Disclosure of Financial and Other Information by FDIC-Insured State Nonmember Banks

CourtFederal Deposit Insurance Corporation
Citation84 FR 9698
Record Number2019-04944
SectionRules and Regulations
Published date18 March 2019
Federal Register, Volume 84 Issue 52 (Monday, March 18, 2019)
[Federal Register Volume 84, Number 52 (Monday, March 18, 2019)]
                [Rules and Regulations]
                [Pages 9698-9702]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-04944]
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                FEDERAL DEPOSIT INSURANCE CORPORATION
                12 CFR Part 350
                RIN 3064-AE65
                Disclosure of Financial and Other Information by FDIC-Insured
                State Nonmember Banks
                AGENCY: Federal Deposit Insurance Corporation.
                ACTION: Final rule.
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                SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending
                its regulations by rescinding and removing its regulations entitled
                Disclosure of Financial and Other Information By FDIC-Insured State
                Nonmember Banks. Upon the removal of the regulations, all insured state
                nonmember banks and insured state-licensed branches of foreign banks
                (collectively, ``banks'') would no longer be subject to the annual
                disclosure statement requirement set out in the existing regulations.
                The financial and other information that has been subject to disclosure
                by individual banks under the regulations is publicly available through
                the FDIC's website.
                DATES: This rule will be effective April 17, 2019.
                FOR FURTHER INFORMATION CONTACT: Robert Storch, Chief Accountant,
                Division of Risk Management Supervision, (202) 898-8906 or
                [email protected]; Andrew Overton, Examination Specialist (Bank
                Accounting), Division of Risk Management Supervision, (202)
                [[Page 9699]]
                898-8922 or [email protected]; Michael Condon, Counsel, Legal Division,
                (202) 898-6536 or [email protected].
                SUPPLEMENTARY INFORMATION:
                I. Policy Objectives
                 The policy objective of the final rule is to simplify the FDIC's
                regulations by removing unnecessary or redundant regulations. The final
                rule rescinds and removes part 350 from the Code of Federal
                Regulations. Technological advancements over the past 30 years provide
                the public with ready access to more extensive and timely information
                on the condition and performance of individual banks, obviating the
                need for the annual disclosure statement requirements in part 350.
                II. Background
                 Part 350 was adopted by the FDIC Board of Directors on December 17,
                1987, and took effect February 1, 1988.\1\ In general, part 350
                requires FDIC-insured state nonmember banks and FDIC-insured state-
                licensed branches of foreign banks (collectively, ``banks'') to
                prepare, and make available on request, annual disclosure statements
                consisting of: (1) Required financial data comparable to specified
                schedules in the Consolidated Reports of Condition and Income (Call
                Report) filed for the previous two year-ends; (2) information that the
                FDIC may require of particular banks, which could include disclosure of
                enforcement actions; and (3) other information at a bank's option. Part
                350 also permits the use of certain alternatives to the Call Report as
                a disclosure statement. Part 350 does not apply to the insured state
                savings associations that are supervised by the FDIC.
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                 \1\ See 52 FR 49379 (December 31, 1987).
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                 The annual disclosure statement for a particular year must be
                prepared, and made available to the public, by March 31 of the
                following year, or the fifth day after an organization's annual report
                covering the year is sent to shareholders, whichever occurs first.
                Banks are required to announce the availability of the disclosure
                statements in lobby notices in each of their offices and in notices of
                annual meetings sent to shareholders.
                 In adopting part 350, the FDIC's intent was to improve public
                awareness and understanding of the financial condition of individual
                banks. In the preamble to the December 1987 final rule, the FDIC stated
                that ``improved financial disclosure should reduce the likelihood of
                the market or bank customers overreacting to incomplete information.''
                The FDIC also said it believed the disclosure requirement ``will
                complement its supervisory efforts and enhance public confidence in the
                banking system.'' With limited resources available for the public to
                gather, analyze, and understand information about the financial
                condition of individual banks before and during the 1980s, the FDIC's
                adoption of part 350 provided the public with an opportunity to obtain
                certain basic bank financial information.
