[Federal Register Volume 65, Number 123 (Monday, June 26, 2000)]
[Proposed Rules]
[Pages 39472-39489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15798]



[[Page 39471]]

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Part II

Department of the Treasury
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Office of the Comptroller of the Currency



Office of Thrift Supervision



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Federal Reserve System

Federal Deposit Insurance Corporation
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12 CFR Parts 30, 208, et al.



Interagency Guidelines Establishing Standards for Safeguarding Customer 
Information and Rescission of Year 2000 Standards for Safety and 
Soundness; Proposed Rule

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / 
Proposed Rules

[[Page 39472]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 30

[Docket No. 00-13]
RIN 1557-AB84

FEDERAL RESERVE SYSTEM

12 CFR Parts 208, 211, 225, and 263

[Docket No. R-1073]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 308 and 364

RIN 3064-AC39

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 568 and 570

[Docket No. 2000-51]
RIN 1550-AB36


Interagency Guidelines Establishing Standards for Safeguarding 
Customer Information and Rescission of Year 2000 Standards for Safety 
and Soundness

AGENCIES: The Office of the Comptroller of the Currency, Treasury; 
Board of Governors of the Federal Reserve System; Federal Deposit 
Insurance Corporation; and Office of Thrift Supervision, Treasury.

ACTION: Joint notice of proposed rule making.

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SUMMARY: The Office of the Comptroller of the Currency, Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, and Office of Thrift Supervision, (collectively, the 
Agencies) are requesting comment on proposed Guidelines establishing 
standards for safeguarding customer information published to implement 
sections 501 and 505(b) of the Gramm-Leach-Bliley Act (the G-L-B Act or 
Act).
    Section 501 of the G-L-B Act requires the Agencies to establish 
appropriate standards for the financial institutions subject to their 
respective jurisdictions relating to administrative, technical, and 
physical safeguards for customer records and information. These 
safeguards are intended to: Insure the security and confidentiality of 
customer records and information; protect against any anticipated 
threats or hazards to the security or integrity of such records; and 
protect against unauthorized access to or use of such records or 
information that could result in substantial harm or inconvenience to 
any customer. The Agencies are to implement these standards in the same 
manner, to the extent practicable, as standards prescribed pursuant to 
section 39(a) of the Federal Deposit Insurance Act (FDI Act). The 
proposed Guidelines implement the requirements of the G-L-B Act.
    The Agencies previously issued guidelines establishing Year 2000 
safety and soundness standards for insured depository institutions 
pursuant to section 39 of the FDI Act. Since the events for which these 
guidelines were issued have passed, the Agencies have concluded that 
the guidelines are no longer necessary and propose to rescind the 
guidelines as part of this rulemaking.

DATES: Comments must be received not later than August 25, 2000.

ADDRESSES: Comments should be directed to: Office of the Comptroller of 
the Currency (OCC): Communications Division, Office of the Comptroller 
of the Currency, 250 E Street, SW., Third Floor, Washington, DC 20219, 
Attention: Docket No. 00-13; Fax number (202) 874-5274 or Internet 
address: <a href="/cdn-cgi/l/email-protection#addfc8cade83cec2c0c0c8c3d9deedc2cece83d9dfc8ccde83cac2db"><span class="__cf_email__" data-cfemail="ed9f888a9ec38e8280808883999ead828e8ec3999f888c9ec38a829b">[email protected]</span></a>. Comments may be inspected and 
photocopied at the OCC's Public Reference Room, 250 E Street, SW., 
Washington, D.C., between 9:00 a.m. and 5:00 p.m. on business days. You 
can make an appointment to inspect the comments by calling (202) 874-
5043.
    Board of Governors of the Federal Reserve System (Board): Comments, 
which should refer to Docket No. R-1073, may be mailed to Ms. Jennifer 
J. Johnson, Secretary, Board of Governors of the Federal Reserve 
System, 20th and C Streets, NW, Washington, DC 20551 or mailed 
electronically to <a href="/cdn-cgi/l/email-protection#52203735217c313d3f3f373c2621123437363720333e203721372024377c353d24"><span class="__cf_email__" data-cfemail="cebcaba9bde0ada1a3a3aba0babd8ea8abaaabbcafa2bcabbdabbcb8abe0a9a1b8">[email protected]</span></a>. Comments addressed 
to Ms. Johnson also may be delivered to the Board's mail room between 
8:45 a.m. and 5:15 p.m. and to the security control room outside of 
those hours. Both the mail room and the security control room are 
accessible from the courtyard entrance on 20th Street between 
Constitution Avenue and C Street, NW. Comments may be inspected in Room 
MP-500 between 9 a.m. and 5 p.m., pursuant to Sec. 261.12, except as 
provided in Sec. 261.14, of the Board's Rules Regarding the 
Availability of Information, 12 CFR 261.12 and 261.14.
    Federal Deposit Insurance Corporation (FDIC): Send written comments 
to Robert E. Feldman, Executive Secretary, Attention: Comments/OES, 
Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429. Comments also may be mailed electronically to 
<a href="/cdn-cgi/l/email-protection#6f0c0002020a011b1c2f090b060c41080019"><span class="__cf_email__" data-cfemail="41222e2c2c242f353201272528226f262e37">[email protected]</span></a>. Comments may be hand delivered to the guard station 
at the rear of the 17th Street building (located on F Street) on 
business days between 7 a.m. and 5 p.m.; Fax number (202) 898-3838. 
Comments may be inspected and photocopied in the FDIC Public 
Information Center, Room 100, 801 17th Street, NW., Washington, DC 
20429, between 9 a.m. and 5:00 p.m. on business days.
    Office of Thrift Supervision (OTS): Send comments to Manager, 
Dissemination Branch, Information Management & Services Division, 
Office of Thrift Supervision, 1700 G Street, NW., lower level from 9:00 
a.m. to 5:00 p.m. on business days. Send facsimile transmissions to Fax 
number (202) 906-7755 or (202) 906-6956 (if the comment is over 25 
pages). Send email to <a href="/cdn-cgi/l/email-protection#655904450d17000358" http: public.info">public.info</a>@ots.treas.gov">public.info@ots.treas.gov</a> and include your name 
and telephone number. Interested persons may inspect comments at 1700 G 
Street, NW., from 9 a.m. until 4 p.m. on Tuesdays and Thursdays.

FOR FURTHER INFORMATION CONTACT:
    OCC: Mark Tenhundfeld, Assistant Director, Legislative and 
Regulatory Activities Division, (202) 874-5090; John Carlson, Acting 
Deputy Director for Bank Technology, (202) 874-5013; Deborah Katz, 
Senior Attorney, Legislative and Regulatory Activities Division, (202) 
874-5090; or Jeffery Abrahamson, Attorney, Legislative and Regulatory 
Activities Division, (202) 874-5090.
    Board: Heidi Richards, Manager, Division of Banking Supervision and 
Regulation, (202) 452-2598; or Stephanie Martin, Managing Senior 
Counsel, Legal Division, (202) 452-3198.
    For the hearing impaired only, contact Janice Simms, 
Telecommunication Device for the Deaf (TDD) (202) 452-3544, Board of 
Governors of the Federal Reserve System, 20th and C Streets, NW., 
Washington, DC 20551.
    FDIC: Thomas J. Tuzinski, Review Examiner, Division of Supervision, 
(202) 898-6748; Jeffrey M. Kopchik, Senior Policy Analyst, Division of 
Supervision, (202) 898-3872; or Robert A. Patrick, Counsel, Legal 
Division, (202) 898-3757.
    OTS: Paul R. Reymann, Senior Project Manager, Technology Risk 
Management, (202) 906-5645; or Christine Harrington, Counsel, Banking 
and Finance,

[[Page 39473]]

Regulations and Legislation Division, (202) 906-7957.

SUPPLEMENTARY INFORMATION: The contents of this preamble are listed in 
the following outline:

I. Background
II. Section-by-Section Analysis
III. Regulatory Analysis
    A. Paperwork Reduction Act
    B. Regulatory Flexibility Act
    C. Executive Order 12866
    D. Unfunded Mandates Act of 1995
IV. Solicitation of Comments on Use of Plain Language

I. Background

    On November 12, 1999, President Clinton signed the G-L-B Act (Pub. 
L. 106-102) into law. Section 501, entitled Protection of Nonpublic 
Personal Information, requires the Agencies and the Securities and 
Exchange Commission, the National Credit Union Administration, and the 
Federal Trade Commission to establish appropriate standards for the 
financial institutions subject to their respective jurisdictions 
relating to the administrative, technical, and physical safeguards for 
customer records and information. These safeguards are intended to: (1) 
Insure the security and confidentiality of customer records and 
information; (2) protect against any anticipated threats or hazards to 
the security or integrity of such records; and (3) protect against 
unauthorized access to or use of such records or information that would 
result in substantial harm or inconvenience to any customer.
    Section 505(b) of the G-L-B Act provides that these standards are 
to be implemented by the Agencies in the same manner, to the extent 
practicable, as standards prescribed pursuant to section 39(a) of the 
FDI Act.\1\ Section 39(a) of the FDI Act authorizes the Agencies to 
establish operational and managerial standards for insured depository 
institutions relative to, among other things, internal controls, 
information systems, and internal audit systems, as well as such other 
operational and managerial standards as the Agencies determine to be 
appropriate. These standards may be issued as guidelines or 
regulations. While this proposal is in the form of guidelines, the 
Agencies solicit comment on whether the final standards should be 
issued in the form of guidelines or as regulations.\2\
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    \1\ Section 39 applies only to insured depository institutions, 
including insured branches of foreign banks. The Guidelines, 
however, will also apply to certain uninsured institutions, such as 
bank holding companies, certain nonbank subsidiaries of bank holding 
companies and insured depository institutions, and uninsured 
branches and agencies of foreign banks. See section 501 and 505(b) 
of the G-L-B Act.
    \2\ The OTS proposes to place its information security 
guidelines in Appendix B to 12 CFR part 570, with the provisions 
implementing section 39 of the FDI Act. At the same time, the OTS 
proposes a regulatory requirement that the institutions the OTS 
regulates comply with the proposed guidelines. Because information 
security guidelines are similar to physical security procedures, the 
OTS proposes including a provision in 12 CFR part 568, which covers 
primarily physical security procedures, requiring compliance with 
the guidelines in Appendix B to part 570.
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    The proposed Guidelines apply to ``nonpublic personal information'' 
of ``customers'' as those terms are defined in the Agencies' privacy 
rules published in accordance with Title V of the G-L-B Act (the 
Privacy Rule). See Privacy of Consumer Financial Information, 65 FR 
35162 (June 1, 2000).\3\ Under section 503(b)(3) of the G-L-B Act and 
the Privacy Rule, financial institutions will be required to disclose 
their policies and practices with respect to protecting the 
confidentiality, security, and integrity of nonpublic personal 
information as part of the initial and annual notices to their 
customers. Key components of the proposed Guidelines were derived from 
security-related supervisory guidance previously issued by the Agencies 
and the Federal Financial Institutions Examination Council (FFIEC).
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    \3\ Where the Supplementary Information refers to a section of 
the Privacy Rule, it will preface the common section number with 
``__'', as each Agency has a different part number.
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    The texts of the Agencies' proposed Guidelines are substantively 
identical. The Agencies request comment on all aspects of the proposed 
Guidelines as well as comment on the specific provisions and issues 
highlighted in the section-by-section analysis below. Those commenters 
who believe that the proposed Guidelines would impose undue burdens on 
financial institutions should identify which parts of the Guidelines 
they believe impose excessive burdens and describe the burdens. Those 
commenters should also discuss either: (1) Alternative methods that 
would accomplish the same purpose; or (2) why the intended purpose is 
unnecessary or should be modified.
    The Agencies also seek comments on the impact of this proposal on 
community banks. The Agencies recognize that community banks operate 
with more limited resources than larger institutions and may present a 
different risk profile. Thus, in addition to reviewing comments, each 
Agency will endeavor to assess the potential impact and burden that the 
proposal may impose on community banks during the comment period. The 
Agencies also specifically request comment on the impact of this 
proposal on community banks' current resources and available personnel 
with the requisite expertise. Commenters should discuss whether (1) The 
standards are reasonable and realistic for community banks, and (2) 
whether the goals of the proposed regulation could be achieved, for 
community banks, through an alternative approach. Based on the comments 
received, the Agencies will consider whether there is a need to develop 
a compliance guide for community banks and other smaller institutions 
in conjunction with the final Guidelines.
    As proposed, the Guidelines will appear as an appendix to each 
Agency's Standards for Safety and Soundness. For the OCC those 
regulations appear at 12 CFR part 30; for the Board at 12 CFR part 208; 
for the FDIC at 12 CFR part 364; and for the OTS at 12 CFR part 570. 
The Board is also amending 12 CFR parts 211 and 225 to apply the 
Guidelines to other institutions that it supervises.
    The Agencies will apply the rules already in place to require the 
submission of a compliance plan in appropriate circumstances. For the 
OCC those regulations appear at 12 CFR part 30; for the Board at 12 CFR 
part 263; for the FDIC at 12 CFR part 308, subpart R; and for the OTS 
at 12 CFR part 570. This proposal makes conforming changes to the 
regulatory text of these parts.
    Rescission of Year 2000 Standards for Safety and Soundness. The 
Agencies previously issued guidelines establishing Year 2000 safety and 
soundness standards for insured depository institutions pursuant to 
section 39 of the FDI Act. Because the events for which these 
guidelines were issued have passed, the Agencies have concluded that 
the guidelines are no longer necessary and propose to rescind the 
guidelines as part of this rulemaking. These guidelines appear for the 
OCC at 12 CFR part 30, appendix B and C; for the Board at 12 CFR part 
208, appendix D-2; for the FDIC at 12 CFR part 364, appendix B; and for 
the OTS at 12 CFR part 570, appendix B. The Agencies request comment on 
whether the rescission of these appendices is appropriate.

