15480 Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Notices
Division, FDIC, 550 17th Street, N.W.,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION: The FDIC
is conducting a systematic review of its
regulations and written policies. Section
303(a) of the CDRI (12 U.S.C. 4803(a))
requires the FDIC, the Office of the
Comptroller of the Currency, the Board
of Governors of the Federal Reserve
System, and the Office of Thrift
Supervision (Federal banking agencies)
to each streamline and modify its
regulations and written policies in order
to improve efficiency, reduce
unnecessary costs, and eliminate
unwarranted constraints on credit
availability. Section 303(a) also requires
each of the Federal banking agencies to
remove inconsistencies and outmoded
and duplicative requirements from its
regulations and written policies.
As a part of this review, the FDIC has
determined that the Statement of Policy
contains a substantial amount of
information that is outmoded, and
duplicated or cross-referenced
elsewhere. The FDIC’s written policies
can be streamlined by eliminating the
Statement of Policy. The relevant
information contained in the Policy
Statement will be condensed and placed
into Statements of Policy regarding
Applications for Deposit Insurance, and
Bank Merger Transactions.
On September 8, 1980, the Statement
of Policy was adopted by the Board of
the FDIC and was published on
September 15, 1980 (45 FR 61025). The
Statement of Policy addresses
unreasonable or excessive fees, insider
fees, and contingency fee arrangements
incidental to applications filed with the
FDIC. Some of the information
contained in the Statement of Policy is
now also in other Statements of Policy
addressing specific applications and, as
a result, it is no longer necessary to have
a Statement of Policy dealing
specifically with legal fees and other
expenses.
Issues formerly dealt with in the
Statement of Policy have now been
condensed and placed into other
application specific ‘‘Statements of
Policy’’. The following specific
statements are now included in relevant
‘‘Statements of Policy’’ published
concurrently herein.
‘‘The commitment to or payment of
unreasonable or excessive fees and other
expenses incident to an application reflects
adversely upon the management of the
applicant institution. Fees and other
organizational expenses incurred or
committed to should be fully supported.
Expenses for professional or other services
rendered by organizers, present or
prospective board members, major
shareholders or executive officers will
receive special review for any indication of
self-dealing to the detriment of the bank and
its other shareholders. As a matter of
practice, the FDIC expects full disclosure to
all directors and shareholders of any material
arrangement with an insider.
In no case will an FDIC application be
approved where the payment of a fee, in
whole or in part, is contingent upon any act
or forbearance by the FDIC or by any other
federal or state agency or official.’’
The rescission does not reflect any
substantive change in the FDIC’s
supervisory attitude toward excessive,
unwarranted, or otherwise
inappropriate fees incident to an
application, and the relevant issues will
continue to be addressed.
For the above reasons, the Statement
of Policy is hereby rescinded.
By order of the Board of Directors.
Dated at Washington, DC, this 25th day of
March, 1997.
Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 97–8171 Filed 3–31–97; 8:45 am]
BILLING CODE 6714–01–P
Statement of Policy Regarding Liability
of Commonly Controlled Depository
Institutions
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Policy statement.
SUMMARY: The FDIC is revising the
statement of policy which sets forth the
procedures and guidelines the FDIC
uses in assessing liability against
commonly controlled depository
institutions under section 5(e) of the
Federal Deposit Insurance Act. The
revised policy statement provides
guidance based on the FDIC’s
experience in administering the
provisions of section 5(e) of the Act and
clarifies the authority granted to the
FDIC to issue assessments of liability or
grant conditional waivers of liability,
the manner in which the FDIC will
assess the amount of loss incurred by
the FDIC, and the manner in which each
liable institution’s share of that loss will
be determined. The revised policy
statement also addresses the potential
liability of depository institutions
acquired by unaffiliated parties prior to
any occurrence establishing liability
under section 5(e) of the Act.
EFFECTIVE DATE: April 1, 1997.
FOR FURTHER INFORMATION CONTACT:
Cheryl Steffen, Special Situations and
Application Section, Division of
Supervision, (202) 898–8768; Michael J.
