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

As Enacted

Cited authorities 24

Cited in

Citation	85 FR 60738
Record Number	2020-18812
Published date	28 September 2020
Court	Federal Deposit Insurance Corporation

60738

Federal Register / Vol. 85, No. 188 / Monday, September 28, 2020 / Proposed Rules

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[FR Doc. 2020–21276 Filed 9–25–20; 8:45 am]

BILLING CODE 6450–01–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Parts 308 and 390

RIN 3064–AF38

Removal of Transferred OTS

Regulations Regarding Prompt

Corrective Action Directives and

Conforming Amendments to Other

Regulations

AGENCY

: Federal Deposit Insurance

Corporation.

ACTION

: Notice of proposed rulemaking.

SUMMARY

: In order to streamline FDIC

regulations, the FDIC proposes to

rescind and remove from the Code of

Federal Regulations rules entitled

‘‘Prompt Corrective Action’’ that were

transferred to the FDIC from the Office

of Thrift Supervision (OTS) on July 21,

2011, in connection with the

implementation of Title III of the Dodd-

Frank Wall Street Reform and Consumer

Protection Act (Dodd-Frank Act), and

amend certain sections of existing FDIC

regulations governing the issuance and

review of orders pursuant to the prompt

corrective action provisions of the

Federal Deposit Insurance Act to make

it clear that such rules apply to all

insured depository institutions for

which the FDIC is the appropriate

Federal banking agency.

DATES

: Comments must be received on

or before October 28, 2020.

ADDRESSES

: You may submit comments,

identified by RIN 3064–AF38, by any of

the following methods:

•FDIC Website: https://

www.fdic.gov/regulations/laws/federal/.

Follow instructions for submitting

comments on the agency website.

•Email: Comments@fdic.gov. Include

RIN 3064–AF38 on the subject line of

the message.

•Mail: Robert E. Feldman, Executive

Secretary, Attention: Comments, Federal

Deposit Insurance Corporation, 550 17th

Street NW, Washington, DC 20429.

•Hand Delivery to FDIC: Comments

may be hand-delivered to the guard

station at the rear of the 550 17th Street

NW building (located on F Street) on

business days between 7 a.m. and 5 p.m.

•Federal eRulemaking Portal: http://

www.regulations.gov. Follow the

instructions for submitting comments.

Please include your name, affiliation,

address, email address, and telephone

number(s) in your comment. All

statements received, including

attachments and other supporting

materials, are part of the public record

and are subject to public disclosure.

You should submit only information

that you wish to make publicly

available.

Please note: all comments received

will be posted generally without change

to https://www.fdic.gov/regulations/

laws/federal/, including any personal

information provided.

FOR FURTHER INFORMATION CONTACT

Robert Watkins, Review Examiner,

Division of Risk Management

Supervision, (202) 898–3865; Andrea

Winkler, Acting Assistant General

Counsel, Legal Division, (202) 898–

3727; or Kristine Schmidt, Counsel,

Legal Division, (202) 898–6686,

krschmidt@fdic.gov.

SUPPLEMENTARY INFORMATION

I. Policy Objectives

The policy objective of the rule is to

remove unnecessary and duplicative

regulations in order to simplify them

and improve the public’s understanding

of them. Part 390, subpart Y outlines

administrative procedures related to

prompt corrective action that are

equivalent to procedures outlined in

part 308, subpart Q of the FDIC’s

existing regulations. Thus, the FDIC is

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Federal Register / Vol. 85, No. 188 / Monday, September 28, 2020 / Proposed Rules

Dodd-Frank Wall Street Reform and Consumer

Protection Act, Public Law 111–203, 124 Stat. 1376

(2010) (codified at 12 U.S.C. 5301 et seq.).

Codified at 12 U.S.C. 5411.

Codified at 12 U.S.C. 5414(b).

Codified at 12 U.S.C. 5414(c).

76 FR 39246 (July 6, 2011).

Codified at 12 U.S.C. 5412(b)(2)(B)(i)(II).

12 U.S.C. 1811 et seq.

Codified at 12 U.S.C. 5412(c)(1).

12 U.S.C. 1813(q).

76 FR 47652 (Aug. 5, 2011).

See 76 FR 47653.

12 U.S.C. 5412(b)(1).

proposing to rescind the regulations in

part 390, subpart Y and reserve the

subpart for future use. In addition, the

proposal would amend certain sections

of part 308, subpart Q of the FDIC’s

existing regulations on the issuance and

review of orders pursuant to the prompt

corrective action provisions of the

Federal Deposit Insurance Act to make

it clear that part 308, subpart Q, applies

to all insured depository institutions for

which the FDIC is the appropriate

Federal banking agency.

II. Background

Part 390, subpart Y, was included in

the regulations that were transferred to

the FDIC from the Office of Thrift

Supervision (OTS) on July 21, 2011, in

connection with the implementation of

applicable provisions of title III of the

Dodd-Frank Wall Street Reform and

Consumer Protection Act (Dodd-Frank

Act).

A. The Dodd-Frank Act

As of July 21, 2011, the transfer date

established by section 311 of the Dodd-

Frank Act,

the powers, duties, and

functions formerly performed by the

OTS were divided among the FDIC, as

to State savings associations, the Office

of the Comptroller of the Currency

(OCC), as to Federal savings

associations, and the Board of

Governors of the Federal Reserve

System (FRB), as to savings and loan

holding companies. Section 316(b) of

the Dodd-Frank Act

provides the

manner of treatment for all orders,

resolutions, determinations, regulations,

and other advisory materials that had

been issued, made, prescribed, or

allowed to become effective by the OTS.

The section provides that if such

materials were in effect on the day

before the transfer date, they continue in

effect and are enforceable by or against

the appropriate successor agency until

they are modified, terminated, set aside,

or superseded in accordance with

applicable law by such successor

agency, by any court of competent

jurisdiction, or by operation of law.

Pursuant to section 316(c) of the

Dodd-Frank Act,

on June 14, 2011, the

FDIC’s Board of Directors (Board)

approved a ‘‘List of OTS Regulations to

be Enforced by the OCC and the FDIC

Pursuant to the Dodd-Frank Wall Street

Reform and Consumer Protection Act.’’

