federal register
66275
Tuesday
December 1, 1998
Part III
Federal Deposit
Insurance
Corporation
12 CFR Parts 303, 337, and 362
Activities of Insured State Banks and
Insured Savings Associations; Proposed
and Final Rules
66275
Tuesday
December 1, 1998
Part III
Federal Deposit
Insurance
Corporation
12 CFR Parts 303, 337, and 362
Activities of Insured State Banks and
Insured Savings Associations; Proposed
and Final Rules
66276 Federal Register / Vol. 63, No. 230 / Tuesday, December 1, 1998 / Rules and Regulations
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 303, 337 and 362
RIN 3064–AC12
Activities of Insured State Banks and
Insured Savings Associations
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: As part of the FDIC’s
systematic review of its regulations and
written policies under section 303(a) of
the Riegle Community Development and
Regulatory Improvement Act of 1994
(CDRI), the FDIC has revised and
consolidated its rules and regulations
governing activities and investments of
insured state banks and insured savings
associations. The rule implements
sections 24, 28, and 18(m) of the Federal
Deposit Insurance Act, and also
establishes certain safety and soundness
standards pursuant to the FDIC’s
authority under section 8. The FDIC’s
final rule establishes a number of new
exceptions and allows institutions to
conduct certain activities after
providing the FDIC with notice rather
than filing an application. Subject to
appropriate separations and limitations,
the activities that may be conducted
through a majority-owned subsidiary
under these expedited notice processing
criteria are real estate investment and
securities underwriting. The FDIC
combined its regulations governing the
activities and investments of insured
state banks with those governing
insured savings associations. In
addition, the FDIC’s final rule updates
its regulations governing the safety and
soundness of securities activities of
subsidiaries and affiliates of insured
state nonmember banks. The FDIC’s
final rule modernizes this group of
regulations and harmonizes the
provisions governing activities that are
not permissible for national banks with
those governing the securities
underwriting and distribution activities
of subsidiaries of state nonmember
banks. The FDIC’s final rule makes a
number of substantive changes and
amends the regulations by deleting
obsolete provisions, rewriting the
regulatory text to make it more readable,
conforming the treatment of state banks
and savings associations to the extent
possible given the underlying statutory
and regulatory scheme governing the
different charters. The FDIC’s final rule
also conforms most of the disclosures
required under the current regulation to
the Interagency Statement on the Retail
Sale of Nondeposit Investment
Products.
EFFECTIVE DATE: January 1, 1999.
FOR FURTHER INFORMATION CONTACT:
Curtis Vaughn, Examination Specialist,
(202/898–6759), Division of
Supervision; Linda L. Stamp, Counsel,
(202/898–7310) or Jamey Basham,
Counsel, (202/898–7265), Legal
Division, FDIC, 550 17th Street, N.W.,
Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Section 303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (RCDRIA)
required that the FDIC review its
regulations for the purpose of
streamlining those regulations, reducing
any unnecessary costs and eliminating
unwarranted constraints on credit
availability while faithfully
implementing statutory requirements.
Pursuant to that statutory direction, the
FDIC reviewed part 362 ‘‘Activities and
Investments of Insured State Banks,’’
subpart G of Part 303, effective October
1, 1998, (formerly § 303.13) ‘‘Filings by
Savings Associations’’, and § 337.4
‘‘Securities Activities of Subsidiaries of
Insured State Banks: Bank Transactions
with Affiliated Securities Companies’’,
and proposed making a number of
changes to those regulations. That
proposal is found in the September 12,
1997, issue of the Federal Register at 62
FR 47969.
The FDIC’s final rule restructures
existing part 362, placing the substance
of the text of the current regulation into
new subpart A. Subpart A addresses the
Activities of Insured State Banks
implementing section 24 of the Federal
Deposit Insurance Act (FDI Act). 12
U.S.C. 1831a. Section 24 restricts and
prohibits insured state banks and their
subsidiaries from engaging in activities
and investments of a type that are not
permissible for national banks and their
subsidiaries. Through this new final
rule, the FDIC introduces a new
streamlined notice processing concept
for insured state nonmember banks that
want to engage in certain activities that
are impermissible for national banks
and their subsidiaries.
