8098 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

1 12 CFR part 390, subpart O. 

2 12 CFR 390.250. 

3 12 CFR 390.251. 

4 12 CFR 390.252. 

5 12 CFR 390.253. 

6 12 CFR 390.254. 

7 12 CFR 390.255. 

8 12 U.S.C. 1831e(a); 12 CFR part 362, subparts C 

and D; 12 U.S.C. 1831n(a). 

9 12 U.S.C. 5301 et seq. 

10 12 U.S.C. 5411. 

11 Id. 

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

13 12 U.S.C. 5414(c). 

14 76 FR 39246 (July 6, 2011). 

15 12 U.S.C. 5412(b)(2)(B)(i)(II). 

16 12 U.S.C. 1811 et seq. 

17 12 U.S.C. 5412(c)(1). 

18 12 U.S.C. 1813(q). 

Authority: 12 U.S.C. 1819. 

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 F—[Removed and Reserved] 

■ 8. Remove and reserve subpart F, 

consisting of §§ 390.100 through 

390.135. 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 

Dated at Washington, DC, on or about 

December 15, 2020. 

James P. Sheesley, 

Assistant Executive Secretary. 

[FR Doc. 2020–28453 Filed 2–2–21; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 362 and 390 

RIN 3064–AF37 

Removal of Transferred OTS 

Regulations Regarding Certain 

Subordinate Organizations of State 

Savings Associations 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Final rule. 

SUMMARY: The Federal Deposit 

Insurance Corporation (FDIC) is 

adopting a final rule to rescind and 

remove rules from the Code of Federal 

Regulations (CFR) regulations titled 

Subordinate Organizations 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 DoddFrank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act) 

regarding subordinate organizations of 

State savings associations because the 

FDIC has determined that the 

requirements for State savings 

association subordinate organizations 

included therein are substantially 

similar to the requirements for State 

savings associations and their 

subsidiaries set forth by certain sections 

of the Federal Deposit Insurance Act 

(FDI Act) and its implementing 

regulations. 

DATES: The final rule is effective on 

March 5, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Donald Hamm, Special Advisor, (202) 

898–3528, dhamm@fdic.gov; or Shelli 

Coffey, Review Examiner, (312) 382– 

7539, scoffey@fdic.gov, Risk 

Management and Applications, Division 

of Risk Management Supervision; 

Suzanne Dawley, Counsel, sudawley@

fdic.gov; or Karlyn J. Hunter, Counsel, 

khunter@fdic.gov, Legal Division. 

SUPPLEMENTARY INFORMATION: 

I. Policy Objective 

The policy objective of the final rule 

is to simplify the FDIC’s regulations by 

removing unnecessary regulations and 

realigning existing regulations in order 

to improve the public’s understanding 

of the rules and to improve the ease of 

the public’s reference to them. Thus, as 

further detailed in this section, the FDIC 

is rescinding and removing from the 

CFR rules entitled Subordinate 

Organizations (12 CFR part 390, subpart 

O) applicable to State savings 

associations.1 Pursuant to subpart O, the 

FDIC may, at any time, limit a State 

savings association’s investment in their 

subordinate organizations, or may limit 

or refuse to permit any activities of any 

of these entities for supervisory, legal, or 

safety and soundness reasons.2

Subpart O includes definitions related 

to State savings association 

subsidiaries,3 a requirement for the 

parent State savings association and its 

subsidiaries to maintain separate 

corporate identities,4 a prior notice 

requirement for a State savings 

association seeking to establish or 

acquire a new subsidiary or engage in 

new activities through an existing 

subsidiary,5 requirements related to the 

issuance of securities by a subsidiary,6

and requirements for the exercise of 

salvage power by a State savings 

association.7

The FDIC has determined that the 

requirements for State savings 

association subordinate organizations 

set forth in subpart O are substantially 

similar to requirements of section 28 of 

the FDI Act and its implementing 

regulations, 12 CFR part 362 of the 

FDIC’s Rules and Regulations; and 

section 37 of the FDI Act.8 Therefore, 

the FDIC is rescinding and removing 

subpart O and will apply part 362, 

subpart C and subpart D, as appropriate, 

to achieve substantially similar 

supervisory results for State savings 

associations and subsidiaries as have 

been obtained through the application 

of subpart O. 

II. Background 

The Dodd-Frank Act,9 signed into law 

on July 21, 2010, provided for a 

substantial reorganization of the 

regulation of State and Federal savings 

associations and their holding 

companies.10 Beginning July 21, 2011, 

the transfer date established by section 

311 of the Dodd-Frank Act,11 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 12 provides the 

manner of treatment of all orders, 

resolutions, determinations, regulations, 

and 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,13 on June 14, 2011, the 

FDIC’s Board of Directors 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 Register on 

July 6, 2011.14

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

the Dodd-Frank Act 15 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 FDI Act 16 and 

other laws as the ‘‘appropriate Federal 

banking agency’’ or under similar 

statutory terminology. Section 312(c) of 

the Dodd-Frank Act 17 revised the 

definition of ‘‘appropriate Federal 

banking agency’’ contained in section 

3(q) of the FDI Act 18 to add State 


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19 76 FR 47652 (Aug. 5, 2011). 