This list was published by the FDIC and

the OCC as a Joint Notice in the Federal

Although section 312(b)(2)(B)(i)(II) of

the Dodd-Frank Act

granted the OCC

rulemaking authority relating to both

State and Federal savings associations,

nothing in the Dodd-Frank Act affected

the FDIC’s existing authority to issue

regulations under the Federal Deposit

Insurance Act (FDI Act)

and other laws

as the ‘‘appropriate Federal banking

agency’’ or under similar statutory

terminology. Section 312(c)(1) of the

Dodd-Frank Act

revised the definition

of ‘‘appropriate Federal banking

agency’’ contained in section 3(q) of the

FDI Act,

to add State savings

associations to the list of entities for

which the FDIC is designated as the

‘‘appropriate Federal banking agency.’’

As a result, when the FDIC acts as the

appropriate Federal banking agency (or

under similar terminology) for State

savings associations, as it does here, the

FDIC is authorized to issue, modify, and

rescind regulations involving such

associations, as well as for State

nonmember banks and insured State-

licensed branches of foreign banks.

As noted above, on June 14, 2011,

operating pursuant to this authority, the

Board issued a list of regulations of the

former OTS that the FDIC would enforce

with respect to State savings

associations. On that same date, the

Board reissued and redesignated certain

regulations transferred from the former

OTS. These transferred OTS regulations

were published as new FDIC regulations

in the Federal Register on August 5,

2011.

When the FDIC republished the

transferred OTS regulations as new

FDIC regulations, it specifically noted

that its staff would evaluate the

transferred OTS rules and might later

recommend incorporating the

transferred OTS regulations into other

FDIC regulations, amending them, or

rescinding them, as appropriate.

B. Transferred OTS Regulations

(Transferred to the FDIC’s Part 390,

Subpart Y)

A subset of the regulations transferred

to the FDIC from the OTS concern

prompt corrective action provisions

applicable to State savings associations.

The OTS regulations, formerly found at

12 CFR part 565, §§ 565.7, 565.8, 565.9

and 565.10, were transferred to the FDIC

with only nomenclature changes and

now comprise part 390, subpart Y. Each

provision of part 390, subpart Y is

discussed in Part III of this

SUPPLEMENTARY INFORMATION

section,

below. The FDIC has conducted a

careful review and comparison of part

390, subpart Y. As discussed in Part III

of this

SUPPLEMENTARY INFORMATION

section, the FDIC proposes to rescind

part 390, subpart Y because the FDIC

considers the provisions related to State

savings associations contained in part

390, subpart Y substantially similar to

similar regulations related to state non-

member banks. The FDIC proposes

combining the regulations to make clear

the same procedures apply to all FDIC-

supervised institutions.

C. Part 308, Subpart Q, Issuance and

Review of Orders Pursuant to the

Prompt Corrective Action Provisions of

the Federal Deposit Insurance Act

The FDIC proposes to further clarify

the administrative procedures relevant

to State savings associations by

amending certain parts of part 308 of the

FDIC’s regulations to clarify that part

308, subpart Q applies to all insured

depository institutions, including State

savings associations, for which the FDIC

is the appropriate Federal banking

agency. As discussed in Part III of this

SUPPLEMENTARY INFORMATION

section, the

FDIC proposes to amend part 308,

subpart Q in order to make part 308,

subpart Q applicable to all insured

depository institutions, including State

savings associations, for which the FDIC

is the appropriate Federal banking

agency.

III. Proposed Regulation Changes

After careful review, the FDIC has

concluded that the retention of part 390,

subpart Y is unnecessary and that

rescission of subpart Y in its entirety

would streamline the FDIC rules and

regulations. The regulations related to

State savings associations will be

incorporated into the part 308, subpart

Q as described below. Part 390, subpart

Y also references savings and loan

holding companies. When the

regulation was transferred from the

OTS, the references to ‘‘any company

that controls the State savings

association’’ were not deleted with the

other technical amendments. The FDIC

is not the appropriate successor agency

for supervision of savings and loan

holding companies. Under the Dodd-

Frank Act, supervision of savings and

loan holding companies was transferred

to the Federal Reserve Board.

The

provisions in the FDIC regulations

relating to ‘‘any company that controls

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Federal Register / Vol. 85, No. 188 / Monday, September 28, 2020 / Proposed Rules

See 83 FR 17737.

See section 312(c) of the Dodd-Frank Act,

codified at 12 U.S.C. 1813(q).

12 U.S.C. 1813(q).

the State savings association’’ will

therefore be set aside and not

incorporated into the existing FDIC

regulations at part 308, subpart Q

addressing FDIC-supervised

institutions.

Consistent with its legal authority to

issue and modify regulations as the

appropriate Federal banking agency

under section 3(q) of the Federal

Deposit Insurance Act, the FDIC also

proposes to amend and revise

provisions of part 308, subpart Q to

clarify and state explicitly the

regulations apply to all FDIC-supervised

institutions.

A. Comparison of FDIC Regulations

With the Transferred OTS Regulations

To Be Rescinded

12 CFR 390.456—Directives to take

prompt corrective action.

Section 390.456 describes the

administrative procedures for the FDIC

to issue a directive to take prompt

corrective action against a State savings

association. These administrative

procedures were initially found at 12

CFR 565.7 and are equivalent to the

administrative procedures relating to

FDIC-supervised banks found at 12 CFR

308.201.

The FDIC proposes that § 390.456 be

rescinded in its entirety. The proposed

amendments to subpart Q will clarify in

a single location that the regulations

apply to all FDIC-supervised

institutions. Therefore, it is not

necessary to have a regulation

specifically applicable to State savings

associations.

12 CFR 390.457—Procedures for

reclassifying a State savings association

based on criteria other than capital.

Section 390.457 describes the

administrative procedures to reclassify a

State savings association based on

criteria other than capital. This section

describes how the FDIC may consider

other unsafe or unsound practices to

lower a State saving association capital

category under part 324. The section

also details the procedures for notifying

the State saving association and

contesting the determination. These

administrative procedures were initially

found at 12 CFR 565.8 and were

recently modified to account for

changes made to part 324.

