17798 Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 

PART 105—SUSPENSION, 

REVOCATION, OR TERMINATION OF 

BIOLOGICAL LICENSES OR PERMITS 

■ 1. The authority citation for part 105 

continues to read as follows: 

Authority: 21 U.S.C. 151–159; 7 CFR 2.22, 

2.80, and 371.4. 

■ 2. Section 105.3 is amended by adding 

a new paragraph (c) and an OMB control 

number citation to read as follows: 

§ 105.3 Notices re: worthless, 

contaminated, dangerous, or harmful 

biological products. 

* * * * * 

(c) When notified to stop distribution 

and sale of a serial or subserial of a 

veterinary biological product under the 

provisions of paragraph (a) or (b) of this 

section, veterinary biologics licensees or 

permittees shall: 

(1) Stop the preparation, distribution, 

sale, barter, exchange, shipment, or 

importation of the affected serial(s) or 

subserial(s) of any veterinary biological 

product pending further instructions 

from APHIS. 

(2) Immediately, but no later than 2 

days, send stop distribution and sale 

notifications to any wholesalers, 

jobbers, dealers, foreign consignees, or 

other persons known to have any such 

veterinary biological product in their 

possession, which instruct them to stop 

the preparation, distribution, sale, 

barter, exchange, shipment, or 

importation of any such veterinary 

biological product. All notifications 

shall be documented in writing by the 

licensee or permittee. 

(3) Account for the remaining 

quantity of each serial(s) or subserial(s) 

of any such veterinary biological 

product at each location in the 

distribution channel known to the 

manufacturer (licensee) or importer 

(permittee). 

(4) When required by the 

Administrator, submit complete and 

accurate reports of all notifications 

concerning stop distribution and sale 

actions to the Animal and Plant Health 

Inspection Service pursuant to § 116.5 

of this subchapter. 

(Approved by the Office of Management and 

Budget under control number 0579–0318.) 

PART 115—INSPECTIONS 

■ 3. The authority citation for part 115 

continues to read as follows: 

Authority: 21 U.S.C. 151–159; 7 CFR 2.22, 

2.80, and 371.4. 

■ 4. Section 115.2 is revised to read as 

follows: 

§ 115.2 Inspections of biological products. 

(a) Any biological product, the 

container of which bears a United States 

veterinary license number or a United 

States veterinary permit number or 

other mark required by these 

regulations, may be inspected at any 

time or place. If, as a result of such 

inspection, it appears that any such 

product is worthless, contaminated, 

dangerous, or harmful, the Secretary 

shall give notice to stop distribution and 

sale to the manufacturer (licensee) or 

importer (permittee) and may proceed 

against such product pursuant to the 

provisions of part 118 of this 

subchapter. 

(b) When notified to stop distribution 

and sale of a serial or subserial of a 

veterinary biological product by the 

Secretary, veterinary biologics licensees 

or permittees shall: 

(1) Stop the preparation, distribution, 

sale, barter, exchange, shipment, or 

importation of the affected serial(s) or 

subserial(s) of any such veterinary 

biological product pending further 

instructions from APHIS. 

(2) Immediately, but no later than 2 

days, send stop distribution and sale 

notifications to any jobbers, 

wholesalers, dealers, foreign consignees, 

or other persons known to have any 

such veterinary biological product in 

their possession, which instruct them to 

stop the preparation, distribution, sale, 

barter, exchange, shipment, or 

importation of any such veterinary 

biological product. All notifications 

shall be documented in writing by the 

licensee or permittee. 

(3) Account for the remaining 

quantity of each serial(s) or subserial(s) 

of any such veterinary biological 

product at each location in the 

distribution channel known to the 

manufacturer (licensee) or importer 

(permittee). 

(4) When required by the 

Administrator, submit complete and 

accurate reports of all notifications 

concerning stop distribution and sale 

actions to the Animal and Plant Health 

Inspection Service pursuant to § 116.5 

of this subchapter. 

(c) Unless and until the Secretary 

shall otherwise direct, no persons so 

notified shall thereafter sell, barter, or 

exchange any such product in any place 

under the jurisdiction of the United 

States or ship or deliver for shipment 

any such product in or from any State, 

Territory, or the District of Columbia. 

However, failure to receive such notice 

shall not excuse any person from 

compliance with the Virus-Serum-Toxin 

Act. (Approved by the Office of 

Management and Budget under control 

number 0579–0318). 

Done in Washington, DC, this 4th day of 

April 2007. 

Kevin Shea, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. E7–6700 Filed 4–9–07; 8:45 am] 

BILLING CODE 3410–34–P 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 4 

[Docket ID OCC–2007–0007] 

FEDERAL RESERVE SYSTEM 

12 CFR Parts 208 and 211 

[Docket No. R–1279] 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 337 and 347 

RIN 3064–AD17 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

12 CFR Part 563 

[Docket ID OTS–2007–0006] 

Expanded Examination Cycle for 

Certain Small Insured Depository 

Institutions and U.S. Branches and 

Agencies of Foreign Banks 

AGENCIES: Office of the Comptroller of 

the Currency (OCC); Board of Governors 

of the Federal Reserve System (Board); 

Federal Deposit Insurance Corporation 

(FDIC); and Office of Thrift Supervision 

(OTS), Treasury. 

ACTION: Interim rules with request for 

comment. 