II. Section-by-Section Analysis

    The discussion that follows applies to each of the Agencies' 
proposed Guidelines.

[[Page 39474]]

Appendix __ to Part __--Interagency Guidelines Establishing 
Standards for Safeguarding Customer Information

I. Introduction

    Proposed paragraph I. sets forth the general purpose of the 
proposed Guidelines, which is to provide guidance to each financial 
institution in establishing and implementing administrative, technical, 
and physical safeguards to protect the security, confidentiality, and 
integrity of customer information. This paragraph also sets forth the 
statutory authority for the proposed Guidelines, including section 
39(a) of the FDI Act (12 U.S.C. 1831p-1) and sections 501 and 505(b) of 
the G-L-B Act (15 U.S.C. 6801 and 6805(b) ).

I.A. Scope

    Paragraph I.A. describes the scope of the proposed Guidelines. Each 
Agency defines specifically those entities within its particular scope 
of coverage in this paragraph of the proposed Guidelines. \4\
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    \4\ While the OTS generally regulates savings and loan holding 
companies under the Home Owners Loan Act (12 U.S.C. 1461 et seq.), a 
different Federal functional regulator, a state insurance authority, 
or the Federal Trade Commission may establish standards for 
safeguarding customer information as to that holding company under 
section 505 of the G-L-B Act, depending on the nature of the holding 
company's activities.
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I.B. Preservation of Existing Authority

    Paragraph I.B. makes clear that in issuing these proposed 
Guidelines none of the Agencies is, in any way, limiting its authority 
to address any unsafe or unsound practice, violation of law, unsafe or 
unsound condition, or other practice, including any condition or 
practice related to safeguarding customer information. Any action taken 
by any Agency under section 39(a) of the FDI Act and these Guidelines 
may be taken independently of, in conjunction with, or in addition to 
any other enforcement action available to the Agency.

I.C. Definitions

    Paragraph I.C. sets forth the definitions of various terms for 
purposes of the proposed Guidelines. \5\
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    \5\ In addition to the definitions discussed below, the Board's 
guidelines in 12 CFR parts 208 and 225 contain a definition of 
``subsidiary,'' which describes the state member bank and bank 
holding company subsidiaries that are subject to the Guidelines.
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I.C.1. In General
    Paragraph I.C.1. provides that terms used in the proposed 
Guidelines have the same meanings as set forth in sections 3 and 39(a) 
of the FDI Act (12 U.S.C. 1813 and 1831p-1), except to the extent that 
the definition of the term is modified in the proposed Guidelines or 
where the context requires otherwise.
I.C.2. Customer Information
    Proposed paragraph I.C.2. defines customer information. Customer 
information includes any records, data, files, or other information 
containing nonpublic personal information, as defined in section 
__.3(n) of the Privacy Rule, about a customer. This includes records in 
paper, electronic, or any other form that are within the control of a 
financial institution or that are maintained by any service provider on 
behalf of an institution. Although the G-L-B Act uses both the terms 
``records'' and ``information,'' for the sake of simplicity, in the 
proposed Guidelines the term ``customer information'' encompasses all 
customer records.
    Section 501(b) refers to safeguarding the security and 
confidentiality of ``customer'' information. The term ``customer'' is 
also used in other sections of Title V of the G-L-B Act and has been 
defined by the Agencies in the Privacy Rule interpreting these sections 
to include those consumers who have a customer relationship with the 
institution. This term does not cover business customers, or consumers 
who have not established an ongoing relationship with a financial 
institution (e.g. those that merely use an institution's ATM or apply 
for a loan). See sections __.3(h) and (i) of the Privacy Rule.
    The Agencies propose defining ``customer'' for purposes of the 
Guidelines consistently with the Privacy Rule. However, the Agencies 
have considered whether the scope of the Guidelines should apply to 
records regarding all consumers, the institution's consumer and 
business clients, or all of an institution's records. The Agencies 
solicit comment on whether a broader definition would change the 
information security program that an institution would implement, or, 
whether, as a practical matter, institutions would respond to the 
Guidelines by implementing an information security program for all 
types of records under their control rather than segregating 
``customer'' records for special treatment.
I.C.3. Customer
    Proposed paragraph I.C.3. defines customer. Customer would include 
any customer of an institution as defined in section __.3(h) of the 
Privacy Rule. A customer is a consumer who has established a continuing 
relationship with an institution under which the institution provides 
one or more financial products or services to the consumer to be used 
primarily for personal, family or household purposes.
I.C.4. Service Provider
    Proposed paragraph I.C.4. defines a service provider as any person 
or entity that maintains or processes customer information on behalf of 
an institution, or is otherwise granted access to customer information 
through its provision of services to an institution.
I.C.5. Board of Directors
    Proposed paragraph I.C.5. defines board of directors to mean, in 
the case of a branch or agency of a foreign bank, the managing official 
in charge of the branch or agency. \6\
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    \6\ The OTS version of the guidelines does not include this 
definition because the OTS does not regulate foreign institutions. 
Section I of the OTS guidelines has been renumbered accordingly.
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I.C.6. Customer Information System
    Proposed paragraph I.C.6. defines customer information system to be 
electronic or physical methods used to access, collect, store, use, 
transmit and protect customer information.

II. Standards for Safeguarding Customer Information

II.A. Information Security Program

    The proposed Guidelines describe the Agencies' expectations for the 
creation, implementation, and maintenance of an information security 
program. This program must include administrative, technical, and 
physical safeguards appropriate to the size and complexity of the 
institution and the nature and scope of its activities. The proposed 
Guidelines describe the oversight role of the board of directors in 
this process and management's continuing duty to evaluate and report to 
the board on the overall status of this program. The four steps in this 
process require an institution to: (1) Identify and assess the risks 
that may threaten customer information; (2) develop a written plan 
containing policies and procedures to manage and control these risks; 
(3) implement and test the plan; and (4) adjust the plan on a 
continuing basis to account for changes in technology, the sensitivity 
of customer information, and internal or external threats to 
information security. The proposed Guidelines also set forth an 
institution's responsibility for overseeing outsourcing arrangements.

II.B. Objectives

    Proposed paragraph II.B. describes the objectives for an 
information security program to ensure the security and

[[Page 39475]]

confidentiality of customer information, protect against any 
anticipated threats or hazards to the security or integrity of such 
information, and protect against unauthorized access to or use of 
customer information that could either: (1) Result in substantial harm 
or inconvenience to any customer; or (2) present a safety and soundness 
risk to the institution. For purposes of the Guidelines, unauthorized 
access to or use of customer information does not include access to or 
use of customer information with the customer's consent. The Agencies 
request comment on whether there are additional or alternative 
objectives that should be included in the Guidelines.

III. Develop and Implement Information Security Program

III.A. Involve the Board of Directors and Management

    Proposed paragraph III.A. describes the involvement of the board 
and management in the development and implementation of an information 
security program. The board's responsibilities are to: (1) Approve the 
institution's written information security policy and program that 
complies with these Guidelines; and (2) oversee efforts to develop, 
implement, and maintain an effective information security program, 
including the regular review of management reports.
    The three responsibilities for management in the development of an 
information security program are to: (1) Evaluate the impact on the 
institution's security program of changing business arrangements (e.g. 
mergers and acquisitions, alliances and joint ventures, outsourcing 
arrangements), and changes to customer information systems; (2) 
document compliance with these Guidelines; and (3) keep the board 
informed of the current status of the institution's information 
security program, e.g., report to the board on a regular basis on the 
overall status of the information security program, including material 
matters related to: Risk assessment; risk management and control 
decisions; results of testing; attempted or actual security breaches or 
violations and responsive actions taken by management; and any 
recommendations for improvements to the information security program.
    The Agencies specifically invite comment regarding the appropriate 
frequency of reports to the board. Should the Guidelines specify 
reporting intervals--monthly, quarterly, annually? How regularly should 
management report to the board regarding the institution's information 
security program and why are these intervals appropriate? Should the 
Guidelines require that the board designate a Corporate Information 
Security Officer or other responsible individual who would have the 
authority, subject to the board's approval, to develop and administer 
the institution's information security program?

III.B. Assess Risk

    Proposed paragraph III.B. describes the risk assessment process 
that should be developed as part of the information security program in 
order to meet the objectives of the Guidelines. First, a financial 
institution should identify and assess risks that may threaten the 
security, confidentiality, or integrity of customer information, 
whether in storage, processing, or transit. The risk assessment should 
be made in light of an institution's size, scope of operations, and 
technology. Institutions should determine the sensitivity of customer 
information to be protected as part of this analysis.
    Next, a financial institution should conduct an assessment of the 
sufficiency of existing policies, procedures, customer information 
systems, and other arrangements intended to control the risks it has 
identified. Finally, the financial institution should monitor, 
evaluate, and adjust its risk assessment, taking into consideration any 
technological or other changes or the sensitivity of the information.

III.C. Manage and Control Risk

    Proposed paragraph III.C. describes the elements of a comprehensive 
risk management plan designed to control identified risks and to 
achieve the overall objective of ensuring the security and 
confidentiality of customer information. It identifies the factors an 
institution should consider in evaluating the adequacy of its policies 
and procedures to effectively manage these risks commensurate with the 
sensitivity of the information as well as the complexity and scope of 
the institution and its activities. In establishing the policies and 
procedures, each institution should consider appropriate:
    a. Access rights to customer information;
    b. Access controls on customer information systems, including 
controls to authenticate and grant access only to authorized 
individuals and companies;
    c. Access restrictions at locations containing customer 
information, such as buildings, computer facilities, and records 
storage facilities;
    d. Encryption of electronic customer information, including while 
in transit or in storage on networks or systems to which unauthorized 
individuals may have access;
    e. Procedures to confirm that customer information system 
modifications are consistent with the institution's information 
security program;
    f. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access to 
customer information;
    g. Contract provisions and oversight mechanisms to protect the 
security of customer information maintained or processed by service 
providers;
    h. Monitoring systems and procedures to detect actual and attempted 
attacks on or intrusions into customer information systems;
    i. Response programs that specify actions to be taken when 
unauthorized access to customer information systems is suspected or 
detected;
    j. Protection against destruction of customer information due to 
potential physical hazards, such as fire and water damage; and
    k. Response programs to preserve the integrity and security of 
customer information in the event of computer or other technological 
failure, including, where appropriate, reconstructing lost or damaged 
customer information.
    The Agencies intend that these elements accommodate institutions of 
varying sizes, scope of operations, and risk management structures. The 
Agencies invite comment on the degree of detail that should be included 
in the Guidelines regarding the risk management program, which elements 
should be specified in the Guidelines, and any other components of a 
risk management program that should be included.
    The Guidelines also provide that an institution's information 
security program should include a training component designed to teach 
employees to recognize and respond to fraudulent attempts to obtain 
customer information and, where appropriate, to report any attempts to 
regulatory and law enforcement agencies.
    The information security program also should include regular 
testing of systems to confirm that an institution and its service 
providers control identified risks and achieve the objectives to ensure 
the security and confidentiality of customer information. The tests 
should be verified by an independent third party or staff independent 
of those who conducted the test. Tests should be documented.