Section

390.457 is equivalent to the

administrative procedures relating to

FDIC-supervised banks found at 12 CFR

308.202.

The FDIC proposes that § 390.457 be

rescinded in its entirety. The proposed

amendments to subpart Q will clarify in

a single location that the regulations

apply to all FDIC-supervised

institutions. Therefore, it is not

necessary to have a regulation

specifically applicable to State savings

associations.

12 CFR 390.458—Order to dismiss a

director or senior executive officer.

Section 390.458 describes the

additional administrative procedures

related to prompt corrective action

directives that require the State savings

association to terminate the

employment of a director or officer. This

section also includes provisions to

challenge this type of prompt corrective

order directive. These administrative

procedures were initially found at 12

CFR 565.9. Section 390.458 is

equivalent to the administrative

procedures relating to FDIC-supervised

banks found at 12 CFR 308.203.

The FDIC proposes that § 390.458 be

rescinded in its entirety. The proposed

amendments to subpart Q will clarify in

a single location that the regulations

apply to all FDIC-supervised

institutions. Therefore, it is not

necessary to have a regulation

specifically applicable to State savings

associations.

12 CFR 390.459—Enforcement of

directives.

Section 390.459 describes the

additional remedies the FDIC may take

to seek compliance with prompt

corrective action directives. These

procedures were initially found at 12

CFR 565.10. Section 390.459 is

equivalent to the administrative

procedures relating to FDIC-supervised

banks found at 12 CFR 308.204.

The FDIC proposes that § 390.459 be

rescinded in its entirety. The proposed

amendments to subpart Q will clarify in

a single location that the regulations

apply to all FDIC-supervised

institutions. Therefore, it is not

necessary to have a regulation

specifically applicable to State savings

associations.

B. Proposed Changes to FDIC

Regulations

As discussed in part III of this

SUPPLEMENTARY INFORMATION

, the FDIC’s

part 308, subpart Q addresses the

administrative procedures related to the

issuance and enforcement of prompt

corrective action directives. The Dodd-

Frank Act added State savings

associations to the list of entities for

which the FDIC is designated as the

appropriate Federal banking agency.

To clarify that part 308, subpart Q

applies to all institutions for which the

FDIC is the appropriate Federal banking

agency, the FDIC proposes to amend

§§ 308.200 through 308.204 to replace

the phrases ‘‘banks’’ and ‘‘insured

branches of foreign banks’’ throughout

subpart Q with the phrase ‘‘FDIC-

supervised institution.’’ Under the

proposal, § 308.200 would be revised to

add the definition of the term ‘‘FDIC-

supervised institution’’ to mean any

insured depository institution for which

the FDIC is the appropriate Federal

banking agency pursuant to section 3(q)

of the FDI Act.

Additionally, the FDIC proposes one

additional change to conform the FDIC’s

regulations relating to prompt corrective

action directives that apply to banks and

the former OTS regulations relating to

State savings associations. Sections

308.202 and 390.457 describe the

procedures relating to classifying an

institution due to something other than

capital. These two regulations differ in

one respect. The FDIC regulation at

308.202(a)(6) provides that when a

hearing is ordered, it will begin no later

than 30 days from the date of the

request unless the bank requests a later

date. The former OTS version of this

regulation, incorporated by the FDIC at

§ 390.457, provides that the hearing

should be ordered within 30 days of

request unless the FDIC allows further

time at the request of the State savings

association. While both of these

provisions demonstrate that a hearing is

likely to be delayed at the request of the

institution, the former OTS version of

the regulation is written with greater

clarity that the FDIC will evaluate and

may then provide consent to the

request. The OTS version of the

regulation makes it clear that there is no

automatic extension granted to the

institution. The greater clarity in this

language makes it the preferred choice

when reconciling the two regulations

into one regulation that applies to all

FDIC-supervised institutions. The

changes to this aspect of the regulation

will provide greater clarity to those

institutions going forward.

IV. Summary

If the proposal is finalized, 12 CFR

part 390, subpart Y would be removed

because it is largely unnecessary,

redundant, or duplicative of existing

FDIC regulations, and the requirements

of part 308, subpart Q expressly would

apply to all FDIC-supervised insured

depository institutions. These initiatives

will serve to streamline the FDIC’s

regulations.

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Call Report data, March 2020.

44 U.S.C. 3501–3521.

V. Expected Effects

As explained in detail in Section III

of this

SUPPLEMENTARY INFORMATION

section, certain OTS regulations

transferred to the FDIC by the Dodd-

Frank Act relating to prompt corrective

action directives are either unnecessary

or effectively duplicate existing FDIC

regulations. This proposal would

eliminate those transferred OTS

regulations. The proposal also would

clarify that the standards in part 308,

subpart Q apply to State savings

associations because the FDIC is the

‘‘appropriate Federal banking agency’’

pursuant to the FDI Act. As of March 30,

2020, the FDIC supervised 3,309

depository institutions, of which 35 (1.1

percent) are State savings associations.

The proposed rule primarily would

affect regulations that govern State

savings associations.

As explained previously, the

proposed rule would rescind 12 CFR

part 390, subpart Y, which includes the

following: § 390.456, which outlines

administrative procedures for issuing a

directive to take prompt corrective

action against a State savings

association; § 390.457, which outlines

administrative procedures for

reclassifying a State savings association

based on criteria other than capital;

§ 390.458, which outlines

administrative procedures related to

prompt corrective action that require a

State savings association to terminate

the employment of a director or officer;

and § 390.459, which outlines

administrative procedures the FDIC may

take to seek compliance with prompt

corrective action directives. The FDIC

has determined that these sections of 12

CFR part 390 are equivalent to

regulations related to prompt corrective

action in the FDIC’s existing regulations.

Therefore, the FDIC does not expect the

removal of the regulations in subpart Y

to significantly affect FDIC-supervised

State savings associations.