Fanaroff, Division of Resolution and
Receiverships, (202) 898–7122; or
Grovetta N. Gardineer, Counsel, Legal
Division, (202) 736–0665, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION: On May
22, 1990, the Board of Directors of the
FDIC adopted a Statement of Policy
Regarding Liability of Commonly
Controlled Depository Institutions. Such
liability is a consequence of section 5(e)
of the Federal Deposit Insurance Act
(Act), 12 U.S.C. 1815(e), which was
added by the passage of section
206(a)(7) of the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989. Section 5(e) created liability for
commonly controlled insured
depository institutions for losses
incurred or anticipated by the FDIC in
connection with (i) the default of a
commonly controlled insured
depository institution; or (ii) any
assistance provided by the FDIC to any
commonly controlled insured
depository institution in danger of
default. The purpose of section 5(e) is to
ensure that the assets of healthy
depository institution subsidiaries
within the same holding company
structure, or of a healthy institution
which controls a failing institution, will
be available to the FDIC to help offset
the cost of resolving the failed
subsidiary. While the FDIC seeks to
recover its losses associated with failing
institutions, it also seeks to encourage
the acquisition of troubled institutions
by those capable of rehabilitating them
and to avoid instances in which the
assessment of liability against an
otherwise healthy institution will cause
its failure, thus exposing the FDIC and
the insurance funds to greater loss.
The FDIC has brought a number of
actions since the enactment of section
5(e). While the original statement of
policy provided guidance to the
industry regarding the application of the
statute at the time it was published, the
FDIC had not initiated any actions
under the statute. The revised policy
statement attempts to provide guidance
to the industry based on actual practice
with administering the statute. The
proposed policy statement contains
information regarding the content of
requests for conditional waiver.
Depending on decisions affecting part
303 of the FDIC Rules and Regulations
(Rules), this information may also be
addressed in the revised part 303 of the
FDIC’s Rules regarding applications.
Any changes in part 303 of the FDIC’s
Rules may also necessitate further
revisions to the policy statement.
The policy statement provides for the
issuance of a Notice of Assessment of
Division, FDIC, 550 17th Street, N.W.,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION: The FDIC
is conducting a systematic review of its
regulations and written policies. Section
303(a) of the CDRI (12 U.S.C. 4803(a))
requires the FDIC, the Office of the
Comptroller of the Currency, the Board
of Governors of the Federal Reserve
System, and the Office of Thrift
Supervision (Federal banking agencies)
to each streamline and modify its
regulations and written policies in order
to improve efficiency, reduce
unnecessary costs, and eliminate
unwarranted constraints on credit
availability. Section 303(a) also requires
each of the Federal banking agencies to
remove inconsistencies and outmoded
and duplicative requirements from its
regulations and written policies.
As a part of this review, the FDIC has
determined that the Statement of Policy
contains a substantial amount of
information that is outmoded, and
duplicated or cross-referenced
elsewhere. The FDIC’s written policies
can be streamlined by eliminating the
Statement of Policy. The relevant
information contained in the Policy
Statement will be condensed and placed
into Statements of Policy regarding
Applications for Deposit Insurance, and
Bank Merger Transactions.
On September 8, 1980, the Statement
of Policy was adopted by the Board of
the FDIC and was published on
September 15, 1980 (45 FR 61025). The
Statement of Policy addresses
unreasonable or excessive fees, insider
fees, and contingency fee arrangements
incidental to applications filed with the
FDIC. Some of the information
contained in the Statement of Policy is
now also in other Statements of Policy
addressing specific applications and, as
a result, it is no longer necessary to have
a Statement of Policy dealing
specifically with legal fees and other
expenses.
Issues formerly dealt with in the
Statement of Policy have now been
condensed and placed into other
application specific ‘‘Statements of
Policy’’. The following specific
statements are now included in relevant
‘‘Statements of Policy’’ published
concurrently herein.
‘‘The commitment to or payment of
unreasonable or excessive fees and other
expenses incident to an application reflects
adversely upon the management of the
applicant institution. Fees and other
organizational expenses incurred or
committed to should be fully supported.
