[Federal Register Volume 85, Number 188 (Monday, September 28, 2020)]
[Proposed Rules]
[Pages 60738-60745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18812]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 308 and 390

RIN 3064-AF38


Removal of Transferred OTS Regulations Regarding Prompt 
Corrective Action Directives and Conforming Amendments to Other 
Regulations

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In order to streamline FDIC regulations, the FDIC proposes to 
rescind and remove from the Code of Federal Regulations rules entitled 
``Prompt Corrective Action'' 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), and amend certain 
sections of existing FDIC regulations governing the issuance and review 
of orders pursuant to the prompt corrective action provisions of the 
Federal Deposit Insurance Act to make it clear that such rules apply to 
all insured depository institutions for which the FDIC is the 
appropriate Federal banking agency.

DATES: Comments must be received on or before October 28, 2020.

ADDRESSES: You may submit comments, identified by RIN 3064-AF38, 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-AF38 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 NW 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: Robert Watkins, Review Examiner, 
Division of Risk Management Supervision, (202) 898-3865; Andrea 
Winkler, Acting Assistant General Counsel, Legal Division, (202) 898-
3727; or Kristine Schmidt, Counsel, Legal Division, (202) 898-6686, 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Policy Objectives

    The policy objective of the rule is to remove unnecessary and 
duplicative regulations in order to simplify them and improve the 
public's understanding of them. Part 390, subpart Y outlines 
administrative procedures related to prompt corrective action that are 
equivalent to procedures outlined in part 308, subpart Q of the FDIC's 
existing regulations. Thus, the FDIC is

[[Page 60739]]

proposing to rescind the regulations in part 390, subpart Y and reserve 
the subpart for future use. In addition, the proposal would amend 
certain sections of part 308, subpart Q of the FDIC's existing 
regulations on the issuance and review of orders pursuant to the prompt 
corrective action provisions of the Federal Deposit Insurance Act to 
make it clear that part 308, subpart Q, applies to all insured 
depository institutions for which the FDIC is the appropriate Federal 
banking agency.

II. Background

    Part 390, subpart Y, was included in the regulations that were 
transferred to the FDIC from the Office of Thrift Supervision (OTS) on 
July 21, 2011, in connection with the implementation of applicable 
provisions of title III of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act).\1\
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    \1\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010) (codified at 12 U.S.C. 
5301 et seq.).
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A. The Dodd-Frank Act

    As of July 21, 2011, the transfer date established by section 311 
of the Dodd-Frank Act,\2\ 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 \3\ provides the manner of 
treatment for all orders, resolutions, determinations, regulations, and 
other advisory materials that had been 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.
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    \2\ Codified at 12 U.S.C. 5411.
    \3\ Codified at 12 U.S.C. 5414(b).
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    Pursuant to section 316(c) of the Dodd-Frank Act,\4\ on June 14, 
2011, the FDIC's Board of Directors (Board) 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.\5\
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    \4\ Codified at 12 U.S.C. 5414(c).
    \5\ 76 FR 39246 (July 6, 2011).
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    Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act \6\ 
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) \7\ and other laws as the ``appropriate Federal 
banking agency'' or under similar statutory terminology. Section 
312(c)(1) of the Dodd-Frank Act \8\ revised the definition of 
``appropriate Federal banking agency'' contained in section 3(q) of the 
FDI Act,\9\ 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 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, as well as for 
State nonmember banks and insured State-licensed branches of foreign 
banks.
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    \6\ Codified at 12 U.S.C. 5412(b)(2)(B)(i)(II).
    \7\ 12 U.S.C. 1811 et seq.
    \8\ Codified at 12 U.S.C. 5412(c)(1).
    \9\ 12 U.S.C. 1813(q).
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    As noted above, on June 14, 2011, operating pursuant to this 
authority, the Board issued a list of regulations of the former OTS 
that the FDIC would enforce with respect to State savings associations. 
On that same date, the Board reissued and redesignated certain 
regulations transferred from the former OTS. These transferred OTS 
regulations were published as new FDIC regulations in the Federal 
Register on August 5, 2011.\10\ When the FDIC republished the 
transferred OTS regulations as new FDIC regulations, it specifically 
noted that its staff would evaluate the transferred OTS rules and might 
later recommend incorporating the transferred OTS regulations into 
other FDIC regulations, amending them, or rescinding them, as 
appropriate.\11\
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    \10\ 76 FR 47652 (Aug. 5, 2011).
    \11\ See 76 FR 47653.
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B. Transferred OTS Regulations (Transferred to the FDIC's Part 390, 
Subpart Y)

    A subset of the regulations transferred to the FDIC from the OTS 
concern prompt corrective action provisions applicable to State savings 
associations. The OTS regulations, formerly found at 12 CFR part 565, 
Sec. Sec.  565.7, 565.8, 565.9 and 565.10, were transferred to the FDIC 
with only nomenclature changes and now comprise part 390, subpart Y. 
Each provision of part 390, subpart Y is discussed in Part III of this 
SUPPLEMENTARY INFORMATION section, below. The FDIC has conducted a 
careful review and comparison of part 390, subpart Y. As discussed in 
Part III of this SUPPLEMENTARY INFORMATION section, the FDIC proposes 
to rescind part 390, subpart Y because the FDIC considers the 
provisions related to State savings associations contained in part 390, 
subpart Y substantially similar to similar regulations related to state 
non-member banks. The FDIC proposes combining the regulations to make 
clear the same procedures apply to all FDIC-supervised institutions.