20 Id. 

21 12 CFR part 390, subpart O. 

22 85 FR 67684 (Oct. 26, 2020). 

23 61 FR 66561, 66562 (Dec. 18, 1996). 

24 12 CFR part 390, subpart O. 

25 85 FR 67684, 67686 (Oct. 26, 2020). 

26 12 U.S.C. 1831e(a), referencing 12 U.S.C. 1463 

et seq. 

27 12 U.S.C. 1828(m). 

28 12 U.S.C. 1463 et seq. 

29 12 CFR 362.9(a). 

30 85 FR 67684 (Oct. 26, 2020). 

31The FDIC rescinded the control definition at 

§ 391.41 as part of its 2015 Filing Requirements and 

Processing Procedures for Changes in Control with 

respect to State Nonmember Banks and State 

Savings Associations rulemaking. 80 FR 65889 (Oct. 

28, 2015). 

32 12 CFR 391.41 (2015). 

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 is designated 

as the ‘‘appropriate Federal banking 

agency’’ (or under similar terminology) 

for State savings associations, the FDIC 

is authorized to issue, modify, and 

rescind regulations involving such 

associations. 

As noted, on July 14, 2011, operating 

pursuant to this authority, the FDIC’s 

Board of Directors reissued and redesignated certain transferring 

regulations of the former OTS. These 

transferred OTS regulations were 

published as new FDIC regulations in 

the Federal Register on August 5, 

2011.19 When it republished the 

transferred OTS regulations as new 

FDIC regulations, the FDIC specifically 

noted that its staff would evaluate the 

transferred OTS rules and might later 

recommend incorporating the 

transferred OTS regulations into other 

FDIC rules, amending them, or 

rescinding them, as appropriate.20

The final rule adopts, without change, 

the notice of proposed rulemaking 

(NPR) published in the Federal Register 

on October 26, 2020, which received no 

comments. 

III. The Proposed Rule 

On October 26, 2020, the FDIC 

published an NPR regarding the removal 

of part 390, subpart O (formerly OTS’s 

12 CFR part 559),21 which generally 

addresses subordinate organizations of 

State savings associations.22 The OTS 

adopted part 559, titled Subordinate 

Organizations, in 1996 to update and 

streamline its regulations and 

statements of policy concerning 

subsidiaries and other subordinate 

organizations in which savings 

associations have ownership interests 

(including operating subsidiaries and 

service corporations) and equity 

investments (including pass-through 

investments).23 Part 559 consolidated 

all OTS regulations affecting thrift 

subsidiaries in order to make it easier 

for savings associations to find and use 

these regulations. The former OTS rule 

was transferred to the FDIC with only 

nominal changes and is found in the 

FDIC’s rules at subpart O, entitled 

Subordinate Organizations.24

The NPR proposed removing subpart 

O, because, after careful review and 

consideration, the FDIC believes it is 

duplicative of substantially similar FDIC 

statutory and regulatory provisions that 

produce the same supervisory result for 

an insured State savings association as 

subpart O.25

Section 28 of the FDI Act prohibits a 

State savings association from engaging 

as principal in any type of activity, or 

in any activity in an amount, that is not 

permissible for a Federal savings 

association unless the FDIC has 

determined the activity would pose no 

significant risk to the Deposit Insurance 

Fund (DIF); and the State savings 

association is, and continues to be, in 

compliance with the capital standards 

set forth in section 5(t) of the Home 

Owners Loan Act (HOLA).26 Pursuant to 

section 18(m) of the FDI Act, a State 

savings association must file a notice 

with the FDIC prior to establishing, 

acquiring or engaging in new activities 

of a subsidiary.27

The NPR proposed using 12 CFR part 

362, Activities of Insured State Banks 

and Insured Savings Associations, to 

provide a substantially similar process 

for an insured State savings association, 

or its subsidiary, to apply for prior 

consent from the FDIC to engage in 

certain activities, that are not otherwise 

prohibited by Federal or State law, 

while reaching substantially the same 

result as provided in subpart O without 

the burden of referring to a duplicative 

set of regulations. Part 362, which 

includes subparts C and D, is issued 

pursuant to several FDIC authorities, 

including the FDIC’s general rulemaking 

authority pursuant to section 

9(a)(Tenth) and section 28 of the FDI 

Act, the FDIC’s statutory authority over 

the activities of State savings 

associations and subsidiaries, that are 

substantially similar to the authorizing 

statutes pursuant to which subpart O 

was issued. 

