associations. Such requirements
prescribe definitions, public accountant qualifications, and the form
and content of financial statements pertaining to certain securities
and their related transaction documents. Transaction documents may
include proxy statements and offering circulars in connection with a
conversion, any offering of securities by a State savings association,
and filings by State savings associations requiring financial
statements under the Securities Exchange Act of 1934 (Exchange Act).\1\
The FDIC has determined that the additional financial disclosure
requirements required by part 390, subpart T for State savings
associations are substantially similar to, although more detailed than,
otherwise applicable financial statement form and content requirements
and disclosure requirements that State nonmember banks must satisfy
under federal banking or securities laws or regulations. Therefore, the
FDIC is proposing to remove part 390, subpart T and apply existing
disclosure requirements, and related form and content of financial
statements requirements to State savings associations.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 78a et seq.
---------------------------------------------------------------------------
II. Background
A. The Dodd-Frank Act
The Dodd-Frank Act, signed into law on July 21, 2010, provided for
a substantial reorganization of the regulation of State and Federal
savings associations and their holding companies.\2\ Beginning July 21,
2011, the transfer date established by section 311 of the Dodd-Frank
Act,\3\ the powers, duties, and functions formerly performed by the OTS
were divided among the FDIC, as to State savings associations, the
Office of the Comptroller of the Currency (OCC), as to Federal savings
associations, and the Board of Governors of the Federal Reserve System
(FRB), as to savings and loan holding companies. Section 316(b) of the
Dodd-Frank Act,\4\ provides the manner of treatment for all orders,
resolutions, determinations, regulations, and advisory materials
issued, made, prescribed, or allowed to become effective by the OTS.
The section provides that, if such materials were in effect on the day
before the transfer date, they continue in effect and are enforceable
by or against the appropriate successor agency until they are modified,
terminated, set aside, or superseded in accordance with applicable law
by such successor agency, by any court of competent jurisdiction, or by
operation of law.
---------------------------------------------------------------------------
\2\ Public Law 111-203, 124 Stat. 1376 (2010).
\3\ 12 U.S.C. 5411.
\4\ 12 U.S.C. 5414(b).
---------------------------------------------------------------------------
Pursuant to section 316(c) of the Dodd-Frank Act,\5\ on June 14,
2011, the FDIC's Board of Directors approved a ``List of OTS
Regulations to be Enforced by the OCC and the FDIC Pursuant to the
Dodd-Frank Wall Street Reform and Consumer Protection Act.'' This list
was published by the FDIC and the OCC as a Joint Notice in the Federal
Register on July 6, 2011.\6\
---------------------------------------------------------------------------
\5\ 12 U.S.C. 5414(c).
\6\ 76 FR 39246 (July 6, 2011).
---------------------------------------------------------------------------
Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act \7\
granted the OCC rulemaking authority relating to both State and Federal
savings associations, nothing in the Dodd-Frank Act affected the FDIC's
existing authority to issue regulations under the Federal Deposit
Insurance Act (FDI Act) \8\ and other laws as the ``appropriate Federal
banking agency'' or under similar statutory terminology. Section
312(c)(1) of the Dodd-Frank Act \9\ revised the definition of
``appropriate Federal banking agency'' contained in section 3(q) of the
FDI Act,\10\ to add State savings associations to the list of entities
for which the FDIC is designated as the ``appropriate Federal banking
agency.'' As a result, when the FDIC acts as the designated
``appropriate Federal banking agency'' (or under similar terminology)
for State savings associations, as it does here, the FDIC is authorized
to issue, modify and rescind regulations involving such associations.
Further, section 376 of the Dodd Frank Act \11\ grants rulemaking and
administrative authority to the FDIC over the Exchange Act \12\ filings
of State savings associations.
---------------------------------------------------------------------------
\7\ 12 U.S.C. 5412(b)(2)(B)(i)(II).
\8\ 12 U.S.C. 1811 et seq.
\9\ 12 U.S.C. 5412(c)(1).
\10\ 12 U.S.C. 1813(q).
\11\ Section 376 of the Dodd Frank Act amended section 3(a) of
the Exchange Act. See, 15 U.S.C. 78c(a)(34).
\12\ 12 U.S.C. 78a et seq.
---------------------------------------------------------------------------
As noted, on June 14, 2011, operating pursuant to this authority,
the FDIC's Board of Directors reissued and re-designated certain
transferring regulations of the former OTS. These transferred OTS
regulations were published as new FDIC regulations in the Federal
Register on August 5, 2011.\13\ When it republished the transferred OTS
regulations as new FDIC regulations, the FDIC specifically noted that
its staff would evaluate the transferred OTS rules and might later
recommend incorporating the
[[Page 52829]]
transferred OTS regulations into other FDIC rules, amending them, or
rescinding them, as appropriate.
---------------------------------------------------------------------------
\13\ 76 FR 47652 (Aug. 5, 2011).
