Rules of Practice and Procedure
Federal Register, Volume 83 Issue 229 (Wednesday, November 28, 2018)
Federal Register Volume 83, Number 229 (Wednesday, November 28, 2018)
Rules and Regulations
Pages 61111-61116
From the Federal Register Online via the Government Publishing Office www.gpo.gov
FR Doc No: 2018-25660
Page 61111
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 308 and 327
RIN 3064-AE75
Rules of Practice and Procedure
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending its rules of practice and procedure to remove duplicative, descriptive regulatory language related to civil money penalty (CMP) amounts that restates existing statutory language regarding such CMPs; codify Congress's recent change to CMP inflation-adjustments in the FDIC's regulations; and direct readers to an annually published notice in the Federal Register--rather than the Code of Federal Regulations (CFR)--
for information regarding the maximum CMP amounts that can be assessed after inflation adjustments. These revisions are intended to simplify the CFR by removing unnecessary and redundant text and to make it easier for readers to locate the current, inflation-adjusted maximum CMP amounts by presenting these amounts in an annually published chart. Additionally, the FDIC is correcting four errors and revising cross-
references currently found in its rules of practice and procedure.
DATES: This rule is effective on January 15, 2019.
FOR FURTHER INFORMATION CONTACT: Graham N. Rehrig, Senior Attorney, Legal Division, (202) 898-3829, email protected; or Sydney Mayer, Attorney, Legal Division, (202) 898-3669; Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
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Policy Objectives
The policy objective of the Rule is to simplify the presentation of maximum CMP amounts within 12 CFR part 308 to support ease of reference and public understanding. The Rule will amend the presentation of maximum CMP limits to help ensure consistency with similar statutes of other federal financial regulators.\1\ Additionally, the Rule will implement recent Office of Management and Budget (OMB) guidance on simplifying the publication of annual inflation adjustments.
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\1\ See 12 CFR 19.240 (2018) and 83 FR 1657 (Jan. 12, 2018) (table containing the CMP adjustments published by the Office of the Comptroller of Currency); 12 CFR 263.65 (2018) (table containing the CMP adjustments published by the Board of Governors of the Federal Reserve System); 12 CFR 747.1001 (2018) (table containing the CMP adjustments published by the National Credit Union Association).
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Background
The FDIC assesses CMPs under section 8(i) of the Federal Deposit Insurance Act (FDIA) (12 U.S.C. 1818) and a variety of other statutes.\2\ Congress has established maximum penalties that can be assessed under these statutes. In many cases, these statutes contain multiple penalty tiers, permitting the assessment of penalties at various levels depending on the severity of the misconduct at issue.\3\
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\2\ See, e.g., 12 U.S.C. 1972(2)(F) (authorizing the FDIC to impose CMPs for violations of the Bank Holding Company Act of 1970 related to prohibited tying arrangements); 15 U.S.C. 78u-2 (authorizing the FDIC to impose CMPs for violations of certain provisions of the Securities Exchange Act of 1934); 42 U.S.C. 4012a(f) (authorizing the FDIC to impose CMPs for pattern or practice violations of the Flood Disaster Protection Act).
\3\ For example, 12 U.S.C. 1818(i)(2) provides for three tiers of CMPs, with the size of the CMP increasing with the gravity of the misconduct.
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Since 1990, Congress has required federal agencies with authority to impose CMPs to periodically adjust the maximum CMP amounts these agencies are authorized to impose.\4\ These periodic updates have helped to ``maintain the deterrent effect of civil monetary penalties and promote compliance with the law.'' \5\ In 2015, Congress revised the process by which federal agencies adjust applicable CMPs for inflation.\6\ Under the 2015 Adjustment Act, the FDIC is required to make annual adjustments to its maximum CMP amounts to account for inflation.\7\ These adjustments apply to all CMPs covered by the 2015 Adjustment Act.\8\ The 2015 Adjustment Act requires annual adjustments be made by January 15 of each year.\9\ The FDIC's 2018 adjustments were published on January 12, 2018.\10\
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\4\ See The Federal Civil Penalties Inflation Adjustment Act of 1990, Public Law 101-410.