Subpart C of part 362 governs the 

activities of insured State savings 

associations and implements section 

28(a) of the FDI Act, which restricts and 

prohibits insured State savings 

associations and their service 

corporations from engaging in activities 

and investments of a type that are not 

permissible for a Federal savings 

association and their service 

corporations. Subpart D of part 362 

governs acquiring, establishing, or 

conducting new activities through a 

subsidiary by an insured State savings 

association, and implements section 

18(m) of the FDI Act, which requires 

that prior notice be given to the FDIC 

when an insured savings association 

establishes or acquires a subsidiary or 

engages in any new activity in a 

subsidiary. In doing so it applies the 

definitions of § 362.2 unless otherwise 

indicated. The phrase ‘‘activity 

permissible for a Federal savings 

association’’ means any activity 

authorized for a Federal savings 

association under any statute including 

HOLA,28 as well as activities recognized 

as permissible for a Federal savings 

association in regulations issued by the 

OCC or in bulletins, orders or written 

interpretations issued by the OCC, or by 

the former OTS until modified, 

terminated, set aside, or superseded by 

the OCC.29

Rather than restate the rationale for 

the rescission and removal of each 

section of subpart O, the reader is 

referred to the fulsome explanations for 

the rescission and removal provided in 

the NPR,30 which the FDIC references 

here as the basis for finalizing the 

regulations as proposed. The regulations 

or statutes that the FDIC expects State 

savings associations and subsidiaries to 

refer to after the removal of subpart O 

are briefly discussed below. 

A. Section 390.251—Definitions 

Section 390.251 is a definition section 

related to subordinate organizations. 

Included in the definitions section are: 

Control, GAAP-consolidated subsidiary, 

lower-tier entity, ownership interest, 

subordinate organization, and, 

subsidiary. The control definition is a 

cross-reference to the removed OTS 

§ 391.41 definition,31 which provided 

that a controlling shareholder is any 

person who, directly or indirectly, or 

acting in concert with one or more 

persons or companies, or together with 

members of his or her immediate family, 

owns, controls, or holds with power to 

vote 10 percent or more of the voting 

stock of a company, or controls in any 

manner the election or appointment of 

a majority of the company’s board of 

directors.32 The FDIC proposed to apply 

the § 362.2(e) control definition which 

is consistent with the control definition 

applicable to service companies of 

Federal savings associations which 


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8100 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

33 12 CFR 5.59(d); 12 CFR part 225; 12 CFR 

362.2(e). 

34 12 U.S.C. 1831n(a)(2); 12 U.S.C. 1463(b)(2). 

35 Instructions for Preparation of Consolidated 

Reports of Condition and Income, Form FFIEC 031 

and 041 https://www.ffiec.gov/pdf/FFIEC_forms/ 

FFIEC031_FFIEC041_201906_i.pdf. 

36 12 CFR 362.4(c). See FIL–97–97. September 23, 

1997. 

37 12 CFR 362.13. 

38Section 362.4(c)(2)(vii) corresponds to 

§ 390.252(a)(4) and (5). 

39Public Law 111–203, 124 Stat 1376 (2010). 

40 12 U.S.C. 1828(m). 

41 85 FR 67684, 67687 (Oct. 26, 2020). 

42 85 FR 67684, 67688 (Oct. 26, 2020). 

references the FRB’s 12 CFR part 225, 

Regulation Y.33

The definition of equity investment in 

§ 362.2(g) is broader than the definition 

of ownership interest in § 390.251, 

which means any equity interest in a 

business organization, limited or general 

partnership interests, or shares in a 

limited liability company. Similarly, the 

definition of subsidiary pursuant to 

§ 362.2(r) is substantially similar to the 

subsidiary definition in § 390.251. The 

distinction is that § 362.2(r) defines a 

subsidiary as ‘‘any company that is 

owned or controlled directly or 

indirectly by one or more insured 

depository institutions,’’ rather than 

only by a State savings association. 

Therefore, the State savings associations 

would refer to those definitions in part 

362 after subpart O was removed from 

the CFR. 

A separate definition for GAAPconsolidated subsidiary is unnecessary 

as State savings association reports and 

financial statements are required to be 

uniform and consistent with U.S. 

generally accepted accounting 

principles (GAAP) pursuant to section 

37 of the FDI Act and section 4(b) of 

HOLA.34 Further, the instructions to the 

Consolidated Reports of Condition and 

Income (Call Report) state that the 

regulatory reporting requirements 

applicable to the Call Report shall 

conform to GAAP as set forth in the 

Financial Accounting Standards Board’s 

Accounting Standards Codification.35

Because State savings associations have 

existing statutory directives to use 

GAAP in reporting and financial 

statements, eliminating a substantially 

similar regulation regarding GAAPconsolidated subsidiaries likely would 

not affect the quality of State savings 

association reporting and financial 

statements. 

B. Section 390.252—How must separate 

corporate entities be maintained? 

