[Federal Register Volume 85, Number 239 (Friday, December 11, 2020)]
[Rules and Regulations]
[Pages 80404-80470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25595]



[[Page 80403]]

Vol. 85

Friday,

No. 239

December 11, 2020

Part IV





Department of the Treasury





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Office of the Comptroller of the Currency





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12 CFR Parts 3, 5 and 7





Licensing Amendments; Final Rule

  Federal Register / Vol. 85 , No. 239 / Friday, December 11, 2020 / 
Rules and Regulations  

[[Page 80404]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 3, 5, 7

[Docket ID OCC-2019-0024]
RIN 1557-AE71


Licensing Amendments

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
amending its rules relating to policies and procedures for corporate 
activities and transactions involving national banks and Federal 
savings associations to update and clarify the policies and procedures, 
eliminate unnecessary requirements consistent with safety and 
soundness, and make other technical and conforming changes.

DATES: The final rule is effective on January 11, 2021, except for 
instruction 15g which is effective on December 11, 2020.

FOR FURTHER INFORMATION CONTACT: For additional information, contact 
Christopher Crawford, Counsel, Valerie Song, Assistant Director, Heidi 
M. Thomas, Special Counsel, or Rima Kundnani, Senior Attorney, Chief 
Counsel's Office, (202) 649-5490; or Karen Marcotte, Director for 
Licensing Activities, (202) 649-7297, Office of the Comptroller of the 
Currency, 400 7th Street SW, Washington, DC 20219. For persons who are 
deaf or hearing impaired, TTY, (202) 649-5597.

SUPPLEMENTARY INFORMATION: 

I. Background

    Twelve CFR part 5 sets forth the OCC's requirements for national 
banks and Federal savings associations that seek to engage in certain 
corporate transactions or activities. It addresses the range of an 
institution's existence from chartering to dissolution and includes, 
among other things, business combinations, branching matters, operating 
subsidiaries, and dividend payments. In some cases, a national bank or 
Federal savings association is required to apply to engage in a certain 
transaction or activity while in other situations the bank or savings 
association must submit a notice to the OCC either for informational 
purposes or as a means for providing the OCC with the opportunity to 
object to the transaction or activity. On March 5, 2020, the OCC issued 
a notice of proposed rulemaking (proposal) to revise part 5.\1\ This 
proposal is part of the OCC's continual review of its regulations to 
eliminate outdated or otherwise unnecessary provisions and to clarify 
or revise requirements imposed on national banks and Federal savings 
associations where possible and when not inconsistent with safety and 
soundness.\2\
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    \1\ The proposed rule was published in the Federal Register on 
April 2, 2020. 85 FR 18728.
    \2\ These periodic reviews are in addition to the OCC's 
decennial review of its regulations as required by the Economic 
Growth and Regulatory Paperwork Reduction Act (EGRPRA). Public Law 
104-208 (1996), codified at 12 U.S.C. 3311(b). Section 2222 of 
EGRPRA requires that, at least once every 10 years, the OCC along 
with the other Federal banking agencies and the Federal Financial 
Institutions Examination Council (FFIEC) conduct a review of their 
regulations to identify outdated or otherwise unnecessary regulatory 
requirements imposed on insured depository institutions. 
Specifically, EGRPRA requires the agencies to categorize and publish 
their regulations for comment, eliminate unnecessary regulations to 
the extent that such action is appropriate, and submit a report to 
Congress summarizing their review. The agencies completed their 
second EGRPRA review on March 30, 2017 and published their report in 
the Federal Register. 82 FR 15900 (March 30, 2017).
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    The OCC received six substantive written comments on this proposal. 
These comments and the OCC's response are discussed in the next section 
of this Supplementary Information.

II. Description of the Final Rule

Rules of General Applicability (Part 5, Subpart A)

    Twelve CFR part 5, subpart A, sets forth the OCC's generally 
applicable rules and procedures for corporate activities and 
transactions of national banks and Federal savings associations. The 
OCC proposed substantive and technical changes to subpart A as 
explained below.
    Rules of General Applicability (Sec.  5.2) Section 5.2(b) provides 
that the OCC may adopt materially different procedures for a particular 
filing or class of filings in exceptional circumstances or for unusual 
transactions after providing notice to the applicant and any other 
party that the OCC determines should receive notice. The proposal would 
increase the OCC's flexibility to address unusual situations by 
providing that the OCC may adopt materially different procedures as it 
deems necessary and then using the term ``exceptional circumstances or 
unusual transactions'' as examples, but not limitations, as to when the 
OCC may deem it necessary to adopt materially different procedures. One 
commenter expressed concern that the phrase ``as it deems necessary'' 
seemed vague and suggested the OCC note specific instances where 
flexibility is needed to eliminate vagueness.
    The OCC disagrees with this commenter. The final rule includes 
examples--for exceptional circumstances or unusual transactions--that 
are intended to explain when the OCC may act while not limiting its 
ability in unforeseen cases where additional flexibility may be needed. 
Therefore, the OCC adopts this change as proposed.
    Definitions (Sec.  5.3) Section 5.3 defines terms that are used 
throughout part 5. The OCC proposed several new definitions to this 
section. First, the OCC proposed definitions for ``nonconforming 
assets'' and ``nonconforming activities.'' The OCC uses, but does not 
define, these terms in Sec. Sec.  5.23 and 5.24 (conversions to a 
Federal savings association or national bank, respectively) and Sec.  
5.33 (business combinations). The OCC proposed these definitions to 
mean assets or activities that are impermissible for a national bank or 
a Federal savings association, as applicable, to hold or conduct, or if 
permissible, are nonetheless held or conducted in a manner that exceeds 
limits applicable to national banks or Federal savings associations. 
Under this proposed definition, the term ``assets'' includes a national 
bank's or Federal savings association's investments in subsidiaries or 
other entities. The OCC did not receive any comments on these 
definitions and adopts them as proposed.
    Second, the OCC proposed to define the term ``previously approved 
activity'' to mean, in the case of a national bank, an activity 
approved in published OCC precedent for a national bank, an operating 
subsidiary of a national bank, or a non-controlling investment of a 
national bank; and in the case of a Federal savings association, an 
activity approved in published OCC or Office of Thrift Supervision 
(OTS) precedent for a Federal savings association, an operating 
subsidiary of a Federal savings association, or a pass-through 
investment of a Federal savings association.\3\ The OCC proposed this 
definition to provide more clarity given the repeated use of this 
standard in Sec. Sec.  5.34, 5.36, 5.38, and 5.58. One commenter 
discussed this definition. This commenter requested that the OCC 
clarify that this definition includes a previous OCC approval for any 
bank, not only the bank in question. The intention of this definition 
is to apply to

[[Page 80405]]

all previously approved activities. To clarify this, the OCC has 
changed ``an activity'' to ``any activity'' in this definition in the 
final rule.
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    \3\ The OCC notes that this definition would not apply to an 
activity that a statute, regulation, or court decision has 
subsequently made impermissible.
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    The preamble to the proposed rule also noted that for references to 
previously approved activities, national banks and Federal savings 
associations may consult the OCC's publications Comparison of the 
Powers of National Banks and Federal Savings Associations and 
Activities Permissible for National Banks and Federal Savings 
Associations, Cumulative.\4\ In response to the commenter, the OCC 
clarifies that these documents are not exclusive examples of where to 
find published OCC precedent. The OCC also publishes interpretive 
letters and corporate decisions that may be used as precedent in its 
monthly Interpretations and Actions.\5\ This commenter also suggested 
that the OCC publish its unpublished interpretive letters regarding 
permissible activities. The OCC notes that it endeavors to publish all 
pertinent interpretive letters.
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    \4\ These references are available at https://www.occ.gov/publications-and-resources/publications/banker-education/files/pub-comparison-powers-national-banks-fed-sav-assoc.pdf and https://www.occ.gov/publications-and-resources/publications/banker-education/files/pub-activities-permissible-for-nat-banks-fed-saving.pdf.
    \5\ See https://occ.gov/topics/charters-and-licensing/interpretations-and-actions/index-interpretations-and-actions.html.
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    Third, the OCC defines the term ``well capitalized'' differently in 
various sections of part 5 by cross-referencing to other OCC rules. The 
OCC proposed to add a definition of ``well capitalized'' to Sec.  5.3 
that incorporates these cross-references so that the individual cross-
references in other sections are no longer needed. The OCC received no 
comments on this change and adopts it in the final rule as proposed, 
with one technical change to make a cross-reference citation more 
specific. As noted in the preamble to the proposed rule, this new 
definition does not make any substantive changes.
    Fourth, the OCC proposed to add the term ``well managed'' to Sec.  
5.3. Currently, part 5 contains two different definitions of ``well 
managed.'' Consistent with section 5136A of the Revised Statutes (12 
U.S.C. 24a), Sec.  5.39 generally defines ``well managed'' for purposes 
of financial subsidiaries as a 1 or 2 composite rating under the 
Uniform Financial Institutions Rating System and at least a rating of 2 
for management. By contrast, Sec. Sec.  5.34 and 5.38, governing 
national bank and Federal savings association operating subsidiaries, 
respectively, generally define ``well managed'' as a 1 or 2 composite 
rating without reference to the management rating. Sections 5.35 (bank 
service company investments), 5.36 (other equity investments by a 
national bank), and 5.58 (Federal savings association pass-through 
investments) cross-reference to the Sec. Sec.  5.34 or 5.38 definition. 
Additionally, Sec.  5.59(h)(2)(ii)(A) requires a Federal savings 
association to be well managed to be eligible for expedited review when 
acquiring or establishing a service corporation.
    The OCC proposed a single definition of ``well managed'' applicable 
throughout part 5 to eliminate confusion between the two definitions 
and to further the OCC's supervisory objectives.\6\ The financial 
subsidiary statute, 12 U.S.C. 24a, defines ``well managed'' to include 
the management rating, and the OCC proposed to use this definition for 
national banks and Federal savings associations. The proposal also 
defined ``well managed'' for Federal branches and agencies of foreign 
banks as meaning the composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance and assets quality) 
of 1 or 2, and at least a rating of 2 for risk management.
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    \6\ There is one instance of the term ``well managed'' in 
current part 5 that does not follow this definition. Specifically, 
12 CFR 5.59(e)(7)(i) requires that each Federal savings association 
``be well managed and operate safely and soundly.'' This provision 
is not directly applicable to any filing procedures but is rather a 
general statement of appropriate management and safety and soundness 
standards. For example, pursuant to Sec.  5.59(e)(7)(ii) the OCC may 
limit a Federal savings association's investment in a service 
corporation, or limit or refuse to permit any activity of a service 
corporation, for supervisory, legal, or safety or soundness reasons.
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    The OCC received one comment on this proposed definition. This 
commenter opposed the inclusion of management rating in a definition of 
``well managed,'' except as required by statute. It stated that the 
financial subsidiary statutory definition of ``well managed'' was 
intended for new non-traditional activities, not core banking 
activities, and that using the new ``well managed'' definition could 
cause some banks to conduct activities in the bank rather than the 
subsidiary. The commenter noted that this could create safety and 
soundness issues because the bank would no longer benefit from having 
the activities conducted in a separate entity. In addition, this 
commenter stated that, in any event, the CAMELS management rating is in 
need of change.
    The OCC disagrees with this commenter. As the OCC explained in the 
preamble to the proposed rule, the OCC believes that a single 
definition of ``well managed'' would enhance bank safety and soundness 
and provide a clearer and more consistent standard for national banks 
and Federal savings associations. In addition, the OCC finds that the 
components reflected in an entity's management rating, such as bank 
controls, are relevant to the establishment of operating subsidiaries, 
investments in bank service companies, other equity investments of a 
national bank and pass-through investments of a Federal savings 
association, and Federal savings association investments in service 
corporations. As explained in the preamble to the proposed rule, a 
national bank, Federal savings association, or Federal branch or agency 
with a 2 composite rating but a 3 management, or risk management, 
rating warrants additional scrutiny. Further, the OCC notes that the 
definition of ``well managed'' in Regulation K (international banking) 
and Regulation Y (bank holding companies) of the Board of Governors of 
the Federal Reserve System (Federal Reserve Board) also includes both 
composite and management ratings.\7\
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    \7\ See 12 CFR 211.2(z); 12 CFR 225.2(s). Additionally, the OCC 
notes that the definition of ``well managed'' in Regulation Y 
applies to both expedited processing, see, e.g., 12 CFR 
225.14(c)(2), and for an entity qualifying to be a financial holding 
company, see, e.g., 12 CFR 225.82. These are analogous, for example, 
to the revised usage of ``well managed'' for processing procedures 
to establish an operating subsidiary in Sec.  5.34 and for a 
national bank qualifying to invest in a financial subsidiary in 
Sec.  5.39, respectively.
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    This commenter also requested that if the OCC adopts the proposed 
``well managed'' definition, the definition should include reasonable 
exceptions to the associated filing requirements. However, the proposed 
definition provides that it applies unless the OCC otherwise determines 
in writing. This provision allows the OCC to make exceptions in certain 
cases as warranted.
    Finally, this commenter requested a transition period in event a 
bank receives a new rating, noting that without such a transition 
period a bank might be required to file an application where it already 
has begun negotiating or entering into an agreement to, for example, 
make a non-controlling investment, or otherwise relied on the fact that 
only an after-the-fact notice would be required. Specifically, the 
commenter recommended that the required ``compliance date'' of a new 
rating, particularly if it creates new requirements for the bank, 
should be several months after it is assigned or there should be an 
exception for any agreement already entered into at the

[[Page 80406]]

time the rating is assigned. The OCC disagrees. For safety and 
soundness reasons, a national bank's or Federal savings association's 
rating should apply to all its activities as of the date the OCC issues 
the rating. Furthermore, a national bank or Federal savings association 
may mitigate any rating changes by including appropriate regulatory 
approval clauses in agreements with third parties.
    For the reasons discussed above, the OCC adopts the definition of 
``well managed'' as proposed.
    The proposed rule also noted that the OCC was considering an 
amendment to the definition of ``short-distance relocation.'' 
Currently, moving the premises of a branch or main office of a national 
bank or a branch or home office of a Federal savings association is a 
short-distance relocation if the move is within: (1) A one-thousand 
foot-radius of the site if the branch, main office, or home office is 
located within a principal city of a metropolitan statistical area 
(MSA); (2) a one-mile radius of the site if the branch, main office, or 
home office is not located within a principal city but is located 
within an MSA; or (3) a two-mile radius of the site if the branch, main 
office, or home office is not located within an MSA. Under the branch 
relocation provisions in Sec.  5.30 (national banks) and Sec.  5.31 
(Federal savings associations) and the main office and home office 
relocation provisions in Sec.  5.40, short-distance relocations have a 
shorter public comment and OCC approval period than other relocations. 
Additionally, the OCC finds the short-distance relocation provision to 
be equivalent to a ``relocation'' for the purposes of branch closings 
under section 42 of the Federal Deposit Insurance Act (FDI Act) (12 
U.S.C. 1831r-1).
    The preamble to the proposed rule noted that the OCC was 
considering doubling the distances for short-distance relocations to 
allow greater flexibility and to reduce regulatory burden for office 
relocations. The preamble noted that any amended definition would not 
apply to a branch that would be relocated from a low- or moderate-
income (LMI) area to a non-LMI area.
    The OCC received three comments on this possible amendment. One 
commenter supported the change and agreed that it would promote 
flexibility and reduce regulatory burden without depriving customers of 
appropriate notice. However, the commenter expressed concerns about 
having a separate standard for LMI areas because it could affect 
statistics on bank closures by more heavily weighing branch relocations 
in LMI areas relative to relocation in non-LMI areas. Another commenter 
stated that the expanded definitions for ``short distance relocations'' 
should not apply when the branch is relocated from an LMI tract to 
another LMI tract in addition to the suggested exclusion for branches 
relocated from an LMI tract to a non-LMI tract. The third commenter 
stated that the suggested definition may disproportionately adversely 
impact LMI persons and that the OCC should exempt branches in LMI areas 
or that largely service LMI customers from the definition change. 
Further, this commenter advocated no change to the definition, noting 
that it is not only LMI customers who would be inconvenienced.
    The OCC has decided not to expand the distances in the definition 
of ``short-distance relocation'' in the final rule. In light of these 
public comments and after further reviewing this suggestion, the OCC 
believes that a bifurcated definition would increase burden on national 
banks without providing a compensating benefit. In addition, the 
exception may cause confusion for banks if a census tract LMI status 
changes. However, any increase in distance without excluding LMI tracts 
would negatively affect LMI communities. Therefore, the current 
definition of ``short distance relocation'' remains unchanged.
    Finally, the OCC proposed technical changes to Sec.  5.3. The OCC 
received no comments on these technical changes and adopts them as 
proposed. First, current Sec.  5.3 defines ``applicant'' as a ``person 
or entity that submits a notice or application to the OCC under'' part 
5. However, this usage of the term ``applicant'' is confusing because 
it covers persons who submit an application or a notice. Accordingly, 
the final rule changes the term ``applicant'' to ``filer'' to more 
clearly cover both a person who files an application or a notice. The 
final rule makes conforming changes throughout part 5.
    Second, the final rule adds a new definition for ``Appropriate 
Federal banking agency'' that cross-references the definition contained 
in section 3(q) of the FDI Act, 12 U.S.C. 1813(q).
    Third, the final rule adds a new definition clarifying that ``MSA'' 
means metropolitan statistical area as defined by the Director of the 
Office of Management and Budget (OMB).\8\
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    \8\ According to the OMB,''[t]he general concept of a 
metropolitan statistical area is that of an area containing a large 
population nucleus and adjacent communities that have a high degree 
of integration with that nucleus.'' 75 FR 37246 (June 28, 2010). 
These standards are then applied to census data to delineate the 
metropolitan statistical areas.
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    Fourth, part 5 currently defines ``notice'' to mean a submission 
notifying the OCC that a national bank or Federal savings association 
intends to engage in or has commenced certain activities or 
transactions. The definition notes that the specific meaning depends on 
context and ``may require the filer to obtain prior OCC approval before 
engaging in the activity or transaction.'' As described later in this 
Supplementary Information, the final rule generally changes the term 
``notice'' to ``application'' for activities or transactions that 
require prior OCC approval. Therefore, the final rule removes the 
quoted language from the definition.
    Fifth, the final rule adds abbreviations for the former OTS, the 
Federal Deposit Insurance Corporation (FDIC), and generally accepted 
accounting principles as used in the United States (GAAP) to make their 
use consistent throughout part 5.
    Finally, to reflect the more current regulatory drafting style, the 
final rule removes the paragraph designations in Sec.  5.3 and makes 
conforming changes to cross-references in Sec.  5.3 and other OCC 
rules.
    The final rule also makes additional technical corrections by 
removing the phrase ``as defined in Sec.  5.3'' and related language 
throughout part 5. The definitions in Sec.  5.3 apply to all of part 5 
so these cross-references are not necessary.
    Filing required (Sec.  5.4) Section 5.4 requires a depository 
institution to file an application or notice with the OCC to engage in 
certain corporate activities and transactions and provides general 
information on this filing requirement. Section 5.4(f) currently 
encourages a potential filer to contact the appropriate OCC licensing 
office to determine the need for a prefiling meeting, and it 
specifically provides that the OCC decides whether to require a 
prefiling meeting on a case-by-case basis. The proposal included more 
general guidance on when a filer should seek a prefiling meeting with 
the OCC. Specifically, the OCC proposed to include a new sentence 
advising potential filers with novel, complex, or unique proposals to 
contact the appropriate OCC licensing office early in the development 
of the proposal to help identify and consider relevant policy issues. 
The OCC received no comments on this change and adopts it as proposed.

[[Page 80407]]

    Additionally, the OCC proposed to move the certification 
requirement in current Sec.  5.13(h) to new Sec.  5.4(g). Current Sec.  
5.13(h) requires filers to certify that material submitted to the OCC 
contains no material misrepresentations or omissions. The OCC also may 
review and verify any information filed in connection with a notice or 
an application. Section 5.13(h) further provides that material 
misrepresentations or omissions may be subject to enforcement actions 
and other penalties, including criminal penalties under 18 U.S.C. 1001. 
As discussed below, the OCC proposed to revise Sec.  5.13(h) to clarify 
the procedures regarding nullification of decisions. The certification 
requirement in Sec.  5.13(h) does not fit well in the revised provision 
so the OCC proposed to move it to Sec.  5.4 with other provisions 
relating to the form of the filing, as new paragraph (g).
    The OCC received one comment on new Sec.  5.4(g). This commenter 
stated that because proposed Sec.  5.4(g) makes no mention of a legal 
standard for culpability, it is unclear whether a filer would be 
subject to criminal penalties even if a material misrepresentation or 
omission were not made knowingly and willfully. The commenter suggested 
that in order to provide clarity regarding the applicable legal 
standard to which criminal penalties may apply when signing a 
certification, the OCC should amend proposed Sec.  5.4(g) to qualify 
that filers who ``knowingly and willfully'' make material 
misrepresentations or omissions in a filing may be subject to 
enforcement and criminal penalty under 18 U.S.C. 1001. The commenter 
also suggested that the OCC update its standard forms accordingly. 
However, the OCC is not the appropriate agency to make representations 
about the specific elements of a criminal statute. Further, the OCC 
notes that the existing phrasing of ``may be subject to enforcement 
action and other penalties'' in the rule text indicates that section 
1001 may or may not be applicable given the circumstances of a 
particular case, and that every misrepresentation or omission will not 
necessarily lead to a violation of section 1001. Section 1001 only 
would be applicable if the misrepresentation or omission meets the 
standard for a violation set forth in section 1001. Therefore, the OCC 
declines to address this comment in Sec.  5.4(g).
    Filing fees (Sec.  5.5) Section 5.5(a) provides the procedure for 
submitting filing fees to the OCC. The current rule requires payment to 
the OCC by check, money order, cashier's check, or wire transfer. The 
OCC proposed updating this provision by providing that a filer can pay 
the fees by check payable to the OCC or by other means acceptable to 
the OCC. The OCC received no comments on this change and adopts it as 
proposed. The OCC notes that it does not currently charge filing fees 
for licensing filings and is not imposing any fees as part of this 
final rule.
    Investigations (Sec.  5.7) Section 5.7 provides the OCC with 
examination and investigation authority related to a filing. As 
discussed in the ``Background Investigations'' booklet of the 
Comptroller's Licensing Manual, the OCC routinely engages in background 
investigations of filers and other individuals involved in filings for 
new charters, changes in bank control, and changes in directors and 
senior executive officers. As part of these background investigations, 
the OCC collects fingerprints and submits them to the Federal Bureau of 
Investigation for a national criminal history background check. The OCC 
proposed adding a new paragraph (b) to Sec.  5.7 to codify this 
procedure. The OCC also proposed conforming changes to other sections 
in part 5 to clarify when it collects fingerprints. The OCC received 
one comment in support of these changes. The final rule includes these 
changes as proposed.
    Public availability, Comments, and Hearings and other meetings 
(Sec. Sec.  5.9, 5.10, 5.11) Section 5.9 addresses the public 
availability and confidential treatment of filings. Section 5.10 
provides the process for public comment periods and the submission of 
public comments. Section 5.11 provides the process for hearings and 
public and private meetings. The OCC proposed changing the terms 
``application'' to ``filing'' and ``applicant'' to ``filer'' in these 
sections to reflect the more general terminology proposed in this rule. 
Furthermore, each of these sections currently uses the term 
``interested persons'' to refer to persons other than the filer who 
seek to interact with a filing or related procedure. The OCC 
understands the term ``interested persons'' to mean any person who is 
or may wish to be involved in the licensing process. Such a person may, 
but need not, have particular financial, pecuniary, or other interest 
in the transaction itself, the filer, or other party to the 
transaction. In the proposal, the OCC invited comment about whether the 
term ``interested persons'' is sufficiently clear, or whether a change 
in terminology would be helpful to indicate the breadth of this 
provision. The OCC received no comments on changing the terms 
``application'' to ``filing'' and ``applicant'' to ``filer'' and adopts 
these changes in the final rule. Further the OCC received no comments 
in the term ``interested persons'' and so does not change this term in 
the final rule.
    Decisions (Sec.  5.13) Section 5.13 contains the OCC's procedures 
for acting on a filing. Paragraph (a)(2) of this section provides the 
procedures for the OCC's expedited review, including extending the time 
frame for reviewing or removing a filing from expedited review. 
Specifically, the OCC may change the expedited review procedures if it 
concludes that the filing, or an adverse comment regarding the filing, 
presents a significant supervisory, Community Reinvestment Act (CRA) 
\9\ (if applicable), or compliance concern or raises a significant 
legal or policy issue requiring additional OCC review. Paragraph 
(a)(2)(ii) of Sec.  5.13 provides that the OCC will not change the 
expedited procedures if it determines, among other things, that an 
adverse comment does not raise a significant supervisory, CRA (if 
applicable), or compliance concern or a significant legal or policy 
issue, or is frivolous or filed primarily as a means of delaying action 
on the filing. The OCC proposed adding non-substantive comments to this 
list to better align the regulation with OCC policy. The proposal 
stated that the OCC considers a comment to be ``non-substantive'' if it 
is: (1) A generalized opinion that a filing should or should not be 
approved; or (2) a conclusory statement, lacking factual or analytical 
support.
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    \9\ 12 U.S.C. 2901 et seq.
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    The OCC received three comments on this proposed change. One 
commenter supported the addition of ``non-substantive'' to the list of 
items that do not remove a filing from expedited processing stating 
that this change would provide commenters with a clear standard and 
reduce unfair or unnecessary delays where a comment lacks factual or 
analytical support.
    Another commenter opposed this change stating that it would 
increase the risk that the OCC could arbitrarily classify comments as 
non-substantive. The OCC disagrees with this commenter. For example, in 
the analogous context of informal rulemaking under the Administrative 
Procedure Act (APA),\10\ agencies need only ``consider and respond to 
significant comments'' received during the public comment period.\11\ 
Courts have not interpreted the APA as requiring agencies to respond to

[[Page 80408]]

insubstantial comments.\12\ As stated by the Supreme Court, 
``administrative proceedings should not be a game or a forum to engage 
in unjustified obstructionism by making cryptic and obscure reference 
to matters that `ought to be' considered and then, after failing to do 
more to bring the matter to the agency's attention, seeking to have 
that agency determination vacated on the ground that the agency failed 
to consider matters `forcefully presented.' '' \13\
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    \10\ 5 U.S.C. 551 et seq.
    \11\ See, e.g., Perez v. Mortg. Bankers Ass'n, 575 U.S. 92, 96 
(2015).
    \12\ See Thompson v. Clark, 741 F.2d 401, 408-09 (D.C. Cir. 
1984); Auto. Parts & Accessories Ass'n v. Boyd, 407 F.2d 330, 338 
(D.C. Cir.1968).
    \13\ Vermont Yankee Nuclear Power Corp. v. Natural Res. Def. 
Council, Inc., 435 U.S. 519, 553-54 (1978). See also, e.g., 
Interstate Natural Gas Ass'n of Am. v. Fed. Energy Regulatory 
Comm'n, 494 F.3d 1092, 1096 (D.C. Cir. 2007) (```[C]omments must be 
significant enough to step over a threshold requirement of 
materiality before any lack of agency response or consideration 
becomes of concern' . . . and `[t]he APA requirement of agency 
responsiveness to comments is subject to the common-sense rule that 
a response be necessary.'''(quoting Portland Cement Ass'n v. 
Ruckelshaus, 486 F.2d 375, 294 (D.C. Cir. 1973) and Natural Res. 
Def. Council, Inc. v. U.S. Envtl. Prot. Agency, 859 F.2d 156, 188 
(D.C. Cir. 1988) (per curiam)).
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    The regulation's requirement that a party seeking relief must 
provide sufficient and supported information to warrant review of its 
claim is fully consistent with established principles that wholly 
speculative or unsupported comments need not be addressed.\14\ Further, 
the receipt of a large number of comments that set forth a particular 
view regarding a proposal does not necessarily render those comments 
``significant'' or material \15\ if they do not contain the requisite 
level of analytical or substantive content.
---------------------------------------------------------------------------

    \14\ See Home Box Office, Inc. v. Fed'l Commc'ns Comm'n, 567 
F.2d 9, 35 n.58 (D.C. Cir. 1977) (``Moreover, comments which 
themselves are purely speculative and do not disclose the factual or 
policy basis on which they rest require no response. There must be 
some basis for thinking a position taken in opposition to the agency 
is true.'').
    \15\ See Hillsdale Envtl. Loss Prevention, Inc. v. U.S. Army 
Corps of Eng'rs, 702 F.3d 1156, 1181-82 (10th Cir. 2012) (Holding 
that ``[e]ven if 90% of the comments . . . were negative, this 
merely demonstrates public opposition, not a substantial dispute'' 
concerning the factors that the agency had to consider per the 
statute).
---------------------------------------------------------------------------

    The situation also may be analogized with the standards applicable 
to setting forth minimally viable claims in litigation. A Federal 
plaintiff has an ``obligation to provide the `grounds' of his 
`entitle[ment] to relief' [that] requires more than labels and 
conclusions, and a formulaic recitation of the elements of a cause of 
action will not do.'' \16\ ``Threadbare recitals of the elements of a 
cause of action, supported by mere conclusory statements, do not 
suffice.'' \17\
---------------------------------------------------------------------------

    \16\ Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) 
(quoting Fed. R. Civ. P. 8(a)(2) (first alteration in original)).
    \17\ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
---------------------------------------------------------------------------

    The OCC believes that either of these standards, as expressed by 
the Supreme Court, are analogous to those proposed for a comment on a 
licensing filing to warrant a change to expedited procedures. The 
requirement that a comment not be ``non-substantive'' to be considered 
reflects that the OCC will not ``accept as true a legal conclusion 
couched as a factual allegation.'' \18\ Similarly, the requirement is 
consistent with the APA's provisions governing formal rulemaking 
proceedings.\19\ Thus, a comment containing merely a conclusory 
statement would not be sufficient to change the expedited processing 
procedures. It is appropriate for the OCC to require that a comment 
must have factual and analytical support to allow the OCC to determine 
that one of the concerns set forth in Sec.  5.13(a)(1) has indeed been 
raised, thus warranting additional OCC review.\20\
---------------------------------------------------------------------------

    \18\ Papsan v. Allain, 478 U.S. 265, 286 (1986).
    \19\ See 5 U.S.C. 556(d) (permitting agency officials or 
administrative law judges overseeing formal rulemaking proceedings 
to exclude ``irrelevant, immaterial, or unduly repetitious 
evidence'').
    \20\ Cf. Twombly, 550 U.S. at 556 (requiring that an antitrust 
complaint contain ``enough fact to raise a reasonable expectation 
that discovery will reveal evidence of illegal agreement'').
---------------------------------------------------------------------------

    Accordingly, the OCC believes that the criteria for being ``non-
substantive'' set forth in the amendment provides a clear standard for 
when the OCC will consider a comment to be non-substantive and provides 
commenters with guidance on submitting views on a filing. Further, the 
OCC notes that if a commenter believes that the OCC inadequately 
considered a comment, they may have grounds to challenge the OCC's 
licensing decision under the APA.
    This commenter also stated that the final rule should describe the 
procedure by which the OCC would notify the commenter if the OCC 
determines a comment to be non-substantive and the procedure for re-
submission of the comment. The OCC also disagrees with this comment. 
The OCC does not intend to notify a commenter that it finds its comment 
non-substantive. As indicated above, the OCC believes the provision as 
proposed adequately explains the OCC's standards for non-substantive 
comments and that these standards should inform commenters when the OCC 
would find a comment to be non-substantive.
    Another commenter requested the OCC to define and explain the term 
``significant'' as used in the current rule to describe supervisory, 
CRA, and compliance concerns and to provide the criteria it would use 
to determine the significance of concerns. In response to this comment, 
the OCC intends ``significant'' as used in the current and final rule 
to mean a ``substantive'' comment that raises material concerns 
requiring a longer review period to determine the impact on the 
application. A ``substantive'' comment is one that includes specific, 
concrete statements raising an issue on the relevant subject with 
supporting argument and material. A comment may be ``substantive'' but 
not ``significant'' if it does not raise concerns for which the OCC 
would need a longer time period to review to determine their impact on 
the application (e.g., they are relatively minor or can be addressed in 
other ways). The OCC notes that it considers all comments received.
    This commenter also requested that the final rule clarify whether a 
``prior filing'' means a filing from the current filer or a different 
bank that shares the same assessment area. This provision is referring 
to the current filer. As requested by the commenter, the final rule 
includes language to clarify this point.
    Current Sec.  5.13(a)(2)(ii) also provides that the OCC will not 
change the expedited procedures if the adverse comment raises a CRA 
concern that the OCC determines has been satisfactorily resolved. The 
current rule states that the OCC considers a CRA concern to be 
satisfactorily resolved if the OCC previously reviewed (e.g., in an 
examination or application) a concern presenting substantially the same 
issue in substantially the same assessment area during substantially 
the same time, and the OCC determines that the concern would not 
warrant denial or imposition of a condition on approval of the 
application. The OCC proposed amending this provision to expand what is 
meant by ``previously reviewed'' to include other supervisory activity, 
in addition to an examination, and a prior filing, which includes 
notices and applications.
    One commenter read this proposed amendment to mean that the OCC 
would not consider a comment to be substantive if it addresses an issue 
the OCC previously resolved during an examination or application and as 
such opposed this change, noting that it would increase the 
arbitrariness of the OCC's rulings. However, the commenter misreads the 
proposal. The proposal does not classify an already addressed issue as 
non-substantive. Instead, a CRA concern that has been satisfactorily 
resolved is currently, and remains in the final rule, a separate basis 
for not changing expedited processing under

[[Page 80409]]

Sec.  5.13(a)(2). The only proposed change to this provision was to 
broaden the types of activities in which the concern had already been 
addressed. The commenter does not address this aspect of the proposal. 
Further, as stated in the ``Public Notice and Comments'' booklet of the 
Comptroller's Licensing Manual, ``[t]he OCC construes these standards 
[for satisfactorily resolved CRA concerns] narrowly. The OCC may 
consider a CRA concern to be unresolved, for example, if the agency 
receives new information on a matter that it reviewed previously.'' 
\21\
---------------------------------------------------------------------------

    \21\ ``Public Notice and Comments'' booklet of the Comptroller's 
Licensing Manual, Version 1.1, Nov. 2017, p. 8. The OCC note's that 
one commenter requested that this language regarding new information 
be included in the regulatory text. However, the OCC believes that 
it is not necessary to include this language in the rule, and that 
the inclusion of this language in the Supplementary Information of 
this final rule and in the Licensing Manual provides adequate 
explanation for how OCC construes as ``previously reviewed.''
---------------------------------------------------------------------------

    The OCC also proposed amending the introductory text to paragraph 
(a)(2) to reflect that some expedited review procedures in part 5 do 
not require the national bank or Federal savings association to be an 
eligible bank or eligible savings association, as defined in Sec.  5.3. 
In addition, the OCC proposed clarifying paragraphs (a)(2)(i) and (ii) 
by revising the punctuation and sentence structure so that it is easier 
to read.
    For these reasons, the OCC adopts these proposed amendments to 
Sec.  5.13 (a)(2) with the change discussed above. Additionally, the 
OCC is making additional technical amendments to paragraph (a)(2)(iii) 
to conform with the general change in terminology from ``application'' 
to ``filing'' in rules of general applicability.
    Paragraph (h) of Sec.  5.13 provides that the OCC may nullify a 
decision on a filing if: (1) The OCC discovers a material 
misrepresentation or omission after the OCC has rendered a decision on 
the filing; (2) the decision is contrary to law, regulation, or OCC 
policy; or (3) the OCC granted the decision due to clerical or 
administrative error or a material mistake of law or fact. The OCC's 
decisions on filings generally contain a statement that the ``OCC may 
modify, suspend or rescind this approval if a material change in the 
information on which the OCC relied occurs prior to the date of the 
transaction to which the decision pertains.'' The OCC proposed revising 
paragraph (h) to clarify that the OCC may nullify a decision on a 
filing either prior to or after consummation of the transaction and 
that the OCC may nullify a decision based on a material 
misrepresentation or omission in any information provided to the OCC in 
the filing or supporting materials. Additionally, the OCC proposed 
adding a new paragraph (i) that would provide that the OCC may modify, 
suspend, or rescind a decision on a filing if a material change in the 
information or circumstance on which the OCC relied occurs prior to the 
date of the consummation of the transaction to which the decision 
pertains. The OCC received no comments on these amendments to Sec.  
5.13(g) and new Sec.  5.13(i) and adopts them as proposed. As explained 
in the preamble to the proposed rule, these revisions are intended to 
clarify that nullification is based on the facts, law, and policy as 
they existed at the time of the OCC's decision. By contrast, 
modification, suspension, or rescission is based on a change in facts 
or circumstance from the time of the OCC's decision until consummation 
of the transaction to which the decision pertains.
    As indicated previously in this Supplementary Information, the 
final rule moves the provisions in current Sec.  5.13(h) regarding 
certification of the submitted filing and penalties for material 
misrepresentation and omissions in a filing to new paragraph Sec.  
5.4(g).

Organizing a National Bank or Federal Savings Association (Sec.  5.20)

    Section 5.20 provides the procedures and requirements involved in 
organizing a de novo national bank or Federal savings association. The 
OCC proposed two new definitions to Sec.  5.20(d). First, the OCC 
proposed defining ``principal shareholder'' as a person who directly or 
indirectly or acting in concert with one or more persons or companies, 
or together with members of their immediate family, will own, control, 
or hold 10 percent or more of the stock of the proposed national bank 
or Federal savings association. This definition is consistent with the 
definition used in the ``Background Investigations'' booklet of the 
Comptroller's Licensing Manual and the instructions for the Interagency 
Biographical and Financial Report.\22\ The OCC proposed this definition 
in conjunction with provisions related to background checks and 
fingerprint collections in Sec.  5.20(i)(3), discussed below.
---------------------------------------------------------------------------

    \22\ The Interagency Biographical and Financial Report is 
available on the OCC's website at https://www.occ.gov/static/licensing/form-ia-biographical-financial-report.pdf.
---------------------------------------------------------------------------

    Second, the OCC proposed clarifying that the term ``organizer'' 
means a member of the organizing group. This definition is not clearly 
stated in current Sec.  5.20.
    The OCC received no comments on these new definitions and adopts 
them as proposed.
    Paragraph (i) contains procedures for filing a charter application. 
The OCC proposed a new paragraph (i)(3) requiring each proposed 
organizer, director, executive officer, or principal shareholder to 
submit to the OCC the information prescribed in the Interagency 
Biographical and Financial Report and legible fingerprints. New 
paragraph (i)(3) permits the OCC to request additional information, if 
appropriate, and waive the requirements of that paragraph if the OCC 
determines it to be in the public interest. The OCC received no 
comments on this provision and adopts it as proposed. As discussed in 
the ``Charters'' booklet of the Comptroller Licensing Manual, the OCC 
generally conducts routine background checks on insiders, including 
proposed organizers, directors, executive officers, and controlling 
shareholders. This revision to Sec.  5.20(i), which is consistent with 
the final rule's background investigation changes in Sec.  5.7(b), 
codifies this process and authorizes the collection of fingerprints for 
charter applications.
    The OCC also proposed a number of technical changes to Sec.  5.20. 
First, in the definition of ``organizing group'' in Sec.  5.20(d)(7), 
the OCC proposed to change the term ``persons'' to ``individuals'' to 
more accurately reflect who may make up an organizing group. One 
commenter stated that further clarity is needed for changing this term. 
The OCC proposed this change to clarify that only individuals and not 
entities may serve in the organizing group, as provided by 12 U.S.C. 
21. Section 21 states that ``[a]ssociations for carrying on the 
business of banking . . . . may be formed by any number of natural 
persons, not less in any case than five.'' However, to be as consistent 
as possible with this statute, the final rule instead changes the term 
``persons'' to ``natural persons.'' Although 12 U.S.C. 21 only applies 
to national banks, this definitional change applies to both national 
banks and Federal savings associations. Second, in Sec.  
5.20(g)(4)(ii), the OCC proposed to change the phrase ``withdrawal of 
preliminary approval'' to ``nullification or rescission of preliminary 
approval'' to align with the terminology in proposed Sec. Sec.  5.13(h) 
and (i). Third, in Sec.  5.20(i), the OCC proposed to change the term 
``spokesperson'' to ``contact person'' in redesignated paragraph (i)(5) 
to conform to the use of this term in other paragraphs of this section. 
Fourth, in redesignated

[[Page 80410]]

paragraph (i)(5), the OCC proposed to change the term ``interested 
parties'' to ``relevant parties,'' which more accurately describes who 
the OCC should notify of its decision on an application. Lastly, the 
OCC proposed to remove the reference to 12 CFR part 197 in Sec.  
5.20(i), redesignated paragraph (i)(6)(iii), because the OCC has 
removed this regulation. The remaining citation, 12 CFR part 16, now 
applies to both national banks and Federal savings associations. The 
OCC received no comments on these technical changes and therefore 
adopts them as proposed, with an additional technical correction of 
cross-references in redesignated paragraph (i)(6)(i).
    The final rule makes one new technical correction to Sec.  5.20. It 
removes the reference to 12 CFR part 195, the Federal savings 
association CRA rule, in Sec.  5.20(e)(2)(ii) as of December 11, 2020. 
The OCC recently amended 12 CFR part 25 to include Federal savings 
associations and removed 12 CFR part 195 as of October 1, 2020.\23\
---------------------------------------------------------------------------

    \23\ See 85 CFR 34734 (June 5, 2020).
---------------------------------------------------------------------------

Federal Mutual Savings Association Charter and Bylaws (Sec.  5.21)

    Section 5.21 governs the procedures and requirements for charters 
and bylaws of Federal mutual savings associations. Pursuant to 
paragraph (f)(2), charter amendments are generally subject to prior 
approval by the OCC although, under paragraph (g), most applications 
for charter amendments are subject to expedited review and deemed 
approved as of the 30th day after filing unless the OCC notifies the 
filer that it has denied the amendment, or the amendment is not 
eligible for expedited review. An application is not eligible for 
expedited review if the charter amendment would render more difficult 
or discourage a merger, proxy contest, the assumption of control by a 
mutual account holder of the association, or the removal of incumbent 
management or involves a significant issue of law or policy. Paragraph 
(g) further provides that a notice is required within 30 days after 
adoption if the filer adopts the optional charter amendments contained 
in paragraph (g) without change.
    The OCC proposed to reorganize these provisions to clarify the 
procedures Federal mutual savings associations must follow in adopting 
charter amendments, to align the terminology in Sec.  5.21 with general 
usage in part 5, and to make other clarifying changes. As indicated in 
the preamble to the proposed rule, the OCC does not intend these 
changes to be substantive. The OCC received no comments on these 
amendments to Sec.  5.21 and adopts them as proposed, with technical 
amendments. Specifically, the final rule amends paragraphs (j)(2) to 
reflect the changes made by the OCC's interim final rule on Director, 
Shareholder, and Member Meetings.\24\ These amendments do not make any 
substantive changes to paragraph (j)(2) as proposed.
---------------------------------------------------------------------------

    \24\ See 85 FR 31943 (May 28, 2020). Because the final rule 
includes the changes made by the interim final rule, the OCC is not 
issuing a separate rulemaking to finalize the part 5 changes made by 
the interim final rule. Among other things, this interim final rule 
amended Sec. Sec.  5.21 and 5.22 to permit an association's bylaws 
to provide for telephonic or electronic participation of members and 
shareholders, as applicable, at both annual and special meetings. 
These amendments also provide that members or shareholders 
participating telephonically or electronically at these meetings 
will be deemed present in person for purposes of the quorum 
requirement in Sec. Sec.  5.21(j)(2)(v) or 5.22(k)(5), as 
applicable. In addition, this interim final rule requires Federal 
savings associations to have procedures in place for telephonic and 
electronic participation and provides associations with a choice of 
procedures to follow based on elected State corporate governance 
procedures, the Delaware General Corporation Law, or the Model 
Business Corporation Act. Further, this interim final rule clarifies 
that stock Federal savings associations may provide for telephonic 
or electronic participation at all board of directors meetings, as 
currently provided for mutual Federal savings associations. The OCC 
received one substantive comment letter on this interim final rule, 
which supported its amendments. In response to a request for comment 
in the preamble to this interim final rule, this commenter opposed 
any new risk management standards to mitigate any security risks 
arising from telephonic or electronic meetings, noting that new 
standards would be unnecessary given current safeguards and 
regulatory requirements. The OCC is not imposing any new risk 
management standards for telephonic or electronic meetings through 
this part 5 final rule.
---------------------------------------------------------------------------

    As a result of the final rule, all of this section's procedural 
requirements for adopting charter amendments are located in paragraph 
(f)(2). These amendments clarify that charter amendments are subject to 
a three-part regime: Application with expedited review, standard 
application, or notice. As a result, revised paragraph (g) now only 
contains provisions relating to optional charter amendments. 
Additionally, the final rule adds a new paragraph (f)(3) specifying 
that a charter amendment is effective once it is: (1) Approved by the 
OCC, if approval is required under paragraph (f)(2); and (2) adopted by 
the association provided the association follows the requirements of 
its charter in adopting the amendment. The final rule also makes a 
clarifying amendment to paragraph (g)(2) to reflect that change of a 
Federal savings association's title does not require prior OCC notice 
under Sec.  5.42, as is implied by the current paragraph (g)(2).\25\ 
The OCC intends no substantive change with this amendment.
---------------------------------------------------------------------------

    \25\ When provisions for Federal savings associations were added 
to Sec.  5.42, the OCC did not include the prior rule's advance 
notice requirement. See 80 FR 28383 (May 15, 2015).
---------------------------------------------------------------------------

    Current paragraph (j) of Sec.  5.21 governs the bylaws for Federal 
mutual savings associations. Paragraph (j)(2)(viii) requires the bylaws 
to specify that the Federal mutual association's board of directors 
consist of no fewer than five nor more than fifteen members unless the 
OCC has authorized a higher or lower number. However, unlike the 
corresponding provision for Federal stock savings associations, 12 CFR 
5.22(l)(2), paragraph (j)(2)(viii) does not explicitly address numbers 
of directors authorized by the former OTS. Accordingly, the final rule 
revises this paragraph to explicitly acknowledge that authorizations by 
the former OTS remain effective.
    Current paragraph (j)(3) contains the filing requirements for 
changes to Federal mutual savings association bylaws. Currently, all 
bylaw amendments require some sort of filing with the OCC. As with the 
charter amendments discussed above, the OCC reorganizes these 
provisions in the final rule to clarify the procedures Federal mutual 
savings associations must follow in adopting bylaw amendments and to 
align the terminology with that used in part 5. The OCC also is 
eliminating the filing requirement for savings associations that adopt 
without change the OCC's model or optional bylaws, thereby reducing 
burden for these Federal mutual savings associations. As a result, 
these amendments specify that bylaw amendments are subject to a four-
part regime: Application with expedited review, standard application, 
notice, and no filing required. As with the charter amendments, the 
final rule provides that a bylaw amendment is effective after approval 
by the OCC, if required, and adoption by the association, provided that 
the association follows the requirements of its charter and bylaws in 
adopting the amendment. Additionally, the final rule makes two 
additional technical changes. First it corrects a cross reference in 
paragraph (j)(3)(i)(A) to correctly refer to paragraph (j)(3)(i)(B). 
Second, it changes the heading of proposed paragraph (j)(3)(ii) from 
``Notice requirement'' to ``Corporate governance election and notice 
requirement'' to better reflect the subject of this paragraph.
    As discussed later in this Supplementary Information, the OCC 
proposed technical changes throughout part 5, including replacing the 
word ``shall'' with another appropriate word or words. These technical 
changes, as well as other minor proposed wording changes, are included 
in the model charter and bylaw provisions provided

[[Page 80411]]

in revised Sec.  5.21. As indicated in the preamble to the proposed 
rule, the OCC does not intend these technical changes to require any 
changes on the part of Federal mutual savings associations that use the 
current model language. Further, the OCC does not intend these 
technical changes to have any effect on the provisions or effectiveness 
of a Federal mutual savings association's current charter or bylaws.

Federal Stock Savings Association Charter and Bylaws (Sec.  5.22)

    Section 5.22 governs the procedures and requirements for Federal 
stock savings association charters and bylaws. Section 5.22 generally 
parallels Sec.  5.21, which applies to Federal mutual savings 
association charters and bylaws. The OCC proposed equivalent changes to 
Sec.  5.22 as proposed for Sec.  5.21. The OCC also proposed two 
additional technical amendments to Sec.  5.22. Section 5.22 contains 
sample charter and bylaw provisions, and paragraph (g)(7) provides an 
optional ``Section 8'' for Federal stock savings association charters 
following mutual to stock conversions. This optional section contains a 
definition of ``acting in concert.'' The OCC proposed minor wording 
changes to this definition for consistency with the definition of this 
term in the OCC's change in bank control regulation, Sec.  5.50. The 
OCC also proposed correcting a cross-reference to 12 CFR part 192 in 
paragraph (e). The OCC received no comments on the revisions to Sec.  
5.22 and adopts them as proposed, with additional technical amendments. 
First, as discussed above regarding Sec.  5.21, the final rule amends 
paragraph (g)(1) to reflect that change of a Federal savings 
association's title does not require prior OCC notice under Sec.  5.42. 
Second, the final rule corrects the cross-reference in paragraph (i) to 
the form ``Federal stock charter.'' Third, the final rule changes the 
heading in proposed paragraph (j)(2)(ii) from ``Notice requirement'' to 
``Corporate governance election and notice requirement'' to better 
reflect the subject of this paragraph. Fourth, the final rule amends 
paragraphs (k)(1) and (l)(3) and (8) to reflect the changes made by the 
OCC's interim final rule on Director, Shareholder, and Member 
Meetings.\26\ Fifth, the final rule corrects cross-references in 
paragraphs (k)(2) and (k)(4)(ii). Finally, the final rule amends 
paragraph (m)(2) to remove the sentence that provides that employment 
contracts shall conform with 12 CFR 163.39 because the OCC removed 
Sec.  163.39 in a separate final rule.\27\
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    \26\ See 85 FR 31943 (May 28, 2020).
    \27\ See 85 FR 42630 (July 14, 2020).
---------------------------------------------------------------------------

Conversion To Become a Federal Savings Association (Sec.  5.23) and 
Conversion To Become a National Bank (Sec.  5.24)

    Sections 5.23 and 5.24 are largely parallel rules that provide the 
procedures and standards for OCC review and approval of an application 
by an institution to convert to a Federal savings association or 
national bank, respectively. The OCC proposed a number of amendments to 
these sections and did not receive any comments. Therefore, the OCC 
adopts these amendments as proposed.
    First, Sec.  5.23(d)(2)(ii)(A) and 5.24(e)(2)(i) each require the 
president or other duly authorized officer to sign the conversion 
application. OCC applications also require an authorized signature. 
However, these sections are the only provisions in part 5 that require 
an authorized officer to sign the application. The final rule removes 
Sec. Sec.  5.23(d)(2)(ii)(A) and 5.24(e)(2)(i) because the OCC does not 
find it necessary to specify this signature requirement in a 
regulation.
    Second, the ``Conversions to Federal Charter'' booklet of the 
Comptroller's Licensing Manual indicates that filers should include a 
list of directors and senior executive officers of the converting 
institution as well as a list of individuals, directors, and 
shareholders who directly or indirectly, or acting in concert with one 
or more persons or companies, or together with members of their 
immediate family, do or will own, control, or hold 10 percent or more 
of the converting institution's stock. It is necessary for the OCC to 
have a complete list of these individuals because the OCC generally 
conducts routine background investigations as part of the application 
process. The final rule codifies these requirements in Sec. Sec.  
5.23(d)(2)(ii) and 5.24(e)(2). Additionally, the final rule makes a 
technical change to redesignated Sec.  5.23(d)(2)(ii)(F) to correctly 
reference Sec.  5.58 for Federal savings association equity 
investments, rather than Sec.  5.36, which applies to national banks.
    Furthermore, as proposed, the final rule adds a new paragraph to 
each of these rules, Sec. Sec.  5.23(d)(2)(iv) and 5.24(e)(4), 
providing that the OCC may require directors and senior executive 
officers of the converting institution to submit the Interagency 
Biographical and Financial Report and legible fingerprints. This 
amendment codifies the background investigation process set forth in 
the ``Conversions to Federal Charter'' booklet of the Comptroller's 
Licensing Manual and specifically authorizes the collection of 
fingerprints for conversion applications, consistent with the 
background investigation changes proposed to other sections in this 
final rule.
    Sections 5.23(d)(4) and 5.24(h) provide for expedited review for 
conversion from an eligible national bank to a Federal savings 
association, and vice versa. Currently, this conversion application is 
deemed approved as of the 60th day after the OCC receives the filing. 
As noted in the preamble to the proposed rule, the OCC believes that it 
can review and decide these conversion applications in a shorter period 
because it already supervises an entity eligible to use the expedited 
review process. Accordingly, the final rule decreases the time period 
for the expedited review to 45 days. The final rule also makes a 
technical change to Sec.  5.23(d)(4) to remove the modifier 
``national'' before bank as the defined term in Sec.  5.3 is ``eligible 
bank.'' This deletion does not change the scope of institutions 
eligible for expedited review as only a national bank, and not a State 
bank, may be an eligible bank under the definition in Sec.  5.3.