SUMMARY: The OCC, Board, FDIC, and 

OTS (collectively, the Agencies) are 

jointly issuing and requesting public 

comment on these interim rules to 

implement the Financial Services 

Regulatory Relief Act of 2006 (FSRRA) 

and related legislation (collectively the 

Examination Amendments). The 

Examination Amendments permit 

insured depository institutions 

(institutions) that have up to $500 

million in total assets, and that meet 

certain other criteria, to qualify for an 

18-month (rather than 12-month) on-site 

examination cycle. Prior to enactment of 

FSRRA, only institutions with less than 

$250 million in total assets were eligible 

for an 18-month on-site examination 


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Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 17799 

cycle. The OCC, Board, and FDIC are 

making parallel changes to their 

regulations governing the on-site 

examination cycle for U.S. branches and 

agencies of foreign banks (foreign bank 

offices), consistent with the 

International Banking Act of 1978 (IBA). 

In addition to implementing the changes 

in the Examination Amendments, the 

Agencies are clarifying when a small 

insured depository institution is 

considered ‘‘well managed’’ for 

purposes of qualifying for an 18-month 

examination cycle. 

DATES: These interim rules are effective 

on April 10, 2007. Comments on the 

rules must be received by May 10, 2007. 

ADDRESSES: Comments should be 

directed to: 

OCC: You may submit comments by 

any of the following methods: 

• Federal eRulemaking Portal— 

‘‘Regulations.gov’’: Go to http:// 

www.regulations.gov, select 

‘‘Comptroller of the Currency’’ from the 

agency drop-down menu, then click 

‘‘Submit.’’ In the ‘‘Docket ID’’ column, 

select ‘‘OCC–2007–0007’’ to submit or 

view public comments and to view 

supporting and related materials for this 

interim rule. The ‘‘User Tips’’ link at the 

top of the Regulations.gov home page 

provides information on using 

Regulations.gov, including instructions 

for submitting or viewing public 

comments, viewing other supporting 

and related materials, and viewing the 

docket after the close of the comment 

period. 

• Mail: Office of the Comptroller of 

the Currency, 250 E Street, SW., Mail 

Stop 1–5, Washington, DC 20219. 

• Hand Delivery/Courier: 250 E 

Street, SW., Attn: Public Information 

Room, Mail Stop 1–5, Washington, DC 

20219. 

Instructions: You must include 

‘‘OCC’’ as the agency name and ‘‘Docket 

ID OCC–2007–0007’’ in your comment. 

In general, OCC will enter all comments 

received into the docket and publish 

them on Regulations.gov without 

change, including any business or 

personal information that you provide 

such as name and address information, 

e-mail addresses, or phone numbers. 

Comments, including attachments and 

other supporting materials, received are 

part of the public record and subject to 

public disclosure. Do not enclose any 

information in your comment or 

supporting materials that you consider 

confidential or inappropriate for public 

disclosure. 

You may review comments and other 

related materials by any of the following 

methods: 

• Viewing Comments Electronically: 

Go to http://www.regulations.gov, select 

Comptroller of the Currency from the 

agency drop-down menu, then click 

‘‘Submit.’’ In the ‘‘Docket ID’’ column, 

select ‘‘OCC–2007–0007’’ to view public 

comments for this interim final rule. 

• Viewing Comments Personally: You 

may personally inspect and photocopy 

comments at the OCC’s Public 

Information Room, 250 E Street, SW., 

Washington, DC. You can make an 

appointment to inspect comments by 

calling (202) 874–5043. 

• Docket: You may also view or 

request available background 

documents and project summaries using 

the methods described above. 

Board: You may submit comments, 

identified by Docket No. R–1279, by any 

of the following methods: 

• Agency Web Site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include the docket number in the 

subject line of the message. 

• FAX: 202–452–3819 or 202–452–

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper in Room MP–500 of the Board’s 

Martin Building (20th and C Streets, 

NW.) between 9 a.m. and 5 p.m. on 

weekdays. 

FDIC: You may submit comments by 

any of the following methods: 

• Agency Web Site: http:// 

www.fdic.gov/regulations/laws/federal. 

Follow instructions for submitting 

comments on the Agency Web Site. 

• E-mail: Comments@FDIC.gov. 

Include ‘‘Expanded Examination Cycle’’

in the subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EST). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal including any personal 

information provided. Comments may 

be inspected and photocopied in the 

FDIC Public Information Center, 3501 

North Fairfax Drive, Room E–1002, 

Arlington, VA 22226, between 9 a.m. 

and 5 p.m. (EST) on business days. 

Paper copies of public comments may 

be ordered from the Public Information 

Center by telephone at (877) 275–3342 

or (703) 562–2200. 

OTS: You may submit comments, 

identified by OTS–2007–0006, by any of 

the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov, select 

‘‘Office of Thrift Supervision’’ from the 

agency drop-down menu, then click 

submit. Select Docket ID ‘‘OTS–2007–

0006’’ to submit or view public 

comments and to view supporting and 

related materials for this interim rule. 

The ‘‘User Tips’’ link at the top of the 

page provides information on using 

Regulations.gov, including instructions 

for submitting or viewing public 

comments, viewing other supporting 

and related materials, and viewing the 

docket after the close of the comment 

period. 

• Mail: Regulation Comments, Chief 

Counsel’s Office, Office Of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552, Attention: OTS–

2007–0006. 

• Hand Delivery/Courier: Guard’s 

Desk, East Lobby Entrance, 1700 G 

Street, NW., from 9 a.m. to 4 p.m. on 

business days, Attention: Regulation 

Comments, Chief Counsel’s Office, 

OTS–2007–0006. 