The core eligibility requirements in 

§ 362.4(c) describe corporate 

separateness in the context of the Statechartered depository institutionsubsidiary. The eligible subsidiary 

requirements in § 362.4(c)(2)—which 

are more detailed than eligible 

subsidiary requirements of § 390.252— 

are designed specifically for the bank/ 

subsidiary relationship, and provide for 

separation between the State-chartered 

depository institution and its subsidiary 

to lessen the possibility of piercing the 

corporate veil; deduction of the Statechartered depository institution 

investment in the subsidiary to 

segregate the capital supporting the 

State-chartered depository institution 

from the capital supporting the 

subsidiary; and limitations on the Statechartered depository institution’s 

investment in the subsidiary and on 

transactions with the subsidiary to 

ensure transactions are arms-length.36

The eligible subsidiary requirements are 

also incorporated into § 362.13. Section 

362.13 permits a State savings 

association that previously filed an 

application, and obtained the FDIC’s 

consent to engage in an activity or to 

acquire or retain an investment in a 

service corporation engaging as 

principal in an activity, to continue the 

activity or retain the investment without 

seeking the FDIC’s consent, provided 

the State savings association and the 

service corporation, if applicable, 

continue to meet the conditions and 

restrictions of approval if the insured 

State savings association and any 

applicable service corporation meet the 

requirements of § 362.4(c)(2).37

The provisions of § 362.4(c)(2) that are 

duplicative of § 390.252 require that an 

eligible subsidiary: (1) Meet applicable 

statutory or regulatory capital 

requirements and have sufficient 

operating capital for normal obligations 

that are reasonably foreseeable for a 

business of its size and character; (2) be 

physically separate and distinct in its 

operations from the operations of the 

state-chartered depository institution; 

(3) maintain separate accounting and 

other business records; (4) observe 

separate business entity formalities; (5) 

conduct business pursuant to 

independent policies and procedures 

designed to inform customers and 

prospective customers of the subsidiary 

that the subsidiary is a separate 

organization from the State-chartered 

depository institution; and (6) that the 

State-chartered depository institution is 

not responsible for, and does not 

guarantee, the obligations of the 

subsidiary.38

State savings associations and service 

corporations that qualify as eligible 

depository institutions and eligible 

subsidiaries pursuant to § 362.4(c) 

maintain separate corporate identities, 

which should sufficiently insulate State 

savings associations from the liabilities 

of subsidiaries. 

C. Section 390.253—What notices are 

required to establish or acquire a new 

subsidiary or engage in new activities 

through a subsidiary? 

This section provides that such a 

notice must contain all of the 

information required under § 362.15, is 

subject to FDIC objection, and must be 

filed at least 30 days prior to the 

establishment or acquisition of a 

subsidiary or commencement of a new 

activity through a subsidiary. The notice 

requirements of § 362.15 are 

substantially similar to the transferred 

OTS notice requirement in § 390.253. 

The proposal included a technical 

amendment to remove references to 

Federal savings association notice 

requirements in § 362.15. Section 18(m) 

of the FDI Act, as amended by section 

363(7) of the Dodd-Frank Act,39 no 

longer requires Federal savings 

associations to provide notice to the 

FDIC prior to the establishment, or 

acquisition, of a subsidiary, or prior to 

commencement of a new activity in a 

subsidiary controlled by a Federal 

savings association.40 State savings 

associations must continue to notify the 

FDIC at least 30 days prior to 

establishing or acquiring a subsidiary or 

prior to commencement of a new 

activity through a State savings 

association-controlled subsidiary 

pursuant to section 18(m) and § 362.15, 

as described in the NPR.41

D. Section 390.254—How may a 

subsidiary of a State savings association 

issue securities? 

State savings association subsidiaries 

are permitted to issue securities 

pursuant to section 28 of the FDI Act 

because the operating subsidiaries and 

service corporations of Federal savings 

associations are permitted to issue 

securities, subject to regulatory 

limitations. State savings associations 

and their subsidiaries are reminded that 

subsidiary issuances, like other 

permissible activities, are subject to the 

same restrictions or conditions imposed 

on the Federal savings association and 

must be conducted in the same manner 

in which an operating subsidiary or 

service corporation is authorized to 

issue such securities.42

Accordingly, a State savings 

association subsidiary should not state 

or imply that the securities it issues are 

covered by Federal deposit insurance, or 

issue any security the payment, 

maturity, or redemption of which may 

be accelerated upon the condition that 


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43 Id. 

44LTOB limits are established by state law of 

each chartering authority, and LTOB Limits are not 

consistent from state to state. Some states allow 

waivers or modifications, while others do not. Part 

362 does not authorize any insured State savings 

association to make investments or conduct 

activities that are not authorized or that are 

prohibited by either Federal or State law. 12 CFR 

362.9(c). 

45 85 FR 67684, 67686 (Oct. 26, 2020). 

46 Id. 

47 85 FR 67684 (Oct. 26, 2020). 

48Public Law 111–203, 124 Stat. 1376 (2010); 12 

U.S.C. 1828(m). 