Fiduciary Powers of National Banks and Federal Savings Associations 
(Sec.  5.26)

    Section 5.26 contains the application requirements and processes 
for a national bank or Federal savings association to engage in the 
exercise of fiduciary powers. Paragraph (e)(2)(i)(C) requires a 
national bank or Federal savings association to submit sufficient 
biographical information on proposed trust management personnel as part 
of an application for fiduciary powers. The OCC proposed two changes to 
this paragraph and did not receive any comments. Therefore, the OCC 
adopts them as proposed. Because the scope of the term ``trust 
management personnel'' in paragraph (e)(2)(i)(C) is unclear, the final 
rule clarifies that the biographical information is required for 
proposed senior trust management personnel, as identified by the OCC. 
The final rule also provides that the application required in paragraph 
(e)(2)(i)(C) include, if requested by the OCC, the Interagency 
Biographical and Financial Report and legible fingerprints for these 
individuals, consistent with the background investigation changes made 
to other sections of part 5 by this final rule.
    Section 5.26(e)(6) requires a national bank or Federal savings 
association to submit a written notice to the OCC no later than 10 days 
after it begins

[[Page 80412]]

previously approved fiduciary activities in additional States. The OCC 
proposed to reorganize this paragraph with no substantive changes. No 
commenters discussed this reorganization and the OCC adopts it as 
proposed. Under the final rule, paragraph (e)(6)(i) generally requires 
a written notice after the national bank or Federal savings association 
begins any of the activities specified in 12 CFR 9.7(d) in a new State. 
Paragraph (e)(6)(ii) requires the notice to include the new States, the 
fiduciary activities to be conducted, and the extent to which the 
activities differ materially from the fiduciary activities currently 
conducted. Paragraph (e)(6)(iii) provides that no notice is required if 
the information required by paragraph (e)(6)(ii) is provided by other 
means, such as in a merger application. Finally, the final rule 
redesignates current paragraph (iii), which provides that no notice is 
required if the national bank or Federal savings association is 
conducting only activities ancillary to its fiduciary business through 
a trust representative office or otherwise, as paragraph (iv).
    One commenter discussed Sec.  5.26(e)(5), which the OCC did not 
propose to amend. This provision requires a national bank or Federal 
savings association that has ceased to conduct previously approved 
fiduciary powers for 18 consecutive months to provide the OCC with a 
new notice as set forth by this section 60 days prior to commencing any 
fiduciary activity. The commenter requested that the OCC change this 18 
month time period to five years. The commenter noted that five years 
would be consistent with 12 U.S.C. 92a(k), which allows the OCC to 
revoke the authority to engage in fiduciary activities if the national 
bank has not exercised it for five consecutive years. The OCC disagrees 
with this commenter's recommendation and continues to believe, as 
discussed when the OCC originally adopted this requirement in 2015, 
that an 18-month time period is appropriate to ensure that the 
management and condition of a national bank or Federal savings 
association has not changed since the OCC's original approval of the 
fiduciary activities.\28\ Further, this 18-month notification period 
enables the OCC to allocate supervisory resources to evaluate the 
institution when it resumes fiduciary activities. Lastly, Sec.  
5.26(e)(5) requires notice to the OCC, and not OCC approval. Therefore, 
the OCC does not find this requirement to be overly burdensome.
---------------------------------------------------------------------------

    \28\ See 80 FR 28345, at 28365 (May 18, 2015).
---------------------------------------------------------------------------

Establishment, Acquisition, and Relocation of a Branch of a National 
Bank (Sec.  5.30)

    Section 5.30 describes the application procedures to establish and 
relocate a national bank branch. Paragraph (d) provides definitions 
applicable to Sec.  5.30. The OCC proposed two amendments to paragraph 
(d). First, paragraph (d)(1)(i) lists certain types of facilities that 
are considered branches. The OCC proposed to reorder this list so that 
the reference to 12 U.S.C. 36(c) applies only to seasonal agencies and 
not to the other types of facilities. Second, paragraph (d)(1)(iii) 
specifies that remote service units (RSUs) and certain types of offices 
are not within the definition of ``branch.'' The OCC proposed to 
clarify this provision by adding both a cross-reference to the 
description of RSUs contained in 12 CFR 7.4003 \29\ and a reference to 
automated teller machines (ATMs), including interactive ATMs, codifying 
OCC Interpretive Letter No. 1165 (August 2019).\30\ As discussed in 
this interpretive letter, a national bank establishment of an 
interactive ATM does not constitute establishing a branch if the 
machine meets the definition of an ATM used for purposes of 12 U.S.C. 
36 consistent with OCC interpretations, and the nature of the 
interactions between the customer and remote bank personnel are 
delimited as would be the case with an RSU. The OCC received no 
comments on these amendments and adopts them as proposed.
---------------------------------------------------------------------------

    \29\ The OCC notes that it has proposed to renumber 12 CFR 
7.4003 to 12 CFR 7.1027 in a separate rulemaking. See 85 FR 40794 
(July 7, 2020). The OCC will update this cross-reference in Sec.  
5.30 if it finalizes this renumbering.
    \30\ OCC Interpretive Letter No. 1165, Legal Requirements for 
the Establishment of Interactive Automated Teller Machines (August 
2019), available at https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2019/int1165.pdf.
---------------------------------------------------------------------------

    One commenter requested that the OCC amend the definition of 
``mobile branch'' in Sec.  5.30(d)(5) to clarify that a mobile branch 
may be located at one location for up to four months without requiring 
an application for a temporary branch. Currently, paragraph (d)(5) 
defines ``mobile branch'' as a branch of a national bank, other than a 
messenger service branch, that does not have a single, permanent site, 
and includes a vehicle that travels to various public locations to 
enable customers to conduct their banking business. Pursuant to this 
definition, a mobile branch may provide services at various regularly 
scheduled locations or it may be open at irregular times and locations 
such as at county fairs, sporting events, or school registration 
periods. The OCC agrees that the rule does not clearly indicate how 
long a mobile branch may serve one location before losing its status as 
a mobile branch and that clarity and uniformity on this point would be 
helpful. Further, the OCC finds that locating a mobile branch at one 
location for a limited period of time without having to continuously 
move it back and forth to this location to prevent it from losing its 
status as a mobile branch would be useful in certain circumstances, 
especially during emergency situations such as weather-related 
emergencies or during the current COVID-19 pandemic. Therefore, the OCC 
is clarifying in the final rule that a mobile branch may be stationed 
continuously at a single location within the geographic area it is 
approved to serve for a period of up to four months. The OCC views this 
new language as interpretive. The OCC notes that a mobile branch is 
only permitted in States where a State bank is permitted to establish a 
mobile branch. Because State statutes restricting mobile branch 
locations are applicable to national banks, if a State statute 
restricts how long a mobile branch could serve a given location, that 
restriction is applicable to national bank mobile branches in that 
State.
    In the preamble to the proposed rule, the OCC noted that it is 
considering one additional change to the definition of ``branch'' in 
paragraph (d). Paragraph (d)(1)(ii)(B) provides that a facility is not 
a branch if it is located at the site, or is an extension, of an 
approved main office or branch office of the national bank. The rule 
further provides that the OCC determines whether a facility is an 
extension of an existing main office or branch office on a case-by-case 
basis. However, the rule deems a drive-in or pedestrian facility 
located within 500 feet of a public entrance to an existing main office 
or branch office to be an extension of the existing main office or 
branch office, provided the functions performed at the drive-in or 
pedestrian facility are limited to functions that are ordinarily 
performed at a teller window, without the OCC's case-by case analysis. 
The OCC requested comment on expanding this 500 foot distance to 1,500 
feet. One commenter supported this increase. However, after further 
review, the OCC has concluded that 500 feet is a more appropriate limit 
for a facility to have the benefit of automatic treatment as an 
extension of the main office or branch.\31\ Furthermore, a

[[Page 80413]]

facility at a distance greater than 500 feet may still be considered an 
extension of the main office or branch based on the OCC's case-by-case 
analysis. The OCC believes this current rule provides adequate 
flexibility without the need to increase the regulatory distance 
threshold.
---------------------------------------------------------------------------

    \31\ The OCC also stated that it was considering the same change 
for a drive-in or pedestrian office of a Federal savings 
association, in 12 CFR 5.31. To maintain consistency between 
national bank and Federal association rules, the OCC also declines 
to move forward with expanding the 500 foot distance rule to 1,500 
feet in Sec.  5.31.
---------------------------------------------------------------------------

    Finally, the OCC proposed a technical change to paragraph (f), 
which provides the procedures for establishing a national bank branch. 
Paragraph (f)(1) requires each national bank that proposes to establish 
a branch to submit an application to the OCC, except in the case of 
messenger services as specified in paragraph (f)(2). However, paragraph 
(f)(3) provides that if a national bank proposes to establish a branch 
jointly with one or more national banks or other depository 
institutions, only one of the national banks must submit a branch 
application and this bank may act as agent for the other institutions. 
Even if a single application is submitted for a joint branch, the OCC 
still considers the relevant factors for each national bank. The OCC 
proposed including paragraph (f)(3) as an additional exception to the 
application requirement in paragraph (f)(1), thereby conforming these 
two paragraphs. The OCC received no comments on this change and adopts 
it as proposed.

Establishment, Acquisition, and Relocation of a Branch and 
Establishment of an Agency Office of a Federal Savings Association 
(Sec.  5.31)

    Section 5.31 describes application and notice procedures for the 
establishment, acquisition, or relocation of a Federal savings 
association branch. Paragraph (j), implementing section 5(m) of the 
Home Owners' Loan Act (HOLA) (12 U.S.C. 1464(m)), requires a Federal or 
State savings association to obtain prior OCC approval to establish or 
move a branch or move its principal office in the District of Columbia. 
The OCC proposed to add a new paragraph (j)(3) to clarify that a branch 
in the District of Columbia includes any location at which accounts are 
opened, payments are received, or withdrawals made, including ATMs that 
perform one or more of these functions. This amendment implements court 
opinions finding that ATMs that accept deposits or disburse funds 
against a customer's account constitute a branch.\32\ Although Congress 
amended 12 U.S.C. 36(j) to remove ATMs and RSUs from the definition of 
a national bank ``branch,'' Congress has not similarly amended section 
5(m) of the HOLA. Therefore, the OCC and OTS have long taken the 
position that an ATM established by a savings association in the 
District of Columbia constitutes a branch requiring approval. The OCC 
did not receive any comments on this proposed amendment and adopts it 
as proposed. Because new paragraph (j)(3) codifies the OCC's existing 
legal interpretation, the OCC believes that this amendment does not add 
any regulatory burden to savings associations.
---------------------------------------------------------------------------

    \32\ See Independent Bankers Ass'n of New York State, Inc. v. 
Marine Midland Bank, N.A., 757 F.2d 453, 458 (2d Cir. 1985) 
(collecting cases).
---------------------------------------------------------------------------

Business Combinations Involving a National Bank or Federal Savings 
Association (Sec.  5.33)

    Section 5.33 provides the application requirements and procedures 
for business combinations involving national banks and Federal savings 
associations, such as mergers, consolidations, and certain purchase and 
assumption transactions. The OCC proposed several changes to this 
section.
    Paragraph (e) of Sec.  5.33 sets forth policies the OCC considers 
when evaluating business combinations. Paragraph (e)(1)(ii)(F) provides 
that the OCC will not approve a transaction that would violate the 
deposit concentration limit in 12 U.S.C. 1828(c)(13). Only interstate 
merger transactions as defined 12 U.S.C. 1828(c)(13)(C)(i) are subject 
to this deposit concentration limit. The OCC proposed adding a 
reference to 12 U.S.C. 1828(c)(13)(C)(i) in paragraph (e)(1)(ii)(F) for 
clarity. The OCC did not receive any comments on this change and adopts 
it as proposed.
    Paragraph (e)(1)(iii) provides the OCC's policy for evaluating 
business combinations under the CRA. Under 12 U.S.C. 2903(a)(2), the 
OCC must evaluate an insured national bank's or Federal savings 
association's CRA record when evaluating its application for a business 
combination. The OCC proposed three changes to paragraph (e)(1)(iii). 
First, the OCC proposed a new paragraph (e)(1)(iii)(A) to better 
describe the OCC's review of a business combination and to more closely 
track the statutory language under which the OCC is required to assess 
the track record of the applicant. This paragraph specifies that the 
OCC takes into account the filer's CRA record of performance in 
considering an application for a business combination. It also states 
that the OCC's conclusion of whether the CRA performance is or is not 
consistent with approval of an application is considered in conjunction 
with the other factors in Sec.  5.33, codifying the OCC's practice of 
evaluating all policy factors in light of the whole application as set 
forth in the OCC's Policies and Procedures Manual (PPM-6300-2).
    One commenter supported the clarification that the OCC will 
consider the institution's CRA's performance in conjunction with the 
other factors in Sec.  5.33, stating that this change is consistent 
with statutory requirements and codifies existing OCC practice. Another 
commenter said that it would break with precedent to remove the 
provision providing that the OCC will take into account the CRA record 
of the target institution. This commenter also stated that this change 
would impair the public's ability to comment and render the OCC unable 
to fully consider the public benefit of the proposed merger as required 
by the CRA statute. The commenter stated that only a review of the CRA 
performance of both the target and the acquiring bank provides a full 
understanding of likely future CRA performance and the resultant bank's 
ability to meet the convenience and needs of the communities it serves.
    The OCC disagrees with this commenter. The OCC's review of an 
institution's CRA performance is retrospective, while the OCC's review 
of a business combination application is prospective. As noted in the 
preamble to the proposed rule, OCC practice is to consider and evaluate 
a filer's record of performance under the CRA and, more broadly, the 
filer's plans and ability to enable the combined organization to serve 
the convenience and needs of its communities. Thus, the target's CRA 
record will inform the convenience and needs analysis but is not in of 
itself a factor in the OCC's review of the application. Additionally, 
the OCC notes that public benefit is not a statutory factor the OCC 
must consider despite the comment's reference to it as such. \33\ The 
OCC therefore adopts this new paragraph (e)(1)(iii)(A) as proposed.
---------------------------------------------------------------------------

    \33\ See 12 U.S.C. 1828(c)(5).
---------------------------------------------------------------------------

    Second, the OCC proposed a new paragraph (e)(1)(iii)(B) to 
recognize the expanded community reinvestment compliance review 
required by 12 U.S.C. 1831u(b)(3) when the filing national bank would 
have a branch or bank affiliate immediately following the transaction 
in any State in which the filer had no branch or bank affiliate 
immediately before the transaction. Specifically, this new paragraph 
provides that the OCC considers the CRA record of performance of the 
filer and its resulting bank affiliates and the filer's record of 
compliance with

[[Page 80414]]

applicable State community reinvestment laws when required by 12 U.S.C. 
1831(b)(3). The OCC received no comments on this new paragraph and 
adopts it as proposed.
    Third, the OCC proposed a new paragraph (e)(1)(iii)(C) requiring 
the filer to disclose whether it has entered into and disclosed a 
covered agreement, as defined in 12 CFR 35.2, in accordance with 12 CFR 
35.6 and 35.7. These regulations implement the CRA sunshine 
requirements of section 48 of the FDI Act, 12 U.S.C. 1831y. Requiring 
disclosure of any covered agreements will better permit the OCC to 
review the filer's CRA record and any CRA-related comments on the 
filing. One commenter supported the disclosure of these covered 
agreements. Therefore, the OCC adopts this new paragraph as proposed. 
The final rule also includes a technical amendment that changes the 
heading of paragraph (e) from ``Policy'' to ``Policy and related filing 
requirements'' to better reflect the contents of this paragraph.
    This commenter also stated that the regulators should work with 
community groups and banks on the development of a process for 
recognizing these agreements during the merger application process and 
for their implementation to become a factor on CRA performance 
evaluations. The OCC agrees that these agreements may provide the OCC 
with context on the credit needs of the community served during the 
application process. However, the OCC and the other Federal banking 
regulators have long held the position that these agreements are 
private agreements between depository institutions and private parties. 
Therefore, the Federal banking regulators do not monitor compliance 
with, nor enforce, these agreements.\34\ Because they are private 
agreements, a bank's compliance with these agreements should not be a 
factor in the OCC's decision on an application.
---------------------------------------------------------------------------

    \34\ See the Interagency Questions and Answers Regarding 
Community Reinvestment, Q&A Sec.  __.29(b)--2, 81 FR 48506 (July 25, 
2016).
---------------------------------------------------------------------------

    The OCC noted in the preamble to the proposed rule that it is 
considering whether to require a filer to memorialize and publish any 
discussion between the filer and any third party with respect to the 
development of any community reinvestment plan, community benefit plan, 
or similar plan in connection with a business combination. Two 
commenters opposed this idea. One commenter stated that the requirement 
to memorialize discussions would be burdensome, frivolous, and 
extraneous because all relevant information is included in the final 
plan. This commenter also stated that such a requirement may cause 
disagreements about what is covered and what constitutes an acceptable 
level of memorialization. In addition, this commenter noted that this 
requirement would discourage community participation in discussions for 
these agreements. The second commenter stated that this requirement 
could have a chilling effect on discussions between filers and third 
parties causing them to be less candid during these discussions, 
reducing the likelihood of reaching an agreement. This commenter also 
stated that the filer and third party may disagree in the way in which 
the discussion has been memorialized. Lastly this commenter noted that 
this requirement would duplicate the CRA sunshine requirements in 12 
CFR part 35, which provides the circumstances under which these 
discussions should be made public.
    The OCC disagrees with these comments and is adding a new paragraph 
in the final rule requiring that the national bank or Federal savings 
association submitting a business combination filing must provide 
summaries of, or documents relating to, all substantive discussions 
with respect to the development of the content of a covered agreement 
submitted pursuant to new paragraph (e)(1)(iii)(C)(1). This summary 
must include the names of participants, dates, and synopsis of these 
discussions. The OCC believes that memorializing and disclosing 
discussions between a national bank or Federal savings association and 
a community group during the development of an agreement promotes 
transparency and results in a fairer and more robust agreement for both 
the financial institution and the community served by the institution, 
furthering the intent of the CRA Sunshine statute as well as providing 
the OCC with additional context during the application process on the 
credit needs of the community served. The OCC does not expect minor or 
trivial communications to be memorialized; for example, discussions 
regarding scheduling or staffing need not be documented. However, 
national banks and Federal savings associations will need to 
memorialize and disclose substantive discussions pertaining to the 
content of a plan. This documentation may consist of summaries or 
transcripts of the discussions, or work product produced to further the 
negotiations, such as summaries of suggested terms of the plan. 
Further, to avoid conflicts between the institution and the community 
group, the institution may share the documentation with the community 
group prior to disclosure. Because national banks and Federal savings 
associations already should be documenting these discussions in the 
course of normal business operations, and because many of the documents 
are already produced as part of the negotiating process, the OCC 
believes that any additional burden placed on banks and savings 
associations will be minimal and will be outweighed by the benefit of 
ensuring transparency in the development of these plans in connection 
with a business combination.
    The OCC also proposed a new paragraph (e)(1)(iv) to state that the 
OCC considers the standards and requirements contained in 12 U.S.C. 
1831u for interstate merger transactions between insured banks, when 
applicable. Current paragraph (h) describes the application of 12 
U.S.C. 1831u to combinations between insured banks with different home 
states. As part of the reorganization of paragraphs (g) and (h), 
discussed below, the OCC proposed instead to include its review of the 
12 U.S.C. 1831u factors in paragraph (e)(1) for clarity. The OCC 
received no comments on this change and adopts it as proposed.
    Paragraph (e)(8)(ii) requires a national bank or Federal savings 
association with one or more classes of securities subject to 
registration under sections 12(b) or (g) of the Securities Exchange Act 
of 1934 to file preliminary proxy material or information statements 
with the Director, Securities and Corporate Practices Division (SCP) of 
the OCC. As a result of an internal reorganization, the OCC proposed 
replacing the reference to SCP in paragraph (e)(8)(ii) with the OCC 
Chief Counsel's Office. The OCC received no comments on this change and 
adopts it as proposed.
    Paragraph (g) provides procedures for different types of 
consolidations and mergers. Paragraph (o) provides general procedures 
for approval of Federal savings association business combinations. 
These paragraphs provide detailed procedures for national banks and 
Federal savings associations engaging in several different types of 
business combinations. Some of these requirements are imposed by 
statute. Specifically, 12 U.S.C. 215 and 215a provide procedures for 
consolidations and mergers, respectively, between national banks and 
State or national banks located in the same State resulting in a 
national bank. Similarly, 12 U.S.C. 214 through 214d provide procedures 
for consolidations and

[[Page 80415]]

mergers between national banks and State banks located in the same 
State resulting in a State bank. Other consolidation and merger 
transactions described in Sec.  5.33 do not have any statutory 
procedures, including interstate consolidations and mergers involving a 
national bank under 12 U.S.C. 215a-1; consolidations and mergers of 
national banks and Federal savings associations under 12 U.S.C. 215c 
and 1467a(s); consolidations and mergers of Federal savings 
associations and State banks, State savings associations, State trust 
companies, or credit unions under 12 U.S.C. 1464(d)(3)(A) and 1467a(s); 
and mergers of national banks with their non-bank affiliates under 12 
U.S.C. 215a-3.
    In order to increase flexibility and reduce regulatory burden for 
national banks and Federal savings associations involved in business 
combinations for which procedural requirements are not specified by 
statute, the OCC proposed a number of changes to these procedural 
provisions. First, the OCC proposed that a national bank may follow the 
procedures for mergers and consolidations under sections 2 and 3 of the 
National Bank Consolidation and Merger Act (NBCMA) currently provided 
in paragraph (g) for the specific transaction.
    Second, the OCC proposed that a national bank or Federal savings 
association may elect to follow the procedures applicable to a State 
bank or State savings association, respectively, chartered by the State 
in which the national bank's main office or the Federal savings 
association's home office is located. In connection with this election, 
the OCC proposed rules of construction so that the State procedures 
function logically for national banks and Federal savings associations. 
Specifically, any references to a State agency in the applicable State 
procedures would be read as referring to the OCC. Additionally, unless 
otherwise specified in Federal law, all filings required by the 
applicable State procedures would be made to the OCC. Requiring filings 
prescribed by State law to be made with the OCC, rather than a State 
agency, is consistent with past OCC practice for certain transactions 
under State corporate governance procedures adopted pursuant to 12 CFR 
7.2000.\35\
---------------------------------------------------------------------------

    \35\ See, e.g., OCC Conditional Approval No. 859 (July 2008).
---------------------------------------------------------------------------

    Third, the OCC proposed that the national bank or Federal savings 
association that is the acquiring institution in a transaction may 
follow a de minimis procedure that does not require a shareholder vote 
pursuant to proposed Sec.  5.33(p) if certain criteria are met. 
Proposed Sec.  5.33(p) is similar to the de minimis exception to 
general shareholder voting requirements for Federal stock savings 
associations in current Sec.  5.33(o)(3)(ii), which applies if the 
transaction does not involve an interim savings association; the 
Federal savings association charter does not change; each share of 
stock outstanding will be identical to an outstanding share or treasury 
share after the effective date of the transaction; and either no stock 
or securities convertible into stock will be issued or delivered under 
the plan of combination, or the authorized unissued shares or treasury 
shares of the resulting Federal savings association to be issued or 
delivered, plus those initially issuable upon conversion of any 
securities to be issued or delivered, do not exceed 15 percent of the 
total shares of voting stock outstanding immediately prior to the 
effective date of the consolidation or merger.
    The OCC proposed making this de minimis exception available to a 
national bank engaging in transactions not subject to statutory 
procedural requirements as well as a Federal stock savings association 
in new paragraph (p) with two revisions. First, the OCC proposed 
permitting certain combinations involving an interim bank or savings 
association. Specifically, a national bank or Federal stock savings 
association engaging in a transaction involving an interim bank or 
interim saving association would potentially be able to use the 
procedures in paragraph (p) if the existing shareholders of the 
national bank or Federal stock savings association would directly hold 
the shares of the resulting national bank or Federal stock savings 
association. In promulgating an amendment to the predecessor to current 
Sec.  5.33(o)(3)(ii), the Federal Home Loan Bank Board, the predecessor 
to OTS, stated that ``[a]lthough the ownership interests of 
shareholders of a reorganizing association generally do not undergo 
substantive change upon a reorganization into holding company form, the 
Board believes that shareholders should, nevertheless, be given an 
opportunity to approve or disapprove a plan of reorganization.'' \36\ 
The OCC believes that in a transaction involving reorganization into a 
holding company structure, shareholders of the national bank or Federal 
stock savings association should have the opportunity to vote. However, 
the OCC believes that a national bank or Federal stock savings 
association may engage in transactions involving interim banks or 
savings association that do not involve holding company reorganizations 
where shareholder votes are not necessary, if the rest of the 
requirements of proposed paragraph (p) are met.
---------------------------------------------------------------------------

    \36\ 47 FR 17797 at 17799 (Apr. 26, 1982).
---------------------------------------------------------------------------

    Second, to provide additional flexibility, the OCC also proposed 
increasing the maximum issuance of shares eligible under this procedure 
for both national banks and Federal savings associations from 15 
percent of total outstanding shares to 20 percent. This change mirrors 
the 20 percent threshold in similar procedures under Delaware law.\37\
---------------------------------------------------------------------------

    \37\ See Del. Code Ann. tit. 8, Sec.  251(f).
---------------------------------------------------------------------------

    The new procedural options described above would apply to: (1) 
Consolidations and mergers of national banks and Federal savings 
associations under 12 U.S.C. 215c and 1467a(s), resulting in either a 
national bank or Federal savings association; (2) consolidations and 
mergers of Federal savings associations and State banks, State savings 
associations, State trust companies, or credit unions under 12 U.S.C. 
1464(d)(3)(A) and 1467a(s), resulting in either a Federal savings 
association or another entity; and (3) mergers of national banks with 
their non-bank affiliates under 12 U.S.C. 215a-3, resulting in either a 
national bank or a non-bank affiliate.
    The new procedural options also would apply to interstate 
consolidations and mergers involving a national bank under 12 U.S.C. 
215a-1 based on a revised analysis of the NBCMA. As indicated in the 
preamble to the proposed rule, the OCC formerly opined in licensing 
decisions that 12 U.S.C. 215a-1 incorporates the provisions of 12 
U.S.C. 215 for consolidations and 12 U.S.C. 215a for mergers.\38\ 
Twelve U.S.C. 215a-1 is the codification of section 4 of the NBCMA, 
which was enacted by section 102(b)(4)(D) of the Riegle-Neal Interstate 
Banking and Branching Efficiency Act of 1994.\39\ Twelve U.S.C. 215 and 
215a are codifications of sections 2 and 3 of the NBCMA, respectively. 
Section 4 of the NBCMA states that ``a national bank may engage in a 
consolidation or merger under this Act with an out-of-State bank if the 
consolidation or merger is approved'' (emphasis added) \40\ under 12 
U.S.C. 1831u, which sets out requirements for interstate mergers of 
insured banks. In prior licensing decisions, the OCC interpreted 
``under this Act'' to mean that an interstate

[[Page 80416]]

consolidation or merger authorized under section 4 of the NBCMA is a 
consolidation or merger under section 2 or 3 of the NBCMA, 
respectively, and thus subject to the procedural provisions of those 
sections with respect to shareholder vote, dissenter's rights, and 
other matters as well as the substantive provisions addressing 
corporate succession, transfer of assets, liabilities, property, rights 
and interests including fiduciary appointments, and the status of the 
resulting bank (collectively ``corporate succession provisions''). In 
other words, section 4 extended sections 2 and 3, which cover 
consolidations and mergers between banks located in the same state, to 
also cover consolidations and mergers between banks with different home 
states. The OCC therefore implemented the NBCMA in Sec.  5.33(h) by 
applying these provisions of sections 2 and 3 of the NBCMA to 
transactions authorized under section 4 of the NBCMA.
---------------------------------------------------------------------------

    \38\ See, e.g., OCC CRA Decision No. 94 (June 1999).
    \39\ Public Law 103-328, 108 Stat. 2338, 2351.
    \40\ 12 U.S.C. 215a-1(a).
---------------------------------------------------------------------------

    However, after further analysis, the OCC believes that the proper 
reading of section 4 of the NBCMA is that it does not directly 
incorporate any provisions of sections 2 or 3 of the NBCMA. As noted 
above, the OCC previously focused on the phrase ``under this Act'' as 
imposing the requirements of sections 2 and 3 on a merger conducted 
under section 4. However, the statutory language is ambiguous and does 
not require the OCC to incorporate any of the provisions in sections 2 
or 3 of the NBCMA. Upon further consideration, the OCC believes the 
text taken in its entirety may be read as merely specifying the source 
of the authority and imposing the requirement that the consolidation or 
merger be approved under section 1831u, but not imposing additional 
requirements or conditions with which the bank must comply. As there 
are no other sections of the NBCMA under which an interstate merger 
between banks with different home States could be conducted in cases in 
which the acquiring bank does not have branches in the same State as 
the target bank, \41\ ``under this Act'' can be read to refer only to 
section 4 itself. Since section 4 of the NBCMA, 12 U.S.C. 215a-1, does 
not contain any substantive or procedural provisions, there are no 
statutory procedures for interstate bank mergers under 12 U.S.C. 215a-1 
resulting in a national bank. Therefore, the new proposed procedures 
described above apply to these section 4 transactions.
---------------------------------------------------------------------------

    \41\ An acquiring bank that has branches in the same State as 
the target bank but has a different home State than the target bank 
is also ``located'' in the same State as the target bank for 
purposes of sections 2 or 3. In this case, while the banks have 
different home states, the transaction can be conducted either under 
section 4 or under sections 2 or 3. See Ghiglieri v. NationsBank of 
Texas, N.A., 1998 U.S. Dist. LEXIS 6637 (N.D. Texas, May 6, 1998); 
OCC Corporate Decision No. 98-19 (April 2, 1998).
---------------------------------------------------------------------------

    In addition to new paragraph (p), the OCC proposed implementing the 
changes discussed above through revisions to paragraphs (g), (h), and 
(o). Specifically, the OCC proposed redesignating current paragraphs 
(g)(2), (g)(3), (g)(6), and (g)(7) as paragraphs (g)(3), (g)(6), 
(g)(7), and (g)(9), respectively. The proposal included new paragraph 
(g)(2) that provides procedures for interstate consolidations and 
mergers under 12 U.S.C. 215a-1 resulting in a national bank and 
paragraph (g)(8) providing procedures for interstate mergers between an 
insured national bank and an insured State bank resulting in a State 
bank. Procedures for these transactions are currently contained in 
paragraph (h). New paragraphs (g)(2) and (g)(8) include an option to 
follow the procedures for intrastate mergers resulting in a national 
bank or State bank in paragraphs (g)(1) and redesignated paragraph 
(g)(7), respectively. The proposal also included in new and 
redesignated paragraphs (g)(2), (g)(3), (g)(4), (g)(5), (g)(6), and 
(g)(8) a reference to a national bank making an election under 
paragraph (h). Revised paragraph (h) would permit a national bank to 
elect to follow the procedures of the laws of the State which the 
national bank association has elected to follow pursuant to 12 CFR 
7.2000(b) or to use the de minimis procedure in new paragraph (p) if 
applicable. Further, the proposal included a new corporate succession 
provision in new paragraph (g)(2)(iv) for interstate mergers resulting 
in a national bank to ensure that the resulting bank succeeds to the 
rights, franchises, and interests, including the fiduciary 
appointments, of the consolidating or merging banks. The proposal also 
included coordinating revisions to cross-references to paragraph (g).
    For Federal savings associations, the OCC proposed reorganizing 
paragraph (o) to contain the election procedures. Revised paragraph 
(o)(1)(i) permits a Federal savings association to follow the 
procedures applicable to a State savings association chartered by the 
State where the Federal savings association's home office is located or 
to follow the standard procedures in revised paragraph (o)(2). As 
discussed above for national banks, revised paragraph (o)(1)(ii) would 
direct Federal savings associations to read references to State 
agencies as the OCC and to make filings generally with the OCC.
    Revised paragraph (o)(2) would contain the procedures in current 
paragraphs (o)(1) and (o)(3) governing board and shareholder votes, 
respectively. The proposal changed the de minimis exception to the 
shareholder voting requirement in current paragraph (o)(3)(ii), 
redesignated by the proposal as paragraph (o)(2)(ii)(B), to a cross-
reference to new paragraph (p) and redesignated current paragraph 
(o)(2) regarding the Federal savings association's change in name or 
home office as paragraph (o)(3). Finally, the OCC proposed a technical 
amendment to revised paragraph (o)(2)(ii)(A), replacing the citation to 
12 CFR 152.4 with the current citation, 12 CFR 5.22.
    The OCC received one comment on these proposed procedures, which 
focused on national bank business combinations conducted under section 
4 of the NBCMA. This commenter stated that the proposal contradicts 
prior OCC public precedent. The OCC acknowledges this is a reversal of 
the OCC's prior interpretation of section 4. However, an agency is 
permitted to change its position on an interpretation of law.\42\ As 
noted above, the statutory language is ambiguous. The OCC's change of 
position is based on the OCC's belief, after further review, that 
reading the language in section 4 of the NBCMA in its entirety as 
authorizing a consolidation or merger with an out-of-State bank under 
the NBCMA if it is approved pursuant 12 U.S.C. 1831u, but not importing 
the substantive or procedural requirements of sections 2 and 3 into 
section 4 through oblique terminology is more in accordance with the 
statutory language. Moreover, the OCC notes that this commenter did not 
identify any reliance concerns implicated by the change in position, 
nor did the OCC receive any such comments from OCC-regulated entities

[[Page 80417]]

that could conceivably have such an interest.
---------------------------------------------------------------------------

    \42\ See, e.g., Perez v. Mortgage Bankers Association, 575 U.S. 
92 (2015); Federal Communications Commission v. Fox Television 
Stations, 556 U.S. 502 (2009) (an agency must provide a reasonable 
explanation for the change in position. The depth of explanation 
depends on the degree of the change. The agency also should take 
into account the reliance interests of parties who have relied on 
the agency's prior interpretation.) See also National Cable & 
Telecommunications Association v. Brand X internet Services., 545 
U.S. 967, 981-82 (2005) (agency reconsiderations of prior 
interpretations entitled to judicial deference so long as the agency 
adequately explains the reasons for the change); Motor Vehicle 
Manufacturers Association of the U.S., Inc. v. State Farm Mutual 
Automobile Insurance Company, 463 U.S. 29, 43 (1983) (``agency must 
examine the relevant data and articulate a satisfactory explanation 
for its action including a `rational connection between the facts 
found and the choice made' '').
---------------------------------------------------------------------------

    This commenter also stated that the proposal contradicts prior OCC 
licensing decisions and has contradictory results, arguing that if 
sections 2 and 3 of the NBCMA cannot now be used to authorize a 
combination of a national bank with an out-of-State bank, then the OCC 
would need to reverse its prior interpretation set forth in previous 
business combination approvals that a bank is located in a State for 
purposes of sections 2 and 3 by virtue of having a branch in that 
State. The OCC disagrees with this point. As noted above, sections 2 
and 3 authorize consolidations and mergers between insured banks that 
are located in the same State. Section 4 authorizes mergers between 
insured banks with different home States if the merger is approved 
under 12 U.S.C. 1831u. It stands on its own and is not tied to sections 
2 and 3. However, the OCC is not changing its interpretation of 
sections 2 and 3 that was involved in the prior business combination 
approvals to which the commenter refers, namely, that an acquiring bank 
that has a different home State than the target bank but that has a 
branch in the target bank's State is located in the target bank's State 
for purposes of section 2 and 3.\43\ The OCC continues to believe such 
banks could engage in the transaction under the authority of section 2 
or 3 or, alternatively, could engage in the transaction under section 
4. Neither the revised interpretation of section 4 nor the prior 
interpretation affects the applicability of sections 2 or 3 to such 
transactions. An interstate merger that must be conducted under section 
4 because the acquiring bank is not located in the same State as the 
target bank would be conducted under the procedures that apply for 
transactions under section 4 at the time of the application (whether 
the procedures of section 2 or 3 of the NBCMA as under the current rule 
or the procedures available under the proposed rule). Thus, the 
commenter failed to distinguish between a transaction conducted under 
section 4 and following the procedures of sections 2 or 3, as in the 
OCC's prior interpretation of section 4, and a transaction conducted 
under sections 2 or 3.
---------------------------------------------------------------------------

    \43\ See Ghiglieri v. NationsBank of Texas, N.A., 1998 U.S. 
Dist. LEXIS 6637 (N.D. Texas, May 6, 1998); OCC Corporate Decision 
No. 98-19 (April 2, 1998). The prior OCC decisions referred to by 
the commenter, Corporate Decision No. 2001-29 (September 28, 2001); 
Conditional Approval No. 687 (April 25, 2005); Conditional Approval 
No. 1105 (Aug. 11, 2014), were instances of such transactions and 
were conducted under the authority of section 3, not under section 
4.
---------------------------------------------------------------------------

    In addition, this commenter argues that the proposed change may 
raise issues with respect to the Tenth Amendment, citing Hopkins 
Federal Savings & Loan Association v. Cleary,\44\ noting that section 4 
does not contain a ``not in contravention of State law'' provision. 
Sections 2 and 3 contain such a provision, and under the OCC's prior 
interpretation of section 4, that provision would have been 
incorporated into section 4. Under the OCC's new interpretation, this 
provision is not incorporated, and the commenter claims that raises an 
issue. The OCC does not agree that such language is needed in Section 
4. Sections 2 and 3 include State banks within their scope, authorizing 
them to consolidate or merge with a national bank, but by virtue of a 
non-contravention provision in those sections, a State bank may not 
engage in a business combination pursuant to sections 2 and 3 with a 
national bank if it would contravene State law. However, section 4 
(interpreted as a stand-alone provision, not incorporating sections 2 
and 3) is directed only at national banks; it does not refer to State 
banks. Therefore, the OCC's proposal with respect to transactions 
authorized under section 4 does not affect State banks. A State bank 
can engage in an interstate merger with a national bank if the State 
bank has authority to do so under State law.
---------------------------------------------------------------------------

    \44\ 296 U.S. 315, 337 (1935) (ruling that a statute allowing 
State-chartered institutions to convert to Federal charters without 
regard to State law violated the Tenth Amendment).
---------------------------------------------------------------------------

    The commenter similarly suggests that failure to include a ``not in 
contravention of State law'' provision with respect to corporate 
succession in mergers conducted under section 4 raises issues under 
Hopkins. However, as noted, an interstate merger of a national bank and 
a State bank under section 4, resulting in a national bank, would occur 
only if the State bank had authority to engage in the merger under 
State law. Moreover, a Federal law providing for corporate succession 
and the transfer of property, fiduciary appointments, and other 
relationships in a merger with a resulting national bank does not raise 
the same concerns as a Federal law purporting to authorize a State bank 
to convert into a Federal institution, as in Hopkins.
    Lastly, this commenter stated that the OCC did not adequately 
explain the proposed change regarding interim transactions appropriate 
for de minimis transactions. Per proposed Sec.  5.33(g) and (o), a 
national bank or Federal savings association that is the acquiring 
institution in a transaction may elect not to have a shareholder vote 
if a vote is not required by statute and certain criteria are met, 
including the de minimis nature of the transaction. The proposed de 
minimis procedures in Sec.  5.33(p) are similar to existing Federal 
savings association de minimis procedures except for two changes. 
First, they permit the use of the procedures for transactions that use 
interim charters that are not holding company reorganizations provided 
that the existing shareholders of the national bank or Federal savings 
association will directly hold the shares of the resulting national 
bank or Federal savings association and the national bank's articles or 
Federal savings association's charter is not changed. Second, they 
increase the maximum issuance of shares under this procedure from 15% 
total outstanding shares to 20%. The current Federal savings 
association regulation for de minimis transactions excludes those 
involving an interim because such transactions were commonly used in a 
reorganization to form a holding company and the OCC believes that 
shareholders in these transactions should have a vote. However, it is 
possible to have a transaction that involves an interim in which the 
existing institution and its shareholders continue as the surviving 
institution after the transaction in a manner that meets the 
requirements set out in the rule that the existing shareholders of the 
national bank or Federal savings association directly hold the shares 
of the resulting national bank or Federal savings association and the 
national bank's articles or Federal savings association's charter is 
not changed. In this case, there is no reason not to allow the 
acquiring institution to use the procedures in proposed paragraph (p).
    For the reasons stated above, the OCC adopts the proposed 
procedures that a national bank or Federal savings association may 
elect for business combinations for which there are no statutory 
procedural requirements.
    Current paragraph (k) of Sec.  5.33 requires a national bank or 
Federal savings association engaging in a consolidation or merger in 
which it is not the filer and the resulting institution to file a 
notice with the OCC advising of its intention. This requirement 
currently applies even when the surviving institution is another 
national bank or Federal savings association. Because the OCC already 
supervises the surviving institution and has acted on the application 
for consolidation or merger, the OCC proposed removing

[[Page 80418]]

this requirement for the disappearing national bank or Federal savings 
association in this type of transaction and making a conforming 
revisions to paragraph (g). In such a case, the OCC already has the 
information that it needs to process termination and ensure that the 
disappearing national bank or Federal savings association has met all 
applicable requirements. The OCC received one comment on this 
provision, which supported the change. The OCC therefore adopts this 
change as proposed. The final rule also makes technical amendments to 
cross-references in paragraph (k)(4).
    Current paragraph (n) provides authority for, and limits on, 
certain business combinations for Federal savings associations. In 
addition to consolidations, mergers, and other specified forms of 
business combinations, this paragraph addresses ``other combinations,'' 
the definition of which in Sec.  5.33(d)(10) includes the transfer of 
any deposit liabilities to another insured depository institution, 
credit union, or other institution. Paragraph (n)(2)(iii) provides 
special requirements for mutual savings associations. Specifically, if 
any combining savings association is a mutual savings association, the 
resulting institution must be a mutually held depository institution 
insured by the FDIC, unless the transaction is approved under 12 CFR 
part 192 governing mutual to stock conversions or the transaction 
involves a mutual holding company organization under 12 U.S.C. 1467a(o) 
or a similar transaction under State law. Under the definition of 
``other combination,'' Sec.  5.33(n)(2)(iii) applies to any transfer of 
deposit liabilities, such as the sale of a branch, even if the mutual 
savings association still exists as an ongoing institution after the 
transaction. Accordingly, a branch sale would not be permissible unless 
the sale is to an insured mutual institution or either the mutual to 
stock or mutual holding company reorganization exception applied. The 
OCC proposed revising paragraph (n)(2)(iii) to state that a 
consolidation or merger involving a mutual savings association or the 
transfer of all or substantially all of the deposits of a mutual 
savings association must result in a mutually held depository 
institution insured by the FDIC unless one of the exceptions applies.
    As noted in the preamble to the proposed rule, the OCC did not 
intend paragraph (n)(2)(iii) to apply to this type of transfer of 
deposit liabilities when it last amended this provision in 2015 (2015 
Final Rule).\45\ In fact, Sec.  5.33(n)(4), which requires mutual 
savings associations to provide notice to accountholders of a proposed 
account transfer and to give them the option of retaining the account 
in the transferring Federal savings association if the account 
liabilities are transferred to an uninsured institution, contemplates 
just such an account transfer. In addition, the anomalous reading of 
Sec.  5.33(n)(2)(iii) was not present in the pre-integration version of 
the Federal savings association combination rules.\46\ Former 12 CFR 
146.2(a)(4) contained a similar restriction on the resulting 
institution being a mutually held savings association with similar 
exceptions. However, Sec.  146.2(a) applied to combinations, which was 
defined in 12 CFR 152.13(b)(1) as a merger or consolidation with 
another depository institution, or an acquisition of all or 
substantially all of the assets or assumption of all or substantially 
all of the liabilities of a depository institution by another 
depository institution. Accordingly, a branch purchase or other 
transfer of less than substantially all deposits was not a combination 
and thus not subject to the restrictions in Sec.  146.2(a)(4). 
Furthermore, in the preamble to the 2015 Final Rule, the OCC did not 
describe paragraph (n)(2)(iii) as applying to transfers of less than 
substantially all deposits.\47\
---------------------------------------------------------------------------

    \45\ 80 FR 28346 (May 18, 2015).
    \46\ The 2015 Final Rule integrated many licensing rules that 
apply to national banks and Federal savings associations.
    \47\ The OCC stated, ``in a merger or consolidation with a 
mutual Federal savings association, a mutual savings association 
must be the resulting institution.'' 80 FR 28346 at 28374 (May 18, 
2015).
---------------------------------------------------------------------------

    The OCC did not receive any comments on this change to paragraph 
(n)(2)(iii) and adopts it as proposed.
    The OCC also proposed adding an additional exception to paragraph 
(n)(2)(iii), as new paragraph (n)(2)(iii)(C). The OCC and OTS have 
permitted transactions where a mutual savings association transferred 
all of its deposits to a non-mutual savings association institution 
followed by the voluntarily liquidation of the mutual savings 
association. These transactions are subject to approvals or non-
objections by the OCC. However, the literal reading of Sec.  
5.33(n)(2)(iii) may not permit such transactions. Accordingly, the OCC 
proposed adding a new exception to the requirement that the resulting 
institution be an insured mutual institution when the transaction is 
part of a voluntary liquidation for which the OCC has provided non-
objection under Sec.  5.48. The OCC received no comments on this change 
and adopts it as proposed.
    Finally, the OCC proposed technical amendments to paragraph (l) to 
correct a typographical error and to revise paragraph (o)(2)(ii)(A) to 
replace the citation to 12 CFR 152.4 with the current citation, 12 CFR 
5.22. The OCC received no comments on these technical amendments and 
adopts them as proposed. The final rule makes additional technical 
amendments to paragraphs (o)(2)(ii)(A) and (o)(2)(ii)(C) to correct 
cross-references, paragraphs (f)(3) and (g)(6) to properly reflect the 
reorganization of paragraph (g), and paragraph (g) to conform headings 
to the plural form.
    Two commenters suggested changes to Sec.  5.33 that were not 
included in the proposed rule. One of these commenters suggested that 
prefiling discussions between the OCC and national banks filing to 
engage in a business combination be memorialized and made public after 
the bank submits its application. The OCC notes that Sec.  5.33 does 
not contain a requirement for prefiling meetings but that these 
meetings may occur. This commenter asserts that publication of these 
discussions would promote fairness and transparency and deter the OCC 
from giving unfair advantage to certain banks. The OCC disagrees with 
this commenter. Prefiling discussions generally concern confidential 
business and often supervisory information, which may not be disclosed. 
The OCC therefore is not including this suggestion in its final rule.
    The other commenter suggested a change to Sec.  5.33(e)(1)(ii), 
which lists the policies that the OCC considers when evaluating a 
business combination under the Bank Merger Act. Specifically, this 
commenter requested a change to paragraph (e)(1)(ii)(D), which states 
that the OCC considers the effectiveness of any insured depository 
institution involved in the business combination in combating money 
laundering activities, including in overseas branches. This commenter 
requested that the OCC change this provision to provide that, as the 
OCC proposed with respect to CRA, the OCC's conclusion of whether the 
filer's effectiveness in combatting money laundering activities is 
consistent with approval of an application be considered in conjunction 
with the other factors in Sec.  5.33. The OCC disagrees with the 
commenter. CRA is a separate statute and is not included in the Bank 
Merger Act. However, 12 U.S.C. 1828(c)(11) requires the OCC to 
consider, among other factors, the effectiveness of insured depository

[[Page 80419]]

institutions' efforts in combating money laundering when evaluating 
proposals subject to the Bank Merger Act. The current regulatory text 
repeats this statutory requirement. In addition, banks with significant 
Bank Secrecy Act deficiencies may not have the capability to put in 
place sufficient controls to mitigate additional money laundering or 
terrorist financing risks associated with significant corporate 
activities.