\5\ See section 2 of the Federal Civil Penalties Inflation Adjustment Act of 1990. Public Law 101-410, 104 Stat. 890 (amended 2015) (codified as amended at 28 U.S.C. 2461 note).
\6\ See The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Public Law 114-74, sec. 701, 129 Stat. 584 (2015 Adjustment Act). Although the 2015 Adjustment Act increased the maximum penalty that may be assessed under each applicable statute, the FDIC still possesses discretion to impose CMP amounts below the maximum level in accordance with the severity of the misconduct at issue. When making a determination as to the appropriate level of any given penalty, the FDIC is guided by statutory factors set forth in 12 U.S.C. 1818(i)(2)(G) and those factors identified in the Interagency Policy Statement Regarding the Assessment of CMPs by the Federal Financial Institutions Regulatory Agencies. See 63 FR 30227 (June 3, 1998). Such factors include, but are not limited to, the gravity and duration of the misconduct and the intent related to the misconduct.
\7\ See 2015 Adjustment Act at sec. 701(b).
\8\ See Public Law 101-410, sec. 3(2), 104 Stat. 890 (amended 2015) (codified as amended at 28 U.S.C. 2461 note).
\9\ Public Law 114-74, sec. 701(b), 129 Stat. 584.
\10\ See 83 FR 1519, https://www.fdic.gov/news/board/2017/2017-12-19-notice-sum-b-fr.pdf.
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The 2015 Adjustment Act directs federal agencies to follow guidance issued by the OMB by December 15 of each year when calculating new maximum penalty amounts.\11\ The OMB issued guidance for the 2018 CMP adjustments on December 15, 2017.\12\ The OMB Guidance noted, ``Some agencies have chosen to remove their specific penalty amounts from the CFR and have instead codified the statutory formula for inflation adjustments. Agencies must still calculate and publish their penalty adjustments in the Federal Register.'' \13\
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\11\ See Public Law 114-74, sec. 701(b), 129 Stat. 584.
\12\ OMB, Implementation of Penalty Inflation Adjustments for 2018, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, M-18-03 (OMB Guidance), https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf.
\13\ OMB Guidance at 4 (citing 81 FR 41438 (June 27, 2016) (Social Security Administration) (codified at 29 CFR 498.103(g) (2018))).
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Description and Expected Effects of the Rule
The FDIC is amending its rules of practice and procedure to remove from
Page 61112
the CFR descriptive regulatory language related to maximum CMP amounts that duplicates statutory language, codify the statutory formula for inflation adjustments to the maximum CMP amounts, and direct readers to a table published annually in the Federal Register, containing the inflation-adjusted maximum CMP amounts. These changes will be consistent with the OMB Guidance and the practices of other Federal regulators.
Currently, 12 CFR 308.116(b) and 308.132(d) contain the maximum CMP amounts that may be assessed for violations of various statutes, along with lengthy descriptions of these statutes. Rather than providing any interpretation of these statutes or providing guidance regarding the assessment of CMPs for violations of these statutes, the descriptive language contained in sections 308.116(b) and 308.132(d) merely restates the enabling statutory language. The FDIC's current format for identifying inflation-adjusted CMP figures differs significantly from the formats published by other prudential regulators \14\ and makes it more difficult for readers to locate applicable maximum CMP amounts. Accordingly, the FDIC is removing descriptive language found in sections 308.116(b) and 308.132(d). The FDIC believes that these changes will remove unnecessary and redundant language from the CFR and improve readability.
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\14\ The OCC, the FRB, and the National Credit Union Association (NCUA) provide a simplified list in a tabular format, identifying each enabling statute and the associated maximum CMP amount, adjusted for inflation. See 12 CFR 19.240 (2018) and 83 FR 1657 (Jan. 12, 2018) (table containing the OCC's CMP adjustments); 12 CFR 263.65 (2018) (table containing the FRB's CMP adjustments); 12 CFR 747.1001 (2018) (table containing the NCUA's CMP adjustments).
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A sample annual table containing the current maximum CMP amounts appears at the end of this section, for reference. Under the Rule, the FDIC will calculate and publish a similar chart with inflation-adjusted figures in the Federal Register on or before January 15 of each calendar year, beginning with the January 15, 2019, annual inflation adjustments.