49Section 28 (12 U.S.C. 1831e(a)), section 18(m) 

(12 U.S.C. 1828(m)), and section 37 (12 U.S.C. 

1831n(a)) of the FDI Act, and section 4(b) of the 

Home Owners Loan Act (12 U.S.C. 1463(b)), govern 

the activities of State savings associations and 

subsidiaries. 

50 12 U.S.C. 1831n(a)(2); 12 U.S.C. 1463(b)(2). 

51 85 FR 67684 (Oct. 26, 2020). 

52Call Report data, September 30, 2020. 

53 12 U.S.C. 1828(m). 

the controlling State savings association 

is insolvent or has been placed into 

receivership, and for as long as any 

securities are outstanding, the 

controlling State savings association 

must maintain all records generated 

through each securities issuance in the 

ordinary course of business, including 

but not limited to a copy of the 

prospectus, offering circular, or similar 

document concerning such issuance, 

and make such records available for 

examination by the FDIC.43

E. Section 390.255—How may a State 

savings association exercise its salvage 

power in connection with a service 

corporation or lower-tier entities? 

In the NPR, staff proposed that State 

savings associations apply to the FDIC 

for prior approval pursuant to § 362.11 

before making a contribution or a loan 

to a lower-tier entity (salvage 

investment) that exceeds the maximum 

amount otherwise permitted under law 

or regulation to exercise its power to 

salvage the underlying asset to be 

consistent with State law. The applicant 

would be required to provide evidence 

that the State approved any exception 

over the loans to one borrower (LTOB) 

limit.44

As discussed in the NPR, these FDIC 

statutory and regulatory provisions 

provide a substantially similar process 

for an insured State savings association, 

or its subsidiary, to apply for prior 

consent from the FDIC to engage in 

certain activities, that are not otherwise 

prohibited by Federal or State law, 

while reaching substantially the same 

result as provided in subpart O without 

the burden of referring to a duplicative 

set of regulations.45 The NPR concluded 

the application of these FDIC statutory 

and regulatory provisions provide 

substantially similar results for the FDIC 

to achieve substantially similar 

supervisory results for State savings 

associations and subsidiaries as would 

be obtained through subpart O.46

IV. Comments 

The FDIC issued the NPR with a 30- 

day comment period, which closed on 

November 25, 2020.47 The FDIC 

received no comments on the NPR. 

Consequently, the proposed rule is 

adopted as final without change, and 

part 390, subpart O, will be rescinded in 

its entirety. 

V. The Final Rule 

The final rule rescinds and removes 

subpart O and amends § 362.15 to 

remove references to Federal savings 

associations made unnecessary because 

of the amendment of Section 18(m) of 

the FDI Act, as amended by section 

363(7) of the Dodd-Frank Act which no 

longer requires Federal savings 

associations to provide notice to the 

FDIC prior to the establishment, or 

acquisition, of a subsidiary, or prior to 

commencement of a new activity in a 

subsidiary controlled by a Federal 

savings association.48

As discussed in the NPR, the FDIC 

statutory and regulatory provisions 

applicable to State savings associations 

and their subsidiaries provide a 

substantially similar process for an 

insured State savings association, or its 

subsidiary, to apply for prior consent 

from the FDIC to engage in certain 

activities, that are not otherwise 

prohibited by Federal or State law, 

while reaching substantially the same 

result as provided in subpart O without 

the burden of referring to a duplicative 

set of regulations.49 Under the final rule, 

the application of part 362, which 

implements section 28 and section 

18(m) of the FDI Act, provides State 

savings associations with substantially 

similar procedures for notices and 

applications related to State savings 

association subsidiaries and 

investments. Further, section 37 of the 

FDI Act and section 4(b) of HOLA 

already require that State savings 

association reports and financial 

statements are uniform and consistent 

with U.S. generally accepted accounting 

principles (GAAP).50 By applying these 

FDIC statutory and regulatory 

provisions to State savings associations 

and subsidiaries, the FDIC will achieve 

substantially similar supervisory results 

for State savings associations and 

subsidiaries under the final rule as 

would be obtained through subpart O.51

VI. Expected Effects 

As of June 30, 2020, the FDIC 

supervised 3,270 depository 

institutions, of which 35 (1.1 percent) 

are State savings associations.52 The 

final rule would affect regulations that 

govern State savings associations. As 

explained in the NPR, the final rule 

would remove §§ 390.250, 390.251, 

390.252, 390.253, 390.254, and 390.255 

of part 390, subpart O, because most of 

its provisions are duplicative of, or 

substantially similar to the requirements 

of section 28 of the FDI Act and its 

implementing regulations, 12 CFR part 

362 of the FDIC’s Rules and Regulations; 

and section 37 of the FDI Act. 