Expenses for professional or other services
rendered by organizers, present or
prospective board members, major
shareholders or executive officers will
receive special review for any indication of
self-dealing to the detriment of the bank and
its other shareholders. As a matter of
practice, the FDIC expects full disclosure to
all directors and shareholders of any material
arrangement with an insider.
In no case will an FDIC application be
approved where the payment of a fee, in
whole or in part, is contingent upon any act
or forbearance by the FDIC or by any other
federal or state agency or official.’’
The rescission does not reflect any
substantive change in the FDIC’s
supervisory attitude toward excessive,
unwarranted, or otherwise
inappropriate fees incident to an
application, and the relevant issues will
continue to be addressed.
For the above reasons, the Statement
of Policy is hereby rescinded.
By order of the Board of Directors.
Dated at Washington, DC, this 25th day of
March, 1997.
Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 97–8171 Filed 3–31–97; 8:45 am]
BILLING CODE 6714–01–P
Statement of Policy Regarding Liability
of Commonly Controlled Depository
Institutions
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Policy statement.
SUMMARY: The FDIC is revising the
statement of policy which sets forth the
procedures and guidelines the FDIC
uses in assessing liability against
commonly controlled depository
institutions under section 5(e) of the
Federal Deposit Insurance Act. The
revised policy statement provides
guidance based on the FDIC’s
experience in administering the
provisions of section 5(e) of the Act and
clarifies the authority granted to the
FDIC to issue assessments of liability or
grant conditional waivers of liability,
the manner in which the FDIC will
assess the amount of loss incurred by
the FDIC, and the manner in which each
liable institution’s share of that loss will
be determined. The revised policy
statement also addresses the potential
liability of depository institutions
acquired by unaffiliated parties prior to
any occurrence establishing liability
under section 5(e) of the Act.
EFFECTIVE DATE: April 1, 1997.
FOR FURTHER INFORMATION CONTACT:
Cheryl Steffen, Special Situations and
Application Section, Division of
Supervision, (202) 898–8768; Michael J.
Fanaroff, Division of Resolution and
Receiverships, (202) 898–7122; or
Grovetta N. Gardineer, Counsel, Legal
Division, (202) 736–0665, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION: On May
22, 1990, the Board of Directors of the
FDIC adopted a Statement of Policy
Regarding Liability of Commonly
Controlled Depository Institutions. Such
liability is a consequence of section 5(e)
of the Federal Deposit Insurance Act
(Act), 12 U.S.C. 1815(e), which was
added by the passage of section
206(a)(7) of the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989. Section 5(e) created liability for
commonly controlled insured
depository institutions for losses
incurred or anticipated by the FDIC in
connection with (i) the default of a
commonly controlled insured
depository institution; or (ii) any
assistance provided by the FDIC to any
commonly controlled insured
depository institution in danger of
default. The purpose of section 5(e) is to
ensure that the assets of healthy
depository institution subsidiaries
within the same holding company
structure, or of a healthy institution
which controls a failing institution, will
be available to the FDIC to help offset
the cost of resolving the failed
subsidiary. While the FDIC seeks to
recover its losses associated with failing
institutions, it also seeks to encourage
the acquisition of troubled institutions
by those capable of rehabilitating them
and to avoid instances in which the
assessment of liability against an
otherwise healthy institution will cause
its failure, thus exposing the FDIC and
the insurance funds to greater loss.
The FDIC has brought a number of
actions since the enactment of section
5(e). While the original statement of
policy provided guidance to the
industry regarding the application of the
statute at the time it was published, the
FDIC had not initiated any actions
under the statute. The revised policy
statement attempts to provide guidance
to the industry based on actual practice
with administering the statute. The
proposed policy statement contains
information regarding the content of
requests for conditional waiver.
Depending on decisions affecting part
303 of the FDIC Rules and Regulations
(Rules), this information may also be
addressed in the revised part 303 of the
FDIC’s Rules regarding applications.
Any changes in part 303 of the FDIC’s
Rules may also necessitate further
revisions to the policy statement.