                 After the FDIC adopted part 350, the Office of the Comptroller of
                the Currency (OCC) and the Federal Reserve Board (FRB) adopted similar
                disclosure regulations. When initially adopted, the disclosure
                regulations adopted by the FDIC (12 CFR part 350), the FRB (12 CFR
                208.17), and the OCC (12 CFR part 18) were substantially uniform. These
                regulations required institutions to make almost identical information
                available to the public upon request. The former Office of Thrift
                Supervision (OTS) had a similar, but not identical, disclosure
                regulation (12 CFR 562.3). As a result of its review of regulations
                pursuant to Section 303(a) of the Riegle Community Development and
                Regulatory Improvement Act of 1994, the OTS repealed 12 CFR 562.3 as
                unnecessary in 1995.\2\ In 1998, the FRB eliminated 12 CFR 208.17,
                Disclosure of Financial Information by State Member Banks, from its
                regulations on the basis that Call Report information for banks had
                become available through the internet.\3\ In 2017, the OCC removed 12
                CFR part 18 from its regulations, noting that the information it
                required national banks to disclose is contained in other publicly
                available documents, which meant that 12 CFR part 18 is duplicative and
                unnecessary.\4\
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                 \2\ See 60 FR 66866 (December 27, 1995).
                 \3\ See 63 FR 37630 (July 13, 1998).
                 \4\ See 82 FR 8082 (January 23, 2017).
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                 With advancements in information technology since part 350 was
                adopted, including widespread public access to the internet (including
                through public libraries for individuals without their own direct
                personal access to the internet), information about the financial
                condition of individual insured depository institutions is now reliably
                and directly offered to the public through the FDIC's and the Federal
                Financial Institutions Examination Council's (FFIEC) websites. For
                example, information about the financial condition and performance of
                all insured depository institutions is publicly available each quarter
                through the Call Report and the Uniform Bank Performance Report (UBPR).
                In addition, enforcement actions taken by the FDIC are readily
                available to the public from the FDIC's website.
                 The Call Report contains an institution's balance sheet, income
                statement, and supplemental schedules that disclose additional details
                about the major categories of assets and liabilities, regulatory
                capital, and other financial information. Since the successful
                deployment of the FFIEC's Central Data Repository (CDR) Public Data
                Distribution (PDD) website,\5\ the public has had ready access to
                financial information for each insured depository institution. The
                public is able to obtain more current Call Report data for individual
                institutions in various formats from the FFIEC's CDR PDD website than
                the financial information available in the annual disclosure statement
                required by part 350. Individual institution Call Report data generally
                are posted on this website within 24 hours after the data have been
                submitted to and accepted by the CDR.
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                 \5\ https://cdr.ffiec.gov/public/ManageFacsimiles.aspx.
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                 The UBPR is an analytical tool created for bank supervisory,
                examination, and management purposes that shows the impact of
                management decisions and economic conditions on a bank's performance
                and balance-sheet composition. The content of the UBPR is calculated
                each quarter primarily from Call Report data. UBPRs for individual
                institutions are available to the public via the CDR PDD website. An
                institution's UBPR is usually published online within a day after its
                Call Report has been filed with and accepted by the CDR. Online access
                to an institution's UBPR each quarter complements the public's use of
                the institution's Call Report and further expands upon the amount of
                publicly available financial data for an institution beyond the limited
                financial information provided in the annual disclosure statement
                required by part 350. The public is able to easily locate the Call
                Report and the UBPR for a bank through the FDIC BankFind tool, which is
                available on the FDIC's website.\6\
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                 \6\ https://research.fdic.gov/bankfind/.
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                 In addition, on a monthly basis, the FDIC publishes a press release
                listing the administrative enforcement actions it has taken against
                banks and individuals during the preceding month. Enforcement actions
                taken by the FDIC since 1990 are available to the public on the FDIC's
                website.\7\ Interested parties may also obtain
                [[Page 9700]]
                administrative orders through the FDIC's Public Information Center.
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                 \7\ https://www5.fdic.gov/EDO/index.html.