[[Page 39476]]

The frequency and nature of the testing should be determined by the 
risk assessment and adjusted as necessary to reflect changes in the 
internal and external conditions. The Agencies request comment on 
whether specific types of security tests, such as penetration tests or 
intrusion detections tests, should be required.
    The Agencies invite comment regarding the appropriate degree of 
independence that should be specified in the Guidelines in connection 
with the testing of information security systems and the review of test 
results. Should the tests or reviews of tests be conducted by persons 
who are not employees of the financial institution? If employees may 
conduct the testing or may review test results, what measures, if any, 
are appropriate to assure their independence?
    Finally, the Guidelines describe the need for an ongoing process of 
monitoring, evaluation, and adjustment of the information security 
program in light of any relevant changes in technology, the sensitivity 
of customer information, and internal or external threats to 
information security.

III.D. Oversee Outsourcing Arrangements

    Proposed paragraph III.D. addresses outsourcing. An institution 
should exercise appropriate due diligence in managing and monitoring 
its outsourcing arrangements to confirm that its service providers have 
implemented an effective information security program to protect 
customer information and customer information systems consistent with 
these Guidelines.
    The Agencies welcome comments on the appropriate treatment of 
outsourcing arrangements. For example, are industry best practices 
available regarding effective monitoring of service provider security 
precautions? Do service providers accommodate requests for specific 
contract provisions regarding information security? To the extent that 
service providers do not accommodate these requests, how do financial 
institutions implement effective information security programs? Should 
these Guidelines contain specific contract provisions requiring service 
provider performance standards in connection with the security of 
customer information?

III.E. Implement the Standards

    Proposed paragraph III.E. describes the timing requirements for the 
implementation of these standards. Each financial institution is to 
take appropriate steps to fully implement an information security 
program pursuant to these Guidelines by July 1, 2001.

III. Regulatory Analysis

A. Paperwork Reduction Act

    FDIC: The FDIC has determined that the proposed rule does not 
contain any information collections as defined by the Paperwork 
Reduction Act (44 U.S.C. 3501, et seq.).

B. Regulatory Flexibility Act

    OCC: The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) 
requires an agency to either provide an Initial Regulatory Flexibility 
Analysis with a proposed rule or certify that the proposed rule will 
not have a significant economic impact on a substantial number of small 
entities (defined for purposes of the RFA to include banks with less 
than $ 100 million in assets).

A. Reasons for Proposed Rule

    The proposed Guidelines implement section 501(b) of the G-L-B Act. 
Section 501(b) requires the OCC to publish standards for financial 
institutions subject to its jurisdiction relating to administrative, 
technical, and physical standards to: (1) Insure the security and 
confidentiality of customer records and information; (2) protect 
against any anticipated threats or hazards to the security or integrity 
of such records; and (3) protect against unauthorized access to or use 
of such records or information which could result in substantial harm 
or inconvenience to any customer.
    The OCC does not expect that this rule, if adopted, would have the 
threshold impact on small entities. The rule would adopt guidelines 
that are to be implemented by each institution within the OCC's primary 
jurisdiction in a way that is appropriate for that institution. Thus, 
the burden stemming from this rule is likely to be less on small 
institutions. Moreover, institutions regulated by the OCC, regardless 
of size, likely already have in place certain policies and procedures 
that would satisfy at least some of the guidelines. However, the OCC 
invites comment on the burden that likely will result on small 
institutions from this rulemaking, and has prepared the following 
analysis.

B. Statement of Objectives and Legal Basis

    The objectives of the proposed Guidelines are described in the 
Supplementary Information section. The legal bases for the proposed 
rule are 12 U.S.C. 93a, 1818, 1831p-1, and 3102(b), and 15 U.S.C. 6801 
and 6805(b)(1).

C. Description of Small Entities to Which the Rule Will Apply

    The proposed rule would apply to all national banks, Federal 
branches and Federal agencies of foreign banks, and any subsidiaries of 
such entities with assets under $100 million.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The OCC does not believe that the proposed rule imposes any 
reporting or any specific recordkeeping requirements within the meaning 
of the RFA. The proposed rule requires all covered institutions to 
develop an information security program to safeguard customer 
information. An institution must assess risks to customer information, 
establish policies, procedures and training to control risks, test the 
program's effectiveness, and manage and monitor its service providers. 
These requirements will apply to all institutions subject to the OCC's 
jurisdiction, regardless of their size.
    Because the information security program described in the proposed 
Guidelines reflects existing supervisory guidance already issued by the 
OCC and the FFIEC, as well as sound business practices, the OCC 
believes that most institutions already have such a program in place. 
Accordingly, the OCC believes that most covered institutions will 
already have the expertise to develop, implement, and maintain the 
program, including the skills of computer security professionals and 
lawyers. However, some institutions may need to formalize or enhance 
their information security programs. The OCC is concerned about the 
potential impact of the proposed Guidelines on community banks and will 
be reviewing current information security practices at smaller 
institutions. The OCC invites comment on the costs of establishing and 
operating an information security program.

E. Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    The OCC is unable to identify any statutes or rules which would 
overlap or conflict with the requirement to develop and implement an 
information security program. The OCC seeks comment and information 
about any such statutes or rules, as well as any other state, local, or 
industry rules or policies that require a covered institution to 
implement business practices that would comply with the requirements of 
the proposed rule.

[[Page 39477]]

F. Discussion of Significant Alternatives

    The G-L-B Act requires that the Agencies issue standards to 
safeguard customer information. However, the G-L-B Act also states that 
the standards should be implemented in the same manner, to the extent 
practicable, as standards issued under section 39(a) of the FDI Act. 
Therefore, the standards have been issued as Guidelines and in a form 
that resembles all of the other standards prescribed by the Agencies 
thus far under section 39(a).
    In addition, the G-L-B Act requires that standards be developed for 
all institutions, without exception. Therefore, the proposed Guidelines 
apply to institutions of all sizes, including those with assets of $100 
million or less. However, the standards in the proposed Guidelines are 
flexible, so that each institution may develop an information security 
program tailored to its size and the nature of its operations. The OCC 
welcomes comment on any significant alternatives, consistent with the 
G-L-B Act, that would minimize the impact on small entities.
    Board: The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) 
requires an agency either to publish an initial regulatory flexibility 
analysis with a proposed rule or certify that the proposed rule would 
not have a significant economic impact on a substantial number of small 
entities. The Board cannot at this time determine whether the proposed 
Guidelines would have significant economic impact on a substantial 
number of small entities as defined by the RFA. Therefore, pursuant to 
subsections 603(b) and (c) of the RFA, the Board provides the following 
initial regulatory flexibility analysis.

A. Reasons for Proposed Rule

    The Board is requesting comment on the proposed interagency 
Guidelines published pursuant to section 501 of the G-L-B Act. Section 
501 requires the Agencies to publish standards for financial 
institutions relating to administrative, technical, and physical 
standards to: (1) Insure the security and confidentiality of customer 
records and information; (2) protect against any anticipated threats or 
hazards to the security or integrity of such records; and (3) protect 
against unauthorized access to or use of such records or information 
which could result in substantial harm or inconvenience to any 
customer.

B. Statement of Objectives and Legal Basis

    The objectives of the proposed Guidelines are described in the 
Supplementary Information section above. The legal basis for the 
proposed Guidelines is the G-L-B Act, sections 501 and 505 (15 U.S.C. 
6801 and 6805).

C. Description/Estimate of Small Entities to Which the Rule Applies

    The proposed Guidelines would apply to approximately 9,500 
institutions, including state member banks and certain of their 
subsidiaries, bank holding companies and certain of their subsidiaries, 
state-licensed uninsured branches and agencies of foreign banks, and 
Edge and agreement corporations. The Board estimates that over 4,500 of 
the covered institutions are small institutions with assets less than 
$100 million.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The G-L-B Act and the proposed Guidelines require a covered 
institution to develop an information security program to safeguard 
customer information. The Guidelines will apply to all covered 
institutions regardless of size. Development of an information security 
program involves assessing risks to customer information, establishing 
policies, procedures, and training to control risks, testing the 
program's effectiveness, and managing and monitoring service providers. 
A covered institution may require professional skills to develop an 
information security program, including the skills of computer security 
professionals and lawyers.
    The Board believes that the establishment of information security 
programs is a sound business practice for the covered institutions that 
is already addressed by existing supervisory procedures. Although some 
institutions may need to establish or enhance information security 
programs to comply with the proposed Guidelines, the cost of doing so 
is not known. Neverthless, the Board is concerned about the potential 
impact on community banks and will be reviewing current information 
security practices at smaller institutions during the comment period. 
The Board seeks any information or comment on the costs of establishing 
information security programs as detailed in the proposed Guidelines, 
particularly for smaller institutions. The Board welcomes comment on 
the appropriate level of detail and degree of flexibility in the 
proposed Guidelines and on the potential cost of particular provisions 
in the proposed Guidelines.
    The Board does not believe that there are information collection 
requirements imposed by the proposed Guidelines.

E. Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    The Board is unable to identify any statutes or rules which would 
overlap or conflict with the requirement to develop and implement an 
information security program. The Board seeks comment and information 
about any such statutes or rules, as well as any other state, local, or 
industry rules or policies that require a covered institution to 
implement business practices that would overlap or conflict with the 
requirements of the proposed Guidelines.

F. Discussion of Significant Alternatives

    The proposed Guidelines attempt to clarify the statutory 
requirements for all covered entities, including small entities. The 
proposed Guidelines are intended to provide substantial flexibility so 
that any institution, regardless of size, may adopt an information 
security program tailored to its individual needs. Neverthless, the 
Board is concerned about the potential impact on community banks and 
will be reviewing current information security practices at smaller 
institutions during the comment period. The Board seeks comment on 
elements that would be most useful in a Compliance Guide to be issued 
in conjunction with the final Guidelines. In addition, the Board 
welcomes comment on any significant alternatives to the proposed 
Guidelines that would provide adequate guidance regarding expectations 
for compliance with the G-L-B Act. The Board seeks any information or 
comment on cost-effective, sound information security programs and 
practices implemented by financial institutions, including community 
banks.
    FDIC: The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) 
requires an agency to publish an initial regulatory flexibility 
analysis with a proposed rule whenever the agency is required to 
publish a general notice of proposed rulemaking for a proposed rule, 
except to the extent provided in the RFA. Pursuant to section 603 of 
the RFA, the FDIC provides the following initial regulatory flexibility 
analysis.

A. Reasons for Proposed Rule

    The FDIC is requesting comment on the proposed interagency 
Guidelines published pursuant to section 501 of the G-L-B Act. Section 
501 requires the Agencies to publish standards for financial 
institutions relating to administrative, technical, and physical 
standards to: (1) Insure the security and confidentiality of customer 
records and information; (2) protect against any

[[Page 39478]]

anticipated threats or hazards to the security or integrity of such 
records; and (3) protect against unauthorized access to or use of such 
records or information which could result in substantial harm or 
inconvenience to any customer. The proposed standards do not represent 
any change in the policies of the FDIC; rather they implement the G-L-B 
Act requirement to provide appropriate standards relating to the 
security and confidentiality of customer records. The FDIC requests 
comment on whether small entities would be required to amend their 
operations in order to comply with the proposed standards and the costs 
for such compliance.

B. Statement of Objectives and Legal Basis

    The SUPPLEMENTARY INFORMATION section above contains this 
information. The legal basis for the proposed rule is the G-L-B Act.