Due to the experience that the FDIC
has gained in reviewing applications
from insured state nonmember banks
since the enactment of section 24, the
FDIC has standardized the eligibility
criteria and conditions for two
activities. This mechanism gives
insured state nonmember banks a level
of certainty that has been lacking for
banks that want to diversify their
earnings and maintain their
competitiveness by investing in
subsidiaries that engage in activities not
permissible for national banks. This
framework sets forth the eligibility
criteria and conditions for majority-
owned subsidiaries of insured state
nonmember banks to engage in real
estate investment and securities
underwriting. This framework allows
insured state nonmember banks to
proceed with their business plans in
these areas with relative certainty that
the FDIC will consent to the execution
of their plans and with assurance that
consent will be forthcoming on a
predictable schedule. This framework
allows the insured state nonmember
banks to be creative and innovative in
their business plan within the structure
appropriate to the activities being
undertaken. The FDIC hopes that this
rule will assist the insured state
nonmember banks as they progress into
the competitive financial environment
of the 21st century in which they
operate their business.
The FDIC’s final rule moves the part
of the FDIC’s regulations governing
securities underwriting not permissible
for national banks (currently at 12 CFR
337.4) into subpart A of part 362.
Although the proposal contemplated
that the entire regulation, Securities
Activities of Insured State Nonmember
Banks, found in § 337.4 of this chapter
would be removed and reserved, we
have postponed that action while
redeveloping some of the safety and
soundness criteria that govern insured
state bank subsidiaries that engage in
the public sale, distribution or
underwriting of securities and other
activities that are not permissible for a
national bank but that are permissible
for national bank subsidiaries. The
redeveloped regulatory language that
will amend subpart B of this regulation
is published as a proposed rule
elsewhere in this issue of the Federal
Register for further public comment.
During the period that § 337.4 still
exists, where activities are covered by
both § 337.4 and this final rule, we have
provided relief from the requirements of
§ 337.4 in this rulemaking.
For those activities that were covered
under § 337.4 and are now covered
under this part 362, we have attempted
to modernize the regulations governing
those activities by updating the
requirements, revising the regulations
by deleting obsolete provisions,
rewriting the regulatory text to make it
more readable, removing a number of
the obsolete current restrictions on
those activities, and removing the
disclosures required under the current
regulation.
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 303, 337 and 362
RIN 3064–AC12
Activities of Insured State Banks and
Insured Savings Associations
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: As part of the FDIC’s
systematic review of its regulations and
written policies under section 303(a) of
the Riegle Community Development and
Regulatory Improvement Act of 1994
(CDRI), the FDIC has revised and
consolidated its rules and regulations
governing activities and investments of
insured state banks and insured savings
associations. The rule implements
sections 24, 28, and 18(m) of the Federal
Deposit Insurance Act, and also
establishes certain safety and soundness
standards pursuant to the FDIC’s
authority under section 8. The FDIC’s
final rule establishes a number of new
exceptions and allows institutions to
conduct certain activities after
providing the FDIC with notice rather
than filing an application. Subject to
appropriate separations and limitations,
the activities that may be conducted
through a majority-owned subsidiary
under these expedited notice processing
criteria are real estate investment and
securities underwriting. The FDIC
combined its regulations governing the
activities and investments of insured
state banks with those governing
insured savings associations. In
addition, the FDIC’s final rule updates
its regulations governing the safety and
soundness of securities activities of
subsidiaries and affiliates of insured
state nonmember banks. The FDIC’s
final rule modernizes this group of
regulations and harmonizes the
provisions governing activities that are
not permissible for national banks with
those governing the securities
underwriting and distribution activities
of subsidiaries of state nonmember
banks. The FDIC’s final rule makes a
number of substantive changes and
amends the regulations by deleting
obsolete provisions, rewriting the
regulatory text to make it more readable,
conforming the treatment of state banks
and savings associations to the extent
possible given the underlying statutory
and regulatory scheme governing the
different charters. The FDIC’s final rule
also conforms most of the disclosures
required under the current regulation to
the Interagency Statement on the Retail
Sale of Nondeposit Investment
Products.