The proposal would also amend the

FDIC’s regulations that establish

administrative procedures for prompt

corrective action in 12 CFR 308.200

through 308.204 to make them

applicable to all FDIC-supervised

institutions, including State savings

associations. As discussed previously,

these changes would not change the

required procedures related to prompt

corrective action that are applicable to

State savings associations since the

requirements in subpart Y are

equivalent to requirements in the FDIC’s

existing regulations, therefore this

aspect of the proposed rule is unlikely

to substantively affect FDIC-supervised

State savings associations.

Finally, the proposal would revise 12

CFR 308.202 to clarify the procedures

for delaying a hearing if an institution

is reclassified based on criteria other

than capital. The FDIC’s regulation

currently states that if a hearing is

scheduled, it will be held within 30

days of the request unless the institution

requests a later date. The regulations in

§ 390.457 state that a hearing will be

held within 30 days of the request

unless the FDIC allows further time at

the request of the institution. The FDIC

is proposing to adopt the language from

§ 390.457 in its own regulations since

§ 390.457 clarifies that requests for an

extension will not be automatically

granted. This aspect of the proposed

rule will pose no change for the 35

FDIC-supervised State savings

associations. The FDIC believes that

adopting the language from § 390.457

should further clarify for State

nonmember institutions that requests

for an extension will not automatically

be granted, however, this change is

unlikely to pose any substantive effects

on State nonmember institutions.

Since the prompt corrective action

directive provisions in § 390 subpart Y

are substantively similar to existing

regulations for state nonmember banks

found in § 308, subpart Q, the FDIC does

not believe that rescission of §§ 390.456

through 390.459 would have any

substantive effects on FDIC-supervised

State savings associations.

The FDIC invites comments on all

aspects of this analysis. In particular,

would the proposed rule have any costs

or benefits to covered entities that the

FDIC has not identified?

VI. Alternatives

The FDIC believes that the proposed

amendments represent the most

appropriate option for covered

institutions and, at this time, has not

identified significant alternatives to

proposing the rule in its current form.

As discussed previously, the Dodd-

Frank Act transferred certain powers,

duties, and functions formerly

performed by the OTS to the FDIC. The

FDIC’s Board reissued and redesignated

certain transferred regulations from the

OTS but noted that it would evaluate

them and might later incorporate them

into other FDIC regulations, amend

them, or rescind them, as appropriate.

The FDIC has evaluated the existing

regulations relating to prompt corrective

actions, including part 308, subpart Q

and part 390, subpart Y. The FDIC has

available the status quo alternative of

retaining the current regulations but is

proposing not to do so because it would

be needlessly duplicative for

substantively similar regulations

regarding prompt corrective action

directives for banks and State savings

associations to be located in different

locations within the Code of Federal

Regulations. The FDIC believes it would

be redundant and potentially confusing

for FDIC-supervised institutions to

continue to refer to these separate sets

of regulations. Therefore, the FDIC is

proposing to amend and streamline the

FDIC’s regulations.

VII. Request for Comments

The FDIC invites comments on all

aspects of this proposed rulemaking. In

particular, the FDIC requests comments

on the following questions:

1. Are the provisions of 12 CFR parts

308, subpart Q sufficient to provide

consistent and effective requirements

related to the issuance and review of

orders pursuant to the prompt corrective

action for all insured depository

institutions for which the FDIC is the

appropriate Federal banking agency?

Please provide examples, data, or

otherwise substantiate your answer.

2. What negative impacts, if any, can

you foresee in the FDIC’s proposal to

rescind part 390, subpart Y and remove

it from the Code of Federal Regulations?

Please provide any other comments you

have on the proposal.

VIII. Administrative Law Matters

A. The Paperwork Reduction Act

In accordance with the requirements

of the Paperwork Reduction Act of 1995

(PRA),

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.

The proposed rule would rescind and

remove from FDIC regulations part 390,

subpart Y. With regard to part 308,

subpart Q, the proposed rule would

amend §§ 308.200 through 308.204 to

clarify that State savings associations, as

well as State nonmember banks and

foreign banks having insured branches

are all subject to part 308, subpart Q.

The proposed rule will not create any

new or revise any existing collections of

information under the PRA. Therefore,

no information collection request will

be submitted to the OMB for review.

B. The Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA),

requires that, in connection with a

notice of proposed rulemaking, an

agency prepare and make available for

public comment an initial regulatory

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5 U.S.C. 601, et seq.

The SBA defines a small banking organization

as having $600 million or less in assets, where ‘‘a

financial institution’s assets are determined by

averaging the assets reported on its four quarterly

financial statements for the preceding year.’’ See 13

CFR 121.201 (as amended by 84 FR 34261, effective

August 19, 2019). ‘‘SBA counts the receipts,

employees, or other measure of size of the concern

whose size is at issue and all of its domestic and

foreign affiliates.’’ See 13 CFR 121.103. Following

these regulations, the FDIC uses a covered entity’s

affiliated and acquired assets, averaged over the

preceding four quarters, to determine whether the

FDIC-supervised institution is ‘‘small’’ for the

purposes of RFA.

FDIC-supervised institutions are set forth in 12

U.S.C. 1813(q)(2).

FDIC Call Report data, March 31, 2020.

Id.

Public Law 106–102, section 722, 113 Stat.

1338, 1471 (1999).

Public Law 104–208, 110 Stat. 3009 (1996).

82 FR 15900 (March 31, 2017).

12 U.S.C. 4802(a).

flexibility analysis that describes the

impact of the proposed rule on small

entities.

However, a regulatory

flexibility analysis is not required if the

agency certifies that the rule will not

have a significant economic impact on

a substantial number of small entities

and publishes its certification and a

short explanatory statement in the

Federal Register together with the rule.

The Small Business Administration

(SBA) has defined ‘‘small entities’’ to

include banking organizations with total

assets of less than or equal to $600

million.

Generally, the FDIC considers

a significant effect to be a quantified

effect in excess of 5 percent of total

annual salaries and benefits per

institution, or 2.5 percent of total

noninterest expenses. The FDIC believes

that effects in excess of these thresholds

typically represent significant effects for

FDIC-supervised institutions. For the

reasons provided below, the FDIC

certifies that the proposed rule would

not have a significant economic impact

on a substantial number of small

entities. Accordingly, a regulatory

flexibility analysis is not required.