C. Description /Estimate of Small Entities to Which the Rule Applies

    The proposed Guidelines would apply to all FDIC-insured state 
nonmember banks, approximately 3,700 of which are small entities as 
defined by the RFA.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The FDIC does not believe that there are new reporting or 
recordkeeping requirements imposed by the proposed rule as defined by 
the Regulatory Flexibility Act (5 U.S.C. 603). Other compliance 
requirements of the proposed guidelines are applicable to all financial 
institutions subject to the jurisdiction of the FDIC and are discussed 
in the SUPPLEMENTARY INFORMATION section above. The G-L-B Act and the 
proposed Guidelines require all financial institutions subject to the 
jurisdiction of the FDIC to develop an information security program to 
safeguard customer information. The Guidelines will apply to all such 
covered institutions regardless of size. Development of an information 
security program involves assessing risks to customer information, 
establishing policies, procedures, and training to control risks, 
testing the program's effectiveness, and managing and monitoring 
service providers. A covered institution may require professional 
skills to develop an information security program, including the skills 
of computer security professionals and lawyers.
    The FDIC believes that the establishment of information security 
programs is a sound business practice for the covered institutions that 
is already addressed by existing supervisory procedures. Although some 
institutions may need to enhance information security programs, the 
cost of doing so is not known. The FDIC seeks any information or 
comment on the costs of establishing information security programs.

E. Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    The FDIC is unable to identify any statutes or rules that would 
overlap or conflict with the requirement to develop and implement an 
information security program. The FDIC seeks comment and information 
about any such statutes or rules, as well as any other state, local, or 
industry rules or policies that require a financial institution subject 
to its jurisdiction to implement business practices that would comply 
with the requirements of the proposed Guidelines.

F. Discussion of Significant Alternatives

    As previously noted, the G-L-B Act requires the FDIC to establish 
appropriate standards for financial institutions under its jurisdiction 
relating to the security and confidentiality of customer records. These 
proposed Guidelines attempt to clarify the statutory requirements for 
all covered entities, including small entities. These proposed 
Guidelines also provide substantial flexibility so that any 
institution, regardless of size, may adopt an information security 
program tailored to its individual needs. The FDIC welcomes comment on 
any significant alternatives, consistent with the G-L-B Act that would 
minimize the impact on small entities.
    OTS: The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) 
requires OTS to publish an initial regulatory flexibility analysis with 
this proposed rule unless OTS can certify that the proposed rule would 
not have a significant economic impact on a substantial number of small 
entities. Because OTS cannot at this time determine what impact this 
proposal would have on small entities, OTS provides the following 
initial regulatory flexibility analysis.

A. Reasons for Proposed Action

    OTS makes this proposal pursuant to section 501 of the G-L-B Act. 
Section 501 requires OTS to publish standards for the thrift industry 
relating to administrative, technical, and physical safeguards to: (1) 
Insure the security and confidentiality of customer records and 
information; (2) protect against any anticipated threats or hazards to 
the security or integrity of such records; and (3) protect against 
unauthorized access to or use of such records or information which 
could result in substantial harm or inconvenience to any customer.

B. Objectives of and Legal Basis for Proposal

    The SUPPLEMENTARY INFORMATION section above contains this 
information. The legal bases for the proposed action are: section 501 
of the G-L-B Act; section 39 of the FDIA; and sections 2, 4, and 5 of 
the Home Owners' Loan Act (12 U.S.C. 1462, 1463, and 1464).

C. Description of Entities to Which Proposal Would Apply

    This proposal would apply to all savings associations whose 
deposits are FDIC insured, and subsidiaries of such savings 
associations, except subsidiaries that are brokers, dealers, persons 
providing insurance, investment companies, and investment advisers. \7\ 
There are approximately 487 such small savings associations, 
approximately 97 of which have subsidiaries.
---------------------------------------------------------------------------

    \7\ For purposes of the Regulatory Flexibility Act, a small 
savings association is one with less that $100 million in assets. 13 
CFR 121.201 (Division H).
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements; Skills Required

    The proposed rule does not contain any specific reporting 
requirements. However, it would require institutions to maintain 
certain records documenting compliance with the proposed rule, as 
detailed more specifically above.
    The statute and the proposed rule require a covered institution to 
develop an information security program to safeguard customer 
information. Developing such a program involves assessing risks to 
customer information, establishing policies, procedures, and training 
to control risks, testing the program's effectiveness, and managing and 
monitoring service providers. OTS believes that establishing an 
information security program is a sound business practice for covered 
institutions. However, some institutions may need to establish or 
enhance information security programs. The cost of doing so is unknown. 
OTS seeks information and comment on the costs of establishing and 
operating information security programs.
    Compliance with the proposed rule would require professional 
skills, especially skills of computer hardware and software 
professionals. Professional skills would be necessary to assess 
information security needs, design and

[[Page 39479]]

implement an information security program, and to monitor service 
providers. The particular skills needed will depend on the nature of 
each institution's customer information systems. Institutions with 
sophisticated and extensive computerization would need far more skills 
to comply with the proposed rules than would institutions with little 
computerization. As a result, small entities are likely to have less 
burdensome compliance needs than large entities.

E. Significant Alternatives

    The G-L-B Act requires OTS to establish standards for information 
security standards, but does not mandate the specific form that those 
standards must take. OTS has considered different alternatives for 
these standards, considering the burden on small institutions. OTS 
considered exempting small institutions entirely from the requirement 
to implement any information security standards. However, OTS does not 
believe that Congress has authorized OTS to exempt small institutions. 
Section 501(b) of the G-L-B Act requires OTS to establish standards for 
the institutions within OTS's jurisdiction, without regard to the 
institution's size.
    OTS has also considered an alternative of publishing standards 
using language the same, or nearly the same, as that in section 501(b) 
of the G-L-B Act. The statutory language is broad and general. This 
alternative would give institutions maximum flexibility in implementing 
information security protections. It would also ensure that 
institutions would not be at a competitive disadvantage with other 
types of financial institutions not subject to the Agencies' 
information security standards. This alternative has disadvantages, 
however. Because the statutory language is very general, this 
alternative would not give institutions information about what risks 
need to be addressed or what types of protections are appropriate. 
Small institutions in particular may need guidance in this area. OTS 
welcomes comments on whether the proposed guidelines have too much or 
too little detail. How would changing the level of detail affect 
institutions' security practices?
    OTS has proposed guidelines that would describe appropriate steps 
institutions must take to ensure the security of their customer 
information. While describing appropriate steps, OTS proposes flexible 
guidelines to let each institution design individual information 
standards appropriate for the institution's particular circumstances.
    OTS is considering whether to adopt the proposed information 
security standards as guidance or as a regulation. OTS solicits 
comments on whether the regulatory burden on small entities would 
differ depending on the form of the standards. If so, how and to what 
extent?
    OTS welcomes comments on the appropriateness of its approach, and 
on any other alternatives that would satisfy the objectives of this 
proposal.

F. Federal Rules That Duplicate, Overlap, or Conflict With the Proposal

    OTS is unaware of any statutes or rules that would overlap or 
conflict with the requirement to develop and implement an information 
security program. OTS seeks comment and information about any such 
statutes or rules, as well as other rules or policies that require 
covered institutions to implement business practices that would comply 
with the proposed guidelines.

C. Executive Order 12866

    OCC: The Comptroller of the Currency has determined that this 
proposed rule, if adopted as a final rule, does not constitute a 
``significant regulatory action'' for the purposes of Executive Order 
12866. The OCC issued the proposed Guidelines in accordance with the 
requirements of Sections 501 and 505(b) of the G-L-B Act and not under 
its own authority. The standards established by the Guidelines reflect 
good business practices and guidance previously issued by the OCC and 
the FFIEC. Accordingly, the OCC believes that most institutions already 
have information security programs in place.
    Nevertheless, the OCC acknowledges that the proposed Guidelines may 
impose costs on some institutions by requiring them to formalize or 
enhance their existing information security programs. Therefore, the 
OCC invites institutions and the public to provide any cost estimates 
and related data that they think would be useful to the agency in 
evaluating the overall costs of the proposed Guidelines. The OCC will 
review any comments and cost data provided carefully and will revisit 
the cost aspects of the proposed Guidelines in developing the final 
rule.
    OTS: OTS has determined that this proposed rule, if adopted as a 
final rule, would not constitute a ``significant regulatory action'' 
for the purposes of Executive Order 12866. OTS issued the proposed 
guidelines as required by sections 501 and 505(b) of the G-L-B Act and 
not under its own authority. The guidelines reflect good business 
practices that many institutions already follow. Further, OTS believes 
that any costs of complying with the guidelines would be below the 
thresholds prescribed in the Executive Order. Nevertheless, OTS 
acknowledges that the proposed guidelines may impose costs on some 
institutions by requiring them to formalize or enhance their existing 
information security programs. Therefore, OTS invites institutions and 
the public to provide any cost estimates and related data that they 
think would be useful to the agency in evaluating the overall costs of 
the proposed guidelines. OTS will carefully review any comments and 
cost data provided and will revisit the cost aspects of the proposed 
guidelines in developing the final rule.

D. Unfunded Mandates Act of 1995

    OCC: Section 202 of the Unfunded Mandates Reform Act of 1995, 2 
U.S.C. 1532 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a federal mandate that may result in the 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 Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. However, an 
agency is not required to assess the effects of its regulatory actions 
on the private sector to the extent that such regulations incorporate 
requirements specifically set forth in law. 2 U.S.C. 1531.
    The OCC believes that most institutions have already established an 
information security program because it is a sound business practice 
that also has been addressed in existing supervisory guidance. 
Therefore, the OCC has determined that this proposed rule is unlikely 
to result in expenditures by state, local, and tribal governments, in 
the aggregate, or by the private sector, of $100 million or more in any 
one year. Accordingly, the OCC has not prepared a budgetary impact 
statement or specifically addressed the regulatory alternatives 
considered.
    OTS: Section 202 of the Unfunded Mandates Act requires that an 
agency prepare a budgetary impact statement before promulgating any 
rule likely to result in a federal mandate that may result in the 
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 Unfunded 
Mandates Act also

[[Page 39480]]

requires the agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating the rule. However, an 
agency is not required to assess the effects of its regulatory actions 
on the private sector to the extent that such regulations incorporate 
requirements specifically set forth in law. 2 U.S.C. 1531.
    OTS has determined that this proposed rule is unlikely to result in 
expenditures by state, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year. 
Accordingly, the OTS has not prepared a budgetary impact statement or 
specifically addressed the regulatory alternatives, except as described 
in the OTS's initial regulatory flexibility analysis earlier in this 
preamble.

IV. Solicitation of Comments on Use of Plain Language

    Section 722 of the G-L-B Act requires the federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. We invite your comments on how to make this proposal 
easier to understand. For example:
    <bullet> Have we organized the material to suit your needs? If not, 
how could this material be better organized?
    <bullet> Are the requirements in the Guidelines clearly stated? If 
not, how could the Guidelines be more clearly stated?
    <bullet> Do the Guidelines contain technical language or jargon 
that is not clear? If so, which language requires clarification?
    <bullet> Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the Guidelines easier to 
understand? If so, what changes to the format would make the Guidelines 
easier to understand?
    <bullet> Would more, but shorter, sections be better? If so which 
sections should be changed?
    <bullet> What else could we do to make the Guidelines easier to 
understand?

List of Subjects

12 CFR Part 30

    Banks, banking, Consumer protection, National banks, Privacy, 
Reporting and recordkeeping requirements.

12 CFR Part 208

    Banks, banking, Consumer protection, Federal Reserve System, 
Foreign banking, Holding companies, Information, Privacy, Reporting and 
recordkeeping requirements.

12 CFR Part 211

    Exports, Federal Reserve System, Foreign banking, Holding 
companies, Investments, Privacy, Reporting and recordkeeping 
requirements.

12 CFR Part 225

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System, Holding companies, Privacy, Reporting and recordkeeping 
requirements, securities.

12 CFR Part 263

    Administrative practice and procedure, Claims, Crime, Equal access 
in justice, Federal Reserve System, Lawyers, Penalties.

