This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

67033 

Vol. 83, No. 248 

Friday, December 28, 2018 

1Public Law 115–174, 132 Stat. 1296 (2018). 

2 12 U.S.C. 1820(d). 

3See section 83001 of the Fixing America’s 

Surface Transportation Act (the FAST) Act, enacted 

on December 4, 2015. Public Law 114–94, 129 Stat. 

1312 (permitting the agencies to examine qualifying 

IDIs with under $1 billion in total assets not less 

than once during each 18-month period). The 

agencies published interim final rules 

implementing the FAST Act amendments in 

February 2016, and final rules in December 2016. 

See 81 FR 10069 (Feb. 29, 2016) and 81 FR 90949 

(Dec. 16. 2016), respectively, codified at 12 CFR 4.6 

and 4.7 (OCC), 12 CFR 208.64 and 211.26 (Board), 

12 CFR 337.12 and 347.211 (FDIC). 

4 12 U.S.C. 1820(d)(4) and 1820(d)(10). 

5 12 U.S.C. 3105(c)(1)(C). 

6 12 U.S.C. 1820(d)(1). 

7The Board, FDIC, or OCC. See 12 U.S.C. 1813(q). 

8 IDIs are evaluated under the Uniform Financial 

Institutions Rating System (commonly referred to as 

CAMELS). CAMELS is an acronym that is drawn 

from the first letters of the individual components 

of the rating system: Capital adequacy, Asset 

quality, Management, Earnings, Liquidity, and 

Sensitivity to market risk. CAMELS ratings of ‘‘1’’ 

and ‘‘2’’ correspond with ratings of ‘‘outstanding’’ 

and ‘‘good,’’ respectively. In addition to having a 

CAMELS composite rating of ‘‘1’’ or ‘‘2,’’ an IDI is 

Continued 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 4 

[Docket ID OCC–2018–0014] 

RIN 1557–AE37 

FEDERAL RESERVE SYSTEM 

12 CFR Parts 208 and 211 

[Docket No. R–1615] 

RIN 7100–AF09 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 337 and 347 

RIN 3064–AE76 

Expanded Examination Cycle for 

Certain Small Insured Depository 

Institutions and U.S. Branches and 

Agencies of Foreign Banks 

AGENCY: Office of the Comptroller of the 

Currency (OCC), Treasury; Board of 

Governors of the Federal Reserve 

System (Board); and Federal Deposit 

Insurance Corporation (FDIC). 

ACTION: Final rules. 

SUMMARY: On August 29, 2018, the OCC, 

Board, and FDIC (collectively, the 

agencies) issued interim final rules that 

were effective immediately to 

implement section 210 of the Economic 

Growth, Regulatory Relief, and 

Consumer Protection Act (Economic 

Growth Act), which was enacted on 

May 24, 2018. The agencies are now 

adopting the interim final rules as final 

without change. The interim final rules 

and final rules implement section 210 of 

the Economic Growth Act, which 

amended section 10(d) of the Federal 

Deposit Insurance Act (FDI Act) to 

permit the agencies to examine 

qualifying insured depository 

institutions (IDIs) with under $3 billion 

in total assets not less than once during 

each 18-month period. In addition, 

these final rules adopt as final the 

parallel changes to the agencies’ 

regulations governing the on-site 

examination cycle for U.S. branches and 

agencies of foreign banks, consistent 

with the International Banking Act of 

1978 (IBA). 

DATES: These final rules are effective on 

January 28, 2019. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Enice Thomas, Senior Advisor 

to Senior Deputy Comptroller, Midsize 

and Community Bank Supervision, 

(202) 649–5420; and Deborah Katz, 

Assistant Director, Melissa J. Lisenbee, 

Senior Attorney, or Christopher 

Rafferty, Attorney, Chief Counsel’s 

Office, (202) 649–5490; for persons who 

are deaf or hearing impaired, TTY, (202) 

649–5597. 

