Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules 3157

reduction in personnel, services, or

management infrastructure beyond

those already implemented would have

a detrimental effect on the program’s

ability to provide meat grading and

certification services and support the

accurate and uniform application of

such services.

In view of these increases in costs,

AMS is proposing to increase the base

hourly rate charged to commitment

applicants from $39.80 to $45. A

commitment applicant is a user of meat

grading and certification services who

agrees to pay for five continuous 8 hour

days, Monday through Friday between

the hours of 6 a.m. and 6 p.m.,

excluding legal holidays. The base

hourly rate for noncommitment

applicants will increase from $42.20 to

$52. A noncommitment applicant is a

user of meat grading and certification

services for eight consecutive hours or

less per day between the hours of 6 a.m.

and 6 p.m., excluding legal holidays.

The hourly rate for premium hours

would increase from $47.80 to $57, and

will be charged to users of the service

for hours worked in excess of 8 hours

per day for each assigned official grader

and for work performed before 6 a.m.

and after 6 p.m., Monday through

Friday, and any time on Saturday or

Sunday, except on Federal legal

holidays. The holiday rate for all

applicants will increase from $79.60 to

$90, and will be charged to users of the

service for all hours worked on legal

holidays.

List of Subjects in 7 CFR Part 54

Food grades and standards, Food

labeling, Meat and meat products.

For the reasons set forth in the

preamble, it is proposed that 7 CFR Part

54 be amended as follows:

PART 54—MEATS, PREPARED

MEATS, AND MEAT PRODUCTS

(GRADING, CERTIFICATION, AND

STANDARDS)

1. The authority citation for part 54

continues to read as follows:

Authority: 7 U.S.C. 1621–1627.

§ 54.27 [Amended]

2. Section 54.27 is amended as

follows:

a. In paragraph (a), ‘‘$42.20’’ is

removed and ‘‘$52’’ is added in its

place, ‘‘$47.80’’ is removed and ‘‘$57’’ is

added in its place, ‘‘$79.60’’ is removed

and ‘‘$90’’ is added in its place, and

b. In paragraph (b), ‘‘$39.80’’ is

removed and ‘‘$45’’ is added in its

place, ‘‘$47.80’’ is removed and ‘‘$57’’ is

added in its place, and ‘‘$79.60’’ is

removed and ‘‘$90’’ is added in its

place.

Dated: January 13, 2000.

Barry L. Carpenter,

Deputy Administrator, Livestock and Seed

Program.

[FR Doc. 00–1281 Filed 1–19–00; 8:45 am]

BILLING CODE 3410–02–P

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 5

[Docket No. 00–03]

RIN 1557–AB80

Financial Subsidiaries and Operating

Subsidiaries

AGENCY: Office of the Comptroller of the

Currency, Treasury.

ACTION: Proposed rule.

SUMMARY: The Office of the Comptroller

of the Currency (OCC) is proposing to

amend its regulations to implement

section 121 of the Gramm-Leach-Bliley

Act, which authorizes national banks to

conduct expanded financial activities

through financial subsidiaries. The OCC

also is revising its operating subsidiary

rule to make conforming changes and

streamline procedures for banks that

engage in activities through operating

subsidiaries.

DATES: Comments must be received by

February 14, 2000.

ADDRESSES: Please direct comments to:

Docket No. 00–03, Communications

Division, Third Floor, Office of the

Comptroller of the Currency, 250 E

Street, SW, Washington, DC, 20219.

Comments are available for inspection

and photocopying at that address. In

addition, comments may be sent by

facsimile transmission to FAX number

(202) 874–5274, or by electronic mail to

REGS.COMMENTS@OCC.TREAS.GOV.

FOR FURTHER INFORMATION CONTACT:

Stuart Feldstein, Assistant Director,

Legislative and Regulatory Activities or

Mitchell Plave, Senior Attorney,

Legislative and Regulatory Activities

Division, (202) 874–5090.

SUPPLEMENTARY INFORMATION:

Background

Prior to the enactment of the GrammLeach-Bliley Act, Public Law 106–102,

(GLBA or the Act), national banks

generally conducted activities in the

bank itself, in an operating subsidiary,

or in a subsidiary authorized for

national banks to own pursuant to a

specific statute (e.g., a bank service

company authorized under 12 U.S.C.

1861 et seq.). Section 5.34 of the OCC’s

regulations governs national bank

operating subsidiaries. Under § 5.34, an

operating subsidiary may engage in

activities that are part of, or incidental

to, the business of banking as

determined by the OCC. A national bank

may acquire or establish an operating

subsidiary, or commence a new activity

in an existing operating subsidiary, by

following specific filing procedures that

vary depending upon the nature of the

activity and whether the bank meets

certain eligibility standards.

Section 5.34(f) also permits national

banks to engage through a special type

of operating subsidiary in activities that

are part of, or incidental to, the business

of banking but that are not permissible

for the national bank to conduct

directly, if the bank satisfies certain

safety and soundness conditions. In

addition, the bank must meet the

definition of ‘‘eligible bank’’ in § 5.3(g)

if the subsidiary is to engage in those

activities as principal.

On November 12, 1999, the President

signed the GLBA, which

comprehensively restructures the

statutory framework that governs the

financial services industry. Section 121

of the Act adds a new section 5136A to

the Revised Statutes that authorizes a

national bank to acquire control of, or

hold an interest in, a new type of

subsidiary called a ‘‘financial

subsidiary.’’ The GLBA defines a

financial subsidiary as a company that

is controlled by one or more insured

depository institutions, other than a

subsidiary that engages solely in

activities that national banks may

engage in directly (under the same terms

and conditions that govern the conduct

of these activities by national banks) or

a subsidiary that a national bank is

specifically authorized to control by the

express terms of a Federal statute. A

financial subsidiary may engage in

specified activities that are financial in

nature and in activities that are

incidental to financial activities if the

bank and the subsidiary meet certain

requirements and comply with stated

safeguards. A financial subsidiary also

may combine these newly authorized

activities with activities that are

permissible for national banks to engage

in directly.

The GLBA does not affect a national

bank’s authority to own and control an

operating subsidiary that engages in

activities that are part of, or incidental

to, the business of banking and that are

permissible for national banks to engage

in directly. Thus, once the financial

subsidiary provisions of the GLBA take

3158 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules

effect, a national bank may continue to

own or establish these operating

subsidiaries and also may have financial

subsidiaries that engage in new

activities that the GLBA authorizes.

Description of the Proposal

Financial Subsidiaries (New § 5.39)

The OCC is issuing this proposal to

implement section 121 of the GLBA by

establishing a process under which a

national bank may obtain OCC approval

to engage in activities authorized

pursuant to section 5136A of the

Revised Statutes through a financial

subsidiary by filing a written notice

with the OCC. The following is a

description of the provisions contained

in proposed new § 5.39.