Instructions: All submissions received 

must include the agency name and 

docket number for this rulemaking. All 

comments received will be entered into 

the docket and posted on 

Regulations.gov without change, 

including any personal information 

provided. Comments, including 

attachments and other supporting 

materials received are part of the public 

record and subject to public disclosure. 

Do not enclose any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

Viewing Comments Electronically: Go 

to http://www.regulations.gov, select 

‘‘Office of Thrift Supervision’’ from the 

agency drop-down menu, then click 

‘‘Submit.’’ Select Docket ID ‘‘OTS–

2007–0006’’ to view public comments 

for this notice of proposed rulemaking. 


cprice-sewell on PROD1PC66 with RULES
17800 Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 

1Section 10(d) of the FDI Act was added by 

section 111 of the Federal Deposit Insurance 

Corporation Improvement Act of 1991 (FDICIA) and 

is codified at 12 U.S.C. 1820(d). 

2Under section 10(d) of the FDI Act, before 

enactment of the Examination Amendments, the 

Agencies had the authority to extend the 18-month 

examination cycle to institutions with composite 

CAMELS ratings of 2 and assets of up to $250 

million. Section 10(d) required that the Agencies 

determine that extending the 18-month cycle in this 

manner would be consistent with safety and 

soundness. See 12 U.S.C. 1820(d)(10). The Agencies 

exercised this discretion in 1997 and extended the 

18-month examination cycle to 2-rated institutions 

with assets of $250 million or less. See 62 FR 6449, 

February 12, 1997 (interim rule); see also 63 FR 

16377, April 2, 1998 (final rule). 

3See 12 CFR 4.6 and 4.7 (OCC), 12 CFR 208.64 

and 211.26 (Board), 12 CFR 337.12 and 347.211 

(FDIC), and 12 CFR 563.171 (OTS). 

4Pub. L. No. 109–351, 120 Stat. 1966 (2006). 

5 120 Stat. 3561 (2007). 

6CAMELS is an acronym that is drawn from the 

first letters of the individual components of the 

rating system: Capital adequacy, Asset quality, 

View Comments On-Site: You may 

inspect comments in the Public Reading 

Room, 1700 G Street, NW., by 

appointment. To make an appointment, 

call (202) 906–5922, send an e-mail to 

public.info@ots.treas.gov, or send a 

facsimile transmission to (202) 906–

6518. (Prior notice identifying the 

materials you will be requesting will 

assist us in serving you.) We schedule 

appointments on business days between 

10 a.m. and 4 p.m. In most cases, 

appointments will be available the next 

business day following the date we 

receive a request. 

FOR FURTHER INFORMATION CONTACT:

OCC: Mitchell Plave, Counsel, 

Legislative and Regulatory Activities 

Division, (202) 874–5090; Stuart E. 

Feldstein, Assistant Director, Legislative 

and Regulatory Activities, (202) 874–

5090; Fred Finke, Mid-size/Community 

Bank Supervision, (202) 874–4468; 

Patricia Roberts, Operational Risk Policy 

Analyst, (202) 874–5637. 

Board: Barbara Bouchard, Deputy 

Associate Director, (202) 452–3072, 

Mary Frances Monroe, Manager, (202) 

452–5231, or Stanley Rediger, 

Supervisory Financial Analyst, (202) 

452–2629, Division of Banking 

Supervision and Regulation; or Pamela 

G. Nardolilli, Senior Counsel, (202) 

452–3289, for the revisions to 

Regulation H, or Jon Stoloff, Senior 

Counsel, (202) 452–3269, for the 

revisions to Regulation K, Legal 

Division. For users of 

Telecommunication Device for the Deaf 

(TDD) only, contact (202) 263–4869. 

FDIC: Melinda West, Senior 

Examination Specialist, (202) 898–7221; 

Patricia A. Colohan, Senior Examination 

Specialist, (202) 898–7283; Division of 

Supervision and Consumer Protection; 

Rodney D. Ray, Counsel, (202) 898–

3556, for the revisions to 12 CFR Part 

347; Kimberly A. Stock, Attorney, (202) 

898–3815, for the revisions to 12 CFR 

Part 337; Legal Division. 

OTS: Robyn H. Dennis, Director, 

Operation Risk, (202) 906–5751, 

Examinations and Supervision Policy; 

or Barbara Shycoff, Special Counsel, 

Regulations and Legislation, (202) 906–

6947, Office of Thrift Supervision, 1700 

G Street, NW., Washington, DC 20552. 

SUPPLEMENTARY INFORMATION: 

Background 

Section 10(d) of the Federal Deposit 

Insurance Act (the FDI Act) 1 generally 

requires that the appropriate federal 

banking agency for an insured 

depository institution conduct a fullscope, on-site examination of the 

institution at least once during each 12- 

month period. Prior to enactment of 

FSRRA, section 10(d) also authorized 

the appropriate federal banking agency 

to lengthen the on-site examination 

cycle for an institution to 18 months if 

the institution (1) had total assets of less 

than $250 million; (2) was well 

capitalized (as defined in the prompt 

corrective action statute at 12 U.S.C. 

1831o); (3) was found, at its most recent 

examination, to be well managed and to 

have a composite condition of 

outstanding or good; 2 (4) had not 

undergone a change in control during 

the previous 12-month period in which 

a full-scope, on-site examination 

otherwise would have been required; 

and (5) was not subject to a formal 

enforcement proceeding or order by its 

appropriate federal banking agency or 

the FDIC. The Board, the FDIC and the 

OTS, as the appropriate federal banking 

agencies for state-chartered insured 

banks and savings associations, are 

permitted to conduct on-site 

examinations of such institutions on 

alternating 12-month or 18-month 

schedules with the institution’s State 

supervisor, if the Board, FDIC, or OTS, 

as appropriate, determines that the 

alternating examination conducted by 

the State carries out the purposes of 

section 10(d) of the FDI Act and the 

Home Owners’ Loan Act. 