The FDIC, however, will retain language in section 308.116(a), (c) and (d) concerning violations of the Change in Bank Control Act. These regulations, which the FDIC implemented in 1991, address requests for a hearing, mitigating factors, and the consequences of a respondent's failure to answer.\15\ The language in current section 308.116(b)(1)-
(3), however, repeats the relevant statutory language of 12 U.S.C. 1817(j)(16)(A)-(D). Further, current section 308.116(b)(4) merely contains inflation adjustments. Therefore, the FDIC is removing current section 308.116(b) and instead directing readers to section 308.132(d) to determine current maximum CMP amounts.
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\15\ See 56 FR 37968 (Aug. 9, 1991).
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The FDIC is also keeping language concerning the late filing of Call Reports at current section 308.132(d)(1) and (d)(3). 12 U.S.C. 1817(a) provides the maximum CMP amounts for the late filing of Call Reports. In 1991, however, the FDIC issued regulations that further subdivided these amounts based upon the size of the institution and the lateness of the filing.\16\ These regulations accordingly differ from other provisions found in section 308.132(d) that simply restate relevant statutory language regarding maximum CMP amounts. The Rule will merge language from current subsections 308.132(d)(1) and (d)(3) into a new section 308.132(e), since, aside from the differing penalty amounts, these two current subsections contain similar language. The new section 308.132(e) will direct readers to the Federal Register to determine the applicable inflation-adjusted penalty amounts.
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\16\ See 56 FR 37968, 37992-93 (Aug. 9, 1991).
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The FDIC is correcting four errors currently located at section 308.132(d)(1) and (d)(3) concerning the maximum amount that generally will be assessed for violations of 12 U.S.C. 1464(v) and 1817(a) regarding the late filing of Call Reports by certain small institutions. The current text contains the inadvertent overstatement of four fractions of an institution's total assets that are paired with correctly stated basis-point figures. These corrections will align the listed fractions of an institution's total assets with the listed basis-point calculations, and these corrections will be reflected in the annual Federal Register CMP notice.\17\
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\17\ For example, current section 308.132(d)(1)(i)(A) states, ``the amount assessed shall be the greater of an inflation-adjusted daily penalty or 1/1,000th of the institution's total assets (1/
10th of a basis point)'' when it should read, ``the amount assessed shall be the greater of an inflation-adjusted daily penalty or 1/
100,000th of the institution's total assets (1/10th of a basis point).'' (Emphasis added.)
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Lastly, the FDIC is revising cross-references found at 12 CFR 308.502(a)(6), 12 CFR 308.502(b)(4), 12 CFR 308.530, and 12 CFR 327.3(c) to reflect the revisions to 12 CFR 308.132(d).
Since the Rule will amend the presentation of maximum CMP levels in the Federal Register, the FDIC believes the Rule will not pose any regulatory costs to IDIs or cost to the public in general.
Sample Civil Money Penalty Table
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Adjusted maximum CMP \18\
U.S. code citation (beginning January 15, 2018)
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12 U.S.C. 1464(v):
Tier One CMP.......................... $3,928.
Tier Two CMP.......................... $39,278.
Tier Three CMP \19\................... $1,963,870.
12 U.S.C. 1467(d)......................... $9,819.
12 U.S.C. 1817(a):
Tier One CMP \20\..................... $3,928.
Tier Two CMP.......................... $39,278.
Tier Three CMP \21\................... $1,963,870.
12 U.S.C. 1817(c):
Tier One CMP.......................... $3,591.
Tier Two CMP.......................... $35,904.
Tier Three CMP \22\................... $1,795,216.
12 U.S.C. 1817(j)(16):
Tier One CMP.......................... $9,819.
Tier Two CMP.......................... $49,096.
Tier Three CMP \23\................... $1,963,870.
12 U.S.C. 1818(i)(2): \24\
Tier One CMP.......................... $9,819.
Tier Two CMP.......................... $49,096.
Tier Three CMP \25\................... $1,963,870.
12 U.S.C. 1820(e)(4)...................... $8,977.
12 U.S.C. 1820(k)(6)...................... $323,027.
12 U.S.C. 1828(a)(3)...................... $122.
12 U.S.C. 1828(h): \26\
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For assessments