Definitions

Section 5.39(d) defines key terms that

are used in the proposal. As the GLBA

requires, a number of these terms, such

as ‘‘affiliate,’’ ‘‘company,’’ ‘‘control,’’

and ‘‘subsidiary,’’ have the same

meaning that is set forth in section 2 of

the Bank Holding Company Act of 1956

(12 U.S.C. 1841). Other terms, such as

‘‘well managed,’’ ‘‘equity capital,’’

‘‘eligible debt,’’ and ‘‘financial

subsidiary’’ have the same definitions

that are contained in the GLBA. The

term ‘‘eligible debt,’’ is defined, in part,

as unsecured ‘‘long term debt’’ meeting

certain requirements. The proposal

defines ‘‘long term debt’’ as any debt

obligation with an initial maturity of

360 days or more.

Permissible Activities for Financial

Subsidiaries

Sections 5.39(e) and (f) provide a

simple format describing the types of

activities permissible and impermissible

for a financial subsidiary. Under

§ 5.39(e), a financial subsidiary may

engage in activities that are financial in

nature or incidental to a financial

activity that are not permissible for a

national bank to conduct directly

(expanded financial activities), as well

as activities that may be conducted by

an operating subsidiary pursuant to

§ 5.34 (that is, generally activities that

are part of, or incidental to, the business

of banking that national banks may

conduct directly.) There is no

requirement, however, that a financial

subsidiary also conduct bankpermissible activities.

Section 5.39(e) also lists the activities

that are defined in the Act as ‘‘financial

in nature.’’ Among other things, this list

includes activities that the Board of

Governors of the Federal Reserve

System (Board) has determined under

section 4(c)(8) of the Bank Holding

Company Act (12 U.S.C. 1843(c)(8)) to

be so closely related to banking or

controlling or managing banks as to be

a proper incident thereto, and activities

that the Board has found under section

4(c)(13) of the BHCA (12 U.S.C.

1843(c)(13)) to be usual in connection

with the transaction of banking or other

financial operations abroad.

The proposal also recognizes that the

Secretary of the Treasury (in

consultation with the Board) may

determine that additional activities are

financial in nature or incidental to a

financial activity and therefore are

permissible for a financial subsidiary.

The Act provides specific procedures,

not detailed in this proposal, for

coordination between the Secretary of

the Treasury and the Board in defining

financial and incidental activities under

this provision.

Section 5.39(f) sets forth activities that

the Act specifically denotes as

impermissible for financial subsidiaries.

These activities include providing

annuities and certain types of insurance

as principal, real estate development or

real estate investment (unless otherwise

expressly authorized by law), and

certain activities described in new

sections 4(k)(4)(H) and (I) of the Bank

Holding Company Act of 1956 (BHCA)

as added by the GLBA. At the end of the

five-year period beginning on November

12, 1999, however, the Board and the

Secretary of the Treasury may find by

regulation that the activities described

in section 4(k)(4)(H) of the BHCA are

permissible for financial subsidiaries.

Qualifications

Section 5.39(g) contains three

conditions that a national bank must

satisfy to acquire control of, or hold an

interest in, a financial subsidiary. First,

the national bank and each of its

depository institution affiliates must be

‘‘well capitalized’’ and ‘‘well managed.’’

Those terms are defined in proposed

§ 5.39(d) consistent with their

definitions in the GLBA. Second, the

aggregate consolidated total assets of all

financial subsidiaries of the bank may

not exceed the lesser of 45 percent of

the consolidated total assets of the

parent bank or $50 billion. The $50

billion limit is to be adjusted according

to an indexing mechanism established

jointly by the Secretary of the Treasury

and the Board. Third, a bank that is one

of the 100 largest insured banks, as

determined by the bank’s consolidated

total assets at the end of the calendar

year, must have at least one issue of

outstanding ‘‘eligible debt’’ that is rated

in one of the three highest investment

grade rating categories by a nationally

recognized statistical rating organization

(eligible debt requirement). If a national

bank is one of the second 50 of the 100

largest insured banks, the proposal

permits the bank to satisfy the eligible

debt requirement if it meets alternative

criteria to be set jointly through

regulation by the Secretary of the

Treasury and the Board. The eligible

debt requirement does not apply to a

bank that intends to acquire control of,

or hold an interest in, a financial

subsidiary that engages solely in

activities in an agency capacity.

Consistent with the GLBA, the OCC

also prohibits a national bank from

commencing any expanded financial

activity pursuant to section 5136A(a) of

the Revised Statutes, or directly or

indirectly acquiring control of a

company engaged in any expanded

financial activity under section

5136A(a) of the Revised Statutes, if the

bank or any of its insured depository

institution affiliates received a

Community Reinvestment Act (CRA)

rating of less than ‘‘satisfactory record of

meeting community credit needs’’ on its

most recent CRA examination prior to

when the bank files a notice under

§ 5.39.

Safeguards

A national bank that establishes or

maintains a financial subsidiary must

comply with six conditions. First, for

purposes of determining regulatory

capital, the bank must deduct the

aggregate amount of its outstanding

equity investment, including retained

earnings, in its financial subsidiaries

from the assets and tangible equity of

the bank. The term ‘‘tangible equity’’ is

defined in § 5.39(d) by reference to the

definition of that term in 12 CFR 6.2(g).

The bank also may not consolidate its

assets and liabilities with those of the

financial subsidiary for purposes of

determining compliance with regulatory

capital requirements.

Second, any published financial

statement of the national bank must, in

addition to providing information

prepared in accordance with generally

accepted accounting principles,

separately present financial information

for the bank in a manner that reflects

these capital adjustments. The third and

fourth conditions require the bank to

establish reasonable policies and

procedures to preserve the separate

corporate identity and limited liability

of the bank and its financial

subsidiaries, and to establish procedures

to identify and manage financial and

operational risks within the bank and

the financial subsidiary that adequately

protect the bank from these risks.

The fifth condition provides that a

financial subsidiary is deemed a

Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules 3159

subsidiary of a bank holding company

and not a subsidiary of the bank for

purposes of the anti-tying prohibitions

set forth in 12 U.S.C. 1971 et seq.

Finally, consistent with the Act,

§ 5.39(h)(5) provides that sections 23A

and 23B of the Federal Reserve Act

(FRA) (12 U.S.C. 371c and 371c–1)

apply to certain transactions between a

bank and its financial subsidiary. The

Act effected this coverage by deeming a

financial subsidiary to be an affiliate of

the bank and not a subsidiary of the

bank for FRA section 23A and 23B

purposes. The GLBA exempts from the

10 percent quantitative limit of FRA

section 23A(a)(1)(A), however, covered

transactions between a bank and any

individual financial subsidiary of the

bank. Thus, covered transactions

between a bank and any one financial

subsidiary may exceed 10 percent of the

bank’s capital and surplus, but are

subject to the 20 percent aggregate limit

on transactions with all affiliates found

in FRA section 23A(a)(1)(B). The

proposal also provides that, for

purposes of FRA sections 23A and 23B,

the bank’s investment in a financial

subsidiary does not include retained

earnings of the financial subsidiary.

However, investment in the securities of

a financial subsidiary of a bank by an

affiliate of the bank are considered to be

an investment in those securities by the

bank; and any extension of credit by an

affiliate of a bank to a financial

subsidiary of the bank may be

considered an extension of credit by the

bank to the financial subsidiary if the

Board determines that this treatment is

necessary or appropriate to prevent

evasions of the FRA or the GLBA.