In addition, section 7(c)(1)(C) of the 

IBA provides that a U.S. branch or 

agency of a foreign bank shall be subject 

to on-site examination by its appropriate 

federal banking agency as frequently as 

a national or state bank would be 

subject to such an examination by the 

agency. The agencies previously 

adopted regulations to implement the 

examination cycle requirements of 

section 10(d) of the FDI Act and section 

7(c)(1)(C) of the IBA, including the 

extended 18-month examination cycle 

available to qualifying small institutions 

and foreign bank offices.3

Section 605 of FSRRA, which became 

effective on October 13, 2006, amended 

section 10(d) of the FDI Act to raise, 

from $250 million to $500 million, the 

total asset threshold below which an 

insured depository institution may 

qualify for an 18-month (rather than a 

12-month) on-site examination cycle.4

Public Law No. 109–473, which became 

effective on January 11, 2007, also 

amended section 10(d)(10) of the FDI 

Act to authorize the appropriate agency, 

if it determines the action would be 

consistent with principles of safety and 

soundness, to allow an insured 

depository institution that falls within 

this expanded total asset threshold to 

qualify for an 18-month examination 

cycle if the institution received a 

composite rating of outstanding or good 

at its most recent examination.5

The Examination Amendments will 

allow the Agencies to better focus their 

supervisory resources on those 

institutions that may present capital, 

managerial, or other issues of 

supervisory concern, while 

concomitantly reducing the regulatory 

burden on small, well capitalized and 

well managed institutions. The 

Agencies will continue to use off-site 

monitoring tools to identify potential 

problems in smaller, well capitalized 

and well managed institutions that 

present low levels of risk. Moreover, 

neither the statute nor the Agencies’

regulations limit, and the Agencies 

therefore retain, the authority to 

examine an insured depository 

institution or foreign bank office more 

frequently than would be required by 

the FDI Act or IBA. 

Description of the Interim Rules 

The Agencies are adopting interim 

rules to implement the Examination 

Amendments. In particular, the 

Agencies are amending their respective 

rules to raise, from $250 million to $500 

million, the total asset threshold below 

which an insured depository institution 

that meets the qualifying criteria in 

section 10(d) and the Agencies’ rules 

may qualify for an 18-month on-site 

examination cycle. In addition, as 

authorized by the Examination 

Amendments, the Agencies have 

determined that it is consistent with 

safety and soundness to permit 

institutions with between $250 million 

and $500 million in total assets that 

received a composite rating of 1 or 2 

under the Uniform Financial 

Institutions Rating System (commonly 

referred to as CAMELS),6 and that meet 


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Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 17801 

Management, Earnings, Liquidity, and Sensitivity to 

market risk. 

7The four components of the ROCA supervisory 

rating system for foreign bank offices are: Risk 

management, Operational controls, Compliance, 

and Asset quality. 

8 Data are as of June 30, 2006, and reflect the 

number of institutions and foreign bank offices with 

total assets of less than $500 million. 

9The Agencies’ rules relating to the examination 

cycle for foreign bank offices already permit the 

appropriate Agency to consider, among other 

things, whether the office received a ‘‘3’’ or lower 

rating for any of the individual ROCA components 

(including risk management) in determining 

whether the office should qualify for an 18-month 

exam cycle. See 12 CFR 4.7(b)(2)(i) (OCC), 

211.26(c)(2)(ii) (Board), and 347.211(b)(2)(i) (FDIC). 

10See, e.g., 12 CFR 362.17(c)(1) (FDIC); 12 CFR 

5.34(d)(3) (OCC); 12 CFR 225.2(5) and 12 CFR 

208.11(h) (Board); OTS Examination Handbook, 

Sec. 060 (2004) (OTS). 

11 44 U.S.C. 3506; 5 CFR part 1320, Appendix 

A.1. 

12Pub. L. 104–4, 109 Stat. 48 (March 22, 1995) 

(Unfunded Mandates Act). 

the other qualifying criteria set forth in 

section 10(d) and the Agencies’ rules, to 

qualify for an 18-month examination 

cycle. In this regard, data indicate that 

between 1985 and 2000, insured 

depository institutions with a composite 

CAMELS rating of 1 or 2 were more than 

three times less likely to fail over the 

next five-year period than institutions 

with a lower composite CAMELS rating. 

Furthermore, the Agencies note that, in 

order to qualify for an 18-month 

examination cycle, any insured 

depository institution with total assets 

of less than $500 million—including 

one with a composite rating of 2—must 

meet the other capital, managerial and 

supervisory criteria set forth in section 

10(d). These provisions, combined with 

the Agencies’ off-site monitoring 

activities and ability to examine an 

institution more frequently as necessary 

or appropriate, have permitted the 

Agencies to effectively supervise and 

protect the safety and soundness of 

institutions with total assets of $250 

million or less since 1997. 

Consistent with section 7(c)(1)(C) of 

the IBA, the OCC, Board and FDIC also 

are making conforming changes to their 

regulations governing the on-site 

examination cycle for the U.S. branches 

and agencies of foreign banks. The 

Agencies’ amended rules permit a 

foreign bank office with total assets of 

less than $500 million to qualify for an 

18-month examination cycle if the office 

received a composite ROCA rating of 1 

or 2 at its most recent examination.7

The Agencies estimate that these 

interim rules will increase the number 

of insured depository institutions that 

may qualify for an extended 18-month 

examination cycle by approximately 

1,089 institutions, for a total of 6,670 

insured depository institutions. 