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                III. The Proposal
                 Under section 2222 of the Economic Growth and Regulatory Paperwork
                Reduction Act of 1996 (EGRPRA),\8\ the FDIC is required to conduct a
                review at least once every 10 years to identify any outdated or
                otherwise unnecessary regulations. As part of the EGRPRA review
                completed in 2017, part 350 was included in the third EGRPRA Federal
                Register notice of regulatory review.\9\ The FDIC did not receive any
                comments on this regulation in response to that notice. Nevertheless,
                upon review, the FDIC has determined that part 350 is outdated and no
                longer necessary and therefore should be eliminated. Part 350 places a
                burden on insured state nonmember banks and insured state-licensed
                branches of foreign banks by requiring them to prepare an annual
                disclosure statement and make available to the public a potentially
                unlimited number of copies of these statements. This burden was
                justified in the past because disclosure statements were an effective
                means for the public to obtain information concerning a bank's
                financial condition. However, with widespread public access to the
                internet where more extensive and timely financial information about
                individual banks, as well as administrative enforcement actions, can be
                readily obtained, the incremental burden on banks of providing an
                annual disclosure statement in accordance with a regulation that has
                become outdated is no longer justified. Furthermore, because part 350
                does not apply to insured state savings associations, for which the
                FDIC became the primary federal regulatory agency in 2011, the proposal
                would eliminate a difference in the regulatory requirements and
                resulting regulatory burden imposed on insured state nonmember banks
                and insured state-licensed branches of foreign banks compared to
                insured state savings associations. Finally, because regulations
                similar to part 350 have been rescinded by the FRB and the OCC (as well
                as the former OTS), the preparation and availability of annual
                disclosure statements are no longer required by the other federal
                banking agencies for the institutions under their supervision.
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                 \8\ Public Law 104-208 (1996), codified at 12 U.S.C. 3311.
                 \9\ See 80 FR 32046 (June 5, 2015).
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                IV. Comments
                 Consistent with the objectives of section 2222 of EGRPRA, on
                October 17, 2018, the FDIC Board authorized publication of a notice of
                proposed rulemaking (NPR) to rescind and remove part 350 from the Code
                of Federal Regulations. The NPR was published in the Federal Register
                on October 25, 2018, with a 30-day comment period.\10\
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                 \10\ See 83 FR 53829 (October 25, 2018).
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                 The FDIC received nine comments addressing the proposed rescission
                and removal of part 350 from bankers, banking associations, and a
                consultant. The nine commenters fully supported the proposal. One
                additional comment was received from an individual, but it did not
                specifically address the proposed rescission and removal. After
                considering the comments received, the FDIC is adopting as proposed the
                rescission and removal of part 350 from the Code of Federal
                Regulations.
                V. Expected Effects
                 The removal of the requirement that each FDIC-insured state
                nonmember bank and insured state-licensed branch of a foreign bank
                prepare, and make available on request, annual disclosure statements
                will lessen the burden the FDIC imposes on these institutions. As of
                September 30, 2018, there were 3,493 FDIC-insured state nonmember banks
                and insured state-licensed branches of foreign banks that would be
                affected by this final rule.\11\
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                 \11\ Data from the September 30, 2018, Call Report and FFIEC 002
                report.
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                 The final rule is expected to reduce recordkeeping, reporting, and
                disclosure requirements for FDIC-insured state nonmember banks and
                insured state-licensed branches of foreign banks. As discussed in
                Section III: The Proposal, part 350 requires institutions to prepare an
                annual disclosure statement and make it available to the public. By
                removing part 350, the final rule will remove this disclosure burden.