As of March 31, 2020, the FDIC

supervised 3,309 depository

institutions,

of which 2,548 were

considered small entities for the

purposes of RFA.

There are 33 (1.3

percent) State savings associations that

are small entities for the purposes of

RFA.

As discussed previously, the

proposed rule would rescind 12 CFR

part 390, subpart Y, which includes the

following: § 390.456, which outlines

administrative procedures for issuing a

directive to take prompt corrective

action against a State savings

association; § 390.457, which outlines

administrative procedures for

reclassifying a State savings association

based on criteria other than capital;

§ 390.458, which outlines

administrative procedures related to

prompt corrective action that require a

State savings association to terminate

the employment of a director or officer;

and § 390.459, which outlines

administrative procedures the FDIC may

take to seek compliance with prompt

corrective action directives. The FDIC

has determined that these sections of 12

CFR part 390 are equivalent to

regulations related to prompt corrective

action in the FDIC’s existing regulations.

Therefore, the FDIC does not expect the

removal of the regulations in subpart Y

to significantly affect small FDIC-

supervised State savings associations.

The proposal would also amend the

FDIC’s regulations that establish

administrative procedures for prompt

corrective action in 12 CFR 308.200

through 308.204 to make them

applicable to all FDIC-supervised

institutions, including State savings

associations. As discussed previously,

these changes would not change the

required procedures related to prompt

corrective action that are applicable to

small State savings associations since

the requirements in subpart Y are

equivalent to requirements in the FDIC’s

existing regulations.

Finally, the proposal would revise 12

CFR 308.202 to clarify the procedures

for delaying a hearing if an institution

is reclassified based on criteria other

than capital. The FDIC’s regulation

currently states that if a hearing is

scheduled, it will be held within 30

days of the request unless the institution

requests a later date. The regulations in

§ 390.457 state that a hearing will be

held within 30 days of the request

unless the FDIC allows further time at

the request of the institution. The FDIC

is proposing to adopt the language from

§ 390.457 in its own regulations since

§ 390.457 clarifies that requests for an

extension will not be automatically

granted. This aspect of the proposed

rule will pose no change for the 33

small FDIC-supervised State savings

associations. The FDIC believes that

adopting the language from § 390.457

should further clarify for small State

nonmember institutions that requests

for an extension will not automatically

be granted; however, this change is

unlikely to pose any substantive effects

on small State nonmember institutions.

Since the prompt corrective action

directive provisions in § 390 subpart Y

are substantively similar to existing

regulations for state nonmember banks

found in § 308, subpart Q, the FDIC

believes it is unlikely that that

rescission of §§ 390.456 through 390.459

would have any substantive effects on

small FDIC-supervised State savings

associations.

Based on the information above, the

FDIC certifies that the proposed rule

would not have a significant economic

impact on a substantial number of small

entities.

The FDIC invites comments on all

aspects of the supporting information

provided in this section, and in

particular, whether the proposed rule

would have any significant effects on

small entities that the FDIC has not

identified.

C. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act

requires the Federal

banking agencies to use plain language

in all proposed and final rules

published after January 1, 2000. The

FDIC has sought to present the proposed

rule in a simple and straightforward

manner. The FDIC invites comments on

whether the proposal is clearly stated

and effectively organized and how the

FDIC might make the proposal easier to

understand.

D. The Economic Growth and

Regulatory Paperwork Reduction Act

Under section 2222 of the Economic

Growth and Regulatory Paperwork

Reduction Act of 1996 (EGRPRA), the

FDIC is required to review all of its

regulations, at least once every 10 years,

in order to identify any outdated or

otherwise unnecessary regulations

imposed on insured institutions.

The

FDIC, along with the other Federal

banking agencies, submitted a Joint

Report to Congress on March 21, 2017

(EGRPRA Report) discussing how the

review was conducted, what has been

done to date to address regulatory

burden, and further measures the FDIC

will take to address issues that were

identified.

As noted in the EGRPRA

Report, the FDIC is continuing to

streamline and clarify its regulations

through the OTS rule integration

process. By removing outdated or

unnecessary regulations, such as part

390, subpart Y, this rule complements

other actions that the FDIC has taken,

separately and with the other Federal

banking agencies, to further the

EGRPRA mandate.

E. Riegle Community Development and

Regulatory Improvement Act of 1994

Pursuant to section 302(a) of the

Riegle Community Development and

Regulatory Improvement Act

(RCDRIA),

in determining the effective

date and administrative compliance

requirements for new regulations that

impose additional reporting, disclosure,

or other requirements on insured

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Id.

depository institutions (IDIs), each

Federal banking agency must consider,

consistent with principles of safety and

soundness and the public interest, any

administrative burdens that such

regulations would place on depository

institutions, including small depository

institutions, and customers of

depository institutions, as well as the

benefits of such regulations. In addition,

section 302(b) of RCDRIA requires new

regulations and amendments to

regulations that impose additional

reporting, disclosures, or other new

requirements on IDIs generally to take

effect on the first day of a calendar

quarter that begins on or after the date

on which the regulations are published

in final form.

The FDIC invites

comments that further will inform its

consideration of RCDRIA.

List of Subjects

12 CFR Part 308

Administrative practice and

procedure, Bank deposit insurance,

Banks, Banking, Claims, Crime, Equal

access to justice, Fraud, Investigations,

Lawyers, Penalties.

12 CFR Part 390

Administrative practice and

procedure, Advertising, Aged, Civil

rights, Conflict of interests, Credit,

Crime, Equal employment opportunity,

Fair housing, Government employees,

Individuals with disabilities, Reporting

and recordkeeping requirements,

Savings associations.