Operating Subsidiaries of a National Bank (Sec.  5.34)

    Section 5.34 provides the licensing requirements for a national 
bank's acquisition or establishment of an operating subsidiary or 
commencement of a new activity in an existing operating subsidiary. 
Paragraph (e)(2)(i) specifies what entities may qualify as an operating 
subsidiary. Paragraph (e)(2)(i)(A) requires that the national bank must 
have the ability to control the management and operations of the 
subsidiary and no other person or entity exercises effective operating 
control over the subsidiary or has the ability to influence the 
subsidiary's operations to an extent equal to or greater than that of 
the bank. The OCC proposed to clarify this provision by requiring that 
no other person or entity has the ability to exercise effective control 
or influence over the management or operations of the subsidiary to an 
extent equal to or greater than that of the bank or an operating 
subsidiary thereof. The OCC also proposed conforming amendments to 
current Sec.  5.34(e)(5)(A)(3)(i), redesignated by the proposed rule as 
Sec.  5.34(f)(2)(i)(C)(l), which contains a parallel requirement for 
operating subsidiary filings. Redesignated Sec.  5.34(f)(2)(i)(C)(l) 
provides additional requirements for how the national bank must 
effectively control the operating subsidiary to be eligible to submit a 
notice to the OCC instead of an application to establish or engage in 
an activity in an operating subsidiary. The OCC received no comments on 
these changes and adopts them as proposed.
    Section 5.34(e)(2)(ii) identifies certain subsidiaries that are not 
operating subsidiaries for purposes of Sec.  5.34. The OCC proposed to 
replace the word ``subsidiaries'' with ``entities'' to further clarify 
the exclusion. The OCC received no comments on this change and adopts 
it as proposed.
    The OCC also proposed a new paragraph (e)(2)(ii)(C) to specify that 
a trust formed for purposes of securitizing assets held by the bank as 
part of its banking business would not be considered an operating 
subsidiary. This proposal would codify the OCC's position that 
securitization trusts generally do not qualify as operating 
subsidiaries because of the bank's limited control over the trust and 
because beneficial interests in trusts lack many of the indicia of 
traditional equity. The OCC received two comments on this new 
paragraph. One commenter supported removing securitization trusts from 
the definition of operating subsidiary, but also proposed excluding 
trusts formed for the purpose of holding securities, off-lease 
property, real estate, and other assets held in satisfaction of debt 
previously contracted (DPC assets) from this definition. The OCC does 
not agree with this suggested change. The parent bank likely will have 
actual control and management of trusts holding securities, off-lease 
property, real estate, and other DPC assets. Therefore, the reasons for 
excluding securitization trusts from the definition of operating 
subsidiary are unlikely to be present for these trusts identified by 
the commenter.
    A second commenter disagreed with the proposed change asserting 
that the OCC has not indicated any authority for the proposition that 
securitization trusts are not operating subsidiaries or non-controlling 
investments. The commenter also stated that the OCC has not adequately 
discussed the intent or expected impact of the proposal. As indicted 
above, the OCC generally has not treated the securitization trust as an 
operating subsidiary. The interests in securitization trusts typically 
are not the equivalent of ``equity'' for purposes of 12 CFR 5.34, 5.36, 
5.38, and 5.58, and do not provide indicia of ``control'' for purposes 
of 12 CFR 5.34 and 5.38. Rather, the beneficial interest or any other 
interests retained in a securitization trust are more akin to economic 
interests than to traditional equity interests. The beneficial 
interests do not give rise to traditional voting power associated with 
equity interests in a corporation or LLC. Furthermore, securitization 
trusts are generally structured simply as a set of instructions for 
administering the securitization that are difficult to change. Given 
these factors, the bank does not control the trust in the traditional 
sense of directing its operations.
    For the reasons discussed above, the OCC adopts new paragraph 
(e)(2)(ii)(C) as proposed.
    Paragraph (e)(5) of Sec.  5.34 provides the procedures for 
operating subsidiary filings. The OCC proposed to redesignate the 
majority of paragraph (e)(5) as paragraph (f) and to redesignate 
current paragraph (e)(6), addressing grandfathered operating 
subsidiaries, as paragraph (g). The OCC also proposed conforming 
revisions to cross-references. The OCC received no comments on these 
technical changes and adopts them as proposed.
    Redesignated Sec.  5.34(f)(2) contains the requirements for a 
national bank to qualify for the notice process for operating 
subsidiary filings. In addition to meeting additional control 
requirements and being well capitalized and well managed, paragraph 
(f)(2)(i)(A) permits a national bank to file a notice instead of an 
application if the activity is listed in paragraph (e)(5), redesignated 
by the proposal as paragraph (f)(5). The OCC proposed to expand the 
scope of this requirement to include any activity that is substantively 
the same as a previously approved activity and that will be conducted 
in accordance with the same terms and conditions applicable to the 
previously approved activity. As discussed previously in this 
Supplementary Information, the OCC proposed to define ``previously 
approved activity'' in Sec.  5.3 to mean, for national banks, any 
activity approved in published OCC precedent for a national bank, an 
operating subsidiary of a national bank, or a non-controlling 
investment of a national bank.\48\ The OCC noted in the preamble to the 
proposed rule that the expansion of the notice requirement to 
activities that are substantively the same as previously approved 
activities does not relieve the national bank from the requirement to 
ensure that the operating subsidiary is only conducting permissible 
activities and would not affect the OCC's ability to take action if the 
OCC finds that the activities are not permissible or are conducted in 
an unsafe or unsound manner.
---------------------------------------------------------------------------

    \48\ As discussed, the final rule changes ``an activity 
approved'' to ``any activity approved.''
---------------------------------------------------------------------------

    The proposal also raised as an alternative removing all filing 
requirements for national bank operating subsidiaries noting that a 
filing would not be required if the activity was conducted in the bank. 
Under this alternative, a national bank would be able to acquire or 
establish an operating subsidiary or commence a new activity in an 
existing operating subsidiary without filing a notice or application if 
the activity to be engaged in by the operating subsidiary is a 
permissible bank activity, provided the operating subsidiary meets the 
ownership and structural aspects currently required for notice and the 
national bank is well capitalized and well managed.
    One commenter supported this alternative noting that no filing 
would be required if the activity were performed in the bank and 
contending

[[Page 80420]]

that there are safety and soundness reasons to reduce regulatory 
obstacles to conducting an activity in an operating subsidiary.\49\ 
However, upon further consideration, the OCC has determined not to 
pursue this alternative at this time. The OCC would like experience 
with the new notice provision for an activity that is substantively the 
same as a previously approved activity before making a decision on 
removing all filings for operating subsidiaries. Therefore, the OCC is 
not including this change in the final rule.
---------------------------------------------------------------------------

    \49\ This commenter also discussed having this alternative 
amendment apply to Federal savings associations. However, this 
alternative would not permissible for Federal savings associations 
because section 18(m) of the FDI Act (12 U.S.C. 1828(m)) requires a 
Federal savings associations to file a notice with the OCC when 
establishing, acquiring, or conducting a new activity in an 
operating subsidiary.
---------------------------------------------------------------------------

    This commenter also argued that the OCC should extend the proposal 
to fiduciary powers, stating that operating subsidiaries should be able 
to rely on the fiduciary powers of the parent national bank or Federal 
savings association without notifying or seeking approval from the OCC, 
so long as the parent national bank or Federal savings association was 
not required to notify or seek approval from the OCC prior to engaging 
in permissible bank activities. The commenter argued that this change 
would also obviate the need for many national banks and Federal savings 
associations to register an operating subsidiary as an investment 
adviser under the Investment Advisers Act of 1940 (Advisers Act) when 
the subsidiary is exercising its investment discretion on behalf of its 
customers or providing investment advice for a fee under 12 CFR part 9 
and therefore would substantially reduce regulatory burden.
    The OCC disagrees with this comment. Regardless of the OCC's 
decision regarding the alternative proposal, the provision regarding 
fiduciary powers and investment advice activity is special and 
distinct. Current Sec.  5.34(e)(5)(vii)(B) does not require an 
investment advisory subsidiary to be registered. Rather, the provision 
provides that if the subsidiary is registered, the national bank or 
Federal savings association need not have fiduciary powers, but if the 
subsidiary is not registered, then the national bank or Federal savings 
association must have fiduciary powers. This requirement is necessary 
to ensure that there will be some applicable law that will govern the 
conduct of the subsidiary, whether it is the Advisers Act or 12 CFR 
part 9.
    The commenter further recommended that if the OCC does not 
eliminate filings for operating subsidiary fiduciary activities, the 
OCC should add the exercise of fiduciary powers to the list of 
activities for which no advance filing is required under 12 CFR 
5.34(e)(5)(vi). The OCC disagrees with this recommendation because the 
proposal to expand the activities eligible for notice under Sec.  
5.34(e)(5)(v) to include all previously approved activities would 
already include most national bank subsidiary fiduciary activities.
    The commenter also argues that subsidiaries engaging in the 
activities listed in Sec.  5.34(e)(5)(v) are an example of why a bank's 
ability to establish an operating subsidiary should not be tied to the 
bank's management rating, as required by the proposed definition of 
``well managed.'' The commenter contends that if a bank is well 
capitalized and has a satisfactory composite rating, it should be able 
to establish, without a separate regulatory approval, a subsidiary to 
engage in activities listed in Sec.  5.34(e)(5)(v), such as the 
management and disposition of DPC assets. The commenter requests that 
the OCC retain the existing definition of ``well managed'' for this 
section, instead of the proposed definition which includes the 
management rating. The OCC disagrees with this comment. If a bank is 
not ``well managed'' it may lack sufficient internal controls and 
processes to properly manage an operating subsidiary, such as one 
managing DPC assets. As such, an application should be required. If the 
bank is well managed and well capitalized, it need only file a notice 
once, as it can rely on the provision in current Sec.  5.34(e)(5)(vi) 
to form additional subsidiaries engaging in the same activity without 
any additional filing.
    The commenter also suggests that, in the event that the OCC decides 
to retain some filing requirements, the OCC use a notice rather than an 
application when a national bank intends to acquire as an operating 
subsidiary an entity that engages in de minimis activities not 
permissible for a national bank. The OCC does not agree with this 
comment. Although de minimis-type provisions did exist in the past, all 
were removed after the passage of the Gramm-Leach-Bliley Act, Public 
Law 105-102. In addition, a financial subsidiary provides an 
alternative existing mechanism if a national bank wishes to use a 
subsidiary to conduct limited activities not permissible for a national 
bank.
    For the reasons discussed above, the OCC adopts redesignated Sec.  
5.34(f) as proposed, with two technical amendments. First, the final 
rule removes unnecessary cross-references to Sec.  5.3 for the 
definitions of ''well capitalized,'' ``well managed, '' and 
``previously approved activity.'' As indicated above, the definitions 
in Sec.  5.3 apply to all of part 5 so these cross-references are 
unnecessary. Additionally, the final rule corrects a cross-reference to 
redesignated Sec.  5.34(f) in Sec.  5.34(c) regarding ownership 
requirements applying to a foreign bank rather than its Federal branch. 
The OCC inadvertently did not adjust the current cross-reference in 
Sec.  5.34(c) to Sec.  5.34(e)(5)(i)(B) when it restructured the rule 
in 2008.\50\ The final rule restores the cross-reference to the 
ownership requirement to file a notice under Sec.  5.34, as was 
originally promulgated in 2001.\51\
---------------------------------------------------------------------------

    \50\ See 73 FR 22216, 22238 (Apr. 24, 2008).
    \51\ See 12 CFR 5.34(c), (e)(5)(i)(B) (2002).
---------------------------------------------------------------------------

    Current paragraph (e)(7) requires national banks to file an annual 
report with the OCC describing operating subsidiaries that do business 
directly with consumers. The OCC publishes this information on its 
website. The OCC proposed to remove this requirement to reduce burden 
and because it generally duplicates information contained elsewhere, 
such as the FFIEC's National Information Center (NIC). In addition, the 
majority of the operating subsidiaries reported are now subject to the 
jurisdiction of the Consumer Financial Protection Bureau, and not the 
OCC, for most consumer law issues. The OCC received one comment on this 
proposal. The commenter supported the proposal and agreed that the 
existing regulation is redundant. The final rule therefore removes the 
requirement as proposed.

Bank Service Company Investments by a National Bank or Federal Savings 
Association (Sec.  5.35)

    Section 5.35 addresses national bank and Federal savings 
association investments in bank service companies as authorized by the 
Bank Service Company Act (BSCA) (12 U.S.C. 1861-1867). Pursuant to 
section 2 of the BSCA (12 U.S.C. 1862), paragraph (i) of Sec.  5.35 
provides that a national bank or Federal savings association may not 
invest more than 10 percent of its capital and surplus in a bank 
service company. In addition, paragraph (i) also provides that the 
national bank's or Federal savings association's total investments in 
all bank service companies may not exceed five percent of the national 
bank's or Federal savings association's total assets. However, section 
2 of the BSCA also specifies that the investment

[[Page 80421]]

limitations in section 5(c)(4)(B) of the HOLA apply to Federal savings 
associations with regard to bank service company investments. This 
limitation is not currently included in paragraph (i). Accordingly, the 
OCC proposed to revise paragraph (i) to directly reference the 
limitations in section 2 of the BSCA. The OCC also proposed a technical 
correction to the title of this section that would remove the 
extraneous word ``investment.'' The OCC received no comments on the 
changes it proposed to Sec.  5.35 and adopts them in the final rule as 
proposed with additional technical changes. Specifically, the final 
rule does not include the unnecessary cross reference to Sec.  5.3 for 
the definitions of ``well capitalized'' and ``well managed'' in 
paragraph (f). The final rule also corrects a reference to the FDI Act 
in paragraph (d)(3).

Other Equity Investments by a National Bank (Sec.  5.36)

    Section 5.36 provides the procedures for national banks to make 
certain types of equity investments. Paragraphs (e) and (f) provide the 
procedures and requirements for a national bank to make a non-
controlling investment that is not prescribed by other OCC rules. The 
OCC proposed to clarify the types of national bank equity investments 
that are subject to Sec.  5.36 by adding a new definition to paragraph 
(c) that would define ``non-controlling investment'' to mean an equity 
investment made pursuant to 12 U.S.C. 24(Seventh) that is not governed 
by procedures prescribed by another OCC rule. Additionally, the OCC 
proposed to specify in the definition that the term ``non-controlling 
investment'' does not include a national bank holding interests in a 
trust formed for the purposes of securitizing assets held by the bank 
as part of its banking business or for the purposes of holding multiple 
legal titles of motor vehicles or equipment in conjunction with lease 
financing transactions. This would codify the OCC's interpretation that 
these interests do not have sufficient indicia of ownership and control 
to qualify as an equity investment for purposes of Sec.  5.36. The OCC 
also proposed a conforming change to paragraphs (e) and (f). The OCC 
received no comments to the new definition and conforming amendments 
and adopts them in the final rule as proposed.
    For a national bank to make a noncontrolling investment, current 
Sec.  5.36 requires a filing with the OCC that: (1) Describes the 
structure of the investment and the activity or activities conducted by 
the enterprise in which the bank is investing; (2) describes how the 
bank has the ability to prevent the enterprise from engaging in 
impermissible activities or has the ability to withdraw its investment; 
(3) describes how the investment is convenient and useful to the bank 
in carrying out its business and not a mere passive investment; (4) 
certifies that the bank's loss exposure is limited; and (5) certifies 
that the enterprise agrees to be subject to OCC supervision and 
examination, subject to the limitations and requirements of section 45 
of the FDI Act (12 U.S.C. 1831v) and section 115 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1820a).
    A national bank must file an application with the OCC to make a 
non-controlling investment unless it qualifies for the notice procedure 
in Sec.  5.36(e). A national bank may file a notice if: (1) The 
investment meets the above requirements; (2) the enterprise engages in 
activities that are listed in Sec.  5.34(e)(5)(v) (permissible 
operating subsidiary activities) or an activity that is substantively 
the same as that contained in published OCC precedent approving a non-
controlling investment by a national bank or its operating subsidiary; 
and (3) the bank is well managed and well capitalized. As with 
operating subsidiary notices, the OCC proposed to expand the activities 
eligible for notice for non-controlling investments to all previously 
approved activities, as defined in proposed Sec.  5.3. This definition 
includes activities approved for national banks and their operating 
subsidiaries, in addition to previously approved non-controlling 
investments. The proposal also reorganized paragraph (e) and made 
conforming changes to paragraphs (e)(2) and (e)(4). Additionally, the 
OCC stated that it is considering an alternative amendment removing the 
filing requirement for non-controlling investments in enterprises 
engaging in bank permissible activities, as discussed above for 
national bank operating subsidiaries.
    The OCC received one comment relating to Sec.  5.36(e), supporting 
the alternative amendment. However, for the reasons noted in the 
discussion on Sec.  5.34, Operating subsidiaries, the OCC declines to 
include this alternative in the final rule.
    This commenter also recommended that if the OCC retains the notice 
requirements and limits the use of a notice to banks meeting the 
proposed definition to ``well managed'' in Sec.  5.3, the OCC should 
make exceptions to these filing requirements for investments that help 
to meet the credit needs of the community and for investments below a 
specified threshold. As noted above in its discussion of comments on 
the definition of ``well managed'' in Sec.  5.3, the OCC finds that the 
components reflected in an entity's management rating, such as bank 
controls, are relevant to the establishment of other equity investments 
of a national bank and that a national bank with a 2 composite rating 
but a 3 management, or risk management, rating warrants additional 
scrutiny. This rationale is generally applicable, regardless of the 
size of the investment, including for investments that help meet the 
credit needs of the community.
    For these reasons, the OCC adopts these changes to Sec.  5.36(e) as 
proposed, with technical amendments to remove unnecessary cross-
references to Sec.  5.3.
    As noted, whether a national bank is filing a notice under 
paragraph (e) or an application under paragraph (f), the current rule 
requires the enterprise in which the bank will make a non-controlling 
investment to agree to OCC supervision and examination. The OCC 
proposed to amend paragraph (f), redesignated as paragraph (f)(1), to 
permit national banks to file an application for prior approval to 
invest in an enterprise that has not agreed to be subject to OCC 
supervision and examination. Additionally, the OCC proposed a new 
paragraph (f)(2) to provide for expedited review of certain 
applications for investments in enterprises that do not agree to OCC 
supervision and examination that pose minimal risk to the national 
bank's safety and soundness. An application under proposed paragraph 
(f)(2) would be deemed approved by the OCC within 10 days after the 
application is received if five additional requirements are met. First, 
the enterprise must engage in permissible bank activities as described 
in proposed paragraph (e) of this section. Second, the national bank 
must be well managed and well capitalized. These two requirements 
parallel the requirements for filing a notice. Third, the book value of 
the national bank's non-controlling investment for which the 
application is submitted must not be more than 1% of the bank's capital 
and surplus. Fourth, no more than 50% of the enterprise may be owned or 
controlled by banks or savings associations subject to examination by 
an appropriate Federal banking agency or credit unions insured by the 
National Credit Union Association. Many enterprises in which national 
banks make non-controlling investments are owned by a consortium of 
banks and savings associations and provide services to their owners and 
others. Given the potentially complex

[[Page 80422]]

interactions between these enterprises and their owners and the 
additional risks posed to the owners, the OCC believes that OCC 
supervision and examination of these enterprises is necessary for the 
safety and soundness of the investing national banks and Federal 
savings associations. Accordingly, the proposed rule did not permit 
investments in these entities without their commitment to OCC 
supervision and examination, and therefore expedited review of these 
investments would not be available. Finally, the OCC must not have 
notified the national bank that the application has been removed from 
expedited review, or that the expedited review process has been 
extended, pursuant to the standards contained in Sec.  5.13(a)(2).
    The OCC received one comment on these proposed amendments to Sec.  
5.36(f), which supported the proposed changes. The OCC therefore adopts 
these amendments to paragraph (f) as proposed, with one technical 
change in wording for clarity. As explained in the preamble to the 
proposed rule, the OCC believes that these amendments will give 
national banks greater flexibility to make permissible non-controlling 
investments, while giving the OCC an opportunity for an in-depth review 
of the proposed investment to ensure there is no inappropriate risk to 
the national bank's safety and soundness. Furthermore, the OCC believes 
that this added flexibility will in particular facilitate national bank 
investments in financial technology (fintech) companies, which will 
enhance the ability of national banks to enter into strategic 
partnerships and to develop innovative products, services, and 
processes while ensuring the OCC receives adequate information to 
supervise the attendant banking activities.\52\
---------------------------------------------------------------------------

    \52\ Notwithstanding this amendment, if the enterprise in which 
the national bank invests also provides services to the national 
bank, it may be subject to the examination and regulation under the 
Bank Service Company Act. See 12 U.S.C. 1867(c).
---------------------------------------------------------------------------

    In addition, the OCC proposed adding a new paragraph (g) to Sec.  
5.36 to permit a national bank to make a non-controlling investment 
without a filing to the OCC in certain circumstances. Specifically, a 
national bank would be permitted to make a non-controlling investment 
without an application or notice if the activities of the enterprise 
are limited to those activities previously reported by the bank in 
connection with making or acquiring a non-controlling investment; the 
activities in the enterprise continue to be legally permissible for a 
national bank; the bank's non-controlling investment will be made in 
accordance with any conditions imposed by the OCC in approving any 
prior non-controlling investment in an enterprise conducting these same 
activities; and the bank is able to make the representations and 
certifications specified in amended Sec. Sec.  5.36(e)(3) through 
(e)(7). As a conforming amendment, the OCC proposed to redesignate 
current paragraphs (g) through (i) as paragraphs (h) through (j), 
respectively.
    The OCC received no comments on new paragraph (g) and the 
conforming amendments and adopts the revisions as proposed, with two 
technical changes to correct a cross-reference in paragraph (h)(1) to 
reflect the redesignation and to remove an unnecessary cross-reference 
to Sec.  5.3 in redesignated paragraph (i). As stated in the preamble 
to the proposed rule, the national bank would already have a non-
controlling investment in an entity conducting particular activities, 
and the OCC finds that there would be little risk in the bank making an 
additional non-controlling investment in an entity conducting the same 
activities. Furthermore, the OCC finds that non-controlling investments 
pose similar risks to national banks as operating subsidiaries, and new 
paragraph (g) would parallel current Sec.  5.34(e)(5)(vi), redesignated 
in the final rule as Sec.  5.34(f)(6), which permits national banks to 
make investments in operating subsidiaries without a filing. Therefore, 
the OCC believes that the revisions to paragraph (g) will reduce burden 
without jeopardizing the national bank's safety and soundness.
    Redesignated paragraph (j) provides exceptions to the rules of 
general applicability. The OCC proposed to remove the exception to 
Sec.  5.9, public availability, because some of these investments may 
be of public interest. Further, the proposal would permit the OCC to 
determine that some or all provisions in Sec. Sec.  5.8, 5.10, and 5.11 
apply if it concludes that an application presents significant or novel 
policy, supervisory, or legal issues. This proposed paragraph (j) would 
parallel the equivalent provision for operating subsidiary filings in 
current Sec.  5.34(e)(5)(iii). The OCC received one comment to these 
changes to paragraph (j). The commenter opposed making the public 
availability requirements of Sec.  5.9 applicable to non-controlling 
investment filings on the grounds that the information included in 
those filings could be competitive information and the commenter 
contended that a bank cannot rely on the OCC deeming this information 
confidential. Therefore, the commenter argued that the proposed change 
would have a chilling effect on equity investments by banks. The 
commenter also stated that the public will learn about bank 
noncontrolling investments when the bank or firm in which the bank 
invested announces the investment.
    The OCC has reconsidered this proposed amendment in light of this 
comment. A noncontrolling investment filing differs from an operating 
subsidiary filing. Although confidential information can be redacted in 
both of these types of filings when made available to the public, the 
fact that a national bank is making a noncontrolling investment in an 
entity may itself be considered confidential information until the 
national bank or entity announces the investment. Therefore, the OCC is 
not removing the exception to Sec.  5.9, public availability, for Sec.  
5.36 filings as proposed. However, the OCC is adopting in the final 
rule the proposed provision that permits the OCC to determine that some 
or all of the provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply if it 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, with the addition of Sec.  5.9 to this 
sentence.

Investment in National Bank or Federal Savings Association Premises 
(Sec.  5.37)

    Section 5.37 describes the procedures for national bank and Federal 
savings association investment in bank premises. Paragraph (d)(1)(i) 
provides that the procedures of Sec.  5.37 are applicable to 
investments in the stocks, bonds, debentures, or other obligations of 
any corporation holding the premises of the national bank or Federal 
savings association in addition to direct investments in the bank 
premises. Twelve CFR 7.1000 provides the authority for national bank 
and Federal savings association investments in bank premises.\53\ In 
addition to the investments listed in Sec.  5.37(d)(1)(i), Sec.  
7.1000(a)(3) provides that national banks and Federal savings 
associations may hold bank premises through a subsidiary organized as a 
corporation, partnership, or similar entity (e.g., a limited liability 
company). The OCC proposed to revise Sec.  5.37(d)(1)(i) to recognize 
the permissibility of holding bank premises through partnerships and 
similar entities, such as limited liability companies, so that it is 
consistent with Sec.  7.1000(a)(3). In addition, the OCC proposed to 
remove the definition of ``capital and surplus'' in Sec.  5.37 as it is 
redundant with the definition of this

[[Page 80423]]

term in Sec.  5.3. The OCC also proposed adding Sec.  5.9, public 
availability, to the exceptions to rules of general applicability in 
Sec.  5.37(d)(5). Finally, the OCC proposed to correct a technical 
error in paragraph (a), replacing ``12 U.S.C. 317d'' with ``12 U.S.C. 
371d.''
---------------------------------------------------------------------------

    \53\ The OCC notes that it has proposed to redesignate 12 CFR 
7.1000 as 12 CFR 7.1024 in a separate rulemaking. See 85 FR 40794 
(July 7, 2020).
---------------------------------------------------------------------------

    The OCC received no comments on these changes and adopts them as 
proposed, with two technical changes to remove an unnecessary cross-
reference to Sec.  5.3 in paragraph (d)(3)(i) and to conform a cross-
reference in paragraph (d)(4).

Operating Subsidiaries of a Federal Savings Association (Sec.  5.38)

    Section 5.38 provides the application requirements for a Federal 
savings association's acquisition or establishment of an operating 
subsidiary or commencement of a new activity in an existing operating 
subsidiary when required by section 18(m) of the FDI Act (12 U.S.C. 
1828(m)). Section 5.38 is largely parallel to Sec.  5.34 for national 
bank operating subsidiaries, except that where a national bank would 
file a notice, a Federal savings association would file an application 
eligible for expedited review. Accordingly, the OCC proposed 
coordinating revisions to Sec.  5.38 including: (1) Revising the 
standard for qualifying subsidiaries in paragraph (e)(2)(i)(A); (2) 
excluding securitization trusts from the scope of the section in new 
paragraph (e)(2)(iii)(C); (3) redesignating paragraphs (e)(5), (e)(6), 
and (e)(7) as paragraphs (f), (g), and (h), respectively; (4) expanding 
the activities eligible for expedited review to include activities 
substantially the same as a previously approved activity (as proposed 
to be defined in Sec.  5.3) and conducted in accordance with the same 
terms and conditions applicable to the previously approved activity, in 
redesignated paragraph (f)(2)(ii)(B); (5) expanding the entities 
eligible for expedited review to include certain trusts where the 
Federal savings association or its operating subsidiary is the sole 
beneficiary and has the ability to replace the trustee at will, in 
redesignated paragraphs (f)(2)(ii)(C) and (D); and (6) explicitly 
recognizing that the control required by redesignated paragraphs 
(f)(2)(ii)(D) may be met through an operating subsidiary of the Federal 
savings association. In addition, the OCC proposed technical changes 
that would remove the definitions of ``well capitalized'' and ``well 
managed'' from Sec.  5.38, as with Sec.  5.34, and replace the word 
``subsidiary'' with the more appropriate word ``entity'' in the 
introductory text of paragraph (e)(2)(iii). The OCC received no 
comments on these proposed amendments and the OCC adopts them as 
proposed, with one technical change to remove unnecessary cross-
references to Sec.  5.3 in paragraph (f).
    In addition, the OCC proposed to correct an inadvertent omission in 
the 2015 Final Rule by amending redesignated Sec.  
5.38(f)(2)(ii)(D)(1), which contains requirements for how a Federal 
savings association must effectively control an operating subsidiary to 
be eligible for expedited review of an application. Although the OCC 
made changes in the 2015 Final Rule to current Sec. Sec.  
5.34(e)(2)(i)(A), 5.34(e)(5)(ii)(A)(3)(i), and 5.38(e)(2)(i)(A) to 
address commenter's concerns regarding the application of the rule to 
joint ventures,\54\ the OCC did not make corresponding conforming 
changes to current Sec.  5.38(e)(5)(ii)(B)(4)(i), redesignated in the 
proposal as Sec.  5.38(f)(2)(ii)(D)(1). However, all of these 
provisions should contain parallel language. Accordingly, the OCC 
proposed to revise redesignated Sec.  5.38(f)(2)(ii)(D)(1) so that it 
parallels current Sec.  5.34(e)(5)(ii)(A)(3)(i), redesignated in this 
proposal as Sec.  5.34(f)(2)(i)(C)(1). The OCC received no comments on 
this change and adopts it as proposed.
---------------------------------------------------------------------------

    \54\ See 80 FR 28346, at 28375 (May 18, 2015).
---------------------------------------------------------------------------

Financial Subsidiaries of a National Bank (Sec.  5.39)

    Section 5.39 describes the procedures for national bank acquisition 
of, and conduct of activities in, a financial subsidiary pursuant to 
section 5136A of the Revised Statutes.\55\ Paragraph (h)(5)(ii) of 
Sec.  5.39 specifies that the restrictions contained in section 
23A(a)(1)(A) of the Federal Reserve Act \56\ do not apply to a covered 
transaction between a bank and its financial subsidiary. However, 
section 609 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act removed this section 23A exclusion. Accordingly, the OCC 
proposed to remove paragraph (h)(5)(ii).
---------------------------------------------------------------------------

    \55\ 12 U.S.C. 24a.
    \56\ 12 U.S.C. 371c(a)(1)(A).
---------------------------------------------------------------------------

    The OCC also proposed to clarify the approval process for financial 
subsidiary activities. First, consistent with other changes in part 5, 
the OCC proposed to change the terminology for filings under Sec.  5.39 
from notice to application. The OCC did not intend any substantive 
change in standards or procedures as a result of this proposal.
    Second, as the OCC recognized in the initial proposal for Sec.  
5.39, section 24a states that OCC approval shall be based solely upon 
statutory factors.\57\ Accordingly, the OCC initially proposed the 
current procedures for Sec.  5.39 upon the understanding that the 
approval may occur upon a bank's submission of information 
demonstrating satisfaction of the statutory criteria.\58\ In the 
current proposal, the OCC proposed to add a new paragraph (i)(3) 
specifying that an application is deemed approved upon filing of the 
information required by the procedures of paragraphs (i)(1) or (i)(2) 
within the time frames provided.
---------------------------------------------------------------------------

    \57\ 65 FR 3159 (Jan. 20, 2000).
    \58\ Id.
---------------------------------------------------------------------------

    Finally, the OCC proposed technical changes to paragraph (d) that 
would remove the definitions of ``appropriate Federal banking agency,'' 
``well capitalized,'' and ``well managed.''
    The OCC received no comments specific to the amendments it proposed 
to Sec.  5.39 and adopts them as proposed with technical changes that 
remove an unnecessary cross-reference to Sec.  5.3 in paragraph (g) and 
correct a cross-reference in paragraph (h)(5), and with other technical 
changes to citations.

Change in Location of a Main Office of a National Bank or Home Office 
of a Federal Savings Association (Sec.  5.40)

    The final rule makes a technical correction to Sec.  5.40. Among 
other things, Sec.  5.40(c)(2)(ii) requires a Federal savings 
association to obtain shareholder approval required under its charter 
if relocating its home office outside the limits of its city, town, or 
village, and must amend its charter. Because this provision applies to 
both Federal stock savings associations and Federal mutual savings 
associations, the OCC is amending this provision to include member 
approval as Federal mutual savings associations have members and not 
shareholders.

National Bank Director Residency and Citizenship Waivers (New Sec.  
5.43)

    The OCC proposed a new Sec.  5.43 to provide procedures for waivers 
of the national bank director residency and citizenship requirements. 
Section 5146 of the Revised Statues (12 U.S.C. 72) requires every 
director of a national bank to be a citizen of the United States and 
that a majority of the directors reside in the State, Territory, or 
District where the national bank is located, or within one hundred 
miles of the location of the office of the bank. These requirements 
reflect the principle of local ownership and control of national banks. 
Twelve U.S.C. 72 provides the Comptroller the discretion to waive the 
residency requirement and to waive the citizenship requirement for not 
more than a minority of the total number of directors.

[[Page 80424]]

    The OCC has processed requests for waivers of the residency and 
citizenship requirements for many years. The ``National Bank Director 
Waivers'' booklet of the Comptroller's Licensing Manual currently 
describes the procedures for requesting and granting waivers. The OCC 
proposed codifying these procedures in a new 12 CFR 5.43 to better 
clarify and structure the waiver process. The OCC received no comments 
on this new section and adopts these provisions as proposed, with the 
changes discussed below.
    Specifically, paragraph (a) of Sec.  5.43 sets forth the authority 
for the regulation, 12 U.S.C. 72 and 93a, the latter of which grants 
the OCC general rulemaking authority. Paragraph (b) sets forth the 
scope of the section as describing the procedures for the OCC to waive 
the residency and citizenship requirements.
    Paragraph (c) sets forth the application procedures. Under 
paragraph (c)(1), a national bank would file a written application with 
the OCC to request a waiver of the residency requirement. Paragraph 
(c)(1) also provides that the OCC may grant this waiver for individual 
directors or for any number of director positions. The OCC typically 
grants residency waivers for a certain number of directors on the board 
rather than to specific individuals, but the final rule increases 
flexibility by permitting either procedure. As a clarifying change, the 
final rule provides that the waiver is valid until the OCC revokes it 
in accordance with paragraph (d) of this section, or, if granted on an 
individual basis, until the individual no longer serves on the board.
    Under paragraph (c)(2), a national bank may request a waiver of the 
citizenship requirements for individuals who comprise up to a minority 
of the total number of directors by filing a written application with 
the OCC. Paragraph (c)(2) also provides that the OCC may grant a waiver 
on an individual basis. Given the more prescriptive nature of the 
citizenship requirement and the greater background investigation that 
the OCC undertakes on proposed non-citizen directors, OCC practice is 
to grant waivers to individuals and not to a designated number of 
directors. Accordingly, the final rule specifies in paragraph (c)(2) 
that a citizenship waiver is valid until the individual leaves the 
board or the OCC revokes the waiver in accordance with paragraph (d), 
discussed below.
    Paragraph (c)(3)(i) requires the subject of a citizenship waiver 
application to submit the information prescribed in the Interagency 
Biographical and Financial Report. Paragraph (c)(3)(ii) provides that 
the OCC may require additional information about the subject of a 
citizenship waiver application, including legible fingerprints, if 
appropriate. This paragraph also permits the OCC to waive any of the 
information requirements if the OCC determines that doing so is in the 
public interest. The final rule makes a technical correction to the 
cross-reference in this paragraph.
    Paragraph (c)(4) provides exceptions to the rules of general 
applicability. Specifically, Sec. Sec.  5.8 (public notice), 5.9 
(public availability), 5.10 (comments), and 5.11 (hearings and other 
meetings) do not apply to applications for citizenship waivers. As 
noted in the preamble to the proposed rule, the OCC believes the 
applications will largely consist of information specific to a bank's 
internal practice as well as private information about the individuals 
subject to the waiver applications. Accordingly, these applications 
should not be publicly available nor subject to public notice, comment, 
or hearings.
    Paragraph (d) provides procedures for the OCC's revocation of a 
residency or citizenship waiver. Under these procedures, the OCC will 
provide written notice before a revocation to the national bank and 
affected director(s) of its intention to revoke the waiver and the 
basis for its intention. The OCC recognizes that discretion in revoking 
residency and citizenship waivers is premised upon the guarantee of due 
process. Accordingly, this paragraph provides the bank and the affected 
director(s) the opportunity to respond in writing to the OCC's 
intention to revoke a waiver within 10 calendar days, unless the OCC 
determines that a shorter period is appropriate in light of relevant 
circumstances. The OCC will consider the written responses of the bank 
and affected director(s), if any, prior to deciding whether or not to 
revoke a residency or citizenship waiver. The OCC will notify the 
national bank and the director of the OCC's decision to revoke a 
residency or citizenship waiver in writing. If the director appeals 
pursuant to paragraph (e), this waiver decision is effective upon the 
director's receipt of the decision of the Comptroller, an authorized 
delegate, or the appellate official, to uphold the initial decision to 
revoke the residency or citizenship waiver. If the director does not 
appeal, the revocation is effective at the expiration of the period to 
appeal. As stated in the preamble to the proposed rule, the OCC 
believes the decision to revoke a waiver is consistent with the 
Comptroller's authority to grant a waiver even though 12 U.S.C. 72 does 
not contain any specific provisions for revoking a waiver. Absent this 
authority many residency waivers effectively would be perpetual as the 
OCC generally grants residency waivers for a designated number of 
director positions. Further, changing geo-political circumstances may 
in some circumstances warrant the revocation of citizenship waivers, 
particularly if foreign governments are unduly influencing directors' 
activities with regard to a national bank.
    Paragraph (e) provides an appeals process for a director whose 
residency or citizenship waiver the OCC has decided to revoke. This 
appeals process parallels the appeals process provided for disapprovals 
of directors and senior executive officers in 12 CFR 5.51, and provides 
review by the Comptroller, an authorized delegate, or a designated 
appellate official. As proposed, a director may appeal on the grounds 
that the reasons for the initial decision to revoke were contrary to 
fact or arbitrary and capricious. The final rule provides that either 
the director or the national bank, or both, may make this appeal. This 
change corrects an inadvertent omission in the proposed rule and is 
consistent with the language in Sec.  5.51. The Comptroller, an 
authorized delegate, or the appellate official will independently 
determine whether the reasons given for the initial decision to revoke 
are contrary to fact or arbitrary and capricious. If they determine 
either to be the case, the Comptroller, an authorized delegate, or the 
appellate official may reverse the initial decision to revoke the 
waiver. The final rule also corrects the cross-reference in paragraph 
(e)(4) for the effective date of a revocation.
    Paragraph (f) provides that waivers outstanding on the effective 
date of the final rule remain in effect, unless revoked pursuant to 
paragraph (d). The OCC adopts this provision as proposed with a 
technical change for clarity. The final rule removes the language 
``notwithstanding paragraph (c)(2)'' and instead adds a reference to a 
waiver no longer being in effect because the individual is no longer on 
the board, as provided in paragraph (c).

Increases in Permanent Capital of a Federal Stock Savings Association 
(Sec.  5.45)

    Section 5.45 sets out the OCC's rules addressing increases in 
permanent capital by a Federal savings association organized in stock 
form. The OCC proposed two technical amendments to this section. The 
OCC received no

[[Page 80425]]

comments to these technical changes and adopts them as proposed. 
Specifically, the final rule changes the term ``Federal savings 
association'' or ``savings association'' to ``Federal stock savings 
association'' each time it appears, except as used in the defined term 
``eligible savings association,'' to more accurately reflect the scope 
of this section. Second, the final rule replaces the reference to 12 
CFR part 197 in paragraph (h) with 12 CFR part 16, which now applies to 
Federal savings associations.
    The OCC invited comment on another possible change to Sec.  5.45. 
Under the current rule, Federal savings associations that meet the 
criteria for an eligible savings association described in Sec.  5.3 may 
have their applications for capital increases, when required, reviewed 
under an expedited process. The OCC requested comment on whether it 
should amend its regulations so that only well capitalized and well 
managed Federal savings associations are eligible to request expedited 
review of their applications for capital increases. The preamble to the 
proposed rule explained that if the OCC makes this change to Sec.  5.45 
in the final rule, it would also amend its other capital filing-related 
rules in part 5 based on this same rationale, Sec. Sec.  5.46 (Changes 
in permanent capital of a national bank), 5.47 (Subordinated debt 
issued by a national bank), 5.55 (Capital distributions by Federal 
savings associations), and 5.56 (Inclusion of subordinated debt 
securities and mandatorily redeemable preferred stock as Federal 
savings association supplementary (tier 2) capital).
    The OCC received no comments specifically on the changes proposed 
or suggested for Sec.  5.45. As discussed further below regarding Sec.  
5.46, the OCC believes that the current standard for evaluating capital 
filings, including the compliance rating, is appropriate. Therefore, 
the OCC adopts the amendments to Sec.  5.45 as proposed.

Changes in Permanent Capital of a National Bank (Sec.  5.46)

    Section 5.46 sets out the OCC's rules addressing changes in 
permanent capital for a national bank. Paragraph (g)(1)(ii) provides 
that prior OCC approval is required for an increase in permanent 
capital in certain cases. In addition, pursuant to 12 U.S.C. 57, 
paragraph (i)(3) of Sec.  5.46 requires a bank to submit a notice to 
the appropriate licensing office after it completes an increase in 
capital, regardless of whether prior approval is required. The OCC 
proposed to clarify these procedures for increases in capital requiring 
prior approval by referencing paragraph (i)(3) in the introductory text 
of paragraph (g)(1)(ii) and removing it from paragraph (g)(1)(ii)(C). 
The OCC also proposed to clarify the introductory text of paragraph 
(g)(1)(ii) to specifically indicate that an application to increase a 
national bank's permanent capital may be eligible for expedited review 
under paragraph (i)(2). The OCC received no comments to these changes.
    Paragraph (h) provides that a national bank must apply and obtain 
the OCC's prior approval for any reduction in its permanent capital. 
Paragraph (i)(2) provides expedited review procedures and currently 
provides that an eligible bank may request approval for decreasing its 
capital for up to four consecutive quarters. The OCC proposed a number 
of amendments to paragraphs (h) and (i) to add flexibility for national 
banks and to clarify procedures. First, the OCC proposed to amend 
paragraph (h) to permit a national bank to request approval in a 
standard application for a reduction in capital for multiple quarters. 
The request need only specify a total dollar amount for the requested 
period and need not specify amounts for each quarter. As a result, a 
national bank may request approval for a reduction in permanent capital 
over more than four consecutive quarters. However, this request would 
not be eligible for expedited review so that the OCC may have the time 
to carefully review the request. Second, the OCC proposed to add 
flexibility to the expedited process in paragraph (i)(2) by specifying 
that an eligible national bank need only state the total dollar amount 
rather than per-quarter reductions in requests for four-quarter 
decreases. As a conforming change, the OCC proposed to amend paragraph 
(i)(5) to clarify that the OCC's approval of a capital change does not 
expire within one year of the date of the approval if the OCC specifies 
a longer period.
    The OCC received one comment on this proposal, which supported the 
proposed amendments. This commenter also recommended amending the 
criteria for an eligible bank in the context of requesting approval for 
decreasing its capital for four consecutive quarters. The commenter 
recommended adopting a single eligibility standard for all part 5 
filings and other procedures that takes into account the criteria that 
are most relevant to the activity at hand, which, in this section, 
would relate to the bank's capital levels. However, the commenter 
stated that if a uniform standard is not adopted, then the OCC should 
not require a bank to receive a consumer compliance rating (or any 
other single component rating) of at least 2 in order to meet the 
eligible bank standard for changes to its permanent capital through the 
expedited review process. The commenter recommended that the OCC 
instead employ a standard for eligibility that relates to the bank's 
capital levels.
    The OCC disagrees with this commenter's recommendation. The OCC 
believes that a consistent definition of ``eligible bank'' is 
appropriate across part 5. Further, ``eligible bank'' status only 
results in expedited processing. Since a bank has to file an 
application regardless of whether it is an ``eligible bank,'' the 
suggested change does not reduce burden. Finally, the OCC believes that 
expedited treatment for a bank with a consumer compliance rating lower 
than 2 is not appropriate when considering a capital reduction. For the 
reasons discussed above, the OCC has not made any changes to the final 
rule in response to this comment and adopts the amendments to Sec.  
5.46 as proposed.

Subordinated Debt Issued by a National Bank (Sec.  5.47)

    Section 5.47 describes the requirements applicable to a national 
bank's issuance of subordinated debt, including subordinated debt 
intended for inclusion in tier 2 capital. The OCC proposed numerous 
changes to this section. Specifically, the OCC proposed to add a new 
definition of ``subordinated debt document'' to Sec.  5.47(c) to mean 
any document pertaining to an issuance of subordinated debt, and any 
renewal, extension, amendment, modification, or replacement thereof, 
including the subordinated debt note, and any global note, pricing 
supplement, note agreement, trust indenture, paying agent agreement, or 
underwriting agreement. The OCC also proposed conforming revisions 
throughout Sec.  5.47 to better reflect this terminology. The OCC 
received one comment on this new definition stating that the definition 
of ``subordinated debt document'' is broad. The OCC disagrees with this 
comment because the ``subordinated debt document'' definition is 
intended to capture the scope of documents that could impact a bank's 
compliance with the OCC's regulatory requirements. Therefore, the OCC 
adopts this definition as proposed. This change clarifies that a 
national bank should submit with their applications all material 
documents needed for the OCC to review the application for compliance 
with its regulatory requirements. The OCC reviews ancillary securities

[[Page 80426]]

documents to ensure that they do not contain language that conflicts 
with required disclosures or statements made in the subordinated debt 
note. The OCC notes that this list of documents in the definition is 
illustrative and not exclusive. The final rule makes a conforming 
change in paragraph (c) to remove the proposed numbering of the 
definitions.
    Paragraph (d)(3)(ii) contains a list of statements and descriptions 
that a national bank must clearly and accurately disclose in the 
subordinated debt note. The OCC proposed adding language to paragraph 
(d)(3)(ii)(C) to clarify that a national bank is only required to 
disclose the OCC's authority under 12 CFR 3.11 to limit certain 
distributions if the disclosure requirement is applicable to the 
subordinated debt issuance. The OCC received no comments on this new 
language and adopts it as proposed. Under the final rule, a national 
bank is only required to incorporate this disclosure language into a 
subordinated debt note if the issuing bank, or any successor 
institution to the issuing bank, would have discretion under the terms 
of the subordinated debt to permanently or temporarily suspend payments 
without triggering an event of default. The OCC believes that this 
amendment will provide flexibility and reduce burden by permitting 
national banks to omit the provisions when warranted.
    The OCC also proposed to add a new paragraph (d)(3)(ii)(D) that 
would require a national bank to disclose in a subordinated debt note 
that the subordinated debt obligation may be fully subordinated to 
interests held by the U.S. government in the event that the national 
bank enters into a receivership, insolvency, liquidation, or similar 
proceeding. This proposed requirement mirrors the language in 12 CFR 
3.20(d)(1)(xi), which requires advanced approaches banks to disclose 
this information in the governing agreement, offering circular, or 
prospectus of an instrument to be included in tier 2 capital. The 
proposal also made a conforming change to the paragraph (e) 
introductory text to remove the reference to advanced approaches 
national banks. The OCC received no comments on this new paragraph or 
the conforming change and adopts them as proposed. As stated in the 
preamble to the proposal, the OCC believes that disclosing this 
information to potential investors in subordinated debt is beneficial 
for all national banks, even those that are not advanced approaches 
banks or that do not intend to include the debt in tier 2 capital.
    Paragraphs (f)(1)(ii) and (h) govern the procedures for a national 
bank to include subordinated debt in tier 2 capital. Currently, these 
provisions provide that a national bank may not include subordinated 
debt as tier 2 capital unless it has filed a notice with the OCC and 
received notification from the OCC that the subordinated debt qualifies 
as tier 2 capital. The OCC proposed to make these paragraphs consistent 
with the general usage in part 5 by changing the terminology from 
notice to application. The OCC also proposed clarifying changes to 
these paragraphs. The OCC received no comments on these changes and 
adopts then as proposed. The OCC does not intend these changes to be 
substantive.
    Additionally, the OCC proposed to provide explicit regulatory 
authority for a national bank to seek approval to include subordinated 
debt as tier 2 capital before issuance of the subordinated debt in 
paragraphs (f)(1)(ii) and (h)(1). National banks routinely seek 
confirmation from the OCC that subordinated debt will qualify as tier 2 
capital prior to issuance to mitigate the risk of issuing nonqualifying 
subordinated debt. This paragraph codifies this practice. Relatedly, 
the OCC proposed a conforming revision to paragraph (h)(2)(ii), which 
requires the application to include the amount and date of receipt of 
funds, to permit submission of the projected amount and date of 
receipt. The OCC also proposed to add a new paragraph (h)(2)(iii) 
requiring the application to include the interest rate or expected 
calculation method for the interest rate for the subordinated debt. 
This paragraph would assist the OCC in reviewing applications for 
inclusion of the subordinated debt in tier 2 capital. The OCC received 
no comments on these changes and adopts them as proposed. Under the 
final rule, and as with current practice, the OCC will not provide 
final approval that the subordinated debt qualifies as tier 2 capital 
until after the debt is issued and final pricing is available.
    Paragraphs (f)(2)(ii) and (g)(1)(ii) require OCC approval for a 
national bank to prepay subordinated debt. The approval requirements 
for prepayment of subordinated debt include specific additional 
requirements for prepayment that is in the form of a call option. 
Specifically, a national bank seeking to prepay subordinated debt in 
the form of a call option is required to provide: (1) A statement 
explaining why the national bank believes that following the proposed 
prepayment the national bank would continue to hold an amount of 
capital commensurate with its risk; or (2) a description of the 
replacement capital instrument that meets the criteria for tier 1 or 
tier 2 capital under 12 CFR 3.20, including the amount of such 
instrument, and the time frame for issuance. As noted in the preamble 
to the proposed rule, the OCC has found that the distinction between 
prepayment and prepayment in the form of a call option is immaterial to 
OCC review, that the additional requirements are generally satisfied in 
most prepayment applications, and that the additional information is 
helpful for the OCC to determine the impact of the prepayment on the 
national bank's capital levels and safety and soundness. Accordingly, 
the OCC proposed having a single procedure for the prepayment of 
subordinated debt that would incorporate the requirements for 
prepayment in the form of a call option. The proposal contained a 
coordinating revision to paragraph (g)(2)(ii) regarding OCC approval. 
The OCC received no comments on these changes and adopts them as 
proposed.
    Currently, Sec.  5.47 does not explicitly require a national bank 
to make a filing with the OCC if the national bank makes a material 
change to its outstanding subordinated debt note or any related 
subordinated debt documents. The OCC proposed to add new paragraphs 
(f)(3) and (g)(1)(iii) to ensure that subordinated debt issuances 
remain compliant with OCC regulatory requirements, including the 
requirements for inclusion in tier 2 capital. These revisions would 
require OCC approval for a material change to an existing subordinated 
debt document if the bank would have been required to receive OCC 
approval to issue the security under paragraph (f)(1) or to include it 
in tier 2 capital under paragraph (h). An application to make a 
material change would include: (1) A description of the proposed 
changes; (2) a statement of whether the national bank is subject to or 
required to file a capital plan with the OCC, and if so, how the 
proposed change conforms to the capital plan; (3) a copy of the revised 
subordinated debt documents reflecting all proposed changes; and (4) a 
statement that the proposed changes to the subordinated debt documents 
comply with all applicable laws and regulations.
    The OCC received one comment letter suggesting that the OCC not 
implement this OCC approval requirement for material changes to 
subordinated debt documents. The commenter stated that the ``material 
change'' standard is imprecise, the ``subordinated debt document'' 
definition is broad, and the overall requirement would increase

[[Page 80427]]

burden. The commenter also argued against tying the application 
requirements to the bank's consumer compliance rating, which is a 
component of whether a bank is an ``eligible bank'' under 12 CFR 5.3 
and therefore subject to certain procedural requirements.
    The OCC disagrees with this comment and is finalizing the OCC 
approval requirement for material changes as proposed. The OCC reviews 
subordinated debt documents for compliance with the OCC's licensing 
requirements at 12 CFR 5.47 and the OCC's capital component eligibility 
criteria at 12 CFR 3.20. The OCC reviews ancillary securities documents 
to ensure that they do not contradict the statements and disclosures 
made in the primary documents. As previously explained, the 
``subordinated debt document'' definition is intended to capture the 
scope of documents that could impact a bank's compliance with the OCC's 
regulatory requirements.
    The OCC uses the ``eligible bank'' criteria as a proxy for 
determining the appropriate level of review for subordinated debt 
issuance and prepayment actions. As discussed elsewhere in this 
Supplementary Information, the OCC believes that expedited treatment 
for a bank with a consumer compliance rating lower than 2 is not 
appropriate. Because the terms of a subordinated debt document govern 
the rights and obligations of the issuing bank throughout the lifetime 
of the security, the OCC's supervisory interest in reviewing 
subordinated debt documents for regulatory compliance extends past the 
security's date of issuance.
    The commenter also requested, in the event the OCC finalized this 
provision as proposed, that the OCC confirm that approval would only be 
required in the event that the bank would have been required to receive 
approval to issue the security under 12 CFR 5.47(f)(1) or to include it 
in tier 2 capital under 12 CFR 5.47(h). In response, the OCC notes that 
a bank would only have to seek OCC approval of a change to a 
subordinated debt document if: (1) The change is material and (2) at 
the time of issuance of the security, the bank would have been required 
to receive OCC approval to issue the security under 12 CFR 5.47(f)(1) 
or to include it in tier 2 capital under 12 CFR 5.47(h). In response to 
the comment that the ``material change'' standard is imprecise, the OCC 
notes that it would not consider a change to a subordinated debt 
document to be material if it consists entirely of technical or 
administrative changes to the subordinated debt document, such as a 
change to a filing address or filing procedure. The OCC would consider 
a change to be material if it pertains to subjects covered by the OCC 
regulatory requirements at 12 CFR 3.20 and 12 CFR 5.47, such as pricing 
and maturity, rights and obligations of the lender and borrowers, and 
required regulatory disclosures.
    Finally, the OCC proposed to make certain stylistic changes to the 
rule text of Sec.  5.47 that are not intended to impact the substantive 
requirements applicable to national banks. The OCC received no comments 
on these changes and adopts them as proposed.

Change in Control of a National Bank or Federal Savings Association; 
Reporting of Stock Loans (Sec.  5.50)

    Section 5.50 sets forth the procedures and standards for changes in 
control of national banks and Federal savings associations. Paragraph 
(d)(8) contains a definition of insured depository institution. 
However, that term is not used within Sec.  5.50. Accordingly, the OCC 
proposed to replace that definition with the definition of ``depository 
institution,'' to mean a depository institution as defined in section 
3(c)(1) of the FDI Act (12 U.S.C. 1813(c)(1)).
    Paragraph (f)(3)(iv) states that an applicant may request a hearing 
by the OCC within 10 days of receipt of a notice disapproving a change 
in control and that following final agency action under 12 CFR part 19, 
further review by the courts is available. Paragraph (f)(6) provides 
that the OCC will notify the proposed acquiror in writing of a 
disapproval within three days and will indicate the basis of its 
disapproval. For clarity, the OCC proposed combining these provisions 
in a revised paragraph (f)(6). The OCC also proposed to add language 
stating that this disapproval notice will inform the filer of the 
availability of a hearing. Additionally, the OCC proposed a new 
paragraph (f)(6)(iii) specifying that if a filer fails to request a 
hearing with a timely request, the notice of disapproval constitutes a 
final and unappealable order. This language is currently included in 12 
CFR 19.161 and the OCC stated in the preamble to the proposal that it 
believes the language also should be included in Sec.  5.50 to put 
filers on notice of the implications of failure to request a hearing in 
a timely manner.
    Finally, paragraph (g)(2)(i) provides procedures for the OCC's 
release of information related to a change in control notice, including 
publication of information in the OCC's Weekly Bulletin. The OCC 
proposed revising this provision to reflect the information that the 
OCC publishes in the Weekly Bulletin in practice, namely the date of 
filing, the disposition of the notice and date thereof, and the 
consummation date of the transaction, if applicable.
    The OCC received no comments on these changes to Sec.  5.50 and 
adopts them as proposed.