The policy statement provides for the
issuance of a Notice of Assessment of
15481Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Notices
Liability, Findings of Fact and
Conclusions of Law, an Order to Pay
and a Notice of Hearing, a good faith
estimate of the FDIC’s loss, and the
determination of the method and
schedule of repayment. The liability
under the statute attaches at the time of
default of a commonly controlled
depository institution. The FDIC, in its
discretion, may assess liability for the
losses incurred by the default or for any
assistance provided by the FDIC to a
commonly controlled institution in
danger of default. Generally, liability
will be assessed against an institution
except in instances of the acquisition of
a distressed institution by an
unaffiliated entity prior to the default of
a commonly controlled institution. A
conditional waiver of the liability will
be considered when, as determined
within the sole discretion of the Board
of Directors of the FDIC, the exemption
is in the best interests of either of the
insurance funds administered by the
FDIC or where a waiver facilitates an
alternative that is in the best interests of
the FDIC. Institutions that believe that
an assessment of liability would be
inappropriate are required to submit
supporting documentation.
The text of the revised policy
statement follows:
Federal Deposit Insurance Corporation
Statement of Policy Regarding Liability
of Commonly Controlled Depository
Institutions
Introduction
Section 5(e) of the Federal Deposit
Insurance Act, as added by section
206(a)(7) of the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989, creates liability for commonly
controlled insured depository
institutions for losses incurred or
anticipated by the Federal Deposit
Insurance Corporation (FDIC) in
connection with (i) the default of a
commonly controlled insured
depository institution; or (ii) any
assistance provided by the FDIC to any
commonly controlled insured
depository institution in danger of
default. In addition to certain statutory
exceptions and exclusions contained in
sections 5(e)(6), (7) and (8), the Act also
permits the FDIC, in its discretion, to
exempt any insured depository
institution from this liability if it
determines that such exemption is in
the ‘‘best interests of the Bank Insurance
Fund or the Savings Association
Insurance Fund’’.
The liability of an insured depository
institution attaches at the time of default
of a commonly controlled institution. It
is completely within the discretion of
the FDIC whether or not to issue a
notice of assessment to the liable
institution for the estimated amount of
the loss incurred by the FDIC.
Guidelines for Conditional Waiver of
Liability
The FDIC may, in its discretion,
choose not to assess liability based upon
analysis of a particular situation, and it
may entertain requests for waivers from
affiliated or unaffiliated parties of an
institution in default or in danger of
default. The determination of whether
an exemption is in the best interests of
either insurance fund rests solely with
the Board of Directors of the FDIC
(Board). Should the Board make such a
determination, a waiver will be issued
setting forth terms and conditions that
must be met in order to receive an
exemption from liability (conditional
waiver of liability). The following
guidelines apply to conditional waivers
of liability under the provisions of this
section:
(1) A conditional waiver of liability
will be considered in those cases where
the waiver facilitates an alternative that
would be in the best interests of the
FDIC; for example, the conditional
waiver may be granted when requisite
additional capital and managerial
resources are being provided which
substantially lessen exposure to the
affected insurance fund. When
conditional waivers are granted to an
otherwise unaffiliated acquirer of a
failing or failed institution they will be
granted for a fixed period, generally not
to exceed a period of time reasonably
required for existing problems to be
identified and resolved.
(2) If one or more institutions in a
commonly controlled relationship is
otherwise solvent, well-managed and
viable, it may be in the best interest of
the FDIC to waive or reduce claims
against such entities. In determining
whether a conditional waiver is
appropriate, consideration will be given
to actions of a holding company which
contribute to or diminish the FDIC’s
losses, as well as proposals to
strengthen other weakened institutions,
if any.
(3) Requests for waivers should be
filed with the appropriate Regional
Director (Supervision).
(4) In the event an application for a
conditional waiver of liability is made,
the applicant should provide the FDIC
information indicating the basis for
requesting a waiver; the existence of any
significant events (e.g., change of
control, capital injection, etc.) that may
have an impact upon the applicant or a
potentially liable institution(s); current
and, if applicable, pro forma financial
information regarding the applicant and
potentially liable institution(s); and the
benefits resulting from the waiver and
any related events. Additional
information may be requested.