Procedures

The proposal provides a streamlined

process for national banks seeking OCC

approval to acquire control of, or hold

an interest in, a financial subsidiary, or

to commence an expanded financial

activity in an existing financial

subsidiary. This process is intended to

accommodate individual bank

preferences by permitting two

alternative procedures for obtaining

OCC approval.

Under the first option, a national bank

may file a ‘‘Financial Subsidiary

Certification’’ with the OCC listing the

bank’s depository institution affiliates

and certifying that the bank and each of

those affiliates is well capitalized and

well managed. Thereafter, at such time

as the bank seeks OCC approval to

acquire control of, or hold an interest in,

a new financial subsidiary, or

commence a new expanded financial

activity authorized under section 5136A

in a financial subsidiary, the bank may

file a written notice with the

appropriate district office at the time of

acquiring control of, or holding an

interest in, a financial subsidiary, or

commencing a new expanded financial

activity authorized pursuant to section

5136A of the Revised Statutes in an

existing financial subsidiary. The

written notice must be labeled

‘‘Financial Subsidiary Notice,’’ must

state that the bank’s certification

remains valid, and describe the activity

or activities to be performed in the

financial subsidiary as well as cite to the

specific authority permitting the

expanded financial activity to be

conducted by a financial subsidiary.

(Where the authority relied on is an

agency order or interpretation under

section 4(c)(8) or 4(c)(13), respectively,

of the Bank Holding Company Act of

1956, a copy of the order or

interpretation should be attached.) The

written notice also must demonstrate

that the aggregate consolidated total

assets of all financial subsidiaries of the

national bank do not exceed the lesser

of 45% of the bank’s consolidated total

assets or $50 billion, that the bank will

remain well capitalized after making the

necessary capital adjustments, and, if

applicable, that the bank meets the

eligible debt requirement.

Alternatively, a bank may choose to

seek approval by filing a combined

certification and notification with the

appropriate OCC district office at least

five business days prior to acquiring

control of, or an interest in, a financial

subsidiary, or commencing a new

expanded financial activity authorized

pursuant to section 5136A of the

Revised Statutes in an existing financial

subsidiary. This type of notice would

combine the information from the

certification and notice described above,

and should be labeled ‘‘Financial

Subsidiary Certification and Notice.’’

Because the GLBA specifically states

that OCC approval shall be based solely

upon specific statutory factors, the OCC

believes its approval may occur upon a

bank’s submission of information

demonstrating satisfaction of these

statutory criteria. Thus, under both of

the proposed alternatives, OCC approval

occurs upon filing the requisite

information within the time frames

provided. Appropriate remedies exist

under current law and OCC regulations

to address any situations where a

certification or notification is

inaccurate, e.g., § 5.13(h) and 18 U.S.C.

1001.

Failure To Continue To Meet Certain

Requirements

A national bank and its affiliated

depository institutions must continue to

satisfy the qualification requirements in

§ 5.39(g)(1) and (2) (well managed, well

capitalized, and asset size requirements

applicable to its financial subsidiaries)

and the conditions in § 5.39(h)(1), (2),

(3), and (4) after the bank acquires

control of, or an interest in, a financial

subsidiary. A national bank that fails to

continue to satisfy these requirements is

subject to several procedural

requirements and OCC remedies. For

example, the OCC must give notice to

the bank promptly upon determining

that the bank does not continue to meet

these requirements. Under the proposal,

the bank is deemed to have received this

notice three days after mailing of the

letter by the OCC. Not later than 45 days

after receipt of this notice, or any

additional time as the OCC may permit,

the bank must execute an agreement

with the OCC to comply with these

requirements.

At any time until the conditions

described in the notice are corrected,

the OCC may impose limitations on the

conduct or activities of the national

bank or any subsidiary of the national

bank that the OCC determines

appropriate under the circumstances

and consistent with the purposes of

section 5136A of the Revised Statutes.

The OCC may require the bank to divest

control of a financial subsidiary if the

bank does not correct the conditions

giving rise to the notice within 180 days

after its receipt of the notice.

A national bank that does not meet

the eligible debt requirement may not

purchase, directly or through a

subsidiary, any additional equity capital

of any financial subsidiary. The term

‘‘equity capital’’ is defined in

§ 5.39(j)(2), consistent with the GLBA, to

include, in addition to any equity

investment, any debt instrument issued

by a financial subsidiary if the

instrument qualifies as capital of the

subsidiary under Federal or State law,

regulation, or interpretation applicable

to the subsidiary.

Finally, as required by the GLBA, the

OCC will prohibit a national bank from

commencing an expanded financial

activity pursuant to section 5136A of

the Revised Statutes, or directly or

indirectly acquiring control of a

company engaged in such activities, if

the national bank or any of its insured

depository institution affiliates received

a CRA rating of less than ‘‘satisfactory

record of meeting community credit

needs’’ on its most recent CRA

examination.

Operating subsidiaries (Revised § 5.34)

Section 5.34 authorizes national

banks to engage through operating

subsidiaries in activities that are part of,

3160 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules

1This is not a complete list of activities that are

part of, or incidental to, the business of banking.

The OCC will review new proposals for activities

that may be permissible under this section pursuant

to the application procedures contained in § 5.34.

or incidental to, the business of banking.

The proposal changes § 5.34 to be more

consistent with the procedural

requirements of new § 5.39, to remove

unnecessary regulatory burden, and to

make other adjustments that are

necessary in light of the GLBA.

Current § 5.34 groups permissible

operating subsidiary activities into three

categories based on the novelty and risk

of the activity and prescribes a different

approval process depending on the

category in which the activity is placed.

For example, an adequately capitalized

or well capitalized bank that is not in

‘‘troubled condition,’’ as defined in

§ 5.51, may establish or acquire an

operating subsidiary to engage in certain

activities listed in § 5.34, by providing

the OCC a written notice within 10 days

after commencing the activity. In

addition, a bank that qualifies as an

‘‘eligible bank’’ may obtain expedited

approval of an application to establish

or acquire an operating subsidiary that

will engage in certain additional

activities listed in § 5.34.

This proposal changes several of the

procedural requirements for national

banks that wish to conduct activities

through an operating subsidiary. First,

the proposal consolidates and moves

activities formerly listed in the

expedited processing list into the notice

category. Second, the proposal expands

the list of notice activities to include

other activities that the OCC has found

to be part of, or incidental to, the

business of banking 1 and has approved

on a regular basis for national bank

operating subsidiaries. Finally, given

the expansion of the notice category, a

national bank using the notice

procedure must be well capitalized and

well managed; the requirement that the

bank not be in a ‘‘troubled condition’’

within the meaning of § 5.51 is removed

to conform more closely to the financial

subsidiary requirements in the GLBA.