Changes in Directors and Senior Executive Officers of a National Bank 
or Federal Savings Association (Sec.  5.51)

    Section 5.51 implements section 914 of the Financial Institutions 
Reform, Recovery, and Enforcement of 1989 (12 U.S.C. 1831i). Section 
914 requires a national bank or Federal savings association to provide 
prior notice to the OCC of the proposed addition of any individual to 
the board of directors or the employment of any individual as a senior 
executive officer of a bank if, among other things, the bank is in 
troubled condition. Paragraph (c)(4) defines ``senior executive 
officer'' to mean the president, chief executive officer, chief 
operating officer, chief financial officer, chief lending officer, 
chief investment officer, and any other individual the OCC identifies 
in writing to the national bank or Federal savings association who 
exercises significant influence over, or participates in, major policy 
making decisions of the bank or savings association without regard to 
title, salary, or compensation. The term also includes employees of 
entities retained by a national bank or Federal savings association to 
perform functions in lieu of directly hiring the individuals, and the 
individual functioning as the chief managing official of the Federal 
branch of a foreign bank. The OCC proposed to add chief risk officer to 
the definition of senior executive officer given the increase in that 
role at many national banks and Federal savings associations. The OCC 
received no comments to this change and adopts it as proposed.
    Paragraph (c)(7) provides the definition of ``troubled condition,'' 
which is one of the circumstances in which a national bank or Federal 
savings association is required to file a notice under Sec.  5.51. 
Pursuant to paragraph (c)(7)(ii), this definition includes a national 
bank or Federal savings association that is subject to a cease and 
desist order, a consent order, or a formal written agreement, unless 
otherwise informed in writing by the OCC. The OCC proposed to amend 
paragraph (c)(7)(ii) to specify that the cease and desist order, 
consent order, or formal written agreement must require the bank or 
savings association to improve its financial condition for the 
institution to be considered in ``troubled condition'' solely as a 
result of the

[[Page 80428]]

enforcement action. The OCC expects to inform a bank in writing when an 
enforcement action does not require action to improve the financial 
condition of the bank. The OCC's general policy is not to apply 
troubled condition status to national banks or Federal savings 
associations solely as a result of cease and desist orders, consent 
orders, or formal written agreements that do not require improvement in 
the financial condition of the bank or savings association, such as 
enforcement actions that address certain compliance-related 
deficiencies that do not affect the financial condition of the bank or 
savings association. Typically, the OCC has noted in these actions that 
the bank or savings association is not in troubled condition as a 
result of the action. The proposal updated the definition of troubled 
condition in Sec.  5.51 to align with the OCC's current supervisory 
practice. The OCC noted in the preamble to the proposal that this 
practice is consistent with that of the Federal Reserve Board and the 
FDIC, and the proposed revision would align the OCC's regulations with 
the Federal Reserve Board's and FDIC's regulations implementing section 
914.\59\ The OCC received a comment in response to this proposed 
amendment that strongly supported the revised definition of ``troubled 
condition.'' Therefore, the OCC finalizes this definition as proposed.
---------------------------------------------------------------------------

    \59\ See 12 CFR 225.71(d) (Board); 12 CFR 303.101(c) (FDIC).
---------------------------------------------------------------------------

Capital Distributions by Federal Savings Associations (Sec.  5.55)

    Section 5.55 provides standards and procedures for capital 
distributions made by Federal savings associations. Paragraph (d)(2) 
defines ``capital'' as total capital, computed under 12 CFR part 3. The 
OCC proposed to delete this definition as unnecessary because all 
references to ``capital'' are either in relation to the defined term 
``capital distribution'' or contain an explicit reference to 
calculations under 12 CFR part 3. Additionally, the OCC proposed a new 
definition of ``control,'' to have the same meaning as in section 
10(a)(2) of the HOLA (12 U.S.C. 1467a(a)(2)), and to use this term to 
describe control relationships, rather than the current use of the term 
``subsidiary'' in Sec.  5.55. The OCC did not receive any comments on 
these updated definitions and adopts them as proposed.
    Current paragraph (e)(1) of Sec.  5.55 requires a Federal savings 
association to file an application if it is not an eligible savings 
association. Current paragraphs (e)(2) and (g)(2) of Sec.  5.55 require 
eligible savings associations to file a notice if certain requirements 
are met. Consistent with other changes in part 5, the OCC proposed to 
change the terminology for notice to application and to make 
corresponding changes throughout Sec.  5.55. As a result, filings that 
are currently notices would be applications subject to expedited 
review. In addition, the OCC proposed to reorganize paragraphs (e) and 
(g) to clarify the procedures; however no substantive change is 
intended. The OCC also proposed additional stylistic revisions to 
current paragraph (e)(4) of Sec.  5.55 to clarify that the notice 
mentioned in this paragraph is that of the notice filed with the 
Federal Reserve Board. The OCC did not receive any comments on these 
changes and adopts them as proposed with clarifying technical changes.
    The OCC proposed a substantive change to the application 
procedures. Current paragraph (e)(1)(ii) requires a Federal savings 
association to file an application if the total amount of all its 
capital distributions (including the proposed capital distribution) for 
the applicable calendar year exceeds its net income for that year to 
date plus retained net income for the preceding two years. Under 12 CFR 
5.64(c)(2), a national bank may calculate its dividends in excess of a 
single year's current net income by offsetting certain excess dividends 
against retained net income from each of the prior two years, with the 
potential to incorporate net income from up to four years prior to the 
current year when determining the maximum dividend payout possible 
without prior OCC approval. To provide additional flexibility, the OCC 
proposed to permit a Federal savings association to conduct this 
calculation when determining whether this application requirement 
applies. Specifically, if the capital distribution is from retained 
earnings, a Federal savings association would be able to calculate the 
aggregate limitation for a capital distribution in accordance with 12 
CFR 5.64(c)(2), substituting ``capital distributions'' for 
``dividends'' in that section. The OCC did not receive any comments on 
this change to the application procedures and adopts it as proposed 
with a confirming change to a citation.
    Paragraph (f)(2) provides that the capital distribution application 
may include a schedule proposing capital distributions over a specified 
period, not to exceed 12 months. The OCC proposed to remove this 12-
month limitation to allow a Federal savings association more 
flexibility for its distributions and to align this provision with the 
analogous national bank provision, 12 CFR 5.46(i)(1)(ii). The OCC did 
not receive any comments on the removal of this 12-month limitation and 
adopts it as proposed.
    Additionally, the OCC proposed a new paragraph (g)(3) to clarify 
the appropriate OCC filing office for capital distribution applications 
and notices. In general, a Federal savings association would file with 
the appropriate OCC licensing office. However, the Federal savings 
association must submit the application to the appropriate OCC 
supervisory office if the application involves solely a cash dividend 
from retained earnings or involves a cash dividend from retained 
earnings and a concurrent cash distribution from permanent capital. The 
OCC did not receive any comments on this change, and the OCC adopts it 
as proposed.
    Finally, the OCC proposed to reorganize paragraph (h), which 
addresses OCC review of an application, by providing separate 
paragraphs for OCC denials and approvals. As a result, paragraph (h)(1) 
would address OCC denials and include the majority of current paragraph 
(h) and paragraph (h)(2) would address OCC approvals. In doing so, the 
proposal clarified that the OCC may approve an application in whole or 
in part and that the OCC may waive any waivable prohibition or 
condition to permit a distribution. The proposal also changed the 
cross-reference in the current introductory text to the more 
appropriate paragraph (e)(1). The OCC did not receive any comments on 
these changes to paragraph (h) of Sec.  5.55 and adopts them as 
proposed.

Inclusion of Subordinated Debt Securities and Mandatorily Redeemable 
Preferred Stock as Federal Savings Association Supplementary (Tier 2) 
Capital (Sec.  5.56)

    Section 5.56 provides the requirements and procedures for a Federal 
savings association to include subordinated debt and mandatorily 
redeemable preferred stock (collectively, ``covered securities'') in 
tier 2 capital. Paragraph (b) provides the filing procedures, including 
the application and notice procedures. Under Sec.  5.56, the OCC must 
approve an application or notice before a Federal savings association 
may include covered securities as tier 2 capital. As with Sec.  5.47, 
the OCC proposed to make this process consistent with the general usage 
in part 5 by changing the terminology from notice to application where 
appropriate throughout Sec.  5.56. The proposal also clarified that a 
savings association may not include covered securities in tier 2 
capital until the OCC approves the application and

[[Page 80429]]

the securities are issued. This change is not intended to be 
substantive.
    Paragraph (b)(2) requires an application and prior approval from 
the OCC for a Federal savings association to prepay covered securities 
included in tier 2 capital. Similar to the national bank requirement in 
Sec.  5.47, paragraphs (b)(2)(ii) and (h) of Sec.  5.56 contain 
additional application requirements for OCC review of prepayments in 
the form of a call option. As provided in the discussion for Sec.  5.47 
in this Supplemental Information, and for the same reasons, the OCC 
proposed to incorporate the application requirements currently 
applicable to prepayment in the form of a call option to all prepayment 
applications. The OCC also proposed one additional technical change in 
Sec.  5.56(b)(2) to replace a reference to ``a tier 1 or tier 2 
instrument'' to refer to ``tier 1 or tier 2 capital.''
    Paragraph (d)(1) contains disclosure requirements for covered 
securities. The OCC proposed to add a new paragraph (d)(1)(i)(H) to 
require the covered security to state that it may be fully subordinated 
to interests held by the U.S. government in the event that the savings 
association enters into a receivership, insolvency, liquidation, or 
similar proceeding. As discussed above regarding Sec.  5.47, a Federal 
savings association that is an advanced approaches institution must 
make this disclosure under 12 CFR 3.20(d)(1)(xi). As stated in the 
preamble to the proposed rule, the OCC believes that disclosing this 
information to potential investors in the covered security is 
beneficial for all Federal savings associations, even those that are 
not advanced approaches Federal savings associations or that do not 
intend to include the debt in tier 2 capital.
    In addition, the OCC proposed to replace the reference to 12 CFR 
part 197 in paragraphs (b)(1)(iii) and (d)(2)(i) of Sec.  5.56 with 12 
CFR part 16, which now applies to Federal savings associations. The OCC 
also proposed to make certain purely stylistic changes to the rule text 
of Sec.  5.56 that are not intended to impact the substantive 
requirements applicable to Federal savings associations.
    The OCC received no comments to any changes proposed to Sec.  5.56 
and adopts them as proposed. The final rule also makes a technical 
correction to the statutory reference to the definition of accredited 
investor in paragraph (d)(2)(ii).

Pass-Through Investments by a Federal Savings Association (Sec.  5.58)

    Section 5.58 provides the licensing procedures for Federal savings 
associations making pass-through investments. Although based on 
different authority, Sec.  5.58 is largely analogous to the provisions 
in Sec.  5.36 governing national bank non-controlling investments. 
Accordingly, the OCC proposed amendments to Sec.  5.58 similar to those 
proposed for Sec.  5.36, and for the same reasons.
    First, the OCC proposed to amend paragraph (d), Definitions, by 
defining ``pass-through investment'' as an investment authorized under 
12 CFR 160.32(a). As discussed in this Supplemental Information for the 
proposed definition of ``non-controlling investment'' in Sec.  5.36, 
the proposed definition for ``pass-through investment'' would exclude a 
Federal savings association holding interests in a trust formed for the 
purposes of securitizing assets held by the bank as part of its 
business or for the purposes of holding multiple legal titles of motor 
vehicles or equipment in conjunction with lease financing transactions. 
The OCC received no comments on the proposed definition of ``pass-
through investment'' and adopts it as proposed.
    The OCC also proposed to amend paragraph (d) by removing the 
definitions of ``well capitalized'' and ``well managed'' because the 
proposed rule defined these terms in Sec.  5.3. The OCC received no 
comments on these changes and adopts them as proposed, with a technical 
change that removes unnecessary cross-references to Sec.  5.3 in 
paragraph (e).
    Second, the OCC proposed to expand the activities eligible for 
notice to include activities that are substantially the same as 
previously approved activities, as proposed to be defined in Sec.  5.3. 
In making this change, the proposal reorganized paragraph (e) and made 
conforming changes to paragraphs (e)(2) and (e)(4). Additionally, the 
OCC stated in the preamble to the proposed rule that it is considering 
removing the filing requirement for pass-through investments in 
enterprises engaging in activities permissible for a Federal savings 
association, as discussed above for national bank operating 
subsidiaries and non-controlling investments. Under the alternative, 
the OCC would not remove the filing requirement if the enterprise would 
be a subsidiary of the Federal savings association for purposes of 
section 18(m) of the FDIA Act (12 U.S.C. 1828(m)), which generally 
requires a Federal savings association to provide 30-days prior notice 
to the OCC before establishing or acquiring a subsidiary defined in 
section 3(w)(4) of the FDI Act (12 U.S.C. 1813(w)(4)).
    The OCC received no comments to the alternative proposal in Sec.  
5.58 directly, but did receive comments to the similar alternative 
proposal for operating subsidiaries, Sec.  5.34, and noncontrolling 
investments of national banks, Sec.  5.36. For the reasons noted in the 
discussion on Sec.  5.34, Operating subsidiaries in this Supplemental 
Information, the OCC declines to include this alternative in the final 
rule.
    Third, the OCC proposed to revise paragraph (f)(1) of Sec.  5.58 to 
permit a Federal savings association to file an application to make a 
pass-through investment in an entity that does not agree to OCC 
supervision and examination. The proposal redesignated paragraph (f)(2) 
as paragraph (f)(3) and added a new paragraph (f)(2) providing for 
expedited review for certain applications. The qualifications for 
expedited review are equivalent to those in proposed Sec.  5.36(f). The 
OCC received no direct responses to this proposal but as discussed in 
this Supplemental Information received one comment in support of the 
similar proposal for noncontrolling investments of national banks under 
Sec.  5.36. The OCC adopts these proposed changes to Sec.  5.58(f), 
with clarifying technical changes, for the same reasons discussed in 
the corresponding change to Sec.  5.36. The final rule also makes 
conforming changes to redesignated paragraph (f)(3) to reflect that a 
Federal savings association may make a pass-through investment 
requiring a filing under 12 U.S.C. 1828(m) in an entity that has not 
agreed to OCC supervision and examination.
    Fourth, the OCC proposed to add a new paragraph (g) that would 
permit a Federal savings association to make a pass-through investment 
without a notice or application to the OCC. The standards would be 
equivalent to those in proposed Sec.  5.36(g) except that the 
enterprise must not be a subsidiary of the Federal savings association 
for purposes of section 18(m) of the FDI Act. In such a case, an 
application would be required under Sec.  5.58(f)(2). The OCC received 
no comments on new paragraph (g) and adopts it as proposed. 
Additionally, the final rule corrects a cross-reference in redesignated 
paragraph (h)(1).
    Finally, the OCC proposed to amend redesignated paragraph (j) to 
provide exceptions to the rules of general applicability in the same 
manner as proposed Sec.  5.36(j). As with this amendment to Sec.  5.36, 
the OCC has not removed the proposed exception to public availability, 
Sec.  5.9, in the final rule. However, as with Sec.  5.36, the OCC is 
adopting in the final rule the proposed provision that permits the OCC 
to determine that some or all of

[[Page 80430]]

these rules of general applicability apply if it concludes that the 
application presents significant or novel policy, supervisory, or legal 
issues, with the addition of Sec.  5.9 to this sentence.
Sec.  5.59 Service Corporations of Federal Savings Associations.
    Section 5.59 provides procedures governing OCC review and approval 
of filings by Federal savings associations to establish or acquire, or 
to conduct new activities in existing, service corporations pursuant to 
the authority provided in section 5(c)(4)(B) of the HOLA, 12 U.S.C. 
1464(c)(4)(B). An application under this section is eligible for 
expedited review if, among other things, the Federal savings 
association is ``well capitalized'' and ``well managed.'' However, this 
section currently does not define ``well managed.'' The proposal 
applied the proposed definition of ``well managed'' in Sec.  5.3 to 
this term as used in Sec.  5.59. The final rule adopts this amendment 
as proposed, with one technical change that removes the cross-reference 
to Sec.  5.3 in paragraph (h)(2)(ii)(A). As indicated elsewhere in this 
SUPLEMENTARY INFORMATION, because the definitions in Sec.  5.3 apply to 
all of part 5, this cross-reference is not necessary.

Earnings Limitation Under 12 U.S.C. 60 (Sec.  5.64)

    Section 5.64 describes the calculations for earnings available for 
dividends under 12 U.S.C. 60. Paragraph (d) provides special rules for 
what the OCC referred to as ``surplus surplus,'' which is an amount in 
capital surplus in excess of capital stock that the national bank can 
demonstrate came from earnings in prior periods. A national bank had 
been required to retain a certain percentage of net income as capital 
surplus whenever it paid dividends. In addition, a variety of statutes 
and regulations established limits for banks based on permanent 
capital, including capital surplus, and ignored any amounts in retained 
earnings, which provided an incentive for banks to shift earnings into 
permanent capital. After Congress revised the statutes to provide more 
flexibility to include retained earnings as capital for purposes of the 
statutory limits, the OCC permitted banks to distribute these surplus 
surplus funds as dividends rather than as reductions in permanent 
capital given the surplus surplus funds' origin as earnings rather than 
paid in capital. As these statutory and regulatory changes occurred 
decades ago, national banks have not needed to create new surplus 
surplus for many years but may still incur recordkeeping burden 
associated with identifying regulatory surplus surplus within capital 
surplus. Accordingly, the OCC proposed to remove the concept of surplus 
surplus and associated procedures described in paragraph (d). The OCC 
received no comments on these proposed changes and finalizes them as 
proposed. The OCC notes that removal of paragraph (d) will not prevent 
a bank from distributing amounts contained in the capital surplus 
accounts. A national bank may make an appropriate filing under 12 CFR 
5.46 for a reduction in capital to distribute these funds.

Dividends Payable in Property Other Than Cash (Sec.  5.66)

    Section 5.66 provides procedures for payment of dividends in non-
cash property by national banks. This section currently provides that 
these dividends are equivalent to a cash dividend in an amount equal to 
the actual current value of the property, even if the bank previously 
has charged down or written off the property. Before the dividend is 
declared, the bank should show the excess of the actual value over book 
value on its books as a recovery and should declare the dividend in the 
amount of the full book value (equivalent to the actual current value) 
of the property being distributed. The OCC proposed to revise this 
section to clarify that the dividend is equivalent to a cash dividend 
in an amount equal to the actual current value of the property, 
regardless of whether the book value is higher or lower under GAAP. The 
OCC also proposed to apply this valuation methodology to all non-cash 
dividends, not just those for property that has been charged down or 
written off. Further, the amendment would provide that the bank should 
show the difference between the actual value and book value on its 
books as gain or loss, as applicable, prior to recording the non-cash 
dividend reflecting the actual value of the property. The OCC received 
no comments on these changes and adopts them as proposed. As stated in 
the preamble to the proposed rule, the OCC believes this approach 
better reflects the value of the property being distributed from the 
bank, particularly in cases where the non-cash property was recorded at 
historical cost under GAAP.

Fractional Shares (Sec.  5.67)

    Section 5.67 provides a number of potential arrangements that a 
national bank may adopt to avoid the issuance of fractional shares. The 
OCC proposed to simplify this section for a national bank by retaining 
only one of these options, the remittance of the cash equivalent of the 
fraction not being issued to those to whom fractional shares would 
otherwise be issued. The OCC believes this procedure is the simplest 
and is the predominant method of disposing of fractional shares today. 
Other options in the current rule include issuing warrants for 
fractional shares or permitting shareholders to purchase additional 
fractions up to one whole share. While the OCC permitted these methods 
historically, these methods can create significant recordkeeping costs 
today when bank stock may be traded in ``round lots'' of 100 shares or 
more. The OCC received no comments on this change and adopts it as 
proposed. Because a transaction that would result in the issuance of 
fractional shares will generally require an application with the OCC, 
revised Sec.  5.67 maintains flexibility for banks by permitting the 
bank to propose an alternate method in the application for the stock 
issuance, which could include one of the options being removed from the 
rule.

Federal Branches and Agencies (Sec.  5.70)

    Section 5.70 provides the filing procedures for corporate 
activities and transactions involving Federal branches and agencies of 
foreign banks. Consistent with the background investigation changes 
proposed to other sections, the OCC proposed adding a new paragraph 
(d)(3) to explicitly permit the OCC to require any senior executive 
officer of a Federal branch or agency submitting a filing to submit an 
Interagency Biographical and Financial Report and legible fingerprints.
    The OCC received no comments to this new paragraph and adopts it as 
proposed.

Additional Issues and General Comments

    Digital and remote filings. One commenter encouraged the OCC to 
advance digital and remote filing procedures, such as digital 
signatures and virtual notarization. The OCC has already updated its 
licensing regulation to encourage the use of electronic filings, 
including permitting digital signatures in the OCC's Central 
Application Tracking System (CATS). Further, the OCC is unable to 
update to virtual notarization because notarization is governed by 
State law.
    Public input. One commenter generally opposed the proposed changes 
for procedures outlining public input. The commenter further expressed 
that it is more difficult for community organizations to offer 
meaningful input under these proposed procedures, which limits the 
OCC's ability to determine whether an application

[[Page 80431]]

achieves a public benefit. The OCC disagrees with this comment. The OCC 
notes that ``public benefit'' is not a factor for any licensing 
filings, rather the OCC is seeking public comments that provide 
meaningful and substantive information about a bank's CRA performance. 
Only such comments can assist the OCC in its evaluation of a 
transaction.
    CRA ratings. Generally, the OCC requires a rating of at least 
``Satisfactory'' for approval of a filing. In response to the CRA 
ratings used in Sec. Sec.  5.30, 5.31, 5.33, 5.40, one commenter 
suggested that a CRA rating of less than ``Satisfactory'' should not 
automatically preclude approval of a filing. The OCC is not adopting 
this commenter's recommendation. OCC policy provides that if an 
applicant bank has an overall less than ``Satisfactory'' rating, the 
OCC provides enhanced scrutiny of covered applications by the bank. 
Further, proposed Sec.  5.33(e)(1)(iii)(A) makes clear that the CRA 
consideration is in conjunction with the other factors.
    One commenter requested that the OCC codify the policies in PPM 
5000-43 and Bulletin 2018-23 regarding CRA downgrades. The commenter 
also asserted that the OCC should allow expedited reexamination if a 
bank believes it has remediated a CRA concern. The OCC notes that this 
comment is outside the scope of this rulemaking.
    Public comment period. One commenter questioned the proposed rule's 
compliance with the notice requirements of the APA noting that the 
Notice of Proposed Rulemaking was published on the OCC website on March 
5, 2020, but not in the Federal Register until April 2, 2020, with the 
comment period ending May 4, 2020.\60\ The commenter is incorrect about 
the requirements of the APA. The OCC notes that the APA does not 
provide a minimum comment period and that the generally recommended 
time for comment is 60 days.\61\ Here, the public had notice of the 
proposal for 60 days beginning on March 5 when the OCC provided notice 
of the proposal on its website and issued a news release and OCC 
Bulletin on the proposal. Moreover, the proposal was published in the 
Federal Register for 32 days.\62\
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    \60\ This commenter also objected to the OCC issuing the 
rulemaking during the COVID-19 pandemic. However, the OCC believes 
that it is important to move forward with updating its rules so that 
national banks and Federal savings associations can better address 
current economic issues. Furthermore the pandemic should not prevent 
the OCC from meeting its obligations to provide oversight and ensure 
the safety and soundness of OCC regulated banks and the Federal 
banking system.
    \61\ See E.O. 12866, section 6(a).
    \62\ The OCC, as well as the FDIC and Federal Reserve Board, 
have published other rules in the Federal Register for only 30 days. 
See e.g., 84 FR 9940 (Mar. 19, 2019), 84 FR 24296 (May 24, 2019), 
and 84 FR 59970 (Nov. 7, 2019).
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General Technical Changes

    The OCC proposed numerous technical changes throughout 12 CFR part 
5. The OCC received no comments on these changes and adopts them as 
proposed, with additional conforming changes. Specifically, the final 
rule:
     Replaces the word ``shall'' with ``must,'' ``will,'' or 
other appropriate language, which is the more current rule writing 
convention for imposing an obligation and is the recommended drafting 
style of the Federal Register;
     Generally replaces the term ``notice'' with the term 
``application'' where prior OCC approval is required, thereby 
conforming the terminology to the licensing action provided in the 
provision (notices would continue to include informational filings to 
the OCC as well as certain transactions that the OCC has the power to 
disapprove, such as changes in control);
     Amends the expedited review provisions throughout part 5 
to refer to the OCC removing a filing from expedited review rather than 
making a determination that the filing is not eligible for expedited 
review to accord with the language and procedure in Sec.  5.13(a)(2).
     Revises citations to the U.S. Code and the Code of Federal 
Regulations by adjusting cross-references, making citations more 
specific, and using consistent style;
     Updates and standardizes references to the OCC website;
     Simplifies gender references by replacing ``his or her'' 
with the neutral ``their;''
     Uniformly capitalizes the word ``State,'' in conformance 
with Federal Register drafting style; and
     Replaces the terms ``bank'' and ``savings association'' 
with ``national bank'' or ``Federal savings association,'' 
respectively, where appropriate.
    The OCC also is adopting in this final rule additional corrections 
to cross-references and citations throughout part 5. Further, the OCC 
is adopting technical changes that update the cross-reference to the 
Sec.  5.3 definition of ``eligible bank'' in 12 CFR 3.701(f)(1)(vi) and 
the cross-reference to the Sec.  5.3 definition of ``appropriate OCC 
licensing office'' in 12 CFR 7.2008(c).

III. Regulatory Analyses

A. Paperwork Reduction Act

Paperwork Reduction Act
    Certain provisions of the proposed rulemaking contain ``collection 
of information'' requirements within the meaning of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with 
the requirements of the PRA, the OCC may not conduct or sponsor, and a 
respondent is not required to respond to, an information collection 
unless it displays a currently valid Office of Management and Budget 
(OMB) control number.
    The OCC reviewed the final rule and determined that it revises 
certain information collection requirements previously cleared by OMB 
under OMB Control No. 1557-0014. The OCC submitted the information 
collection requirements at the proposed rule stage. OMB neither 
approved nor disapproved the submission, requiring OCC to resubmit the 
collection at the final rule stage. Therefore, the OCC has submitted 
the revised information collection to OMB for review under section 
3507(d) of the PRA (44 U.S.C. 3507(d)) and section 1320.11 of the OMB's 
implementing regulations (5 CFR 1320).
Current Actions
    The final rule:
     Adds new definitions to add clarity and consistency across 
part 5. This includes proposing a single definition well managed 
applicable throughout part 5. 12 CFR 5.3.
     Requires each proposed organizer, director, executive 
officer, or principal shareholder to submit information prescribed in 
the Interagency Biographical and Financial Report and legible 
fingerprints. This amendment merely codifies current application 
requirements and will not result in a change in burden. 12 CFR 5.20.
     Eliminates the bylaw amendment notice requirement for 
Federal savings associations that adopt without change the OCC's model 
or optional bylaws set forth in the rule. 12 CFR 5.21, 5.22.
     Requires that applications to convert to a Federal savings 
association or national bank include: A list of directors and senior 
executive officers of the converting institution; and a list of 
individuals, directors, and shareholders who directly or indirectly, or 
acting in concert with one or more persons or companies, or together 
with members of their immediate family, do or will own, control, or 
hold 10 percent or more of the converting institution's stock. This 
amendment merely codifies current

[[Page 80432]]

application requirements and will not result in a change in burden. 12 
CFR 5.23(d)(2)(ii), 5.24(e)(2).
     Permits the OCC to require directors and senior executive 
officers of a converting institution to submit the Interagency 
Biographical and Financial Report and legible fingerprints. This 
amendment merely codifies current application requirements and will not 
result in a change in burden. 12 CFR 5.23, 5.24.
     Requires that applications for national banks or Federal 
savings associations that wish to engage in the exercise of fiduciary 
powers include, if requested by the OCC, the Interagency Biographical 
and Financial Report and legible fingerprints. 12 CFR 5.26.
     Requires a filer of a business combination application 
under CRA to disclose whether it has entered into and disclosed a 
covered agreement, as defined in 12 CFR 35.2. A filer must also provide 
summaries of, or documents related to, all substantive discussions with 
respect to the development of the content of a CRA sunshine agreement. 
12 CFR 5.33(e)(1)(iii).
     Removes the requirement that a disappearing national bank 
or Federal savings association consolidating or merging with another 
OCC-supervised institution provide a notice to the OCC. Sec.  5.33(g), 
(k).
     For national bank operating subsidiaries, expands the 
after the fact notice for national banks to activities that are 
substantially the same as previously approved activities that will be 
conducted in accordance with the same terms and conditions applicable 
to the previously approved activity. Expands the list of eligible 
entities to include trusts provided that the bank or operating 
subsidiary has the ability to replace the trustee at will and be the 
sole beneficial owner of the trust. 12 CFR 5.34.
     Removes the requirement for a national bank to file an 
annual report identifying its operating subsidiaries that do business 
directly with consumers and are not functionally regulated. 12 CFR 
5.34.
     For national bank non-controlling investments and Federal 
savings association pass-through investments, expands the activities 
eligible for notice to activities that are substantially the same as 
previously approved activities. 12 CFR 5.36, 5.58.
     Allows national banks and Federal savings associations to 
file an application to make a non-controlling investment or a pass-
through investment, respectively, in an enterprise that has not agreed 
to be subject to OCC supervision and examination. 12 CFR 5.36(f), 
5.58(f).
     Allows national banks and Federal savings associations to 
make non-controlling investments or a pass-through investments, 
respectively, without a filing if the activities of the enterprise are 
limited to those previously reported to the OCC in connection with a 
prior investment. 12 CFR 5.36, 5.58.
     For Federal savings association operating subsidiaries, 
expands the expedited approval process for Federal savings associations 
to include activities that are substantially the same as previously 
approved activities that will be conducted in accordance with the same 
terms and conditions applicable to the previously approved activity. 
Expands the list of eligible entities to include trusts provided that 
the Federal savings association or operating subsidiary has the ability 
to replace the trustee at will and be the sole beneficial owner of the 
trust. 12 CFR 5.38.
     Permits national banks to request approval for a reduction 
in permanent capital for multiple quarters. 12 CFR 5.46.
     Regarding subordinated debt notes, allows national banks 
to omit inapplicable provisions when warranted, and require national 
banks to disclose in subordinated debt notes that the subordinated debt 
obligation may be fully subordinated to interests held by the U.S. 
government in the event that the national bank enters into a 
receivership, insolvency, liquidation, or similar proceeding. 12 CFR 
5.47.
     Revises the standard for when prior approval is required 
for a national bank's issuance of subordinated debt and for prepayment 
of any subordinated debt that is not included in tier 2 capital 12 CFR 
5.47(f).
     Requires OCC approval for a material change to an existing 
subordinated debt document if the national bank would have been 
required to receive OCC approval to issue the security under Sec.  
5.47(f)(1) or to include it in tier 2 capital under Sec.  5.47(h). 12 
CFR 5.47.
     Adds the position of chief risk officer to the definition 
of senior executive officer. This change requires prior OCC approval 
for the employment of an individual as a chief risk officer by a 
national bank or Federal savings association in troubled condition. 12 
CFR 5.51.
     Requires a covered security (inclusion of subordinated 
debt and mandatorily redeemable preferred stock) issued by a Federal 
savings association to state that it may be fully subordinated to 
interests held by the U.S. government in the event that the savings 
association enters into a receivership, insolvency, liquidation, or 
similar proceeding. 12 CFR 5.56.
     Permits the OCC to require any senior executive officer of 
a Federal branch or agency submitting a filing to submit an Interagency 
Biographical and Financial Report and legible fingerprints. This 
amendment merely codifies current application requirements and will not 
result in a change in burden. 12 CFR 5.70.
    Title of Information Collection: Licensing Manual.
    Frequency: Event generated.
    Affected Public: Businesses or other for-profit.
    Estimated number of respondents: 3,698.
    Total estimated annual burden: 12,981 hours.
    Comments are invited on:
    a. Whether the collections of information are necessary for the 
proper performance of the agencies' functions, including whether the 
information has practical utility;
    b. The accuracy or the estimate of the burden of the information 
collections, including the validity of the methodology and assumptions 
used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments will become a matter of public record. Comments on 
aspects of this notice that may affect reporting, recordkeeping, or 
disclosure requirements and burden estimates should be sent to the 
addresses listed in the ADDRESSES section of this document. A copy of 
the comments may also be submitted to the OMB desk officer by mail to 
U.S. Office of Management and Budget, 725 17th Street NW, #10235, 
Washington, DC 20503; facsimile to (202) 395-6974; or email to 
[email protected], Attention, Federal Banking Agency Desk 
Officer.

B. Regulatory Flexibility Act Analysis

    In general, the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
requires an agency, in connection with a final rule, to prepare a 
Regulatory Flexibility Analysis describing the impact of the rule on 
small entities (defined by the SBA for purposes of the RFA to include 
commercial banks and savings

[[Page 80433]]

institutions with total assets of $600 million or less and trust 
companies with total revenue of $41.5 million or less). However, under 
section 605(b) of the RFA, this analysis is not required if an agency 
certifies that the rule would 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 along with 
its rule.
    The OCC currently supervises approximately 1,163 institutions 
(commercial banks, trust companies, Federal savings associations, and 
branches or agencies of foreign banks, collectively banks), of which 
745 are small entities.\63\ To measure whether a rule will have a 
``significant economic impact,'' the OCC focuses on the potential costs 
of the rule to OCC-supervised small entities, consistent with guidance 
on the RFA published by the Office of Advocacy of the Small Business 
Administration.\64\ Because the rule applies to all OCC-supervised 
depository institutions, the final rule would affect all small OCC-
supervised entities, and thus a substantial number of them.
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    \63\ The OCC bases its estimate of the number of small entities 
on the SBA's size thresholds for commercial banks and savings 
institutions, and trust companies, which are $600 million and $41.5 
million, respectively. Consistent with the General Principles of 
Affiliation 13 CFR 121.103(a), the OCC counts the assets of 
affiliated financial institutions when determining if it should 
classify an institution as a small entity. The OCC used December 31, 
2019, to determine size because a ``financial institution's assets 
are determined by averaging the assets reported on its four 
quarterly financial statements for the preceding year.'' See 
footnote 8 of the U.S. Small Business Administration's Table of 
Standards.
    \64\ See, ``A Guide for Government Agencies; How to Comply with 
the Regulatory Flexibility Act,'' (pp. 18-20), available at: https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf.
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    The OCC classifies the economic impact of total costs on an OCC-
regulated entity as significant if the total costs for the entity in a 
single year are greater than 5 percent of total salaries and benefits, 
or greater than 2.5 percent of total non-interest expense. The OCC 
estimates that the monetized direct cost of this rulemaking will range 
from a low of approximately $4,600 per bank (40 hours x $115 per hour 
\65\) to a high of approximately $18,400 per bank (160 hours x $115 per 
hour).\66\ Using the upper bound average direct cost per bank, the OCC 
finds the compliance costs will have a significant economic impact on 
no more than 18 small banks, which is not a substantial number.\67\ 
Therefore, the OCC finds that this final rule does not have a 
significant economic impact on a substantial number of small entities 
supervised by the OCC. Accordingly, a Regulatory Flexibility Analysis 
is not required.
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    \65\ This per hour dollar amount is based on the U.S. Bureau of 
Labor Statistics data for wages (by industry and occupation).
    \66\ The OCC believes that substantially all of banks' direct 
costs will be associated with reviewing the final rule and, when 
necessary, modifying policies and procedures to correct any 
inconsistencies between banks' internal policies and the final 
modified rules. The overall impact estimate of the final rule is a 
conservative one because it is difficult to monetize the potential 
offsetting benefits associated with the final changes. Benefits from 
these changes will accrue over the long-term and are therefore more 
difficult to monetize for purposes of this estimate.
    \67\ The OCC's threshold for a substantial number of small 
entities is five percent of OCC-supervised small entities, or 37 as 
of December 31, 2019.
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C. Unfunded Mandates Reform Act of 1995

    The OCC has analyzed the final rule under the factors in the 
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1501 et seq.). 
Under this analysis, the OCC considered whether the final rule includes 
a Federal mandate that may result in the expenditure by State, local, 
and tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any one year, adjusted annually for inflation 
(currently $157 million). The UMRA does not apply to regulations that 
incorporate requirements specifically set forth in law.
    Based on the OCC estimate that the monetized direct cost of this 
rulemaking would range from a low of approximately $4,600 per bank to a 
high of approximately $18,400 per bank, the OCC's overall estimate of 
the total effect of the final rule ranges from approximately $5.4 
million to approximately $21.4 million for the approximately 1,163 
institutions supervised by the OCC. Therefore, the OCC finds that the 
final rule does not trigger the UMRA cost threshold. Accordingly, the 
OCC has not prepared the written statement described in section 202 of 
the UMRA.

D. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act of 1994 (RCDRIA) (12 U.S.C. 4802(a)), in 
determining the effective date and administrative compliance 
requirements for new regulations that impose additional reporting, 
disclosure, or other requirements on insured depository institutions, 
the OCC must consider, consistent with the principles of safety and 
soundness and the public interest: (1) Any administrative burdens that 
the rule would place on depository institutions, including small 
depository institutions and customers of depository institutions; and 
(2) the benefits of the rule. The has considered the changes made by 
this final rule and believes that the overall effective date of January 
11, 2021 will provide OCC-regulated institutions with adequate time to 
comply with the rule.\68\ With respect to administrative compliance 
requirements, the OCC has considered the administrative burdens and the 
benefits of this final rule and believes that any burdens are necessary 
for safety and soundness and proper OCC supervision. The final rule's 
benefits include increased flexibility for filing procedures, 
elimination of redundant or unnecessary reporting requirements 
consistent with safety and soundness, and updated policies and 
procedures that increase clarity and reduce ambiguity for banks seeking 
compliance with 12 CFR part 5 requirements. Further discussion of the 
consideration by the OCC of these administrative compliance 
requirements is found in other sections of the final rule's 
SUPPLEMENTARY INFORMATION section.
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    \68\ The OCC is making one technical change that takes effect on 
December 11, 2020. This amendment removes the reference to 12 CFR 
part 195, the Federal savings association CRA rule, in Sec.  
5.20(e)(2)(ii) because the OCC recently amended 12 CFR part 25 to 
include Federal savings associations and removed 12 CFR part 195 as 
of this date.
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E. Effective Date

    The APA \69\ requires that a substantive rule must be published not 
less than 30 days before its effective date, except for: (1) 
Substantive rules which grant or recognize an exemption or relieve a 
restriction; (2) interpretative rules and statements of policy; or (3) 
as otherwise provided by the agency for good cause.\70\ The January 11, 
2021 effective date of this final rule for all but one of its 
amendments meets the APA effective date requirements, as it will take 
effect at least 30 days after its publication date of December 11, 
2020. One technical amendment takes effect on December 11, 2020. This 
amendment removes the reference to 12 CFR part 195, the Federal savings 
association CRA rule, in Sec.  5.20(e)(2)(ii) because the OCC recently 
amended 12 CFR part 25 to include Federal savings associations and 
removed 12 CFR part 195 as of October 1, 2020.\71\ Because this is a 
technical amendment that aligns Sec.  5.20(e)(2)(ii) with revised part 
25, the OCC believes

[[Page 80434]]

it has good cause to issue this rule without a delayed effective date.
---------------------------------------------------------------------------

    \69\ Codified at 5 U.S.C. 551 et seq.
    \70\ 5 U.S.C. 553(d).
    \71\ See 85 CFR 34734 (June 5, 2020).
---------------------------------------------------------------------------

    Pursuant to section 553(b)(B) of the APA, general notice and the 
opportunity for public comment are not required with respect to a 
rulemaking when an ``agency for good cause finds (and incorporates the 
finding and a brief statement of reasons therefor in the rules issued) 
that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \72\ As described in 
the final rule's SUPPLEMENTARY INFORMATION section, the final rule 
includes a number of technical, clarifying, or conforming amendments 
that the OCC did not include in its proposed rule. Because these 
amendments are not substantive and merely correct or clarify the rule, 
update the rule to reflect current law, or fix citation and regulatory 
text format, the OCC believes that public notice of these changes is 
unnecessary and therefore that it has good cause to adopt these changes 
without notice and comment.
---------------------------------------------------------------------------

    \72\ 5 U.S.C. 553(b)(3)(A).
---------------------------------------------------------------------------

F. Congressional Review Act

    For purposes of the Congressional Review Act, the Office of 
Management and Budget (OMB) makes a determination as to whether a final 
rule constitutes a ``major rule.'' \73\ If a rule is deemed a ``major 
rule'' by OMB, the Congressional Review Act generally provides that the 
rule may not take effect until at least 60 days following its 
publication.\74\
---------------------------------------------------------------------------

    \73\ 5 U.S.C. 801 et seq.
    \74\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------

    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of Information and Regulatory 
Affairs of the OMB finds has resulted in or is likely to result in: (1) 
An annual effect on the economy of $100,000,000 or more; (2) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies, or geographic regions; or 
(3) a significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
domestic and export markets.\75\
---------------------------------------------------------------------------

    \75\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    OMB has determined that this final rule is not a major rule. As 
required by the Congressional Review Act, the OCC will submit the final 
rule and other appropriate reports to Congress and the Government 
Accountability Office for review.

List of Subjects

12 CFR Part 3

    Administrative practice and procedure, Capital, National banks, 
Federal savings associations, Risk.

12 CFR Part 5

    Administrative practice and procedure, Federal savings 
associations, National banks, Reporting and recordkeeping requirements, 
Securities.

12 CFR Part 7

    Computer technology, Credit, Derivatives, Federal savings 
associations, Insurance, Investments, Metals, National banks, Reporting 
and recordkeeping requirements, Securities, Security bonds.

    For the reasons set out in the preamble, the OCC proposes to amend 
12 CFR chapter I as follows:

PART 3--CAPITAL ADEQUACY STANDARDS

0
1. The authority citation for part 3 continues to read as follows:

    Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, 5412(b)(2)(B), and 
Pub. L. 116-136, 134 Stat. 281.134 Stat. 281.


Sec.  3.701   [Amended]

0
2. Amend Sec.  3.701(f)(1)(vi) by removing the phrase ``12 CFR 5.3(g)'' 
and adding in its place the phrase ``12 CFR 5.3''.

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

0
3. The authority citation for part 5 is revised to read as follows:

    Authority: 12 U.S.C. 1 et seq., 24a, 35, 93a, 214a, 215, 215a, 
215a-1, 215a-2, 215a-3, 215c, 371d, 481, 1462a, 1463, 1464, 1817(j), 
1831i, 1831u, 2901 et seq., 3101 et seq., 3907, and 5412(b)(2)(B).


Sec.  5.2  [Amended]

0
4. Amend Sec.  5.2 by:
0
a. In paragraph (b), removing the word ``filings,'' and adding in its 
place the phrase ``filings as it deems necessary, for example,'' and 
removing the word ``applicant'' and adding in its place the word 
``filer''; and
0
b. In paragraph (c), removing the phrase ``on the OCC's Internet Web 
page''.

0
5. Revise Sec.  5.3 to read as follows.


Sec.  5.3  Definitions.

    As used in this part:
    Application means a submission requesting OCC approval to engage in 
various corporate activities and transactions.
    Appropriate Federal banking agency has the meaning set forth in 
section 3(q) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(q).
    Appropriate OCC licensing office means the OCC office that is 
responsible for processing applications or notices to engage in various 
corporate activities or transactions, as described at www.occ.gov.
    Appropriate OCC supervisory office means the OCC office that is 
responsible for the supervision of a national bank or Federal savings 
association, as described in subpart A of 12 CFR part 4.
    Capital and surplus means:
    (1) For qualifying community banking organizations that have 
elected to use the community bank leverage ratio framework, as set 
forth under the OCC's Capital Adequacy Standards at part 3 of this 
chapter:
    (i) A qualifying community banking organization's tier 1 capital, 
as used under Sec.  3.12 of this chapter; plus
    (ii) A qualifying community banking organization's allowance for 
loan and lease losses or adjusted allowances for credit losses, as 
applicable, as reported in the national bank's or Federal savings 
association's Consolidated Report of Condition and Income (Call 
Report); or
    (2) For all other national banks and Federal savings associations:
    (i) A national bank's or Federal savings association's tier 1 and 
tier 2 capital calculated under the OCC's risk-based capital standards 
set forth in part 3 of this chapter, as applicable, as reported in the 
Call Report, respectively; plus
    (ii) The balance of the national bank's or Federal savings 
association's allowance for loan and lease losses or adjusted 
allowances for credit losses, as applicable, not included in the 
institution's tier 2 capital, for purposes of the calculation of risk-
based capital described in paragraph (2)(i) of this definition, as 
reported in the Call Report.
    Depository institution means any bank or savings association.
    Eligible bank or eligible savings association means a national bank 
or Federal savings association that:
    (1) Is well capitalized under Sec.  5.3;
    (2) Has a composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System (CAMELS);
    (3) Has a Community Reinvestment Act (CRA), 12 U.S.C. 2901 et seq., 
rating of ``Outstanding'' or ``Satisfactory,'' if applicable;
    (4) Has a consumer compliance rating of 1 or 2 under the Uniform 
Interagency

[[Page 80435]]

Consumer Compliance Rating System; and
    (5) Is not subject to a cease and desist order, consent order, 
formal written agreement, or Prompt Corrective Action directive (see 12 
CFR part 6, subpart B) or, if subject to any such order, agreement, or 
directive, is informed in writing by the OCC that the bank or savings 
association may be treated as an ``eligible bank or eligible savings 
association'' for purposes of this part.
    Eligible depository institution means:
    (1) With respect to a national bank, a State bank or a Federal or 
State savings association that meets the criteria for an ``eligible 
bank or eligible savings association'' under Sec.  5.3 and is FDIC-
insured; and
    (2) With respect to a Federal savings association, a State or 
national bank or a State savings association that meets the criteria 
for an ``eligible bank or eligible savings association'' under Sec.  
5.3 and is FDIC-insured.
    FDIC means the Federal Deposit Insurance Corporation.
    Filer means a person or entity that submits a notice or application 
to the OCC under this part.
    Filing means an application or notice submitted to the OCC under 
this part.
    GAAP means generally accepted accounting principles as used in the 
United States.
    MSA means metropolitan statistical area as defined by the Director 
of the Office of Management and Budget.
    Nonconforming assets and nonconforming activities mean assets or 
activities, respectively, that are impermissible for national banks or 
Federal savings associations to hold or conduct, as applicable, or, if 
permissible, are held or conducted in a manner that exceeds limits 
applicable to national banks or Federal savings associations, as 
applicable. Assets include investments in subsidiaries or other 
entities.
    Notice, in general, means a submission notifying the OCC that a 
national bank or Federal savings association intends to engage in or 
has commenced certain corporate activities or transactions. The 
specific meaning of notice depends on the context of the rule in which 
it is used and may provide the OCC with authority to disapprove the 
notice or may be informational requiring no official OCC action.
    OTS means the former Office of Thrift Supervision.
    Previously approved activity means:
    (1) In the case of a national bank, any activity approved in 
published OCC precedent for a national bank, an operating subsidiary of 
a national bank, or a non-controlling investment of a national bank; 
and
    (2) In the case of a Federal savings association, any activity 
approved in published OCC or OTS precedent for a Federal savings 
association, an operating subsidiary of a Federal savings association, 
or a pass-through investment of a Federal savings association.
    Principal city means an area designated as a ``principal city'' by 
the Office of Management and Budget.
    Short-distance relocation means moving the premises of a branch or 
main office of a national bank or a branch or home office of a Federal 
savings association within a:
    (1) One thousand foot-radius of the site if the branch, main 
office, or home office is located within a principal city of an MSA;
    (2) One-mile radius of the site if the branch, main office, or home 
office is not located within a principal city, but is located within an 
MSA; or
    (3) Two-mile radius of the site if the branch, main office, or home 
office is not located within an MSA.
    Well capitalized means:
    (1) In the case of a national bank or Federal savings association, 
the capital level described in 12 CFR 6.4(b)(1);
    (2) In the case of a Federal branch or agency, the capital level 
described in 12 CFR 4.7(b)(1)(iii); or
    (3) In the case of another depository institution, the capital 
level designated as ``well capitalized'' by the institution's 
appropriate Federal banking agency pursuant to section 38 of the 
Federal Deposit Insurance Act (12 U.S.C. 1831o).
    Well managed means:
    (1) In the case of a national bank or Federal savings association:
    (i) Unless otherwise determined in writing by the OCC, the national 
bank or Federal savings association has received a composite rating of 
1 or 2 under the Uniform Financial Institutions Rating System in 
connection with its most recent examination, and at least a rating of 2 
for management, if such a rating is given; or
    (ii) In the case of a national bank or Federal savings association 
that has not been examined by the OCC, the existence and use of 
managerial resources that the OCC determines are satisfactory.
    (2) In the case of a Federal branch or agency of a foreign bank:
    (i) Unless determined otherwise in writing by the OCC, the Federal 
branch or agency has received a composite ROCA supervisory rating 
(which rates risk management, operational controls, compliance, and 
asset quality) of 1 or 2 at its most recent examination, and at least a 
rating of 2 for risk management, if such a rating is given; or
    (ii) In the case of a Federal branch or agency that has not been 
examined by the OCC, the existence and use of managerial resources that 
the OCC determines are satisfactory.
    (3) In the case of another depository institution:
    (i) Unless otherwise determined in writing by the appropriate 
Federal banking agency, the institution has received a composite rating 
of 1 or 2 under the Uniform Financial Institutions Rating System (or an 
equivalent rating under an equivalent rating system) in connection with 
the most recent examination or subsequent review of the depository 
institution and, at least a rating of 2 for management, if such a 
rating is given; or
    (ii) In the case of another depository institution that has not 
been examined by its appropriate Federal banking agency, the existence 
and use of managerial resources that the appropriate Federal banking 
agency determines are satisfactory.

0
6. Amend Sec.  5.4 by:
0
a. In paragraph (a), removing the word ``shall'' and adding in its 
place the word ``must'';
0
b. In paragraph (b), removing the phrase ``on the OCC's Internet Web 
page'';
0
c. In paragraph (c), removing the word ``applicant'' wherever it 
appears and adding in its place the word ``filer'';
0
d. In paragraph (d):
0
i. Removing the phrases ``An applicant'' and ``an applicant'' and 
adding in their place the phrases ``A filer'' and ``a filer'', 
respectively; and
0
ii. Removing the phrase ``the OCC's Internet Web page at'';
0
e. In paragraph (e), removing the phrase ``An applicant'' and adding in 
its place the phrase ``A filer'';
0
f. Revising paragraph (f); and
0
g. Adding paragraph (g).
    The addition and revision read as follows:


Sec.  5.4  Filing required.

* * * * *
    (f) Prefiling meeting. Before submitting a filing to the OCC, a 
potential filer is encouraged to contact the appropriate OCC licensing 
office to determine the need for a prefiling meeting. The OCC decides 
whether to require a prefiling meeting on a case-by-case basis. 
Submission of a draft business plan or other relevant information 
before any prefiling meeting may expedite the filing review process. A 
potential filer considering a novel,

[[Page 80436]]

complex, or unique proposal is encouraged to contact the appropriate 
OCC licensing office to schedule a prefiling meeting early in the 
development of its proposal for the early identification and 
consideration of policy issues. Information on model business plans can 
be found in the Comptroller's Licensing Manual.
    (g) Certification. A filer must certify that any filing or 
supporting material submitted to the OCC contains no material 
misrepresentations or omissions. The OCC may review and verify any 
information filed in connection with a notice or an application. Any 
person responsible for any material misrepresentation or omission in a 
filing or supporting materials may be subject to enforcement action and 
other penalties, including criminal penalties provided in 18 U.S.C. 
1001.

0
7. Amend Sec.  5.5 by revising paragraph (a) to read as follows:


Sec.  5.5  Filing fees.

    (a) Procedure. A filer must submit the appropriate filing fee, if 
any, in connection with its filing. Filing fees must be paid by check 
payable to the OCC or by other means acceptable to the OCC. Additional 
information on filing fees, including where to file, can be found in 
the Comptroller's Licensing Manual. The OCC generally does not refund 
the filing fees.
* * * * *

0
8. Amend Sec.  5.7 by redesignating paragraph (b) as paragraph (c) and 
adding a new paragraph (b) to read as follows:


Sec.  5.7  Investigations.

* * * * *
    (b) Fingerprints. For certain filings, the OCC collects 
fingerprints for submission to the Federal Bureau of Investigation for 
a national criminal history background check.
* * * * *


Sec.  5.8  [Amended]

0
9. Amend Sec.  5.8 by:
0
a. In paragraph (a), removing the phrase ``An applicant shall publish'' 
and adding in its place the phrase ``A filer must publish'' and 
removing the phrase ``the applicant proposes'' and adding in its place 
the phrase ``the filer proposes'';
0
b. In paragraphs (a) and (b), removing the word ``shall'' and adding in 
its place the word ``must'';
0
c. In paragraphs (b) and (g)(1), removing the word ``applicant'' and 
adding in its place the word ``filer'';
0
d. In paragraphs (c) and (d), removing the phrase ``applicant shall'' 
and adding in its place the phrase ``filer must''; and
0
e. In paragraphs (e) and (g) introductory text, removing the phrase 
``an applicant'' and adding in its place the phrase ``a filer''.