Board: Division of Supervision and 

Regulation—Richard Naylor, Associate 

Director, (202) 728–5854; Jonathan 

Rono, Manager, (202) 721–4568; 

Assetou Traore, Supervisory Financial 

Analyst, (202) 974–7066; Virginia Gibbs, 

Manager, (202) 452–2521; or Alexander 

Kobulsky, Supervisory Financial 

Analyst, (202) 452–2031; and Legal 

Division—Laurie Schaffer, Associate 

General Counsel, (202) 452–2277; 

Victoria Szybillo, Senior Counsel, (202) 

475–6325; or Mary Watkins, Senior 

Attorney, (202) 452–3722. 

FDIC: Policy Branch Division of Risk 

Management and Supervision—Thomas 

F. Lyons, Chief, Policy and Program 

Development, (202) 898–6850, tlyons@

FDIC.gov; Karen J. Currie, Senior 

Examination Specialist, (202) 898–3981, 

Policy and Program Development, 

Division of Risk Management 

Supervision; Legal Division—Suzanne J. 

Dawley, Counsel, (202) 898–6509; or 

Gregory S. Feder, Counsel, (202) 898– 

8724. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 210 of the Economic Growth 

Act 1 amended section 10(d) of the FDI 

Act 2 to permit the agencies to examine 

qualifying IDIs (generally, those IDIs 

that are well capitalized and well 

managed) with under $3 billion in total 

assets not less than once during each 18- 

month period, rather than not less than 

once during each 12-month period. 

Prior to the enactment of the Economic 

Growth Act, only qualifying IDIs with 

under $1 billion in total assets were 

eligible for an 18-month on-site 

examination cycle.3

On August 29, 2018, the agencies 

issued interim final rules to implement 

the Economic Growth Act’s 

amendments to sections 10(d)(4) and 

10(d)(10) of the FDI Act 4 that allow 

qualifying IDIs with under $3 billion in 

total assets to benefit from the extended 

18-month examination cycle. In 

addition, the interim final rules made 

parallel changes to the agencies’ 

regulations governing the on-site 

examination cycle for U.S. branches and 

agencies of foreign banks, consistent 

with the IBA.5

Section 10(d)(1) of the FDI Act 6

generally requires the appropriate 

Federal banking agency for an IDI 7 to 

conduct a full-scope, on-site 

examination of an IDI at least once 

during each 12-month period. With the 

enactment of section 210 of the 

Economic Growth Act, section 10(d)(4) 

of the FDI Act authorizes the 

appropriate Federal banking agency to 

extend the on-site examination cycle for 

an IDI to at least once during an 18- 

month period if the IDI (1) has total 

assets of less than $3 billion; (2) is well 

capitalized (as defined in 12 U.S.C. 

1831o (prompt corrective action)); (3) 

was found, at its most recent 

examination, to be well managed 8 and 


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67034 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Rules and Regulations 

considered to be ‘‘well managed’’ for the purposes 

of section 10(d) of the FDI Act only if the IDI also 

received a rating of ‘‘1’’ or ‘‘2’’ for the management 

component of the CAMELS rating at its most recent 

examination. See 72 FR 17798 (Apr. 10, 2007). 

9The Board and the FDIC, as the appropriate 

Federal banking agencies for State-chartered 

insured banks and savings associations, are 

permitted to conduct on-site examinations of such 

IDIs on alternating 12-month or 18-month periods 

with an IDI’s State supervisor, if the Board or FDIC, 

as appropriate, determines that the alternating 

examination conducted by the State carries out the 

purposes of section 10(d) of the FDI Act. 12 U.S.C. 

1820(d)(3). 

10Call Report data, Sept. 30, 2018. 

11 Id. 

12 5 U.S.C. 553(d). 

13 12 U.S.C. 4802(a). 