---------------------------------------------------------------------------
B. OTS Regulations Transferred to the FDIC's Part 390, Subpart T
One of the OTS rules transferred to the FDIC governs the accounting
requirements for State savings associations. The OTS rule, formerly
found at 12 CFR part 563c, was transferred to the FDIC with nominal
changes and is now found in the FDIC's rules at part 390, subpart T,
entitled Accounting Requirements.\14\ This subpart prescribes for State
savings associations accounting requirements with respect to
definitions, public accountant qualifications, and the form and content
of financial statements pertaining to certain securities transaction
documents. These transaction documents include proxy statements and
offering circulars in connection with a conversion, any offering of
securities by a State savings association, and filings by State savings
associations requiring financial statements under the Exchange Act.\15\
Each provision of part 390, subpart T is discussed in Part III of this
section.
---------------------------------------------------------------------------
\14\ 12 CFR part 390, subpart T.
\15\ Id.
---------------------------------------------------------------------------
III. The Proposal To Rescind the Transferred OTS Accounting
Requirements Regulations
After careful review of part 390, subpart T, the FDIC has
determined that the accounting requirements with respect to financial
statement and disclosure form and content set forth by part 390,
subpart T are substantially similar to, although more detailed than,
other requirements that a State savings association must satisfy under
federal banking or securities laws or regulations. Therefore, the FDIC
proposes to rescind and remove part 390, subpart T (including the
Appendix to 12 CFR 390.384).
State savings association reports and financial statements are
required to be uniform and consistent with U.S. generally accepted
accounting principles (GAAP) pursuant to section 37 of the FDI Act and
section 4(b) of the Homeowners Owners Loan Act (HOLA).\16\ While
securities issued by State savings associations are exempt from
registration requirements of the Securities Act of 1933 (Securities
Act),\17\ the FDIC reviews for compliance with 12 CFR part 192,
Conversion from a Mutual to Stock Form, offering circulars related to
mutual-to-stock conversions involving securities offerings by State
savings associations. The FDIC will not approve an offering circular
until concerns regarding the adequacy or accuracy of the offering
circular or the disclosures are satisfactorily addressed.\18\ The FDIC
is also responsible for administering and enforcing certain sections of
the Exchange Act with respect to State savings associations with
securities that are publicly traded.\19\ As such, a State savings
association that is an Exchange Act reporting company must file
required periodic reports such as annual reports on Form 10-K,
quarterly reports on Form 10-Q, and current reports on Form 8-K with
the FDIC pursuant to part 335 of the FDIC rules.\20\ With respect to
the form and content requirements for offerings of mutual capital
certificates and debt securities of State savings associations set
forth in part 390, subpart T,\21\ the FDIC has determined that the
additional disclosures required by part 390, subpart T, may be more
detailed than otherwise applicable financial statement form and content
and disclosure requirements that a State savings association must
satisfy under GAAP, the Exchange Act, FDIC regulations, and state
regulations, as appropriate. While there may be situations where the
disclosures required under GAAP, FDIC regulations, and state
regulations, as appropriate, with respect to the offerings of mutual
capital certificates and debt securities are less detailed that the
requirements under part 390, subpart T, there have been no recent
filings by State savings associations to the FDIC related to the
offerings of mutual capital certificates and debt securities.
Therefore, the FDIC has concluded that the practical impact of the
differences in level of disclosure detail is negligible and does not
justify maintaining separate disclosure regulations applicable solely
to State savings associations.
---------------------------------------------------------------------------
\16\ 12 U.S.C. 1831n(a)(2); 12 U.S.C. 1463(b)(2).
\17\ 15 U.S.C. 77a et seq. Section 3(a)(5) of the Securities Act
exempts from registration requirements securities issued by State
savings associations. 15 U.S.C. 77c(a)(5).
\18\ 12 CFR 192.300.
\19\ 12 CFR 335.101. Part 335 issued by the FDIC under section
12(i) of the Exchange Act applies to all securities of State savings
associations that are subject to the registration requirements of
section 12(b) or section 12(g) of the Exchange Act. The FDIC is
vested with the powers, functions, and duties of the Securities and
Exchange Commission (SEC) to administer and enforce Exchange Act
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of the
Exchange Act (15 U.S.C. 78j-1, 78l, 78m, 78n(a), 78n(c), 78n(d),
78n(f), and 78p) and sections 302, 303, 304, 306, 401(b), 404, 406,
and 407 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) (15
U.S.C. 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265) regarding
State savings associations with one or more classes of securities
subject to the registration provisions of sections 12(b) or 12(g) of
the Exchange Act.