C. Part 308, Subpart Q, Issuance and Review of Orders Pursuant to the 
Prompt Corrective Action Provisions of the Federal Deposit Insurance 
Act

    The FDIC proposes to further clarify the administrative procedures 
relevant to State savings associations by amending certain parts of 
part 308 of the FDIC's regulations to clarify that part 308, subpart Q 
applies to all insured depository institutions, including State savings 
associations, for which the FDIC is the appropriate Federal banking 
agency. As discussed in Part III of this SUPPLEMENTARY INFORMATION 
section, the FDIC proposes to amend part 308, subpart Q in order to 
make part 308, subpart Q applicable to all insured depository 
institutions, including State savings associations, for which the FDIC 
is the appropriate Federal banking agency.

III. Proposed Regulation Changes

    After careful review, the FDIC has concluded that the retention of 
part 390, subpart Y is unnecessary and that rescission of subpart Y in 
its entirety would streamline the FDIC rules and regulations. The 
regulations related to State savings associations will be incorporated 
into the part 308, subpart Q as described below. Part 390, subpart Y 
also references savings and loan holding companies. When the regulation 
was transferred from the OTS, the references to ``any company that 
controls the State savings association'' were not deleted with the 
other technical amendments. The FDIC is not the appropriate successor 
agency for supervision of savings and loan holding companies. Under the 
Dodd-Frank Act, supervision of savings and loan holding companies was 
transferred to the Federal Reserve Board.\12\ The provisions in the 
FDIC regulations relating to ``any company that controls

[[Page 60740]]

the State savings association'' will therefore be set aside and not 
incorporated into the existing FDIC regulations at part 308, subpart Q 
addressing FDIC-supervised institutions.
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    \12\ 12 U.S.C. 5412(b)(1).
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    Consistent with its legal authority to issue and modify regulations 
as the appropriate Federal banking agency under section 3(q) of the 
Federal Deposit Insurance Act, the FDIC also proposes to amend and 
revise provisions of part 308, subpart Q to clarify and state 
explicitly the regulations apply to all FDIC-supervised institutions.

A. Comparison of FDIC Regulations With the Transferred OTS Regulations 
To Be Rescinded

    12 CFR 390.456--Directives to take prompt corrective action.
    Section 390.456 describes the administrative procedures for the 
FDIC to issue a directive to take prompt corrective action against a 
State savings association. These administrative procedures were 
initially found at 12 CFR 565.7 and are equivalent to the 
administrative procedures relating to FDIC-supervised banks found at 12 
CFR 308.201.
    The FDIC proposes that Sec.  390.456 be rescinded in its entirety. 
The proposed amendments to subpart Q will clarify in a single location 
that the regulations apply to all FDIC-supervised institutions. 
Therefore, it is not necessary to have a regulation specifically 
applicable to State savings associations.
    12 CFR 390.457--Procedures for reclassifying a State savings 
association based on criteria other than capital.
    Section 390.457 describes the administrative procedures to 
reclassify a State savings association based on criteria other than 
capital. This section describes how the FDIC may consider other unsafe 
or unsound practices to lower a State saving association capital 
category under part 324. The section also details the procedures for 
notifying the State saving association and contesting the 
determination. These administrative procedures were initially found at 
12 CFR 565.8 and were recently modified to account for changes made to 
part 324.\13\ Section 390.457 is equivalent to the administrative 
procedures relating to FDIC-supervised banks found at 12 CFR 308.202.
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    \13\ See 83 FR 17737.
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    The FDIC proposes that Sec.  390.457 be rescinded in its entirety. 
The proposed amendments to subpart Q will clarify in a single location 
that the regulations apply to all FDIC-supervised institutions. 
Therefore, it is not necessary to have a regulation specifically 
applicable to State savings associations.
    12 CFR 390.458--Order to dismiss a director or senior executive 
officer.
    Section 390.458 describes the additional administrative procedures 
related to prompt corrective action directives that require the State 
savings association to terminate the employment of a director or 
officer. This section also includes provisions to challenge this type 
of prompt corrective order directive. These administrative procedures 
were initially found at 12 CFR 565.9. Section 390.458 is equivalent to 
the administrative procedures relating to FDIC-supervised banks found 
at 12 CFR 308.203.
    The FDIC proposes that Sec.  390.458 be rescinded in its entirety. 
The proposed amendments to subpart Q will clarify in a single location 
that the regulations apply to all FDIC-supervised institutions. 
Therefore, it is not necessary to have a regulation specifically 
applicable to State savings associations.
    12 CFR 390.459--Enforcement of directives.
    Section 390.459 describes the additional remedies the FDIC may take 
to seek compliance with prompt corrective action directives. These 
procedures were initially found at 12 CFR 565.10. Section 390.459 is 
equivalent to the administrative procedures relating to FDIC-supervised 
banks found at 12 CFR 308.204.
    The FDIC proposes that Sec.  390.459 be rescinded in its entirety. 
The proposed amendments to subpart Q will clarify in a single location 
that the regulations apply to all FDIC-supervised institutions. 
Therefore, it is not necessary to have a regulation specifically 
applicable to State savings associations.