14 12 U.S.C. 4802(b). 

to have a composite condition of 

‘‘outstanding’’ or, in the case of an IDI 

with total assets of not more than $200 

million, ‘‘outstanding’’ or ‘‘good;’’ (4) is 

not subject to a formal enforcement 

proceeding or order by the FDIC or its 

appropriate Federal banking agency; 

and (5) has not undergone a change in 

control during the previous 12-month 

period in which a full-scope, on-site 

examination otherwise would have been 

required. The Economic Growth Act 

also amended section 10(d)(10) of the 

FDI Act to give each appropriate Federal 

banking agency discretionary authority 

to extend eligibility for an 18-month 

examination cycle, by regulation, to 

qualifying IDIs with an ‘‘outstanding’’ or 

‘‘good’’ composite condition and total 

assets not greater than $3 billion, if the 

agency determines that this amount 

would be consistent with the principles 

of safety and soundness for IDIs.9

In addition, section 7(c)(1)(C) of the 

IBA provides that a Federal or a State 

branch or agency of a foreign bank shall 

be subject to on-site examination by its 

appropriate Federal banking agency or 

State bank supervisor as frequently as a 

national or State bank would be subject 

to such an examination by the agency. 

II. Description of the Final Rules 

The agencies received three comment 

letters addressing the interim final rules, 

two from trade associations and one 

from a multi-bank financial holding 

company. All three letters were 

supportive of the interim final rules. 

After considering the comments on 

the interim final rules, the agencies are 

adopting the interim final rules as final 

without change. The final rules, like the 

interim final rules implement section 

10(d)(4) of the FDI Act to increase, from 

$1 billion to $3 billion, the total asset 

threshold under which an agency may 

apply an 18-month on-site examination 

cycle for qualified IDIs that have an 

‘‘outstanding’’ composite rating. 

The agencies also are exercising their 

discretionary authority under section 

10(d)(10) of the FDI Act to extend 

eligibility for an 18-month examination 

cycle, by regulation, to qualifying IDIs 

with an ‘‘outstanding’’ or ‘‘good’’ 

composite rating with total assets under 

$3 billion. The agencies have 

determined that increasing the 

maximum asset amount limitation for 

qualifying IDIs with less than $3 billion 

in total assets is consistent with the 

principles of safety and soundness. 

In determining whether the reduction 

in examination frequency is consistent 

with the principles of safety and 

soundness for such IDIs, the agencies 

considered several factors. The agencies 

acknowledge that extending the 

examination cycle could make it more 

likely that there will be a delay in an 

agency’s ability to detect deterioration 

in an IDI’s performance. However, the 

agencies believe that extending the 

examination cycle from 12 months to 18 

months for these small IDIs with 

relatively simple risk profiles should 

not appreciably increase their risk of 

financial deterioration or failure. In 

addition, the agencies will continue 

their off-site monitoring activities and 

have the ability to examine IDIs more 

frequently as necessary or appropriate. 

The agencies also note that, in order to 

qualify for an 18-month examination 

cycle, any IDI with total assets under $3 

billion—including one with a composite 

rating of ‘‘good’’—must meet the other 

capital, managerial, and supervisory 

criteria set forth in section 10(d) of the 

FDI Act and the agencies’ implementing 

regulations. 

Considering the agencies’ off-site 

monitoring activities; their discretion to 

examine IDIs more frequently as 

necessary; and the capital, managerial, 

and supervisory criteria in section 10(d) 

of the FDI Act, the agencies believe that 

increasing the maximum asset amount 

limitation for IDIs from less than $1 

billion to less than $3 billion is 

consistent with the principles of safety 

and soundness. Additionally, the 

agencies expect that this increase will 

allow the agencies to better focus their 

supervisory resources on the IDIs and 

U.S. branches and agencies of foreign 

banks (collectively, financial 

institutions) that may present capital, 

managerial, or other issues of 

supervisory concern, and therefore, the 

final rules have the potential to enhance 

safety and soundness collectively for all 

financial institutions. The agencies will 

continue to monitor financial 

institutions in this asset range between 

examinations and the impact of the 

extended examination cycle. 