                The FDIC assumes that 15 percent of the institutions covered by part
                350 provide a management discussion and analysis in their annual
                disclosure statement, and estimates that preparing this material takes
                each institution 1.5 hours. Assuming the time spent preparing the
                material is divided equally between a financial analyst and a manager,
                each earning the 75th percentile wage for their occupation, the
                estimated annual cost per institution to prepare the material is
                $157.82.\12\ Based on the FDIC's estimation that 15 percent of
                institutions prepare this material, the total annual cost is estimated
                to be $82,695, or approximately 0.0001 percent of noninterest expenses
                for covered institutions.\13\
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                 \12\ The annual cost per institution is estimated using the 75th
                percentile hourly wage for financial analysts and management
                occupations in the depository credit intermediation industry as of
                May 2017. This hourly wage is adjusted for inflation, and grossed-up
                to include benefits, through June 2018. The 75th percentile
                inflation and benefit-adjusted hourly wage of management occupations
                as of June 2018 is $125.21, and for financial analysts is $85.21.
                Assuming the 1.5 hours are equally divided between a manager and an
                analyst, this yields an estimated total annual cost per institution
                of (0.75 * $125.21) + (0.75 * $85.21) = $157.82.
                 Hourly wages are from the Bureau of Labor Statistics (BLS) May
                2017 National Industry-Specific Occupational Employment and Wage
                Estimates, https://www.bls.gov/oes/current/oessrci.htm. Wages are
                adjusted for inflation through June 2018 using the Seasonally
                Adjusted All-items Consumer Price Index for All Urban Consumers,
                https://data.bls.gov/PDQWeb/cu. The hourly wages are grossed-up to
                include benefits based on Employer Cost for Employee Compensation
                data as of June 2018, https://www.bls.gov/news.release/pdf/ecec.pdf.
                June 2018 is the latest available period of Employer Cost for
                Employee Compensation data. The data on hourly wages, inflation, and
                employer cost for employee compensation was extracted on December
                14, 2018.
                 \13\ This equals 524 * $157.82, i.e., (3,493 * 0.15) * $157.82,
                rounded to the nearest dollar. Noninterest expenses are calculated
                from data reported in the September 30, 2018, Call Report, and
                annualized.
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                 In addition to the directly measurable cost savings, another
                potential benefit of the final rule is that it frees up institution
                staff time that would otherwise have been spent complying with part
                350. Theoretically, time previously spent complying with part 350 may
                now be spent on another task of higher value to the institution. This
                potential effect is difficult to accurately estimate with available
                information, but it is likely to be small given that the disclosure
                burden imposed by part 350 is a relatively small percentage of
                noninterest expenses.
                 The final rule removes a disclosure requirement for affected
                institutions; however, the FDIC believes that the reduction will not
                have material effects for customers, investors, or counterparties. As
                discussed in Section III: The Proposal, extensive and timely financial
                information about individual banks, as well as administrative
                enforcement actions, can be readily obtained by the public on the
                internet. Therefore, the FDIC believes that removal of this disclosure
                requirement will not have substantive effects on financial market
                participants.
                VI. Alternatives Considered
                 The FDIC considered alternatives, but believes that the rescission
                and removal of part 350 represents the most appropriate option. In
                particular, the FDIC considered whether to (1) retain the existing
                disclosure statement requirement, but to extend it to the
                [[Page 9701]]
                insured state savings associations now supervised by the FDIC, (2)
                require that disclosure statements be updated quarterly instead of
                annually, and/or (3) require the inclusion in disclosure statements of
                either the entire Call Report (excluding a limited number of items
                accorded confidential treatment) or financial data comparable to a
                greater number of specified Call Report schedules. However, with the
                timely public availability of each institution's quarterly Call Report
                and UBPR via the FDIC's and the FFIEC's websites, and with the public
                disclosure of information about enforcement actions taken by the FDIC
                routinely made available on the FDIC's website, the FDIC believes any
                extension of part 350 to other institutions, increase in the frequency
                of disclosure, increase in the scope of disclosure, or combination of
                these alternatives, imposes additional cost without any corresponding
                public benefit in terms of access to financial and other information on
                institutions. Moreover, the FDIC is not aware of any difficulties
                encountered by the public in obtaining current financial and
                enforcement action information on institutions supervised by the FRB
                and the OCC (and those institutions previously supervised by the OTS)
                via public websites since these agencies eliminated their respective
                disclosure statement requirements.