B. Proposed Changes to FDIC Regulations

    As discussed in part III of this SUPPLEMENTARY INFORMATION, the 
FDIC's part 308, subpart Q addresses the administrative procedures 
related to the issuance and enforcement of prompt corrective action 
directives. The Dodd-Frank Act added State savings associations to the 
list of entities for which the FDIC is designated as the appropriate 
Federal banking agency.\14\ To clarify that part 308, subpart Q applies 
to all institutions for which the FDIC is the appropriate Federal 
banking agency, the FDIC proposes to amend Sec. Sec.  308.200 through 
308.204 to replace the phrases ``banks'' and ``insured branches of 
foreign banks'' throughout subpart Q with the phrase ``FDIC-supervised 
institution.'' Under the proposal, Sec.  308.200 would be revised to 
add the definition of the term ``FDIC-supervised institution'' to mean 
any insured depository institution for which the FDIC is the 
appropriate Federal banking agency pursuant to section 3(q) of the FDI 
Act.\15\
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    \14\ See section 312(c) of the Dodd-Frank Act, codified at 12 
U.S.C. 1813(q).
    \15\ 12 U.S.C. 1813(q).
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    Additionally, the FDIC proposes one additional change to conform 
the FDIC's regulations relating to prompt corrective action directives 
that apply to banks and the former OTS regulations relating to State 
savings associations. Sections 308.202 and 390.457 describe the 
procedures relating to classifying an institution due to something 
other than capital. These two regulations differ in one respect. The 
FDIC regulation at 308.202(a)(6) provides that when a hearing is 
ordered, it will begin no later than 30 days from the date of the 
request unless the bank requests a later date. The former OTS version 
of this regulation, incorporated by the FDIC at Sec.  390.457, provides 
that the hearing should be ordered within 30 days of request unless the 
FDIC allows further time at the request of the State savings 
association. While both of these provisions demonstrate that a hearing 
is likely to be delayed at the request of the institution, the former 
OTS version of the regulation is written with greater clarity that the 
FDIC will evaluate and may then provide consent to the request. The OTS 
version of the regulation makes it clear that there is no automatic 
extension granted to the institution. The greater clarity in this 
language makes it the preferred choice when reconciling the two 
regulations into one regulation that applies to all FDIC-supervised 
institutions. The changes to this aspect of the regulation will provide 
greater clarity to those institutions going forward.

IV. Summary

    If the proposal is finalized, 12 CFR part 390, subpart Y would be 
removed because it is largely unnecessary, redundant, or duplicative of 
existing FDIC regulations, and the requirements of part 308, subpart Q 
expressly would apply to all FDIC-supervised insured depository 
institutions. These initiatives will serve to streamline the FDIC's 
regulations.

[[Page 60741]]