Additionally, the final rule amends 

§ 362.15 to remove the references to 

Federal savings association notice 

requirements because Federal savings 

associations are no longer required to 

provide notice to the FDIC prior to the 

establishment, or acquisition, of a 

subsidiary, or prior to commencement 

of a new activity in a subsidiary 

controlled by a Federal savings 

association.53 The FDIC does not believe 

that the final rule will have substantive 

effects on State savings associations. By 

removing duplicative or unnecessary 

regulations the FDIC believes that the 

final rule will benefit State savings 

associations by clarifying regulations 

and improving the ease of references. 

VII. Alternatives 

The FDIC considered alternatives to 

the final rule but believes that the 

amendments represent the most 

appropriate option for covered 

institutions. 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 certain 

subordinate organizations of State 

savings associations. The FDIC 

considered the alternative of retaining 

the current regulations, but did not 

choose to do so because it would be 

needlessly complex and confusing for 

its supervised institutions to continue to 

have substantively similar regulations 

regarding subordinate organizations of 

State savings associations located in 

different locations within the CFR. The 

FDIC believes it would be unnecessarily 

burdensome for FDIC-supervised 

institutions to refer to these separate 

sets of regulations, and, therefore, is 

rescinding and removing subpart O and 


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8102 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

54 5 U.S.C. 601, et seq. 

55The SBA defines a ‘‘small banking 

organization’’ as one having $600 million or less in 

assets, where an organization’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 covered entity is ‘‘small’’ for 

the purposes of RFA. 

56FDIC Call Report, June 30, 2020. 

57 Id. 

58 12 U.S.C. 1828(m). 

59 12 U.S.C. 1828(m). 

60 12 CFR 5.59(d); 12 CFR part 225. 

61 61 FR 66561, 66567 (Dec. 18, 1996). 

making a technical amendment to 

§ 362.15 to remove references to Federal 

savings associations to streamline the 

FDIC’s regulations. 

VIII. Regulatory Analysis and 

Procedure 

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 final rule 

rescinds and removes from part 390, 

subpart O, and makes a technical 

amendment to § 362.15 to remove 

references to Federal savings 

associations to streamline the FDIC’s 

regulations. The final 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 final 

rule, an agency prepare a final 

regulatory flexibility analysis that 

describes the impact of a proposed rule 

on small entities.54 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.55

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 non-interest 

expenses. The FDIC believes that effects 

in excess of these thresholds typically 

represent significant effects for FDICsupervised institutions. For the reasons 

provided below, the FDIC certifies that 

the rule will not have a significant 

economic impact on a substantial 

number of small banking organizations. 

As of June 30, 2020, the FDIC 

supervised 3,270 insured depository 

institutions, of which 2,548 are 

considered small banking organizations 

for the purposes of RFA. The rule 

primarily affects regulations that govern 

State savings associations.56 There are 

33 State savings associations considered 

to be small banking organizations for the 

purposes of the RFA.57

As previously discussed, the rule 

rescinds part 390, subpart O, because 

most of its elements are duplicative of, 

or substantially similar to the 

requirements of section 28 of the FDI 

Act and its implementing regulations, 

12 CFR part 362 of the FDIC’s Rules and 

Regulations; and section 37 of the FDI 

Act. 

Additionally, the rule would amend 

certain sections of part 362 to remove 

the references to Federal savings 

association notice requirements because 

Federal savings associations are no 

longer required to provide notice to the 

FDIC prior to the establishment, or 

acquisition, of a subsidiary, or prior to 

commencement of a new activity in a 

subsidiary controlled by a Federal 

savings association.58 The FDIC does 

not believe that the rule will have 

substantive effects on small State 

savings associations. 

Section 390.250 sets forth the FDIC’s 

general rulemaking and supervisory 

authority under the FDI Act, its specific 

authority under section 18(m) of the FDI 

Act 59 and subpart O’s application to 

subordinate organizations of State 

savings associations. As previously 

discussed, State savings associations are 

subject to part 362, subparts C and D, 

which has the same statutory basis as 

§ 390.350. Therefore, the FDIC believes 

that the practical application of part 

362, subparts C and D, generally 

achieves the same outcomes for State 

savings associations as does subpart O. 

Therefore, the FDIC believes that the 

rescission of § 390.250 is unlikely to 

have any substantive effects for small 

State savings associations or their 

subordinate organizations. 

Section 390.251 is a definition section 

related to subordinate organizations. As 

previously discussed, the FDIC believes 

that the definitions of subsidiary and 

GAAP-consolidated subsidiary are 

substantially similar to and redundant 

to other statutory and regulatory 

requirements to which State savings 

associations are already subject. As 

previously discussed, State savings 

associations are already subject to a 

definition of control in § 362.2(e), a 

definition that is narrower, however, 

than the one in § 390.251. Therefore, the 

rescission of § 390.251 could benefit 

State savings associations by narrowing 

the scope of investments in subordinate 

organizations that may be subject to 

limitation for supervisory, legal, or 

safety and soundness reasons asserted 

by the FDIC. The rescission of the 

definition of control in § 390.251 could 

further benefit State savings associations 

by creating parity with the control 

definition applicable to service 

companies of Federal savings 

associations which references the FRB’s 

12 CFR part 225, Regulation Y.60 As 

previously discussed, State savings 

associations are already subject to a 

definition of equity investment in 

§ 362.2(g), a definition that is broader, 

however, than the one in § 390.251. 

