69–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–873 

FEDERAL SAVINGS ASSOCIATION CHARTER FLEXIBILITY 

ACT OF 2015 

DECEMBER 12, 2016.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 1660] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1660) to amend the Home Owners’ Loan Act to allow Federal savings associations to elect to operate as national banks, and 

for other purposes, having considered the same, report favorably 

thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

H.R. 1660 amends the Home Owners’ Loan Act (12 U.S.C. 1464) 

to permit a federal savings association to elect to operate subject 

to supervision by the Comptroller of the Currency with the rights 

and duties of a national bank. The election is considered approved 

60 days after the date on which the OCC receives the notice, unless 

the OCC otherwise notifies the electing entity. H.R. 1660 requires 

the OCC to issue a rulemaking that clarifies the required documentation and timeline for the election process, and one that requires the federal savings association to identify assets and subsidiaries that do not conform to those required of a national bank. 

H.R. 1660 also requires the OCC to establish a transition process 

for bringing any assets of an electing federal savings association 

that do not conform to national bank requirements after notice of 

election into conformance, or the ability to justify the 

grandfathering of such assets and subsidiaries. 


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BACKGROUND AND NEED FOR LEGISLATION

Federal savings associations and national banks are both chartered and regulated by the OCC and insured by the FDIC, but 

have different structures and different lending and investment 

powers. 

Federal savings association charters were created under HOLA 

and are community-based financial institutions that have no shareholders. Because they are non-stock institutions, federal savings associations are built on the foundation of pledged deposits (similar 

to long-term certificates of deposit) that provide the capital to operate. Federal savings associations specialize in real estate financing, 

and are subject to several specific lending constraints. 

Federal savings associations historically enjoyed several advantages not accorded national banks, including: 

(1) consolidated supervision by the Office of Thrift Supervision (OTS); 

(2) broad interstate branching authority; 

(3) liberal branching rights; and 

(4) the absence of uniform regulatory holding company capital requirements. 

In order to qualify for these benefits, HOLA requires that federal 

savings associations be subject to statutory commercial lending limits and restrictions under the so-called qualified thrift lender (QTL) 

test. The QTL test requires that at least 65 percent of a savings 

association’s portfolio assets must be comprised of mortgage and 

consumer-related assets. While the Dodd-Frank Act eliminated 

many of the benefits afforded to federal savings associations, the 

HOLA restrictions remain. 

National banks are for-profit business corporations owned by private investors and governed by a board of directors chosen by the 

stockholders. Unlike federal savings associations, national banks 

enjoy the ability to engage in a wider range of lending activities because they are not required to focus on a particular area of lending 

and investment, and do not have specific asset-type lending constraints. Additionally, national banks are provided significant benefits in the form of federal preemption: the OCC has the authority 

to preempt state statutes and regulations, which means that national banks can operate under a single set of laws and regulations, 

rather than having to comply with multiple sets of state laws and 

regulations that may or may not be consistent. 

Under current law, federal savings associations that want to 

offer products and services outside of these restrictions must convert to a national bank charter, a particularly burdensome process 

for smaller associations, as they must first convert to stock form 

before they can convert their charter. 

On February 6, 2015, the OCC sent a letter to the House Financial Services Committee proposing several legislative measures to 

reduce the regulatory burden on banks, including a proposal to add 

a new section to HOLA that would give federal savings associations 

the flexibility to exercise national bank powers without changing 

their charters, which would give the institutions the ability to exceed the commercial and consumer loan limits that apply under 

HOLA, while retaining their charters and corporate forms, and continuing to be treated as federal savings associations for purposes 


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of consolidation, merger, dissolution, conservatorship, and receivership. 

In a letter of support for H.R. 1660 dated April 15, 2015, the 

Independent Community Bankers of America wrote: 

H.R. 1660 would provide flexibility for institutions to 

choose the business model that best suits their needs and 

the communities they serve, without having to go through 

the process or incurring the legal expense of converting to 

a national bank charter. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Financial Institutions held a hearing examining matters relating to H.R. 

1660 on June 11, 2015. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on November 3, 2015 and November 4, 2015, and ordered H.R. 1660 to 

be reported favorably to the House without amendment by voice 

vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. There were no 

record votes in Committee with respect to this measure. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 1660 will reduce regulatory burden and provide for the greater availability of 

financial products and services by establishing a mechanism for 

federal savings associations to function with the powers and authorities of a national bank without having to change their charter. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 


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COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, January 14, 2016. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

Dear MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1660, the Federal Savings 

Association Charter Flexibility Act of 2015. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

ROBERT A. SUNSHINE

(for Keith Hall, Director.) 

Enclosure. 

H.R. 1660—Federal Savings Association Charter Flexibility Act of 

2015 

H.R. 1660 would permit financial institutions known as federal 

savings associations to increase their commercial or consumer lending above current law limits without changing their charters and 

would require the Office of the Comptroller of the Currency (OCC) 

to complete a rulemaking process concerning this new authority. 

Implementing H.R. 1660 could affect direct spending; therefore, 

pay-as-you-go procedures apply. However, CBO estimates that any 

net increase in spending would be insignificant for each year. Enacting the bill would not affect revenues. 