V. Expected Effects

    As explained in detail in Section III of this SUPPLEMENTARY 
INFORMATION section, certain OTS regulations transferred to the FDIC by 
the Dodd-Frank Act relating to prompt corrective action directives are 
either unnecessary or effectively duplicate existing FDIC regulations. 
This proposal would eliminate those transferred OTS regulations. The 
proposal also would clarify that the standards in part 308, subpart Q 
apply to State savings associations because the FDIC is the 
``appropriate Federal banking agency'' pursuant to the FDI Act. As of 
March 30, 2020, the FDIC supervised 3,309 depository institutions, of 
which 35 (1.1 percent) are State savings associations.\16\ The proposed 
rule primarily would affect regulations that govern State savings 
associations.
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    \16\ Call Report data, March 2020.
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    As explained previously, the proposed rule would rescind 12 CFR 
part 390, subpart Y, which includes the following: Sec.  390.456, which 
outlines administrative procedures for issuing a directive to take 
prompt corrective action against a State savings association; Sec.  
390.457, which outlines administrative procedures for reclassifying a 
State savings association based on criteria other than capital; Sec.  
390.458, which outlines administrative procedures related to prompt 
corrective action that require a State savings association to terminate 
the employment of a director or officer; and Sec.  390.459, which 
outlines administrative procedures the FDIC may take to seek compliance 
with prompt corrective action directives. The FDIC has determined that 
these sections of 12 CFR part 390 are equivalent to regulations related 
to prompt corrective action in the FDIC's existing regulations. 
Therefore, the FDIC does not expect the removal of the regulations in 
subpart Y to significantly affect FDIC-supervised State savings 
associations.
    The proposal would also amend the FDIC's regulations that establish 
administrative procedures for prompt corrective action in 12 CFR 
308.200 through 308.204 to make them applicable to all FDIC-supervised 
institutions, including State savings associations. As discussed 
previously, these changes would not change the required procedures 
related to prompt corrective action that are applicable to State 
savings associations since the requirements in subpart Y are equivalent 
to requirements in the FDIC's existing regulations, therefore this 
aspect of the proposed rule is unlikely to substantively affect FDIC-
supervised State savings associations.
    Finally, the proposal would revise 12 CFR 308.202 to clarify the 
procedures for delaying a hearing if an institution is reclassified 
based on criteria other than capital. The FDIC's regulation currently 
states that if a hearing is scheduled, it will be held within 30 days 
of the request unless the institution requests a later date. The 
regulations in Sec.  390.457 state that a hearing will be held within 
30 days of the request unless the FDIC allows further time at the 
request of the institution. The FDIC is proposing to adopt the language 
from Sec.  390.457 in its own regulations since Sec.  390.457 clarifies 
that requests for an extension will not be automatically granted. This 
aspect of the proposed rule will pose no change for the 35 FDIC-
supervised State savings associations. The FDIC believes that adopting 
the language from Sec.  390.457 should further clarify for State 
nonmember institutions that requests for an extension will not 
automatically be granted, however, this change is unlikely to pose any 
substantive effects on State nonmember institutions.
    Since the prompt corrective action directive provisions in Sec.  
390 subpart Y are substantively similar to existing regulations for 
state nonmember banks found in Sec.  308, subpart Q, the FDIC does not 
believe that rescission of Sec. Sec.  390.456 through 390.459 would 
have any substantive effects on FDIC-supervised State savings 
associations.
    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 believes that the proposed amendments represent the most 
appropriate option for covered institutions and, at this time, has not 
identified significant alternatives to proposing the rule in its 
current form. 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 prompt corrective actions, including 
part 308, subpart Q and part 390, subpart Y. The FDIC has available the 
status quo alternative of retaining the current regulations but is 
proposing not to do so because it would be needlessly duplicative for 
substantively similar regulations regarding prompt corrective action 
directives for banks and State savings associations to be located in 
different locations within the Code of Federal Regulations. The FDIC 
believes it would be redundant and potentially confusing for FDIC-
supervised institutions to continue to refer to these separate sets of 
regulations. Therefore, the FDIC is proposing to amend and streamline 
the FDIC's regulations.

VII. Request for Comments

    The FDIC invites comments on all aspects of this proposed 
rulemaking. In particular, the FDIC requests comments on the following 
questions:
    1. Are the provisions of 12 CFR parts 308, subpart Q sufficient to 
provide consistent and effective requirements related to the issuance 
and review of orders pursuant to the prompt corrective action for all 
insured depository institutions for which the FDIC is the appropriate 
Federal banking agency? Please provide examples, data, or otherwise 
substantiate your answer.
    2. What negative impacts, if any, can you foresee in the FDIC's 
proposal to rescind part 390, subpart Y and remove it from the Code of 
Federal Regulations? Please provide any other comments you have on the 
proposal.

VIII. Administrative Law Matters

A. The Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA),\17\ 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.
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    \17\ 44 U.S.C. 3501-3521.
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    The proposed rule would rescind and remove from FDIC regulations 
part 390, subpart Y. With regard to part 308, subpart Q, the proposed 
rule would amend Sec. Sec.  308.200 through 308.204 to clarify that 
State savings associations, as well as State nonmember banks and 
foreign banks having insured branches are all subject to part 308, 
subpart Q. 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.

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

[[Page 60742]]