Sec.  5.9  [Amended]

0
10. Amend Sec.  5.9 by:
0
a. In paragraph (b), in the second sentence, removing the word 
``Applicants'' and adding in its place the word ``Filers''; and
0
b. In paragraph (c), in the first sentence, removing the word 
``applicant'' and adding in its place the word ``filer''.


Sec.  5.10  [Amended]

0
11. Amend Sec.  5.10 by:
0
a. In paragraphs (b)(2)(i) and (b)(3), removing the word ``applicant'' 
and adding in its place the word ``filer'';
0
b. In paragraph (b)(2)(ii), removing the word ``application'' and 
adding in its place the word ``filing''; and
0
c. In paragraph (b)(3), revising the paragraph heading by removing the 
word ``Applicant'' and adding in its place the word ``Filer''.


Sec.  5.11  [Amended]

0
12. Amend Sec.  5.11 by:
0
a. In paragraphs (a), (e), and (g)(2), removing the word ``shall'' 
wherever it appears and adding in its place the word ``must'';
0
b. In paragraphs (a), (d)(1), (e), (g)(1), and (g)(2), removing the 
word ``applicant'' and adding in its place the word ``filer'';
0
c. In paragraph (c), removing the word ``shall'' and adding in its 
place the word ``will'';
0
d. In paragraphs (e) and (f), removing the phrase ``his or her'' and 
adding in its place the word ``their'';
0
e. In paragraph (h), removing the word ``applicant's'' and adding in 
its place the word ``filer's''; and
0
f. In paragraph (i)(1) removing the phrase ``an application'' and 
adding in its place the phrase ``a filing'' and removing the phrase 
``the application'' and adding in its place the phrase ``the filing''; 
and
0
g. In paragraph (i)(2), removing the phrase ``an applicant'' and adding 
in its place the phrase ``a filer''.


Sec.  5.12  [Amended]

0
13. Amend Sec.  5.12 by removing the phrase ``an application'' and 
adding in its place the phrase ``a filing''.

0
14. Amend Sec.  5.13 by:
0
a. In paragraphs (a) introductory text and (b)(1), (d), and (g), 
removing the phrase ``the applicant'' wherever it appears and adding in 
its place the phrase ``the filer'';
0
b. Revising paragraph (a)(2);
0
c. In paragraph (b)(3), removing the phrase ``The applicant'' and 
adding in its place the phrase ``The filer'';
0
d. In paragraph (c), removing the phrase ``an applicant'' and adding in 
its place the phrase ``a filer'';
0
e. In paragraph (f), removing the phrase ``An applicant'' and adding in 
its place the phrase ``A filer'';
0
f. In paragraph (g), removing the word ``applicant's'' and adding in 
its place the word filer's'';
0
g. Revising paragraph (h); and
0
h. Adding paragraph (i).
    The revisions and addition read as follows:


Sec.  5.13  Decisions.

    (a) * * *
    (2) Expedited review. The OCC grants qualifying national banks and 
Federal savings associations expedited review within a specified time 
after filing or commencement of the public comment period for certain 
filings.
    (i) The OCC may extend the expedited review period or remove a 
filing from expedited review procedures if it concludes that the 
filing, or an adverse comment regarding the filing, presents a 
significant supervisory, CRA (if applicable), or compliance concern or 
raises a significant legal or policy issue requiring additional OCC 
review. The OCC will provide the filer with a written explanation if it 
decides not to process an application from a qualifying national bank 
or Federal savings association under expedited review pursuant to this 
paragraph.
    (ii) Adverse comments that the OCC determines do not raise a 
significant supervisory, CRA (if applicable), or compliance concern or 
a significant legal or policy issue; are frivolous, non-substantive, or 
filed primarily as a means of delaying action on the filing; or raise a 
CRA concern that has been satisfactorily resolved do not affect the 
OCC's decision under paragraph (a)(2)(i) of this section. The OCC 
considers a comment to be non-substantive if it is a generalized 
opinion that a filing should or should not be approved or a conclusory 
statement, lacking factual or analytical support. The OCC considers a 
CRA concern to have been satisfactorily resolved if the OCC previously 
reviewed (e.g., in an examination, other supervisory activity, or a 
prior filing made by the current filer) a concern presenting 
substantially the same issue in substantially the same assessment area 
during substantially the same time, and the OCC determines that the

[[Page 80437]]

concern would not warrant denial or imposition of a condition on 
approval of the application.
    (iii) If a bank or savings association makes a filing for any 
activity or transaction that is dependent upon the approval of another 
filing under this part, or if requests for approval for more than one 
activity or transaction are combined in a single filing under 
applicable sections of this part, none of the subject filings may be 
deemed approved upon expiration of the applicable time periods, unless 
all of the filings are subject to expedited review procedures and the 
longest of the time periods expires without the OCC issuing a decision 
or notifying the bank or savings association that the filings are not 
eligible for expedited review under the standards in paragraph 
(a)(2)(i) of this section.
* * * * *
    (h) Nullifying a decision. The OCC may nullify any decision on a 
filing either prior to or after consummation of the transaction if:
    (1) The OCC discovers a material misrepresentation or omission in 
any information provided to the OCC in the filing or supporting 
materials;
    (2) The decision is contrary to law, regulation, or OCC policy 
thereunder; or
    (3) The decision was granted due to clerical or administrative 
error, or a material mistake of law or fact.
    (i) Modifying, Suspending, or Rescinding a Decision. The OCC may 
modify, suspend, or rescind a decision on a filing if a material change 
in the information or circumstance on which the OCC relied occurs prior 
to the date of the consummation of the transaction to which the 
decision pertains.

0
15. Amend Sec.  5.20 by:
0
a. In paragraph (b), paragraph (e)(1)(iii) introductory text, and 
paragraphs (h)(1)(i), (h)(2), (h)(3)(i), (h)(5)(i), (h)(5)(ii), 
(h)(5)(iii), (h)(7), (i)(2), (k)(1), (l)(1), and (l)(2), removing the 
word ``shall'' wherever it appears and adding in its place the word 
``must'';
0
b. In paragraph (d)(2), removing the phrase ``section 2'' and adding in 
its place ``section 2(a)(2)'' and removing the phrase ``section 10'' 
and adding in its place ``section 10(a)(2)'';
0
c. Redesignating paragraphs (d)(7) and (8) as paragraphs (d)(8) and 
(9), respectively, and adding new paragraphs (d)(7) and (d)(10);
0
d. In redesignated paragraph (d)(8), adding the word ``natural'' before 
the word ``persons''; and
0
e. In redesignated paragraph (d)(9), removing the phrase ``an 
applicant'' and adding in its place the phrase ``a filer'';
0
f. In paragraph (e)(1)(ii)(A), removing the word ``applicants'' and 
adding in its place the word ``filers'';
0
g. Effective December 11, 2020, revising paragraph (e)(2);
0
h. In paragraph (e)(3), removing the phrase ``Federal Deposit Insurance 
Corporation (FDIC)'' and adding in its place the word ``FDIC'';
0
i. In paragraph (g)(4)(ii), removing the word ``shall'' and adding in 
its place the word ``may'' and removing the phrase ``withdrawal of 
preliminary approval'' and adding in its place the phrase 
``nullification or rescission of a preliminary approval'';
0
j. In paragraphs (i)(1) and (j)(2), removing the word ``applicant'' and 
adding in its place the word ``filer'';
0
k. Redesignating paragraphs (i)(3) through (5) as paragraphs (i)(4) 
through (i)(6) and adding a new paragraph (i)(3);
0
l. In redesignated paragraph (i)(4), removing the word ``shall'' 
wherever it appears and adding in its place the word ``must'';
0
m. In redesignated paragraph (i)(5), removing the phrase ``spokesperson 
and other interested persons'' and adding in its place the phrase 
``contact person and other relevant parties'';
0
n. In redesignated paragraph (i)(6)(i), removing the phrase ``paragraph 
(i)(5)(iii)'' wherever it appears and adding in its place the phrase 
``paragraph (i)(6)(iii)'';
0
o. In redesignated paragraphs (i)(6)(ii)(A) and (B), and (iii) and 
(iv), removing the word ``shall'' wherever it appears and adding in its 
place the word ``must'';
0
p. In redesignated paragraph (i)(6)(iii), removing the phrase ``or part 
197'';
0
q. Revising paragraph (j)(1); and
0
r. In paragraphs (k)(2) and (l)(1), removing the phrase ``An 
applicant'' wherever it appears and adding in its place the phrase ``A 
filer''.
    The additions and revision read as follows:


Sec.  5.20  Organizing a national bank or Federal savings association.

* * * * *
    (d) * * *
    (7) Organizer means a member of the organizing group.
* * * * *
    (10) Principal shareholder means a person who directly or 
indirectly or acting in concert with one or more persons or companies, 
or together with members of their immediate family, will own, control, 
or hold 10 percent or more of the voting stock of the proposed national 
bank or Federal savings association.
    (e) * * *
    (2) Community Reinvestment Act. Twelve CFR part 25 requires the OCC 
to take into account a proposed insured national bank's or Federal 
savings association's description of how it will meet its CRA 
objectives.
* * * * *
    (i) * * *
    (3) Biographical and financial reports--(i) Each proposed 
organizer, director, executive officer, or principal shareholder must 
submit to the appropriate OCC licensing office:
    (A) The information prescribed in the Interagency Biographical and 
Financial Report, available at www.occ.gov; and
    (B) Legible fingerprints.
    (ii) The OCC may require additional information about any proposed 
organizer, director, executive officer, or principal shareholder, if 
appropriate. The OCC may waive any of the information requirements of 
this paragraph if the OCC determines that it is in the public interest.
* * * * *
    (j) * * *
    (1) Notifies the filer prior to that date that the filing has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2); or
* * * * *

0
16. Amend Sec.  5.21 by:
0
a. In paragraph (d), removing the word ``shall'' and adding in its 
place the word ``do'';
0
b. In paragraph (e) introductory text, removing the word ``shall'' and 
adding in its place the word ``must'' in the first and second sentence; 
and removing the word ``shall'' and adding in its place the word 
``will'' in the last sentence;
0
c. In the form ``Federal Mutual Charter'' following paragraph (e):
0
i. Removing the phrase ``shall be'' and adding in its place the word 
``is'' in Section 2 and Section 7;
0
ii. In Section 6:
0
A. Removing the phrase ``shall be permitted'' and adding in its place 
the phrase ``is permitted'';
0
B. Removing the phrase ``shall cast'' and adding in its place the 
phrase ``may cast''; and
0
C. Removing the phrase ``accounts shall be'' and adding in its place 
the phrase ``accounts are'';
0
iii. In Section 7:
0
A. Removing the phrase ``shall be'' and adding in its place the word 
``is'';
0
B. Removing the phrase ``shall not'' and adding in its place the phrase 
``may not''; and
0
iv. Removing the word ``shall'' and adding in its place the word 
``will'' wherever it appears in Section 8 and Section 9;
0
d. Revising paragraph (f)(2) and adding paragraph (f)(3);

[[Page 80438]]

0
e. Revising paragraph (g) introductory text;
0
f. Revising paragraph (g)(1):
0
g. In paragraph (g)(2), removing the phrase ``has complied'' and adding 
in its place the word ``complies'';
0
h. Revising paragraph (i); and
0
g. Revising paragraph (j).
    The revisions and addition read as follows.


Sec.  5.21   Federal mutual savings association charter and bylaws.

* * * * *
    (f) * * *
    (2) Form of filing--(i) Application requirement. Except as provided 
in paragraph (f)(2)(ii) of this section, a Federal mutual savings 
association must file the proposed charter amendment with, and obtain 
the prior approval of, the OCC.
    (A) Expedited review. Except as provided in paragraph (f)(2)(i)(B) 
of this section, the charter amendment will be deemed approved as of 
the 30th day after filing, unless the OCC notifies the filer that the 
amendment is denied or that the amendment contains procedures of the 
type described in paragraph (f)(2)(i)(B) of this section and is not 
eligible for expedited review, provided the association follows the 
requirements of its charter in adopting the amendment.
    (B) Amendments exempted from expedited review. Expedited review is 
not available for a charter amendment that would render more difficult 
or discourage a merger, proxy contest, the assumption of control by a 
mutual account holder of the association, or the removal of incumbent 
management; or involve a significant issue of law or policy.
    (ii) Notice requirement. No application under paragraph (f)(2)(i) 
of this section is required if the text of the amendment is contained 
within paragraphs (e) or (g) of this section. In such case, the Federal 
mutual savings association must submit a notice with the charter 
amendment to the OCC within 30 days after adoption.
    (3) Effectiveness. A charter amendment is effective after approval 
by the OCC, if required pursuant to paragraph (f)(2) of this section, 
and adoption by the association, provided the association follows the 
requirements of its charter in adopting the amendment.
    (g) Optional charter amendments. The following charter amendments 
are subject to the notice requirement in paragraph (f)(2)(ii) of this 
section if adopted without change:
    (1) Purpose and powers. Add a second paragraph to section 4, as 
follows:
    Section 4. Purpose and powers. * * * The association has the 
express power: (i) To act as fiscal agent of the United States when 
designated for that purpose by the Secretary of the Treasury, under 
such regulations as the Secretary may prescribe, to perform all such 
reasonable duties as fiscal agent of the United States as may be 
required, and to act as agent for any other instrumentality of the 
United States when designated for that purpose by any such 
instrumentality; (ii) To sue and be sued, complain and defend in any 
court of law or equity; (iii) To have a corporate seal, affixed by 
imprint, facsimile or otherwise; (iv) To appoint officers and agents as 
its business requires and allow them suitable compensation; (v) To 
adopt bylaws not inconsistent with the Constitution or laws of the 
United States and rules and regulations adopted thereunder and under 
this Charter; (vi) To raise unlimited capital by accepting payments on 
savings, demand, or other accounts, as are authorized by rules and 
regulations made by the OCC, and the holders of all such accounts or 
other accounts as will, to such extent as may be provided by such rules 
and regulations, be members of the association and will have such 
voting rights and such other rights as are thereby provided; (vii) To 
issue notes, bonds, debentures, or other obligations, or securities, 
provided by or under any provision of Federal statute as from time to 
time is in effect; (viii) To provide for redemption of insured 
accounts; (ix) To borrow money without limitation and pledge and 
otherwise encumber any of its assets to secure its debts; (x) To lend 
and otherwise invest its funds as authorized by statute and the rules 
and regulations of the OCC; (xi) To wind up and dissolve, merge, 
consolidate, convert, or reorganize; (xii) To purchase, hold, and 
convey real estate and personalty consistent with its objects, 
purposes, and powers; (xiii) To mortgage or lease any real estate and 
personalty and take such property by gift, devise, or bequest; and 
(xiv) To exercise all powers conferred by law. In addition to the 
foregoing powers expressly enumerated, this association has the power 
to do all things reasonably incident to the accomplishment of its 
express objects and the performance of its express powers.
* * * * *
    (i) Availability of chartering documents. A Federal mutual savings 
association must make available a true copy of its charter and bylaws 
and all amendments thereto to accountholders at all times in each 
office of the savings association, and must upon request deliver to any 
accountholders a copy of such charter and bylaws or amendments thereto.
    (j) Bylaws for Federal mutual savings associations--(1) In general. 
A Federal mutual savings association must operate under bylaws that 
contain provisions that comply with all requirements specified by the 
OCC in this paragraph and that are not otherwise inconsistent with the 
provisions of this paragraph; the association's charter; and all other 
applicable laws, rules, and regulations provided that, a bylaw 
provision inconsistent with the provisions of this paragraph may be 
adopted with the approval of the OCC. Bylaws may be adopted, amended or 
repealed by a majority of the votes cast by the members at a legal 
meeting or a majority of the association's board of directors. The 
bylaws for a Federal mutual savings bank must substitute the term 
``savings bank'' for ``association''. The term ``trustee'' may be 
substituted for the term ``director''.
    (2) Requirements. The following requirements are applicable to 
Federal mutual savings associations:
    (i) Annual meetings of members. (A) An association must provide for 
and conduct an annual meeting of its members for the election of 
directors and at which any other business of the association may be 
conducted. Such meeting must be held at any convenient place the board 
of directors may designate, and at a date and time within 150 days 
after the end of the association's fiscal year. The association's 
bylaws may provide for telephonic or electronic participation of 
members at an annual meeting. Members participating in an annual 
meeting telephonically or electronically will be deemed present in 
person for purposes of the quorum requirement in paragraph (j)(2)(v) of 
this section.
    (B) At each annual meeting, the officers must make a full report of 
the financial condition of the association and of its progress for the 
preceding year and must outline a program for the succeeding year.
    (C) If the association's bylaws provide for telephonic or 
electronic participation in member meetings, the association must 
follow the procedures for telephonic or electronic participation of the 
State corporate governance procedures it is permitted to elect pursuant 
to paragraph (j)(3)(ii) of this section, if those State corporate 
governance procedures include telephonic or electronic participation 
procedures; the Delaware General Corporation Law, Del. Code Ann. Tit. 8 
(1991, as amended 1994, and as

[[Page 80439]]

amended thereafter) (with ``member'' substituting for ``stockholder''); 
or the Model Business Corporation Act (with ``member'' substituting for 
``shareholder''), provided, however, that such procedures are not 
inconsistent with applicable Federal statutes and regulations and 
safety and soundness. The association must indicate the use of these 
procedures in its bylaws.
    (ii) Special meetings of members. Procedures for calling any 
special meeting of the members and for conducting such a meeting must 
be set forth in the bylaws. The board of directors of the association 
or the holders of 10 percent or more of the voting capital must be 
entitled to call a special meeting. The association's bylaws may 
provide for telephonic or electronic participation of members at a 
special meeting pursuant to the procedures specified in paragraph 
(j)(2)(i)(C) of this section. Members participating in a special 
meeting telephonically or electronically will be deemed present in 
person for purposes of the quorum requirement in paragraph (j)(2)(v) of 
this section. For purposes of this paragraph, ``voting capital'' means 
FDIC-insured deposits as of the voting record date.
    (iii) Notice of meeting of members. Notice specifying the date, 
time, and place of the annual or any special meeting and adequately 
describing any business to be conducted must be published for two 
successive weeks immediately prior to the week in which such meeting 
will convene in a newspaper of general circulation in the city or 
county in which the principal place of business of the association is 
located, or mailed postage prepaid at least 15 days and not more than 
45 days prior to the date on which such meeting will convene to each of 
its members of record. A similar notice must be posted in a conspicuous 
place in each of the offices of the association during the 14 days 
immediately preceding the date on which such meeting will convene. The 
bylaws may permit a member to waive in writing any right to receive 
personal delivery of the notice. When any meeting is adjourned for 30 
days or more, notice of the adjournment and reconvening of the meeting 
must be given as in the case of the original meeting.
    (iv) Fixing of record date. The bylaws must provide for the fixing 
of a record date and a method for determining from the books of the 
association the members entitled to vote. Such date may not be more 
than 60 days nor fewer than 10 days prior to the date on which the 
action, requiring such determination of members, is to be taken. The 
same determination must apply to any adjourned meeting.
    (v) Member quorum. Any number of members present and voting, 
represented in person or by proxy, at a regular or special meeting of 
the members constitutes a quorum. A majority of all votes cast at any 
meeting of the members determines any question, unless otherwise 
required by regulation. At any adjourned meeting, any business may be 
transacted that might have been transacted at the meeting as originally 
called. Members present at a duly constituted meeting may continue to 
transact business until adjournment.
    (vi) Voting by proxy. Procedures must be established for voting at 
any annual or special meeting of the members by proxy pursuant to the 
rules and regulations of the OCC. Proxies may be given telephonically 
or electronically as long as the holder uses a procedure for verifying 
the identity of the member. All proxies with a term greater than eleven 
months or solicited at the expense of the association must run to the 
board of directors as a whole, or to a committee appointed by a 
majority of such board.
    (vii) Communications between members. Provisions relating to 
communications between members must be consistent with Sec.  144.8 of 
this chapter. No member, however, may have the right to inspect or copy 
any portion of any books or records of a Federal mutual savings 
association containing:
    (A) A list of depositors in or borrowers from such association;
    (B) Their addresses;
    (C) Individual deposit or loan balances or records; or
    (D) Any data from which such information could be reasonably 
constructed.
    (viii) Number of directors, membership. The bylaws must set forth a 
specific number of directors, not a range. The number of directors may 
not be fewer than five nor more than fifteen, unless a higher or lower 
number has been authorized by the OTS prior to July 21, 2011 or by the 
OCC. Each director of the association must be a member of the 
association. Directors may be elected for periods of one to three years 
and until their successors are elected and qualified, but if a 
staggered board is chosen, provision must be made for the election of 
approximately one-third or one-half of the board each year, as 
appropriate. State-chartered savings banks converting to Federal 
savings banks may include alternative provisions for the election and 
term of office of directors so long as such provisions are authorized 
by the OCC, and provide for compliance with the standard provisions of 
this paragraph no later than six years after the conversion to a 
Federal savings association.
    (ix) Meetings of the board. The board of directors determines the 
place, frequency, time, procedure for notice, which must be at least 24 
hours unless waived by the directors, and waiver of notice for all 
regular and special meetings. The board also may permit telephonic or 
electronic participation at meetings. The bylaws may provide for action 
to be taken without a meeting if unanimous written consent is obtained 
for such action. A majority of the authorized directors constitutes a 
quorum for the transaction of business. The act of a majority of the 
directors present at any meeting at which there is a quorum will be the 
act of the board.
    (x) Officers, employees and agents. (A) The bylaws must contain 
provisions regarding the officers of the association, their functions, 
duties, and powers. The officers of the association must consist of a 
president, one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom must be elected annually by the board of 
directors. Such other officers and assistant officers and agents as may 
be deemed necessary may be elected or appointed by the board of 
directors or chosen in such other manner as may be prescribed in the 
bylaws. Any two or more offices may be held by the same person, except 
the offices of president and secretary.
    (B) Any officer may be removed by the board of directors with or 
without cause, but such removal, other than for cause, must be without 
prejudice to the contractual rights, if any, of the person so removed. 
Termination for cause, for purposes of this section and Sec.  5.22, 
includes termination because of the person's personal dishonesty; 
incompetence; willful misconduct; breach of fiduciary duty involving 
personal profit; intentional failure to perform stated duties; willful 
violation of any law, rule, or regulation (other than traffic 
violations or similar offenses) or final cease and desist order; or 
material breach of any provision of an employment contract.
    (xi) Vacancies, resignation or removal of directors. In the event 
of a vacancy on the board, the board of directors may, by its 
affirmative vote, fill such vacancy, even if the remaining directors 
constitute less than a quorum. A director elected to fill a vacancy may 
serve only until the next election of directors by the members. The 
bylaws must set out the procedure for the resignation of a director. 
Directors may be removed only for cause, as defined in

[[Page 80440]]

paragraph (j)(2)(x)(B) of this section, by a vote of the holders of a 
majority of the shares then entitled to vote at an election of 
directors.
    (xii) Powers of the board. The board of directors has the power to 
exercise any and all of the powers of the association not expressly 
reserved by the charter to the members.
    (xiii) Nominations for directors. The bylaws must provide that 
nominations for directors may be made at the annual meeting by any 
member and must be voted upon, except, however, the bylaws may require 
that nominations by a member must be submitted to the secretary and 
then prominently posted in the principal place of business at least 10 
days prior to the date of the annual meeting. However, if such 
provision is made for prior submission of nominations by a member, then 
the bylaws must provide for a nominating committee, which, except in 
the case of a nominee substituted as a result of death or other 
incapacity, must submit nominations to the secretary and have such 
nominations similarly posted at least 15 days prior to the date of the 
annual meeting.
    (xiv) New business. The bylaws must provide procedures for the 
introduction of new business at the annual meeting.
    (xv) Amendment. Bylaws may include any provision for their 
amendment that would be consistent with applicable law, rules, and 
regulations and adequately addresses its subject and purpose.
    (A) Amendments will be effective:
    (1) After approval by a majority vote of the authorized board, or 
by a majority of the vote cast by the members of the association at a 
legal meeting; and
    (2) After receipt of any applicable regulatory approval.
    (B) When an association fails to meet its quorum requirement, 
solely due to vacancies on the board, the bylaws may be amended by an 
affirmative vote of a majority of the sitting board.
    (xvi) Miscellaneous. The bylaws also may address any other subjects 
necessary or appropriate for effective operation of the association.
    (3) Form of filing--(i) Application requirement. Except as provided 
in paragraphs (j)(3)(ii) or (j)(3)(iii) of this section, a Federal 
mutual savings association must file the proposed bylaw amendment with, 
and obtain the prior approval of, the OCC.
    (A) Expedited review. Except as provided in paragraph (j)(3)(i)(B) 
of this section, the bylaw amendment will be deemed approved as of the 
30th day after filing, unless the OCC notifies the filer that the bylaw 
amendment is denied or that the amendment contains procedures of the 
type described in paragraph (j)(3)(i)(B) of this section and is not 
eligible for expedited review, provided the association follows the 
requirements of its charter and bylaws in adopting the amendment.
    (B) Amendments not subject to expedited review. A bylaw amendment 
is not subject to expedited review if it would render more difficult or 
discourage a merger, proxy contest, the assumption of control by a 
mutual account holder of the association, or the removal of incumbent 
management; involve a significant issue of law or policy, including 
indemnification, conflicts of interest, and limitations on director or 
officer liability; or be inconsistent with the requirements of this 
paragraph or with applicable laws, rules, regulations, or the 
association's charter.
    (ii) Corporate governance election and notice requirement. A 
Federal mutual association may elect to follow the corporate governance 
procedures of the laws of the State where the home office of the 
institution is located, provided that such procedures are not 
inconsistent with applicable Federal statutes, regulations, and safety 
and soundness, and such procedures are not of the type described in 
paragraph (j)(3)(i)(B) of this section. If this election is selected, a 
Federal mutual association must designate in its bylaws the provision 
or provisions from the body of law selected for its corporate 
governance procedures, and must submit a notice containing a copy of 
such bylaws, within 30 days after adoption. The notice must indicate, 
where not obvious, why the bylaw provisions meet the requirements 
stated in paragraph (j)(3)(i)(B) of this section.
    (iii) No filing required. No filing is required for purposes of 
paragraph (j)(3) of this section if a bylaw amendment adopts the 
language of the OCC's model or optional bylaws without change.
    (4) Effectiveness. A bylaw amendment is effective after approval by 
the OCC, if required, and adoption by the association, provided that 
the association follows the requirements of its charter and bylaws in 
adopting the amendment.
    (5) Effect of subsequent charter or bylaw change. Notwithstanding 
any subsequent change to its charter or bylaws, the authority of a 
Federal mutual savings association to engage in any transaction is 
determined only by the association's charter or bylaws then in effect.

0
17. Amend Sec.  5.22 by:
0
a. In paragraph (d), removing the word ``shall'' and adding in its 
place the word ``do'';
0
b. In paragraph (e) introductory text removing the word ``shall'' 
wherever it appears and adding in its place the word ``must'' and 
removing ``Sec.  192.3(c)(13)'' and adding in its place ``Sec.  
192.485'';
0
c. In the form ``Federal Stock Charter'' following paragraph (e):
0
i. In Section 2, removing the phrase ``shall be'' and adding in its 
place the word ``is'';
0
ii. Revising Section 5;
0
iii. In Section 6, removing the phrase ``shall not be entitled'' and 
adding in its place the phrase ``are not entitled'';
0
iv. In Section 7, removing the phrase ``shall be'' and adding in its 
place the phrase ``will be'' and removing the phrase ``shall not be'' 
and adding in its place the phrase ``may not be''; and
0
v. In Section 8, removing the phrase ``shall be'' and adding in its 
place ``may be'';
0
d. Revising paragraph (f)(2) and adding paragraph (f)(3);
0
e. Revising paragraph (g) introductory text;
0
f. In paragraph (g)(1), removing the phrase ``has complied'' and adding 
in its place the word ``complies'';
0
g. Revising paragraph (g)(4);
0
h. Removing the word ``shall'' wherever it appears and adding in its 
place the word ``will'' in paragraph (g)(6); and
0
i. Revising paragraph (g)(7);
0
j. In paragraph (h):
0
i. Removing the phrase ``shall file'' and adding in its place the word 
``files'';
0
ii. Removing the phrase ``for approval'' and adding in its place the 
phrase ``pursuant to paragraph (f)(2)(i) of this section'';
0
iii. Removing the word ``state'' and adding in its place the word 
``State''; and
0
iv. Removing the phrase ``shall not'' and adding in its place the 
phrase ``may not'';
0
k. In paragraph (i), removing the phrase ``under (c) of this part'' and 
adding in its place ``in the form ``Federal Stock Charter'' in 
paragraph (e) of this section'';
0
l. Revising paragraphs (j)(2) and (3);
0
m. In paragraph (j)(4), removing the phrase ``shall be'' and adding in 
its place the word ``is'':
0
n. Revising paragraphs (k)(1) through (7);
0
o. Revising paragraphs (l)(1) through (10);
0
p. In paragraph (m)(1) removing the phrase ``shall be a president'' and 
adding in its place the phrase ``must consist of a president''; 
removing the phrase ``shall be elected'' and adding in its place the 
phrase ``must be elected''; and removing the word ``chairman'' and

[[Page 80441]]

adding in its place the word ``chair''; and
0
q. In paragraph (m)(2) removing the phrase ``shall be'' and adding in 
its place the phrase ``will be'' and removing the last sentence; and
0
r. Revising paragraph (n).
    The addition and revisions read as follows.


Sec.  5.22  Federal stock savings association charter and bylaws.

* * * * *
    (e) * * *
    Federal Stock Charter
* * * * *
    Section 5. Capital stock. The total number of shares of all classes 
of the capital stock that the association has the authority to issue is 
__, all of which is common stock of par [or if no par is specified then 
shares have a stated] value of __per share. The shares may be issued 
from time to time as authorized by the board of directors without the 
approval of its shareholders, except as otherwise provided in this 
Section 5 or to the extent that such approval is required by governing 
law, rule, or regulation. The consideration for the issuance of the 
shares must be paid in full before their issuance and may not be less 
than the par [or stated] value. Neither promissory notes nor future 
services may constitute payment or part payment for the issuance of 
shares of the association. The consideration for the shares must be 
cash, tangible or intangible property (to the extent direct investment 
in such property would be permitted to the association), labor, or 
services actually performed for the association, or any combination of 
the foregoing. In the absence of actual fraud in the transaction, the 
value of such property, labor, or services, as determined by the board 
of directors of the association, is conclusive. Upon payment of such 
consideration, such shares are deemed to be fully paid and 
nonassessable. In the case of a stock dividend, that part of the 
retained earnings of the association that is transferred to common 
stock or paid-in capital accounts upon the issuance of shares as a 
stock dividend is deemed to be the consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association 
from the mutual to stock form of capitalization, no shares of capital 
stock (including shares issuable upon conversion, exchange, or exercise 
of other securities) may be issued, directly or indirectly, to 
officers, directors, or controlling persons of the association other 
than as part of a general public offering or as qualifying shares to a 
director, unless the issuance or the plan under which they would be 
issued has been approved by a majority of the total votes eligible to 
be cast at a legal meeting. The holders of the common stock exclusively 
possess all voting power. Each holder of shares of common stock is 
entitled to one vote for each share held by such holder, except as to 
the cumulation of votes for the election of directors, unless the 
charter provides that there will be no such cumulative voting. Subject 
to any provision for a liquidation account, in the event of any 
liquidation, dissolution, or winding up of the association, the holders 
of the common stock will be entitled, after payment or provision for 
payment of all debts and liabilities of the association, to receive the 
remaining assets of the association available for distribution, in cash 
or in kind. Each share of common stock must have the same relative 
rights as and be identical in all respects with all the other shares of 
common stock.
* * * * *
    (f) * * *
    (2) Form of filing--(i) Application requirement. Except as provided 
in paragraph (f)(2)(ii) of this section, a Federal stock savings 
association must file the proposed charter amendment with, and obtain 
the prior approval of the OCC.
    (A) Expedited review. Except as provided in paragraph (f)(2)(i)(B) 
of this section, the charter amendment will be deemed approved as of 
the 30th day after filing, unless the OCC notifies the filer that the 
amendment is denied or that the amendment contains procedures of the 
type described in paragraph (f)(2)(ii)(B) of this section and is not 
subject to expedited review, provided the association follows the 
requirements of its charter in adopting the amendment.
    (B) Amendments exempted from expedited review. Expedited review is 
not available for a charter amendment that would render more difficult 
or discourage a merger, tender offer, or proxy contest, the assumption 
of control by a holder of a block of the association's stock, the 
removal of incumbent management, or involve a significant issue of law 
or policy.
    (ii) Notice requirement. No application under paragraph (f)(2)(i) 
of this section is required if the amendment is contained within 
paragraphs (e) or (g) of this section. In such case, the Federal stock 
savings association must submit a notice with the charter amendment to 
the OCC within 30 days after adoption.
    (3) Effectiveness. A charter amendment is effective after approval 
by the OCC, if required, and adoption by the association, provided the 
association follows the requirements of its charter in adopting the 
amendments.
    (g) Optional charter amendments. The following charter amendments 
are subject to the notice requirement in paragraph (f)(2)(ii) of this 
section if adopted without change:
* * * * *
    (4) Capital stock. A Federal stock association may amend its 
charter by revising Section 5 to read as follows:
    Section 5. Capital stock. The total number of shares of all classes 
of capital stock that the association has the authority to issue is __, 
of which __is common stock of par [or if no par value is specified the 
stated] value of __per share and of which [list the number of each 
class of preferred and the par or if no par value is specified the 
stated value per share of each such class]. The shares may be issued 
from time to time as authorized by the board of directors without 
further approval of shareholders, except as otherwise provided in this 
Section 5 or to the extent that such approval is required by governing 
law, rule, or regulation. The consideration for the issuance of the 
shares must be paid in full before their issuance and may not be less 
than the par [or stated] value. Neither promissory notes nor future 
services may constitute payment or part payment for the issuance of 
shares of the association. The consideration for the shares must be 
cash, tangible or intangible property (to the extent direct investment 
in such property would be permitted), labor, or services actually 
performed for the association, or any combination of the foregoing. In 
the absence of actual fraud in the transaction, the value of such 
property, labor, or services, as determined by the board of directors 
of the association, will be conclusive. Upon payment of such 
consideration, such shares will be deemed to be fully paid and 
nonassessable. In the case of a stock dividend, that part of the 
retained earnings of the association that is transferred to common 
stock or paid-in capital accounts upon the issuance of shares as a 
stock dividend will be deemed to be the consideration for their 
issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association 
from the mutual to the stock form of capitalization, no shares of 
capital stock (including shares issuable upon conversion, exchange, or 
exercise of other securities) may be issued, directly or indirectly, to 
officers, directors, or controlling persons of the

[[Page 80442]]

association other than as part of a general public offering or as 
qualifying shares to a director, unless their issuance or the plan 
under which they would be issued has been approved by a majority of the 
total votes eligible to be cast at a legal meeting.
    Nothing contained in this Section 5 (or in any supplementary 
sections hereto) entitles the holders of any class of a series of 
capital stock to vote as a separate class or series or to more than one 
vote per share, except as to the cumulation of votes for the election 
of directors, unless the charter otherwise provides that there will be 
no such cumulative voting: Provided, That this restriction on voting 
separately by class or series does not apply:
    i. To any provision which would authorize the holders of preferred 
stock, voting as a class or series, to elect some members of the board 
of directors, less than a majority thereof, in the event of default in 
the payment of dividends on any class or series of preferred stock;
    ii. To any provision that would require the holders of preferred 
stock, voting as a class or series, to approve the merger or 
consolidation of the association with another corporation or the sale, 
lease, or conveyance (other than by mortgage or pledge) of properties 
or business in exchange for securities of a corporation other than the 
association if the preferred stock is exchanged for securities of such 
other corporation: Provided, That no provision may require such 
approval for transactions undertaken with the assistance or pursuant to 
the direction of the OCC or the Federal Deposit Insurance Corporation;
    iii. To any amendment which would adversely change the specific 
terms of any class or series of capital stock as set forth in this 
Section 5 (or in any supplementary sections hereto), including any 
amendment which would create or enlarge any class or series ranking 
prior thereto in rights and preferences. An amendment which increases 
the number of authorized shares of any class or series of capital 
stock, or substitutes the surviving association in a merger or 
consolidation for the association, is not considered to be such an 
adverse change.
    A description of the different classes and series (if any) of the 
association's capital stock and a statement of the designations, and 
the relative rights, preferences, and limitations of the shares of each 
class of and series (if any) of capital stock are as follows:
    A. Common stock. Except as provided in this Section 5 (or in any 
supplementary sections thereto) the holders of the common stock 
exclusively possess all voting power. Each holder of shares of the 
common stock is entitled to one vote for each share held by each 
holder, except as to the cumulation of votes for the election of 
directors, unless the charter otherwise provides that there will be no 
such cumulative voting.
    Whenever there has been paid, or declared and set aside for 
payment, to the holders of the outstanding shares of any class of stock 
having preference over the common stock as to the payment of dividends, 
the full amount of dividends and of sinking fund, retirement fund, or 
other retirement payments, if any, to which such holders are 
respectively entitled in preference to the common stock, then dividends 
may be paid on the common stock and on any class or series of stock 
entitled to participate therewith as to dividends out of any assets 
legally available for the payment of dividends.
    In the event of any liquidation, dissolution, or winding up of the 
association, the holders of the common stock (and the holders of any 
class or series of stock entitled to participate with the common stock 
in the distribution of assets) will be entitled to receive, in cash or 
in kind, the assets of the association available for distribution 
remaining after: (i) Payment or provision for payment of the 
association's debts and liabilities; (ii) distributions or provision 
for distributions in settlement of its liquidation account; and (iii) 
distributions or provision for distributions to holders of any class or 
series of stock having preference over the common stock in the 
liquidation, dissolution, or winding up of the association. Each share 
of common stock will have the same relative rights as and be identical 
in all respects with all the other shares of common stock.
    B. Preferred stock. The association may provide in supplementary 
sections to its charter for one or more classes of preferred stock, 
which must be separately identified. The shares of any class may be 
divided into and issued in series, with each series separately 
designated so as to distinguish the shares thereof from the shares of 
all other series and classes. The terms of each series must be set 
forth in a supplementary section to the charter. All shares of the same 
class must be identical except as to the following relative rights and 
preferences, as to which there may be variations between different 
series:
    a. The distinctive serial designation and the number of shares 
constituting such series;
    b. The dividend rate or the amount of dividends to be paid on the 
shares of such series, whether dividends are cumulative and, if so, 
from which date(s), the payment date(s) for dividends, and the 
participating or other special rights, if any, with respect to 
dividends;
    c. The voting powers, full or limited, if any, of shares of such 
series;
    d. Whether the shares of such series are redeemable and, if so, the 
price(s) at which, and the terms and conditions on which, such shares 
may be redeemed;
    e. The amount(s) payable upon the shares of such series in the 
event of voluntary or involuntary liquidation, dissolution, or winding 
up of the association;
    f. Whether the shares of such series are entitled to the benefit of 
a sinking or retirement fund to be applied to the purchase or 
redemption of such shares, and if so entitled, the amount of such fund 
and the manner of its application, including the price(s) at which such 
shares may be redeemed or purchased through the application of such 
fund;
    g. Whether the shares of such series are convertible into, or 
exchangeable for, shares of any other class or classes of stock of the 
association and, if so, the conversion price(s) or the rate(s) of 
exchange, and the adjustments thereof, if any, at which such conversion 
or exchange may be made, and any other terms and conditions of such 
conversion or exchange.
    h. The price or other consideration for which the shares of such 
series are issued; and
    i. Whether the shares of such series which are redeemed or 
converted have the status of authorized but unissued shares of serial 
preferred stock and whether such shares may be reissued as shares of 
the same or any other series of serial preferred stock.
    Each share of each series of serial preferred stock must have the 
same relative rights as and be identical in all respects with all the 
other shares of the same series.
    The board of directors has authority to divide, by the adoption of 
supplementary charter sections, any authorized class of preferred stock 
into series, and, within the limitations set forth in this section and 
the remainder of this charter, fix and determine the relative rights 
and preferences of the shares of any series so established.
    Prior to the issuance of any preferred shares of a series 
established by a supplementary charter section adopted by the board of 
directors, the association must file with the OCC a dated copy of that 
supplementary section of this charter established and designating the

[[Page 80443]]

series and fixing and determining the relative rights and preferences 
thereof.
* * * * *
    (7) Anti-takeover provisions following mutual to stock conversion. 
Notwithstanding the law of the State in which the association is 
located, a Federal stock association may amend its charter by 
renumbering existing sections as appropriate and adding a new section 8 
as follows:
    Section 8. Certain Provisions Applicable for Five Years. 
Notwithstanding anything contained in the Association's charter or 
bylaws to the contrary, for a period of [specify number of years up to 
five] years from the date of completion of the conversion of the 
Association from mutual to stock form, the following provisions will 
apply:
    A. Beneficial Ownership Limitation. No person may directly or 
indirectly offer to acquire or acquire the beneficial ownership of more 
than 10 percent of any class of an equity security of the association. 
This limitation does not apply to a transaction in which the 
association forms a holding company without change in the respective 
beneficial ownership interests of its stockholders other than pursuant 
to the exercise of any dissenter and appraisal rights, the purchase of 
shares by underwriters in connection with a public offering, or the 
purchase of less than 25 percent of a class of stock by a tax-qualified 
employee stock benefit plan as defined in 12 CFR 192.25.
    In the event shares are acquired in violation of this section 8, 
all shares beneficially owned by any person in excess of 10 percent 
will be considered ``excess shares'' and will not be counted as shares 
entitled to vote and may not be voted by any person or counted as 
voting shares in connection with any matters submitted to the 
stockholders for a vote.
    For purposes of this section 8, the following definitions apply:
    1. The term ``person'' includes an individual, a group acting in 
concert, a corporation, a partnership, an association, a joint stock 
company, a trust, an unincorporated organization or similar company, a 
syndicate or any other group formed for the purpose of acquiring, 
holding or disposing of the equity securities of the association.
    2. The term ``offer'' includes every offer to buy or otherwise 
acquire, solicitation of an offer to sell, tender offer for, or request 
or invitation for tenders of, a security or interest in a security for 
value.
    3. The term ``acquire'' includes every type of acquisition, whether 
effected by purchase, exchange, operation of law or otherwise.
    4. The term ``acting in concert'' means (a) knowing participation 
in a joint activity or parallel action towards a common goal of 
acquiring control whether or not pursuant to an express agreement, or 
(b) a combination or pooling of voting or other interests in the 
securities of an issuer for a common purpose pursuant to any contract, 
understanding, relationship, agreement or other arrangement, whether 
written or otherwise.
    B. Cumulative Voting Limitation. Stockholders may not cumulate 
their votes for election of directors.
    C. Call for Special Meetings. Special meetings of stockholders 
relating to changes in control of the association or amendments to its 
charter may be called only upon direction of the board of directors.
* * * * *
    (j) * * *
    (2) Form of filing--(i) Application requirement. Except as provided 
in paragraphs (j)(2)(ii) or (j)(2)(iii) of this section, a Federal 
stock savings association must file the proposed bylaw amendment with, 
and obtain the prior approval of, the OCC.
    (A) Expedited review. Except as provided in paragraph (j)(2)(i)(B) 
of this section, the bylaw amendment will be deemed approved as of the 
30th day after filing, unless the OCC notifies the filer that the 
application is denied or that the amendment contains procedures of the 
type described in paragraph (j)(2)(i)(B) of this section and is not 
eligible for expedited review, provided the association follows the 
requirements of its charter and bylaws in adopting the amendment.
    (B) Amendments exempted from expedited review. Expedited review is 
not available for a bylaw amendment that would:
    (1) Render more difficult or discourage a merger, tender offer, or 
proxy contest, the assumption of control by a holder of a large block 
of the association's stock, or the removal of incumbent management; or
    (2) Be inconsistent with paragraphs (k) through (n) of this 
section, with applicable laws, rules, regulations or the association's 
charter or involve a significant issue of law or policy, including 
indemnification, conflicts of interest, and limitations on director or 
officer liability.
    (ii) Corporate governance election and notice requirement. A 
Federal stock association may elect to follow the corporate governance 
procedures of: The laws of the State where the home office of the 
association is located; the laws of the State where the association's 
holding company, if any, is incorporated or chartered; Delaware General 
Corporation law; or The Model Business Corporation Act, provided that 
such procedures may be elected to the extent not inconsistent with 
applicable Federal statutes and regulations and safety and soundness, 
and such procedures are not of the type described in paragraph 
(j)(2)(i)(B) of this section. If this election is selected, a Federal 
stock association must designate in its bylaws the provision or 
provisions from the body or bodies of law selected for its corporate 
governance procedures, and must file a notice containing a copy of such 
bylaws, within 30 days after adoption. The notice must indicate, where 
not obvious, why the bylaw provisions meet the requirements stated in 
paragraph (j)(2)(i)(B) of this section.
    (iii) No filing required. No filing is required for purposes of 
paragraph (j)(2) of this section if a bylaw amendment adopts the 
language of the OCC's model or optional bylaws without change.
    (3) Effectiveness. A bylaw amendment is effective after approval by 
the OCC, if required, and adoption by the association, provided that 
the association follows the requirements of its charter and bylaws in 
adopting the amendment.
* * * * *
    (k) * * *
    (1) Shareholder meetings. (i) In general. A meeting of the 
shareholders of the association for the election of directors and for 
the transaction of any other business of the association must be held 
annually within 150 days after the end of the association's fiscal 
year. Unless otherwise provided in the association's charter, special 
meetings of the shareholders may be called by the board of directors or 
on the request of the holders of 10 percent or more of the shares 
entitled to vote at the meeting, or by such other persons as may be 
specified in the bylaws of the association.
    (ii) Location of shareholder meetings. (A) In general. All annual 
and special meetings of shareholders of the association may be held at 
any convenient place the board of directors may designate. The 
association's bylaws may provide for the telephonic or electronic 
participation of shareholders in these meetings. Shareholders 
participating in an annual or special meeting telephonically or 
electronically will be deemed present in person for purposes of the 
quorum requirement in paragraph (k)(5) of this section.
    (B) Procedures for telephonic or electronic participation. If the

[[Page 80444]]

association's bylaws provide for telephonic or electronic participation 
in shareholder meetings, the association must elect to follow corporate 
governance procedures for these meetings pursuant to paragraph 
(j)(2)(ii) of this section that include procedures for telephonic or 
electronic participation in shareholder meetings. The association must 
indicate the use of these elected procedures in its bylaws.
    (2) Notice of shareholder meetings. Written notice stating the 
place, day, and hour of the meeting and the purpose or purposes for 
which the meeting is called must be delivered not fewer than 20 nor 
more than 50 days before the date of the meeting, either personally or 
by mail, by or at the direction of the chair of the board, the 
president, the secretary, or the directors, or other persons calling 
the meeting, to each shareholder of record entitled to vote at such 
meeting. If mailed, such notice will be deemed to be delivered when 
deposited in the mail, addressed to the shareholder at the address 
appearing on the stock transfer books or records of the association as 
of the record date prescribed in paragraph (k)(3) of this section, with 
postage thereon prepaid. When any shareholders' meeting, either annual 
or special, is adjourned for 30 days or more, notice of the adjourned 
meeting must be given as in the case of an original meeting. 
Notwithstanding anything in this section, however, a Federal stock 
association that is wholly owned is not subject to the shareholder 
notice requirement.
    (3) Fixing of record date. For the purpose of determining 
shareholders entitled to notice of or to vote at any meeting of 
shareholders or any adjournment thereof, or shareholders entitled to 
receive payment of any dividend, or in order to make a determination of 
shareholders for any other proper purpose, the board of directors must 
fix in advance a date as the record date for any such determination of 
shareholders. Such date in any case may not be more than 60 days and, 
in case of a meeting of shareholders, not less than 10 days prior to 
the date on which the particular action, requiring such determination 
of shareholders, is to be taken. When a determination of shareholders 
entitled to vote at any meeting of shareholders has been made as 
provided in this section, such determination will apply to any 
adjournment thereof.
    (4) Voting lists. (i) At least 20 days before each meeting of the 
shareholders, the officer or agent having charge of the stock transfer 
books for the shares of the association must make a complete list of 
the stockholders of record entitled to vote at such meeting, or any 
adjournments thereof, arranged in alphabetical order, with the address 
and the number of shares held by each. This list of shareholders must 
be kept on file at the home office of the association and is subject to 
inspection by any shareholder of record or the stockholder's agent 
during the entire time of the meeting. The original stock transfer book 
will constitute prima facie evidence of the stockholders entitled to 
examine such list or transfer books or to vote at any meeting of 
stockholders. Notwithstanding anything in this section, however, a 
Federal stock association that is wholly owned is not subject to the 
voting list requirements.
    (ii) In lieu of making the shareholders list available for 
inspection by any shareholders as provided in paragraph (k)(4)(i) of 
this section, the board of directors may perform such acts as required 
by paragraphs (a) and (b) of Rule 14a-7 of the General Rules and 
Regulations under the Securities and Exchange Act of 1934 (17 CFR 
240.14a-7) as may be duly requested in writing, with respect to any 
matter which may be properly considered at a meeting of shareholders, 
by any shareholder who is entitled to vote on such matter and who must 
defray the reasonable expenses to be incurred by the association in 
performance of the act or acts required.
    (5) Shareholder quorum. A majority of the outstanding shares of the 
association entitled to vote, represented in person or by proxy, 
constitutes a quorum at a meeting of shareholders. The shareholders 
present at a duly organized meeting may continue to transact business 
until adjournment, notwithstanding the withdrawal of enough 
shareholders to leave less than a quorum. If a quorum is present, the 
affirmative vote of the majority of the shares represented at the 
meeting and entitled to vote on the subject matter will be the act of 
the stockholders, unless the vote of a greater number of stockholders 
voting together or voting by classes is required by law or the charter. 
Directors, however, are elected by a plurality of the votes cast at an 
election of directors.
    (6) Shareholder voting--(i) Proxies. Unless otherwise provided in 
the association's charter, at all meetings of shareholders, a 
shareholder may vote in person or by proxy executed in writing by the 
shareholder or by a duly authorized attorney in fact. Proxies may be 
given telephonically or electronically as long as the holder uses a 
procedure for verifying the identity of the shareholder. Proxies 
solicited on behalf of the management must be voted as directed by the 
shareholder or, in the absence of such direction, as determined by a 
majority of the board of directors. No proxy maybe valid more than 
eleven months from the date of its execution except for a proxy coupled 
with an interest.
    (ii) Shares controlled by association. Neither treasury shares of 
its own stock held by the association nor shares held by another 
corporation, if a majority of the shares entitled to vote for the 
election of directors of such other corporation are held by the 
association, may be voted at any meeting or counted in determining the 
total number of outstanding shares at any given time for purposes of 
any meeting.
    (7) Nominations and new business submitted by shareholders. 
Nominations for directors and new business submitted by shareholders 
must be voted upon at the annual meeting if such nominations or new 
business are submitted in writing and delivered to the secretary of the 
association at least five days prior to the date of the annual meeting. 
Ballots bearing the names of all the persons nominated must be provided 
for use at the annual meeting.
* * * * *
    (l) * * *
    (1) General powers and duties. The business and affairs of the 
association must be under the direction of its board of directors. 
Directors need not be stockholders unless the bylaws so require.
    (2) Number and term. The bylaws must set forth a specific number of 
directors, not a range. The number of directors may not be fewer than 
five nor more than fifteen, unless a higher or lower number has been 
authorized by the OTS prior to July 21, 2011 or the OCC. Directors must 
be elected for a term of one to three years and until their successors 
are elected and qualified. If a staggered board is chosen, the 
directors must be divided into two or three classes as nearly equal in 
number as possible and one class must be elected by ballot annually.
    (3) Regular meetings. The board of directors determines the place, 
frequency, time and procedure for notice of regular meetings. The 
bylaws may provide for telephonic or electronic participation at these 
meetings.
    (4) Quorum. A majority of the number of directors constitutes a 
quorum for the transaction of business at any meeting of the board of 
directors. The act of the majority of the directors present at a 
meeting at which a quorum is present will be the act of the board of 
directors, unless a greater number is prescribed by regulation of the 
OCC.