Therefore, the rescission of § 390.251 is 

unlikely to pose additional costs for 

State savings associations because they 

are already subject to regulations with a 

substantively similar and broader 

defined scope of investments in 

subordinate organizations. Finally, the 

rescission of § 390.251 would remove 

definitions of lower-tier entity and 

second-tier service corporations or 

service corporation subsidiaries for 

which there is no corollary in FDIC 

regulations. However, as previously 

discussed, the FDIC does not believe 

that the existence of these defined terms 

enhance the quality of State savings 

association supervision. Therefore, the 

FDIC believes that the rescission of 

these definitions is unlikely to have any 

substantive effects on small State 

savings associations. 

Section 390.252 requires State savings 

associations and their subordinate 

organizations to operate in a manner 

that demonstrates to the public that they 

are separate corporate entities because 

of concerns that a failure to maintain 

separate corporate existences could 

potentially result in a court, for 

equitable reasons, holding the savings 

association liable for the obligations of 

the subordinate organization.61 As 

discussed previously, FDIC-supervised 

depository institutions, including State 

savings associations and their 

subsidiaries, are covered by §§ 362.4(c) 

and 362.13, which are substantively 

similar to or broader than the 


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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 8103 

62 12 CFR 390.253. See 12 U.S.C. 1828(m)(1). 

63 12 U.S.C. 1828(m). 

64Without the salvage power provision, the 

maximum amount a State savings association 

would be permitted would be related the LTOB 

limit, which is equivalent to the applicable state’s 

legal lending limit. 

65Public Law 106–102, 113 Stat. 1338, 1471 

(codified at 12 U.S.C. 4809). 

66Public Law 104–208, 110 Stat. 3009 (1996). 

obligations in § 390.252. Therefore, the 

FDIC believes that the rescission of 

§ 390.252 is unlikely to have any 

substantive effect on small State savings 

associations or their subsidiaries. 

Section 390.253 establishes 

notification requirements for State 

savings associations prior to their 

establishing, acquiring or engaging in 

new activities of a subsidiary as 

required under section 18(m) of the FDI 

Act.62 As discussed previously, State 

savings associations are already subject 

to substantively similar requirements in 

§ 362.15. Therefore, the FDIC believes 

that the rescission of § 390.253 is 

unlikely to pose any substantive effects 

on small State savings associations. 

Section 362.15 established 

notification requirements for State and 

Federal savings associations prior to 

their establishing or acquiring a 

subsidiary, or conducting any new 

activity through a subsidiary. As 

discussed previously, after the Dodd 

Frank Act amendment of section 18(m) 

of the FDI Act, Federal savings 

associations are no longer required to 

provide notice to the FDIC prior to the 

establishment, or acquisition, of a 

subsidiary, or prior to the 

commencement of a new activity in a 

subsidiary controlled by a Federal 

savings association.63 Therefore, the 

FDIC believes that the rescission of 

references to Federal savings 

associations from § 362.15 is unlikely to 

have any substantive effect on small 

insured depository institutions in that it 

is simply consistent with existing law. 

Section 390.254 permits a State 

savings association subsidiary to issue, 

either directly or through a third party 

intermediary, any securities that its 

parent State savings association is 

permitted to issue. As discussed 

previously, although there is no 

corollary regulation for FDIC-supervised 

depository institutions, State savings 

association subsidiaries are permitted to 

issue securities pursuant to section 28 of 

the FDI Act because the operating 

subsidiaries and service corporations of 

Federal savings associations are 

permitted to issue securities, subject to 

regulatory limitations. Therefore, the 

FDIC believes that the rescission of 

§ 390.254, if adopted, is unlikely to have 

any substantive effect on small State 

savings associations or their 

subsidiaries. 

Section 390.255 generally permits a 

State savings association to notify the 

FDIC at least 30 days before making a 

contribution or a loan (including a 

guarantee of a loan made by any other 

person) to a lower-tier entity (salvage 

investment) that exceeds the maximum 

amount otherwise permitted under law 

or regulation to exercise its power to 

salvage the underlying asset (typically, 

an outstanding loan).64 As discussed 

previously, State savings associations 

are currently subject to § 362.11 which 

requires State savings associations to 

seek prior approval from the FDIC 

before making a contribution or a loan 

to a lower-tier entity (salvage 

investment) that exceeds the maximum 

amount otherwise permitted under law 

or regulation to exercise its power to 

salvage the underlying asset to be 

consistent with State law. Therefore, the 

FDIC believes that the rescission of 

§ 390.255 is unlikely to substantively 

affect small State savings associations. 

By removing duplicative or 

unnecessary regulations, the FDIC 

believes that the rule will benefit small 

State savings associations by clarifying 

regulations and improving the ease of 

references. 