\20\ Pursuant to section 12(a) of the Exchange Act, an issuer
must register as an Exchange Act reporting company if it elects to
list a class of securities (debt or equity) on a national securities
exchange. 15 U.S.C. 78l(a). Generally, an issuer must register
pursuant to section 12(g) of the Exchange Act if a class of its
equity securities (other than exempted securities) is held of record
by either (i) 2,000 persons, or (ii) 500 persons who are not
accredited investors and, on the last day of the issuer's fiscal
year, its total assets exceed $10 million. 12 CFR part 335. However,
for banks, bank holding companies, and savings and loan holding
companies, the threshold is 2,000 or more holders of record; the
separate registration trigger for 500 or more non-accredited holders
of record does not apply. A list of FDIC-supervised depository
institutions currently reporting to the FDIC under the Exchange Act
and part 335 can be accessed at https://www.fdic.gov/bank/individual/part335/index.html.
\21\ 12 CFR 390.384(c).
---------------------------------------------------------------------------
A brief review of the State savings association accounting
requirements in part 390, subpart T follows.
A. Part 390, Subpart T--Accounting Requirements
Historically, the Federal Home Loan Bank Board (FHLBB), the
predecessor to the OTS, established various accounting and financial
reporting requirements for savings associations.\22\ These requirements
occasionally differed from GAAP and when this occurred, such
requirements were referred to as regulatory accounting practices.
Regulatory accounting practices were often less stringent than
GAAP.\23\ The Competitive Equality Banking Act of 1987 (CEBA) \24\
amended HOLA to require the FHLBB to prescribe uniformly applicable
accounting standards to be used by all savings associations for the
purpose of determining compliance with any rule or regulation of the
FHLBB to the same degree that GAAP is used to determine compliance with
rules and regulations of the Federal banking agencies. To implement the
statute, the FHLBB promulgated regulations that required all unaudited
financial statements and financial reports submitted and Statements of
Condition be prepared in accordance with GAAP. The Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA),\25\ amended section 4(b)(1) of HOLA to require the Director
of the OTS to prescribe, by regulation, uniform accounting and
disclosure standards for savings associations, to be used to
[[Page 52830]]
determine savings associations' compliance with all applicable
regulations. Section 4(b)(2) of HOLA requires that these uniform
accounting standards for savings associations incorporate GAAP to the
same degree that such principles are used to determine compliance with
regulations prescribed by the Federal banking agencies. Consistent with
these goals, the former OTS savings association accounting
requirements, formerly found at part 563c, as they applied to State
savings associations, were transferred to the FDIC with only
nomenclature changes as part 390, subpart T.
---------------------------------------------------------------------------
\22\ 57 FR 40085 (September 2, 1992). The term ``savings
association'' includes both any Federal savings association, any
State savings association, and any corporation (other than a bank)
that the FDIC Board of Directors and the Comptroller of the Currency
jointly determine to be operating in substantially the same manner
as a savings association. 12 U.S.C. 1831(b)(1).
\23\ Id.
\24\ Public Law 100-86, 101 Stat. 552 (1978).
\25\ Public Law 101-73, 103 Stat. 183 (1989).
---------------------------------------------------------------------------
390.380 Form and Content of Financial Statements
This section provides the form and content requirements of
financial disclosures, including specific statements, to be included by
a State savings association in a proxy statement or offering circular
required to be used in connection with a mutual-to-stock conversion
under 12 CFR part 192 and an offering circular or nonpublic offering
materials required to be used in connection with an offer or sale of
securities under part 390, subpart W (Securities Offerings). Unless
provided for by FDIC rule or order, the financial disclosures governed
by this subpart must be prepared and presented in accordance with U.S.
generally accepted accounting principles (GAAP) and be consistent with
certain provisions of SEC Regulation S-X (Regulation S-X).\26\ In
addition, this section requires that financial statement disclosures
comply with the Appendix to Sec. 390.384, which specifies the various
items that must appear on the face of the financial statements related
to any proxy statement and offering circular for conversion application
and any filing under the Exchange Act under this section, and
additional disclosures that must be included with the financial
statements in related notes.\27\ Regulation S-X sets forth the specific
form and content of financial reports for several federal securities
laws, and extends the meaning of financial statements to include all
notes to the statements and all related schedules.\28\
---------------------------------------------------------------------------
\26\ 17 CFR part 210, entitled Form and Content of and
Requirements for Financial Statements, Securities Act of 1933,
Securities Exchange Act of 1934, Public Utility Holding Company Act
of 1935, Investment Company Act of 1940, Investment Advisers Act of
1940, and Energy Policy and Conservation Act of 1975. Such
provisions include articles 1, 2, 3, 4, 10, and 11 of Regulation S-
X, 17 CFR 210.l-210.4; 210.10, and 210.11. Regulation S-X generally
sets forth form and content of and requirements for financial
statements with respect to filing under the Securities Act and
Exchange Act, among others.
\27\ Appendix to 12 CFR 390.384.
\28\ See 17 CFR 210.1-01.
---------------------------------------------------------------------------
390.381 Definitions
Section 390.381 provides a general cross-reference to the
definitions section of Regulation S-X. This section also includes
Regulation S-X definitions of registrant and significant subsidiary
that the OTS modified specifically for State savings associations.