[[Page 80445]]

    (5) Vacancies. Any vacancy occurring in the board of directors may 
be filled by the affirmative vote of a majority of the remaining 
directors even with less than a quorum of the board of directors. A 
director elected to fill a vacancy may serve only until the next 
election of directors by the shareholders. Any directorship to be 
filled by reason of an increase in the number of directors may be 
filled by election by the board of directors for a term of office 
continuing only until the next election of directors by the 
shareholders.
    (6) Removal or resignation of directors. (i) At a meeting of 
shareholders called expressly for that purpose, any director may be 
removed only for cause, as termination for cause is defined in Sec.  
5.21(j)(2)(x)(B), by a vote of the holders of a majority of the shares 
then entitled to vote at an election of directors. Associations may 
provide for procedures regarding resignations in the bylaws.
    (ii) If less than the entire board is to be removed, no one of the 
directors may be removed if the votes cast against the removal would be 
sufficient to elect a director if then cumulatively voted at an 
election of the class of directors of which such director is a part.
    (iii) Whenever the holders of the shares of any class are entitled 
to elect one or more directors by the provisions of the charter or 
supplemental sections thereto, the provisions of this section apply, in 
respect to the removal of a director or directors so elected, to the 
vote of the holders of the outstanding shares of that class and not to 
the vote of the outstanding shares as a whole.
    (7) Executive and other committees. The board of directors, by 
resolution adopted by a majority of the full board, may designate from 
among its members an executive committee and one or more other 
committees. No committee may have the authority of the board of 
directors with reference to: The declaration of dividends; the 
amendment of the charter or bylaws of the association; recommending to 
the stockholders a plan of merger, consolidation, or conversion; the 
sale, lease, or other disposition of all, or substantially all, of the 
property and assets of the association otherwise than in the usual and 
regular course of its business; a voluntary dissolution of the 
association; a revocation of any of the foregoing; or the approval of a 
transaction in which any member of the executive committee, directly or 
indirectly, has any material beneficial interest. The designation of 
any committee and the delegation of authority thereto does not operate 
to relieve the board of directors, or any director, of any 
responsibility imposed by law or regulation.
    (8) Notice of special meetings. Written notice of at least 24 hours 
regarding any special meeting of the board of directors or of any 
committee designated thereby must be given to each director in 
accordance with the bylaws, although such notice may be waived by the 
director. The attendance of a director at a meeting constitutes a 
waiver of notice of such meeting, except where a director attends a 
meeting for the express purpose of objecting to the transaction of any 
business because the meeting is not lawfully called or convened. 
Neither the business to be transacted at, nor the purpose of, any 
meeting need be specified in the notice or waiver of notice of such 
meeting. The bylaws may provide for telephonic or electronic 
participation at a special meeting.
    (9) Action without a meeting. Any action required or permitted to 
be taken by the board of directors at a meeting may be taken without a 
meeting if a consent in writing, setting forth the actions so taken, is 
signed by all of the directors.
    (10) Presumption of assent. A director of the association who is 
present at a meeting of the board of directors at which action on any 
association matter is taken is presumed to have assented to the action 
taken unless their dissent or abstention is entered in the minutes of 
the meeting or unless a written dissent to such action is filed with 
the person acting as the secretary of the meeting before the 
adjournment thereof or is forwarded by registered mail to the secretary 
of the association within five days after the date on which a copy of 
the minutes of the meeting is received. Such right to dissent does not 
apply to a director who voted in favor of such action.
* * * * *
    (n) Certificates for shares and their transfer--(1) Certificates 
for shares. Certificates representing shares of capital stock of the 
association must be in such form as determined by the board of 
directors and approved by the OCC. The name and address of the person 
to whom the shares are issued, with the number of shares and date of 
issue, must be entered on the stock transfer books of the association. 
All certificates surrendered to the association for transfer must be 
cancelled and no new certificate may be issued until the former 
certificate for a like number of shares has been surrendered and 
cancelled, except that in the case of a lost or destroyed certificate a 
new certificate may be issued upon such terms and indemnity to the 
association as the board of directors may prescribe.
    (2) Transfer of shares. Transfer of shares of capital stock of the 
association may be made only on its stock transfer books. Authority for 
such transfer may be given only by the holder of record or by a legal 
representative, who must furnish proper evidence of such authority, or 
by an attorney authorized by a duly executed power of attorney and 
filed with the association. The transfer may be made only on surrender 
for cancellation of the certificate for the shares. The person in whose 
name shares of capital stock stand on the books of the association is 
deemed by the association to be the owner for all purposes.

0
18. Amend Sec.  5.23 by:
0
a. In paragraph (b)(2), removing the phrase ``an industrial bank or a 
credit union, chartered in'' and adding in its place the phrase ``an 
industrial bank, or a credit union chartered in'';
0
b. In paragraphs (c), (d)(2)(ii) introductory text, (e), and (f)(1), 
removing the word ``shall'' wherever it appears and adding in its place 
the word ``must'';
0
c. In paragraphs (c), (d)(1), and (d)(2)(i), removing the word 
``applicant'' wherever it appears and adding in its place the word 
``filer'';
0
d. In paragraph (c), removing the phrase ``Federal Deposit Insurance 
Corporation (FDIC)'' and adding in its place the word ``FDIC'';
0
e. Removing paragraph (d)(2)(ii)(A), redesignating paragraphs 
(d)(2)(ii)(B) through (K) as paragraphs (d)(2)(ii)(A) through (J), 
respectively and adding new paragraphs (d)(2)(ii)(K) and (d)(2)(ii)(L);
0
f. In redesignated paragraph (d)(2)(ii)(D), removing the phrase 
``state-chartered'' and adding in its place the phrase ``State-
chartered'' and removing the word ``state'' and adding in its place the 
word ``State'';
0
g. In redesignated paragraph (d)(2)(ii)(F), removing the citations 
``Sec.  5.36, Sec.  5.38'' and adding in their place ``Sec.  5.38, 
Sec.  5.58'';
0
h. In redesignated paragraph (d)(2)(ii)(G), removing the comma after 
the phrase ``engages in'';
0
i. In redesignated paragraph (d)(2)(ii)(I), removing the word ``state'' 
and adding in its place the word ``State'' wherever it appears and 
removing the word ``and'' after the phrase ``after conversion;'';
0
j. In redesignated paragraph (d)(2)(ii)(J), removing the period after 
the phrase ``from the OCC'' and adding in its place a semicolon;
0
k. In paragraph (d)(2)(iii), removing the word ``HOLA'' and adding in 
its

[[Page 80446]]

place ``Home Owners' Loan Act (12 U.S.C. 1464(c))'';
0
l. Redesignating paragraphs (d)(2)(iv) through (v) as paragraphs 
(d)(2)(v) through (vi) and adding a new paragraph (d)(2)(iv);
0
m. In redesignated paragraph (d)(2)(vi), removing the word 
``applicant'' and adding in its place the word ``filer'';
0
n. Revising paragraph (d)(4);
0
o. In paragraph (e), removing the phrase ``an applicant'' and adding in 
its place the phrase ``a filer'';
0
p. In paragraph (f)(1), removing the word ``state'' and adding in its 
place the word ``State''; and
0
q. In paragraph (g) removing the phrase ``shall continue'' and adding 
in its place the word ``continues'' and removing the phrase ``shall 
be'' and adding in its place the word ``is''.
    The additions and revision read as follows.


Sec.  5.23  Conversion to become a Federal savings association

* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (K) Include a list of directors and senior executive officers, as 
defined in Sec.  5.51, of the converting institution; and
    (L) Include a list of individuals, directors, and shareholders who 
directly or indirectly, or acting in concert with one or more persons 
or companies, or together with members of their immediate family, do or 
will own, control, or hold 10 percent or more of the institution's 
voting stock.
* * * * *
    (iv) The OCC may require directors and senior executive officers of 
the converting institution to submit the Interagency Biographical and 
Financial Report, available at www.occ.gov, and legible fingerprints.
* * * * *
    (4) Expedited review. An application by an eligible bank to convert 
to a Federal savings association charter is deemed approved by the OCC 
as of the 45th day after the filing is received by the OCC, unless the 
OCC notifies the filer prior to that date that the filing has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2).
* * * * *

0
19. Amend Sec.  5.24 by:
0
a. In paragraphs (b), (c)(1), (c)(2), (d), (e)(2) introductory text, 
and (e)(3), removing the word ``state'' wherever it appears and adding 
in its place the word ``State'';
0
b. In paragraphs (b), (e)(2) introductory text, and (f), removing the 
word ``shall'' wherever it appears and adding in its place the word 
``must'';
0
c. In paragraph (c)(2), removing the word ``state'' and adding in its 
place the word ``State'';
0
d. In paragraphs (d), and (e)(1), removing the word ``applicant'' 
wherever it appears and adding in its place the word ``filer'';
0
e. Removing paragraph (e)(2)(i) and redesignating paragraphs (e)(2)(ii) 
through (x) as paragraphs (e)(2)(i) through (ix), respectively, and 
adding paragraphs (e)(2)(x) and (xi);
0
f. In redesignated paragraphs (e)(2)(iv) and (e)(2)(ix), removing the 
word ``state'' wherever it appears and adding in its place the word 
``State'';
0
g. At the end of redesignated paragraph (e)(2)(viii), removing the word 
``and'';
0
h. At the end of redesignated paragraph (e)(2)(ix), removing the period 
and adding in its place a semicolon;
0
i. Redesignating paragraphs (e)(4) through (5) as paragraphs (e)(5) 
through (6), respectively, and adding a new paragraph (e)(4);
0
j. In redesignated paragraph (e)(6), removing the word ``applicant'' 
and adding the word ``filer'' in its place;
0
k. Revising paragraph (h); and
0
l. In paragraph (i):
0
i. In the first sentence, removing the phrase ``shall continue'' and 
adding in its place the word ``continues''; and
0
ii. In the second sentence, removing the phrase ``shall be'' and adding 
in its place the word ``is''.
    The additions and revisions read as follows.


Sec.  5.24  Conversion to become a national bank.

* * * * *
    (e) * * *
    (2) * * *
    (x) Include a list of directors and senior executive officers, as 
defined in Sec.  5.51, of the converting institution; and
    (xi) Include a list of individuals, directors, and shareholders who 
directly or indirectly, or acting in concert with one or more persons 
or companies, or together with members of their immediate family, do or 
will own, control, or hold 10 percent or more of the institution's 
voting stock.
* * * * *
    (4) The OCC may require directors and senior executive officers of 
the converting institution to submit the Interagency Biographical and 
Financial Report, available at www.occ.gov, and legible fingerprints.
* * * * *
    (h) Expedited review. An application by an eligible savings 
association to convert to a national bank charter is deemed approved by 
the OCC as of the 45th day after the filing is received by the OCC, 
unless the OCC notifies the filer prior to that date that the filing 
has been removed from expedited review, or the expedited review process 
is extended, under Sec.  5.13(a)(2).
* * * * *


Sec.  5.25  [Amended]

0
20. Amend Sec.  5.25 by:
0
a. In the section heading and in paragraphs (b), (c), (d)(1), (d)(2), 
(d)(3)(i), and (d)(4), removing the word ``state'' wherever it appears 
and adding in its place the word ``State''
0
b. In paragraphs (b), (d)(3)(i), and (d)(3)(ii) introductory text, 
removing the word ``shall'' wherever it appears and adding in its place 
the word ``must''; and
0
c. In paragraphs (d)(1) and (d)(3)(i), removing the phrase ``defined in 
214(a)'' wherever it appears and adding in its place the phrase 
``defined in 12 U.S.C. 214(a)''.

0
21. Amend Sec.  5.26 by:
0
a. In paragraph (a), removing the phrase ``12 U.S.C. 92a and'' and 
adding in its place the phrase ``12 U.S.C. 92a,'';
0
b. In paragraphs (b)(2) and (b)(4), removing the phrase ``Office of 
Thrift Supervision'' wherever it appears and adding in its place the 
word ``OTS'';
0
c. In paragraphs (b)(3), (b)(4), (e)(1)(ii), (e)(1)(iii), (e)(2)(i)(B), 
(e)(2)(i)(E), and (e)(2)(iii)(B), removing the word ``state'' wherever 
it appears and adding in its place the word ``State''; and
0
d. In paragraph (e)(2)(i) introductory text, removing the word 
``shall'' and adding in its place the word ``must'';
0
e. Revising paragraph (e)(2)(i)(C);
0
f. In paragraph (e)(2)(ii), removing the word ``applicant'' and adding 
in its place the word ``filer''; and
0
g. Revising paragraphs (e)(3) and (6). .
    The revisions read as follows.


Sec.  5.26  Fiduciary powers of national banks and Federal savings 
associations.

* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (C) Sufficient biographical information on proposed senior trust 
management personnel, as identified by the OCC, to enable the OCC to 
assess their qualifications, including, if requested by the OCC, 
legible fingerprints and the Interagency Biographical and Financial 
Report, available at www.occ.gov;
* * * * *
    (3) Expedited review. An application by an eligible bank or 
eligible savings

[[Page 80447]]

association to exercise fiduciary powers is deemed approved by the OCC 
as of the 30th day after the application is received by the OCC, unless 
the OCC notifies the bank or savings association prior to that date 
that the filing has been removed from expedited review, or the 
expedited review process is extended, under Sec.  5.13(a)(2).
* * * * *
    (6) Notice of fiduciary activities in additional States. (i) Except 
as provided in paragraphs (e)(6)(iii) through (iv) of this section, a 
national bank or Federal savings association with existing OCC approval 
to exercise fiduciary powers must provide written notice to the OCC no 
later than 10 days after it begins to engage in any of the activities 
specified in Sec.  9.7(d) of this chapter in a State in addition to the 
State or States described in the application for fiduciary powers that 
the OCC has approved.
    (ii) A notice submitted pursuant to paragraph (e)(6)(i) of this 
section must identify the new State or States involved, identify the 
fiduciary activities to be conducted, and describe the extent to which 
the activities differ materially from the fiduciary activities the 
national bank or Federal savings association previously conducted.
    (iii) No notice under paragraph (e)(6)(i) of this section is 
required if the national bank or Federal savings association provides 
the information required by paragraph (e)(6)(ii) of this section 
through other means, such as a merger application.
    (iv) No notice is required if the national bank or Federal savings 
association is conducting only activities ancillary to its fiduciary 
business through a trust representative office or otherwise.
* * * * *

0
22. Amend Sec.  5.30 by:
0
a. In paragraphs (b), (f)(1), (f)(4), (g), (h)(1), and (j), removing 
the word ``shall'' wherever it appears and adding in its place the word 
``must'';
0
b. In paragraph (c)(2), removing ``12 CFR 5.24'' and adding in its 
place ``Sec.  5.24'';
0
c. Revising paragraphs (d)(1)(i) and (iii);
0
d. In paragraph (d)(2), removing the word ``state'' and adding in its 
place the word ``State'';
0
e. In paragraphs (d)(2), (d)(3), (g), and (h)(4), removing the word 
``state'' wherever it appears and adding in its place the word 
``State'';
0
f. In paragraph (d)(5), adding a sentence after the second sentence;
0
g. In paragraph (f)(1), removing the phrase ``paragraph (f)(2)'' and 
adding in its place the phrase ``paragraphs (f)(2) or (f)(3)''; and
0
h. In paragraph (f)(6), removing the phrase ``is not eligible for 
expedited review, or the expedited review process is extended, under 
Sec.  5.13(a)(2)'' and adding in its place the phrase ``has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2)''.
    The revisions read as follows.


Sec.  5.30  Establishment, acquisition, and relocation of a branch of a 
national bank.

* * * * *
    (d) * * *
    (1) * * *
    (i) A branch established by a national bank includes a seasonal 
agency described in 12 U.S.C. 36(c), a mobile facility, a temporary 
facility, an intermittent facility, or a drop box.
* * * * *
    (iii) A branch does not include a remote service unit (RSU) as 
described in 12 CFR 7.4003. This encompasses RSUs that are automated 
teller machines (ATMs), including interactive ATMs. A branch also does 
not include a loan production office, a deposit production office, a 
trust office, an administrative office, a data processing office, or 
any other office that does not engage in at least one of the activities 
in paragraph (d)(1) of this section.
* * * * *
    (5) * * * A mobile branch may be stationed continuously at a single 
location within the geographic area it is approved to serve for a 
period of up to four months. * * *

0
23. Amend Sec.  5.31 by:
0
a. In paragraph (a) removing the period after ``1464'' and adding in 
its place a comma; and adding a comma after ``2907'';
0
b. In paragraphs (b), (f)(1)(i), (f)(3), (i), (j)(2), and (k)(2)(ii) 
removing the word ``shall'' and adding in its place the word ``must'' 
wherever it appears;
0
c. In paragraph (c)(2), removing ``12 CFR 5.23'' and adding in its 
place ``Sec.  5.23'' and removing ``12 CFR 5.33'' and adding in its 
place ``Sec.  5.33'';
0
d. In paragraphs (c)(3) and paragraph (j)(1), removing the word 
``HOLA'' and adding in its place the phrase ``Home Owners' Loan Act'' 
wherever it appears;
0
e. In paragraph (d)(1), removing the word ``office'';
0
f. In paragraph (d)(2), removing the word ``state'' and adding in its 
place the word ``State'';
0
g. In paragraphs (d)(2), (g)(2), and (j)(2), removing the word 
``state'' and adding in its place the word ``State'' wherever it 
appears;
0
h. In paragraph (f)(1)(iii), removing the word ``Federal'' and removing 
the phrase ``is not eligible for expedited review, or the expedited 
review process is extended, under Sec.  5.13(a)(2)'' and adding in its 
place the phrase ``has been removed from expedited review, or the 
expedited review process is extended, under Sec.  5.13(a)(2)'';
0
i. In paragraph (f)(2)(ii), removing the phrase ``, as defined in Sec.  
5.3(l)'';
0
j. In paragraph (f)(2)(iii) introductory text, removing the phrase ``as 
defined in Sec.  5.3(g)'';
0
k. In the heading to paragraph (j), removing the word ``HOLA'' and 
adding in its place ``Home Owners' Loan Act''; and
0
k. Adding paragraph (j)(3).
    The addition reads as follows.


Sec.  5.31  Establishment, acquisition, and relocation of a branch and 
establishment of an agency office of a Federal savings association.

* * * * *
    (j) * * *
    (3) For purposes of 12 U.S.C. 1464(m)(1), a branch in the District 
of Columbia includes any location at which accounts are opened, 
payments are received, or withdrawals are made. This includes an 
Automated Teller Machine that performs one or more of these functions.
* * * * *


Sec.  5.32  [Amended]

0
24. Amend Sec.  5.32 by:
0
a. In paragraphs (c), (f), (h)(1), and (h)(2), removing the word 
``shall'' and adding in its place the word ``must'' wherever it appears 
;
0
b. In paragraph (d)(1), removing the phrase ``shall be'' and adding in 
its place the word ``is'';
0
c. In paragraph (d)(2)(i), removing the word ``shall'' and adding in 
its place the word ``will'';
0
d. In paragraph (e), removing the phrase ``his or her'' and adding in 
its place the word ``their'';
0
e. In paragraph (f), removing the word Applicants'' and adding in its 
place the word ``Filers''; and
0
f. In paragraph (h)(1), removing the phrase ``An applicant'' and adding 
in its place the phrase ``A filer''; and
0
g. In paragraph (h)(2), removing the word ``applicant'' and adding in 
its place the word ``filer''.

0
25. Revise Sec.  5.33 to read as follows:


Sec.  5.33  Business combinations involving a national bank or Federal 
savings association.

    (a) Authority. 12 U.S.C. 24(Seventh), 93a, 181, 214a, 214b, 215, 
215a, 215a-1, 215a-3, 215b, 215c, 1462a, 1463, 1464, 1467a, 1828(c), 
1831u, 2903, and 5412(b)(2)(B).

[[Page 80448]]

    (b) Scope. This section sets forth the provisions governing 
business combinations and the standards for:
    (1) OCC review and approval of an application by a national bank or 
a Federal savings association for a business combination resulting in a 
national bank or Federal savings association; and
    (2) Requirements of notices and other procedures for national banks 
and Federal savings associations involved in other combinations in 
which a national bank or Federal savings association is not the 
resulting institution.
    (c) Licensing requirements. As prescribed by this section, a 
national bank or Federal savings association must submit an application 
and obtain prior OCC approval for a business combination when the 
resulting institution is a national bank or Federal savings 
association. As prescribed by this section, a national bank or Federal 
savings association must give notice to the OCC prior to engaging in 
any other combination where the resulting institution will not be a 
national bank or Federal savings association.\1\ A national bank must 
submit an application and obtain prior OCC approval for any merger 
between the national bank and one or more of its nonbank affiliates.
---------------------------------------------------------------------------

    \1\ Other combinations, as defined in paragraph (d)(10) of this 
section, do not require an application under this section. However, 
some may require an application under Sec.  5.53.
---------------------------------------------------------------------------

    (d) Definitions. For purposes of this section:
    (1) Bank means any national bank or any State bank.
    (2) Business combination means:
    (i) Any merger or consolidation between a national bank or a 
Federal savings association and one or more depository institutions or 
State trust companies, in which the resulting institution is a national 
bank or Federal savings association;
    (ii) In the case of a Federal savings association, any merger or 
consolidation with a credit union in which the resulting institution is 
a Federal savings association;
    (iii) In the case of a national bank, any merger between a national 
bank and one or more of its nonbank affiliates;
    (iv) The acquisition by a national bank or a Federal savings 
association of all, or substantially all, of the assets of another 
depository institution; or
    (v) The assumption by a national bank or a Federal savings 
association of any deposit liabilities of another insured depository 
institution or any deposit accounts or other liabilities of a credit 
union or any other institution that will become deposits at the 
national bank or Federal savings association.
    (3) Business reorganization means either:
    (i) A business combination between eligible banks and eligible 
savings associations, or between an eligible bank or an eligible 
savings association and an eligible depository institution, that are 
controlled by the same holding company or that will be controlled by 
the same holding company prior to the combination; or
    (ii) A business combination between an eligible bank or an eligible 
savings association and an interim national bank or interim Federal 
savings association chartered in a transaction in which a person or 
group of persons exchanges its shares of the eligible bank or eligible 
savings association for shares of a newly formed holding company and 
receives after the transaction substantially the same proportional 
share interest in the holding company as it held in the eligible bank 
or eligible savings association (except for changes in interests 
resulting from the exercise of dissenters' rights), and the 
reorganization involves no other transactions involving the bank or 
savings association.
    (4) Company means a corporation, limited liability company, 
partnership, business trust, association, or similar organization.
    (5) For business combinations under paragraphs (g)(4) and (5) of 
this section, a company or shareholder is deemed to control another 
company if:
    (i) Such company or shareholder, directly or indirectly, or acting 
through one or more other persons owns, controls, or has power to vote 
25 percent or more of any class of voting securities of the other 
company; or
    (ii) Such company or shareholder controls in any manner the 
election of a majority of the directors or trustees of the other 
company. No company is deemed to own or control another company by 
virtue of its ownership or control of shares in a fiduciary capacity.
    (6) Credit union means a financial institution subject to 
examination by the National Credit Union Administration Board.
    (7) Home State means, with respect to a national bank, the State in 
which the main office of the national bank is located and, with respect 
to a State bank, the State by which the bank is chartered.
    (8) Interim national bank or interim Federal savings association 
means a national bank or Federal savings association that does not 
operate independently but exists solely as a vehicle to accomplish a 
business combination.
    (9) Nonbank affiliate of a national bank means any company (other 
than a bank or Federal savings association) that controls, is 
controlled by, or is under common control with the national bank.
    (10) Other combination means:
    (i) Any merger or consolidation between a national bank or a 
Federal savings association and one or more depository institutions or 
State trust companies, in which the resulting institution is not a 
national bank or Federal savings association;
    (ii) In the case of a Federal stock savings association, any merger 
or consolidation with a credit union in which the resulting institution 
is a credit union;
    (iii) The transfer by a national bank or a Federal savings 
association of any deposit liabilities to another insured depository 
institution, a credit union or any other institution; or
    (iv) The acquisition by a national bank or a Federal savings 
association of all, or substantially all, of the assets, or the 
assumption of all or substantially all of the liabilities, of any 
company other than a depository institution.
    (11) Savings association and State savings association have the 
meaning set forth in section 3(b) of the Federal Deposit Insurance Act, 
12 U.S.C. 1813(b).
    (12) State trust company means a trust company organized under 
State law that is not engaged in the business of receiving deposits, 
other than trust funds.
    (e) Policy and related filing requirements--(1) Factors--(i) In 
general. When the OCC evaluates any application for a business 
combination, the OCC considers the following factors:
    (A) The capital level of any resulting national bank or Federal 
savings association;
    (B) The conformity of the transaction to applicable law, 
regulation, and supervisory policies;
    (C) The purpose of the transaction;
    (D) The impact of the transaction on safety and soundness of the 
national bank or Federal savings association; and
    (E) The effect of the transaction on the national bank's or Federal 
savings association's shareholders (or members in the case of a mutual 
savings association), depositors, other creditors, and customers.
    (ii) Bank Merger Act. When the OCC evaluates an application for a 
business combination under the Bank Merger Act, the OCC also considers 
the following factors:
    (A) Competition. (1) The OCC considers the effect of a proposed

[[Page 80449]]

business combination on competition. The filer must provide a 
competitive analysis of the transaction, including a definition of the 
relevant geographic market or markets. A filer may refer to the 
Comptroller's Licensing Manual for procedures to expedite its 
competitive analysis.
    (2) The OCC will deny an application for a business combination if 
the combination would result in a monopoly or would be in furtherance 
of any combination or conspiracy to monopolize or attempt to monopolize 
the business of banking in any part of the United States. The OCC also 
will deny any proposed business combination whose effect in any section 
of the United States may be substantially to lessen competition, or 
tend to create a monopoly, or which in any other manner would be in 
restraint of trade, unless the probable effects of the transaction in 
meeting the convenience and needs of the community clearly outweigh the 
anticompetitive effects of the transaction. For purposes of weighing 
against anticompetitive effects, a business combination may have 
favorable effects in meeting the convenience and needs of the community 
if the depository institution being acquired has limited long-term 
prospects, or if the resulting national bank or Federal savings 
association will provide significantly improved, additional, or less 
costly services to the community.
    (B) Financial and managerial resources and future prospects. The 
OCC considers the financial and managerial resources and future 
prospects of the existing or proposed institutions.
    (C) Convenience and needs of community. The OCC considers the 
probable effects of the business combination on the convenience and 
needs of the community served. The filer must describe these effects in 
its application, including any planned office closings or reductions in 
services following the business combination and the likely impact on 
the community. The OCC also considers additional relevant factors, 
including the resulting national bank's or Federal savings 
association's ability and plans to provide expanded or less costly 
services to the community.
    (D) Money laundering. The OCC considers the effectiveness of any 
insured depository institution involved in the business combination in 
combating money laundering activities, including in overseas branches.
    (E) Financial stability. The OCC considers the risk to the 
stability of the United States banking and financial system.
    (F) Deposit concentration limit. The OCC will not approve a 
transaction that would violate the deposit concentration limit in 12 
U.S.C. 1828(c)(13) for interstate merger transactions, as defined in 12 
U.S.C. 1828(c)(13)(C)(i).
    (iii) Community Reinvestment Act--(A) In General. The OCC takes 
into account the filer's Community Reinvestment Act (CRA) record of 
performance in considering an application for a business combination. 
The OCC's conclusion of whether the CRA performance is or is not 
consistent with approval of an application is considered in conjunction 
with the other factors of this section.
    (B) Interstate mergers under 12 U.S.C. 1831u. The OCC considers the 
CRA record of performance of the filer and its resulting bank 
affiliates and the filer's record of compliance with applicable State 
community reinvestment laws when required by 12 U.S.C. 1831u(b)(3).
    (C) CRA Sunshine. A filer must:
    (1) Disclose whether it has entered into and disclosed a covered 
agreement, as defined in 12 CFR 35.2, in accordance with 12 CFR 35.6 
and 35.7; and
    (2) Provide summaries of, or documents relating to, all substantive 
discussions with respect to the development of the content of a covered 
agreement disclosed in (e)(1)(iii)(C)(1) that include the names of 
participants, dates, and synopsis of the discussions.
    (iv) Interstate mergers under 12 U.S.C. 1831u. The OCC considers 
the standards and requirements contained in 12 U.S.C. 1831u for 
interstate merger transactions between insured banks, when applicable.
    (2) Acquisition and retention of branches. A filer must disclose 
the location of any branch it will acquire and retain in a business 
combination, including approved but unopened branches. The OCC 
considers the acquisition and retention of a branch under the standards 
set out in Sec.  5.30 or Sec.  5.31, as applicable, but it does not 
require a separate application.
    (3) Subsidiaries. (i) A filer must identify any subsidiary, 
financial subsidiary investment, bank service company investment, 
service corporation investment, or other equity investment to be 
acquired in a business combination and state the activities of each 
subsidiary or other company in which the filer would be acquiring an 
investment. The OCC does not require a separate application or notice 
under Sec. Sec.  5.34, 5.35, 5.36, 5.38, 5.39, 5.58, and 5.59.
    (ii) A national bank filer proposing to acquire, through a business 
combination, a subsidiary, financial subsidiary investment, bank 
service company investment, service corporation investment, or other 
equity investment of any entity other than a national bank must provide 
the same information and analysis of the subsidiary's activities, or of 
the investment, that would be required if the filer were establishing 
the subsidiary, or making such investment, pursuant to Sec. Sec.  5.34, 
5.35, 5.36, or 5.39.
    (iii) A Federal savings association filer proposing to acquire, 
through a business combination, a subsidiary, bank service company 
investment, service corporation investment, or other equity investment 
of any entity other than a Federal savings association must provide the 
same information and analysis of the subsidiary's activities, or of the 
investment, that would be required if the filer were establishing the 
subsidiary, or making such investment, pursuant to Sec. Sec.  5.35, 
5.38, 5.58, or 5.59.
    (4) Interim national bank or interim Federal savings association--
(i) Application. A filer for a business combination that plans to use 
an interim national bank or interim Federal savings association to 
accomplish the transaction must file an application to organize an 
interim national bank or interim Federal savings association as part of 
the application for the related business combination.
    (ii) Conditional approval. The OCC grants conditional preliminary 
approval to form an interim national bank or interim Federal savings 
association when it acknowledges receipt of the application for the 
related business combination.
    (iii) Corporate status. An interim national bank or interim Federal 
savings association becomes a legal entity and may enter into legally 
valid agreements when it has filed, and the OCC has accepted, the 
interim national bank's duly executed articles of association and 
organization certificate or the Federal savings association's charter 
and bylaws. OCC acceptance occurs:
    (A) On the date the OCC advises the interim national bank that its 
articles of association and organization certificate are acceptable or 
advises the interim Federal savings association that its charter and 
bylaws are acceptable; or
    (B) On the date the interim national bank files articles of 
association and an organization certificate that conform to the form 
for those documents provided by the OCC in the Comptroller's Licensing 
Manual or the date the interim Federal savings association files

[[Page 80450]]

a charter and bylaws that conform to the requirements set out in this 
part 5.
    (iv) Other corporate procedures. A filer should consult the 
Comptroller's Licensing Manual to determine what other information is 
necessary to complete the chartering of the interim national bank as a 
national bank or the interim Federal savings association as a Federal 
savings association.
    (5) Nonconforming assets. (i) A filer must identify any 
nonconforming activities and assets, including nonconforming 
subsidiaries, of other institutions involved in the business 
combination that will not be disposed of or discontinued prior to 
consummation of the transaction. The OCC generally requires a national 
bank or Federal savings association to divest or conform nonconforming 
assets, or discontinue nonconforming activities, within a reasonable 
time following the business combination.
    (ii) Any resulting Federal savings association must conform to the 
requirements of sections 5(c) and 10(m) of the Home Owners' Loan Act 
(12 U.S.C. 1464(c) and 1467a(m)) within the time period prescribed by 
the OCC.
    (6) Fiduciary powers. (i) A filer must state whether the resulting 
national bank or Federal savings association intends to exercise 
fiduciary powers pursuant to Sec.  5.26(b).
    (ii) If a filer intends to exercise fiduciary powers after the 
combination and requires OCC approval for such powers, the filer must 
include the information required under Sec.  5.26(e)(2).
    (7) Expiration of approval. Approval of a business combination, and 
conditional approval to form an interim national bank or interim 
Federal savings association, if applicable, expires if the business 
combination is not consummated within six months after the date of OCC 
approval, unless the OCC grants an extension of time.
    (8) Adequacy of disclosure. (i) A filer must inform shareholders of 
all material aspects of a business combination and must comply with any 
applicable requirements of the Federal securities laws and securities 
regulations of the OCC. Accordingly, a filer must ensure that all proxy 
and information statements prepared in connection with a business 
combination do not contain any untrue or misleading statement of a 
material fact, or omit to state a material fact necessary in order to 
make the statements made, in the light of the circumstances under which 
they were made, not misleading.
    (ii) A national bank or Federal savings association filer with one 
or more classes of securities subject to the registration provisions of 
section 12(b) or (g) of the Securities Exchange Act of 1934, 15 U.S.C. 
78l(b) or 78l(g), must file preliminary proxy material or information 
statements for review with the Director, Bank Advisory, OCC, 
Washington, DC 20219. Any other filer must submit the proxy materials 
or information statements it uses in connection with the combination to 
the appropriate OCC licensing office no later than when the materials 
are sent to the shareholders.
    (f) Exceptions to rules of general applicability--(1) National bank 
or Federal savings association filer--(i) In general. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.10 and 5.11 apply.
    (ii) Statutory notice. If an application is subject to the Bank 
Merger Act or to another statute that requires notice to the public, a 
national bank or Federal savings association filer must follow the 
public notice requirements contained in 12 U.S.C. 1828(c)(3) or the 
other statute and Sec. Sec.  5.8(b) through 5.8(e), 5.10, and 5.11.
    (2) Interim national bank or interim Federal savings association. 
Sections 5.8, 5.10, and 5.11 do not apply to an application to organize 
an interim national bank or interim Federal savings association. 
However, if the OCC concludes that an application presents significant 
or novel policy, supervisory, or legal issues, the OCC may determine 
that any or all parts of Sec. Sec.  5.8, 5.10, and 5.11 apply. The OCC 
treats an application to organize an interim national bank or interim 
Federal savings association as part of the related application to 
engage in a business combination and does not require a separate public 
notice and public comment process.
    (3) State bank, or State savings association, State trust company, 
or credit union as resulting institution. Sections 5.7 through 5.13 do 
not apply to transactions covered by paragraphs (g)(7) through (g)(9) 
of this section.
    (g) Provisions governing consolidations and mergers with different 
types of entities--(1) Consolidations and mergers under 12 U.S.C. 215 
or 215a of a national bank with other national banks and State banks as 
defined in 12 U.S.C. 215b(1) resulting in a national bank. A national 
bank entering into a consolidation or merger authorized pursuant to 12 
U.S.C. 215 or 215a, respectively, is subject to the approval procedures 
and requirements with respect to treatment of dissenting shareholders 
set forth in those provisions.
    (2) Interstate consolidations and mergers under 12 U.S.C. 215a-1 
resulting in a national bank--(i) With the approval of the OCC, an 
insured national bank may consolidate or merge with an insured out-of-
State bank, as defined in 12 U.S.C. 1831u(g)(8), with the national bank 
as the resulting institution.
    (ii) Unless it has elected to follow the procedures set out in 
paragraph (h) of this section, the resulting national bank entering 
into the consolidation or merger must comply with the procedures of 12 
U.S.C. 215 or 215a, as applicable.
    (iii) Unless it has elected to follow the procedures applicable to 
State banks under paragraph (h)(1)(i), any national bank that will not 
be the resulting bank in a consolidation or merger pursuant to 12 
U.S.C. 215a-1 must comply with the procedures of 12 U.S.C. 215 or 215a, 
as applicable.
    (iv) Corporate existence. The corporate existence of each bank 
participating in a consolidation or merger continues in the resulting 
national bank, and all the rights, franchises, property, appointments, 
liabilities, and other interests of the participating bank are 
transferred to the resulting national bank, as set forth in 12 U.S.C. 
215(b), (e) and (f) or 12 U.S.C. 215a(a), (e), and (f), as applicable.
    (3) Consolidations and mergers of a national bank with Federal 
savings associations under 12 U.S.C. 215c resulting in a national bank. 
(i) With the approval of the OCC, any national bank and any Federal 
savings association may consolidate or merge with a national bank as 
the resulting institution by complying with the following procedures:
    (A) Unless it has elected to follow the procedures set out in 
paragraph (h) of this section, a national bank entering into the 
consolidation or merger must follow the procedures of 12 U.S.C. 215 or 
215a, respectively, as if the Federal savings association were a 
national bank.
    (B)(1) A Federal savings association entering into the 
consolidation or merger must comply with the requirements of paragraph 
(n) of this section and follow the procedures set out in paragraph (o) 
of this section.
    (2) For purposes of this paragraph (g)(3), a combination in which a 
national bank acquires all or substantially all of the assets, or 
assumes all or substantially all of the liabilities, of a Federal 
savings association will be treated as a

[[Page 80451]]

consolidation for the Federal savings association.
    (ii)(A) Unless the national bank has elected to follow the 
procedures set out in paragraph (h) of this section, national bank 
shareholders who dissent from a plan to consolidate may receive in cash 
the value of their national bank shares if they comply with the 
requirements of 12 U.S.C. 215 as if the Federal savings association 
were a national bank.
    (B) Unless the Federal savings association has elected to follow 
the procedures applicable to State savings associations pursuant to 
paragraph (o)(1)(i)(A) of this section, Federal savings association 
shareholders who dissent from a plan to consolidate or merge may 
receive in cash the value of their Federal savings association shares 
if they comply with the requirements of 12 U.S.C. 215 or 215a as if the 
Federal savings association were a national bank.
    (C) Unless the national bank or Federal savings association has 
elected to follow the procedures applicable to State banks or State 
savings associations, respectively, pursuant to paragraph (h)(1)(i) or 
(o)(1)(i)(A) of this section, respectively, the OCC will conduct an 
appraisal or reappraisal of the value of a national bank or Federal 
savings association held by dissenting shareholders in accordance with 
the provisions of 12 U.S.C. 215 or 215a, as applicable, except that the 
costs and expenses of any appraisal or reappraisal may be apportioned 
and assessed by the Comptroller as he or she may deem equitable against 
all or some of the parties. In making this determination the 
Comptroller will consider whether any party has acted arbitrarily or 
not in good faith in respect to the rights provided by this paragraph.
    (iii) The consolidation or merger agreement must address the effect 
upon, and the terms of the assumption of, any liquidation account of 
any participating institution by the resulting institution.
    (4) Mergers of a national bank with its nonbank affiliates under 12 
U.S.C. 215a-3 resulting in a national bank. (i) With the approval of 
the OCC, a national bank may merge with one or more of its nonbank 
affiliates, with the national bank as the resulting institution, in 
accordance with the provisions of this paragraph, provided that the law 
of the State or other jurisdiction under which the nonbank affiliate is 
organized allows the nonbank affiliate to engage in such mergers. If 
the national bank is an insured bank, the transaction is also subject 
to approval by the FDIC under the Bank Merger Act, 12 U.S.C. 1828(c).
    (ii) Unless it has elected to follow the procedures set out in 
paragraph (h) of this section, a national bank entering into the merger 
must follow the procedures of 12 U.S.C. 215a as if the nonbank 
affiliate were a State bank, except as otherwise provided herein.
    (iii) A nonbank affiliate entering into the merger must follow the 
procedures for such mergers set out in the law of the State or other 
jurisdiction under which the nonbank affiliate is organized.
    (iv) The rights of dissenting shareholders and appraisal of 
dissenters' shares of stock in the nonbank affiliate entering into the 
merger must be determined in the manner prescribed by the law of the 
State or other jurisdiction under which the nonbank affiliate is 
organized.
    (v) The corporate existence of each institution participating in 
the merger continues in the resulting national bank, and all the 
rights, franchises, property, appointments, liabilities, and other 
interests of the participating institutions are transferred to the 
resulting national bank, as set forth in 12 U.S.C. 215a(a), (e), and 
(f) in the same manner and to the same extent as in a merger between a 
national bank and a State bank under 12 U.S.C. 215a(a), as if the 
nonbank affiliate were a State bank.
    (5) Mergers of an uninsured national bank with its nonbank 
affiliates under 12 U.S.C. 215a-3 resulting in a nonbank affiliate. (i) 
With the approval of the OCC, a national bank that is not an insured 
bank as defined in 12 U.S.C. 1813(h) may merge with one or more of its 
nonbank affiliates, with the nonbank affiliate as the resulting entity, 
in accordance with the provisions of this paragraph, provided that the 
law of the State or other jurisdiction under which the nonbank 
affiliate is organized allows the nonbank affiliate to engage in such 
mergers.
    (ii) Unless it has elected to follow the procedures applicable to 
State banks under paragraph (h)(1)(i) of this section, a national bank 
entering into the merger must follow the procedures of 12 U.S.C. 214a, 
as if the nonbank affiliate were a State bank, except as otherwise 
provided in this section.
    (iii) A nonbank affiliate entering into the merger must follow the 
procedures for such mergers set out in the law of the State or other 
jurisdiction under which the nonbank affiliate is organized.
    (iv)(A) National bank shareholders who dissent from an approved 
plan to merge may receive in cash the value of their national bank 
shares if they comply with the requirements of 12 U.S.C. 214a as if the 
nonbank affiliate were a State bank. The OCC may conduct an appraisal 
or reappraisal of dissenters' shares of stock in a national bank 
involved in the merger if all parties agree that the determination is 
final and binding on each party and agree on how the total expenses of 
the OCC in making the appraisal will be divided among the parties and 
paid to the OCC.
    (B) The rights of dissenting shareholders and appraisal of 
dissenters' shares of stock in the nonbank affiliate involved in the 
merger must be determined in the manner prescribed by the law of the 
State or other jurisdiction under which the nonbank affiliate is 
organized.
    (v) The corporate existence of each entity participating in the 
merger continues in the resulting nonbank affiliate, and all the 
rights, franchises, property, appointments, liabilities, and other 
interests of the participating national bank are transferred to the 
resulting nonbank affiliate as set forth in 12 U.S.C. 214b, in the same 
manner and to the same extent as in a merger between a national bank 
and a State bank under 12 U.S.C. 214a, as if the nonbank affiliate were 
a State bank.
    (6) Consolidations and mergers of a Federal savings association 
with other Federal savings associations, national banks, State banks, 
State savings banks, State savings associations, State trust companies, 
or credit unions resulting in a Federal savings association. (i) With 
the approval of the OCC, a Federal savings association may consolidate 
or merge with another Federal savings association, a national bank, a 
State bank, a State savings association, a State trust company, or a 
credit union with the Federal savings association as the resulting 
institution by complying with the following procedures:
    (A)(1) The filer Federal savings association must comply with the 
requirements of paragraph (n) of this section and follow the procedures 
set out in paragraph (o) of this section.
    (2) For purposes of this paragraph (g)(6), a combination in which a 
Federal savings association acquires all or substantially all of the 
assets, or assumes all or substantially all of the liabilities, of 
another other participating institution will be treated as a 
consolidation for the acquiring Federal savings association and as a 
consolidation by a Federal savings association whose assets are 
acquired, if any.
    (B)(1) Unless it has elected to follow the procedures applicable to 
State banks under paragraph (h)(1)(i) of this section, a national bank 
entering into a merger or consolidation with a Federal savings

[[Page 80452]]

association when the resulting institution will be a Federal savings 
association must comply with the requirements of 12 U.S.C. 214a and 12 
U.S.C. 214c as if the Federal savings association were a State bank. 
However, for these purposes the references in 12 U.S.C. 214c to ``law 
of the State in which such national banking association is located'' 
and ``any State authority'' mean ``laws and regulations governing 
Federal savings associations'' and ``Office of the Comptroller of the 
Currency'' respectively.
    (2) Unless the national bank has elected to follow the procedures 
applicable to State banks under paragraph (h)(1)(i) of this section, 
national bank shareholders who dissent from a plan to merge or 
consolidate may receive in cash the value of their national bank shares 
if they comply with the requirements of 12 U.S.C. 214a as if the 
Federal savings association were a State bank. The OCC will conduct an 
appraisal or reappraisal of the value of the national bank shares held 
by dissenting shareholders in accordance with the provisions of 12 
U.S.C. 214a, except that the costs and expenses of any appraisal or 
reappraisal may be apportioned and assessed by the Comptroller as he or 
she may deem equitable against all or some of the parties. In making 
this determination the Comptroller will consider whether any party has 
acted arbitrarily or not in good faith in respect to the rights 
provided by this paragraph.
    (C)(1) A Federal savings association entering into a merger or 
consolidation with another Federal savings association when the 
resulting institution will be the other Federal savings association 
must comply with the requirements of paragraph (n) of this section and 
the procedures of paragraph (o) of this section.
    (2) Unless the Federal savings association has elected to follow 
the procedures applicable to State savings associations under paragraph 
(o)(1)(i)(A), Federal savings association shareholders who dissent from 
a plan to merge or consolidate may receive in cash the value of their 
Federal savings association shares if they comply with the requirements 
of 12 U.S.C. 214a as if the other Federal savings association were a 
State bank. The OCC will conduct an appraisal or reappraisal of the 
value of the Federal savings association shares held by dissenting 
shareholders in accordance with the provisions of 12 U.S.C. 214a, 
except that the costs and expenses of any appraisal or reappraisal may 
be apportioned and assessed by the Comptroller as he or she may deem 
equitable against all or some of the parties. In making this 
determination the Comptroller will consider whether any party has acted 
arbitrarily or not in good faith in respect to the rights provided by 
this paragraph.
    (3) Unless the Federal savings association has elected to follow 
the procedures applicable to State savings associations under paragraph 
(o)(1)(i)(A), the plan of merger or consolidation must provide the 
manner of disposing of the shares of the resulting Federal savings 
association not taken by the dissenting shareholders of the Federal 
savings association.
    (D)(1) A State bank, State savings association, State trust 
company, or credit union entering into a consolidation or merger with a 
Federal savings association when the resulting institution will be a 
Federal savings association must follow the procedures for such 
consolidations or mergers set out in the law of the State or other 
jurisdiction under which the State bank, State savings association, 
State trust company, or credit union is organized.
    (2) The rights of dissenting shareholders and appraisal of 
dissenters' shares of stock in the State bank, State savings 
association, or State trust company, entering into the consolidation or 
merger will be determined in the manner prescribed by the law of the 
State or other jurisdiction under which the State bank, State savings 
association, or State trust company is organized.
    (ii) The consolidation or merger agreement must address the effect 
upon, and the terms of the assumption of, any liquidation account of 
any participating institution by the resulting institution.
    (7) Consolidations and mergers under 12 U.S.C. 214a of a national 
bank with State banks resulting in a State bank as defined in 12 U.S.C. 
214(a)--(i) In general. Prior OCC approval is not required for the 
merger or consolidation of a national bank with a State bank as defined 
in 12 U.S.C. 214(a). Termination of a national bank's existence and 
status as a national banking association is automatic, and its charter 
cancelled, upon completion of the statutory and regulatory requirements 
for engaging in the consolidation or merger and consummation of the 
consolidation or merger.
    (ii) Procedures. A national bank desiring to merge or consolidate 
with a State bank as defined in 12 U.S.C. 214(a) when the resulting 
institution will be a State bank must comply with the requirements and 
follow the procedures of 12 U.S.C. 214a and 214c and must provide 
notice to the OCC under paragraph (k) of this section.
    (iii) Dissenters' rights and appraisal procedures. National bank 
shareholders who dissent from a plan to merge or consolidate may 
receive in cash the value of their national bank shares if they comply 
with the requirements of 12 U.S.C. 214a. The OCC conducts an appraisal 
or reappraisal of the value of the national bank shares held by 
dissenting shareholders as provided for in 12 U.S.C. 214a.
    (iv) Liquidation account. The consolidation or merger agreement 
must address the effect upon, and the terms of the assumption of, any 
liquidation account of any participating institution by the resulting 
institution.
    (8) Interstate consolidations and mergers between an insured 
national bank and insured State banks resulting in a State bank.--(i) 
In general. Prior OCC approval is not required for the merger or 
consolidation of an insured national bank with an insured out-of-State 
State bank, as defined in 12 U.S.C. 1831u(g)(8), with the State bank as 
the resulting institution, that has been approved by the appropriate 
Federal banking agency for the State bank. Termination of a national 
bank's existence and status as a national banking association is 
automatic, and its charter cancelled, upon completion of the statutory 
and regulatory requirements for engaging in the consolidation or merger 
and consummation of the consolidation or merger.
    (ii) Procedures. Unless it has elected to follow the procedures 
applicable to State banks under paragraph (h)(1)(i) of this section, 
the national bank entering into the consolidation or merger must comply 
with the procedures of 12 U.S.C. 214a, as applicable.
    (iii) Notice. The national bank must provide a notice to the OCC 
under paragraph (k) of this section.
    (9) Consolidations and mergers of a Federal savings association 
with State banks, State savings banks, State savings associations, 
State trust companies, or credit unions resulting in a State bank, 
State savings bank, State savings association, State trust company, or 
credit union--(i) Policy. Prior OCC approval is not required for the 
merger or consolidation of a Federal savings association with a State 
bank, State savings bank, State savings association, State trust 
company, or credit union when the resulting institution will be a State 
institution or credit union. Termination of a national bank's or 
Federal savings association's existence and status as a national 
banking association or Federal savings association is automatic, and 
its charter cancelled, upon completion of the

[[Page 80453]]

statutory and regulatory requirements for engaging in the consolidation 
or merger and consummation of the consolidation or merger.
    (ii) Procedures. (A) A Federal savings association desiring to 
merge or consolidate with a State bank, State savings bank, State 
savings association, State trust company, or credit union when the 
resulting institution will be a State institution or credit union must 
comply with the requirements of paragraph (n) of this section and the 
procedures of paragraph (o) of this section and must provide notice to 
the OCC under paragraph (k) of this section.
    (B) For purposes of this paragraph (g)(9), a combination in which a 
State bank, State savings bank, State savings association, State trust 
company, or credit union acquires all or substantially all of the 
assets, or assumes all or substantially all of the liabilities, of a 
Federal savings association must be treated as a consolidation by the 
Federal savings association.
    (iii) Dissenters' rights and appraisal procedures. (A) Unless the 
Federal savings association has elected to follow the procedures 
applicable to State savings associations under paragraph (o)(1)(i)(A), 
Federal savings association shareholders who dissent from a plan to 
merge or consolidate may receive in cash the value of their Federal 
savings association shares if they comply with the requirements of 12 
U.S.C. 214a as if the Federal savings association were a national bank. 
The OCC conducts an appraisal or reappraisal of the value of the 
Federal savings association shares held by dissenting shareholders only 
if all parties agree that the determination will be final and binding. 
The parties also must agree on how the total expenses of the OCC in 
making the appraisal will be divided among the parties and paid to the 
OCC.
    (B) Unless the Federal savings association has elected to follow 
the procedures applicable to State savings associations under paragraph 
(o)(1)(i)(A), the plan of merger or consolidation must provide the 
manner of disposing of the shares of the resulting State institution 
not taken by the dissenting shareholders of the Federal savings 
association.
    (iv) Liquidation account. The consolidation or merger agreement 
must address the effect upon, and the terms of the assumption of, any 
liquidation account of any participating institution by the resulting 
institution.
    (h) Procedural requirements for national bank combinations--(1) 
Permissible elections. A national bank participating in a combination 
pursuant to paragraph (g)(2), (g)(3), (g)(4), (g)(5), (g)(6), or (g)(8) 
of this section may elect to follow with respect to the combination:
    (i) The procedures applicable to a State bank chartered by the 
State where the national bank's main office is located; or
    (ii) Paragraph (p) of this section, if applicable.
    (2) Rules of Construction. For purposes of paragraph (h)(1) of this 
section:
    (i) Any references to a State agency in the applicable State 
procedures should be read as referring to the OCC; and
    (ii) Unless otherwise specified in Federal law, all filings 
required by the applicable State procedures must be made to the OCC.
    (i) Expedited review for business reorganizations and streamlined 
applications. A filing that qualifies as a business reorganization as 
defined in paragraph (d)(3) of this section, or a filing that qualifies 
as a streamlined application as described in paragraph (j) of this 
section, is deemed approved by the OCC as of the 15th day after the 
close of the comment period, unless the OCC notifies the filer that the 
filing is not eligible for expedited review, or the expedited review 
process is extended, under Sec.  5.13(a)(2). An application under this 
paragraph must contain all necessary information for the OCC to 
determine if it qualifies as a business reorganization or streamlined 
application.
    (j) Streamlined applications. (1) A filer may qualify for a 
streamlined business combination application in the following 
situations:
    (i) At least one party to the transaction is an eligible bank or 
eligible savings association, and all other parties to the transaction 
are eligible banks, eligible savings associations, or eligible 
depository institutions, the resulting national bank or resulting 
Federal savings association will be well capitalized immediately 
following consummation of the transaction, and the total assets of the 
target institution are no more than 50 percent of the total assets of 
the acquiring bank or Federal savings association, as reported in each 
institution's Consolidated Report of Condition and Income filed for the 
quarter immediately preceding the filing of the application;
    (ii) The acquiring bank or Federal savings association is an 
eligible bank or eligible savings association, the target bank or 
savings association is not an eligible bank, eligible savings 
association, or an eligible depository institution, the resulting 
national bank or resulting Federal savings association will be well 
capitalized immediately following consummation of the transaction, and 
the filers in a prefiling communication request and obtain approval 
from the appropriate OCC licensing office to use the streamlined 
application;
    (iii) The acquiring bank or Federal savings association is an 
eligible bank or eligible savings association, the target bank or 
savings association is not an eligible bank, eligible savings 
association, or an eligible depository institution, the resulting bank 
or resulting Federal savings association will be well capitalized 
immediately following consummation of the transaction, and the total 
assets acquired do not exceed 10 percent of the total assets of the 
acquiring national bank or acquiring Federal savings association, as 
reported in each institution's Consolidated Report of Condition and 
Income filed for the quarter immediately preceding the filing of the 
application; or
    (iv) In the case of a transaction under paragraph (g)(4) of this 
section, the acquiring bank is an eligible bank, the resulting national 
bank will be well capitalized immediately following consummation of the 
transaction, the filers in a prefiling communication request and obtain 
approval from the appropriate OCC licensing office to use the 
streamlined application, and the total assets acquired do not exceed 10 
percent of the total assets of the acquiring national bank, as reported 
in the bank's Consolidated Report of Condition and Income filed for the 
quarter immediately preceding the filing of the application.
    (2) Notwithstanding paragraph (j)(1) of this section, a filer does 
not qualify for a streamlined business combination application if the 
transaction is part of a conversion under part 192 of this chapter.
    (3) When a business combination qualifies for a streamlined 
application, the filer should consult the Comptroller's Licensing 
Manual to determine the abbreviated application information required by 
the OCC. The OCC encourages prefiling communications between the filers 
and the appropriate OCC licensing office before filing under paragraph 
(j) of this section.
    (k) Exit notice to OCC--(1) Notice required. As provided in 
paragraphs (g)(7)(ii), (g)(8)(iii), and (g)(9)(ii) of this section, a 
national bank or Federal savings association engaging in a 
consolidation or merger in which it is not the filer and the resulting 
institution must file a notice rather than an application to the 
appropriate OCC licensing office advising of its intention.