(5) In the event a conditional waiver
of liability is issued, failure to comply
with the terms specified therein may
result in the termination of the
conditional waiver of liability. The FDIC
reserves the right to revoke the
conditional waiver of liability after
giving the applicant written notice of
said revocation and a reasonable
opportunity to be heard on the matter.
(6) In cases where an insured
depository institution is sold to an
acquirer with no financial interest,
directly or indirectly, in the institution
prior to the acquisition, it is the general
policy of the FDIC to forego the issuance
of a notice of assessment to the acquirer
and its affiliated institutions in the
event of a default of an insured
depository institution formerly affiliated
with the acquired institution. The FDIC
will review all such transactions prior to
making a final determination to forego
the issuance of the notice of assessment.
Guidelines for Assessment of Liability
Whenever the FDIC determines that
assessment of liability in connection
with a commonly controlled insured
depository institution(s) is appropriate,
a Notice of Assessment of Liability,
Findings of Fact and Conclusions of
Law, Order to Pay, and Notice of
Hearing (Notice of Assessment) will be
served upon the liable institution. In
assessing the amount of the FDIC’s loss
and the liable institution(s) method of
payment, the following guidelines shall
apply:
(1) A good faith estimate of the
amount of loss the FDIC will incur shall
be based upon (a) the actual sale or
calculation of loss from a review by the
FDIC of the assets and liabilities of the
institution prior to default or the
granting of assistance; or (b) any other
cost estimate bases as explained in the
Notice of Assessment.
(2) If there is more than one
commonly controlled depository
institution to be assessed, each such
institution is jointly and severally liable
for all losses; however, the FDIC shall
make a good faith estimate of the
liability of each institution as
determined by (a) first assessing an
initial amount on a pro rata capital basis
that brings about parity in the capital
ratios of the liable institutions and (b)
then apportioning any residual
assessment on a pro-rata size basis
utilizing the most recent Report of
Condition. Any final assessment can be
based on the estimated liability of each
Liability, Findings of Fact and
Conclusions of Law, an Order to Pay
and a Notice of Hearing, a good faith
estimate of the FDIC’s loss, and the
determination of the method and
schedule of repayment. The liability
under the statute attaches at the time of
default of a commonly controlled
depository institution. The FDIC, in its
discretion, may assess liability for the
losses incurred by the default or for any
assistance provided by the FDIC to a
commonly controlled institution in
danger of default. Generally, liability
will be assessed against an institution
except in instances of the acquisition of
a distressed institution by an
unaffiliated entity prior to the default of
a commonly controlled institution. A
conditional waiver of the liability will
be considered when, as determined
within the sole discretion of the Board
of Directors of the FDIC, the exemption
is in the best interests of either of the
insurance funds administered by the
FDIC or where a waiver facilitates an
alternative that is in the best interests of
the FDIC. Institutions that believe that
an assessment of liability would be
inappropriate are required to submit
supporting documentation.
The text of the revised policy
statement follows:
Federal Deposit Insurance Corporation
Statement of Policy Regarding Liability
of Commonly Controlled Depository
Institutions
Introduction
Section 5(e) of the Federal Deposit
Insurance Act, as added by section
206(a)(7) of the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989, creates liability for commonly
controlled insured depository
institutions for losses incurred or
anticipated by the Federal Deposit
Insurance Corporation (FDIC) in
connection with (i) the default of a
commonly controlled insured
depository institution; or (ii) any
assistance provided by the FDIC to any
commonly controlled insured
depository institution in danger of
default. In addition to certain statutory
exceptions and exclusions contained in
sections 5(e)(6), (7) and (8), the Act also
permits the FDIC, in its discretion, to
exempt any insured depository
institution from this liability if it
determines that such exemption is in
the ‘‘best interests of the Bank Insurance
Fund or the Savings Association
Insurance Fund’’.
The liability of an insured depository
institution attaches at the time of default
of a commonly controlled institution. It
is completely within the discretion of
the FDIC whether or not to issue a
notice of assessment to the liable
institution for the estimated amount of
the loss incurred by the FDIC.