                VII. Regulatory Analysis and Procedure
                A. The Paperwork Reduction Act
                 In accordance with the requirements of the Paperwork Reduction Act
                of 1995 (PRA) (44 U.S.C. 3501-3521), the FDIC may not conduct or
                sponsor, and the respondent is not required to respond to, an
                information collection unless it displays a currently valid Office of
                Management and Budget (OMB) control number. Part 350 is currently an
                approved information collection with OMB Control No. 3064-0090.
                Removing part 350 obviates the need for this collection of information
                pursuant to the PRA, and FDIC will seek to discontinue its use.
                B. The Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA) generally requires that, in
                connection with a rulemaking, an agency prepare and make available for
                public comment a final regulatory flexibility analysis describing the
                impact of the final rule on small entities.\14\ A regulatory
                flexibility analysis is not required; however, if the agency certifies
                that the rule will not have a significant economic impact on a
                substantial number of small entities. The U.S. Small Business
                Administration (SBA) has defined ``small entities'' to include banking
                organizations with total assets less than or equal to $550 million.\15\
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                 \14\ 5 U.S.C. 601 et seq.
                 \15\ The SBA defines a small banking organization as having $550
                million or less in assets, where an organization's ``assets are
                determined by averaging the assets reported on its four quarterly
                financial statements for the preceding year.'' See 13 CFR 121.201
                (as amended, effective December 2, 2014). In its determination, the
                ``SBA counts the receipts, employees, or other measure of size of
                the concern whose size is at issue and all of its domestic and
                foreign affiliates.'' See 13 CFR 121.103. Following these
                regulations, the FDIC uses a covered entity's affiliated and
                acquired assets, averaged over the preceding four quarters, to
                determine whether the covered entity is ``small'' for the purposes
                of RFA.
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                 As of September 30, 2018, there are 3,493 FDIC-insured state
                nonmember banks and FDIC-insured state-licensed branches of foreign
                banks.\16\ Of these, 2,689 are considered small entities for the
                purposes of RFA. Thus, the FDIC concludes the proposed rule will affect
                a substantial number of small entities.
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                 \16\ Data from the September 30, 2018, Call Report and FFIEC 002
                report.
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                 The final rule is expected to reduce recordkeeping, reporting, and
                disclosure requirements for small FDIC-supervised banks. As discussed
                in Section III: The Proposal, part 350 requires institutions to prepare
                an annual disclosure statement and make it available to the public. By
                removing part 350, the final rule will remove this disclosure burden.
                As discussed in Section IV: Expected Effects, the FDIC estimates the
                annual cost per institution to prepare the material is $157.82.\17\
                Based on the FDIC's estimation that 15 percent of institutions prepare
                this material, the total annual cost for small FDIC-supervised
                institutions is estimated to be $63,599, or less than 0.0005 percent of
                noninterest expenses for such institutions.\18\
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                 \17\ The annual cost per institution is estimated using the 75th
                percentile hourly wage for financial analysts and management
                occupations in the depository credit intermediation industry as of
                May 2017. This hourly wage is adjusted for inflation, and grossed-up
                to include benefits, through June 2018. The 75th percentile
                inflation and benefit-adjusted hourly wage of management occupations
                as of June 2018 is $125.21, and for financial analysts is $85.21.
                Assuming the 1.5 hours are equally divided between a manager and an
                analyst, this yields an estimated total annual cost per institution
                of (0.75 * $125.21) + (0.75 * $85.21) = $157.82.
                 Hourly wages are from the Bureau of Labor Statistics (BLS) May
                2017 National Industry-Specific Occupational Employment and Wage
                Estimates, https://www.bls.gov/oes/current/oessrci.htm. Wages are
                adjusted for inflation through June 2018 using the Seasonally
                Adjusted All-items Consumer Price Index for All Urban Consumers,
                https://data.bls.gov/PDQWeb/cu. The hourly wages are grossed-up to
                include benefits based on Employer Cost for Employee Compensation
                data as of June 2018, https://www.bls.gov/news.release/pdf/ecec.pdf.