flexibility analysis that describes the impact of the proposed rule on 
small entities.\18\ 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.\19\ 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 noninterest 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 would 
not have a significant economic impact on a substantial number of small 
entities. Accordingly, a regulatory flexibility analysis is not 
required.
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    \18\ 5 U.S.C. 601, et seq.
    \19\ The SBA defines a small banking organization as having $600 
million or less in assets, where ``a financial institution'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 FDIC-supervised institution is ``small'' for 
the purposes of RFA.
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    As of March 31, 2020, the FDIC supervised 3,309 depository 
institutions,\20\ of which 2,548 were considered small entities for the 
purposes of RFA.\21\ There are 33 (1.3 percent) State savings 
associations that are small entities for the purposes of RFA.\22\ As 
discussed previously, the proposed rule would rescind 12 CFR part 390, 
subpart Y, which includes the following: Sec.  390.456, which outlines 
administrative procedures for issuing a directive to take prompt 
corrective action against a State savings association; Sec.  390.457, 
which outlines administrative procedures for reclassifying a State 
savings association based on criteria other than capital; Sec.  
390.458, which outlines administrative procedures related to prompt 
corrective action that require a State savings association to terminate 
the employment of a director or officer; and Sec.  390.459, which 
outlines administrative procedures the FDIC may take to seek compliance 
with prompt corrective action directives. The FDIC has determined that 
these sections of 12 CFR part 390 are equivalent to regulations related 
to prompt corrective action in the FDIC's existing regulations. 
Therefore, the FDIC does not expect the removal of the regulations in 
subpart Y to significantly affect small FDIC-supervised State savings 
associations.
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    \20\ FDIC-supervised institutions are set forth in 12 U.S.C. 
1813(q)(2).
    \21\ FDIC Call Report data, March 31, 2020.
    \22\ Id.
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    The proposal would also amend the FDIC's regulations that establish 
administrative procedures for prompt corrective action in 12 CFR 
308.200 through 308.204 to make them applicable to all FDIC-supervised 
institutions, including State savings associations. As discussed 
previously, these changes would not change the required procedures 
related to prompt corrective action that are applicable to small State 
savings associations since the requirements in subpart Y are equivalent 
to requirements in the FDIC's existing regulations.
    Finally, the proposal would revise 12 CFR 308.202 to clarify the 
procedures for delaying a hearing if an institution is reclassified 
based on criteria other than capital. The FDIC's regulation currently 
states that if a hearing is scheduled, it will be held within 30 days 
of the request unless the institution requests a later date. The 
regulations in Sec.  390.457 state that a hearing will be held within 
30 days of the request unless the FDIC allows further time at the 
request of the institution. The FDIC is proposing to adopt the language 
from Sec.  390.457 in its own regulations since Sec.  390.457 clarifies 
that requests for an extension will not be automatically granted. This 
aspect of the proposed rule will pose no change for the 33 small FDIC-
supervised State savings associations. The FDIC believes that adopting 
the language from Sec.  390.457 should further clarify for small State 
nonmember institutions that requests for an extension will not 
automatically be granted; however, this change is unlikely to pose any 
substantive effects on small State nonmember institutions.
    Since the prompt corrective action directive provisions in Sec.  
390 subpart Y are substantively similar to existing regulations for 
state nonmember banks found in Sec.  308, subpart Q, the FDIC believes 
it is unlikely that that rescission of Sec. Sec.  390.456 through 
390.459 would have any substantive effects on small FDIC-supervised 
State savings associations.
    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.
    The FDIC invites comments on all aspects of the supporting 
information provided in this section, and in particular, whether the 
proposed rule would have any significant effects on small entities that 
the FDIC has not identified.

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \23\ requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The FDIC has sought to present the 
proposed rule in a simple and straightforward manner. The FDIC invites 
comments on whether the proposal is clearly stated and effectively 
organized and how the FDIC might make the proposal easier to 
understand.
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    \23\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999).
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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.\24\ The FDIC, along with the other Federal banking 
agencies, submitted a Joint Report to Congress on March 21, 2017 
(EGRPRA Report) discussing how the review was conducted, what has been 
done to date to address regulatory burden, and further measures the 
FDIC will take to address issues that were identified.\25\ 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 Y, this 
rule complements other actions that the FDIC has taken, separately and 
with the other Federal banking agencies, to further the EGRPRA mandate.
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    \24\ Public Law 104-208, 110 Stat. 3009 (1996).
    \25\ 82 FR 15900 (March 31, 2017).
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E. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\26\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
insured

[[Page 60743]]

depository institutions (IDIs), each Federal banking agency must 
consider, consistent with principles of safety and soundness and the 
public interest, any administrative burdens that such regulations would 
place on depository institutions, including small depository 
institutions, and customers of depository institutions, as well as the 
benefits of such regulations. In addition, section 302(b) of RCDRIA 
requires new regulations and amendments to regulations that impose 
additional reporting, disclosures, or other new requirements on IDIs 
generally to take effect on the first day of a calendar quarter that 
begins on or after the date on which the regulations are published in 
final form.\27\ The FDIC invites comments that further will inform its 
consideration of RCDRIA.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 4802(a).
    \27\ Id.
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 308

    Administrative practice and procedure, Bank deposit insurance, 
Banks, Banking, Claims, Crime, Equal access to justice, Fraud, 
Investigations, Lawyers, Penalties.