12 CFR Part 308

    Administrative practice and procedure, Banks, banking, Claims, 
Crime, Equal access of justice, Lawyers, Penalties, State nonmember 
banks.

12 CFR Part 364

    Administrative practice and procedure, Bank deposit insurance, 
Banks, banking, Reporting and recordkeeping requirements, Safety and 
soundness.

12 CFR Part 568

    Reporting and recordkeeping requirements, Savings associations, 
Security measures.

12 CFR Part 570

    Consumer protection, Privacy, Savings associations.

Office of the Comptroller of the Currency

 12 CFR Chapter I

Authority and Issuance
    For the reasons set forth in the joint preamble, part 30 of the 
chapter I of title 12 of the Code of Federal Regulations is proposed to 
be amended as follows:

PART 30--SAFETY AND SOUNDNESS STANDARDS

    1. The authority citation for part 30 is revised to read as 
follows:

    Authority: 12 U.S.C. 93a, 1818, 1831p-1, 3102(b); 15 U.S.C. 
6801, 6805(b)(1).

    2. Revise Sec. 30.1 to read as follows:


Sec. 30.1  Scope.

    (a) This rule and the standards set forth in appendices A and B to 
this part apply to national banks and federal branches of foreign 
banks, that are subject to the provisions of section 39 of the Federal 
Deposit Insurance Act (section 39) (12 U.S.C. 1831p-1).
    (b) The standards set forth in appendix B to this part also apply 
to uninsured national banks, federal branches and federal agencies of 
foreign banks, and the subsidiaries of any national bank, federal 
branch or federal agency of a foreign bank (except brokers, dealers, 
persons providing insurance, investment companies and investment 
advisers). Violation of these standards may be an unsafe and unsound 
practice within the meaning of 12 U.S.C. 1818.
    3. In Sec. 30.2, revise the last sentence to read as follows:


Sec. 30.2  Purpose.

    * * * The Interagency Guidelines Establishing Standards for Safety 
and Soundness are set forth in appendix A to this part, and the 
Interagency Guidelines Establishing Standards for Safeguarding Customer 
Information are set forth in appendix B to this part.
    4. In Sec. 30.3, revise paragraph (a) to read as follows:


Sec. 30.3  Determination and notification of failure to meet safety and 
soundness standard.

    (a) Determination. The OCC may, based upon an examination, 
inspection, or any other information that becomes available to the OCC, 
determine that a bank has failed to satisfy the safety and soundness 
standards contained in the Interagency Guidelines Establishing 
Standards for Safety and Soundness set forth in appendix A to this 
part, and the Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information set forth in appendix B to this part.
* * * * *
    5. Revise Appendix B to part 30 to read as follows:

Appendix B to Part 30--Interagency Guidelines Establishing Standards 
For Safeguarding Customer Information

Table of Contents

I. Introduction
    A. Scope
    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors and Management
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Outsourcing Arrangements
    E. Implement the Standards

I. Introduction

    The Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information (Guidelines) set forth standards 
pursuant to section 39 of the Federal Deposit Insurance Act (section 
39, codified at 12

[[Page 39481]]

U.S.C. 1831p-1), and sections 501 and 505(b), codified at 15 U.S.C. 
6801 and 6805(b), of the Gramm-Leach-Bliley Act. These Guidelines 
address standards for developing and implementing administrative, 
technical, and physical safeguards to protect the security, 
confidentiality, and integrity of customer information.
    A. Scope. The Guidelines apply to customer information 
maintained by or on behalf of entities over which the OCC has 
authority. Such entities, referred to as ``the bank,'' are national 
banks, federal branches and federal agencies of foreign banks, and 
any subsidiaries of such entities (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers).
    B. Preservation of Existing Authority. Neither section 39 nor 
these Guidelines in any way limit the authority of the OCC to 
address unsafe or unsound practices, violations of law, unsafe or 
unsound conditions, or other practices. The OCC may take action 
under section 39 and these Guidelines independently of, in 
conjunction with, or in addition to, any other enforcement action 
available to the OCC.
    C. Definitions. For purposes of the Guidelines, the following 
definitions apply:
    1. In general. For purposes of the Guidelines, except as 
modified in the Guidelines or unless the context otherwise requires, 
the terms used have the same meanings as set forth in sections 3 and 
39 of the Federal Deposit Insurance Act (12 U.S.C. 1813 and 1831p-
1).
    2. Customer information means any records, data, files, or other 
information containing nonpublic personal information, as defined in 
Sec. 40.3(n) of this chapter, about a customer, whether in paper, 
electronic or other form, that are maintained by or on behalf of the 
bank.
    3. Customer means any customer of the bank as defined in 
Sec. 40.3(h) of this chapter.
    4. Service provider means any person or entity that maintains or 
processes customer information on behalf of the bank, or is 
otherwise granted access to customer information through its 
provision of services to the bank.
    5. Board of directors, in the case of a branch or agency of a 
foreign bank means the managing official in charge of the branch or 
agency.
    6. Customer information systems means the electronic or physical 
methods used to access, collect, store, use, transmit and protect 
customer information.

II. Standards for Safeguarding Customer Information

    A. Information Security Program. Each bank shall implement a 
comprehensive information security program that includes 
administrative, technical, and physical safeguards appropriate to 
the size and complexity of the bank and the nature and scope of its 
activities.
    B. Objectives. A bank's information security program shall:
    1. Ensure the security and confidentiality of customer 
information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such 
information that could result in substantial harm or inconvenience 
to any customer or risk to the safety and soundness of the bank.

III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors and Management.
    1. The board of directors of each bank shall:
    a. Approve the bank's written information security policy and 
program that complies with these Guidelines; and
    b. Oversee efforts to develop, implement, and maintain an 
effective information security program.
    2. The bank's management shall develop, implement, and maintain 
an effective information security program. In conjunction with its 
responsibility to implement the bank's information security program, 
management of each bank shall regularly:
    a. Evaluate the impact on the bank's security program of 
changing business arrangements, such as mergers and acquisitions, 
alliances and joint ventures, outsourcing arrangements, and changes 
to customer information systems;
    b. Document its compliance with these Guidelines; and
    c. Report to the board on the overall status of the information 
security program, including material matters related to the 
following: risk assessment; risk management and control decisions; 
results of testing; attempted or actual security breaches or 
violations and responsive actions taken by management; and any 
recommendations for improvements in the information security 
program.
    B. Assess Risk. To achieve the objectives of its information 
security program, each bank shall:
    1. Identify and assess the risks that may threaten the security, 
confidentiality, or integrity of customer information systems. As 
part of the risk assessment, a bank shall determine the sensitivity 
of customer information and the internal or external threats to the 
bank's customer information systems.
    2. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control 
risks.
    3. Monitor, evaluate, and adjust its risk assessment in light of 
any relevant changes to technology, the sensitivity of customer 
information, and internal or external threats to information 
security.
    C. Manage and Control Risk. As part of a comprehensive risk 
management plan, each bank shall:
    1. Establish written policies and procedures that are adequate 
to control the identified risks and achieve the overall objectives 
of the bank's information security program. Policies and procedures 
shall be commensurate with the sensitivity of the information as 
well as the complexity and scope of the bank and its activities. In 
establishing the policies and procedures, each bank should consider 
appropriate:
    a. Access rights to customer information;
    b. Access controls on customer information systems, including 
controls to authenticate and grant access only to authorized 
individuals and companies;
    c. Access restrictions at locations containing customer 
information, such as buildings, computer facilities, and records 
storage facilities;
    d. Encryption of electronic customer information, including 
while in transit or in storage on networks or systems to which 
unauthorized individuals may have access;
    e. Procedures to confirm that customer information system 
modifications are consistent with the bank's information security 
program;
    f. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access 
to customer information;
    g. Contract provisions and oversight mechanisms to protect the 
security of customer information maintained or processed by service 
providers;
    h. Monitoring systems and procedures to detect actual and 
attempted attacks on or intrusions into customer information 
systems;
    i. Response programs that specify actions to be taken when 
unauthorized access to customer information systems is suspected or 
detected;
    j. Protection against destruction of customer information due to 
potential physical hazards, such as fire and water damage; and
    k. Response programs to preserve the integrity and security of 
customer information in the event of computer or other technological 
failure, including, where appropriate, reconstructing lost or 
damaged customer information.
    2. Train staff to recognize, respond to, and, where appropriate, 
report to regulatory and law enforcement agencies, any unauthorized 
or fraudulent attempts to obtain customer information.
    3. Regularly test the key controls, systems and procedures of 
the information security program to confirm that they control the 
risks and achieve the overall objectives of the bank's information 
security program. The frequency and nature of such tests should be 
determined by the risk assessment, and adjusted as necessary to 
reflect changes in internal and external conditions. Tests shall be 
conducted, where appropriate, by independent third parties or staff 
independent of those that develop or maintain the security programs. 
Test results shall be reviewed by independent third parties or staff 
independent of those that conducted the test.
    4. Monitor, evaluate, and adjust, as appropriate, the 
information security program in light of any relevant changes in 
technology, the sensitivity of its customer information, and 
internal or external threats to information security.
    D. Oversee Outsourcing Arrangements. The bank continues to be 
responsible for safeguarding customer information even when it gives 
a service provider access to that

[[Page 39482]]

information. The bank must exercise appropriate due diligence in 
managing and monitoring its outsourcing arrangements to confirm that 
its service providers have implemented an effective information 
security program to protect customer information and customer 
information systems consistent with these Guidelines.
    E. Implement the Standards. Each bank is to take appropriate 
steps to fully implement an information security program pursuant to 
these Guidelines by July 1, 2001.

    Dated: June 5, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance
    For the reasons set forth in the joint preamble, parts 208, 211, 
225, and 263 of chapter II of title 12 of the Code of Federal 
Regulations are proposed to be amended as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

    1. The authority citation for 12 CFR part 208 is revised to read as 
follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1835a, 1882, 2901-2907, 
3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 78l(b), 78l(g), 
78l(i), 78o-4(c)(5), 78q, 78q-1, 78w, 6801, and 6805; 31 U.S.C. 
5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

    2. Amend Sec. 208.3 to revise paragraph (d)(1) to read as follows:


Sec. 208.3  Application and conditions for membership in the Federal 
Reserve System.

* * * * *
    (d) Conditions of membership. (1) Safety and soundness. Each member 
bank shall at all times conduct its business and exercise its powers 
with due regard to safety and soundness. Each member bank shall comply 
with the Interagency Guidelines Establishing Standards for Safety and 
Soundness prescribed pursuant to section 39 of the FDI Act (12 U.S.C. 
1831p-1), set forth in appendix D-1 to this part, and the Interagency 
Guidelines Establishing Standards for Safeguarding Customer Information 
prescribed pursuant to sections 501 and 505 of the Gramm-Leach-Bliley 
Act (15 U.S.C. 6801 and 6805), set forth in appendix D-2 to this part.
* * * * *
    3. Revise appendix D-2 to read as follows:

Appendix D-2 To Part 208--Interagency Guidelines Establishing Standards 
For Safeguarding Customer Information

Table of Contents
I. Introduction
    A. Scope
    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors and Management
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Outsourcing Arrangements
    E. Implement the Standards

I. Introduction

    These Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information (Guidelines) set forth standards 
pursuant to sections 501 and 505 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6801 and 6805), in the same manner, to the extent 
practicable, as standards prescribed pursuant to section 39 of the 
Federal Deposit Insurance Act (12 U.S.C. 1831p-1). These Guidelines 
address standards for developing and implementing administrative, 
technical, and physical safeguards to protect the security, 
confidentiality, and integrity of customer information.
    A. Scope. The Guidelines apply to customer information 
maintained by or on behalf of state member banks (banks) and their 
nonbank subsidiaries, except for brokers, dealers, persons providing 
insurance, investment companies, and investment advisors. Pursuant 
to Secs. 211.9 and 211.24 of this chapter, these guidelines also 
apply to customer information maintained by or on behalf of Edge 
corporations, agreement corporations, and uninsured state-licensed 
branches or agencies of a foreign bank.
    B. Preservation of Existing Authority. Neither section 39 nor 
these Guidelines in any way limit the authority of the Board to 
address unsafe or unsound practices, violations of law, unsafe or 
unsound conditions, or other practices. The Board may take action 
under section 39 and these Guidelines independently of, in 
conjunction with, or in addition to, any other enforcement action 
available to the Board.
    C. Definitions. For purposes of the Guidelines, the following 
definitions apply:
    1. In general. For purposes of the Guidelines, except as 
modified in the Guidelines or unless the context otherwise requires, 
the terms used have the same meanings as set forth in sections 3 and 
39 of the Federal Deposit Insurance Act (12 U.S.C. 1813 and 1831p-
1).
    2. Customer information means any records, data, files, or other 
information containing nonpublic personal information, as defined in 
Sec. 216.3(n) of this chapter, about a customer, whether in paper, 
electronic or other form, that are maintained by or on behalf of the 
bank.
    3. Customer means any customer of the bank as defined in 
Sec. 216.3(h) of this chapter.
    4. Service provider means any person or entity that maintains or 
processes customer information on behalf of the bank, or is 
otherwise granted access to customer information through its 
provision of services to the bank.
    5. Board of directors, in the case of a branch or agency of a 
foreign bank means the managing official in charge of the branch or 
agency.
    6. Customer information systems means the electronic or physical 
methods used to access, collect, store, use, transmit and protect 
customer information.
    7. Subsidiary means any company controlled by a bank, except a 
broker, dealer, person providing insurance, investment company, 
investment advisor, insured depository institution, or subsidiary of 
an insured depository institution.

