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| ## Com |   |                                    |        |          |   |
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+--------+---+------------------------------------+--------+----------+---+
| ## Su  |   | ## Economic Growth and Regulato    | ##     | ##       |   |
| bject: |   | ry Paperwork Reduction Act of 1996 | Descri |  Summary |   |
|        |   |                                    | ption: |          |   |
+--------+---+------------------------------------+--------+----------+---+

**TO:** Chief Executive Officers and Compliance Personnel of all
National Banks

The attached summary highlights the major provisions of the "Economic
Growth and Regulatory Paperwork Reduction Act of 1996," which was signed
into law on September 30, 1996. This legislation amends many laws that
affect national banks, consumers, and the Office of the Comptroller of
the Currency (OCC). Many of its provisions were effective on the date of
enactment.

This document briefly describes only the highlights of the legislation.
A more detailed section-by-section analysis is available through the
OCC's Internet site, http://www.occ.treas.gov. This section-by-section
analysis also may be obtained through the OCC's Communications Division,
250 E Street, SW, Washington, DC 20219, 202-874-4700, and through the
OCC's District Offices.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Julie L. Williams

Chief Counsel

Attachment

##### **"Economic Growth And Regulatory Paperwork Reduction Act of 1996"**

**Signed into Law on September 30, 1996**

**(As Reprinted in the [Congressional]{.underline} [Record]{.underline},
H11749-H11775, Sept. 28, 1996)**

**HIGHLIGHTS**[^1]

**I. [Regulatory Burden Relief]{.underline}**

**[(Generally Effective Upon Enactment)]{.underline}**

A. [Supervisory Provisions]{.underline}

-   Eliminates the per branch capital requirement. \[§ 2204\][^2]

-   Excludes ATMs or remote service units from the definition of
    "branch" for purposes of prior approval requirements and geographic
    restrictions, as well as any other requirements applicable to
    "branches." \[§ 2205\]

-   Permits well-capitalized banks rated CAMEL 1 or 2 to invest in bank
    premises in amounts up to 150% of the bank\'s capital and surplus
    with only a 30-day after-the- fact notice. \[§ 2206\]

-   Establishes expedited procedures to permit certain bank holding
    companies to engage in permissible nonbanking activities, except for
    acquisitions of thrifts. \[§ 2208\]

-   Eliminates new director or senior executive officer notices (914
    notices) currently required for banks chartered within the past two
    years or that have undergone a change in control within the past 2
    years; retains 914 notices for undercapitalized and troubled banks
    and gives the Federal banking agencies discretion to require prior
    notice if deemed appropriate in connection with review of a prompt
    corrective action plan or otherwise; gives the Federal banking
    agencies 90 days to disapprove an officer or director based on a 914
    notice, instead of the current 30 days. \[§ 2209\]

-   Makes a number of changes to the Depository Institution Management
    Interlocks Act (DIMIA): increases the amount of the asset-size test
    that prohibits nationwide interlocks involving large nonaffiliated
    institutions \-- banks with assets of up to \$2.5 billion (increased
    from \$1 billion) can now have interlocking management with
    nonaffiliated institutions with assets of up to \$1.5 billion
    (increased from \$500 million); permits grandfathered interlocks to
    continue indefinitely; and restores the Federal banking agencies'
    authority to make exemptions to DIMIA, subject to certain
    conditions. \[§ 2210\]

-   Permits the Federal Reserve Board (Fed) under certain conditions to
    exempt from insider lending restrictions preferential loans to
    executive officers and directors of certain affiliates if the
    officer or director does not participate in major policy-making
    functions of the bank. \[§ 2211\]

-   Exempts from the insider lending restrictions a bank's company-wide
    benefit or compensation plans that are widely available to employees
    of the bank and that do not give preference to any officer,
    director, or principal shareholder (or related interests) over other
    employees of the bank. \[§ 2211\]

-   Exempts ATMs, certain branch relocations or consolidations within an
    immediate neighborhood, and branches closed in connection with an
    emergency acquisition from the prior notice requirement for branch
    closures. \[§ 2213\]

-   Permits the Federal banking agencies to raise the asset limit for an
    18-month examination cycle from \$175,000,000 to \$250,000,000 for
    banks with a CAMEL 2 rating. \[§ 2221\]

-   Increases the number of depository institutions that are exempt
    under the Home Mortgage Disclosure Act (HMDA) by indexing the
    current exemption limit of \$10 million to inflation retroactive to
    1975; as a result, institutions with approximately \$28 million in
    assets are now exempt from HMDA. \[§ 2225\]

-   Permits the OCC to waive the State residency requirement for
    directors of national banks. There is a technical drafting error in
    this amendment. As drafted, the amendment inadvertently deleted the
    OCC's current authority to waive the citizenship requirement for up
    to a minority of a national bank's directors if the bank is
    affiliated with a foreign bank. A colloquy on the Floor of the
    Senate between Chairman D'Amato of the Senate Banking Committee and
    Sens. Mack and Graham (142 Cong. Rec. S11919 (daily ed. Sept. 30,
    1996)) clarifies that no change in the OCC's citizenship waiver
    authority was intended by Congress and instructs the OCC to treat
    the authority as continuing in effect and not to require any
    national banks that have citizenship waivers to restructure their
    boards of directors. \[§ 2241\]

-   Requires each Federal banking agency to ensure that its examiners
    consult with each other regarding examination activities of a
    national bank and resolve any inconsistencies in their
    recommendations, and consider appointing an examiner-in-charge for
    each national bank. \[§ 2244\]

-   Eliminates the independent auditor attestation requirement for
    compliance with safety and soundness laws. \[§ 2301\]

