[Federal Register Volume 65, Number 130 (Thursday, July 6, 2000)]
[Rules and Regulations]
[Pages 41559-41560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17008]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 5

[Docket No. 00-14]
RIN 1557-AB86


Other Equity Investments

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is making 
a technical correction to its regulation on non-controlling equity 
investments to clarify that a national bank that wishes to use the 
notice procedure to make a non-controlling investment in an enterprise 
must certify that its loss exposure is limited, as a legal and 
accounting matter, and that it does not have open-ended liability for 
the obligations of the enterprise.

EFFECTIVE DATE: July 6, 2000.

FOR FURTHER INFORMATION CONTACT: Stuart Feldstein, Assistant Director, 
or Karl Betz, Attorney, Legislative and Regulatory Activities Division, 
(202) 874-5090, Office of the Comptroller of the Currency, 250 E 
Street, SW, Washington, DC, 20219.

SUPPLEMENTARY INFORMATION:

Description of Change

    On March 10, 2000 the OCC published a final rule titled ``Financial 
Subsidiaries and Operating Subsidiaries.'' 65 FR 12905. The final rule 
amended 12 CFR 5.36, ``Other equity investments,'' to provide a 
streamlined, after-the-fact notice procedure for national banks making 
non-controlling investments in enterprises engaging in specified 
activities. As part of the notice process, the applicant must certify 
that it has satisfied the standards and conditions that the OCC applies 
to investments of this type.\1\ These standards and conditions are 
established by OCC precedents approving non-controlling investments.\2\
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    \1\ See 65 FR at 12913 (provisions describing the certifications 
that the notice must contain).
    \2\ See, e.g., OCC Corporate Decision No. 97-54 (June 26, 1997); 
OCC Interpretive Letter No. 692, reprinted in [1995-1996 Transfer 
Binder] Fed. Banking L. Rep. (CCH) para. 81,007 (Nov. 1, 1995); OCC 
Interpretive Letter No. 694, reprinted in [1995-1996 Transfer 
Binder] Fed. Banking L. Rep. (CCH) para. 81,009 (Dec. 13, 1995); OCC 
Interpretive Letter No. 705, reprinted in [1995-1996 Transfer 
Binder] Fed. Banking L. Rep. (CCH) para. 81,020 (October 25, 1995); 
OCC Interpretive Letter No. 711, reprinted in [1995-1996 Transfer 
Binder] Fed. Banking L. Rep. (CCH) para. 81-026 (Feb. 23, 1996).
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    The final rule omitted from the notice procedure one standard 
contained in these precedents. In order to clarify that all of the 
standards and conditions contained in OCC precedent approving non-
controlling investments apply to non-controlling investments that are 
eligible for the after-the-fact notice procedure, we are amending 
Sec. 5.36(e) to conform the requirements of the notice procedure with 
those of the precedents on which it is based. Accordingly, this rule 
adds the requirement that a national bank certify that its loss 
exposure is limited, as a legal and accounting matter, and that the 
bank does not have open-ended unlimited liability for the obligations 
of the enterprise. The rule is published in final form and takes effect 
immediately upon publication in the Federal Register.

Administrative Procedure Act--Notice and Comment

    Pursuant to section 553(b)(B) of the Administrative Procedure Act 
(APA), 5 U.S.C. 553(b)(B), the OCC finds good cause for dispensing with 
the requirements for notice and an opportunity for public comment that 
the APA would otherwise require. This technical correction conforms the 
rule with the governing standards that have been available in published 
OCC precedent for some time. By removing an apparent inconsistency with 
the precedents in this area, the rule avoids the confusion, and the 
potential for the filing of incomplete notices, that may otherwise 
occur when banks compare the requirements of the rule with those in the 
precedents.

Effective Date

    The APA generally requires that a final rule take effect 30 days 
after publication in the Federal Register. 5 U.S.C. 553(d). Similarly, 
section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (CDRI Act) generally requires that a final rule 
issued by a Federal banking agency take effect on the first day of the 
first calendar quarter that begins on or after the date on which the 
regulation is published in final form. 12 U.S.C. 4802(b)(1). Both 
requirements are subject to a good cause exception.
    For the reasons previously explained, the OCC finds good cause for 
making this amendment to 12 CFR 5.36(e) effective immediately upon 
publication. Delaying the effective date of the amendment will delay 
national banks' ability to rely with certainty on the notice process 
for non-controlling investments and thus impede the rule's purpose of 
facilitating national banks' ability to make non-controlling

[[Page 41560]]

investments that comport with the standards the OCC has adopted in its 
published precedents.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612) does not 
apply to a rulemaking where a general notice of proposed rulemaking is 
not required. 5 U.S.C. 603 and 604. As noted previously, the OCC has 
determined that it is not necessary to publish a notice of proposed 
rulemaking for this final rule. Accordingly, the RFA's requirements 
relating to an initial and final regulatory flexibility analysis are 
not applicable. In any event, however, since this final rule merely 
adds one additional element to the notice that the rule permits a 
national bank to file, this final rule does not have a significant 
economic impact on a substantial number of small entities.

Executive Order 12866

    The Comptroller of the Currency has determined that this final rule 
is not a significant regulatory action for purposes of Executive Order 
12866.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, 109 
Stat. 48 (UMA), applies only when an agency is required to issue a 
general notice of proposed rulemaking or a final rule for which the 
agency published a general notice of proposed rulemaking (2 U.S.C. 
1532). As noted previously, the OCC has determined, for good cause, 
that notice and comment is unnecessary. Accordingly, the UMA does not 
require a budgetary impact analysis.
    Nevertheless, the OCC has determined that this final rule will not 
result in expenditures by State, local, and tribal governments, 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 activities considered.

List of Subjects in 12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Securities.

Authority and Issuance

    For the reasons set forth in the preamble, the OCC amends chapter I 
of title 12 of the Code of Federal Regulations as follows:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

    1. The authority citation for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 93a; and section 5136A of the 
Revised Statutes, (12 U.S.C. 24a).


    2. Section 5.36 is amended by:
    A. Redesignating paragraph (e)(7) as (e)(8);
    B. Removing ``and'' from the end of paragraph (e)(6); and
    C. Adding a new paragraph (e)(7) to read as follows:


Sec. 5.36  Other equity investments.

* * * * *
    (e) *  *  *
    (7) Certify that the bank's loss exposure is limited, as a legal 
and accounting matter, and the bank does not have open-ended liability 
for the obligations of the enterprise; and
* * * * *

    Dated: June 27, 2000
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-17008 Filed 7-5-00; 8:45 am]
BILLING CODE 4810-33-P