II. Standards for Safeguarding Customer Information

    A. Information Security Program. Each bank shall implement a 
comprehensive information security program that includes 
administrative, technical, and physical safeguards appropriate to 
the size and complexity of the bank and the nature and scope of its 
activities. A bank also shall ensure that each of its subsidiaries 
is subject to a comprehensive information security program. The bank 
may fulfill this requirement either by including a subsidiary within 
the scope of the bank's comprehensive information security program 
or by causing the subsidiary to implement a separate comprehensive 
information security program in accordance with the standards and 
procedures in sections II and III of this appendix that apply to 
banks.
    B. Objectives. A bank's information security program shall:
    1. Ensure the security and confidentiality of customer 
information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such 
information that could result in substantial harm or inconvenience 
to any customer or risk to the safety and soundness of the bank.

III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors and Management.
    1. The board of directors of each bank shall:
    a. Approve the bank's written information security policy and 
program that complies with these Guidelines; and
    b. Oversee efforts to develop, implement, and maintain an 
effective information security program.
    2. The bank's management shall develop, implement, and maintain 
an effective information security program. In conjunction with its 
responsibility to implement the bank's information security program, 
management of each bank shall regularly:
    a. Evaluate the impact on the bank's security program of 
changing business arrangements, such as mergers and acquisitions, 
alliances and joint ventures,

[[Page 39483]]

outsourcing arrangements, and changes to customer information 
systems;
    b. Document its compliance with these Guidelines; and
    c. Report to the board on the overall status of the information 
security program, including material matters related to: risk 
assessment; risk management and control decisions; results of 
testing; attempted or actual security breaches or violations and 
responsive actions taken by management; and any recommendations for 
improvements in the information security program.
    B. Assess Risk. To achieve the objectives of its information 
security program, each bank shall:
    1. Identify and assess the risks that may threaten the security, 
confidentiality, or integrity of customer information systems. As 
part of the risk assessment, a bank shall determine the sensitivity 
of customer information and the internal or external threats to the 
bank's customer information systems.
    2. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control 
risk.
    3. Monitor, evaluate, and adjust its risk assessment in light of 
any relevant changes to technology, the sensitivity of customer 
information, and internal or external threats to information 
security.
    C. Manage and Control Risk. As part of a comprehensive risk 
management plan, each bank shall:
    1. Establish written policies and procedures that are adequate 
to control the identified risks and achieve the overall objectives 
of the bank's information security program. Policies and procedures 
shall be commensurate with the sensitivity of the information as 
well as the complexity and scope of the bank and its activities. In 
establishing the policies and procedures, each bank should consider 
appropriate:
    a. Access rights to customer information;
    b. Access controls on customer information systems, including 
controls to authenticate and grant access only to authorized 
individuals and companies;
    c. Access restrictions at locations containing customer 
information, such as buildings, computer facilities, and records 
storage facilities;
    d. Encryption of electronic customer information, including 
while in transit or in storage on networks or systems to which 
unauthorized individuals may have access;
    e. Procedures to confirm that customer information system 
modifications are consistent with the bank's information security 
program;
    f. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access 
to customer information;
    g. Contract provisions and oversight mechanisms to protect the 
security of customer information maintained or processed by service 
providers;
    h. Monitoring systems and procedures to detect actual and 
attempted attacks on or intrusions into customer information 
systems;
    i. Response programs that specify actions to be taken when 
unauthorized access to customer information systems is suspected or 
detected;
    j. Protection against destruction of customer information due to 
potential physical hazards, such as fire and water damage; and
    k. Response programs to preserve the integrity and security of 
customer information in the event of computer or other technological 
failure, including, where appropriate, reconstructing lost or 
damaged customer information.
    2. Train staff to recognize, respond to, and, where appropriate, 
report to regulatory and law enforcement agencies, any unauthorized 
or fraudulent attempts to obtain customer information.
    3. Regularly test the key controls, systems and procedures of 
the information security program to confirm that they control the 
risks and achieve the overall objectives of the bank's information 
security program. The frequency and nature of such tests should be 
determined by the risk assessment, and adjusted as necessary to 
reflect changes in internal and external conditions. Tests shall be 
conducted, where appropriate, by independent third parties or staff 
independent of those that develop or maintain the security programs. 
Test results shall be reviewed by independent third parties or staff 
independent of those that conducted the test.
    4. Monitor, evaluate, and adjust, as appropriate, the 
information security program in light of any relevant changes in 
technology, the sensitivity of its customer information, and 
internal or external threats to information security.
    D. Oversee Outsourcing Arrangements. The bank continues to be 
responsible for safeguarding customer information even when it gives 
a service provider access to that information. The bank must 
exercise appropriate due diligence in managing and monitoring its 
outsourcing arrangements to confirm that its service providers have 
implemented an effective information security program to protect 
customer information and customer information systems consistent 
with these Guidelines.
    E. Implement the Standards. Each bank is to take appropriate 
steps to fully implement an information security program pursuant to 
these Guidelines by July 1, 2001.

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)

    4. The authority citation for part 211 is revised to read as 
follows:

    Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 
3101 et seq., and 3901 et seq.; 15 U.S.C. 6801 and 6805.

    5. Add new Sec. 211.9 to read as follows:


Sec. 211.9  Protection of customer information.

    An Edge or agreement corporation shall comply with the Interagency 
Guidelines Establishing Standards for Safeguarding Customer Information 
prescribed pursuant to sections 501 and 505 of the Gramm-Leach-Bliley 
Act (15 U.S.C. 6801 and 6805), set forth in appendix D-2 to part 208 of 
this chapter.
    6. In Sec. 211.24, add new paragraph (i) to read as follows:


Sec. 211.24  Approval of offices of foreign banks; procedures for 
applications; standards for approval; representative-office activities 
and standards for approval; preservation of existing authority; reports 
of crimes and suspected crimes; government securities sales practices.

* * * * *
    (i) Protection of customer information. An uninsured state-licensed 
branch or agency of a foreign bank shall comply with the Interagency 
Guidelines Establishing Standards for Safeguarding Customer Information 
prescribed pursuant to sections 501 and 505 of the Gramm-Leach-Bliley 
Act (15 U.S.C. 6801 and 6805), set forth in appendix D-2 to part 208 of 
this chapter.

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

    7. The authority citation for part 225 is revised to read as 
follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, and 
3909; 15 U.S.C. 6801 and 6805.

    8. In Sec. 225.1, add new paragraph (c)(16) to read as follows:


Sec. 225.1  Authority, purpose, and scope.

* * * * *
    (c) * * *
    (16) Appendix F contains the Interagency Guidelines Establishing 
Standards for Safeguarding Customer Information.
    9. In Sec. 225.4, add new paragraph (g) to read as follows:


Sec. 225.4  Corporate practices.

* * * * *
    (g) Protection of nonpublic personal information. A bank holding 
company, including a bank holding company that is a financial holding 
company, shall comply with the Interagency Guidelines Establishing 
Standards for Safeguarding Customer Information, as set forth in 
appendix F of this part, prescribed pursuant to sections 501 and 505 of 
the Gramm-Leach-Bliley Act (15 U.S.C. 6801 and 6805).
    10. Add new appendix F to read as follows:

Appendix F To Part 225--Interagency Guidelines Establishing 
Standards For Safeguarding Customer Information

Table of Contents

I. Introduction
    A. Scope

[[Page 39484]]

    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors and Management
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Outsourcing Arrangements
    E. Implement the Standards

I. Introduction

    These Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information (Guidelines) set forth standards 
pursuant to sections 501 and 505 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6801 and 6805). These Guidelines address standards for 
developing and implementing administrative, technical, and physical 
safeguards to protect the security, confidentiality, and integrity of 
customer information.
    A. Scope. The Guidelines apply to customer information maintained 
by or on behalf of bank holding companies and their nonbank 
subsidiaries or affiliates (except brokers, dealers, persons providing 
insurance, investment companies, and investment advisors), for which 
the Board has supervisory authority.
    B. Preservation of Existing Authority. These Guidelines do not in 
any way limit the authority of the Board to address unsafe or unsound 
practices, violations of law, unsafe or unsound conditions, or other 
practices. The Board may take action to enforce these Guidelines 
independently of, in conjunction with, or in addition to, any other 
enforcement action available to the Board.
    C. Definitions. For purposes of the Guidelines, the following 
definitions apply:
    1. In general. For purposes of the Guidelines, except as modified 
in the Guidelines or unless the context otherwise requires, the terms 
used have the same meanings as set forth in sections 3 and 39 of the 
Federal Deposit Insurance Act (12 U.S.C. 1813 and 1831p-1).
    2. Customer information means any records, data, files, or other 
information containing nonpublic personal information, as defined in 
Sec. 216.3(n) of this chapter, about a customer, whether in paper, 
electronic or other form, that are maintained by or on behalf of the 
bank holding company.
    3. Customer means any customer of the bank holding company as 
defined in Sec. 216.3(h) of this chapter.
    4. Service provider means any person or entity that maintains or 
processes customer information on behalf of the bank holding company, 
or is otherwise granted access to customer information through its 
provision of services to the bank holding company.
    5. Board of directors, in the case of a branch or agency of a 
foreign bank means the managing official in charge of the branch or 
agency.
    6. Customer information systems means the electronic or physical 
methods used to access, collect, store, use, transmit and protect 
customer information.
    7. Subsidiary means any company controlled by a bank holding 
company, except a broker, dealer, person providing insurance, 
investment company, investment advisor, insured depository institution, 
or subsidiary of an insured depository institution.

II. Standards for Safeguarding Customer Information

    A. Information Security Program. Each bank holding company shall 
implement a comprehensive information security program that includes 
administrative, technical, and physical safeguards appropriate to the 
size and complexity of the bank holding company and the nature and 
scope of its activities. A bank holding company also shall ensure that 
each of its subsidiaries is subject to a comprehensive information 
security program. The bank holding company may fulfill this requirement 
either by including a subsidiary within the scope of the bank holding 
company's comprehensive information security program or by causing the 
subsidiary to implement a separate comprehensive information security 
program in accordance with the standards and procedures in sections II 
and III of this appendix that apply to bank holding companies.
    B. Objectives. A bank holding company's information security 
program shall:
    1. Ensure the security and confidentiality of customer information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such 
information that could result in substantial harm or inconvenience to 
any customer or risk to the safety and soundness of the bank holding 
company.