-   Authorizes the Federal banking agencies to permit a bank's
    independent audit committee to include some inside directors if the
    bank is unable to find competent outside directors, provided a
    majority of the committee is still made up of outside directors
    (prior to the enactment of this amendment, all members of the audit
    committee had to be outside directors). \[§ 2301\]

-   Removes the 7-percent asset growth cap for non-bank banks. \[§
    2304\]

-   Permits national banks to invest in Edge and Agreement Act
    corporations in an aggregate amount that exceeds 10% of capital
    (which was the maximum permitted under prior law) if the total
    investment does not exceed 20% and the Fed determines that the
    additional investment would not be unsafe or unsound. \[§ 2307\]

-   Makes it a Federal crime to produce, possess, or sell a fictitious
    financial instrument, e.g., so-called \"Comptroller's Warrants,\"
    which purports to be a financial instrument of the United States (or
    any subdivision thereof), a foreign country, or a private
    organization. \[§ 2603\]

-   Provides that tax deferred annuities sold by an insured depository
    institution (\"retirement CDS\") are not deposits and, therefore,
    are not insured, but does not otherwise affect the authority of
    national banks to sell insurance. \[§ 2614\]

B. [Consumer Provisions]{.underline}

-   Requires the Fed and HUD, within 6 months of enactment, to simplify
    and improve RESPA and TILA disclosures and provide a single format
    for such disclosures. \[§ 2101\]

-   Makes a number of changes to RESPA's disclosure requirements. \[§
    2103\]

-   Generally provides that, if a bank or a third party self-tests for
    compliance under the Equal Credit Opportunity Act and the Fair
    Housing Act, the test results will not be used against the bank if
    the bank identifies possible violations and is taking appropriate
    corrective actions, and if the bank is not using the results in its
    defense. \[§ 2302\]

-   After six months from the date of enactment, gives the FTC
    regulatory authority over credit repair organizations and imposes
    disclosure requirements and civil liability for violations. \[§
    2451\]

-   Prevents the Fed from finalizing for at least nine months its
    proposed Electronic Funds Transfer Act (EFTA) regulations that would
    regulate stored value cards and requires the Fed to study whether
    the EFTA could be applied to electronic stored value products
    without adversely impacting their cost, development, and operation.
    \[§ 2601\]

-   Sunsets the Truth-in-Savings Act's civil liability provision in five
    years. \[§ 2604\]

**II. [Recapitalization of SAIF]{.underline}**

**[(Effective October 1, 1996)]{.underline}**

-   Recapitalizes the Savings Association Insurance Fund (SAIF) as of
    October 1, 1996. \[§ 2702\]

-   Requires banks after December 31, 1996 to pay 20% of the interest on
    the bonds that funded the initial capitalization of SAIF (\"FICA
    bonds\") but banks would be required to pay a full pro-rata share of
    the interest obligation beginning after the earlier of December 31,
    1999 or the date on which the last savings association ceases to
    exist. \[§ 2703\]

-   Requires the Federal banking agencies to take appropriate actions,
    including enforcement actions, to prevent insured depository
    institutions and their holding companies from facilitating or
    encouraging the shifting of deposits from SAIF to the Bank Insurance
    Fund (BIF) for the purpose of evading SAIF assessments but would not
    prohibit a depository institution from taking actions that are in
    the ordinary course of business and not directed towards the
    depositors of an affiliate. \[§ 2703\]

-   Merges SAIF and BIF on January 1, 1999 but only [if]{.underline} no
    insured depository institution is a savings association on that
    date. \[§ 2704\]

-   Requires the Department of Treasury to conduct a study by March 31,
    1997 on the development of a common charter for all insured
    depository institutions. \[§ 2709\]

> **[III. Amendments to FCRA (Generally Effective One Year After
> Enactment)]{.underline}**

-   Substantially amends the Fair Credit Reporting Act (FCRA). \[§§
    2401-2422\]

-   Prohibits the Federal banking agencies from examining for compliance
    with FCRA unless there has been a complaint about a violation or the
    agency otherwise has knowledge of a violation. \[§ 2416\]

**[IV. Amendments to Lender Liability]{.underline}**

**[(Generally Effective Upon Enactment)]{.underline}**

-   Amends the Comprehensive Environmental Response, Compensation, and
    Liability Act to clarify that a lender is not liable for
    environmental cleanups of property securing a loan unless the
    lender, among other things, participates in day-to-day decision
    making over the operations of the property or has control over
    environmental compliance. \[§§ 2501-2505\]

-   Provides that lenders that foreclose on property may take certain
    post-foreclosure actions (including, for instance, the sale,
    liquidation, or re-lease (in the case of a lease financing
    transaction) of the property and the maintaining or winding up of
    business activities involving the property) without incurring
    liability for environmental cleanup if the lender did not
    participate in management of the property prior to foreclosure and
    the lender seeks to dispose of the property as soon as it is
    commercially reasonable. \[§ 2502\]

-   Puts into place the Environmental Protection Agency's 1992
    regulation clarifying lender liability that was invalidated by a
    court decision and prohibits judicial review of this regulation. \[§
    2504\]

-   Changes made by the legislation apply to any claim that has not been
    finally adjudicated as of the date of enactment, i.e., September
    30, 1996. \[§ 2505\]

[^1]: \[**Note:** This document discusses only the highlights of the
    "Economic Growth and Regulatory Paperwork Reduction Act of 1996."
    For more detail and information about the Act, please refer to the
    summary of the legislation that was prepared by the OCC's Law
    Department, which is available through the OCC's Internet cite,
    http://www.occ.treas.gov. A copy of this summary may also be
    obtained through the OCC's Communications Division, 250 E Street,
    SW, Washington, DC 20219, 202-874-4700, or the OCC's District
    Offices.**\]**

[^2]: \[**Note:** Section numbers in brackets refer to the section
    numbers in the enacted legislation.\]