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 parts 308 and 390 of title 12 
of the Code of Federal Regulations as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation for Part 308 continues to read as follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 
1464, 1467(d), 1467a, 1468, 1815(e), 1817, 1818, 1819, 1820, 1828, 
1829, 1829(b), 1831i, 1831m(g)(4), 1831o, 1831p-1, 1832(c), 1884(b), 
1972, 3102, 3108(a), 3349, 3909, 4717, 5412(b)(2)(C), 5414(b)(3); 15 
U.S.C. 78(h) and (i), 78o(c)(4), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 
78u-2, 78u-3, 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31 
U.S.C. 330, 5321; 42 U.S.C. 4012a; Pub. L. 104-134, sec. 31001(s), 
110 Stat. 1321; Pub. L. 109-351, 120 Stat. 1966; Pub. L. 111-203, 
124 Stat. 1376; Pub. L. 114-74, sec. 701, 129 Stat. 584.

0
2. Revise Sec.  308.200 to read as follows:


Sec.  308.200   Scope.

    The rules and procedures set forth in this subpart apply to FDIC-
supervised institutions and senior executive officers and directors of 
the same that are subject to the provisions of section 38 of the 
Federal Deposit Insurance Act (section 38) (12 U.S.C. 1831o) and 
subpart H of part 324 of this chapter. For purposes of this subpart, 
the term ``FDIC-supervised institution'' means any insured depository 
institution for which the Federal Deposit Insurance Corporation is the 
appropriate Federal banking agency pursuant to section 3(q) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1813(q).
0
3. Revise Sec.  308.201 to read as follows:


Sec.  308.201   Directives to take prompt corrective action.

    (a) Notice of intent to issue directive--
    (1) In general. The FDIC shall provide an undercapitalized, 
significantly undercapitalized, or critically undercapitalized FDIC-
supervised institution prior written notice of the FDIC's intention to 
issue a directive requiring such FDIC-supervised institution to take 
actions or to follow proscriptions described in section 38 that are 
within the FDIC's discretion to require or impose under section 38 of 
the FDI Act, including sections 38(e)(5), (f)(2), (f)(3), or (f)(5). 
The FDIC-supervised institution shall have such time to respond to a 
proposed directive as provided by the FDIC under paragraph (c) of this 
section.
    (2) Immediate issuance of final directive. If the FDIC finds it 
necessary in order to carry out the purposes of section 38 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue a directive requiring an FDIC-supervised 
institution immediately to take actions or to follow proscriptions 
described in section 38 that are within the FDIC's discretion to 
require or impose under section 38 of the FDI Act, including section 
38(e)(5), (f)(2), (f)(3), or (f)(5). An FDIC-supervised institution 
that is subject to such an immediately effective directive may submit a 
written appeal of the directive to the FDIC. Such an appeal must be 
received by the FDIC within 14 calendar days of the issuance of the 
directive, unless the FDIC permits a longer period. The FDIC shall 
consider any such appeal, if filed in a timely matter, within 60 days 
of receiving the appeal. During such period of review, the directive 
shall remain in effect unless the FDIC, in its sole discretion, stays 
the effectiveness of the directive.
    (b) Contents of notice. A notice of intention to issue a directive 
shall include:
    (1) A statement of the FDIC-supervised institution's capital 
measures and capital levels;
    (2) A description of the restrictions, prohibitions or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of such affirmative 
actions; and
    (4) The date by which the FDIC-supervised institution subject to 
the directive may file with the FDIC a written response to the notice.
    (c) Response to notice--
    (1) Time for response. An FDIC-supervised institution may file a 
written response to a notice of intent to issue a directive within the 
time period set by the FDIC. The date shall be at least 14 calendar 
days from the date of the notice unless the FDIC determines that a 
shorter period is appropriate in light of the financial condition of 
the FDIC-supervised institution or other relevant circumstances.
    (2) Content of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 38;
    (ii) Any recommended modification of the proposed directive; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
FDIC-supervised institution regarding the proposed directive.
    (d) FDIC consideration of response. After considering the response, 
the FDIC may:
    (1) Issue the directive as proposed or in modified form;
    (2) Determine not to issue the directive and so notify the FDIC-
supervised institution; or
    (3) Seek additional information or clarification of the response 
from the FDIC-supervised institution or any other relevant source.
    (e) Failure to file response. Failure by an FDIC-supervised 
institution to file with the FDIC, within the specified time period, a 
written response to a proposed directive shall constitute a waiver of 
the opportunity to respond and shall constitute consent to the issuance 
of the directive.
    (f) Request for modification or rescission of directive. Any FDIC-
supervised institution that is subject to a directive under this 
subpart may, upon a change in circumstances, request in writing that 
the FDIC reconsider the terms of the directive and may propose that the 
directive be rescinded or

[[Page 60744]]

modified. Unless otherwise ordered by the FDIC, the directive shall 
continue in place while such request is pending before the FDIC.
0
4. Revise Sec.  308.202 to read as follows:


Sec.  308.202   Procedures for reclassifying an FDIC-supervised 
institution based on criteria other than capital.