The proposal also clarifies that

‘‘authorized products’’ referenced in the

GLBA are activities permissible for

operating subsidiaries under § 5.34. The

term ‘‘authorized product’’ is defined at

§ 5.34(d)(1) to include certain insurance

products that national banks may

provide as principal pursuant to the

GLBA because, as of January 1, 1999,

either the OCC had determined that

national banks could provide the

product as principal or national banks

were lawfully providing the product as

principal, and as of that date no court

had issued a final judgment overturning

the OCC’s determination that national

banks could provide the product as

principal. The term ‘‘authorized

product’’ does not include title

insurance or an annuity the income of

which is subject to treatment under

section 72 of the Internal Revenue Code

of 1986 (26 U.S.C. 72). However,

providing title insurance as principal is

a permissible activity for an operating

subsidiary if the national bank or

subsidiary thereof was actively and

lawfully underwriting title insurance

before November 12, 1999, and no

affiliate of the national bank (other than

a subsidiary) provides insurance as

principal.

The proposal also revises § 5.34 to

conform to other changes made by the

GLBA. First, the OCC has removed

former § 5.34(f) from the rule because

the GLBA makes clear that an operating

subsidiary may engage only in activities

that are permissible for the parent bank

to engage in directly, and that an

operating subsidiary conducts its

activities subject to the same terms and

conditions that apply to the conduct of

those activities by its parent bank.

Second, the proposal removes the

former statement that ‘‘each operating

subsidiary is subject to examination and

supervision by the OCC’’ and clarifies

that the OCC’s authority to examine and

take action against certain subsidiaries

is subject to the limitations and

requirements of new section 45 of the

Federal Deposit Insurance Act and

section 115 of the GLBA. The purpose

of this change is to recognize the

provisions in the GLBA relating to

functional regulation of certain types of

bank subsidiaries and affiliates.

Comment Solicitation

The OCC requests comment on all

aspects of this proposal, including the

specific issues that follow.

The OCC seeks comment on the

impact of this proposal on community

banks. The OCC recognizes that

community banks operate with more

limited resources than larger

institutions and may present a different

risk profile. Thus, the OCC specifically

requests comment on the impact of the

proposal on community banks’ current

resources and available personnel with

the requisite expertise, and whether the

goals of the proposal could be achieved,

for community banks, through an

alternative approach.

Second, while as a matter of corporate

law a subsidiary of a branch or agency

of a foreign bank would technically be

a subsidiary of the parent bank, for

regulatory purposes the company could

be treated as if it were a subsidiary of

the branch or agency itself, provided the

company is in fact operated in that

manner. Thus, the OCC also seeks

comment on whether national treatment

principles would be furthered if Federal

branches and agencies of foreign banks

are authorized (as are national banks) to

invest in financial and operating

subsidiaries, and, if so, how the

applicable qualification standards

would be applied.

Finally, the OCC requests comment

on whether the proposal is written

clearly and is easy to understand. On

June 1, 1998, the President issued a

Memorandum directing each agency in

the Executive branch to write its rules

in plain language. This directive applies

to all new proposed and final

rulemaking documents issued on or

after January 1, 1999. In addition, Public

Law 106–102 requires each federal

agency to use plain language in all

proposed and final rules published after

January 1, 2000. The OCC invites

comment on how to make this rule

clearer. For example, you may wish to

discuss:

(1) Whether we have organized the

material to suit your needs;

(2) Whether the requirements of the

rule are clear; or

(3) Whether there is something else

we could do to make the rule easier to

understand.

Regulatory Flexibility Act Analysis

Pursuant to section 605(b) of the

Regulatory Flexibility Act, the

Comptroller of the Currency certifies

that this proposal will not have a

significant economic impact on a

substantial number of small entities.

The principal effect of the rule is to

provide procedures for implementing

section 121 of the GLBA for national

banks that wish to engage in activities

through financial subsidiaries. The

proposal also would reduce regulatory

burden by increasing the number of

activities that are subject to notice

requirements rather than application

requirements where a national bank

intends to engage in activities through

an operating subsidiary.

Unfunded Mandates Reform Act of

1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, Public

Law 104–4 (Unfunded Mandates Act)

requires that an agency prepare a

budgetary impact statement before

promulgating a rule that includes a

Federal mandate that may result in

expenditure by State, local, and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year. If a budgetary impact

statement is required, section 205 of the

Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules 3161

Unfunded Mandates Act also requires

an agency to identify and consider a

reasonable number of regulatory

alternatives before promulgating a rule.

The OCC has determined that the

proposal will not result in expenditures

by State, local, or tribal governments or

by the private sector of $100 million or

more. Accordingly, the OCC has not

prepared a budgetary impact statement

or specifically addressed the regulatory

alternatives considered.

Executive Order 12866 Determination

The Comptroller of the Currency has

determined that this rule does not

constitute a ‘‘significant regulatory

action’’ for the purposes of Executive

Order 12866.

Paperwork Reduction Act

The collection of information

requirements in this proposal are found

in 12 CFR 5.34(b) and (e) and 12 CFR

5.39(b) and (i). These collection of

information requirements have been

reviewed and approved by the Office of

Management and Budget in accordance

with the emergency review procedures

of the Paperwork Reduction Act of 1995

(44 U.S.C. 3507(j)) under OMB Control

Number 1557–0215.

List of Subjects in 12 CFR Part 5

Administrative practice and

procedure, National banks, Reporting

and recordkeeping requirements,

Securities.

Authority and Issuance

For the reasons set forth in the

preamble, the OCC proposes to amend

Chapter I of Title 12 as follows:

PART 5—RULES, POLICIES, AND

PROCEDURES FOR CORPORATE

ACTIVITIES

1. The authority citation for Part 5 is

revised to read as follows:

Authority: 12 U.S.C. 1 et seq., 93a; and

section 5136A of the Revised Statutes (12

U.S.C. 24a).

2. Section 5.34 is revised to read as

follows:

§ 5.34 Operating subsidiaries.

(a) Authority. 12 U.S.C. 24(Seventh),

93a, and section 5136A of the Revised

Statutes (12 U.S.C. 24a).

(b) Licensing requirements. A national

bank must file a notice or application as

prescribed in this section to acquire or

establish an operating subsidiary, or to

commence a new activity in an existing

operating subsidiary.

(c) Scope. This section sets forth

authorized activities and application or

notice procedures for national banks

engaging in activities through an

operating subsidiary. This section does

not apply to financial subsidiaries

authorized under § 5.39.

(d) Definitions. For purposes of this

§ 5.34:

(1) Authorized product means a

product that would be defined as

insurance under section 302(c) of the

Gramm-Leach-Bliley Act (Public Law

106–102, 113 Stat. 1338, 1407) (GLBA)

that, as of January 1, 1999, the OCC had

determined in writing that national

banks may provide as principal or

national banks were in fact lawfully

providing the product as principal, and

as of that date no court of relevant

jurisdiction had, by final judgment,

overturned a determination by the OCC

that national banks may provide the

product as principal. An authorized

product does not include title

insurance, or an annuity contract the

income of which is subject to treatment

under section 72 of the Internal Revenue

Code of 1986 (26 U.S.C. 72).

(2) Well capitalized means the capital

level described in 12 CFR 6.4(b)(1).

(3) Well managed means, unless

otherwise determined in writing by the

OCC:

(i) The national bank has received a

composite rating of 1 or 2 under the

Uniform Financial Institutions Rating

System in connection with its most

recent examination; or

(ii) In the case of any national bank

that has not been examined, the

existence and use of managerial

resources that the OCC determines are

satisfactory.