Under this section, registrant includes an applicant, State savings
association, or any other person required to prepare financial
statements pursuant to part 390, subpart T. The definition of
significant subsidiary pursuant to this subpart means a subsidiary
(including its subsidiary) for which (1) the State savings association
or its other subsidiaries' investments in and advances to the
subsidiary exceed 10 percent of the total consolidated assets of the
association and its subsidiaries; (2) the State savings association or
its other subsidiaries' proportionate share of the total assets of the
subsidiary exceeds 10 percent of the total consolidated assets of the
State savings association and its subsidiaries; or (3) the State
savings association or its other subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items,
and cumulative effect of a change in accounting principle of the
subsidiary exceeds 10 percent of the consolidated income of the State
savings association and its subsidiaries; all for the most recently
completed fiscal year.
390.382 Qualification of Public Accountant
Section 390.382 provides a cross-reference to SEC Rule 2-01 of
Regulation S-X that sets forth qualifications of accountants.\29\
Pursuant to this section, a ``qualified public accountant'' must be a
certified public accountant certified by, or a licensed public
accountant licensed by, a regulatory authority of a State or other
political subdivision of the United States who is in good standing
under the laws of the jurisdiction where the home office of the
registrant to be audited is located. Further, any person or firm
suspended from practice before the SEC or other governmental agency is
not a qualified public accountant for the purposes of this section.
---------------------------------------------------------------------------
\29\ 17 CFR 210.2-01.
---------------------------------------------------------------------------
390.383 Condensed Financial Information [Parent only]
Section 390.383 applies to the condensed financial information of
the State savings association as the parent of consolidated
subsidiaries required to be presented in a note to the financial
statements when the restricted net assets of consolidated subsidiaries
exceed 25 percent of the consolidated net assets as of the end of the
most recent fiscal year, and is closely related to the following
section, Sec. 390.384, Financial statements for conversions, SEC
filings, and offering circulars.\30\ Section 390.383 further requires
that the investment in, and indebtedness of and to, State savings
association subsidiaries be stated separately in the condensed balance
sheet from amounts for other subsidiaries, and the amount of cash
dividends paid to the parent State savings association for each of the
last three years by the State savings association subsidiaries be
stated separately in the condensed income statement from amounts from
other subsidiaries. Restricted net assets of a subsidiary are the
amount of the State savings association's proportionate share of the
net assets of the subsidiaries (after intercompany netting) that as of
the end of the most recent year may not be transferred to the parent
State savings association by the subsidiaries in the form of loans,
advances, or cash dividends without the consent of a third party, such
as a lender, regulatory agency, or foreign government. For the purposes
of this section, if the restrictions on the amount of the funds that
may not be loaned or advanced differ from the amount restricted for
transfer as cash dividends, the State savings association should use
the amount least restrictive to the subsidiary. Also, redeemable
preferred stocks and minority interest must be deducted in computing
net assets.
---------------------------------------------------------------------------
\30\ 12 CFR 390.383.
---------------------------------------------------------------------------
390.384 Financial Statements for Conversions, SEC Filings, and Offering
Circulars
Section 390.384 and its appendix prescribe the form and content of
State savings association financial statements used in connection with
(1) mutual-to-stock conversions pursuant to 12 CFR 192, (2) filings
under the Exchange Act, and (3) offering circulars used in connection
with mutual capital certificates \31\ and debt securities.\32\ This
section reflects items in SEC Rule 9-03 and SEC Rule 9-04 that, if
applicable, should appear on the face of the balance sheets or its
notes, or income statement or its notes, respectively, as well as
incorporating items from other rules in Regulation S-X as modified by
the OTS to specifically apply to savings
[[Page 52831]]
associations and includes references to Regulation S-X rules as
well.\33\
---------------------------------------------------------------------------
\31\ 12 CFR 163.74.
\32\ 12 CFR 390.341.
\33\ 17 CFR 210-9.03, 210-9.04. Other items included by the OTS
in the Appendix to Sec. 390.384 are similar to items in SEC Rule 1-
02 Definitions, Rule 3-04 Changes in stockholders' equity and
noncontrolling interests, Rule 4-08, General notes to financial
statements, and Rule 10-01, Interim financial statements.
---------------------------------------------------------------------------
B. Accounting Requirements Applicable to State Savings Associations
The FDIC's regulations do not have a direct analog to the
accounting requirements for State savings association set forth in the
transferred OTS regulations at part 390, subpart T. However, as
mentioned above, existing federal banking and securities laws and
regulations provide requirements that are substantially similar.