Approximately 126 foreign branches 

and agencies would be eligible for the 

extended examination cycle based on 

the interim rules, for an increase of 31 

offices.8

In connection with these changes, the 

Agencies also have modified their rules 

to specify, consistent with current 

practice, that a small institution meets 

the statutory ‘‘well managed’’ criteria for 

an 18-month cycle if the institution, 

besides having a CAMELS composite 

rating of 1 or 2, also received a rating 

of 1 or 2 for the management component 

of the CAMELS rating at its most recent 

examination. The Agencies believe this 

amendment will provide additional 

transparency to their rules and clarify 

for institutions how the ‘‘well managed’’

requirement in section 10(d) is 

interpreted and applied by the 

Agencies.9 This interpretation is 

consistent with definitions of ‘‘well 

managed’’ that the Agencies currently 

apply in other circumstances.10

The FDI Act and the IBA set the 

outside limits within which an on-site 

safety and soundness examination of an 

institution or foreign bank office must 

commence, and permit the appropriate 

Agency for an institution or foreign 

bank to conduct an on-site examination 

more frequently than required. The 

Agencies’ rules continue to expressly 

recognize that the appropriate Agency 

may examine an institution or foreign 

bank office as frequently as the Agency 

deems necessary. 

Effective Date/Request for Comment 

The Agencies are issuing these 

interim rules without advance notice 

and comment and the 30-day delayed 

effective date ordinarily prescribed by 

the Administrative Procedure Act, 5 

U.S.C. 551 et seq. (‘‘APA’’). The interim 

rules implement the provisions of 

section 605 of the FSRRA, which 

became effective on October 13, 2006, 

and Public Law No. 109-473, which 

became effective on January 11, 2007. 

The interim rules adopt without change 

the statutory increase in the asset ceiling 

for 18-month examination of CAMELS–

1 rated institutions and the statutory 

availability of the 18-month 

examination cycle for CAMELS–2 

institutions. The interim rules also 

explain how the Agencies apply the 

‘‘well managed’’ requirement in the 

underlying statute and thus, provide 

greater clarity to institutions consistent 

with the agencies’ current practices. For 

these reasons, the Agencies find there is 

good cause to issue the rules without 

advance notice and comment. 5 U.S.C. 

553(b)(3)(A), (B). The rules explain how 

the Agencies generally exercise the 

discretion given them by the statute to 

examine qualifying institutions less 

frequently than once every 12 months. 

The Agencies retain the discretion to 

examine individual institutions more 

frequently; the interim rules do not bind 

the Agencies to examine qualifying 

institutions on an 18-month basis, nor 

do they create a right for institutions to 

be examined on an 18-month cycle. 

With respect to the delayed effective 

date, the Agencies conclude that, 

because the rules recognize an 

exemption, the interim rules are exempt 

from the APA’s delayed effective date 

requirement. 5 U.S.C. 553(d)(1). The 

Agencies are nevertheless interested in 

the views of the public and request 

comment on all aspects of these interim 

rules. 

Regulatory Flexibility Act 

The interim rules do not impose any 

new obligations, restrictions or burdens 

on banking organizations, including 

small banking organizations, and, 

indeed, reduce regulatory burden 

associated with on-site examinations for 

qualifying small institutions and foreign 

bank offices. For these reasons, the 

Agencies certify that the interim rules 

will not have a significant impact on a 

substantial number of small entities, as 

defined in the Regulatory Flexibility 

Act. 5 U.S.C. 601 et seq. The objective 

and legal basis for the interim rules are 

discussed in the SUPPLEMENTARY

INFORMATION. 

Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995,11 the Agencies 

have determined that no collections of 

information pursuant to the Paperwork 

Reduction Act are contained in these 

interim rules. 

OCC and OTS Executive Order 12866 

Statement 

The OCC and OTS have each 

independently determined that the 

interim rules with request for comment 

are not significant regulatory actions 

under Executive Order 12866. 

OCC and OTS Unfunded Mandates Act 

of 1995 Statement 

Section 202 of the Unfunded 

Mandates Reform Act of 199512 requires 

that an agency prepare a budgetary 

impact statement before promulgating a 

rule that includes 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 


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17802 Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 

Mandates Act also requires an agency to 

identify and consider a reasonable 

number of regulatory alternatives before 

promulgating a rule. Because the OCC 

and the OTS have each independently 

determined that the interim rules will 

not result in expenditures by state, 

local, and tribal governments, in the 

aggregate, or by the private sector, of 

more than $100 million in any one year, 

the OCC and the OTS have not prepared 

a budgetary impact statement or 

specifically addressed the regulatory 

alternatives considered. Nevertheless, as 

discussed in the preamble, the interim 

rules will have the effect of reducing 

regulatory burden on certain institutions 

and foreign bank offices. 

Plain Language 

Section 722 of the Gramm-LeachBliley Act (12 U.S.C. 4809) requires the 

Agencies to use ‘‘plain language’’ in all 

proposed and final rules published after 

January 1, 2000. The Agencies believe 

the interim rules are presented in a clear 

and straightforward manner and solicit 

comments on ways to make the rules 

easier to understand. 

List of Subjects 

12 CFR Part 4 

Administrative practice and 

procedure, Availability and release of 

information, Confidential business 

information, Contracting outreach 

program, Freedom of information, 

National banks, Organization and 

functions (government agencies), 

Reporting and recordkeeping 

requirements, Women and minority 

businesses. 