Authority and Issuance

For the reasons stated in the

preamble, the Federal Deposit Insurance

Corporation proposes to amend parts

308 and 390 of title 12 of the Code of

Federal Regulations as follows:

PART 308—RULES OF PRACTICE AND

PROCEDURE

■1. The authority citation for Part 308

continues to read as follows:

Authority: 5 U.S.C. 504, 554–557; 12

U.S.C. 93(b), 164, 505, 1464, 1467(d), 1467a,

1468, 1815(e), 1817, 1818, 1819, 1820, 1828,

1829, 1829(b), 1831i, 1831m(g)(4), 1831o,

1831p–1, 1832(c), 1884(b), 1972, 3102,

3108(a), 3349, 3909, 4717, 5412(b)(2)(C),

5414(b)(3); 15 U.S.C. 78(h) and (i), 78o(c)(4),

78o–4(c), 78o–5, 78q–1, 78s, 78u, 78u–2,

78u–3, 78w, 6801(b), 6805(b)(1); 28 U.S.C.

2461 note; 31 U.S.C. 330, 5321; 42 U.S.C.

4012a; Pub. L. 104–134, sec. 31001(s), 110

Stat. 1321; Pub. L. 109–351, 120 Stat. 1966;

Pub. L. 111–203, 124 Stat. 1376; Pub. L. 114–

74, sec. 701, 129 Stat. 584.

■2. Revise § 308.200 to read as follows:

§ 308.200 Scope.

The rules and procedures set forth in

this subpart apply to FDIC-supervised

institutions and senior executive

officers and directors of the same that

are subject to the provisions of section

38 of the Federal Deposit Insurance Act

(section 38) (12 U.S.C. 1831o) and

subpart H of part 324 of this chapter.

For purposes of this subpart, the term

‘‘FDIC-supervised institution’’ means

any insured depository institution for

which the Federal Deposit Insurance

Corporation is the appropriate Federal

banking agency pursuant to section 3(q)

of the Federal Deposit Insurance Act, 12

U.S.C. 1813(q).

■3. Revise § 308.201 to read as follows:

§ 308.201 Directives to take prompt

corrective action.

(a) Notice of intent to issue directive—

(1) In general. The FDIC shall provide

an undercapitalized, significantly

undercapitalized, or critically

undercapitalized FDIC-supervised

institution prior written notice of the

FDIC’s intention to issue a directive

requiring such FDIC-supervised

institution to take actions or to follow

proscriptions described in section 38

that are within the FDIC’s discretion to

require or impose under section 38 of

the FDI Act, including sections 38(e)(5),

(f)(2), (f)(3), or (f)(5). The FDIC-

supervised institution shall have such

time to respond to a proposed directive

as provided by the FDIC under

paragraph (c) of this section.

(2) Immediate issuance of final

directive. If the FDIC finds it necessary

in order to carry out the purposes of

section 38 of the FDI Act, the FDIC may,

without providing the notice prescribed

in paragraph (a)(1) of this section, issue

a directive requiring an FDIC-supervised

institution immediately to take actions

or to follow proscriptions described in

section 38 that are within the FDIC’s

discretion to require or impose under

section 38 of the FDI Act, including

section 38(e)(5), (f)(2), (f)(3), or (f)(5). An

FDIC-supervised institution that is

subject to such an immediately effective

directive may submit a written appeal of

the directive to the FDIC. Such an

appeal must be received by the FDIC

within 14 calendar days of the issuance

of the directive, unless the FDIC permits

a longer period. The FDIC shall consider

any such appeal, if filed in a timely

matter, within 60 days of receiving the

appeal. During such period of review,

the directive shall remain in effect

unless the FDIC, in its sole discretion,

stays the effectiveness of the directive.

(b) Contents of notice. A notice of

intention to issue a directive shall

include:

(1) A statement of the FDIC-

supervised institution’s capital

measures and capital levels;

(2) A description of the restrictions,

prohibitions or affirmative actions that

the FDIC proposes to impose or require;

(3) The proposed date when such

restrictions or prohibitions would be

effective or the proposed date for

completion of such affirmative actions;

and

(4) The date by which the FDIC-

supervised institution subject to the

directive may file with the FDIC a

written response to the notice.

(1) Time for response. An FDIC-

supervised institution may file a written

response to a notice of intent to issue a

directive within the time period set by

the FDIC. The date shall be at least 14

calendar days from the date of the

notice unless the FDIC determines that

a shorter period is appropriate in light

of the financial condition of the FDIC-

supervised institution or other relevant

circumstances.

(2) Content of response. The response

should include:

(i) An explanation why the action

proposed by the FDIC is not an

appropriate exercise of discretion under

section 38;

(ii) Any recommended modification

of the proposed directive; and

(iii) Any other relevant information,

mitigating circumstances,

documentation, or other evidence in

support of the position of the FDIC-

supervised institution regarding the

proposed directive.

(d) FDIC consideration of response.

After considering the response, the FDIC

may:

(1) Issue the directive as proposed or

in modified form;

(2) Determine not to issue the

directive and so notify the FDIC-

supervised institution; or

(3) Seek additional information or

clarification of the response from the

FDIC-supervised institution or any other

relevant source.

(e) Failure to file response. Failure by

an FDIC-supervised institution to file

with the FDIC, within the specified time

period, a written response to a proposed

directive shall constitute a waiver of the

opportunity to respond and shall

constitute consent to the issuance of the

directive.

(f) Request for modification or

rescission of directive. Any FDIC-

supervised institution that is subject to

a directive under this subpart may,

upon a change in circumstances, request

in writing that the FDIC reconsider the

terms of the directive and may propose

that the directive be rescinded or

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modified. Unless otherwise ordered by

the FDIC, the directive shall continue in

place while such request is pending

before the FDIC.

■4. Revise § 308.202 to read as follows:

§ 308.202 Procedures for reclassifying an

FDIC-supervised institution based on

criteria other than capital.

(a) Reclassification based on unsafe or

unsound condition or practice—

(1) Issuance of notice of proposed

reclassification—

(i) Grounds for reclassification. (A)

Pursuant to § 324.403(d) of this chapter,

the FDIC may reclassify a well-

capitalized FDIC-supervised institution

as adequately capitalized or subject an

adequately capitalized or

undercapitalized institution to the

supervisory actions applicable to the

next lower capital category if:

(1) The FDIC determines that the

FDIC-supervised institution is in unsafe

or unsound condition; or

(2) The FDIC, pursuant to section

8(b)(8) of the FDI Act (12 U.S.C.