Generally Accepted Accounting Principles
In the United States, GAAP is a commonly recognized set of rules
and procedures designed to govern corporate accounting and financial
reporting.\34\ This comprehensive set of accounting practices was
developed by the Financial Accounting Standards Board (FASB), an
independent not-for-profit body that derives its authority from the
SEC.\35\ FASB sets GAAP with input from the SEC, the American Institute
of Certified Public Accountants, and other stakeholders that include
preparers, users, and auditors.\36\
---------------------------------------------------------------------------
\34\ Robert Parrino and David Kidwell, Fundamentals of Corporate
Finance, 3.1 (John Wiley & Sons) (2009).
\35\ Id
\36\ Id.
---------------------------------------------------------------------------
Section 37 of the FDI Act, like part 390, subpart T, requires that
reports and statements to be filed with federal banking agencies by
insured depository institutions, including insured State saving
associations, be uniform and consistent with GAAP.\37\ Section 4(b) of
HOLA also requires that savings associations use accounting standards
that are no less stringent than GAAP.\38\ Further, the instructions to
the Consolidated Reports of Condition and Income (Call Report) state
that the regulatory reporting requirements applicable to the Call
Report shall conform to GAAP as set forth in the FASB's Accounting
Standards Codification.\39\ By eliminating regulations that are
substantially similar to existing statutory directives for State
savings associations to use GAAP, the FDIC would follow the SEC in
amending disclosure requirements that have become redundant in light of
GAAP, among other things.\40\
---------------------------------------------------------------------------
\37\ 12 U.S.C. 1831n(a)(2).
\38\ 12 U.S.C. 1463(b)(2).
\39\ Instructions for Preparation of Consolidated Reports of
Condition and Income, Form FFIEC 031 and 041, https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_201906_i.pdf; Instructions for
Preparation of Consolidated Reports of Condition and Income for a
Bank with Domestic Offices Only and Total Assets Less than $1
Billion, Form FFIEC 051, https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC051_201906_i.pdf.
\40\ 83 FR 50148 (Oct. 4, 2018).
---------------------------------------------------------------------------
Exchange Act Filings
State saving associations that have securities subject to the
registration requirements of Section 12(b) or Section 12(g) of the
Exchange Act are subject to a mandatory periodic disclosure process
that is designed to require Exchange Act-registered companies to make
public the information that investors would find pertinent in making
investment decisions. Section 12(i) of the Exchange Act provides that
the appropriate Federal banking agencies must issue substantially
similar regulations to regulations and rules issued by the SEC.\41\
Therefore, the FDIC is vested with the powers and duties of the SEC to
enforce the registration provisions of the Exchange Act with respect to
State nonmember banks and State savings associations.\42\
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78l(i).
\42\ Id.
---------------------------------------------------------------------------
Part 335, Securities of State Nonmember Banks and State Savings
Associations, applies to all securities of State nonmember banks and
State savings associations (FDIC-supervised institutions). Part 335
implements section 12(i) of the Exchange Act which vests authority in
the FDIC to administer and enforce certain sections of the Exchange Act
and Sarbanes-Oxley, including the accounting standards to be used in
the preparation of filings and other reports under the respective laws.
Part 335 incorporates the regulations and rules of the SEC with respect
to the registration, reporting, and accounting requirements applicable
to companies subject to the Exchange Act. The FDIC amended the scope of
part 335 to include State savings associations in 2014, and, therefore,
the requirement for all FDIC-supervised institutions is the same. These
requirements are substantially similar to the securities offerings
disclosure regulations that the OCC promulgated under the same
authority for national banks and federal savings associations.\43\
Therefore, State savings associations would file reports containing
generally the same information, and the same form and content, that
would be included in Exchange Act reports, including applicable
financial statement form and content requirements of Regulation S-X,
with the FDIC rather than the SEC, and subject to the same regulations
as State nonmember banks.
---------------------------------------------------------------------------
\43\ 12 CFR part 16.
---------------------------------------------------------------------------
Mutual to Stock Conversion Offerings
Mutually-owned State savings associations may convert from the
mutual form of ownership, where the institution is owned jointly by the
association members, to the stock form of ownership, where the
institution is owned by shareholders. Although section 312 of the Dodd-
Frank Act transferred all functions of the OTS relating to State
savings associations to the FDIC, rulemaking authority for Federal and
State savings associations was transferred to the OCC.\44\ As a result,
the form and content of financial statements included as part of a
State savings association conversion application is governed by part
192 of the OCC's Rules (OCC conversion regulations), instead of part
390, subpart T. Part 192 governs savings association conversions
generally. These OCC conversion regulations apply to financial
statements included with proxy solicitations and offering
circulars.\45\ In reviewing a notice of intent to convert from mutual
to stock form from an insured state-chartered mutually-owned savings
association, the FDIC takes into account the extent to which the
proposed conversion transaction conforms with the OCC conversion
regulations, providing consistency in standards for financial
statements included with proxy solicitations and offering circulars for
mutual State savings association and mutual State bank conversions.\46\
Additionally, mutual State savings associations must comply with the
disclosure requirements for offering materials used in connection with
the issuance of mutual capital certificates pursuant to 12 CFR
163.74.\47\
---------------------------------------------------------------------------
\44\ Section 312(b)(2), 124 Stat. at 1522, codified to 12 U.S.C.