(e) Standards and requirements—(1)

Authorized activities. A national bank

may conduct in an operating subsidiary

activities that are permissible for a

national bank to engage in directly

either as part of, or incidental to, the

business of banking, as determined by

the OCC, or otherwise under other

statutory authority, including:

(i) Providing authorized products as

principal; or

(ii) Providing title insurance as

principal if the national bank or

subsidiary thereof was actively and

lawfully underwriting title insurance

before November 12, 1999, and no

affiliate of the national bank (other than

a subsidiary) provides insurance as

principal. A subsidiary may not provide

title insurance as principal if the state

had in effect before November 12, 1999,

a law which prohibits any person from

underwriting title insurance with

respect to real property in that state.

(2) Qualifying subsidiaries. An

operating subsidiary in which a national

bank may invest includes a corporation,

limited liability company, or similar

entity if the parent bank owns more

than 50 percent of the voting (or similar

type of controlling) interest of the

operating subsidiary; or the parent bank

otherwise controls the operating

subsidiary and no other party controls

more than 50 percent of the voting (or

similar type of controlling) interest of

the operating subsidiary. However, the

following subsidiaries are not operating

subsidiaries subject to this section:

(i) A subsidiary in which the bank’s

investment is made pursuant to specific

authorization in a statute or OCC

regulation (e.g., a bank service company

under 12 U.S.C. 1861 et seq. or a

financial subsidiary under section

5136A of the Revised Statutes); and

(ii) A subsidiary in which the bank

has acquired, in good faith, shares

through foreclosure on collateral, by

way of compromise of a doubtful claim,

or to avoid a loss in connection with a

debt previously contracted.

(3) Examination and supervision. An

operating subsidiary conducts activities

authorized under this section subject to

the same terms and conditions that

apply to the conduct of such activities

by its parent national bank. If, upon

examination, the OCC determines that

the operating subsidiary is operating in

violation of law, regulation, or written

condition, or in an unsafe or unsound

manner or otherwise threatens the safety

and soundness of the bank, the OCC

will direct the bank or operating

subsidiary to take appropriate remedial

action, which may include requiring the

bank to divest or liquidate the operating

subsidiary, or discontinue specified

activities. OCC authority under this

paragraph is subject to the limitations

and requirements of section 45 of the

Federal Deposit Insurance Act and

section 115 of the Gramm-Leach-Bliley

Act.

(4) Consolidation of figures. Pertinent

book figures of the parent bank and its

operating subsidiary shall be combined

for the purpose of applying statutory

limitations when combination is needed

to effect the intent of the statute, e.g., for

purposes of 12 U.S.C. 56, 60, 84, and

371d.

(5) Procedures—(i) Application

required. (A) Except as provided in

paragraph (e)(5)(iv) or (e)(5)(vi) of this

section, a national bank that intends to

acquire or establish an operating

subsidiary, or to perform a new activity

in an existing operating subsidiary,

must first submit an application to, and

receive approval from, the OCC. The

application must include a complete

description of the bank’s investment in

the subsidiary, the proposed activities of

the subsidiary, the organizational

structure and management of the

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1See, e.g., the OCC’s monthly publication

‘‘Interpretations and Actions.’’ Beginning with the

May 1996 issue, the OCC’s web site provides access

to electronic versions of Interpretations and Actions

(www.occ.treas.gov).

subsidiary, the relations between the

bank and the subsidiary, and other

information necessary to adequately

describe the proposal. It also must state

whether the bank intends to conduct

any activity of the operating subsidiary

at a location other than the main office

or a previously approved branch of the

bank. The OCC may require the

applicant to submit a legal analysis if

the proposal is novel, unusually

complex, or raises substantial

unresolved legal issues. In these cases,

the OCC encourages applicants to have

a pre-filing meeting with the OCC.

(B) A national bank must file an

application and obtain prior approval

before acquiring or establishing an

operating subsidiary, or performing a

new activity in an existing subsidiary, if

the bank controls the subsidiary but

owns 50 percent or less of the voting (or

similar type of controlling) interest of

the subsidiary. These applications are

not subject to the filing exemption in

paragraph (e)(5)(vi) of this section and

are not eligible for the notice procedures

in paragraph (e)(5)(iv) of this section.

(ii) Exceptions to rules of general

applicability. Sections 5.8, 5.10, and

5.11 do not apply to this section.

However, if the OCC concludes that an

application presents significant and

novel policy, supervisory, or legal

issues, the OCC may determine that

some or all provisions in §§ 5.8, 5.10,

and 5.11 apply.

(iii) OCC review and approval. The

OCC reviews a national bank’s

application to determine whether the

proposed activities are legally

permissible and to ensure that the

proposal is consistent with safe and

sound banking practices and OCC

policy and does not endanger the safety

or soundness of the parent national

bank. As part of this process, the OCC

may request additional information and

analysis from the applicant.

(iv) Notice process for certain

activities. A national bank that is ‘‘well

capitalized’’ and ‘‘well managed’’ may

acquire or establish an operating

subsidiary, or perform a new activity in

an existing operating subsidiary, by

providing the appropriate district office

written notice within 10 days after

acquiring or establishing the subsidiary,

or commencing the activity, if the

activity is listed in paragraph (e)(5)(v) of

this section. The written notice must

include a complete description of the

bank’s investment in the subsidiary and

of the activity conducted and a

representation and undertaking that the

activity will be conducted in accordance

with OCC policies contained in

guidance issued by the OCC regarding

the activity. Any bank receiving

approval under this paragraph is

deemed to have agreed that the

subsidiary will conduct the activity in a

manner consistent with published OCC

guidance.

(v) Activities eligible for notice. The

following activities qualify for the

notice procedures, provided the activity

is conducted pursuant to the same terms

and conditions as would be applicable

if the activity was being conducted

directly by a national bank:

(A) Holding and managing assets

acquired by the parent bank, including

investment assets and property acquired

by the bank through foreclosure or

otherwise in good faith to compromise

a doubtful claim, or in the ordinary

course of collecting a debt previously

contracted;

(B) Providing services to or for the

bank or its affiliates, including

accounting, auditing, appraising,

advertising and public relations, and

financial advice and consulting;

(C) Making loans or other extensions

of credit, and selling money orders,

savings bonds, and travelers checks;

(D) Purchasing, selling, servicing, or

warehousing loans or other extensions

of credit, or interests therein;

(E) Providing courier services between

financial institutions;

(F) Providing management consulting,

operational advice, and services for

other financial institutions;

(G) Providing check guaranty and

verification services;

(H) Providing data processing, data

warehousing and data transmission

products, services, and related activities

and facilities, including associated

equipment and technology, for the bank

or its affiliates;

(I) Acting as investment adviser or

financial adviser or counselor to

governmental entities or

instrumentalities, businesses, or

individuals, including advising

registered investment companies and

mortgage or real estate investment

trusts, furnishing economic forecasts or

other economic information, providing

investment advice related to futures and

options on futures, and providing

consumer financial counseling;

(J) Providing tax planning and

preparation services;