Guidelines for Conditional Waiver of
Liability
The FDIC may, in its discretion,
choose not to assess liability based upon
analysis of a particular situation, and it
may entertain requests for waivers from
affiliated or unaffiliated parties of an
institution in default or in danger of
default. The determination of whether
an exemption is in the best interests of
either insurance fund rests solely with
the Board of Directors of the FDIC
(Board). Should the Board make such a
determination, a waiver will be issued
setting forth terms and conditions that
must be met in order to receive an
exemption from liability (conditional
waiver of liability). The following
guidelines apply to conditional waivers
of liability under the provisions of this
section:
(1) A conditional waiver of liability
will be considered in those cases where
the waiver facilitates an alternative that
would be in the best interests of the
FDIC; for example, the conditional
waiver may be granted when requisite
additional capital and managerial
resources are being provided which
substantially lessen exposure to the
affected insurance fund. When
conditional waivers are granted to an
otherwise unaffiliated acquirer of a
failing or failed institution they will be
granted for a fixed period, generally not
to exceed a period of time reasonably
required for existing problems to be
identified and resolved.
(2) If one or more institutions in a
commonly controlled relationship is
otherwise solvent, well-managed and
viable, it may be in the best interest of
the FDIC to waive or reduce claims
against such entities. In determining
whether a conditional waiver is
appropriate, consideration will be given
to actions of a holding company which
contribute to or diminish the FDIC’s
losses, as well as proposals to
strengthen other weakened institutions,
if any.
(3) Requests for waivers should be
filed with the appropriate Regional
Director (Supervision).
(4) In the event an application for a
conditional waiver of liability is made,
the applicant should provide the FDIC
information indicating the basis for
requesting a waiver; the existence of any
significant events (e.g., change of
control, capital injection, etc.) that may
have an impact upon the applicant or a
potentially liable institution(s); current
and, if applicable, pro forma financial
information regarding the applicant and
potentially liable institution(s); and the
benefits resulting from the waiver and
any related events. Additional
information may be requested.
(5) In the event a conditional waiver
of liability is issued, failure to comply
with the terms specified therein may
result in the termination of the
conditional waiver of liability. The FDIC
reserves the right to revoke the
conditional waiver of liability after
giving the applicant written notice of
said revocation and a reasonable
opportunity to be heard on the matter.
(6) In cases where an insured
depository institution is sold to an
acquirer with no financial interest,
directly or indirectly, in the institution
prior to the acquisition, it is the general
policy of the FDIC to forego the issuance
of a notice of assessment to the acquirer
and its affiliated institutions in the
event of a default of an insured
depository institution formerly affiliated
with the acquired institution. The FDIC
will review all such transactions prior to
making a final determination to forego
the issuance of the notice of assessment.
Guidelines for Assessment of Liability
Whenever the FDIC determines that
assessment of liability in connection
with a commonly controlled insured
depository institution(s) is appropriate,
a Notice of Assessment of Liability,
Findings of Fact and Conclusions of
Law, Order to Pay, and Notice of
Hearing (Notice of Assessment) will be
served upon the liable institution. In
assessing the amount of the FDIC’s loss
and the liable institution(s) method of
payment, the following guidelines shall
apply:
(1) A good faith estimate of the
amount of loss the FDIC will incur shall
be based upon (a) the actual sale or
calculation of loss from a review by the
FDIC of the assets and liabilities of the
institution prior to default or the
granting of assistance; or (b) any other
cost estimate bases as explained in the
Notice of Assessment.
(2) If there is more than one
commonly controlled depository
institution to be assessed, each such
institution is jointly and severally liable
for all losses; however, the FDIC shall
make a good faith estimate of the
liability of each institution as
determined by (a) first assessing an
initial amount on a pro rata capital basis
that brings about parity in the capital
ratios of the liable institutions and (b)
then apportioning any residual
assessment on a pro-rata size basis
utilizing the most recent Report of
Condition. Any final assessment can be
based on the estimated liability of each