[[Page 80454]]

    (2) Timing of notice. The national bank or Federal savings 
association must submit the notice at the time the application to merge 
or consolidate is filed with the responsible agency under the Bank 
Merger Act, 12 U.S.C. 1828(c), or if there is no such filing then no 
later than 30 days prior to the effective date of the merger or 
consolidation.
    (3) Content of notice. The notice must include the following:
    (i)(A) A short description of the material features of the 
transaction, the identity of the acquiring institution, the identity of 
the State or Federal regulator to whom the application was made, and 
the date of the application; or
    (B) A copy of a filing made with another Federal or State 
regulatory agency seeking approval from that agency for the transaction 
under the Bank Merger Act or other applicable statute;
    (ii) The planned consummation date for the transaction;
    (iii) Information to demonstrate compliance by the national bank or 
Federal savings association with applicable requirements to engage in 
the transactions (e.g., board approval or shareholder or accountholder 
requirements); and
    (iv) If the national bank or Federal savings association submitting 
the notice maintains a liquidation account established pursuant to part 
192 of this chapter, the notice must state that the resulting 
institution will assume such liquidation account.
    (4) Termination of status. The national bank or Federal savings 
association must advise the OCC when the transaction is about to be 
consummated. Termination of a national bank's or Federal savings 
association's existence and status as a national banking association or 
Federal savings association is automatic, and its charter cancelled, 
upon completion of the statutory and regulatory requirements and 
consummation of the consolidation or merger. When the national bank or 
Federal savings association files the notice under paragraph (k)(1) of 
this section, the OCC provides instructions to the national bank or 
Federal savings association for terminating its status as a national 
bank or Federal savings association, including surrendering its charter 
to the OCC immediately after consummation of the transaction.
    (5) Expiration. If the action contemplated by the notice is not 
completed within six months after the OCC's receipt of the notice, a 
new notice must be submitted to the OCC, unless the OCC grants an 
extension of time.
    (l) Mergers and consolidations; transfer of assets and liabilities 
to the resulting institution. (1) In any consolidation or merger in 
which the resulting institution is a national bank or Federal savings 
association, on the effective date of the merger or consolidation, all 
assets and property (real, personal and mixed, tangible and intangible, 
choses in action, rights, and credits) then owned by each participating 
institution or which would inure to any of them, immediately by 
operation of law and without any conveyance, transfer, or further 
action, become the property of the resulting national bank or Federal 
savings association. The resulting national bank or Federal savings 
association is deemed to be a continuation of the entity of each 
participating institution, and will succeed to such rights and 
obligations of each participating institution and the duties and 
liabilities connected therewith.
    (2) The authority in paragraph (l)(1) of this section is in 
addition to any authority granted by applicable statutes for specific 
transactions and is subject to the National Bank Act, the Home Owners' 
Loan Act, and other applicable statutes.
    (m) Certification of combination; effective date. (1) When a 
national bank or Federal savings association is the filer and will be 
the resulting entity in a consolidation or merger, after receiving 
approval from the OCC, it must complete any remaining steps needed to 
complete the transaction, provide the OCC with a certification that all 
other required regulatory or shareholder approvals have been obtained, 
and inform the OCC of the planned consummation date.
    (2) When the transaction is consummated, the filer must notify the 
OCC of the consummation date. The OCC will issue a letter certifying 
that the combination was effective on the date specified in the filer's 
notice.
    (n) Authority for and certain limits on business combinations and 
other transactions by Federal savings associations. (1) Federal savings 
associations may enter into business combinations only in accordance 
with this section, the Bank Merger Act, and sections 5(d)(3)(A) and 
10(s) of the Home Owners' Loan Act (12 U.S.C. 1464(d)(3)(A) and 
1467a(s)).
    (2) A Federal savings association may consolidate or merge with 
another depository institution, a State trust company or a credit 
union, may engage in another business combination listed in paragraphs 
(d)(2)(iv) and (v) of this section, or may engage in any other 
combination listed in paragraph (d)(10), provided that:
    (i) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (ii) Any resulting Federal savings association meets the 
requirements for insurance of accounts; and
    (iii) A consolidation or merger involving a mutual savings 
association or the transfer of all or substantially all of the deposits 
of a mutual savings association must result in a mutually held 
depository institution that is insured by the FDIC, unless:
    (A) The transaction is approved under part 192 governing mutual to 
stock conversions;
    (B) The transaction involves a mutual holding company 
reorganization under 12 U.S.C. 1467a(o) or a similar transaction under 
State law; or
    (C) The transaction is part of a voluntary liquidation for which 
the OCC has provided non-objection under Sec.  5.48.
    (3) Where the resulting institution is a Federal mutual savings 
association, the OCC may approve a temporary increase in the number of 
directors of the resulting institution provided that the association 
submits a plan for bringing the board of directors into compliance with 
the requirements of Sec.  5.21(e) within a reasonable period of time.
    (4)(i) The Federal savings associations described in paragraph 
(n)(4)(ii) of this section below must provide affected accountholders 
with a notice of a proposed account transfer and an option of retaining 
the account in the transferring Federal savings association. The notice 
must allow affected accountholders at least 30 days to consider whether 
to retain their accounts in the transferring Federal savings 
association.
    (ii) The following savings associations must provide the notices:
    (A) A Federal mutual savings association transferring account 
liabilities to an institution the accounts of which are not insured by 
the Deposit Insurance Fund or the National Credit Union Share Insurance 
Fund; and
    (B) Any Federal mutual savings association transferring account 
liabilities to a stock form depository institution.
    (o) Procedural requirements for Federal savings association 
approval of combinations--(1) In general--(i) Permissible elections. A 
Federal savings association participating in a combination may elect to 
follow the applicable procedures with respect to the combination:

[[Page 80455]]

    (A) The procedures applicable to a State savings association 
chartered by the State where the Federal savings association's home 
office is located: or
    (B) The standard procedures provided in paragraph (o)(2) of this 
section.
    (ii) Rules of Construction. For purposes of paragraph (o)(1)(i) of 
this section:
    (A) Any references to a State agency in the applicable State 
procedures should be read as referring to the OCC; and
    (B) Unless otherwise specified in Federal law, all filings required 
by the applicable State procedures must be made to the OCC.
    (2) Standard procedures--(i) Board approval. Before a Federal 
savings association files a notice or application for any consolidation 
or merger, the combination and combination agreement must be approved 
by majority vote of the entire board of each constituent Federal 
savings association in the case of Federal stock savings associations 
or a two-thirds vote of the entire board of each constituent Federal 
savings association in the case of Federal mutual savings associations.
    (ii) Shareholder vote--(A) General rule. Except as otherwise 
provided in this paragraph (o)(2)(ii), an affirmative vote of two-
thirds of the outstanding voting stock of any constituent Federal stock 
savings association is required for approval of a consolidation or 
merger. If any class of shares is entitled to vote as a class pursuant 
to Sec.  5.22(g)(4), an affirmative vote of a majority of the shares of 
each voting class and two-thirds of the total voting shares is 
required. The required vote must be taken at a meeting of the savings 
association.
    (B) General exception. Stockholders of the resulting Federal stock 
savings association need not authorize a consolidation or merger if the 
transaction meets the requirements of paragraph (p) of this section.
    (C) Exceptions for certain combinations involving an interim 
association. Stockholders of a Federal stock savings association need 
not authorize by a two-thirds affirmative vote consolidations or 
mergers involving an interim Federal savings association or interim 
State savings association when the resulting Federal stock savings 
association is acquired pursuant to the regulations of the Board of 
Governors of the Federal Reserve System at 12 CFR 238.15(e) (relating 
to the creation of a savings and loan holding company by a savings 
association). In those cases, an affirmative vote of 50 percent of the 
shares of the outstanding voting stock of the Federal stock savings 
association plus one affirmative vote is required. If any class of 
shares is entitled to vote as a class pursuant to the charter 
provisions in Sec.  5.22(g)(4), an affirmative vote of 50 percent of 
the shares of each voting class plus one affirmative vote is required. 
The required votes must be taken at a meeting of the association.
    (3) Change of name or home office. If the name of the resulting 
Federal savings association or the location of the home office of the 
resulting Federal savings association will change as a result of the 
business combination, the resulting Federal savings association must 
amend its charter accordingly.
    (4) Mutual member vote. Notwithstanding any other provision of this 
section, the OCC may require that a consolidation, merger or other 
business combination be submitted to the voting members of any mutual 
savings association participating in the proposed transaction at duly 
called meetings and that the transaction, to be effective, must be 
approved by such voting members.
    (p) Exception to voting requirements. Shareholders of a resulting 
national bank or Federal stock savings association need not authorize a 
consolidation or merger if:
    (1) Either:
    (i) The transaction does not involve an interim bank or an interim 
savings association; or
    (ii) The transaction involves an interim bank or an interim savings 
association and the existing shareholders of the national bank or 
Federal stock savings association will directly hold the shares of the 
resulting national bank or Federal stock savings association;
    (2) The national bank's articles of association or the Federal 
stock savings association's charter, as applicable, is not changed;
    (3) Each share of stock outstanding immediately prior to the 
effective date of the consolidation or merger is to be an identical 
outstanding share or a treasury share of the resulting national bank or 
Federal stock savings association after such effective date; and
    (4) Either:
    (i) No shares of voting stock of the resulting national bank or 
Federal stock savings association and no securities convertible into 
such stock are to be issued or delivered under the plan of combination; 
or
    (ii) The authorized unissued shares or the treasury shares of 
voting stock of the resulting national bank or Federal stock savings 
association to be issued or delivered under the plan of merger or 
consolidation, plus those initially issuable upon conversion of any 
securities to be issued or delivered under such plan, do not exceed 20 
percent of the total shares of voting stock of such national bank or 
Federal stock savings association outstanding immediately prior to the 
effective date of the consolidation or merger.

0
26. Amend Sec.  5.34 by:
0
a. In paragraph (a), removing ``3101 et seq.'' and adding in its place 
``and 3102(b).'';
0
b. In paragraph (c), removing the phrase ``(e)(5)(i)(B) of this section 
shall apply'' and adding in its place the phrase ``(f)(2)(i)(C)(2) of 
this section applies'';
0
c. Revising paragraph (d);
0
d. In paragraphs (e)(1)(i)(B), (e)(3), and (e)(4)(ii), removing the 
word ``state'' and adding in its place the word ``State'' wherever it 
appears;
0
e. Revising paragraph (e)(2)(i)(A);
0
f. In paragraph (e)(2)(i)(C), removing the phrase ``generally accepted 
accounting principles (GAAP)'' and adding in its place the word 
``GAAP'';
0
g. In paragraph (e)(2)(ii) introductory text, removing the phrase 
``following subsidiaries'' and adding in its place the phrase 
``following entities'';
0
h. In paragraph (e)(2)(ii)(A), removing the phrase ``part 24; and'' and 
adding in its place the phrase ``12 CFR part 24;'';
0
i. Removing the period and adding in its place ``; and'' in paragraph 
(e)(2)(ii)(B);
0
j. Adding paragraph (e)(2)(ii)(C);
0
k. In paragraph (e)(2)(iii)(B), removing the word ``shall'' and adding 
in its place the word ``may'';
0
l. In paragraphs (e)(4)(i) and (e)(4)(ii), removing the word ``shall'' 
and adding in its place the word ``will'';
0
m. Removing paragraph (e)(7);
0
n. Redesignating paragraphs (e)(5) and (e)(6) as paragraphs (f) and 
(g), respectively ; and
0
o. Revising redesignated paragraph (f).
    The addition and revisions read as follows.


Sec.  5.34  Operating subsidiaries of a national bank.

* * * * *
    (d) Definition. For purposes of this section, authorized product 
means a product that would be defined as insurance under section 302(c) 
of the Gramm-Leach-Bliley Act (15 U.S.C. 6712) that, as of January 1, 
1999, the OCC had determined in writing that national banks may provide 
as principal or national banks were in fact lawfully providing the 
product as principal, and as of that date no court of relevant 
jurisdiction had, by final judgment, overturned a determination by the 
OCC that national banks may provide the

[[Page 80456]]

product as principal. An authorized product does not include title 
insurance, or an annuity contract the income of which is subject to 
treatment under section 72 of the Internal Revenue Code of 1986 (26 
U.S.C. 72).
    (e) * * *
    (2) * * *
    (i) * * *
    (A) The bank has the ability to control the management and 
operations of the subsidiary, and no other person or entity has the 
ability to exercise effective control or influence over the management 
or operations of the subsidiary to an extent equal to or greater than 
that of the bank or an operating subsidiary thereof;
* * * * *
    (ii) * * *
    (C) A trust formed for purposes of securitizing assets held by the 
bank as part of its banking business.
* * * * *
    (f) Procedures--(1) Application required. (i) Except for an 
operating subsidiary that qualifies for the notice procedures in 
paragraph (f)(2) of this section or is exempt from application or 
notice requirements under paragraph (f)(6) of this section, a national 
bank must first submit an application to, and receive prior approval 
from, the OCC to establish or acquire an operating subsidiary or to 
perform a new activity in an existing operating subsidiary.
    (ii) The application must explain, as appropriate, how the bank 
``controls'' the enterprise, describing in full detail structural 
arrangements where control is based on factors other than bank 
ownership of more than 50 percent of the voting interest of the 
subsidiary and the ability to control the management and operations of 
the subsidiary by holding voting interests sufficient to select the 
number of directors needed to control the subsidiary's board and to 
select and terminate senior management. In the case of a limited 
partnership or limited liability company that does not qualify for the 
notice procedures set forth in paragraph (f)(2) of this section, the 
bank must provide a statement explaining why it is not eligible. The 
application also must include a complete description of the bank's 
investment in the subsidiary, the proposed activities of the 
subsidiary, the organizational structure and management of the 
subsidiary, the relations between the bank and the subsidiary, and 
other information necessary to adequately describe the proposal. To the 
extent that the application relates to the initial affiliation of the 
bank with a company engaged in insurance activities, the bank must 
describe the type of insurance activity in which the company is engaged 
and has present plans to conduct. The bank must also list for each 
State the lines of business for which the company holds, or will hold, 
an insurance license, indicating the State where the company holds a 
resident license or charter, as applicable. The application must state 
whether the operating subsidiary will conduct any activity at a 
location other than the main office or a previously approved branch of 
the bank. The OCC may require a filer to submit a legal analysis if the 
proposal is novel, unusually complex, or raises substantial unresolved 
legal issues. In these cases, the OCC encourages filers to have a 
prefiling meeting with the OCC. Any bank receiving approval under this 
paragraph is deemed to have agreed that the subsidiary will conduct the 
activity in a manner consistent with published OCC guidance.
    (2) Notice process only for certain qualifying filings. (i) Except 
for an operating subsidiary that is exempt from application or notice 
procedures under paragraph (f)(6) of this section, a national bank that 
is well capitalized and well managed may establish or acquire an 
operating subsidiary, or perform a new activity in an existing 
operating subsidiary, by providing the appropriate OCC licensing office 
written notice prior to, or within 10 days after, acquiring or 
establishing the subsidiary, or commencing the new activity, if:
    (A) The activity is listed in paragraph (f)(5) of this section or, 
except as provided in paragraph (f)(2)(ii) of this section, the 
activity is substantively the same as a previously approved activity 
and the activity will be conducted in accordance with the same terms 
and conditions applicable to the previously approved activity;
    (B) The entity is a corporation, limited liability company, limited 
partnership, or trust; and
    (C) The bank or an operating subsidiary thereof:
    (1) Has the ability to control the management and operations of the 
subsidiary and no other person or entity has the ability to exercise 
effective control or influence over the management or operations of the 
subsidiary to an extent equal to or greater than that of the bank or an 
operating subsidiary thereof. The ability to control the management and 
operations means:
    (i) In the case of a subsidiary that is a corporation, the bank or 
an operating subsidiary thereof holds voting interests sufficient to 
select the number of directors needed to control the subsidiary's board 
and to select and terminate senior management;
    (ii) In the case of a subsidiary that is a limited partnership, the 
bank or an operating subsidiary thereof has the ability to control the 
management and operations of the subsidiary by controlling the 
selection and termination of senior management;
    (iii) In the case of a subsidiary that is a limited liability 
company, the bank or an operating subsidiary thereof has the ability to 
control the management and operations of the subsidiary by controlling 
the selection and termination of senior management; or
    (iv) In the case of a subsidiary that is a trust, the bank or an 
operating subsidiary thereof has the ability to replace the trustee at 
will;
    (2) Holds more than 50 percent of the voting, or equivalent, 
interests in the subsidiary and:
    (i) In the case of a subsidiary that is a limited partnership, the 
bank or an operating subsidiary thereof is the sole general partner of 
the limited partnership, provided that under the partnership agreement, 
limited partners have no authority to bind the partnership by virtue 
solely of their status as limited partners;
    (ii) In the case of a subsidiary that is a limited liability 
company, the bank or an operating subsidiary thereof is the sole 
managing member of the limited liability company, provided that under 
the limited liability company agreement, other limited liability 
company members have no authority to bind the limited liability company 
by virtue solely of their status as members; or
    (iii) In the case of a subsidiary that is a trust, the bank or an 
operating subsidiary thereof is the sole beneficial owner of the trust; 
and
    (3) Is required to consolidate its financial statements with those 
of the subsidiary under GAAP.
    (ii) A national bank must file an application under paragraph 
(f)(1) of this section if a State has or will charter or license the 
proposed operating subsidiary as a bank, trust company, or savings 
association.
    (iii) The written notice must include a complete description of the 
bank's investment in the subsidiary and of the activity conducted and a 
representation and undertaking that the activity will be conducted in 
accordance with OCC policies contained in guidance issued by the OCC 
regarding the activity. To the extent that the notice relates to the 
initial affiliation of the bank with a company engaged in insurance 
activities, the bank must describe the type of insurance activity in 
which the

[[Page 80457]]

company is engaged and has present plans to conduct. The bank also must 
list for each State the lines of business for which the company holds, 
or will hold, an insurance license, indicating the State where the 
company holds a resident license or charter, as applicable. Any bank 
receiving approval under this paragraph is deemed to have agreed that 
the subsidiary will conduct the activity in a manner consistent with 
published OCC guidance.
    (3) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (4) OCC review and approval. The OCC reviews a national bank's 
application to determine whether the proposed activities are legally 
permissible under Federal banking laws and to ensure that the proposal 
is consistent with safe and sound banking practices and OCC policy and 
does not endanger the safety or soundness of the parent national bank. 
As part of this process, the OCC may request additional information and 
analysis from the filer.
    (5) Activities eligible for notice. The following activities 
qualify for the notice procedures in paragraph (f)(2) of this section, 
provided the activity is conducted pursuant to the same terms and 
conditions as would be applicable if the activity were conducted 
directly by a national bank:
    (i) Holding and managing assets acquired by the parent bank or its 
operating subsidiaries, including investment assets and property 
acquired by the bank through foreclosure or otherwise in good faith to 
compromise a doubtful claim, or in the ordinary course of collecting a 
debt previously contracted;
    (ii) Providing services to or for the bank or its affiliates, 
including accounting, auditing, appraising, advertising and public 
relations, and financial advice and consulting;
    (iii) Making loans or other extensions of credit, and selling money 
orders, savings bonds, and travelers checks;
    (iv) Purchasing, selling, servicing, or warehousing loans or other 
extensions of credit, or interests therein;
    (v) Providing courier services between financial institutions;
    (vi) Providing management consulting, operational advice, and 
services for other financial institutions;
    (vii) Providing check guaranty, verification and payment services;
    (viii) Providing data processing, data warehousing and data 
transmission products, services, and related activities and facilities, 
including associated equipment and technology, for the bank or its 
affiliates;
    (ix) Acting as investment adviser (including an adviser with 
investment discretion) or financial adviser or counselor to 
governmental entities or instrumentalities, businesses, or individuals, 
including advising registered investment companies and mortgage or real 
estate investment trusts, furnishing economic forecasts or other 
economic information, providing investment advice related to futures 
and options on futures, and providing consumer financial counseling;
    (x) Providing tax planning and preparation services;
    (xi) Providing financial and transactional advice and assistance, 
including advice and assistance for customers in structuring, 
arranging, and executing mergers and acquisitions, divestitures, joint 
ventures, leveraged buyouts, swaps, foreign exchange, derivative 
transactions, coin and bullion, and capital restructurings;
    (xii) Underwriting and reinsuring credit related insurance to the 
extent permitted under section 302 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6712);
    (xiii) Leasing of personal property and acting as an agent or 
adviser in leases for others;
    (xiv) Providing securities brokerage or acting as a futures 
commission merchant, and providing related credit and other related 
services;
    (xv) Underwriting and dealing, including making a market, in bank 
permissible securities and purchasing and selling as principal, asset 
backed obligations;
    (xvi) Acting as an insurance agent or broker, including title 
insurance to the extent permitted under section 303 of the Gramm-Leach-
Bliley Act (15 U.S.C. 6713);
    (xvii) Reinsuring mortgage insurance on loans originated, 
purchased, or serviced by the bank, its subsidiaries, or its 
affiliates, provided that if the subsidiary enters into a quota share 
agreement, the subsidiary assumes less than 50 percent of the aggregate 
insured risk covered by the quota share agreement. A ``quota share 
agreement'' is an agreement under which the reinsurer is liable to the 
primary insurance underwriter for an agreed upon percentage of every 
claim arising out of the covered book of business ceded by the primary 
insurance underwriter to the reinsurer;
    (xviii) Acting as a finder pursuant to 12 CFR 7.1002 to the extent 
permitted by published OCC precedent for national banks; \2\
---------------------------------------------------------------------------

    \2\ See, e.g., the OCC's monthly publication ``Interpretations 
and Actions.'' Beginning with the May 1996 issue, electronic 
versions of ``Interpretations and Actions'' are available at 
www.occ.gov.
---------------------------------------------------------------------------

    (xix) Offering correspondent services to the extent permitted by 
published OCC precedent for national banks;
    (xx) Acting as agent or broker in the sale of fixed or variable 
annuities;
    (xxi) Offering debt cancellation or debt suspension agreements;
    (xxii) Providing real estate settlement, closing, escrow, and 
related services; and real estate appraisal services for the 
subsidiary, parent bank, or other financial institutions;
    (xxiii) Acting as a transfer or fiscal agent;
    (xxiv) Acting as a digital certification authority to the extent 
permitted by published OCC precedent for national banks, subject to the 
terms and conditions contained in that precedent;
    (xxv) Providing or selling public transportation tickets, event and 
attraction tickets, gift certificates, prepaid phone cards, promotional 
and advertising material, postage stamps, and Electronic Benefits 
Transfer (EBT) script, and similar media, to the extent permitted by 
published OCC precedent for national banks, subject to the terms and 
conditions contained in that precedent;
    (xxvi) Providing data processing, and data transmission services, 
facilities (including equipment, technology, and personnel), databases, 
advice and access to such services, facilities, databases and advice, 
for the parent bank and for others, pursuant to 12 CFR 7.5006 to the 
extent permitted by published OCC precedent for national banks;
    (xxvii) Providing bill presentment, billing, collection, and 
claims-processing services;
    (xxviii) Providing safekeeping for personal information or valuable 
confidential trade or business information, such as encryption keys, to 
the extent permitted by published OCC precedent for national banks;
    (xxix) Providing payroll processing;
    (xxx) Providing branch management services;
    (xxxi) Providing merchant processing services except when the 
activity involves the use of third parties to solicit or underwrite 
merchants; and
    (xxxii) Performing administrative tasks involved in benefits 
administration.
    (6) No application or notice required. A national bank may acquire 
or

[[Page 80458]]

establish an operating subsidiary, or perform a new activity in an 
existing operating subsidiary, without filing an application or 
providing notice to the OCC, if the bank is well managed and well 
capitalized and the:
    (i) Activities of the new subsidiary are limited to those 
activities previously reported by the bank in connection with the 
establishment or acquisition of a prior operating subsidiary;
    (ii) Activities in which the new subsidiary will engage continue to 
be legally permissible for the subsidiary;
    (iii) Activities of the new subsidiary will be conducted in 
accordance with any conditions imposed by the OCC in approving the 
conduct of these activities for any prior operating subsidiary of the 
bank; and
    (iv) The standards set forth in paragraphs (f)(2)(i)(B) and (C) of 
this section are satisfied.
    (7) Fiduciary powers. (i) If an operating subsidiary proposes to 
accept fiduciary appointments for which fiduciary powers are required, 
such as acting as trustee or executor, then the national bank must have 
fiduciary powers under 12 U.S.C. 92a and the subsidiary also must have 
its own fiduciary powers under the law applicable to the subsidiary.
    (ii) Unless the subsidiary is a registered investment adviser, if 
an operating subsidiary proposes to exercise investment discretion on 
behalf of customers or provide investment advice for a fee, the 
national bank must have prior OCC approval to exercise fiduciary powers 
pursuant to Sec.  5.26 and 12 CFR part 9.
    (8) Expiration of approval. Approval expires if the national bank 
has not established or acquired the operating subsidiary or commenced 
the new activity in an existing operating subsidiary within 12 months 
after the date of the approval, unless the OCC shortens or extends the 
time period.
* * * * *

0
27. Amend Sec.  5.35 by:
0
a. Revising the section heading;
0
b. In paragraph (a), adding the word ``and'' before ``5412(b)(2)(B),''
0
c. In paragraphs (b) and (d)(6), removing the word ``shall'' and adding 
in its place the word ``must'';
0
d. In paragraphs (d)(2), (d)(3), (g)(2), and (g)(4), removing the word 
``state'' and adding in its place the word ``State'' wherever it 
appears;
0
e. In paragraph (d)(2) removing the phrase ``section 3 of the Federal 
Deposit Insurance Act'' and adding in its place the phrase ``section 
3(a)(3) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(a)(3)'';
0
f. In paragraph (d)(3):
0
i. After the words ``an insured bank'', removing the phrase ``(as 
defined in section 3 of the Federal Deposit Insurance Act)'' and adding 
in its place the phrase ``(as defined in section 3(h) of the Federal 
Deposit Insurance Act, 12 U.S.C. 1813(h))'';
0
ii. After the words ``a savings association'', removing the phrase 
``(as defined in section 3 of the Federal Deposit Insurance Act)'' and 
adding in its place the phrase ``(as defined in section 3(b)(1) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1813(b)(1))'';
0
iii. Removing the phrase ``Federal Deposit Insurance Corporation'' and 
adding in its place the word ``FDIC'';
0
g. In paragraph (d)(4), removing the phrase ``section 3 of the Federal 
Deposit Insurance Act'' and adding in its place the phrase ``section 
3(c)(2) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c)(2)'';
0
h. Revising paragraph (f)(2)(ii)(A);
0
i. In paragraph (f)(2)(ii)(B), removing the phrase ``Sec.  
5.34(e)(5)(v) or Sec.  5.38(e)(5)(v)'' and adding in its place the 
phrase ``Sec.  5.34(f)(5) or Sec.  5.38(f)(5)''; and
0
j. Revising paragraph (i).
    The revision and addition read as follows.


Sec.  5.35  Bank service company investments by a national bank or 
Federal savings association.

* * * * *
    (f) * * *
    (2) * * *
    (ii) * * *
    (A) The national bank or Federal savings association is well 
capitalized and well managed; and
* * * * *
    (i) Investment limitations. A national bank or Federal savings 
association must comply with the investment limitations specified in 12 
U.S.C. 1862.
* * * * *

0
28. Amend Sec.  5.36 by:
0
a. In paragraph (a), removing the phrase ``and 93a.'' and adding in its 
place the phrase ``93a, and 3101 et seq.'';
0
b. In paragraph (b), removing the phrase ``and 5.37'' and adding in its 
place the phrase ``5.37, and 5.39'';
0
c. Revising paragraph (c);
0
d. Revising paragraph (e) introductory text;
0
e. In paragraph (e)(1), removing the word ``state'' and adding in its 
place the word ``State'' wherever it appears;
0
f. Revising paragraphs (e)(2) through (4)
0
g. Revising paragraph (f);
0
h. Redesignating paragraphs (g) through (i) as paragraph (h) through 
(j);
0
i. Adding new paragraph (g);
0
j. In redesignated paragraph (h)(1), removing ``(g)(1)'' wherever it 
appears and adding in its place (h)(1);
0
k. Revising redesignated paragraphs (i) and (j).
    The addition and revisions read as follows.


Sec.  5.36  Other equity investments by a national bank.

* * * * *
    (c) Definitions. For purposes of this section:
    (1) Enterprise means any corporation, limited liability company, 
partnership, trust, or similar business entity.
    (2) Non-controlling investment means an equity investment made 
pursuant to 12 U.S.C. 24(Seventh) that is not governed by procedures 
prescribed by another OCC rule. A non-controlling investment does not 
include a national bank holding interests in a trust formed for the 
purposes of securitizing assets held by the bank as part of its banking 
business or for the purposes of holding multiple legal titles of motor 
vehicles or equipment in conjunction with lease financing transactions.
* * * * *
    (e) Non-controlling investments; notice procedure. Except as 
provided in paragraphs (f), (g), and (h) of this section, a national 
bank may make a non-controlling investment, directly or through its 
operating subsidiary, in an enterprise that engages in an activity 
described in Sec.  5.34(f)(5) or in an activity that is substantively 
the same as a previously approved activity by filing a written notice. 
The bank must file this written notice with the appropriate OCC 
licensing office no later than 10 days after making the investment. The 
written notice must:
* * * * *
    (2) State:
    (i) Which paragraphs of Sec.  5.34(f)(5) describe the activity; or
    (ii) If the activity is substantively the same as a previously 
approved activity:
    (A) How the activity is substantively the same as a previously 
approved activity;
    (B) The citation to the applicable precedent; and
    (C) That the activity will be conducted in accordance with the same 
terms and conditions applicable to the previously approved activity;
    (3) Certify that the bank is well capitalized and well managed at 
the time of the investment;
    (4) Describe how the bank has the ability to prevent the enterprise 
from engaging in activities that are not set forth in Sec.  5.34(f)(5) 
or not contained in published OCC precedent for previously

[[Page 80459]]

approved activities, or how the bank otherwise has the ability to 
withdraw its investment;
* * * * *
    (f) Non-controlling investment; application procedure--(1) In 
general. A national bank must file an application and obtain prior 
approval before making or acquiring, either directly or through an 
operating subsidiary, a non-controlling investment in an enterprise if 
the non-controlling investment does not qualify for the notice 
procedure set forth in paragraph (e) of this section because the bank 
is unable to make the representation required by paragraph (e)(2) or 
the certifications required by paragraphs (e)(3) or (e)(7) of this 
section. The application must include the information required in 
paragraphs (e)(1) and (e)(4) through (e)(6) of this section and, if 
possible, the information required by paragraphs (e)(2), (e)(3), and 
(e)(7) of this section. If the bank is unable to make the 
representation set forth in paragraph (e)(2) of this section, the 
bank's application must explain why the activity in which the 
enterprise engages is a permissible activity for a national bank and 
why the filer should be permitted to hold a non-controlling investment 
in an enterprise engaged in that activity. A bank may not make a non-
controlling investment if it is unable to make the representations and 
certifications specified in paragraphs (e)(1) and (e)(4) through (e)(6) 
of this section.
    (2) Expedited review. An application submitted by a national bank 
is deemed approved by the OCC as of the 10th day after the application 
is received by the OCC if:
    (i) The national bank makes the representation required by 
paragraph (e)(2) and the certification required by paragraph (e)(3) of 
this section;
    (ii) The book value of the national bank's non-controlling 
investment for which the application is being submitted is no more than 
1% of the bank's capital and surplus;
    (iii) No more than 50% of the enterprise is owned or controlled by 
banks or savings associations subject to examination by an appropriate 
Federal banking agency or credit unions insured by the National Credit 
Union Association; and
    (iv) The OCC has not notified the national bank that the 
application has been removed from expedited review, or the expedited 
review process is extended, under Sec.  5.13(a)(2).
    (g) Non-controlling investment; no application or notice required. 
A national bank may make or acquire, either directly or through an 
operating subsidiary, a non-controlling investment in an enterprise 
without an application or notice to the OCC, if the:
    (1) Activities of the enterprise are limited to those activities 
previously reported by the bank in connection with the making or 
acquiring of a non-controlling investment;
    (2) Activities of the enterprise continue to be legally permissible 
for a national bank;
    (3) The bank's non-controlling investment will be made in 
accordance with any conditions imposed by the OCC in approving any 
prior non-controlling investment in an enterprise conducting these same 
activities; and
    (4) The bank is able to make the representations and certifications 
specified in paragraphs (e)(3) through (e)(7) of this section.
* * * * *
    (i) Non-controlling investments by Federal branches. A Federal 
branch that is well capitalized and well managed may make a non-
controlling investment in accordance with paragraph (e) of this section 
in the same manner and subject to the same conditions and requirements 
as a national bank, and subject to any additional requirements that may 
apply under 12 CFR 28.10(c).
    (j) Exceptions to rules of general applicability. Sections 5.8, 
5.9, 5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.9, 5.10, and 5.11 apply.


Sec.  5.37  [Amended]

0
29. Amend Sec.  5.37 by:
0
a. In paragraph (a), removing ``317d'' and adding in its place 
``371d'';
0
b. Removing paragraph (c)(3);
0
c. In paragraph (d)(1)(i) and (d)(3)(i), removing the word ``shall'' 
and adding in its place the word ``must'' it appears;
0
d. In paragraph (d)(1)(i), removing the phrase ``any corporation'' and 
adding in its place the phrase ``any corporation, partnership, or 
similar entity (e.g., a limited liability company)'';
0
e. In paragraph (d)(3)(i), removing the phrase ``as defined in 12 CFR 
part 6'';
0
f. In paragraph (d)(4), removing ``12 CFR 5.59'' and adding in its 
place ``Sec.  5.59''; and
0
g. In paragraph (d)(5), adding '' 5.9,'' after ``5.8,'' wherever it 
appears.

0
30. Amend Sec.  5.38 by:
0
a. In paragraph (a), adding the word ``and'' before ``5412(b)(2)(B)'';
0
b. In paragraph (b), adding ``(12 U.S.C. 1828(m))'' after the word 
``Act'';
0
c. Removing and reserving paragraph (d);
0
d. Revising paragraph (e)(2)(i)(A);
0
e. In paragraph (e)(2)(i)(C), removing the phrase ``generally accepted 
accounting principles (GAAP)'' and adding in its place the word 
``GAAP'';
0
f. In paragraph (e)(2)(iii) introductory text, removing the phrase 
``following subsidiaries'' and adding in its place the phrase 
``following entities'';
0
g. Removing the word ``and'' at the end of paragraph (e)(2)(iii)(A);
0
h. In paragraph (e)(2)(iii)(B), removing the period and adding in its 
place ``; and'';
0
i. Adding new paragraph (e)(2)(iii)(C);
0
j. In paragraph (e)(2)(iv)(B), removing the word ``shall'' and adding 
in its place the word ``may'';
0
k. In paragraph (e)(3), removing the word ``state'' and adding in its 
place the word ``State'';
0
l. In paragraph (e)(4)(i), removing the word ``shall'' and adding in 
its place the word ``must'';
0
m. Redesignating paragraphs (e)(5) through (7) as paragraphs (f) 
through (h);
0
n. Revising redesignated paragraph (f); and
0
o. In redesignated paragraph (h), removing the word ``shall'' wherever 
it appears and adding in its place the word ``may''.
    The addition and revisions read as follows.


Sec.  5.38  Operating subsidiaries of a Federal savings association.

* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (A) The savings association has the ability to control the 
management and operations of the subsidiary, and no other person or 
entity has the ability to exercise effective control or influence over 
the management or operations of the subsidiary to an extent equal to or 
greater than that of the savings association or an operating subsidiary 
thereof;
* * * * *
    (iii) * * *
    (C) A trust formed for purpose of securitizing assets held by the 
savings association as part of its business.
* * * * *
    (f) Procedures--(1) Application required. (i) A Federal savings 
association must first submit an application to, and receive prior 
approval from, the OCC to establish or acquire an operating subsidiary, 
or to perform a new activity in an existing operating subsidiary.
    (ii) The application must explain, as appropriate, how the savings 
association ``controls'' the enterprise, describing in full detail 
structural arrangements

[[Page 80460]]

where control is based on factors other than savings association 
ownership of more than 50 percent of the voting interest of the 
subsidiary and the ability to control the management and operations of 
the subsidiary by holding voting interests sufficient to select the 
number of directors needed to control the subsidiary's board and to 
select and terminate senior management. In the case of a limited 
partnership or limited liability company that does not qualify for the 
expedited review procedure set forth in paragraph (f)(2) of this 
section, the savings association must provide a statement explaining 
why it is not eligible. The application also must include a complete 
description of the savings association's investment in the subsidiary, 
the proposed activities of the subsidiary, the organizational structure 
and management of the subsidiary, the relations between the savings 
association and the subsidiary, and other information necessary to 
adequately describe the proposal. To the extent that the application 
relates to the initial affiliation of the savings association with a 
company engaged in insurance activities, the savings association must 
describe the type of insurance activity in which the company is engaged 
and has present plans to conduct. The savings association must also 
list for each State the lines of business for which the company holds, 
or will hold, an insurance license, indicating the State where the 
company holds a resident license or charter, as applicable. The 
application must state whether the operating subsidiary will conduct 
any activity at a location other than the home office or a previously 
approved branch of the savings association. The OCC may require a filer 
to submit a legal analysis if the proposal is novel, unusually complex, 
or raises substantial unresolved legal issues. In these cases, the OCC 
encourages filers to have a prefiling meeting with the OCC. Any savings 
association receiving approval under this paragraph is deemed to have 
agreed that the subsidiary will conduct the activity in a manner 
consistent with published OCC guidance.
    (2) Expedited review. (i) An application to establish or acquire an 
operating subsidiary, or to perform a new activity in an existing 
operating subsidiary, that meets the requirements of this paragraph is 
deemed approved by the OCC as of the 30th day after the filing is 
received by the OCC, unless the OCC notifies the filer prior to that 
date that the filing has been removed from expedited review, or the 
expedited review process is extended under Sec.  5.13(a)(2). Any 
savings association receiving approval under this paragraph is deemed 
to have agreed that the subsidiary will conduct the activity in a 
manner consistent with published OCC guidance.
    (ii) An application is eligible for expedited review if all of the 
following requirements are met:
    (A) The savings association is well capitalized and well managed;
    (B) The activity is listed in paragraph (f)(5) this section or is 
substantively the same as a previously approved activity and the 
activity will be conducted in accordance with the same terms and 
conditions applicable to the previously approved activity;
    (C) The entity is a corporation, limited liability company, limited 
partnership or trust; and
    (D) The savings association or an operating subsidiary thereof:
    (1) Has the ability to control the management and operations of the 
subsidiary and no other person or entity has the ability to exercise 
effective control or influence over the management or operations of the 
subsidiary to an extent equal to or greater than that of the savings 
association or an operating subsidiary thereof. The ability to control 
the management and operations means:
    (i) In the case of a subsidiary that is a corporation, the savings 
association or an operating subsidiary thereof holds voting interests 
sufficient to select the number of directors needed to control the 
subsidiary's board and to select and terminate senior management;
    (ii) In the case of a subsidiary that is a limited partnership, the 
savings association or an operating subsidiary thereof has the ability 
to control the management and operations of the subsidiary by 
controlling the selection and termination of senior management;
    (iii) In the case of a subsidiary that is a limited liability 
company, the savings association or an operating subsidiary thereof has 
the ability to control the management and operations of the subsidiary 
by controlling the selection and termination of senior management; or
    (iv) In the case of a subsidiary that is a trust, the savings 
association or an operating subsidiary thereof has the ability to 
replace the trustee at will;
    (2) Holds more than 50 percent of the voting, or equivalent, 
interests in the subsidiary, and:
    (i) In the case of a subsidiary that is a limited partnership, the 
savings association or an operating subsidiary thereof is the sole 
general partner of the limited partnership, provided that under the 
partnership agreement, limited partners have no authority to bind the 
partnership by virtue solely of their status as limited partners;
    (ii) In the case of a subsidiary that is a limited liability 
company, the savings association or an operating subsidiary thereof is 
the sole managing member of the limited liability company, provided 
that under the limited liability company agreement, other limited 
liability company members have no authority to bind the limited 
liability company by virtue solely of their status as members; or
    (iii) In the case of a subsidiary that is a trust, the savings 
association or an operating subsidiary thereof is the sole beneficial 
owner of the trust; and
    (3) Is required to consolidate its financial statements with those 
of the subsidiary under GAAP. A filer proposing to qualify for 
expedited review must include in the application all necessary 
information showing the application meets the requirements.
    (3) Exceptions to rules of general applicability. Sections 5.8, 
5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.10, and 5.11 apply.
    (4) OCC review and approval. The OCC reviews a Federal savings 
association's application to determine whether the proposed activities 
are legally permissible under Federal savings association law and to 
ensure that the proposal is consistent with safe and sound banking 
practices and OCC policy and does not endanger the safety or soundness 
of the parent Federal savings association. As part of this process, the 
OCC may request additional information and analysis from the filer.
    (5) Activities eligible for expedited review. The following 
activities qualify for the expedited review procedures in paragraph 
(f)(2) of this section, provided the activity is conducted pursuant to 
the same terms and conditions as would be applicable if the activity 
were conducted directly by a Federal savings association:
    (i) Holding and managing assets acquired by the parent savings 
association or its operating subsidiaries, including investment assets 
and property acquired by the savings association through foreclosure or 
otherwise in good faith to compromise a doubtful claim, or in the 
ordinary course of collecting a debt previously contracted;
    (ii) Providing services to or for the savings association or its 
affiliates, including accounting, auditing,

[[Page 80461]]

appraising, advertising and public relations, and financial advice and 
consulting;
    (iii) Making loans or other extensions of credit, and selling money 
orders and travelers checks;
    (iv) Purchasing, selling, servicing, or warehousing loans or other 
extensions of credit, or interests therein;
    (v) Providing management consulting, operational advice, and 
services for other financial institutions;
    (vi) Providing check payment services;
    (vii) Acting as investment adviser (including an adviser with 
investment discretion) or financial adviser or counselor to 
governmental entities or instrumentalities, businesses, or individuals, 
including advising registered investment companies and mortgage or real 
estate investment trusts;
    (viii) Providing financial and transactional advice and assistance, 
including advice and assistance for customers in structuring, 
arranging, and executing mergers and acquisitions, divestitures, joint 
ventures, leveraged buyouts, swaps, foreign exchange, derivative 
transactions, coin and bullion, and capital restructurings;
    (ix) Underwriting and reinsuring credit life and disability 
insurance;
    (x) Leasing of personal property;
    (xi) Providing securities brokerage;
    (xii) Underwriting and dealing, including making a market, in 
savings association permissible securities and purchasing and selling 
as principal, asset backed obligations;
    (xiii) Acting as an insurance agent or broker for credit life, 
disability, and unemployment insurance; single property interest 
insurance; and title insurance;
    (xiv) Offering correspondent services to the extent permitted by 
published OCC precedent for Federal savings associations;
    (xv) Acting as agent or broker in the sale of fixed annuities;
    (xvi) Offering debt cancellation or debt suspension agreements;
    (xvii) Providing escrow services;
    (xviii) Acting as a transfer agent; and
    (xix) Providing or selling postage stamps.
    (6) Redesignation. A Federal savings association that proposes to 
redesignate a service corporation as an operating subsidiary must 
submit a notification to the OCC at least 30 days prior to the 
redesignation date. The notification must include a description of how 
the redesignated service corporation meets all of the requirements of 
this section to be an operating subsidiary, a resolution of the savings 
association's board of directors approving the redesignation, and the 
proposed effective date of the redesignation. The savings association 
may effect the redesignation on the proposed date unless the OCC 
notifies the savings association otherwise prior to that date. The OCC 
may require an application if the redesignation presents policy, 
supervisory, or legal issues.
    (7) Fiduciary powers. (i) If an operating subsidiary proposes to 
accept fiduciary appointments for which fiduciary powers are required, 
such as acting as trustee or executor, then the Federal savings 
association must have fiduciary powers under section 5(n) of the Home 
Owners' Loan Act, 12 U.S.C. 1464(n), and the subsidiary also must have 
its own fiduciary powers under the law applicable to the subsidiary.
    (ii) Unless the subsidiary is a registered investment adviser, if 
an operating subsidiary proposes to exercise investment discretion on 
behalf of customers or provide investment advice for a fee, the Federal 
savings association must have prior OCC approval to exercise fiduciary 
powers pursuant to Sec.  5.26 (or a predecessor provision) and 12 CFR 
part 150.
    (8) Expiration of approval. Approval expires if the Federal savings 
association has not established or acquired the operating subsidiary, 
or commenced the new activity in an existing operating subsidiary 
within 12 months after the date of the approval, unless the OCC 
shortens or extends the time period.

0
31. Amend Sec.  5.39 by:
0
a. Revising paragraph (a);
0
b. In paragraph (b), removing the phrase ``a notice'' and adding in its 
place the phrase ``an application'', and removing ``Sec.  5.34(e)(5)'' 
and adding in its place ``Sec.  5.34(f)'';
0
c. In paragraph (b) and paragraph (e)(1) introductory text, removing 
``(12 U.S.C. 24a)'' and adding in its place ``(12 U.S.C. 
24a(a)(2)(A)(i))'';
0
d. In paragraphs (b), (h)(2), and (j)(1)(ii), removing the word 
``shall'' and adding in its place the word ``must'' wherever it 
appears;
0
e. In paragraph (d)(1), removing the phrase ``shall have'' and adding 
in its place the word ``has'';
0
f. Removing paragraphs (d)(2), (d)(11) and (d)(12) and redesignating 
paragraphs (d)(3) through (d)(10) as paragraphs (d)(2) through (d)(9);
0
g. In paragraphs (e)(1)(ii) and (j)(2), removing the word ``state'' and 
adding in its place the word ``State'' wherever it appears;
0
h. In paragraph (f)(1), removing the phrase ``Gramm-Leach-Bliley Act 
(GLBA)), 113 Stat. 1407-1409, (15 U.S.C. 6712 or 15 U.S.C. 6713)'' and 
adding in its place the phrase ``Gramm-Leach-Bliley Act, (15 U.S.C. 
6712 or 15 U.S.C. 6713))'';
0
i. In paragraph (f)(3), removing ``(12 U.S.C. 1843) of the Bank Holding 
Company Act'' and adding in its place ``of the Bank Holding Company Act 
(12 U.S.C. 1843(k)(4)(H) or (I))'', and removing the phrase ``GLBA, 113 
Stat. 1381'' and adding in its place the phrase ``Gramm-Leach-Bliley 
Act (12 U.S.C. 1843 note)'';
0
j. In paragraph (h)(2), removing the phrase ``generally accepted 
accounting principles'' and adding in its place the word ``GAAP'';
0
k. In paragraph (h)(5) introductory text, removing the phrase 
``paragraph (a)(6)'' and adding the phrase ``paragraph (d)(5)'';
0
l. Revising paragraph (h)(5)(i);
0
m. Removing and reserving paragraph (h)(5)(ii);
0
n. In paragraphs (h)(5)(vi), removing the word ``GLBA'' and adding in 
its place the phrase ``Gramm-Leach-Bliley Act'';
0
o. Removing the phrase ``shall be'' and adding in its place the word 
``is'' in paragraph (h)(6);
0
p. Revising paragraph (i);
0
q. In paragraph (j)(1)(i), removing the phrase ``OCC shall'' and adding 
in its place the phrase ``OCC will'' and removing the phrase ``shall 
be'' and adding in its place the word ``is''; and
0
r. In paragraph (k), removing the word ``GLBA'' and adding in its place 
the phrase ``Gramm-Leach-Bliley Act''.
    The revisions read as follows.


Sec.  5.39  Financial subsidiaries of a national bank.