C. The Congressional Review Act 

For purposes of Congressional Review 

Act, the OMB makes a determination as 

to whether a final rule constitutes a 

‘‘major’’ rule. If a rule is deemed a major 

rule by the OMB, the Congressional 

Review Act generally provides that the 

rule may not take effect until at least 60 

days following its publication. 

The Congressional Review Act defines 

a ‘‘major rule’’ as any rule that the 

Administrator of the Office of 

Information and Regulatory Affairs of 

the OMB finds has resulted in or is 

likely to result in: (A) An annual effect 

on the economy of $100,000,000 or 

more; (B) a major increase in costs or 

prices for consumers, individual 

industries, Federal, State, or local 

government agencies or geographic 

regions, or (C) significant adverse effects 

on competition, employment, 

investment, productivity, innovation, or 

on the ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic and 

export markets. 

The OMB has determined that the 

final rule is not a major rule for 

purposes of the Congressional Review 

Act and the FDIC will submit the final 

rule and other appropriate reports to 

Congress and the Government 

Accountability Office for review. 

D. Plain Language 

Section 722 of the Gramm-LeachBliley Act 65 requires each Federal 

banking agency to use plain language in 

all of its proposed and final rules 

published after January 1, 2000. As a 

Federal banking agency subject to the 

provisions of this section, the FDIC has 

sought to present the final rule in a 

simple and straightforward manner and 

did not receive any comments on the 

use of plain language. 

E. 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.66 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 

burdens, and further measures that will 

be taken 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 

subpart O, this final rule complements 

other actions the FDIC has taken, 

separately and with the other Federal 

banking agencies, to further the 

EGRPRA mandate. 

F. 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 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 


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8104 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

1 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.). 

2Codified at 12 U.S.C. 5411. 

3Codified at 12 U.S.C. 5414(b). 

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. 

Because the final rule does not 

impose additional reporting, disclosure, 

or other requirements on IDIs, section 

302 of RCDRIA does not apply. 

List of Subjects 

12 CFR Part 362 

Administrative practice and 

procedure, Authority delegations 

(Government agencies), Bank deposit 

insurance, Banks, Banking, Investments, 

Reporting and recordkeeping 

requirements. 

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 amends 12 CFR parts 362 

and 390 as follows: 

PART 362—ACTIVITIES OF INSURED 

STATE BANKS AND INSURED 

SAVINGS ASSOCIATIONS 

■ 1. The authority citation for part 362 

continues to read as follows: 

Authority: 12 U.S.C. 1816, 1818, 

1819(a)(Tenth), 1828(j), 1828(m), 1828a, 

1831a, 1831e, 1831w, 1843(l). 

■ 2. Revise § 362.15 to read as follows: 

§ 362.15 Acquiring or establishing a 

subsidiary; conducting new activities 

through a subsidiary. 

No state insured savings association 

may establish or acquire a subsidiary, or 

conduct any new activity through a 

subsidiary, unless it files a notice in 

compliance with § 303.142(c) of this 

chapter at least 30 days prior to 

establishment of the subsidiary or 

commencement of the activity and the 

FDIC does not object to the notice. This 

section does not apply to any state 

savings association that acquired its 

principal assets from a Federal savings 

bank that was chartered prior to October 

15, 1982, as a savings bank under state 

law. 

PART 390—REGULATIONS 

TRANSFERRED FROM THE OFFICE OF 

THRIFT SUPERVISION 

■ 3. The authority citation for part 390 

continues to read as follows: 

Authority: 12 U.S.C. 1819. 

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 O—[Removed and Reserved] 

■ 4. Remove and reserve subpart O, 

consisting of §§ 390.250 through 

390.255. 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 

Dated at Washington, DC, on December 15, 

2020. 

James P. Sheesley, 

Assistant Executive Secretary. 

[FR Doc. 2020–28454 Filed 2–2–21; 8:45 am] 

BILLING CODE 6714–01–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: Final rule. 

SUMMARY: The Federal Deposit 

Insurance Corporation (FDIC) is 

adopting a final rule 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: The final rule is effective on 

March 5, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Robert Watkins, Review Examiner, 

RoWatkins@FDIC.gov, Division of Risk 

Management Supervision, (202) 898– 

3865; Seth Rosebrock, Assistant General 

Counsel, Legal Division, (202) 898– 

6609, srosebrock@FDIC.gov; or Kristine 

Schmidt, Counsel, Legal Division, (202) 

898–6686, krschmidt@fdic.gov. 

SUPPLEMENTARY INFORMATION: 

I. Policy Objective 

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 

rescinding the regulations in part 390, 

subpart Y, and reserving the subpart for 

future use. In addition, the FDIC is 

amending 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).1

A. The Dodd-Frank Act 

As of July 21, 2011, the transfer date 

established by section 311 of the DoddFrank Act,2 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 3 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. 


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