12 CFR Part 208 

Accounting, Agriculture, Banks, 

Banking, Confidential business 

information, Crime, Currency, Federal 

Reserve System, Flood insurance, 

Mortgages, Reporting and recordkeeping 

requirements, Safety and soundness, 

Securities. 

12 CFR Part 211 

Exports, Federal Reserve System, 

Foreign banking, Holding companies, 

Investments, Reporting and 

recordkeeping requirements. 

12 CFR Part 337 

Banks, banking, Reporting and 

recordkeeping requirements, Securities. 

12 CFR Part 347 

Authority delegations (Government 

agencies), Bank deposit insurance, 

Banks, banking, Credit, Foreign banking, 

Investments, Reporting and 

recordkeeping requirements, United 

States investments abroad. 

12 CFR Part 563 

Accounting, Advertising, Crime, 

Currency, Investments, Reporting and 

recordkeeping requirements, Savings 

associations, Securities, Surety bonds. 

Office of the Comptroller of the 

Currency 

12 CFR Chapter I 

Authority and Issuance 

■ For the reasons set forth in the joint 

preamble, part 4 of chapter I of title 12 

of the Code of Federal Regulations is 

amended as follows: 

PART 4—ORGANIZATION AND 

FUNCTIONS, AVAILABILITY AND 

RELEASE OF INFORMATION, 

CONTRACTING OUTREACH 

PROGRAM, POST-EMPLOYMENT 

RESTRICTIONS FOR SENIOR 

EXAMINERS 

■ 1. The authority citation for part 4 

continues to read as follows: 

Authority: 12 U.S.C. 93a. Subpart A also 

issued under 5 U.S.C. 552. Subpart B also 

issued under 5 U.S.C. 552; E.O. 12600 (3 

CFR, 1987 Comp., p. 235). Subpart C also 

issued under 5 U.S.C. 301, 552; 12 U.S.C. 

161, 481, 482, 484(a), 1442, 1817(a)(3), 

1818(u) and(v), 1820(d)(6), 1820(k), 1821(c), 

1821(o), 1821(t), 1831m, 1831p-1, 1831o, 

1867, 1951 et seq., 2901 et seq., 3101 et seq., 

3401 et seq.; 15 U.S.C. 77uu(b), 78q(c)(3); 18 

U.S.C. 641, 1905, 1906; 29 U.S.C. 1204; 31 

U.S.C. 9701; 42 U.S.C. 3601; 44 U.S.C. 3506, 

3510. Subpart D also issued under 12 U.S.C. 

1833e. 

■ 2. In Subpart A, § 4.6(b) is revised to 

read as follows: 

§ 4.6 Frequency of examination of national 

banks. 

* * * * * 

(b) 18-month rule for certain small 

institutions. The OCC may conduct a 

full-scope, on-site examination of a 

national bank at least once during each 

18-month period, rather than each 12- 

month period as provided in paragraph 

(a) of this section, if the following 

conditions are satisfied: 

(1) The bank has total assets of less 

than $500 million; 

(2) The bank is well capitalized as 

defined in part 6 of this chapter; 

(3) At the most recent examination, 

the OCC: 

(i) Assigned the bank a rating of 1 or 

2 for management as part of the bank’s 

rating under the Uniform Financial 

Institutions Rating System; and 

(ii) Assigned the bank a composite 

rating of 1 or 2 under the Uniform 

Financial Institutions Rating System; 

(4) The bank currently is not subject 

to a formal enforcement proceeding or 

order by the FDIC, OCC or the Federal 

Reserve System; and 

(5) No person acquired control of the 

bank during the preceding 12-month 

period in which a full-scope, on-site 

examination would have been required 

but for this section. 

* * * * * 

■ 3. In § 4.7, paragraph (b)(1) 

introductory text is republished and 

paragraph (b)(1)(i) is revised to read as 

follows: 

§ 4.7 Frequency of examination of Federal 

agencies and branches. 

* * * * * 

(b) 18-month rule for certain small 

institutions. (1) Mandatory standards. 

The OCC may conduct a full-scope, onsite examination at least once during 

each 18-month period, rather than each 

12-month period as provided in 

paragraph (a) of this section, if the 

Federal branch or agency: 

(i) Has total assets of less than $500 

million; 

* * * * * 

Federal Reserve System 

12 CFR Chapter II 

Authority and Issuance 

■ For the reasons set forth in the joint 

preamble, the Board amends 12 CFR 

parts 208 and 211 of chapter II of title 

12 of the Code of Federal Regulations as 

follows: 

PART 208—MEMBERSHIP OF STATE 

BANKING INSTITUTIONS IN THE 

FEDERAL RESERVE SYSTEM 

(REGULATION H) 

■ 1. The authority citation for part 208 

continues to read as follows: 

Authority: 12 U.S.C. 24, 36, 92(a), 93(a), 

248(a), 248(c), 321–338a, 371d, 461, 481–486, 

601, 611, 1814, 1816, 1818, 1820(d)(9), 

1823(j), 1828(o), 1831, 1831(o), 1831p–1, 

1831r–1, 1831(w), 1831(x), 1835a, 1882, 

2901–2907, 3105, 3310, 3331–3351, and 

3906–3909; 15 U.S.C. 78b, 781(b), 781(g), 

781(i), 78o–4(c)(5), 78q, 78q–1 and 78w; 

1681S, 31 U.S.C. 5318; 42 U.S.C. 4012a, 

4104a, 4104b, 4106 and 4128. 