In accordance with section 7(c)(1)(C) 

of the IBA, the agencies also are 

finalizing conforming changes to their 

regulations governing the on-site 

examination cycle for the U.S. branches 

and agencies of foreign banks. For the 

same reasons as discussed above with 

respect to qualifying IDIs, the agencies 

believe that extending similar treatment 

to qualifying U.S. branches and agencies 

of foreign banks is consistent with the 

principles of safety and soundness. 

Based on data available at 

publication, the agencies estimate that 

the number of banks and savings 

associations that may qualify for an 

extended 18-month examination cycle 

increased by approximately 430 (241 of 

which are supervised by the FDIC, 99 by 

the OCC, and 90 by the Board), bringing 

the total number to 4,706 banks and 

savings associations since the interim 

rules took effect.10 Approximately 30 

U.S. branches and agencies of foreign 

banks would be eligible for the extended 

examination cycle based on the final 

rules (2 of which are supervised by the 

FDIC, 8 by the OCC, and 20 by the 

Board).11

For all the reasons described above, 

the agencies are adopting the interim 

final rules as final without change. 

Effective Date 

The Administrative Procedure Act 

(APA) generally requires that a final rule 

be published in the Federal Register no 

less than 30 days before its effective 

date.12 Therefore, the final rules will 

become effective on January 28, 2019. 

The interim final rules will continue to 

be in effect until the final rules become 

effective. 

Section 302 of the Riegle Community 

Development and Regulatory 

Improvement Act of 1994 (RCDRIA) 

requires that each Federal banking 

agency, in determining the effective date 

and administrative compliance 

requirements for new regulations that 

impose additional reporting, 

disclosures, or other requirements on 

IDIs, consider, consistent with the 

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.13 Further, new 

regulations that impose additional 

reporting, disclosures, or other new 

requirements on IDIs generally must 

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.14 The RCDRIA does not 

apply to the final rules because the rules 

do not impose any additional reporting, 


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Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Rules and Regulations 67035 

15Public Law 106–102, section 722, 113 Stat. 

1338, 1471 (1999). 

16 5 U.S.C. 601 et seq. 

17Under regulations issued by the Small Business 

Administration, a small entity includes a depository 

institution, bank holding company, or savings and 

loan holding company with total assets of $550 

million or less and trust companies with total assets 

of $38.5 million or less. 

18 44 U.S.C. 3501–3521. 

disclosures, or other new requirements 

on IDIs. 

III. Use of Plain Language 

Section 722 of the Gramm-LeachBliley Act 15 requires the Federal 

banking agencies to use plain language 

in all proposed and final rules 

published after January 1, 2000. The 

agencies’ staff believe the final rules are 

presented in a simple and 

straightforward manner. Having 

received no comments with respect to 

making the interim final rules easier to 

understand, the agencies are adopting 

the final rules without change. 

IV. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(RFA) 16 requires an agency to consider 

whether the rules it proposes will have 

a significant economic impact on a 

substantial number of small entities.17

The RFA applies only to rules for which 

an agency publishes a general notice of 

proposed rulemaking pursuant to 5 

U.S.C. 553(b). As discussed in the joint 

interim final rules, consistent with 

section 553(b)(B) of the APA, the 

agencies determined for good cause that 

general notice and opportunity for 

public comment was unnecessary, and 

therefore the agencies did not issue a 

notice of proposed rulemaking. 

Accordingly, the agencies have 

concluded that the RFA’s requirements 

relating to initial and final regulatory 

flexibility analysis do not apply. 

Further, the agencies note that no small 

entities, as defined by the Small 

Business Administration’s rules 

implementing the RFA, will be affected 

by the final rules’ increased asset 

thresholds. 