                June 2018 is the latest available period of Employer Cost for
                Employee Compensation data. The data on hourly wages, inflation, and
                employer cost for employee compensation was extracted on December
                14, 2018.
                 \18\ This equals 403 * $157.82, i.e., (2,689 * 0.15) * $157.82,
                rounded to the nearest dollar. Noninterest expenses are calculated
                from data reported in the September 30, 2018, Call Report, and
                annualized.
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                 Also as described in Section IV above, in addition to the directly
                measurable cost savings, another potential benefit of the final rule is
                that it frees up institution staff time that would otherwise have been
                spent complying with part 350. While this potential effect is difficult
                to accurately estimate with available information, it is likely to be
                small given that the disclosure burden imposed by part 350 is a
                relatively small percentage of noninterest expenses for small FDIC-
                supervised institutions.
                 The final rule removes a disclosure requirement for affected
                institutions; however, the FDIC believes that the reduction will not
                have material effects for customers, investors, or counterparties. As
                discussed in Section III: The Proposal, extensive and timely financial
                information about individual banks, as well as administrative
                enforcement actions, can be readily obtained by the public on the
                internet. Therefore, the FDIC believes that removal of this disclosure
                requirement with have not substantive effects on financial market
                participants.
                 Based on the information above, the FDIC certifies that the final
                rule will not have a significant economic impact on a substantial
                number of small entities.
                C. Small Business Regulatory Enforcement Fairness Act
                 The OMB has determined that the final rule is not a ``major rule''
                within the meaning of the Small Business Regulatory Enforcement
                Fairness Act of 1996 (SBREFA).\19\ As required by SBREFA, the FDIC will
                submit the final rule and other appropriate reports to Congress and the
                Government Accountability Office for review.
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                 \19\ 5 U.S.C. 801 et seq.
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                D. Plain Language
                 Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113
                Stat. 1338, 1471, 12 U.S.C. 4809, requires each Federal banking agency
                to use plain language in all of its proposed and final rules published
                after January 1, 2000. As a Federal banking agency subject to the
                provisions of this section, the FDIC has sought to present the final
                rule to rescind part 350 in a simple and straightforward manner.
                [[Page 9702]]
                E. The Economic Growth and Regulatory Paperwork Reduction Act
                 Under section 2222 of EGRPRA, the FDIC is required to conduct a
                review at least once every 10 years to identify any outdated or
                otherwise unnecessary regulations. The FDIC completed its most recent
                comprehensive review of its regulations under EGRPRA in 2017 and did
                not receive any comments from the public concerning part 350. The
                burden reduction evidenced in this final rule is consistent with the
                objectives of the EGRPRA review process.
                F. Riegle Community Development and Regulatory Improvement Act
                 Under section 302(b) of the Riegle Community Development and
                Regulatory Improvement Act, 12 U.S.C. 4802(b), new regulations and
                amendments to regulations prescribed by a Federal banking agency which
                impose additional reporting, disclosures, or other new requirements on
                insured depository institutions shall take effect on the first day of a
                calendar quarter which begins on or after the date on which the
                regulations are published in final form. Because this rule rescission
                does not impose additional reporting, disclosures, or other
                requirements, but rather relieves banks of a disclosure requirement,
                this rule may take effect prior to the start of the next calendar
                quarter.
                List of Subjects in 12 CFR Part 350
                 Accounting, Banks, Banking, Reporting and recordkeeping
                requirements.
                Authority and Issuance
                PART 350--[REMOVED AND RESERVED]
                0
                For the reasons stated in the preamble, and under the authority of 12
                U.S.C 1817(a)(1), 1819 ``Seventh'' and ``Tenth,'' the Board of
                Directors of the Federal Deposit Insurance Corporation removes and
                reserves 12 CFR part 350.
                 Dated at Washington, DC, on March 12, 2019.
                 By order of the Board of Directors.
                Federal Deposit Insurance Corporation.
                Robert E. Feldman,
                Executive Secretary.
                [FR Doc. 2019-04944 Filed 3-15-19; 8:45 am]
                BILLING CODE 6714-01-P
                

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