■ 2. Section 208.64(b) is revised to read 

as follows: 

§ 208.64 Frequency of examination. 

* * * * * 

(b) 18-month rule for certain small 

institutions. The Federal Reserve may 

conduct a full-scope, on-site 

examination of an insured member bank 

at least once during each 18-month 

period, rather than each 12-month 

period as provided in paragraph (a) of 

this section, if the following conditions 

are satisfied: 

(1) The bank has total assets of less 

than $500 million; 


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Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 17803 

(2) The bank is well capitalized as 

defined in subpart D of this part 

(§ 208.43); 

(3) At the most recent examination 

conducted by either the Federal Reserve 

or applicable State banking agency, the 

Federal Reserve—

(i) Assigned the bank a rating of 1 or 

2 for management as part of the bank’s 

rating under the Uniform Financial 

Institutions Rating System (commonly 

referred to as CAMELS); and 

(ii) Assigned the bank a composite 

CAMELS rating of 1 or 2 under the 

Uniform Financial Institutions Rating 

System; 

(4) The bank currently is not subject 

to a formal enforcement proceeding or 

order by the Federal Reserve or the 

FDIC; and 

(5) No person acquired control of the 

bank during the preceding 12-month 

period in which a full-scope 

examination would have been required 

but for this paragraph (b). 

* * * * * 

PART 211—INTERNATIONAL 

BANKING OPERATIONS 

(REGULATION K) 

■ 1. The authority citation for part 211 

continues to read as follows: 

Authority: 12 U.S.C. 221 et seq., 1818, 

1835a, 1841 et seq., 3101 et seq., and 3901 

et seq. 

■ 2. In § 211.26 paragraph (c)(2)(i) 

introductory text is republished and 

paragraph (c)(2)(i)(A) is revised to read 

as follows: 

§ 211.26 Examinations of offices and 

affiliates of foreign banks. 

* * * * * 

(c) Frequency of on-site examination 

* * * 

(2) 18-month cycle for certain small 

institutions—(i) Mandatory standards. 

The Board may conduct a full-scope, onsite examination at least once during 

each 18-month period, rather than each 

12-month period as required in 

paragraph (c)(1) of this section, if the 

branch or agency: 

(A) Has total assets of less than $500 

million; 

* * * * * 

Federal Deposit Insurance Corporation 

12 CFR Chapter III 

Authority and Issuance 

■ For the reasons set forth in the joint 

preamble, the Board of Directors of the 

FDIC amends parts 337 and 347 of 

chapter III of title 12 of the Code of 

Federal Regulations as follows: 

PART 337—UNSAFE AND UNSOUND 

BANK PRACTICES 

■ 1. The authority citation for part 337 

is revised to read as follows: 

Authority: 12 U.S.C. 375a(4), 375b, 1816, 

1818(a), 1818(b), 1819, 1820(d)(10), 1821(f), 

1828(j)(2), 1831. 

■ 2. Section 337.12(b) is revised to read 

as follows: 

§ 337.12 Frequency of examination. 

* * * * * 

(b) 18-month rule for certain small 

institutions. The FDIC may conduct a 

full-scope, on-site examination of an 

insured state nonmember bank at least 

once during each 18-month period, 

rather than each 12-month period as 

provided in paragraph (a) of this 

section, if the following conditions are 

satisfied: 

(1) The bank has total assets of less 

than $500 million; 

(2) The bank is well capitalized as 

defined in § 325.103(b)(1) of this 

chapter; 

(3) At the most recent FDIC or 

applicable State banking agency 

examination, the FDIC—

(i) Assigned the bank a rating of 1 or 

2 for management as part of the bank’s 

composite rating under the Uniform 

Financial Institutions Rating System 

(commonly referred to as CAMELS); and 

(ii) Assigned the bank a composite 

rating of 1 or 2 under the Uniform 

Financial Institutions Rating System 

(copies of which are available at the 

addresses specified in § 309.4 of this 

chapter); 

(4) The bank currently is not subject 

to a formal enforcement proceeding or 

order by the FDIC, OCC or the Federal 

Reserve and 

(5) No person acquired control of the 

bank during the preceding 12-month 

period in which a full-scope, on-site 

examination would have been required 

but for this section. 

* * * * * 

PART 347—INTERNATIONAL 

BANKING 

■ 1. The authority citation for part 347 

continues to read as follows: 

Authority: 12 U.S.C. 1813, 1815, 1817, 

1819, 1820, 1828, 3103, 3104, 3105, 3108, 

3109; Title IX, Pub. L. 98–181, 97 Stat. 1153. 

■ 2. In § 347.211, paragraph (b)(1) 

introductory text is republished and 

paragraph (b)(1)(i) is revised to read as 

follows: 

§ 347.211 Examination of branches of 

foreign banks. 

* * * * * 

(b) 18-month cycle for certain small 

institutions. (1) Mandatory standards. 

The FDIC may conduct a full-scope, onsite examination at least once during 

each 18-month period, rather than each 

12-month period as provided in 

paragraph (a) of this section, if the 

insured branch: 

(i) Has total assets of less than $500 

million; 

* * * * * 

Office of Thrift Supervision 

12 CFR Chapter V 

Authority and Issuance 

■ For the reasons set forth in the joint 

preamble, the OTS amends part 563 of 

Chapter V of title 12 of the Code of 

Federal Regulations as follows: 

PART 563—SAVINGS 

ASSOCIATIONS—OPERATIONS 

■ 1. The authority citation for part 563 

continues to read as follows: 

Authority: 12 U.S.C. 375b, 1462, 1462a, 

1463, 1464, 1467a, 1468, 1817, 1820, 1828, 

1831o, 3806; 31 U.S.C. 5318; 42 U.S.C. 4106. 