(K) Providing financial and

transactional advice and assistance,

including advice and assistance for

customers in structuring, arranging, and

executing mergers and acquisitions,

divestitures, joint ventures, leveraged

buyouts, swaps, foreign exchange,

derivative transactions, coin and

bullion, and capital restructurings;

(L) Underwriting credit life insurance;

(M) Leasing of personal property and

acting as an agent or adviser in leases

for others;

(N) Providing securities brokerage or

acting as a futures commission

merchant, and providing related credit

and other related services;

(O) Underwriting, dealing, and

making a market in bank permissible

securities including asset backed

securities;

(P) Acting as an insurance agent or

broker, including title insurance to the

extent permitted under section 303 of

the GLBA;

(Q) Reinsuring mortgage insurance on

loans originated, purchased, or serviced

by the bank, its subsidiaries, or its

affiliates, provided that if the subsidiary

enters into a quota share arrangement,

the subsidiary assumes less than 50% of

the aggregate insured risk covered by

the agreement. A ‘‘quota share

agreement’’ is an agreement under

which the reinsurer is liable to the

primary insurance underwriter for an

agreed upon percentage of every claim

arising out of the covered book of

business ceded by the primary

insurance underwriter to the reinsurer;

(R) Acting as a finder pursuant to 12

CFR 7.1002 to the extent permitted by

published OCC precedents 1;

(S) Offering bank permissible

correspondent services to others to the

extent permitted by published OCC

precedents;

(T) Acting as agent or broker in the

sale of fixed or variable annuities;

(U) Offering debt cancellation

agreements or debt suspension

agreements;

(V) Providing real estate settlement,

closing, escrow and related services; or

(W) Acting as a transfer or fiscal

agent.

(vi) No application or notice required.

A national bank may acquire or

establish an operating subsidiary

without filing an application or

providing notice to the OCC, if the bank

is adequately capitalized or well

capitalized and the:

(A) Activities of the new subsidiary

are limited to those activities previously

reported by the bank in connection with

the establishment or acquisition of a

prior operating subsidiary;

(B) Activities in which the new

subsidiary will engage continue to be

legally permissible for the subsidiary;

and

(C) Activities of the new subsidiary

will be conducted in accordance with

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any conditions imposed by the OCC in

approving the conduct of these activities

for any prior operating subsidiary of the

bank.

(vii) Fiduciary powers. If an operating

subsidiary proposes to exercise

investment discretion on behalf of

customers or provide investment advice

for a fee, the national bank must have

prior OCC approval to exercise fiduciary

powers pursuant to § 5.26.

3. A new § 5.39 is added to subpart C

to read as follows:

§ 5.39 Financial subsidiaries.

(a) Authority. 12 U.S.C. 93a and

section 121 of Public Law 106–102, 113

Stat. 1338, 1373.

(b) Approval requirements. A national

bank must file a notice as prescribed in

this section prior to acquiring a

financial subsidiary or engaging in

activities authorized pursuant to section

5136A(a)(2)(A)(i) of the Revised Statutes

(12 U.S.C. 24a) through a financial

subsidiary. When a financial subsidiary

proposes to conduct a new activity

permitted under § 5.34, the bank shall

follow the procedures in § 5.34(e)(5)

instead of paragraph (i) of this section.

(c) Scope. This section sets forth

authorized activities, approval

procedures, and, where applicable,

conditions for national banks engaging

in activities through a financial

subsidiary.

(d) Definitions. For purposes of this

§ 5.39:

(1) Affiliate has the meaning set forth

in section 2 of the Bank Holding

Company Act of 1956 (12 U.S.C. 1841),

except that the term ‘‘affiliate’’ for

purposes of paragraph (h)(5) of this

section shall have the meaning set forth

in sections 23A or 23B of the Federal

Reserve Act (12 U.S.C. 371c and 371c–

1), as applicable.

(2) Appropriate Federal banking

agency has the meaning set forth in

section 3 of the Federal Deposit

Insurance Act (12 U.S.C. 1813).

(3) Company has the meaning set

forth in section 2 of the Bank Holding

Company Act of 1956 (12 U.S.C. 1841),

and includes a limited liability

company (LLC).

(4) Control has the meaning set forth

in section 2 of the Bank Holding

Company Act of 1956 (12 U.S.C. 1841).

(5) Eligible debt means unsecured

long-term debt that is:

(i) Not supported by any form of

credit enhancement, including a

guaranty or standby letter of credit; and

(ii) Not held in whole or in any

significant part by any affiliate, officer,

director, principal shareholder, or

employee of the bank or any other

person acting on behalf of or with funds

from the bank or an affiliate of the bank.

(6) Financial subsidiary means any

company that is controlled by one or

more insured depository institutions,

other than a subsidiary that:

(i) Engages solely in activities that

national banks may engage in directly

and that are conducted subject to the

same terms and conditions that govern

the conduct of these activities by

national banks; or

(ii) A national bank is specifically

authorized to control by the express

terms of a Federal statute (other than

section 5136A of the Revised Statutes),

and not by implication or interpretation,

such as by section 25 of the Federal

Reserve Act (12 U.S.C. 601–604a),

section 25A of the Federal Reserve Act

(12 U.S.C. 611–631), or the Bank Service

Company Act (12 U.S.C. 1861 et seq.)

(7) Insured depository institution has

the meaning set forth in section 3 of the

Federal Deposit Insurance Act (12

U.S.C. 1813).

(8) Long term debt means any debt

obligation with an initial maturity of

360 days or more.

(9) Subsidiary has the meaning set

forth in section 2 of the Bank Holding

Company Act of 1956 (12 U.S.C. 1841).

(10) Tangible equity has the meaning

set forth in 12 CFR 6.2(g).

(11) Well capitalized with respect to

a depository institution means the

capital level designated as ‘‘well

capitalized’’ by the institution’s

appropriate Federal banking agency

pursuant to section 38 of the Federal

Deposit Insurance Act (12 U.S.C.

1831o).

(12) Well managed means:

(i) Unless otherwise determined in

writing by the appropriate Federal

banking agency, the institution has

received a composite rating of 1 or 2

under the Uniform Financial

Institutions Rating System (or an

equivalent rating under an equivalent

rating system) in connection with the

most recent examination or subsequent

review of the depository institution and,

at least a rating of 2 for management, if

such a rating is given; or

(ii) In the case of any depository

institution that has not been examined

by its appropriate Federal banking

agency, the existence and use of

managerial resources that the

appropriate Federal banking agency

determines are satisfactory.

(e) Authorized activities. A financial

subsidiary may engage in the following

activities:

(1) Activities that are financial in

nature and activities incidental to a

financial activity, authorized pursuant

to 5136A(a)(2)(A)(i) of the Revised

Statutes (to the extent not otherwise

permitted under paragraph (e)(2) of this

section), including:

(i) Lending, exchanging, transferring,

investing for others, or safeguarding

money or securities;

(ii) Engaging as agent or broker in any

state for purposes of insuring,

guaranteeing, or indemnifying against

loss, harm, damage, illness, disability,

death, defects in title, or providing

annuities as agent or broker;

(iii) Providing financial, investment,

or economic advisory services,

including advising an investment

company as defined in section 3 of the

Investment Company Act (15 U.S.C.