V. Paperwork Reduction Act 

The Paperwork Reduction Act of 

1995 18 states that no agency may 

conduct or sponsor, nor is the 

respondent required to respond to, an 

information collection unless it displays 

a currently valid Office of Management 

and Budget (OMB) control number. 

Because the final rules do not create a 

new, or revise an existing, collection of 

information, no information collection 

request submission needs to be made to 

the OMB. 

VI. OCC Unfunded Mandates Reform 

Act of 1995 Determination 

Consistent with section 202 of the 

Unfunded Mandates Reform Act of 1995 

(UMRA), before promulgating any final 

rule for which a general notice of 

proposed rulemaking was published, 

the OCC prepares an economic analysis 

of the final rules. Because the OCC 

determined that the publication of a 

general notice of proposed rulemaking 

was unnecessary, the OCC has not 

prepared an economic analysis of the 

joint final rules under UMRA. 

List of Subjects 

12 CFR Part 4 

Administrative practice and 

procedure, Freedom of information, 

Individuals with disabilities, Minority 

businesses, Organization and functions 

(Government agencies), Reporting and 

recordkeeping requirements, Women. 

12 CFR Part 208 

Accounting, Agriculture, Banks, 

banking, Confidential business 

information, Crime, Currency, Federal 

Reserve System, Flood insurance, 

Mortgages, Reporting and recordkeeping 

requirements, Safety and soundness, 

Securities. 

12 CFR Part 211 

Exports, Federal Reserve System, 

Foreign banking, Holding companies, 

Investments, Reporting and 

recordkeeping requirements. 

12 CFR Part 337 

Banks, banking, Reporting and 

recordkeeping requirements, Savings 

Associations. 

12 CFR Part 347 

Authority delegations (Government 

agencies), Bank deposit insurance, 

Banks, banking, Credit, Foreign banking, 

Investments, Reporting and 

recordkeeping requirements, U.S. 

investments abroad. 

Office of the Comptroller of the 

Currency 

12 CFR Chapter I 

PART 4—ORGANIZATION AND 

FUNCTIONS, AVAILABILITY AND 

RELEASE OF INFORMATION, 

CONTRACTING OUTREACH 

PROGRAM, POST-EMPLOYMENT 

RESTRICTIONS FOR SENIOR 

EXAMINERS 

■ The interim final rule amending 12 

CFR part 4 of chapter I, title 12 of the 

Code of Federal Regulations, which was 

published at 83 FR 43961 on August 29, 

2018, is adopted as a final rule without 

change. 

FEDERAL RESERVE SYSTEM 

12 CFR Chapter II 

PART 208—MEMBERSHIP OF STATE 

BANKING INSTITUTIONS IN THE 

FEDERAL RESERVE SYSTEM 

(REGULATION H) 

PART 211—INTERNATIONAL 

BANKING OPERATIONS 

(REGULATION K) 

■ The interim final rule amending parts 

208 and 211 of chapter II, title 12 of the 

Code of Federal Regulations, which was 

published at 83 FR 43961 on August 29, 

2018, is adopted as a final rule without 

change. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Chapter III 

PART 337—UNSAFE AND UNSOUND 

BANK PRACTICES 

PART 347—INTERNATIONAL 

BANKING 

■ The interim final rule amending parts 

337 and 347 of chapter III of title 12 of 

the Code of Federal Regulations, which 

was published at 83 FR 43961 on 

August 29, 2018, is adopted as a final 

rule without change. 

Dated: December 13, 2018. 

Joseph M. Otting, 

Comptroller of the Currency. 

By order of the Board of Governors of the 

Federal Reserve System. 

Ann E. Misback, 

Secretary to the Board. 

Dated at Washington, DC, on December 18, 

2018. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Valerie J. Best, 

Assistant Executive Secretary. 

[FR Doc. 2018–28267 Filed 12–27–18; 8:45 am] 

BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P 


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