5412(b)(2).
\45\ 12 CFR part 192, subpart A, Standard Conversions.
\46\ 12 CFR 303.163(b). Paragraph (b) references the former OTS
mutual-to-stock regulations that were at 12 CFR part 563b. The OCC
republished part 563b as part 192 as an interim final rule in August
2011, 76 FR 49156 (Aug. 9, 2011).
\47\ Debt securities issued pursuant to 12 CFR 390.341 are also
subject to the disclosure requirements for offering materials.
---------------------------------------------------------------------------
State Savings Association Securities Offerings
Securities issuances by State savings association are exempt from
registration requirements pursuant to section 3(a)(5) of the Securities
Act.\48\ State savings
[[Page 52832]]
associations are subject to a separate and stringent regulatory and
reporting structure under federal banking laws independent of the SEC,
such as through ongoing supervision and oversight, as well as extensive
reporting requirements, frequent safety and soundness examinations \49\
and capital requirements \50\ that protect investors from securities
fraud and improper disclosure that the SEC registration process is
designed to prevent. The Securities Act registration exemption allows
State savings associations to issue securities with many of the
benefits of registered offerings with the efficiency and cost
effectiveness of private placements, does not place limitations on the
number or type of investors that can participate, or on the amount of
securities offered. As a result, State savings associations may access
capital markets without the time and expense of conducting an SEC-
registered offering.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 77c(a)(5).
\49\ 12 CFR 337.12.
\50\ 12 CFR part 324.
---------------------------------------------------------------------------
Nonetheless, as in any other securities offering, the anti-fraud
provisions of the federal securities laws apply, including section 17
of the Securities Act and section 10(b) of and Rule 10b-5 under the
Exchange Act.\51\ Financial statements used in proxy solicitations or
offering circulars used in marketing securities must disclose the
information necessary to avoid liability under the anti-fraud
provisions even if specific disclosure requirements are not imposed.
The FDIC reviews offering circulars to ensure that they were prepared
in compliance with the anti-fraud provisions of the federal securities
laws which require full and adequate disclosure of material facts and
meet the needs of investors, depositors, and issuers.
---------------------------------------------------------------------------
\51\ 15 U.S.C. 77q; 15 U.S.C. 78j(b) and 17 CFR 240.10b-5.
---------------------------------------------------------------------------
With respect to the form and content requirements for offerings of
mutual capital certificates and debt securities of State savings
associations set forth in part 390, subpart T, the FDIC has determined
that the additional disclosures required by part 390, subpart T may be
more detailed than otherwise applicable financial statement form and
content and disclosure requirements that a State savings association
must satisfy under GAAP, FDIC regulations, and state regulations, as
appropriate. While there may be situations where the disclosures
required under GAAP, FDIC regulations, and state regulations, as
appropriate, with respect to the offerings of mutual capital
certificates and debt securities are less detailed than the
requirements under part 390, subpart T, there have been no recent
filings by State savings associations to the FDIC related to the
offerings of mutual capital certificates and debt securities.
Therefore, the FDIC has concluded that the practical impact of the
differences in level of disclosure detail is negligible and does not
justify maintaining separate disclosure regulations applicable solely
to State savings associations. The FDIC continues to evaluate whether
to update the 1996 statement of policy related to the use of offering
circulars in connection with the public distribution of bank securities
to include issuances of mutual capital certificates and debt securities
by State savings associations. The statement of policy currently
applies only to insured state nonmember banks.\52\
---------------------------------------------------------------------------
\52\ 44 FR 39381 (July 6, 1979); 61 FR 46808 (Sept. 5, 1996).
---------------------------------------------------------------------------
IV. Summary
If the proposal is finalized, 12 CFR part 390, subpart T would be
rescinded and removed because the financial statement and disclosure
requirements set forth in part 390, subpart T are substantially similar
to, although more detailed than, otherwise applicable financial
statement form and content requirements and disclosure requirements
that a State savings association must satisfy under federal banking or
securities laws or regulations. The FDI Act has long required that
reports and statements to be filed with the FDIC by insured depository
institutions, including insured State saving associations, be uniform
and consistent with GAAP. Moreover, the HOLA has required that savings
association reports and financial statements be consistent with GAAP
since CEBA was enacted in 1987. State savings associations with
securities traded in the secondary market are subject to the
registration provisions and reporting requirements of the Exchange Act
as implemented by the FDIC, pursuant to the authority granted by
Section 12(i) of the Exchange Act. As a result, a State savings
association, like a State nonmember bank, is required to file reports
and other filings containing generally the same information that would
be included in Exchange Act reports with the FDIC pursuant to part 335,
instead of filing with the SEC.