80a–3);

(iv) Issuing or selling instruments

representing interests in pools of assets

permissible for a bank to hold directly;

(v) Underwriting, dealing in, or

making a market in securities;

(vi) Engaging in any activity that the

Board of Governors of the Federal

Reserve System has determined, by

order or regulation in effect on

November 12, 1999, to be so closely

related to banking or managing or

controlling banks as to be a proper

incident thereto (subject to the same

terms and conditions contained in the

order or regulation, unless the order or

regulation is modified by the Board of

Governors of the Federal Reserve

System);

(vii) Engaging, in the United States, in

any activity that a bank holding

company may engage in outside the

United States and the Board of

Governors of the Federal Reserve

System has determined, under

regulations prescribed or interpretations

issued pursuant to section 4(c)(13) of

the Bank Holding Company Act of 1956

(BHCA) (12 U.S.C. 1843(c)(13)) as in

effect on November 11, 1999, to be usual

in connection with the transaction of

banking or other financial operations

abroad; and

(viii) Activities that the Secretary of

the Treasury in consultation with the

Board of Governors of the Federal

Reserve System, as provided in section

5136A of the Revised Statutes,

determines to be financial in nature or

incidental to a financial activity; and

(2) Activities that may be conducted

by an operating subsidiary pursuant to

§ 5.34.

(f) Impermissible activities. A

financial subsidiary may not engage as

principal in the following activities:

(1) Insuring, guaranteeing, or

indemnifying against loss, harm,

damage, illness, disability or death

(except to the extent permitted under

sections 302 or 303(c) of the GrammLeach-Bliley Act (GLBA), 113 Stat.

1407–1409) or providing or issuing

3164 Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules

annuities the income of which is subject

to tax treatment under section 72 of the

Internal Revenue Code (26 U.S.C. 72);

(2) Real estate development or real

estate investment, unless otherwise

expressly authorized by law; and

(3) Activities authorized for bank

holding companies by virtue of section

4(k)(4)(H) or (I) of the Bank Holding

Company Act, except activities

described in section 4(k)(4)(H) that may

be permitted in accordance with section

122 of the GLBA, 113 Stat. 1381.

(g) Qualifications. A national bank

may control a financial subsidiary or

hold an interest in a financial subsidiary

if:

(1) The national bank and each

depository institution affiliate of the

national bank are well capitalized and

well managed;

(2) The aggregate consolidated total

assets of all financial subsidiaries of the

national bank do not exceed the lesser

of 45 percent of the consolidated total

assets of the parent bank or $50 billion

(or such greater amount as is

determined according to an indexing

mechanism jointly established by

regulation by the Secretary of the

Treasury and the Board of Governors of

the Federal Reserve System); and

(3) A national bank that is one of the

100 largest insured banks, determined

on the basis of the bank’s consolidated

total assets at the end of the calendar

year, has at least one issue of

outstanding eligible debt that is

currently rated in one of the three

highest investment grade rating

categories by a nationally recognized

statistical rating organization. If the

national bank is one of the second 50

largest insured banks, it may either

satisfy this requirement or satisfy

alternative criteria the Secretary of the

Treasury and the Board of Governors of

the Federal Reserve System establish

jointly by regulation. This paragraph

(g)(3) does not apply if the financial

subsidiary is engaged solely in activities

in an agency capacity.

(h) Safeguards. The following

safeguards apply to a national bank that

establishes or maintains a financial

subsidiary:

(1) For purposes of determining

regulatory capital:

(i) The national bank must deduct the

aggregate amount of its outstanding

equity investment, including retained

earnings, in its financial subsidiaries

from the assets and tangible equity of

the bank; and

(ii) The national bank may not

consolidate the assets and liabilities of

a financial subsidiary with those of the

bank;

(2) Any published financial statement

of the national bank shall, in addition to

providing information prepared in

accordance with generally accepted

accounting principles, separately

present financial information for the

bank in the manner provided in

paragraph (1) of this section;

(3) The national bank must have

reasonable policies and procedures to

preserve the separate corporate identity

and limited liability of the bank and the

financial subsidiaries of the bank;

(4) The national bank must have

procedures for identifying and

managing financial and operational

risks within the bank and the financial

subsidiary that adequately protect the

national bank from such risks;

(5) Sections 23A and 23B of the

Federal Reserve Act (12 U.S.C. 371c and

371c–1) apply to transactions involving

a financial subsidiary in the following

manner:

(i) A financial subsidiary shall be

deemed to be an affiliate of the bank and

shall not be deemed to be a subsidiary

of the bank;

(ii) The restrictions contained in

section 23A(a)(1)(A) of the Federal

Reserve Act shall not apply with respect

to covered transactions between a bank

and any individual financial subsidiary

of the bank;

(iii) The bank’s investment in the

financial subsidiary shall not include

retained earnings of the financial

subsidiary;

(iv) Any purchase of, or investment

in, the securities of a financial

subsidiary of a bank by an affiliate of the

bank will be considered to be a

purchase of or investment in such

securities by the bank; and

(v) Any extension of credit by an

affiliate of a bank to a financial

subsidiary of the bank may be

considered an extension of credit by the

bank to the financial subsidiary if the

Board of Governors of the Federal

Reserve System determines that such

treatment is necessary or appropriate to

prevent evasions of the Federal Reserve

Act or the Gramm-Leach-Bliley Act.

(6) A financial subsidiary shall be

deemed a subsidiary of a bank holding

company and not a subsidiary of the

bank for purposes of the anti-tying

prohibitions set forth in 12 U.S.C. 1971

et seq.

(i) Procedures to engage in activities

through a financial subsidiary. A

national bank that intends to acquire

control of, or hold an interest in, a

financial subsidiary, or to commence a

new activity in an existing financial

subsidiary, may obtain OCC approval

through the procedures set forth in

paragraph (i)(1) or (i)(2) of this section.

(1) Certification with subsequent

notice. (i) At any time, a national bank

may file a ‘‘Financial Subsidiary

Certification’’ with the appropriate

district office listing the bank’s

depository institution affiliates and

certifying that the bank and each of

those affiliates is well capitalized and

well managed.

(ii) Thereafter, at such time as the

bank seeks OCC approval to acquire

control of, or hold an interest in, a new

financial subsidiary, or commence a

new activity authorized under section

5136A(a)(2)(A)(i) of the Revised Statutes

in an existing subsidiary, the bank may

file a written notice with the

appropriate district office at the time of

acquiring control of, or holding an

interest in, a financial subsidiary, or

commencing such activity in an existing

subsidiary. The written notice must be

labeled ‘‘Financial Subsidiary Notice’’

and must:

(A) State that the bank’s Certification

remains valid;

(B) Describe the activity or activities

conducted by the financial subsidiary;

(C) Cite the specific authority

permitting the activity to be conducted

by the financial subsidiary. (Where the

authority relied on is an agency order or

interpretation under section 4(c)(8) or

4(c)(13), respectively, of the Bank

Holding Company Act of 1956,

respectively, a copy of the order or

interpretation should be attached);

(D) Certify that the bank will be well

capitalized after making adjustments

required by paragraph (h)(1) of this

section;

(E) Demonstrate the aggregate

consolidated total assets of all financial

subsidiaries of the national bank do not

exceed the lesser of 45% of the bank’s

consolidated total assets or $50 billion;

and

(F) If applicable, certify that the bank

meets the eligible debt requirement in

paragraph (g)(3) of this section.