    (a) Authority. 12 U.S.C. 24a and 93a.
* * * * *
    (h) * * *
    (5) * * *
    (i) A financial subsidiary is deemed to be an affiliate of the bank 
and is not deemed to be a subsidiary of the bank;
* * * * *
    (i) Procedures to engage in activities through a financial 
subsidiary. A national bank that intends, directly or indirectly, to 
acquire control of, or hold an interest in, a financial subsidiary, or 
to commence a new activity in an existing financial subsidiary, must 
obtain OCC approval through the procedures set forth in paragraph 
(i)(1) or (i)(2) of this section.
    (1) Certification with subsequent application. (i) At any time, a 
national bank may file a ``Financial Subsidiary Certification'' with 
the appropriate OCC licensing office listing the bank's depository 
institution affiliates and certifying that the bank and each of

[[Page 80462]]

those affiliates is well capitalized and well managed.
    (ii) Thereafter, at such time as the bank seeks OCC approval to 
acquire control of, or hold an interest in, a new financial subsidiary, 
or commence a new activity authorized under section 5136A(a)(2)(A)(i) 
of the Revised Statutes (12 U.S.C. 24a(a)(2)(A)(i)) in an existing 
subsidiary, the bank may file an application with the appropriate OCC 
licensing office at the time of acquiring control of, or holding an 
interest in, a financial subsidiary, or commencing such activity in an 
existing subsidiary. The application must be labeled ``Financial 
Subsidiary Application'' and must:
    (A) State that the bank's Certification remains valid;
    (B) Describe the activity or activities conducted by the financial 
subsidiary. To the extent the application relates to the initial 
affiliation of the bank with a company engaged in insurance activities, 
the bank should describe the type of insurance activity that the 
company is engaged in and has present plans to conduct. The bank must 
also list for each State the lines of business for which the company 
holds, or will hold, an insurance license, indicating the State where 
the company holds a resident license or charter, as applicable;
    (C) Cite the specific authority permitting the activity to be 
conducted by the financial subsidiary. (Where the authority relied on 
is an agency order or interpretation under section 4(c)(8) or 4(c)(13), 
respectively, of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8) or (c)(13)), a copy of the order or interpretation should be 
attached);
    (D) Certify that the bank will be well capitalized after making 
adjustments required by paragraph (h)(1) of this section;
    (E) Demonstrate the aggregate consolidated total assets of all 
financial subsidiaries of the national bank do not exceed the lesser of 
45 percent of the bank's consolidated total assets or $50 billion (or 
the increased level established by the indexing mechanism); and
    (F) If applicable, certify that the bank meets the eligible debt 
requirement in paragraph (g)(3) of this section.
    (2) Combined certification and application. A national bank may 
file a combined certification and application with the appropriate OCC 
licensing office at least five business days prior to acquiring control 
of, or holding an interest in, a financial subsidiary, or commencing a 
new activity authorized pursuant to section 5136A(a)(2)(A)(i) of the 
Revised Statutes (12 U.S.C. 24a(a)(2)(A)(i)) in an existing subsidiary. 
The written application must be labeled ``Financial Subsidiary 
Certification and Application'' and must:
    (i) List the bank's depository institution affiliates and certify 
that the bank and each depository institution affiliate of the bank is 
well capitalized and well managed;
    (ii) Describe the activity or activities to be conducted in the 
financial subsidiary. To the extent the application relates to the 
initial affiliation of the bank with a company engaged in insurance 
activities, the bank should describe the type of insurance activity 
that the company is engaged in and has present plans to conduct. The 
bank must also list for each State the lines of business for which the 
company holds, or will hold, an insurance license, indicating the State 
where the company holds a resident license or charter, as applicable;
    (iii) Cite the specific authority permitting the activity to be 
conducted by the financial subsidiary. (Where the authority relied on 
is an agency order or interpretation under section 4(c)(8) or 4(c)(13), 
respectively, of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8) or (c)(13)), a copy of the order or interpretation should be 
attached);
    (iv) Certify that the bank will remain well capitalized after 
making the adjustments required by paragraph (h)(1) of this section;
    (v) Demonstrate the aggregate consolidated total assets of all 
financial subsidiaries of the national bank do not exceed the lesser of 
45% of the bank's consolidated total assets or $50 billion (or the 
increased level established by the indexing mechanism); and
    (vi) If applicable, certify that the bank meets the eligible debt 
requirement in paragraph (g)(3) of this section.
    (3) Approval. An application is deemed approved upon filing the 
information required by paragraphs (i)(1) or (i)(2) of this section 
within the time frames provided therein.
    (4) Exceptions to rules of general applicability. Sections 5.8, 
5.10, 5.11, and 5.13 do not apply to activities authorized under this 
section.
    (5) Community Reinvestment Act (CRA). A national bank may not apply 
under this paragraph (i) to commence a new activity authorized under 
section 5136A(a)(2)(A)(i) of the Revised Statutes (12 U.S.C. 
24a(a)(2)(A)(i)), or directly or indirectly acquire control of a 
company engaged in any such activity, if the bank or any of its insured 
depository institution affiliates received a CRA rating of less than 
``satisfactory record of meeting community credit needs'' on its most 
recent CRA examination prior to when the bank would file an application 
under this section.
* * * * *


Sec.  5.40  [Amended]

0
32. Amend Sec.  5.40 by:
0
a. In paragraph (a), adding a comma after ``2901-2907'';
0
b. Removing the word ``shall'' and adding in its place the word 
``must'' wherever it appears in paragraphs (b), (c)(1), (c)(2)(i), 
(c)(2)(ii), and (c)(3);
0
c. In paragraph (c)(2)(ii), adding the phrase ``or member'' after the 
word ``shareholder''; and
0
d. In paragraph (c)(4), removing the phrase ``national bank'' and 
adding in its place the word ``bank'', removing the phrase ``Federal 
savings association'' and adding in its place the phrase ``savings 
association'', and removing the phrase ``is not eligible for'' and 
adding in its place the phrase ``has been removed from''.

0
33. Section 5.42 is amended by:
0
a. In paragraphs (d)(1) and (d)(2), removing the word ``shall'' and 
adding in its place the word ``must'';
0
b. Revising paragraph (d)(3);
0
c. In paragraph (d)(4), removing ``5.13(a)'' and adding in its place 
``5.13'' wherever it appears and removing the word ``application'' and 
adding in its place the word ``notice''.
    The revision reads as follows.


Sec.  5.42  Corporate title of a national bank or Federal savings 
association.

* * * * *
    (d) * * *
    (3) Amendment to charter. A Federal savings association must amend 
its charter in accordance with Sec.  5.21 or Sec.  5.22, as applicable, 
to change its title.
* * * * *

0
34. Section 5.43 is added to read as follows:


Sec.  5.43  National bank director residency and citizenship waivers.

    (a) Authority. 12 U.S.C. 72 and 93a.
    (b) Scope. This section describes the procedures for the OCC to 
waive the residency and citizenship requirements for national bank 
directors set forth at 12 U.S.C. 72.
    (c) Application Procedures--(1) Residency. A national bank may 
request a waiver of the residency requirement for any number of 
directors by filing a written application with the OCC. The OCC may 
grant a waiver on an individual basis or for any number of director 
positions. The waiver is valid until the OCC revokes it in accordance 
with paragraph (d) of this section, or, if

[[Page 80463]]

granted on an individual basis, until the individual no longer serves 
on the board.
    (2) Citizenship. A national bank may request a waiver of the 
citizenship requirements for individuals who comprise up to a minority 
of the total number of directors by filing a written application with 
the OCC. The OCC may grant a waiver on an individual basis. A 
citizenship waiver is valid until the individual no longer serves on 
the board or the OCC revokes the waiver in accordance with paragraph 
(d) of this section.
    (3) Biographical and Financial Reports. (i) Each subject of a 
citizenship waiver application must submit to the appropriate OCC 
licensing office the information prescribed in the Interagency 
Biographical and Financial Report, available at www.occ.gov.
    (ii) The OCC may require additional information about any subject 
of a citizenship waiver application, including legible fingerprints, if 
appropriate. The OCC may waive any of the information requirements of 
paragraph (c)(3)(i) if the OCC determines that doing so is in the 
public interest.
    (4) Exceptions to rules of general applicability. Sections 5.8, 
5.9, 5.10, and 5.11 do not apply to this section.
    (d) Revocation of waiver--(1) Procedure. The OCC may revoke a 
residency or citizenship waiver. Before revocation, the OCC will 
provide written notice to the national bank and affected director(s) of 
its intention to revoke a residency or citizenship waiver and the basis 
for its intention. The bank and affected director(s) may respond in 
writing to the OCC within 10 calendar days, unless the OCC determines 
that a shorter period is appropriate in light of relevant 
circumstances. The OCC will consider the written responses of the bank 
and affected director(s), if any, prior to deciding whether or not to 
revoke a residency or citizenship waiver. The OCC will notify the 
national bank and the director of the OCC's decision to revoke a 
residency or citizenship waiver in writing.
    (2) Effective date. The OCC's decision to revoke a residency or 
citizenship waiver is effective:
    (i) If the director or national bank, or both, appeals pursuant to 
paragraph (e) of this section, upon the director's receipt of the 
decision of the Comptroller, an authorized delegate, or the appellate 
official, to uphold the initial decision to revoke the residency or 
citizenship waiver; or
    (ii) If neither the director nor national bank appeals pursuant to 
paragraph (e) of this section, upon the expiration of the period to 
appeal.
    (e) Appeal. (1) A director or national bank, or both, may seek 
review by appealing the OCC's decision to revoke a residency or 
citizenship waiver to the Comptroller, or an authorized delegate, 
within 15 days of the receipt of the OCC's written decision to revoke. 
The director or national bank, or both, may appeal on the grounds that 
the reasons for revocation are contrary to fact or arbitrary and 
capricious. The appellant must submit all documents and written 
arguments that the appellant wishes to be considered in support of the 
appeal.
    (2) The Comptroller, or an authorized delegate, may designate an 
appellate official who was not previously involved in the decision 
leading to the appeal at issue. The Comptroller, an authorized 
delegate, or the appellate official considers all information submitted 
with the original application for the residency or citizenship waiver, 
the material before the OCC official who made the initial decision, and 
any information submitted by the appellant at the time of appeal.
    (3) The Comptroller, an authorized delegate, or the appellate 
official will independently determine whether the reasons given for the 
initial decision to revoke are contrary to fact or arbitrary and 
capricious. If they determine either to be the case, the Comptroller, 
an authorized delegate, or the appellate official may reverse the 
initial decision to revoke the waiver.
    (4) Upon completion of the review, the Comptroller, an authorized 
delegate, or the appellate official will notify the appellant in 
writing of the decision. If the initial decision is upheld, the 
decision to revoke the waiver is effective pursuant to paragraph 
(d)(2)(i) of this section.
    (f) Prior waivers. Any waiver granted by the OCC before January 11, 
2021 remains in effect unless revoked pursuant to paragraph (d) of this 
section or, for a waiver granted to an individual, until the individual 
no longer serves on the board.


Sec.  5.45  [Amended]

0
35. Amend Sec.  5.45 by:
0
a. In paragraphs (b), (e)(1), and (g)(5), removing the phrase ``Federal 
savings association'' and adding in its place ``Federal stock savings 
association'';
0
b. In paragraph (f)(3), removing the phrase ``savings association's'' 
and adding in its place ``Federal stock savings association's'';
0
c. In paragraph (g)(1) introductory text, removing the phrase ``the 
savings association'' and adding in its place ``the Federal stock 
savings association'';
0
d. In paragraphs (g)(2)(iii), (g)(4)(i) introductory text, 
(g)(4)(i)(C), (h), and (i), removing the phrase ``savings association'' 
and adding in its place ``Federal stock savings association'';
0
e. In paragraph (g)(4)(i) introductory text and paragraphs (h) and (i), 
removing the word ``shall'' and adding in its place the word ``must''; 
and
0
f. In paragraph (h), removing the number ``197'' and adding in its 
place ``16''.

0
36. Amend Sec.  5.46 by:
0
a. In paragraph (b), removing the word ``shall'' and adding in its 
place the word ``must'' in the first sentence and removing the word 
``shall'' and adding in its place the word ``may'' in the second 
sentence;
0
b. Revising paragraph (g)(1)(ii);
0
c. In paragraphs (g)(2), (i)(1) introductory text, (i)(3)(i) 
introductory text, (i)(4), (j), and (k), removing the word ``shall'' 
and adding in its place the word ``must'' wherever it appears;
0
d. In paragraph (g)(2), removing the word ``applicant'' and adding in 
its place the word ``filer'';
0
e. Revising paragraphs (h) and (i)(2);
0
f. In paragraph (i)(5), adding the phrase, `` unless the OCC specifies 
a longer period'' after the word ``approval'';
0
g. In paragraph (i)(6)(i), removing the phrase ``U.S. generally 
accepted accounting principles'' and adding in its place the word 
``GAAP''; and
0
h. In paragraph (i)(6)(ii), removing the word ``U.S.''.
    The revisions read as follows.


Sec.  5.46   Changes in permanent capital of a national bank.

* * * * *
    (g) * * *
    (1) * * *
    (ii) Prior approval required. In addition to a notice of capital 
increase under paragraph (i)(3) of this section, a national bank must 
submit an application under paragraph (i)(1) or (i)(2) of this section 
and obtain prior OCC approval to increase its permanent capital if the 
bank is:
    (A) Required to receive OCC approval pursuant to letter, order, 
directive, written agreement, or otherwise;
    (B) Selling common or preferred stock for consideration other than 
cash; or
    (C) Receiving a material noncash contribution to capital surplus.
* * * * *
    (h) Decreases in permanent capital. A national bank must submit an 
application and obtain prior approval under paragraph (i)(1) or (i)(2) 
of this section for any reduction of its permanent capital. A national 
bank may request approval for a reduction in

[[Page 80464]]

capital for multiple quarters. The request need only specify a total 
dollar amount for the requested period and need not specify amounts for 
each quarter.
    (i) * * *
    (2) Expedited review. An eligible bank's application is deemed 
approved by the OCC 15 days after the date the OCC receives the 
application described in paragraph (i)(1) of this section, unless the 
OCC notifies the bank prior to that date that the application has been 
removed from expedited review, or the expedited review process is 
extended, under Sec.  5.13(a)(2). An eligible bank seeking to decrease 
its capital may request OCC approval for up to four consecutive 
quarters. The request need only specify a total dollar amount for the 
four-quarter period and need not specify amounts for each quarter. An 
eligible bank may decrease its capital pursuant to such a plan only if 
the bank maintains its eligible bank status before and after each 
decrease in its capital.
* * * * *

0
37. Amend Sec.  5.47 by:
0
a. In paragraph (b), removing the phrase ``debt notes'' and adding in 
its place the word ``debt'';
0
b. Revising paragraph (c);
0
c. In paragraph (d)(1)(ii), removing the phrase ``Federal Deposit 
Insurance Corporation (FDIC)'' and adding in its place the word 
``FDIC'';
0
d. In paragraph (d)(1)(iv)(B), removing the word ``state'' and adding 
in its place the word ``State'';
0
e. In paragraph (d)(1)(vi), removing the word ``shall'' and adding in 
its place the word ``must'' the first time it appears and removing the 
word ``shall'' and adding in its place the word ``may'' the second time 
it appears;
0
f. In paragraph (d)(vii), removing the word ``shall'' and adding in its 
place the word ``may'';
0
g. In paragraph (d)(2) introductory text, removing the word ``note'' 
and adding in its place the word ``document'';
0
h. In paragraph (d)(3)(ii)(C), adding the phrase, `` if applicable to 
the subordinated debt issuance'' after the word ``default'';
0
i. Adding paragraph (d)(3)(ii)(D);
0
j. In paragraph (e), removing the phrase, `` including, for an advanced 
approaches national bank, the disclosure requirement in 12 CFR 
3.20(d)(1)(xi)''; and
0
k. Revising paragraphs (f), (g) and (h).
    The addition and revisions read as follows.


Sec.  5.47  Subordinated debt issued by a national bank.

* * * * *
    (c) Definitions. The following definitions apply to this section:
    Capital plan means a plan describing the means and schedule by 
which a national bank will attain specified capital levels or ratios, 
including a capital restoration plan filed with the OCC under 12 U.S.C. 
1831o and 12 CFR 6.5.
    Original maturity means the stated maturity of the subordinated 
debt note. If the subordinated debt note does not have a stated 
maturity, then original maturity means the earliest possible date the 
subordinated debt note may be redeemed, repurchased, prepaid, 
terminated, or otherwise retired by the national bank pursuant to the 
terms of the subordinated debt note.
    Payment on subordinated debt means principal and interest, and 
premium, if any.
    Subordinated debt document means any document pertaining to an 
issuance of subordinated debt, and any renewal, extension, amendment, 
modification, or replacement thereof, including the subordinated debt 
note and any global note, pricing supplement, note agreement, trust 
indenture, paying agent agreement, or underwriting agreement.
    Tier 2 capital has the same meaning as set forth in 12 CFR 3.20(d).
    (d) * * *
    (3) * * *
    (ii) * * *
    (D) A statement that the obligation may be fully subordinated to 
interests held by the U.S. government in the event that the national 
bank enters into a receivership, insolvency, liquidation, or similar 
proceeding.
* * * * *
    (f) Process and procedures--(1) Issuance of subordinated debt--(i) 
Approval--(A) Eligible bank. An eligible bank is required to receive 
prior approval from the OCC to issue any subordinated debt, in 
accordance with paragraph (g)(1)(i) of this section, if:
    (1) The national bank will not continue to be an eligible bank 
after the transaction;
    (2) The OCC has previously notified the national bank that prior 
approval is required; or
    (3) Prior approval is required by law.
    (B) National bank not an eligible bank. A national bank that is not 
an eligible bank must receive prior OCC approval to issue any 
subordinated debt, in accordance with paragraph (g)(1)(i) of this 
section.
    (ii) Application to include subordinated debt in tier 2 capital. A 
national bank that intends to include subordinated debt in tier 2 
capital must submit an application to the OCC for approval, in 
accordance with paragraph (h) of this section, before or within ten 
days after issuing the subordinated debt. Where a national bank's 
application to issue subordinated debt has been deemed to be approved, 
in accordance with paragraph (g)(2)(i) of this section, and the 
national bank does not contemporaneously receive approval from the OCC 
to include the subordinated debt as tier 2 capital, the national bank 
must submit an application for approval to include subordinated debt in 
tier 2 capital, pursuant to paragraph (h) of this section, after 
issuance of the subordinated debt. A national bank may not include 
subordinated debt in tier 2 capital unless the national bank has filed 
the application with the OCC and received approval from the OCC that 
the subordinated debt issued by the national bank qualifies as tier 2 
capital.
    (2) Prepayment of subordinated debt--(i) Subordinated debt not 
included in tier 2 capital--(A) Eligible bank. An eligible bank is 
required to receive prior approval from the OCC to prepay any 
subordinated debt that is not included in tier 2 capital (including 
acceleration, repurchase, redemption prior to maturity, and exercising 
a call option), in accordance with paragraph (g)(1)(ii) of this 
section, only if:
    (1) The national bank will not be an eligible bank after the 
transaction;
    (2) The OCC has previously notified the national bank that prior 
approval is required;
    (3) Prior approval is required by law; or
    (4) The amount of the proposed prepayment is equal to or greater 
than one percent of the national bank's total capital, as defined in 12 
CFR 3.2.
    (B) National bank not an eligible bank. A national bank that is not 
an eligible bank must receive prior OCC approval to prepay any 
subordinated debt that is not included in tier 2 capital (including 
acceleration, repurchase, redemption prior to maturity, and exercising 
a call option), in accordance with paragraph (g)(1)(ii) of this 
section.
    (ii) Subordinated debt included in tier 2 capital. All national 
banks must receive prior OCC approval to prepay subordinated debt 
included in tier 2 capital, in accordance with paragraph (g)(1)(ii) of 
this section.
    (3) Material changes to existing subordinated debt documents. A 
national bank must receive prior approval from the OCC in accordance 
with paragraph (g)(1)(iii) of this section prior to making a material 
change to an existing subordinated debt document if the bank would have 
been required to receive OCC approval to issue the

[[Page 80465]]

security under paragraph (f)(1)(i) of this section or to include it in 
tier 2 capital under paragraph (h) of this section.
    (g) Prior approval procedure--(1) Application--(i) Issuance of 
subordinated debt. A national bank required to obtain OCC approval 
before issuing subordinated debt must submit an application to the 
appropriate OCC licensing office. The application must include:
    (A) A description of the terms and amount of the proposed issuance;
    (B) A statement of whether the national bank is subject to a 
capital plan or required to file a capital plan with the OCC and, if 
so, how the proposed change conforms to the capital plan;
    (C) A copy of the proposed subordinated note and any other 
subordinated debt documents; and
    (D) A statement that the subordinated debt issue complies with all 
applicable laws and regulations.
    (ii) Prepayment of subordinated debt. A national bank required to 
obtain OCC approval before prepaying subordinated debt, pursuant to 
paragraph (f)(2) of this section, must submit an application to the 
appropriate OCC licensing office. The application must include:
    (A) A description of the terms and amount of the proposed 
prepayment;
    (B) A statement of whether the national bank is subject to a 
capital plan or required to file a capital plan with the OCC and, if 
so, how the proposed change conforms to the capital plan;
    (C) A copy of the subordinated debt note the national bank is 
proposing to prepay and any other subordinated debt documents; and
    (D) Either:
    (1) A statement explaining why the national bank believes that 
following the proposed prepayment the national bank would continue to 
hold an amount of capital commensurate with its risk; or
    (2) A description of the replacement capital instrument that meets 
the criteria for tier 1 or tier 2 capital under 12 CFR 3.20, including 
the amount of such instrument, and the time frame for issuance.
    (iii) Material changes to existing subordinated debt. A national 
bank required to obtain OCC approval before making a material change to 
an existing subordinated debt document, pursuant to paragraph (f)(3) of 
this section, must submit an application to the appropriate OCC 
licensing office. The application must include:
    (A) A description of all proposed changes;
    (B) A statement of whether the national bank is subject to a 
capital plan or required to file a capital plan with the OCC and, if 
so, how the proposed change conforms to the capital plan;
    (C) A copy of the revised subordinated debt documents reflecting 
all proposed changes; and
    (D) A statement that the proposed changes to the subordinated debt 
documents complies with all applicable laws and regulations.
    (iv) Additional information. The OCC reserves the right to request 
additional relevant information, as appropriate.
    (2) Approval--(i) General. The application is deemed approved by 
the OCC as of the 30th day after the filing is received by the OCC, 
unless the OCC notifies the national bank prior to that date that the 
filing presents a significant supervisory or compliance concern or 
raises a significant legal or policy issue.
    (ii) Prepayment. Notwithstanding this paragraph (g)(2)(i) of this 
section, if the application for prior approval is for prepayment, the 
national bank must receive affirmative approval from the OCC. If the 
OCC requires the national bank to replace the subordinated debt, the 
national bank must receive affirmative approval that the replacement 
capital instrument meets the criteria for tier 1 or tier 2 capital 
under 12 CFR 3.20 and must issue the replacement instrument prior to 
prepaying the subordinated debt, or immediately thereafter.\4\
---------------------------------------------------------------------------

    \4\ A national bank may replace tier 2 capital instruments 
concurrent with the redemption of existing tier 2 capital 
instruments.
---------------------------------------------------------------------------

    (iii) Tier 2 capital. Following notification to the OCC pursuant to 
paragraph (f)(1)(ii) of this section that the national bank has issued 
the subordinated debt, the OCC will notify the national bank whether 
the subordinated debt qualifies as tier 2 capital.
    (iv) Expiration of approval. Approval expires if a national bank 
does not complete the sale of the subordinated debt within one year of 
approval.
    (h) Application procedure for inclusion in tier 2 capital. (1) A 
national bank must submit an application to the appropriate OCC 
licensing office in writing before or within ten days after issuing 
subordinated debt that it intends to include in tier 2 capital. A 
national bank may not include such subordinated debt in tier 2 capital 
unless the national bank has received approval from the OCC that the 
subordinated debt qualifies as tier 2 capital.
    (2) The application must include:
    (i) The terms of the issuance;
    (ii) The amount or projected amount and date or projected date of 
receipt of funds;
    (iii) The interest rate or expected calculation method for the 
interest rate;
    (iv) Copies of the final subordinated debt documents; and
    (v) A statement that the issuance complies with all applicable laws 
and regulations.
* * * * *


Sec.  5.48  [Amended]

0
38. Amend Sec.  5.48 in paragraphs (b), (e)(1), (e)(2)(i), (e)(3)(i) 
introductory text, (e)(3)(ii), (e)(3)(iii), (e)(4), (e)(5), (e)(6), and 
(f)(2)(ii) by removing the word ``shall'' and adding in its place the 
word ``must'' wherever it appears.

0
39. Section 5.50 is amended by:
0
a. In paragraphs (b), (c)(3)(v)(B), (f)(2)(i), (f)(2)(vii), 
(f)(3)(ii)(B), (f)(3)(ii)(C), (g)(1) introductory text, (h), (i)(1)(i), 
(i)(1)(ii), (i)(4)(ii), and (i)(5), removing the word ``shall'' and 
adding in its place the word ``must'' wherever it appears;
0
b. In paragraph (c)(2)(iii), removing the word ``(HOLA)'';
0
c. In paragraph (d)(1)(ii), removing the phrase ``shall be'' and adding 
in its place the word ``is'';
0
d. In paragraph (d)(5), removing the phrase ``his or her''; and adding 
in its place the word ``their'';
0
e. Removing paragraph (d)(8);
0
f. Redesignating paragraphs (d)(6) through (7) as paragraphs (d)(7) 
through (8);
0
g. Adding new paragraph (d)(6);
0
h. In redesignated paragraph (d)(7), removing the word ``HOLA'' and 
adding in its place the phrase ``Home Owners' Loan Act, 12 U.S.C. 
1464'';
0
i. In paragraph (f)(2)(ii) introductory text, removing the phrase 
``shall be'' and adding in its place the word ``are'';
0
j. In paragraph (f)(2)(ii)(D), adding the phrase ``15 U.S.C. 78m or 
78n,'' after ``1934,'';
0
k. In paragraph (f)(2)(ii)(E), removing the phrase ``defined in Sec.  
192.25 of this chapter shall'' and adding in its place the phrase 
``defined in 12 CFR 192.25 is'';
0
l. In paragraph (f)(2)(iii)(A), removing ``78l'' and adding in its 
place ``78l'';
0
m. In paragraph (f)(2)(viii), removing the word ``shall'' and adding in 
its place the word ``will'';
0
n. In paragraph (f)(3)(i)(A), removing the phrase ``on the OCC's 
internet web page,'' and adding in its place the word ``at'';
0
o. In paragraphs (f)(3)(ii)(A), (f)(3)(ii)(B), (f)(3)(iii) introductory 
text, and (g)(1) introductory text removing the word ``applicant'' and 
adding in its place the word ``filer'';
0
p. In paragraph (f)(3)(ii)(C), removing the phrase ``An applicant'' and 
adding in its place the phrase ``A filer'';

[[Page 80466]]

0
q. Removing paragraph (f)(3)(iv);
0
r. Removing the phrase ``of notice'' in the heading of paragraph 
(f)(5);
0
s. Revising paragraph (f)(6);
0
t. Revising paragraph (g)(2)(i);
0
u. In paragraph (i)(1)(iii), removing the phrase ``paragraph 
(h)(1)(i)'' and adding in its place the phrase ``paragraph (i)(1)(i)''; 
and
0
v. In paragraph (i)(3)(i), removing the phrase ``paragraph (h)(1)'' and 
adding in its place the phrase ``paragraph (i)(1)''.
    The addition and revisions read as follows.


Sec.  5.50  Change in control of a national bank or Federal savings 
association; reporting of stock loans.

* * * * *
    (d) * * *
    (6) Depository institution means a depository institution as 
defined in section 3(c)(1) of the Federal Deposit Insurance Act, 12 
U.S.C. 1813(c)(1).
* * * * *
    (f) * * *
    (6) Notification of disapproval. (i) Written notice by OCC. If the 
OCC disapproves a notice, it will notify the filer in writing within 
three days after the decision. The OCC's written disapproval will 
contain a statement of the basis for disapproval and indicate that the 
filer may request a hearing.
    (ii) Hearing Request. The filer may request a hearing by the OCC 
within 10 days of receipt of disapproval, pursuant to the procedures in 
12 CFR part 19, subpart H. Following final agency action under 12 CFR 
part 19, further review by the courts is available. (See 12 U.S.C. 
1817(j)(5)).
    (iii) Failure to request a hearing. If a filer fails to request a 
hearing with a timely request, the notice of disapproval constitutes a 
final and unappealable order.
* * * * *
    (g) * * *
    (2) * * *
    (i) Upon the request of any person, the OCC releases the 
information provided in the public portion of the notice and makes it 
available for public inspection and copying as soon as possible after a 
notice has been filed. In certain circumstances the OCC may determine 
that the release of the information would not be in the public 
interest. In addition, the OCC makes the date that the notice is filed, 
the disposition of the notice and the date thereof, and the 
consummation date of the transaction, if applicable, publicly available 
in the OCC's ``Weekly Bulletin.''
* * * * *

0
40. Amend Sec.  5.51 by:
0
a. Revising paragraph (a);
0
b. In paragraph (c)(4), adding the phrase ``chief risk officer,'' after 
the phrase ``chief investment officer,''
0
c. In paragraph (c)(7)(ii), adding the phrase ``that requires action to 
improve the financial condition of the national bank or Federal savings 
association'' after the word ``agreement'';
0
d. In paragraph (d) introductory text, and paragraphs (e)(1), 
(e)(6)(i)(C), (e)(6)(1)(D)(2), (e)(6)(i)(E), and (f)(1), removing the 
word ``shall'' and adding in its place the word ``must'' wherever it 
appears;
0
e. In paragraph (e)(6)(i)(E), removing the phrase ``his or her'' and 
adding in its place the word ``their'';
0
f. In paragraph (e)(8), adding ``5.9,'' after ``5.8,''; and
0
g. In paragraphs (e)(8), (f)(3), and (f)(4), removing the word 
``shall'' and adding in its place the word ``will''.
    The revision reads as follows.


Sec.  5.51  Changes in directors and senior executive officers of a 
national bank or Federal savings association.

    (a) Authority. 12 U.S.C. 1831i, 3102(b), and 5412(b)(2)(B).
* * * * *


Sec.  5.52  [Amended]

0
41. Amend Sec.  5.52 by:
0
a. In paragraph (c)(1), removing the word ``shall'' and adding in its 
place the word ``must''; and
0
b. In paragraph (c)(2), removing ``Sec.  5.40(b)'' and adding in its 
place ``Sec.  5.40(c)(1)''.


Sec.  5.53  [Amended]

0
42. Amend Sec.  5.53 by:
0
a. In paragraph (c)(2)(ii), removing ``12 CFR 5.48'' wherever it 
appears and adding in its place ``Sec.  5.48''; and
0
b. In paragraph (d)(3)(i)(A), removing the phrase ``under paragraph 
(d)(1)'' and adding in its place ``filed under paragraph (d)(2)''.

0
43. Amend Sec.  5.55 by:
0
a. In paragraph (b), removing the phrase ``or notice'';
0
b. Removing paragraph (d)(2) and redesignating paragraph (d)(3) as 
paragraph (d)(2);
0
c. Adding a new paragraph (d)(3);
0
d. In paragraph (d)(4), removing the phrase ``generally accepted 
accounting principles (GAAP)'' and adding in its place the word 
``GAAP'';
0
e. Revising paragraphs (e), (f), (g), and paragraph (h) introductory 
text;
0
f. Redesignating paragraphs (h)(1) through (h)(3) as paragraphs 
(h)(1)(i) through (h)(1)(iii);
0
g. Removing the last sentence of redesignated paragraph (h)(1)(iii); 
and
0
h. Adding new paragraph (h)(1) introductory text and paragraph (h)(2).
    The additions and revisions read as follows.


Sec.  5.55  Capital distributions by Federal savings associations.

* * * * *
    (d) * * *
    (3) Control has the same meaning as in section 10(a)(2) of the Home 
Owners' Loan Act (12 U.S.C. 1467a(a)(2)).
* * * * *
    (e) Filing requirements--(1) Application required. A Federal 
savings association must file an application with the OCC before making 
a capital distribution if:
    (i) The Federal savings association would not be at least well 
capitalized or would not otherwise remain an eligible savings 
association following the distribution;
    (ii) The total amount of all of the Federal savings association's 
capital distributions (including the proposed capital distribution) for 
the applicable calendar year exceeds its net income for that year to 
date plus retained net income for the preceding two years. If the 
capital distribution is from retained earnings, the aggregate 
limitation in this paragraph may be calculated in accordance with Sec.  
5.64(c)(2), substituting ``capital distributions'' for ``dividends'' in 
that section;
    (iii) The Federal savings association's proposed capital 
distribution would reduce the amount of or retire any part of its 
common or preferred stock or retire any part of debt instruments such 
as notes or debentures included in capital under 12 CFR part 3 (other 
than regular payments required under a debt instrument approved under 
Sec.  5.56);
    (iv) The Federal savings association's proposed capital 
distribution is payable in property other than cash;
    (v) The Federal savings association is directly or indirectly 
controlled by a mutual savings and loan holding company or by a company 
that is not a savings and loan holding company; or
    (vi) The Federal savings association's proposed capital 
distribution would violate a prohibition contained in any applicable 
statute, regulation, or agreement between the Federal savings 
association and the OCC or the OTS, or violate a condition imposed on 
the Federal savings association in an application or notice approved by 
the OCC or the OTS.
    (2) No application required. A Federal savings association may make 
a capital distribution without filing an application with the OCC if it 
does not meet the filing requirements in paragraph (e)(1) of this 
section.
    (3) Informational copy of Federal Reserve System notice required. 
If the

[[Page 80467]]

Federal savings association is a subsidiary of a savings and loan 
holding company that is filing a notice with the Board of Governors of 
the Federal Reserve System (Board) for a dividend solely under 12 
U.S.C. 1467a(f) and not also under 12 U.S.C. 1467a(o)(11), and no 
application under paragraph (e)(1) of this section is required, then 
the savings association must provide an informational copy to the OCC 
of the notice filed with the Board, at the same time the notice is 
filed with the Board.
    (f) Application format--(1) Contents. The application must:
    (i) Be in narrative form;
    (ii) Include all relevant information concerning the proposed 
capital distribution, including the amount, timing, and type of 
distribution; and
    (iii) Demonstrate compliance with paragraph (h) of this section.
    (2) Schedules. The application may include a schedule proposing 
capital distributions over a specified period.
    (3) Combined filings. A Federal savings association may combine the 
application required under paragraph (e)(1) of this section with any 
other notice or application, if the capital distribution is a part of, 
or is proposed in connection with, another transaction requiring a 
notice or application under this chapter. If submitting a combined 
filing, the Federal savings association must state that the related 
notice or application is intended to serve as an application under this 
section.
    (g) Filing procedures--(1) Application. When a Federal savings 
association is required to file an application under paragraph (e)(1) 
of this section, it must file the application at least 30 days before 
the proposed declaration of dividend or approval of the proposed 
capital distribution by its board of directors. Except as provided in 
paragraph (g)(2) of this section, the OCC is deemed to have approved an 
application from an eligible savings association upon the expiration of 
30 days after the filing date of the application unless, before the 
expiration of that time period, the OCC notifies the Federal savings 
association that:
    (i) Additional information is required to supplement the 
application;
    (ii) The application has been removed from expedited review, or the 
expedited review process is extended, under 5.13(a)(2); or
    (iii) The application is denied.
    (2) Applications not subject to expedited review. An application is 
not subject to expedited review if:
    (i) The Federal savings association is not an eligible savings 
association;
    (ii) The total amount of all of the Federal savings association's 
capital distributions (including the proposed capital distribution) for 
the applicable calendar year exceeds its net income for that year to 
date plus retained net income for the preceding two years;
    (iii) The Federal savings association would not be at least 
adequately capitalized, as set forth in 12 CFR 6.4, following the 
distribution; or
    (iv) The Federal savings association's proposed capital 
distribution would violate a prohibition contained in any applicable 
statute, regulation, or agreement between the savings association and 
the OCC or the OTS, or violate a condition imposed on the savings 
association in an application or notice approved by the OCC or the OTS.
    (3) OCC filing office--(i) Appropriate licensing office. Except as 
provided in paragraph (g)(3)(ii) of this section, a Federal savings 
association that is required to file an application under paragraph 
(e)(1) of this section or an informational copy of a notice under 
paragraph (e)(3) of this section must submit the application or notice 
to the appropriate OCC licensing office.
    (ii) Appropriate supervisory office. A Federal savings association 
that is required to file an application under paragraph (e)(1) of this 
section for capital distributions involving solely a cash dividend from 
retained earnings or involving a cash dividend from retained earnings 
and a concurrent cash distribution from permanent capital must submit 
the application to the appropriate OCC supervisory office.
    (h) OCC review of capital distributions. After review of an 
application submitted pursuant to paragraph (e)(1) of this section:
    (1) The OCC may deny the application in whole or in part, if it 
makes any of the following determinations:
* * * * *
    (2) The OCC may approve the application in whole or in part. 
Notwithstanding paragraph (h)(1)(iii) of this section, the OCC may 
waive any waivable prohibition or condition to permit a distribution.
* * * * *

0
44. Amend Sec.  5.56 by:
0
a. Revising paragraph (b);
0
b. In paragraph (d)(1)(i)(F), removing the word ``and'';
0
c. In paragraph (d)(1)(i)(G), removing the period and adding in its 
place ``; and'';
0
d. Adding new paragraph (d)(1)(i)(H);
0
e. In paragraph (d)(2)(i), removing ``12 CFR 197.4'' and adding in its 
place ``12 CFR 16.7'' and removing the word ``shall'' and adding in its 
place the word ``may'';
0
f. In paragraph (d)(2)(ii), removing ``15 U.S.C. 77d(6)'' and adding in 
its place ``15 U.S.C. 77b(a)(15);
0
g. In paragraph (e)(1) introductory text, removing the phrase ``notices 
and'';
0
h. In paragraphs (e)(2) and (i), removing the phrase ``or notice'' 
wherever it appears; and
0
i. Revising paragraph (h).
    The addition and revisions read as follows.


Sec.  5.56  Inclusion of subordinated debt securities and mandatorily 
redeemable preferred stock as Federal savings association supplementary 
(tier 2) capital.

* * * * *
    (b) Application procedures--(1) Application to include covered 
securities in tier 2 capital--(i) Application required. A Federal 
savings association must file an application seeking the OCC's approval 
of the inclusion of covered securities in tier 2 capital. The savings 
association may file its application before or after it issues covered 
securities, but may not include covered securities in tier 2 capital 
until the OCC approves the application and the securities are issued.
    (ii) Expedited review. The OCC is deemed to have approved an 
application from an eligible savings association to include covered 
securities in tier 2 capital upon the expiration of 30 days after the 
filing date of the application unless, before the expiration of that 
time period, the OCC notifies the Federal savings association that:
    (A) Additional information is required to supplement the 
application;
    (B) The application has been removed from expedited review or the 
expedited review process is extended under Sec.  5.13(a)(2); or
    (C) The OCC denies the application.
    (iii) Securities offering rules. A Federal savings association also 
must comply with the securities offering rules at 12 CFR part 16 by 
filing an offering circular for a proposed issuance of covered 
securities, unless the offering qualifies for an exemption under that 
part.
    (2) Application required to prepay covered securities included in 
tier 2 capital--(i) In general. A Federal savings association must file 
an application to, and receive prior approval from, the OCC before 
prepaying covered securities included in tier 2 capital. The 
application must include:
    (A) A statement explaining why the Federal savings association 
believes that following the proposed prepayment the savings association 
would continue to hold an amount of capital commensurate with its risk; 
or

[[Page 80468]]

    (B) A description of the replacement capital instrument that meets 
the criteria for tier 1 or tier 2 capital under 12 CFR 3.20, including 
the amount of such instrument and the time frame for issuance.
    (ii) Replacement covered security. If the OCC conditions approval 
of prepayment on a requirement that a Federal savings association must 
replace the covered security with a covered security of an equivalent 
amount that satisfies the requirements for tier 1 or tier 2 capital, 
the savings association must file an application to issue the 
replacement covered security and must receive prior OCC approval.
* * * * *
    (d) * * *
    (1) * * *
    (i) * * *
    (H) State that the security may be fully subordinated to interests 
held by the U.S. government in the event that the savings association 
enters into a receivership, insolvency, liquidation, or similar 
proceeding;
* * * * *
    (h) Issuance of a replacement regulatory capital instrument in 
connection with prepaying a covered security. The OCC may require a 
Federal savings association seeking prior approval to prepay a covered 
security included in tier 2 capital to issue a replacement covered 
security of an equivalent amount that qualifies as tier 1 or tier 2 
capital under 12 CFR 3.20. If the OCC imposes such a requirement, the 
savings association must complete the sale of such covered security 
prior to, or immediately after, the prepayment.\5\
---------------------------------------------------------------------------

    \5\ A Federal savings association may replace tier 2 capital 
instruments concurrent with the redemption of existing tier 2 
capital instruments.
---------------------------------------------------------------------------

* * * * *

0
45. Amend Sec.  5.58 by:
0
a. In paragraph (a), adding ``and'' before ``5412(b)(2)(B)'';
0
b. Revising paragraph (d)(2) and removing paragraph (d)(3);
0
c. Revising paragraph (e) introductory text;
0
d. In paragraph (e)(1), removing the word ``state'' wherever it appears 
and adding in its place the word ``State'';
0
e. Revising paragraphs (e)(2) through (4);
0
f. Revising paragraph (f)(1);
0
g. Redesignating paragraph (f)(2) as paragraph (f)(3) and revising 
newly redesignated paragraph (f)(3);
0
h. Adding a new paragraph (f)(2);
0
i. Redesignating paragraphs (g) through (i) as paragraphs (h) through 
(j), respectively and adding new paragraph (g);
0
j. In the heading of redesignated paragraph (h), removing the word 
``entities'' and adding in its place the word ``enterprises'';
0
k. In redesignated paragraph (h) introductory text, removing the word 
``entity'' and adding in its place the word ``enterprise'';
0
l. In redesignated paragraph (h)(1), removing the phrase ``paragraph 
(g)(1)(i)'' wherever it appears and adding in its place the phrase 
``paragraph (h)(1)'';
0
m. In redesignated paragraph (i)(3), removing the word ``non-
controlling'' and adding in its place the word ``pass-through''; and
0
n. Revising redesignated paragraph (j).
    The additions and revisions read as follows.


Sec.  5.58  Pass-through investments by a Federal savings association.

* * * * *
    (d) * * *
    (2) Pass-through investment means an investment authorized under 12 
CFR 160.32(a). A pass-through investment does not include a Federal 
savings association holding interests in a trust formed for the 
purposes of securitizing assets held by the savings association as part 
of its business or for the purposes of holding multiple legal titles of 
motor vehicles or equipment in conjunction with lease financing 
transactions.
    (e) Pass-through investments; notice procedure. Except as provided 
in paragraphs (f) through (i) of this section, a Federal savings 
association may make a pass-through investment, directly or through its 
operating subsidiary, in an enterprise that engages in an activity 
described in Sec.  5.38(f)(5) or in an activity that is substantively 
the same as a previously approved activity by filing a written notice. 
The Federal savings association must file this written notice with the 
appropriate OCC licensing office no later than 10 days after making the 
investment. The written notice must:
* * * * *
    (2) State:
    (i) Which paragraphs of Sec.  5.38(f)(5) describe the activity; or
    (ii) If the activity is substantively the same as a previously 
approved activity:
    (A) How, the activity is substantively the same as a previously 
approved activity;
    (B) The citation to the applicable precedent; and
    (C) That the activity will be conducted in accordance with the same 
terms and conditions applicable to the previously approved activity;
    (3) Certify that the Federal savings association is well 
capitalized and well managed at the time of the investment;
    (4) Describe how the Federal savings association has the ability to 
prevent the enterprise from engaging in an activity that is not set 
forth in Sec.  5.38(f)(5) or not contained in published OCC (including 
published former OTS) precedent for previously approved activities, or 
how the savings association otherwise has the ability to withdraw its 
investment;
* * * * *
    (f) * * * (1) In general. A Federal savings association must file 
an application and obtain prior approval before making or acquiring, 
either directly or through an operating subsidiary, a pass-through 
investment in an enterprise if the pass-through investment does not 
qualify for the notice procedure set forth in paragraph (e) of this 
section because the savings association is unable to make the 
representation required by paragraph (e)(2) or the certification 
required by paragraphs (e)(3) or (e)(7) of this section. The 
application must include the information required in paragraphs (e)(1) 
and (e)(4) through (e)(6) of this section and, if possible, paragraphs 
(e)(2), (e)(3), and (e)(7) of this section. If the Federal savings 
association is unable to make the representation set forth in paragraph 
(e)(2) of this section, the savings association's application must 
explain why the activity in which the enterprise engages is a 
permissible activity for a Federal savings association and why the 
filer should be permitted to hold a pass-through investment in an 
enterprise engaged in that activity. A Federal savings association may 
not make a pass-through investment if it is unable to make the 
representations and certifications specified in paragraphs (e)(1) and 
(e)(4) through (e)(6) of this section.
    (2) Expedited review. An application submitted by a Federal savings 
association is deemed approved by the OCC as of the 10th day after the 
application is received by the OCC if:
    (A) The Federal savings association makes the representation 
required by paragraph (e)(2) and the certification required by 
paragraph (e)(3) of this section;
    (B) The book value of the Federal savings association's pass-
through investment for which the application is being submitted is no 
more than 1% of the savings association's capital and surplus;
    (C) No more than 50% of the enterprise is owned or controlled by 
banks or savings associations subject to examination by an appropriate 
Federal banking agency or credit unions insured by the National Credit 
Union Association; and

[[Page 80469]]

    (D) The OCC has not notified the Federal savings association that 
the application has been removed from expedited review, or the 
expedited review process is extended, under Sec.  5.13(a)(2).
    (3) Investments requiring a filing under 12 U.S.C. 1828(m). 
Notwithstanding any other provision in this section, if an enterprise 
in which a Federal savings association proposes to invest would be a 
subsidiary of the Federal savings association for purposes of 12 U.S.C. 
1828(m) and the enterprise would not be an operating subsidiary or a 
service corporation, the Federal savings association must file an 
application with the OCC under paragraph (f)(3) of this section at 
least 30 days prior to making the investment and obtain prior approval 
from the OCC before making the investment. The application must include 
the information required in paragraphs (e)(1) and (e)(4) through (e)(6) 
of this section and, if possible, paragraphs (e)(2), (e)(3), and (e)(7) 
of this section. If the Federal savings association is unable to make 
the representation set forth in paragraph (e)(2) of this section, the 
savings association's application must explain why the activity in 
which the enterprise engages is a permissible activity for a Federal 
savings association and why the filer should be permitted to hold a 
pass-through investment in an enterprise engaged in that activity. A 
Federal savings association may not make a pass-through investment if 
it is unable to make the representations and certifications specified 
in paragraphs (e)(1) and (e)(4) through (e)(6) of this section.
    (g) Pass-through investments; no application or notice required. A 
Federal savings association may make or acquire, either directly or 
through an operating subsidiary, a pass-through investment in an 
enterprise, without an application or notice to the OCC, if:
    (i) The activities of the enterprise are limited to those to 
activities previously reported by the savings association in connection 
with the making or acquiring of a pass-through investment;
    (ii) The activities in the enterprise continue to be legally 
permissible for a Federal savings association;
    (iii) The savings association's pass-through investment will be 
made in accordance with any conditions imposed by the OCC or OTS in 
approving any prior pass-through investment conducting these 
activities;
    (iv) The savings association is able to make the representations 
and certifications specified in paragraphs (e)(3) through (e)(7) of 
this section; and
    (v) The enterprise will not be a subsidiary for purposes of 12 
U.S.C. 1828(m).
* * * * *
    (j) Exceptions to rules of general applicability. Sections 5.8, 
5.9, 5.10, and 5.11 do not apply to this section. However, if the OCC 
concludes that an application presents significant or novel policy, 
supervisory, or legal issues, the OCC may determine that some or all 
provisions in Sec. Sec.  5.8, 5.9, 5.10, and 5.11 apply.
* * * * *

0
46. Amend Sec.  5.59 by:
0
a. In paragraph (a), removing ``1464'' and adding in its place 
``1464(c)(4)(B)'' and adding ``and'' before ``5412(b)(2)(B);
0
b. In paragraph (b) introductory text, adding ``(12 U.S.C. 1828(m))'' 
after the phrase ``Insurance Act'';
0
c. In paragraph (d)(2), removing the phrase ``generally accepted 
accounting principles (GAAP)'' and adding in its place the word 
``GAAP'';
0
d. In paragraphs (e)(1), (e)(2), (f)(6)(i), and (h)(1)(ii), removing 
the word ``state'' and adding the word ``State'' wherever it appears;
0
e. In paragraph (e)(1), removing the phrase ``state-chartered'' and 
adding in its place the phrase ``State-chartered'';
0
f. In paragraph (e)(4), removing the word ``HOLA'' and adding in its 
place the phrase ``Home Owners' Loan Act, 12 U.S.C. 1464(c)'';
0
g. In paragraph (e)(9), removing the word ``shall'' and adding in its 
place the word ``must'' wherever it appears;
0
h. In paragraph (g)(1), removing the word ``HOLA'' and adding in its 
place the phrase ``Home Owners' Loan Act (12 U.S.C. 1464(c)(4)(B))'';
0
i. In paragraph (g)(1), removing ``Sec.  24.6 of this chapter'' and 
adding in its place ``12 CFR part 24'';
0
j. In paragraph (g)(2), removing the phrase ``HOLA and parts 5 and 160 
of this chapter'' and adding in its place the phrase ``Home Owners' 
Loan Act (12 U.S.C. 1464(c)), this part 5, and 12 CFR part 160'';
0
k. In paragraph (g)(3), removing the word ``paragraph,'' and adding in 
its place the phrase ``paragraph (g),'';
0
l. In paragraph (h)(1)(i) introductory text, adding the phrase ``(12 
U.S.C. 1828(m))'' after the word ``Act'';
0
m. In paragraph (h)(1)(ii), removing the phrase ``an applicant'' and 
adding in its place the phrase ``a filer'', and removing the word 
``applicants'' and adding in its place the word ``filers'';
0
n. In paragraphs (h)(2)(i) and (h)(3), removing the word ``applicant'' 
and adding in its place the word ``filer'';
0
o. In paragraph (h)(2), removing the phrase ``is not eligible for 
expedited review under 5.13(a)(2)'' and adding in its place the phrase 
``has been removed from expedited review, or the expedited review 
period is extended, under Sec.  5.13(a)(2)''
0
p. Revising paragraph (h)(2)(ii)(A); and
0
q. In paragraph (h)(2)(ii)(B), removing ``Sec.  5.59(f).'' and adding 
in its place the phrase ``paragraph (f) of this section.''.
    The revision reads as follows:


Sec.  5.59  Service corporations of Federal savings associations.

* * * * *
    (h) * * *
    (2) * * *
    (ii) * * *
    (A) The savings association is well capitalized and well managed; 
and
* * * * *


Sec.  5.62  [Amended]

0
47. Section 5.62 is amended by removing the word ``shall'' and adding 
in its place the word ``must''.


Sec.  5.64  [Amended]

0
48. Section 5.64 is amended by:
0
a. In paragraph (c)(2)(i), removing the word ``shall'' and adding in 
its place the word ``does'';
0
b. In paragraph (c)(2)(iii), removing the phrase ``paragraph (c)(2)'' 
and adding in its place the phrase ``paragraphs (c)(2)(i) and 
(c)(2)(ii)'' and removing the phrase ``shall apply'' and adding in its 
place the word ``applies'';
0
c. In paragraph (c)(3), removing the phrase ``paragraph (c)'' and 
adding in its place the phrase ``paragraphs (c)(1) and (c)(2)'' and 
removing the word ``shall'' and adding in its place the word ``must''; 
and
0
d. Removing paragraph (d).

0
49. Revise Sec.  5.66 to read as follows.


Sec.  5.66  Dividends payable in property other than cash.

    In addition to cash dividends, directors of a national bank may 
declare dividends payable in property, with the approval of the OCC. A 
national bank must submit a request for prior approval of a noncash 
dividend to the appropriate OCC licensing office. The dividend is 
equivalent to a cash dividend in an amount equal to the actual current 
value of the property, regardless of whether the book value is higher 
or lower under GAAP. Before the dividend is declared, the bank should 
show the difference between actual value and book value on the books of 
the national bank as a gain or loss, as applicable, and the dividend 
should then be declared in the amount of the actual current value of 
the property being distributed.

[[Page 80470]]


0
50. Revise Sec.  5.67 to read as follows.


Sec.  5.67  Fractional shares.

    A national bank issuing additional stock may adopt arrangements to 
preclude the issuance of fractional shares. The bank may remit the cash 
equivalent of the fraction not being issued to those to whom fractional 
shares would otherwise be issued. The cash equivalent is based on the 
market value of the stock, if there is an established and active market 
in the national bank's stock. In the absence of such a market, the cash 
equivalent is based on a reliable and disinterested determination as to 
the fair market value of the stock if such stock is available. The bank 
may propose an alternate method in the application for the stock 
issuance filed with the OCC.

0
51. Amend Sec.  5.70 by:
0
a. In paragraphs (c)(1)(iv) and (c)(1)(v), removing the word ``state'' 
and adding in its place the word ``State'' wherever it appears;
0
b. In paragraph (d)(1) and paragraph (d)(2) introductory text, removing 
the word ``shall'' and adding in its place the word ``must'' wherever 
it appears; and
0
c. Adding new paragraph (d)(3).
    The addition reads as follows.


Sec.  5.70  Federal branches and agencies.

* * * * *
    (d) * * *
    (3) Biographical and Financial Reports. The OCC may require any 
senior executive officer of a Federal branch or agency submitting a 
filing to submit an Interagency Biographical and Financial Report, 
available at www.occ.gov, and legible fingerprints.

PART 7--ACTIVITIES AND OPERATIONS

0
52. The authority citation for part 7 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 25b, 29, 71, 71a, 92, 92a, 93, 
93a, 95(b)(1), 371, 371d, 481, 484, 1463, 1464, 1465, 1818, 1828(m) 
and 5412(b)(2)(B).


Sec.  7.2008  [Amended]

0
53. Amend Sec.  7.2008(c) by removing the phrase ``12 CFR 5.3(c)'' and 
adding in its place the phrase ``12 CFR 5.3''.

Brian P. Brooks,
Acting Comptroller of the Currency.
[FR Doc. 2020-25595 Filed 12-10-20; 8:45 am]
BILLING CODE 4810-33-P