The form and content of financial statements used in connection
with proxy solicitations and offering circulars for the conversion of a
State savings association from mutual to stock form remain subject to
the OCC conversion regulations at part 192 and offering materials for
the issuance of mutual capital certificates remain subject to the OCC
regulations at 12 CFR 163.74, in addition to GAAP and any applicable
Exchange Act requirements. While State savings association public
offerings of securities are exempt from Securities Act registration
requirements, the FDIC reviews offering circulars to ascertain that
they were prepared in compliance with the anti-fraud provisions of the
federal securities laws which require full and adequate disclosure of
material facts and meet the needs of investors, depositors, and are
uniform and consistent with GAAP, including financial statement
disclosure requirements. Removing part 390, subpart T will streamline
the FDIC's regulations and will not increase regulatory burden for
FDIC-supervised institutions.
V. Expected Effects
As of March 31, 2019, the FDIC supervises 3,465 insured depository
institutions, of which 38 (1.1%) are insured State saving
associations.\53\ The proposed rule primarily would only affect
regulations that govern State savings associations. As explained
previously, the proposed rule would remove sections 390.380, 390.381,
390.382, 390.383, and 390.384 of part 390, subpart T because other
federal banking or securities laws or regulations contain similar
requirements. Because these regulations are largely redundant,
rescinding them will not have any substantive effects on FDIC-
supervised institutions.
---------------------------------------------------------------------------
\53\ FDIC Call Report, March 31, 2019.
---------------------------------------------------------------------------
The FDIC invites comments on all aspects of this analysis. In
particular, would the proposed rule have any costs or benefits to
covered entities that the FDIC has not identified?
VI. Alternatives
The FDIC considered alternatives to the proposed rule but believes
that the proposed amendments represent the most appropriate option for
covered institutions. As discussed previously, the Dodd-Frank Act
transferred certain powers, duties, and functions formerly performed by
the OTS to the FDIC. The FDIC's Board reissued and redesignated certain
transferred regulations from the OTS, but noted that it would evaluate
them and might later incorporate them into other FDIC regulations,
amend them, or rescind them, as appropriate. The FDIC has evaluated the
existing regulations relating to State savings association accounting
requirements and part 390, subpart T (including the
[[Page 52833]]
Appendix to 12 CFR 390.384). The FDIC considered the alternative of
retaining the current regulations, but did not choose to do so because
it would be needlessly complex and confusing for its supervised
institutions if substantively similar regulations regarding accounting
requirements for Exchange Act filers were located in different
locations within the Code of Federal Regulations. The FDIC believes it
would be burdensome for FDIC-supervised institutions to refer to these
separate sets of regulations. Therefore, the FDIC is proposing to
rescind part 390, subpart T (including the Appendix to 12 CFR 390.384)
and streamline the FDIC's regulations.
VII. Request for Comments
The FDIC invites comments on all aspects of this proposed
rulemaking, and specifically requests comments on the following:
1. Are the provisions of part 192, part 335, and section 37 of the
FDI Act sufficient to provide consistent and effective filing and
disclosure requirements for securities registered under the Exchange
Act, mutual-to-stock conversions, and mutual capital certificates and
debt securities for State savings associations? Please provide a
detailed response.
2. Should part 390, subpart T pertaining to the accounting
requirements for State savings associations be retained in whole or in
part? Please substantiate your response.
3. What negative impacts, if any, can you foresee in the FDIC's
proposal to rescind part 390, subpart T and remove it from the Code of
Federal Regulations?
4. What negative impacts to State savings associations, if any, do
you foresee in the FDIC's proposal to rescind part 390, subpart T and
rely on 12 CFR part 192 and section 37 of the FDI Act with respect to
the accounting requirements that would be applicable to public
offerings?
5. What negative impacts to State savings associations, if any, do
you foresee in the FDIC's proposal to rescind the accounting
requirements in part 390, subpart T that are applicable to State
savings association mutual-to-stock conversions involving a public
offering of securities and registration of the securities under the
Exchange Act?
Written comments must be received by the FDIC no later than
November 4, 2019.
VIII. Regulatory Analysis and Procedure
A. The Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA),\54\ 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. The proposed rule would rescind and remove from
FDIC regulations part 390, subpart T (including the Appendix to 12 CFR
390.384). The proposed rule will not create any new or revise any
existing collections of information under the PRA. Therefore, no
information collection request will be submitted to the OMB for review.