1818(b)(8)), deems the FDIC-supervised

institution to be engaged in an unsafe or

unsound practice and not to have

corrected the deficiency.

(B) Any action pursuant to this

paragraph (a)(1)(i) shall hereinafter be

referred to as reclassification.

(ii) Prior notice to institution. Prior to

taking action pursuant to § 324.403(d) of

this chapter, the FDIC shall issue and

serve on the FDIC-supervised institution

a written notice of the FDIC’s intention

to reclassify it.

(2) Contents of notice. A notice of

intention to reclassify an FDIC-

supervised institution based on unsafe

or unsound condition shall include:

(i) A statement of the FDIC-supervised

institution’s capital measures and

capital levels and the category to which

the FDIC-supervised institution would

be reclassified;

(ii) The reasons for reclassification of

the FDIC-supervised institution;

(iii) The date by which the FDIC-

supervised institution subject to the

notice of reclassification may file with

the FDIC a written appeal of the

proposed reclassification and a request

for a hearing, which shall be at least 14

calendar days from the date of service

of the notice unless the FDIC determines

that a shorter period is appropriate in

light of the financial condition of the

FDIC-supervised institution or other

relevant circumstances.

(3) Response to notice of proposed

reclassification. An FDIC-supervised

institution may file a written response

to a notice of proposed reclassification

within the time period set by the FDIC.

The response should include:

(i) An explanation of why the FDIC-

supervised institution is not in an

unsafe or unsound condition or

otherwise should not be reclassified;

and

(ii) Any other relevant information,

mitigating circumstances,

documentation, or other evidence in

support of the position of the FDIC-

supervised institution regarding the

reclassification.

(4) Failure to file response. Failure by

an FDIC-supervised institution to file,

within the specified time period, a

written response with the FDIC to a

notice of proposed reclassification shall

constitute a waiver of the opportunity to

respond and shall constitute consent to

the reclassification.

(5) Request for hearing and

presentation of oral testimony or

witnesses. The response may include a

request for an informal hearing before

the FDIC under this section. If the FDIC-

supervised institution desires to present

oral testimony or witnesses at the

hearing, the FDIC-supervised institution

shall include a request to do so with the

request for an informal hearing. A

request to present oral testimony or

witnesses shall specify the names of the

witnesses and the general nature of their

expected testimony. Failure to request a

hearing shall constitute a waiver of any

right to a hearing, and failure to request

the opportunity to present oral

testimony or witnesses shall constitute

a waiver of any right to present oral

testimony or witnesses.

(6) Order for informal hearing. Upon

receipt of a timely written request that

includes a request for a hearing, the

FDIC shall issue an order directing an

informal hearing to commence no later

than 30 days after receipt of the request,

unless the FDIC allows further time at

the request of the FDIC-supervised

institution. The hearing shall be held in

Washington, DC or at such other place

as may be designated by the FDIC before

a presiding officer(s) designated by the

FDIC to conduct the hearing.

(7) Hearing procedures.

(i) The FDIC-supervised institution

shall have the right to introduce

relevant written materials and to present

oral argument at the hearing. The FDIC-

supervised institution may introduce

oral testimony and present witnesses

only if expressly authorized by the FDIC

or the presiding officer(s). Neither the

provisions of the Administrative

Procedure Act (5 U.S.C. 554–557)

governing adjudications required by

statute to be determined on the record

nor the Uniform Rules of Practice and

Procedure in this part apply to an

informal hearing under this section

unless the FDIC orders that such

procedures shall apply.

(ii) The informal hearing shall be

recorded, and a transcript shall be

furnished to the FDIC-supervised

institution upon request and payment of

the cost thereof. Witnesses need not be

sworn, unless specifically requested by

a party or the presiding officer(s). The

presiding officer(s) may ask questions of

any witness.

(iii) The presiding officer(s) may order

that the hearing be continued for a

reasonable period (normally five

business days) following completion of

oral testimony or argument to allow

additional written submissions to the

hearing record.

(8) Recommendation of presiding

officers. Within 20 calendar days

following the date the hearing and the

record on the proceeding are closed, the

presiding officer(s) shall make a

recommendation to the FDIC on the

reclassification.

(9) Time for decision. Not later than

60 calendar days after the date the

record is closed or the date of the

response in a case where no hearing was

requested, the FDIC will decide whether

to reclassify the FDIC-supervised

institution and notify the FDIC-

supervised institution of the FDIC’s

decision.

(b) Request for rescission of

reclassification. Any FDIC-supervised

institution that has been reclassified

under this section, may, upon a change

in circumstances, request in writing that

the FDIC reconsider the reclassification

and may propose that the

reclassification be rescinded and that

any directives issued in connection with

the reclassification be modified,

rescinded, or removed. Unless

otherwise ordered by the FDIC, the

FDIC-supervised institution shall

remain subject to the reclassification

and to any directives issued in

connection with that reclassification

while such request is pending before the

FDIC.

■5. Revise § 308.203 to read as follows:

§ 308.203 Order to dismiss a director or

senior executive officer.

(a) Service of notice. When the FDIC

issues and serves a directive on an

FDIC-supervised institution pursuant to

§ 308.201 of this part requiring the

FDIC-supervised institution to dismiss

from office any director or senior

executive officer under § 38(f)(2)(F)(ii)

of the FDI Act, the FDIC shall also serve

a copy of the directive, or the relevant

portions of the directive where

appropriate, upon the person to be

dismissed.

(b) Response to directive—

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(1) Request for reinstatement. A

director or senior executive officer who

has been served with a directive under

paragraph (a) of this section

(Respondent) may file a written request

for reinstatement. The request for

reinstatement shall be filed within 10

calendar days of the receipt of the

directive by the Respondent, unless

further time is allowed by the FDIC at

the request of the Respondent.