    (a) Reclassification based on unsafe or unsound condition or 
practice--
    (1) Issuance of notice of proposed reclassification--
    (i) Grounds for reclassification. (A) Pursuant to Sec.  324.403(d) 
of this chapter, the FDIC may reclassify a well-capitalized FDIC-
supervised institution as adequately capitalized or subject an 
adequately capitalized or undercapitalized institution to the 
supervisory actions applicable to the next lower capital category if:
    (1) The FDIC determines that the FDIC-supervised institution is in 
unsafe or unsound condition; or
    (2) The FDIC, pursuant to section 8(b)(8) of the FDI Act (12 U.S.C. 
1818(b)(8)), deems the FDIC-supervised institution to be engaged in an 
unsafe or unsound practice and not to have corrected the deficiency.
    (B) Any action pursuant to this paragraph (a)(1)(i) shall 
hereinafter be referred to as reclassification.
    (ii) Prior notice to institution. Prior to taking action pursuant 
to Sec.  324.403(d) of this chapter, the FDIC shall issue and serve on 
the FDIC-supervised institution a written notice of the FDIC's 
intention to reclassify it.
    (2) Contents of notice. A notice of intention to reclassify an 
FDIC-supervised institution based on unsafe or unsound condition shall 
include:
    (i) A statement of the FDIC-supervised institution's capital 
measures and capital levels and the category to which the FDIC-
supervised institution would be reclassified;
    (ii) The reasons for reclassification of the FDIC-supervised 
institution;
    (iii) The date by which the FDIC-supervised institution subject to 
the notice of reclassification may file with the FDIC a written appeal 
of the proposed reclassification and a request for a hearing, which 
shall be at least 14 calendar days from the date of service of the 
notice unless the FDIC determines that a shorter period is appropriate 
in light of the financial condition of the FDIC-supervised institution 
or other relevant circumstances.
    (3) Response to notice of proposed reclassification. An FDIC-
supervised institution may file a written response to a notice of 
proposed reclassification within the time period set by the FDIC. The 
response should include:
    (i) An explanation of why the FDIC-supervised institution is not in 
an unsafe or unsound condition or otherwise should not be reclassified; 
and
    (ii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the 
FDIC-supervised institution regarding the reclassification.
    (4) Failure to file response. Failure by an FDIC-supervised 
institution to file, within the specified time period, a written 
response with the FDIC to a notice of proposed reclassification shall 
constitute a waiver of the opportunity to respond and shall constitute 
consent to the reclassification.
    (5) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the FDIC under this section. If the FDIC-supervised institution 
desires to present oral testimony or witnesses at the hearing, the 
FDIC-supervised institution shall include a request to do so with the 
request for an informal hearing. A request to present oral testimony or 
witnesses shall specify the names of the witnesses and the general 
nature of their expected testimony. Failure to request a hearing shall 
constitute a waiver of any right to a hearing, and failure to request 
the opportunity to present oral testimony or witnesses shall constitute 
a waiver of any right to present oral testimony or witnesses.
    (6) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the FDIC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the FDIC allows further time at 
the request of the FDIC-supervised institution. The hearing shall be 
held in Washington, DC or at such other place as may be designated by 
the FDIC before a presiding officer(s) designated by the FDIC to 
conduct the hearing.
    (7) Hearing procedures.
    (i) The FDIC-supervised institution shall have the right to 
introduce relevant written materials and to present oral argument at 
the hearing. The FDIC-supervised institution may introduce oral 
testimony and present witnesses only if expressly authorized by the 
FDIC or the presiding officer(s). Neither the provisions of the 
Administrative Procedure Act (5 U.S.C. 554-557) governing adjudications 
required by statute to be determined on the record nor the Uniform 
Rules of Practice and Procedure in this part apply to an informal 
hearing under this section unless the FDIC orders that such procedures 
shall apply.
    (ii) The informal hearing shall be recorded, and a transcript shall 
be furnished to the FDIC-supervised institution upon request and 
payment of the cost thereof. Witnesses need not be sworn, unless 
specifically requested by a party or the presiding officer(s). The 
presiding officer(s) may ask questions of any witness.
    (iii) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (8) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the 
FDIC on the reclassification.
    (9) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where 
no hearing was requested, the FDIC will decide whether to reclassify 
the FDIC-supervised institution and notify the FDIC-supervised 
institution of the FDIC's decision.
    (b) Request for rescission of reclassification. Any FDIC-supervised 
institution that has been reclassified under this section, may, upon a 
change in circumstances, request in writing that the FDIC reconsider 
the reclassification and may propose that the reclassification be 
rescinded and that any directives issued in connection with the 
reclassification be modified, rescinded, or removed. Unless otherwise 
ordered by the FDIC, the FDIC-supervised institution shall remain 
subject to the reclassification and to any directives issued in 
connection with that reclassification while such request is pending 
before the FDIC.
0
5. Revise Sec.  308.203 to read as follows:


Sec.  308.203  Order to dismiss a director or senior executive officer.