(2) Combined certification and notice.

A national bank may file a combined

certification and notice with the

appropriate district office at least five

business days prior to acquiring control

of, or holding an interest in, a financial

subsidiary, or commencing a new

activity authorized pursuant to section

5136A(a)(2)(A)(i) of the Revised Statutes

in an existing subsidiary. The written

notice must be labeled ‘‘Financial

Subsidiary Certification and Notice’’

and must:

(A) List the bank’s depository

institution affiliates and certify that the

bank and each depository institution

affiliate of the bank is well capitalized

and well managed;

Federal Register / Vol. 65, No. 13 / Thursday, January 20, 2000 / Proposed Rules 3165

(B) Describe the activity or activities

to be conducted in the financial

subsidiary;

(C) Cite the specific authority

permitting the activity to be conducted

by the financial subsidiary. (Where the

authority relied on is an agency order or

interpretation under section 4(c)(8) or

4(c)(13), respectively, of the Bank

Holding Company Act of 1956,

respectively, a copy of the order or

interpretation should be attached);

(D) Certify that the bank will remain

well capitalized after making the

adjustments required by paragraph

(h)(1) of this section;

(E) Demonstrate the aggregate

consolidated total assets of all financial

subsidiaries of the national bank do not

exceed the lesser of 45% of the bank’s

consolidated total assets or $50 billion;

and

(F) If applicable, certify that the bank

meets the eligible debt requirement in

paragraph (g)(3) of this section

(3) Exceptions to rules of general

applicability. Section 5.8, 5.10, 5.11,

and 5.13 do not apply to activities

authorized under this section.

(4) Community Reinvestment Act

(CRA). A national bank may not apply

under this paragraph (i) to commence a

new activity authorized under section

5136A(a)(2)(A)(i) of the Revised

Statutes, or directly or indirectly acquire

control of a company engaged in any

such activity, if the bank or any of its

insured depository institution affiliates

received a CRA rating of less than

‘‘satisfactory record of meeting

community credit needs’’ on its most

recent CRA examination prior to when

the bank would file a notice under this

section.

(j) Failure to continue to meet certain

qualification requirements—(1)

Qualifications and safeguards. A

national bank, or, as applicable, its

affiliated depository institutions, must

continue to satisfy the qualification

requirements set forth in paragraphs

(g)(1) and (2) of this section and the

safeguards in paragraphs (h)(1), (2), (3)

and (4) of this section following its

acquisition of control of, or an interest

in, a financial subsidiary. A national

bank that fails to continue to satisfy

these requirements will be subject to the

following procedures and requirements:

(i) The OCC shall give notice to the

national bank promptly upon

determining that the national bank does

not continue to meet the requirements

in paragraphs (g)(1) or (2) of this section

or the safeguards in paragraphs (h)(1),

(2), (3), or (4) of this section. The bank

shall be deemed to have received such

notice three business days after mailing

of the letter by the OCC;

(ii) Not later than 45 days after receipt

of the notice under paragraph (j)(1)(i) of

this section, or any additional time as

the OCC may permit, the national bank

shall execute an agreement with the

OCC to comply with the requirements in

paragraphs (g)(1) and (2) and (h)(1), (2),

(3), and (4) of this section;

(iii) The OCC may impose limitations

on the conduct or activities of the

national bank or any subsidiary of the

national bank as the OCC determines

appropriate under the circumstances

and consistent with the purposes of

section 5136A of the Revised Statutes;

and

(iv) The OCC may require a national

bank to divest control of a financial

subsidiary if the national bank does not

correct the conditions giving rise to the

notice within 180 days after receipt of

the notice provided under paragraph

(j)(1)(i) of this section.

(2) Eligible debt rating requirement. A

national bank that does not continue to

meet the qualification requirement set

forth in paragraph (g)(3) of this section

may not directly or through a

subsidiary, purchase or acquire any

additional equity capital of any

financial subsidiary until the bank

meets the requirement in paragraph

(g)(3) of this section. For purposes of

this paragraph (j)(2), the term ‘‘equity

capital’’ includes, in addition to any

equity investment, any debt instrument

issued by the financial subsidiary if the

instrument qualifies as capital of the

subsidiary under federal or state law,

regulation, or interpretation applicable

to the subsidiary.

Dated: January 14, 2000.

John D. Hawke, Jr.,

Comptroller of the Currency.

[FR Doc. 00–1330 Filed 1–19–00; 8:45 am]

BILLIING CODE 4810–33–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 98–SW–82–AD]

Airworthiness Directives; Eurocopter

France Model AS–350B, BA, B1, B2, C,

D, and D1, and AS–355E, F, F1, F2 and

N Helicopters

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes to

revise an existing airworthiness

directive (AD), applicable to

Aerospatiale (Societe Nationale

Industrielle Aerospatiale) (SNIAS) (now

known as Eurocopter France) Model AS

350 and AS 355 series helicopters that

currently requires repetitive inspections

of the main rotor head components, the

main gearbox (MGB) suspension bars,

and the ground resonance prevention

system components at intervals not to

exceed 400 hours time-in-service (TIS).

This action would require the same

inspections, but at intervals not to

exceed 500 hours TIS. This proposal is

prompted by reports of confusion and

unnecessary costs associated with the

difference in the current 400 hours TIS

inspection interval and the current

manufacturer’s master service

recommendation of 500 hours TIS

inspection interval. The actions

specified by the proposed AD are

intended to eliminate confusion and

unnecessary costs and to prevent

ground resonance due to reduced

structural stiffness, which could lead to

failure of a main rotor head or MGB

suspension component and subsequent

loss of control of the helicopter.

DATES: Comments must be received by

March 20, 2000.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Office of the

Regional Counsel, Southwest Region,

Attention: Rules Docket No. 98–SW–82–

AD, 2601 Meacham Blvd., Room 663,

Fort Worth, Texas 76137. Comments

may be inspected at this location

between 9 a.m. and 3 p.m., Monday

through Friday, except Federal holidays.

The service information referenced in

the proposed rule may be obtained from

American Eurocopter Corporation, 2701

Forum Drive, Grand Prairie, Texas

75053–4005, telephone (972) 641–3460,

fax (972) 641–3527. This information

may be examined at the FAA, Office of

the Regional Counsel, Southwest

Region, 2601 Meacham Blvd., Room

663, Fort Worth, Texas.

FOR FURTHER INFORMATION CONTACT: Jim

Grigg, Aerospace Engineer, FAA,

Rotorcraft Directorate, Rotorcraft

Standards Staff, 2601 Meacham Blvd.,

Fort Worth, Texas 76137, telephone

(817) 222–5490, fax (817) 222–5961.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications

should identify the Rules Docket

number and be submitted in triplicate to

the address specified above. All

communications received on or before