(2) Contents of request; informal

hearing. The request for reinstatement

shall include reasons why the

Respondent should be reinstated and

may include a request for an informal

hearing before the FDIC under this

section. If the Respondent desires to

present oral testimony or witnesses at

the hearing, the Respondent shall

include a request to do so with the

request for an informal hearing. The

request to present oral testimony or

witnesses shall specify the names of the

witnesses and the general nature of their

expected testimony. Failure to request a

hearing shall constitute a waiver of any

right to a hearing, and failure to request

the opportunity to present oral

testimony or witnesses shall constitute

a waiver of any right or opportunity to

present oral testimony or witnesses.

(3) Effective date. Unless otherwise

ordered by the FDIC, the dismissal shall

remain in effect while a request for

reinstatement is pending.

receipt of a timely written request from

a Respondent for an informal hearing on

the portion of a directive requiring an

FDIC-supervised institution to dismiss

from office any director or senior

executive officer, the FDIC shall issue

an order directing an informal hearing

to commence no later than 30 days after

receipt of the request, unless the

Respondent requests a later date. The

hearing shall be held in Washington,

DC, or at such other place as may be

designated by the FDIC, before a

presiding officer(s) designated by the

FDIC to conduct the hearing.

(d) Hearing procedures.

(1) A Respondent may appear at the

hearing personally or through counsel.

A Respondent shall have the right to

introduce relevant written materials and

to present oral argument. A Respondent

may introduce oral testimony and

present witnesses only if expressly

authorized by the FDIC or the presiding

officer(s). Neither the provisions of the

Administrative Procedure Act governing

adjudications required by statute to be

determined on the record nor the

Uniform Rules of Practice and

Procedure in this part apply to an

informal hearing under this section

unless the FDIC orders that such

procedures shall apply.

(2) The informal hearing shall be

recorded, and a transcript shall be

furnished to the Respondent upon

request and payment of the cost thereof.

Witnesses need not be sworn, unless

specifically requested by a party or the

presiding officer(s). The presiding

officer(s) may ask questions of any

witness.

(3) The presiding officer(s) may order

that the hearing be continued for a

reasonable period (normally five

business days) following completion of

oral testimony or argument to allow

additional written submissions to the

hearing record.

(e) Standard for review. A Respondent

shall bear the burden of demonstrating

that his or her continued employment

by or service with the FDIC-supervised

institution would materially strengthen

the FDIC-supervised institution’s

ability:

(1) To become adequately capitalized,

to the extent that the directive was

issued as a result of the FDIC-supervised

institution’s capital level or failure to

submit or implement a capital

restoration plan; and

(2) To correct the unsafe or unsound

condition or unsafe or unsound

practice, to the extent that the directive

was issued as a result of classification

of the FDIC-supervised institution based

on supervisory criteria other than

capital, pursuant to section 38(g) of the

FDI Act.

(f) Recommendation of presiding

officers. Within 20 calendar days

following the date the hearing and the

record on the proceeding are closed, the

presiding officer(s) shall make a

recommendation to the FDIC concerning

the Respondent’s request for

reinstatement with the FDIC-supervised

institution.

(g) Time for decision. Not later than

60 calendar days after the date the

record is closed or the date of the

response in a case where no hearing was

requested, the FDIC shall grant or deny

the request for reinstatement and notify

the Respondent of the FDIC’s decision.

If the FDIC denies the request for

reinstatement, the FDIC shall set forth in

the notification the reasons for the

FDIC’s action.

■6. Revise § 308.204 to read as follows:

§ 308.204 Enforcement of directives.

(a) Judicial remedies. Whenever an

FDIC-supervised institution fails to

comply with a directive issued under

section 38, the FDIC may seek

enforcement of the directive in the

appropriate United States district court

pursuant to section 8(i)(1) of the FDI Act

(12 U.S.C. 1818(i)(1)).

(b) Administrative remedies—

(1) Failure to comply with directive.

Pursuant to section 8(i)(2)(A) of the FDI

Act, the FDIC may assess a civil money

penalty against any FDIC-supervised

institution that violates or otherwise

fails to comply with any final directive

issued under section 38 and against any

institution-affiliated party who

participates in such violation or

noncompliance.

(2) Failure to implement capital

restoration plan. The failure of an FDIC-

supervised institution to implement a

capital restoration plan required under

section 38, or subpart H of part 324 of

this chapter, or the failure of a company

having control of an FDIC-supervised

institution to fulfill a guarantee of a

capital restoration plan made pursuant

to section 38(e)(2) of the FDI Act shall

subject the FDIC-supervised institution

to the assessment of civil money

penalties pursuant to section 8(i)(2)(A)

of the FDI Act.

addition to the actions described in

paragraphs (a) and (b) of this section,

the FDIC may seek enforcement of the

provisions of section 38 or subpart H of

part 324 of this chapter through any

other judicial or administrative

proceeding authorized by law.

PART 390—REGULATIONS

TRANSFERRED FROM THE OFFICE OF

THRIFT SUPERVISION

■7. The authority citation for part 390

is revised to read as follows:

Authority: 12 U.S.C. 1819.

Subpart F also issued under 5 U.S.C. 552;

559; 12 U.S.C. 2901 et seq.

Subpart G also issued under 12 U.S.C. 2810

et seq., 2901 et seq.; 15 U.S.C. 1691; 42 U.S.C.

1981, 1982, 3601–3619.

Subpart O also issued under 12 U.S.C.

1828.

Subpart Q also issued under 12 U.S.C.

1462; 1462a; 1463; 1464.

Subpart W also issued under 12 U.S.C.

1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m;

78n; 78p; 78w.

Subpart Y—[Removed and Reserved]

■8. Remove and reserve part 390,

subpart Y, consisting of §§ 390.456

through 390.459.

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, on August 21,

2020.

James P. Sheesley,

Acting Assistant Executive Secretary.

[FR Doc. 2020–18812 Filed 9–25–20; 8:45 am]

BILLING CODE 6714–01–P

VerDate Sep<11>2014 16:57 Sep 25, 2020 Jkt 250001 PO 00000 Frm 00022 Fmt 4702 Sfmt 9990 E:\FR\FM\28SEP1.SGM 28SEP1

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

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