    (a) Service of notice. When the FDIC issues and serves a directive 
on an FDIC-supervised institution pursuant to Sec.  308.201 of this 
part requiring the FDIC-supervised institution to dismiss from office 
any director or senior executive officer under Sec.  38(f)(2)(F)(ii) of 
the FDI Act, the FDIC shall also serve a copy of the directive, or the 
relevant portions of the directive where appropriate, upon the person 
to be dismissed.
    (b) Response to directive--

[[Page 60745]]

    (1) Request for reinstatement. A director or senior executive 
officer who has been served with a directive under paragraph (a) of 
this section (Respondent) may file a written request for reinstatement. 
The request for reinstatement shall be filed within 10 calendar days of 
the receipt of the directive by the Respondent, unless further time is 
allowed by the FDIC at the request of the Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement shall include reasons why the Respondent should be 
reinstated and may include a request for an informal hearing before the 
FDIC under this section. If the Respondent desires to present oral 
testimony or witnesses at the hearing, the Respondent shall include a 
request to do so with the request for an informal hearing. The request 
to present oral testimony or witnesses shall specify the names of the 
witnesses and the general nature of their expected testimony. Failure 
to request a hearing shall constitute a waiver of any right to a 
hearing, and failure to request the opportunity to present oral 
testimony or witnesses shall constitute a waiver of any right or 
opportunity to present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the FDIC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring an FDIC-supervised institution to dismiss from 
office any director or senior executive officer, the FDIC shall issue 
an order directing an informal hearing to commence no later than 30 
days after receipt of the request, unless the Respondent requests a 
later date. The hearing shall be held in Washington, DC, or at such 
other place as may be designated by the FDIC, before a presiding 
officer(s) designated by the FDIC to conduct the hearing.
    (d) Hearing procedures.
    (1) A Respondent may appear at the hearing personally or through 
counsel. A Respondent shall have the right to introduce relevant 
written materials and to present oral argument. A Respondent may 
introduce oral testimony and present witnesses only if expressly 
authorized by the FDIC or the presiding officer(s). Neither the 
provisions of the Administrative Procedure Act governing adjudications 
required by statute to be determined on the record nor the Uniform 
Rules of Practice and Procedure in this part apply to an informal 
hearing under this section unless the FDIC orders that such procedures 
shall apply.
    (2) The informal hearing shall be recorded, and a transcript shall 
be furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by 
a party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the FDIC-supervised institution would materially strengthen the FDIC-
supervised institution's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the FDIC-supervised institution's 
capital level or failure to submit or implement a capital restoration 
plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the FDIC-supervised institution based on supervisory 
criteria other than capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the 
FDIC concerning the Respondent's request for reinstatement with the 
FDIC-supervised institution.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where 
no hearing was requested, the FDIC shall grant or deny the request for 
reinstatement and notify the Respondent of the FDIC's decision. If the 
FDIC denies the request for reinstatement, the FDIC shall set forth in 
the notification the reasons for the FDIC's action.
0
6. Revise Sec.  308.204 to read as follows:


Sec.  308.204   Enforcement of directives.

    (a) Judicial remedies. Whenever an FDIC-supervised institution 
fails to comply with a directive issued under section 38, the FDIC may 
seek enforcement of the directive in the appropriate United States 
district court pursuant to section 8(i)(1) of the FDI Act (12 U.S.C. 
1818(i)(1)).
    (b) Administrative remedies--
    (1) Failure to comply with directive. Pursuant to section 
8(i)(2)(A) of the FDI Act, the FDIC may assess a civil money penalty 
against any FDIC-supervised institution that violates or otherwise 
fails to comply with any final directive issued under section 38 and 
against any institution-affiliated party who participates in such 
violation or noncompliance.
    (2) Failure to implement capital restoration plan. The failure of 
an FDIC-supervised institution to implement a capital restoration plan 
required under section 38, or subpart H of part 324 of this chapter, or 
the failure of a company having control of an FDIC-supervised 
institution to fulfill a guarantee of a capital restoration plan made 
pursuant to section 38(e)(2) of the FDI Act shall subject the FDIC-
supervised institution to the assessment of civil money penalties 
pursuant to section 8(i)(2)(A) of the FDI Act.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the FDIC may seek 
enforcement of the provisions of section 38 or subpart H of part 324 of 
this chapter through any other judicial or administrative proceeding 
authorized by law.

PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT 
SUPERVISION

0
7. 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 O also issued under 12 U.S.C. 1828.
    Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464.
    Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15 
U.S.C. 78c; 78l; 78m; 78n; 78p; 78w.

Subpart Y--[Removed and Reserved]

0
8. Remove and reserve part 390, subpart Y, consisting of Sec. Sec.  
390.456 through 390.459.

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on August 21, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020-18812 Filed 9-25-20; 8:45 am]
BILLING CODE 6714-01-P