Under the bill, institutions that choose to increase their lending 

would be known as covered savings institutions. Based on information from the OCC, CBO estimates that no more than 10 percent 

of the 400 federal savings associations nationwide might be interested in becoming a covered savings institution under the provisions of the bill. Because the OCC would continue to regulate those 

institutions under the legislation, CBO expects that regulatory 

costs to the agency would be the same. 

H.R. 1660 also would require the OCC to issue a rule to implement the new authority for federal savings associations. Based on 

information from the agency, CBO estimates that it would cost $1 

million to complete the rulemaking process. Costs incurred by the 

OCC are recorded in the budget as an increase in direct spending. 

However, the OCC is authorized to collect fees from the institutions 

it supervises to cover administrative expenses. CBO expects that 

the OCC would collect fees to recover any costs associated with 


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completing the rulemaking. In addition, CBO estimates that establishing such authority would not increase the likelihood of failure 

for any institution that converts its charter. As a result, the net effect on the deficit would be insignificant. 

CBO estimates that enacting H.R. 1660 would not increase net 

direct spending or on-budget deficits by more than $5 billion in any 

of the four consecutive 10-year period beginning in 2026. 

H.R. 1660 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

If the OCC increases fees to offset the costs associated with implementing the bill, H.R. 1660 would increase the cost of an existing mandate on private entities required to pay those fees. CBO expects that the incremental cost of the mandate would be about $1 

million and would fall well below the annual threshold for privatesector mandates established in UMRA ($154 million in 2016, adjusted annually for inflation). 

The CBO staff contacts for this estimate are Sarah Puro (for federal costs) and Logan Smith (for private-sector mandates). The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 1660 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), the 

Committee states that no provision of H.R. 1660 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included 

in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or a program 

related to a program identified in the most recent Catalog of Federal Domestic Assistance. 


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DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 1660 contains one directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Section cites H.R. 1660 as the ‘‘Federal Savings Association 

Charter Flexibility Act of 2015’’. 

Section 2. Option for federal savings associations to operate as a 

covered savings association 

This section amends the Home Owners’ Loan Act to permit Federal savings associations to elect to operate with the rights and duties of national banks without changing their charters, by submitting a streamlined election notice to the OCC. The application is 

considered approved after 60 days, unless stated otherwise by the 

OCC. Further, the OCC is required to issue rules on documentation, timeline and identification for the election process and rules 

for identifying federal savings association assets and subsidiaries 

that are different from those required of a national bank. Lastly, 

the OCC must establish a transition process for those federal savings association assets and subsidiaries to conform to national 

bank requirements. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

HOME OWNERS’ LOAN ACT 

* * * * * * * 

SEC. 5A. ELECTION TO OPERATE AS A COVERED SAVINGS ASSOCIATION. 

(a) DEFINITION.—In this section, the term ‘‘covered savings association’’ means a Federal savings association that makes an election 

approved under subsection (b). 

(b) ELECTION.— 

(1) IN GENERAL.—Upon issuance of the rules described in subsection (f), a Federal savings association may elect to operate as 

a covered savings association by submitting a notice to the 

Comptroller of such election. 

(2) APPROVAL.—A Federal savings association shall be 

deemed to be approved to operate as a covered savings association on the date that is 60 days after the date on which the 

Comptroller receives the notice under paragraph (1), unless the 

Comptroller notifies the Federal savings association otherwise. 

(c) RIGHTS AND DUTIES.—Notwithstanding any other provision of 

law and except as otherwise provided in this section, a covered savings association shall— 


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(1) have the same rights and privileges as a national bank 

that has its main office situated in the same location as the 

home office of the covered savings association; and 

(2) be subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to such a national bank. 

(d) TREATMENT OF COVERED SAVINGS ASSOCIATIONS.—A covered 

savings association shall be treated as a Federal savings association 

for the purposes— 

(1) of governance of the covered savings association, including 

incorporation, bylaws, boards of directors, shareholders, and 

distribution of dividends; 

(2) of consolidation, merger, dissolution, conversion (including conversion to a stock bank or to another charter), conservatorship, and receivership; and 

(3) determined by regulation of the Comptroller. 

(e) EXISTING BRANCHES.—A covered savings association may continue to operate any branch or agency the covered savings association operated on the date on which an election under subsection (b) 

is approved. 

(f) RULEMAKING.—The Comptroller shall issue rules to carry out 

this section— 

(1) that establish streamlined standards and procedures that 

clearly identify required documentation or timelines for an election under subsection (b); 

(2) that require a Federal savings association that makes an 

election under subsection (b) to identify specific assets and subsidiaries— 

(A) that do not conform to the requirements for assets 

and subsidiaries of a national bank; and 

(B) that are held by the Federal savings association on 

the date on which the Federal savings association submits 

a notice of such election; 

(3) that establish— 

(A) a transition process for bringing such assets and subsidiaries into conformance with the requirements for a national bank; and 

(B) procedures for allowing the Federal savings association to provide a justification for grandfathering such assets and subsidiaries after electing to operate as a covered 

savings association; 

(4) that establish standards and procedures to allow a covered savings association to terminate an election under subsection (b) after an appropriate period of time or to make a subsequent election; 

(5) that clarify requirements for the treatment of covered savings associations, including the provisions of law that apply to 

covered savings associations; and 

(6) as the Comptroller deems necessary and in the interests 

of safety and soundness. 

* * * * * * * 

Æ 


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