---------------------------------------------------------------------------
\54\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------
B. The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), requires that, in connection
with a notice of proposed rulemaking, an agency prepare and make
available for public comment an initial regulatory flexibility analysis
that describes the impact of the proposed rule on small entities.\55\
However, a regulatory flexibility analysis is not required if the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities, and publishes its
certification and a short explanatory statement in the Federal Register
together with the rule. The Small Business Administration (SBA) has
defined ``small entities'' to include banking organizations with total
assets of less than or equal to $600 million.\56\ Generally, the FDIC
considers a significant effect to be a quantified effect in excess of 5
percent of total annual salaries and benefits per institution, or 2.5
percent of total non-interest expenses. The FDIC believes that effects
in excess of these thresholds typically represent significant effects
for FDIC-supervised institutions. For the reasons provided below, the
FDIC certifies that the proposed rule, if adopted in final form, would
not have a significant economic impact on a substantial number of small
banking organizations. Accordingly, a regulatory flexibility analysis
is not required.
---------------------------------------------------------------------------
\55\ 5 U.S.C. 601, et seq.
\56\ The SBA defines a small banking organization as having $600
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, by 84 FR 34261, effective August 19, 2019). ``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.
---------------------------------------------------------------------------
As of March 31, 2019, the FDIC supervised 3,465 insured depository
institutions, of which 2,705 are considered small banking organizations
for the purposes of RFA. The proposed rule primarily affects
regulations that govern State savings associations.\57\ There are 36
State savings associations considered to be small banking organizations
for the purposes of the RFA.\58\
---------------------------------------------------------------------------
\57\ FDIC Call Report, March 31, 2019.
\58\ Id.
---------------------------------------------------------------------------
As explained previously, the proposed rule would remove sections
390.380, 390.381, 390.382, 390.383, and 390.364 of part 390, subpart T
because these sections are unnecessary or redundant of existing federal
banking and securities laws or regulations that prescribe accounting
requirements for State savings associations. Because these regulations
are redundant to existing regulations, rescinding them would not have
any substantive effects on small FDIC-supervised institutions.
Based on the information above, the FDIC certifies that the
proposed rule would not have a significant economic impact on a
substantial number of small entities.
6. The FDIC invites comments on all aspects of the supporting
information provided in this RFA section. In particular, would this
rule have any significant effects on small entities that the FDIC has
not identified?
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \59\ 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 390, subpart T in a simple
and straightforward manner.
---------------------------------------------------------------------------
\59\ Public Law 106-102, 113 Stat. 1338, 1471 (codified at 12
U.S.C. 4809).
---------------------------------------------------------------------------
7. 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 the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (EGRPRA), the FDIC is required to review all of
its regulations, at least once every 10 years, in order to identify any
outdated or otherwise unnecessary regulations imposed on insured
institutions.\60\ The FDIC, along with the other federal banking
agencies, submitted a Joint Report to Congress on March 21, 2017,
[[Page 52834]]
(EGRPRA Report) discussing how the review was conducted, what has been
done to date to address regulatory burden, and further measures that
will be taken to address issues that were identified. As noted in the
EGRPRA Report, the FDIC is continuing to streamline and clarify its
regulations through the OTS rule integration process. By removing
outdated or unnecessary regulations, such as part 390, subpart T, this
proposal complements other actions the FDIC has taken, separately and
with the other federal banking agencies, to further the EGRPRA mandate.
---------------------------------------------------------------------------
\60\ Public Law 104-208, 110 Stat. 3009 (1996).
---------------------------------------------------------------------------
List of Subjects in 12 CFR Part 390
Administrative practice and procedure, Advertising, Aged, Civil
rights, Conflict of interests, Credit, Crime, Equal employment
opportunity, Fair housing, Government employees, Individuals with
disabilities, Reporting and recordkeeping requirements, Savings
associations.
Authority and Issuance
For the reasons stated in the preamble, the Federal Deposit
Insurance Corporation proposes to amend 12 CFR 390 as follows:
PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT
SUPERVISION
0
1. The authority citation for part 390 is revised to read as follows:
Authority: 12 U.S.C. 1819.
Subpart F also issued under 5 U.S.C. 552; 559; 12 U.S.C. 2901 et
seq.
Subpart G also issued under 12 U.S.C. 2810 et seq., 2901 et
seq.; 15 U.S.C. 1691; 42 U.S.C. 1981, 1982, 3601-3619.
Subpart M also issued under 12 U.S.C. 1818.
Subpart O also issued under 12 U.S.C. 1828.
Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464.
Subpart R also issued under 12 U.S.C. 1463.
Subpart S also issued under 12 U.S.C. 1462; 1462a; 1463; 1464;
1468a; 1817; 1820; 1828; 1831e; 1831o; 1831p-1; 1881-1884; 3207;
3339; 15 U.S.C. 78b; 78l; 78m; 78n; 78p; 78q; 78w; 31 U.S.C. 5318;
42 U.S.C. 4106.
Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15
U.S.C. 78c; 78l; 78m; 78n; 78p; 78w.
Subpart Y also issued under 12 U.S.C.1831o.
Subpart T--[Removed and Reserved]
0
2. Remove and reserve subpart T, consisting of Sec. Sec. 390.380
through 390.384.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on September 17, 2019.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2019-20770 Filed 10-2-19; 8:45 am]
BILLING CODE 6714-01-P