III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors and Management.
    1. The board of directors of each bank holding company shall:
    a. Approve the bank holding company's written information security 
policy and program that complies with these Guidelines; and
    b. Oversee efforts to develop, implement, and maintain an effective 
information security program.
    2. The bank holding company's management shall develop, implement, 
and maintain an effective information security program. In conjunction 
with its responsibility to implement the bank holding company's 
information security program, management of each bank holding company 
shall regularly:
    a. Evaluate the impact on the bank holding company's security 
program of changing business arrangements, such as mergers and 
acquisitions, alliances and joint ventures, outsourcing arrangements, 
and changes to customer information systems;
    b. Document its compliance with these Guidelines; and
    c. Report to the board on the overall status of the information 
security program, including material matters related to: risk 
assessment; risk management and control decisions; results of testing; 
attempted or actual security breaches or violations and responsive 
actions taken by management; and any recommendations for improvements 
in the information security program.
    B. Assess Risk. To achieve the objectives of its information 
security program, each bank holding company shall:
    1. Identify and assess the risks that may threaten the security, 
confidentiality, or integrity of customer information systems. As part 
of the risk assessment, a bank holding company shall determine the 
sensitivity of customer information and the internal or external 
threats to the bank holding company's customer information systems.
    2. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control risks 
identified in section III.B.1 of this appendix.
    3. Monitor, evaluate, and adjust its risk assessment in light of 
any relevant changes to technology, the sensitivity of customer 
information, and internal or external threats to information security.
    C. Manage and Control Risk. As part of a comprehensive risk 
management plan, each bank holding company shall:

[[Page 39485]]

    1. Establish written policies and procedures that are adequate to 
control the identified risks and achieve the overall objectives of the 
bank holding company's information security program. Policies and 
procedures shall be commensurate with the sensitivity of the 
information as well as the complexity and scope of the bank holding 
company and its activities. In establishing the policies and 
procedures, each bank holding company should consider appropriate:
    a. Access rights to customer information;
    b. Access controls on customer information systems, including 
controls to authenticate and grant access only to authorized 
individuals and companies;
    c. Access restrictions at locations containing customer 
information, such as buildings, computer facilities, and records 
storage facilities;
    d. Encryption of electronic customer information, including while 
in transit or in storage on networks or systems to which unauthorized 
individuals may have access;
    e. Procedures to confirm that customer information system 
modifications are consistent with the bank holding company's 
information security program;
    f. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access to 
customer information;
    g. Contract provisions and oversight mechanisms to protect the 
security of customer information maintained or processed by service 
providers;
    h. Monitoring systems and procedures to detect actual and attempted 
attacks on or intrusions into customer information systems;
    i. Response programs that specify actions to be taken when 
unauthorized access to customer information systems is suspected or 
detected;
    j. Protection against destruction of customer information due to 
potential physical hazards, such as fire and water damage; and
    k. Response programs to preserve the integrity and security of 
customer information in the event of computer or other technological 
failure, including, where appropriate, reconstructing lost or damaged 
customer information.
    2. Train staff to recognize, respond to, and, where appropriate, 
report to regulatory and law enforcement agencies, any unauthorized or 
fraudulent attempts to obtain customer information.
    3. Regularly test the key controls, systems and procedures of the 
information security program to confirm that they control the risks and 
achieve the overall objectives of the bank holding company's 
information security program. The frequency and nature of such tests 
should be determined by the risk assessment, and adjusted as necessary 
to reflect changes in internal and external conditions. Tests shall be 
conducted, where appropriate, by independent third parties or staff 
independent of those that develop or maintain the security programs. 
Test results shall be reviewed by independent third parties or staff 
independent of those that conducted the test.
    4. Monitor, evaluate, and adjust, as appropriate, the information 
security program in light of any relevant changes in technology, the 
sensitivity of its customer information, and internal or external 
threats to information security.
    D. Oversee Outsourcing Arrangements. The bank holding company 
continues to be responsible for safeguarding customer information even 
when it gives a service provider access to that information. The bank 
holding company must exercise appropriate due diligence in managing and 
monitoring its outsourcing arrangements to confirm that its service 
providers have implemented an effective information security program to 
protect customer information and customer information systems 
consistent with these Guidelines.
    E. Implement the Standards. Each bank holding company is to take 
appropriate steps to fully implement an information security program 
pursuant to these Guidelines by July 1, 2001.

PART 263--RULES OF PRACTICE FOR HEARINGS

    11. The authority citation for part 263 is revised to read as 
follows:

    Authority: 5 U.S.C. 504; 12 U.S.C. 248, 324, 504, 505, 1817(j), 
1818, 1828(c), 1831o, 1831p-1, 1847(b), 1847(d), 1884(b), 
1972(2)(F), 3105, 3107, 3108, 3907, 3909; 15 U.S.C. 21, 78o-4, 78o-
5, 78u-2, 6801, 6805; and 28 U.S.C. 2461 note.

    12. Amend Sec. 263.302 to revise paragraph (a) to read as follows:


Sec. 263.302  Determination and notification of failure to meet safety 
and soundness standard and request for compliance plan.

    (a) Determination. The Board may, based upon an examination, 
inspection, or any other information that becomes available to the 
Board, determine that a bank has failed to satisfy the safety and 
soundness standards contained in the Interagency Guidelines 
Establishing Standards for Safety and Soundness or the Interagency 
Guidelines Establishing Standards for Safeguarding Customer 
Information, set forth in appendices D-1 and D-2 to part 208 of this 
chapter, respectively.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, June 13, 2000.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance
    For the reasons set forth in the joint preamble, parts 308 and 364 
of chapter III of title 12 of the Code of Federal Regulation are 
proposed to be amended as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

    1. The authority citation for part 308 continues to read as 
follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831o, 1831p-1, 
1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717; 15 U.S.C. 
78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3 and 
78w; 28 U.S.C. 2461 note; 31 U.S.C. 330, 5321; 42 U.S.C. 4012a; sec. 
31001(s), Pub. L. 104-134, 110 Stat. 1321-358.

    1. Amend Sec. 308.302 to revise paragraph (a) to read as follows:


Sec. 308.302  Determination and notification of failure to meet a 
safety and soundness standard and request for compliance plan.

    (a) Determination. The FDIC may, based upon an examination, 
inspection, or any other information that becomes available to the 
FDIC, determine that a bank has failed to satisfy the safety and 
soundness standards set out in part 364 of this chapter and in the 
Interagency Guidelines Establishing Standards for Safety and Soundness 
in appendix A and the Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information in appendix B to part 364 of this 
chapter.
* * * * *

PART 364--STANDARDS FOR SAFETY AND SOUNDNESS

    2. The authority citation for part 364 is revised to read as 
follows:

    Authority: 12 U.S.C. 1818 (Tenth), 1831p-1; 15 U.S.C. 6801(b), 
6805(b)(1).

    3. Amend Sec. 364.101 to revise paragraph (b) to read as follows:


Sec. 364.101  Standards for safety and soundness.

* * * * *

[[Page 39486]]

    (b) Interagency Guidelines Establishing Standards for Safeguarding 
Customer Information. The Interagency Guidelines Establishing Standards 
for Safeguarding Customer Information prescribed pursuant to section 39 
of the Federal Deposit Insurance Act (12 U.S.C. 1831p-1) and sections 
501 and 505(b) of the Gramm-Leach-Bliley Act (15 U.S.C. 6801, 6805(b)), 
as set forth in appendix B to this part, apply to all insured state 
nonmember banks, insured state licensed branches of foreign banks, and 
any subsidiaries of such entities (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers).
    4. Revise Appendix B to Part 364 to read as follows:

Appendix B to Part 364--Interagency Guidelines Establishing Standards 
for Safeguarding Customer Information

Table of Contents

I. Introduction
    A. Scope
    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors and Management
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Outsourcing Arrangements
    E. Implement the Standards

I. Introduction

    The Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information (Guidelines) set forth standards 
pursuant to section 39 of the Federal Deposit Insurance Act (section 
39, codified at 12 U.S.C. 1831p-1), and sections 501 and 505(b), 
codified at 15 U.S.C. 6801 and 6805(b), of the Gramm-Leach-Bliley 
Act. These Guidelines address standards for developing and 
implementing administrative, technical, and physical safeguards to 
protect the security, confidentiality, and integrity of customer 
information.
    A. Scope. The Guidelines apply to customer information 
maintained by or on behalf of entities for which the Federal Deposit 
Insurance Corporation (FDIC) has authority. Such entities are 
referred to in this appendix as ``the bank.'' These are banks 
insured by the FDIC (other than members of the Federal Reserve 
System), insured state branches of foreign banks, and any 
subsidiaries of such entities (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers).
    B. Preservation of Existing Authority. Neither section 39 nor 
these Guidelines in any way limit the authority of the FDIC to 
address unsafe or unsound practices, violations of law, unsafe or 
unsound conditions, or other practices. The FDIC may take action 
under section 39 and these Guidelines independently of, in 
conjunction with, or in addition to, any other enforcement action 
available to the FDIC.
    C. Definitions. For purposes of the Guidelines, the following 
definitions apply:
    1. In general. For purposes of the Guidelines, except as 
modified in the Guidelines or unless the context otherwise requires, 
the terms used have the same meanings as set forth in sections 3 and 
39 of the Federal Deposit Insurance Act (12 U.S.C. 1813 and 1831p-
1).
    2. Customer information means any records, data, files, or other 
information containing nonpublic personal information, as defined in 
Sec. 332.3(n) of this chapter (the Privacy Rule), about a customer, 
whether in paper, electronic or other form, that are maintained by 
or on behalf of the bank.
    3. Customer means any customer of the bank as defined in 
Sec. 332.3(h) of this chapter.
    4. Service provider means any person or entity that maintains or 
processes customer information on behalf of the bank, or is 
otherwise granted access to customer information through its 
provision of services to the bank.
    5. Board of directors, in the case of a branch or agency of a 
foreign bank means the managing official in charge of the branch or 
agency.
    6. Customer information systems means the electronic or physical 
methods used to access, collect, store, use, transmit and protect 
customer information.

II. Standards for Safeguarding Customer Information

    A. Information Security Program. Each bank shall implement a 
comprehensive information security program that includes 
administrative, technical, and physical safeguards appropriate to 
the size and complexity of the bank and the nature and scope of its 
activities.
    B. Objectives. A bank's information security program shall:
    1. Ensure the security and confidentiality of customer 
information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such 
information that could result in substantial harm or inconvenience 
to any customer or risk to the safety and soundness of the bank.

III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors and Management. 
    1. The board of directors of each bank shall:
    a. Approve the bank's written information security policy and 
program that complies with these Guidelines; and
    b. Oversee efforts to develop, implement, and maintain an 
effective information security program.
    2. The bank's management shall develop, implement, and maintain 
an effective information security program. In conjunction with its 
responsibility to implement the bank's information security program, 
management of each bank shall regularly:
    a. Evaluate the impact on the bank's security program of 
changing business arrangements, such as mergers and acquisitions, 
alliances and joint ventures, outsourcing arrangements, and changes 
to customer information systems;
    b. Document its compliance with these Guidelines; and
    c. Report to the board on the overall status of the information 
security program, including material matters related to: risk 
assessment; risk management and control decisions; results of 
testing; attempted or actual security breaches or violations and 
responsive actions taken by management; and any recommendations for 
improvements in the information security program.
    B. Assess Risk. To achieve the objectives of its information 
security program, each bank shall:
    1. Identify and assess the risks that may threaten the security, 
confidentiality, or integrity of customer information systems. As 
part of the risk assessment, a bank shall determine the sensitivity 
of customer information and the internal or external threats to the 
bank's customer information systems.
    2. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control 
risks.
    3. Monitor, evaluate, and adjust its risk assessment in light of 
any relevant changes to technology, the sensitivity of customer 
information, and internal or external threats to information 
security.
    C. Manage and Control Risk. As part of a comprehensive risk 
management plan, each bank shall:
    1. Establish written policies and procedures that are adequate 
to control the identified risks and achieve the overall objectives 
of the bank's information security program. Policies and procedures 
shall be commensurate with the sensitivity of the information as 
well as the complexity and scope of the bank and its activities. In 
establishing the policies and procedures, each bank should consider 
appropriate:
    a. Access rights to customer information;
    b. Access controls on customer information systems, including 
controls to authenticate and grant access only to authorized 
individuals and companies;
    c. Access restrictions at locations containing customer 
information, such as buildings, computer facilities, and records 
storage facilities;
    d. Encryption of electronic customer information, including 
while in transit or in storage on networks or systems to which 
unauthorized individuals may have access;
    e. Procedures to confirm that customer information system 
modifications are consistent with the bank's information security 
program;
    f. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access 
to customer information;
    g. Contract provisions and oversight mechanisms to protect the 
security of