EFFECTIVE DATE: January 1, 1999.
FOR FURTHER INFORMATION CONTACT:
Curtis Vaughn, Examination Specialist,
(202/898–6759), Division of
Supervision; Linda L. Stamp, Counsel,
(202/898–7310) or Jamey Basham,
Counsel, (202/898–7265), Legal
Division, FDIC, 550 17th Street, N.W.,
Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Section 303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (RCDRIA)
required that the FDIC review its
regulations for the purpose of
streamlining those regulations, reducing
any unnecessary costs and eliminating
unwarranted constraints on credit
availability while faithfully
implementing statutory requirements.
Pursuant to that statutory direction, the
FDIC reviewed part 362 ‘‘Activities and
Investments of Insured State Banks,’’
subpart G of Part 303, effective October
1, 1998, (formerly § 303.13) ‘‘Filings by
Savings Associations’’, and § 337.4
‘‘Securities Activities of Subsidiaries of
Insured State Banks: Bank Transactions
with Affiliated Securities Companies’’,
and proposed making a number of
changes to those regulations. That
proposal is found in the September 12,
1997, issue of the Federal Register at 62
FR 47969.
The FDIC’s final rule restructures
existing part 362, placing the substance
of the text of the current regulation into
new subpart A. Subpart A addresses the
Activities of Insured State Banks
implementing section 24 of the Federal
Deposit Insurance Act (FDI Act). 12
U.S.C. 1831a. Section 24 restricts and
prohibits insured state banks and their
subsidiaries from engaging in activities
and investments of a type that are not
permissible for national banks and their
subsidiaries. Through this new final
rule, the FDIC introduces a new
streamlined notice processing concept
for insured state nonmember banks that
want to engage in certain activities that
are impermissible for national banks
and their subsidiaries.
Due to the experience that the FDIC
has gained in reviewing applications
from insured state nonmember banks
since the enactment of section 24, the
FDIC has standardized the eligibility
criteria and conditions for two
activities. This mechanism gives
insured state nonmember banks a level
of certainty that has been lacking for
banks that want to diversify their
earnings and maintain their
competitiveness by investing in
subsidiaries that engage in activities not
permissible for national banks. This
framework sets forth the eligibility
criteria and conditions for majority-
owned subsidiaries of insured state
nonmember banks to engage in real
estate investment and securities
underwriting. This framework allows
insured state nonmember banks to
proceed with their business plans in
these areas with relative certainty that
the FDIC will consent to the execution
of their plans and with assurance that
consent will be forthcoming on a
predictable schedule. This framework
allows the insured state nonmember
banks to be creative and innovative in
their business plan within the structure
appropriate to the activities being
undertaken. The FDIC hopes that this
rule will assist the insured state
nonmember banks as they progress into
the competitive financial environment
of the 21st century in which they
operate their business.
The FDIC’s final rule moves the part
of the FDIC’s regulations governing
securities underwriting not permissible
for national banks (currently at 12 CFR
337.4) into subpart A of part 362.
Although the proposal contemplated
that the entire regulation, Securities
Activities of Insured State Nonmember
Banks, found in § 337.4 of this chapter
would be removed and reserved, we
have postponed that action while
redeveloping some of the safety and
soundness criteria that govern insured
state bank subsidiaries that engage in
the public sale, distribution or
underwriting of securities and other
activities that are not permissible for a
national bank but that are permissible
for national bank subsidiaries. The
redeveloped regulatory language that
will amend subpart B of this regulation
is published as a proposed rule
elsewhere in this issue of the Federal
Register for further public comment.
During the period that § 337.4 still
exists, where activities are covered by
both § 337.4 and this final rule, we have
provided relief from the requirements of
§ 337.4 in this rulemaking.
For those activities that were covered
under § 337.4 and are now covered
under this part 362, we have attempted
to modernize the regulations governing
those activities by updating the
requirements, revising the regulations
by deleting obsolete provisions,
rewriting the regulatory text to make it
more readable, removing a number of
the obsolete current restrictions on
those activities, and removing the
disclosures required under the current
regulation.