[[Page 39487]]

customer information maintained or processed by service providers;
    h. Monitoring systems and procedures to detect actual and 
attempted attacks on or intrusions into customer information 
systems;
    i. Response programs that specify actions to be taken when 
unauthorized access to customer information systems is suspected or 
detected;
    j. Protection against destruction of customer information due to 
potential physical hazards, such as fire and water damage; and
    k. Response programs to preserve the integrity and security of 
customer information in the event of computer or other technological 
failure, including, where appropriate, reconstructing lost or 
damaged customer information.
    2. Train staff to recognize, respond to, and, where appropriate, 
report to regulatory and law enforcement agencies, any unauthorized 
or fraudulent attempts to obtain customer information.
    3. Regularly test the key controls, systems and procedures of 
the information security program to confirm that they control the 
risks and achieve the overall objectives of your information 
security program. The frequency and nature of such tests should be 
determined by the risk assessment, and adjusted as necessary to 
reflect changes in internal and external conditions. Tests shall be 
conducted, where appropriate, by independent third parties or staff 
independent of those that develop or maintain the security programs. 
Test results shall be reviewed by independent third parties or staff 
independent of those that conducted the test.
    4. Monitor, evaluate, and adjust, as appropriate, the 
information security program in light of any relevant changes in 
technology, the sensitivity of its customer information, and 
internal or external threats to information security.
    D. Oversee Outsourcing Arrangements. The bank continues to be 
responsible for safeguarding customer information even when it gives 
a service provider access to that information. The bank must 
exercise appropriate due diligence in managing and monitoring your 
outsourcing arrangements to confirm that your service providers have 
implemented an effective information security program to protect 
customer information and customer information systems consistent 
with these Guidelines.
    E. Implement the Standards. Each bank is to take appropriate 
steps to fully implement an information security program pursuant to 
these Guidelines by July 1, 2001.


    By order of the Board of Directors.

    Dated at Washington, D.C., this 6th day of June, 2000.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance
    For the reasons set forth in the joint preamble, parts 568 and 570 
of chapter V of title 12 of the Code of Federal regulations are 
proposed to be amended as follows:

PART 568--SECURITY PROCEDURES

    1. The authority citation for part 568 is revised to read as 
follows:

    Authority: Secs. 2-5, 82 Stat. 294-295 (12 U.S.C. 1881-1984); 12 
U.S.C. 1831p-1; 15 U.S.C. 6801, 6805(b)(1).
    2. Amend Sec. 568.1 to revise paragraph (a) to read as follows:


Sec. 568.1  Authority, purpose, and scope.

    (a) This part is issued by the Office of Thrift Supervision 
(``OTS'') pursuant to section 3 of the Bank Protection Act of 1968 (12 
U.S.C. 1882), and sections 501 and 505(b)(1) of the Gramm-Leach-Bliley 
Act (12 U.S.C. 6801, 6805(b)(1). This part is applicable to savings 
associations. It requires each savings association to adopt appropriate 
security procedures to discourage robberies, burglaries, and larcenies 
and to assist in the identification and prosecution of persons who 
commit such acts. Section 568.5 of this part is applicable to savings 
associations and their subsidiaries (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers). 
Section 568.5 of this part requires covered institutions to establish 
and implement appropriate administrative, technical, and physical 
safeguards to protect the security, confidentiality, and integrity of 
customer information.
* * * * *
    3. Add Sec. 568.5 to read as follows:


Sec. 568.5  Protection of customer information.

    Savings associations and their subsidiaries (except brokers, 
dealers, persons providing insurance, investment companies, and 
investment advisers) must comply with the Interagency Guidelines 
Establishing Standards for Safeguarding Customer Information prescribed 
pursuant to sections 501 and 505 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6801 and 6805), set forth in appendix B to part 570 of this 
chapter.

PART 570--SUBMISSION AND REVIEW OF SAFETY AND SOUNDNESS COMPLIANCE 
PLANS AND ISSUANCE OF ORDERS TO CORRECT SAFETY AND SOUNDNESS 
DEFICIENCIES

    4. Amend Sec. 570.1 to add a sentence to the end of paragraph (a) 
and revise the last sentence of paragraph (b) to read as follows:


Sec. 570.1  Authority, purpose, scope and preservation of existing 
authority.

    (a) * * * Appendix B to this part is further issued under sections 
501(b) and 505 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338 (1999)).
    (b) * * * Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information are set forth in appendix B to this 
part.
    5. Amend Sec. 570.2 to revise paragraph (a) to read as follows:


Sec. 570.2  Determination and notification of failure to meet safety 
and soundness stnadards and request for compliance plan.

    (a) Determination. The OTS may, based upon an examination, 
inspection, or any other information that becomes available to the OTS, 
determine that a savings association has failed to satisfy the safety 
and soundness standards contained in the Interagency Guidelines 
Establishing Standards for Safety and Soundness as set forth in 
appendix A to this part or the Interagency Guidelines Establishing 
Standards for Safeguarding Customer Information as set forth in 
appendix B to this part.
* * * * *
    6. Revise Appendix B to Part 570 to read as follows:

Appendix B to Part 570--Interagency Guidelines Establishing Standards 
for Safeguarding Customer Information

Table of Contents

I. Introduction
    A. Scope
    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors and Management
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Outsourcing Arrangements
    E. Implement the Standards

I. Introduction

    The Interagency Guidelines Establishing Standards for 
Safeguarding Customer Information (Guidelines) set forth standards 
pursuant to section 39 of the Federal Deposit Insurance Act (section 
39, codified at 12 U.S.C. 1831p-1), and sections 501 and

[[Page 39488]]

505(b), codified at 15 U.S.C. 6801 and 6805(b), of the Gramm-Leach-
Bliley Act. These Guidelines address standards for developing and 
implementing administrative, technical, and physical safeguards to 
protect the security, confidentiality, and integrity of customer 
information.
    A. Scope. The Guidelines apply to customer information 
maintained by or on behalf of entities for which OTS has authority. 
For purposes of this appendix, these entities are savings 
associations whose deposits are FDIC-insured and any subsidiaries of 
such savings associations, except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers. 
This appendix refers to such entities as ``you.''
    B. Preservation of Existing Authority. Neither section 39 nor 
these Guidelines in any way limit the OTS's authority to address 
unsafe or unsound practices, violations of law, unsafe or unsound 
conditions, or other practices. OTS may take action under section 39 
and these Guidelines independently of, in conjunction with, or in 
addition to, any other enforcement action available to OTS.
    C. Definitions. For purposes of the Guidelines, the following 
definitions apply:
    1. In general. For purposes of the Guidelines, except as 
modified in the Guidelines or unless the context otherwise requires, 
the terms used have the same meanings as set forth in sections 3 and 
39 of the Federal Deposit Insurance Act (12 U.S.C. 1813 and 1831p-
1).
    2. Customer information means any records, data, files, or other 
information containing nonpublic personal information, as defined in 
12 CFR 573.3(n), about a customer, whether in paper, electronic or 
other form, that you maintain or that are maintained on your behalf.
    3. Customer means any of your customers, as defined in 12 CFR 
573.3(h).
    4. Service provider means any person or entity that maintains or 
processes customer information on your behalf, or is otherwise 
granted access to customer information through its provision of 
services to you.
    5. Customer information systems means the electronic or physical 
methods used to access, collect, store, use, transmit and protect 
customer information.

II. Standards for Safeguarding Customer Information

    A. Information Security Program. You shall implement a 
comprehensive information security program that includes 
administrative, technical, and physical safeguards appropriate to 
your size and complexity and the nature and scope of your 
activities.
    B. Objectives. Your information security program shall:
    1. Ensure the security and confidentiality of customer 
information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such 
information that could result in substantial harm or inconvenience 
to any customer or risk to your safety and soundness.

III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors and Management.
    1. Your board of directors shall:
    a. Approve your written information security policy and program 
that complies with these Guidelines; and
    b. Oversee efforts to develop, implement, and maintain an 
effective information security program.
    2. Your management shall develop, implement, and maintain an 
effective information security program. In conjunction with its 
responsibility to implement your information security program, your 
management shall regularly:
    a. Evaluate the impact on your security program of changing 
business arrangements, such as mergers and acquisitions, alliances 
and joint ventures, outsourcing arrangements, and changes to 
customer information systems;
    b. Document its compliance with these Guidelines; and
    c. Report to your board on the overall status of the information 
security program, including material matters related to; risk 
assessment; risk management and control decisions; results of 
testing; attempted or actual security breaches or violations and 
responsive actions taken by management; and any recommendations for 
improvements in the information security program.
    B. Assess Risk. To achieve the objectives of its information 
security program, you shall:
    1. Identify and assess the risks that may threaten the security, 
confidentiality, or integrity of customer information systems. As 
part of the risk assessment, you shall determine the sensitivity of 
customer information and the internal or external threats to your 
customer information systems.
    2. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control 
risks.
    3. Monitor, evaluate, and adjust your risk assessment in light 
of any relevant changes to technology, the sensitivity of customer 
information, and internal or external threats to information 
security.
    C. Manage and Control Risk. As part of a comprehensive risk 
management plan, you shall:
    1. Establish written policies and procedures that are adequate 
to control the identified risks and achieve the overall objectives 
of your information security program. Policies and procedures shall 
be commensurate with the sensitivity of the information as well as 
the complexity and scope of you and your activities. In establishing 
the policies and procedures, you should consider appropriate:
    a. Access rights to customer information;
    b. Access controls on customer information systems, including 
controls to authenticate and grant access only to authorized 
individuals and companies;
    c. Access restrictions at locations containing customer 
information, such as buildings, computer facilities, and records 
storage facilities;
    d. Encryption of electronic customer information, including 
while in transit or in storage on networks or systems to which 
unauthorized individuals may have access;
    e. Procedures to confirm that customer information system 
modifications are consistent with your information security program;
    f. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access 
to customer information;
    g. Contract provisions and oversight mechanisms to protect the 
security of customer information maintained or processed by service 
providers;
    h. Monitoring systems and procedures to detect actual and 
attempted attacks on or intrusions into customer information 
systems;
    i. Response programs that specify actions to be taken when 
unauthorized access to customer information systems is suspected or 
detected;
    j. Protection against destruction of customer information due to 
potential physical hazards, such as fire and water damage; and
    k. Response programs to preserve the integrity and security of 
customer information in the event of computer or other technological 
failure, including, where appropriate, reconstructing lost or 
damaged customer information.
    2. Train staff to recognize, respond to, and, where appropriate, 
report to regulatory and law enforcement agencies, any unauthorized 
or fraudulent attempts to obtain customer information.
    3. Regularly test the key controls, systems and procedures of 
the information security program to confirm that they control the 
risks and achieve the overall objectives of your information 
security program. The frequency and nature of such tests should be 
determined by the risk assessment, and adjusted as necessary to 
reflect changes in internal and external conditions. Tests shall be 
conducted, where appropriate, by independent third parties or staff 
independent of those that develop or maintain the security programs. 
Test results shall be reviewed by independent third parties or staff 
independent of those that conducted the test.
    4. Monitor, evaluate, and adjust, as appropriate, the 
information security program in light of any relevant changes in 
technology, the sensitivity of its customer information, and 
internal or external threats to information security.

[[Page 39489]]

    D. Oversee Outsourcing Arrangements. You continue to be 
responsible for safeguarding customer information even when you give 
a service provider access to that information. You must exercise 
appropriate due diligence in managing and monitoring your 
outsourcing arrangements to confirm that your service providers have 
implemented an effective information security program to protect 
customer information and customer information systems consistent 
with these Guidelines.
    E. Implement the Standards. You are to take appropriate steps to 
fully implement an information security program pursuant to these 
Guidelines by July 1, 2001.

    Dated: June 9, 2000.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 00-15798 Filed 6-23-00; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P


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