■ 2. Section 563.171(b) is revised to 

read as follows: 

§ 563.171 Frequency of safety and 

soundness examination. 

* * * * * 

(b) 18-month rule for certain small 

institutions. The OTS may conduct a 

full-scope, on-site examination of a 

savings association at least once during 

each 18-month period, rather than each 

12-month period as provided in 

paragraph (a) of this section, if the 

following conditions are satisfied: 

(1) The savings association has total 

assets of less than $500 million; 

(2) The savings association is well 

capitalized as defined in § 565.4 of this 

chapter; 

(3) At its most recent examination, the 

OTS—

(i) Assigned the savings association a 

rating of 1 or 2 for management as part 

of the savings association’s composite 

rating under the Uniform Financial 

Institutions Rating System (commonly 

referred to as CAMELS), and 

(ii) Determined that the savings 

association was in outstanding or good 

condition, that is, it received a 

composite rating, as defined in 

§ 516.5(c) of this chapter, of 1 or 2; 

(4) The savings association currently 

is not subject to a formal enforcement 

proceeding or order by the OTS or the 

FDIC; and 

(5) No person acquired control of the 

savings association during the preceding 

12-month period in which a full-scope, 

on-site examination would have been 

required but for this section. 

* * * * * 


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17804 Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 

Dated: March 29, 2007. 

John C. Dugan, 

Comptroller of the Currency, Office of the 

Comptroller of the Currency. 

Board of Governors of the Federal Reserve 

System, April 3, 2007. 

Jennifer J. Johnson, 

Secretary of the Board. 

Dated at Washington, DC, this 20th day of 

March, 2007. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

Dated: April 2, 2007. 

By the Office of Thrift Supervision. 

John M. Reich, 

Director. 

[FR Doc. 07–1716 Filed 4–9–07; 8:45 am] 

BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P; 

6720–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 71 

[Docket No. FAA–2006–24826; Airspace 

Docket No. 06–ANM–3] 

Establishment of Class E Airspace; 

Nucla, CO 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; correction. 

SUMMARY: This action corrects an error 

in the northwest boundary description 

of a final rule that was published in the 

Federal Register on February 23, 2007 

(72 FR 8100) Federal Register Docket 

No. FAA–2006–24826, Airspace Docket 

No. 06–ANM–3. 

DATES: Effective Date: 0901 UTC, May 

10, 2007. The Director of the Federal 

Register approves this incorporation by 

reference action under 1 CFR part 51, 

subject to the annual revision of FAA 

Order 7400.9 and publication of 

conforming amendments. 

FOR FURTHER INFORMATION CONTACT: Ed 

Haeseker, Federal Aviation 

Administration, Western Service Area, 

System Support Group, 1601 Lind 

Avenue, SW., Renton, WA 98057; 

telephone: (425) 917–6714. 

SUPPLEMENTARY INFORMATION: 

History 

Federal Register Docket FAA–2006–

24826, Airspace Docket No. 06–ANM–3, 

published on February 23, 2007 (72 FR 

8100), establishes Class E Airspace at 

Hopkins Field, Nucla, CO, effective May 

10, 2007. An error was discovered in the 

northwest geographic boundary of the 

Class E airspace. This action corrects 

this error. 

Correction to Final Rule 

■ Accordingly, pursuant to the authority 

delegated to me, the legal description as 

published in the Federal Register 

February 23, 2007 (72 FR 8100), Federal 

Register Docket No. FAA–2006–24826, 

Airspace Docket No. 06–ANM–3, and 

incorporated by reference in 14 CFR 

71.1, is corrected as follows: 

PART 71—[AMENDED] 

§ 71.1 [Amended] 

* * * * * 

ANM CO E5 Nucla, CO [Corrected] 

Hopkins Field, CO 

(Lat. 38°14′20′′ N., long. 108°33′48′′ W.) 

That airspace extending upward from 700 

feet above the surface within a 6.0-mile 

radius of Hopkins Field and within 4 miles 

each side of the 317° bearing from Hopkins 

Field extending from the 6.0-mile radius of 

Hopkins Field northwest to 12.0 miles from 

Hopkins Field; that airspace extending 

upward from 1,200 feet above the surface 

beginning at lat. 38°45′00′′ N., long. 

109°00′00′′ W.; to lat. 38°30′00′′ N., long. 

108°30′00′′ W.; to CONES VOR/DME; to 

DOVE CREEK VORTAC; to lat. 38°30′00′′ N., 

long. 109°10′00′′ W.; to point of beginning. 

* * * * * 

Issued in Seattle, Washington, on March 

30, 2007. 

Steven M. Osterdahl, 

Director of Operations, En Route and Oceanic, 

Western Service Area. 

[FR Doc. E7–6649 Filed 4–9–07; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9322] 

RIN 1545–BG26 

Anti-Avoidance and Anti-Loss 

Reimportation Rules Applicable 

Following a Loss on Disposition of 

Stock of Consolidated Subsidiaries 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final and temporary 

regulations. 

SUMMARY: This document contains final 

and temporary regulations under section 

1502 of the Internal Revenue Code 

(Code). These regulations provide 

guidance to corporations filing 

consolidated returns. These regulations 

apply an anti-avoidance rule and revise 

an anti-loss reimportation rule that 

applies following a disposition of stock 

of a subsidiary at a loss. The text of the 

temporary regulations also serves as the 

text of the proposed regulations (REG–

156420–06) set forth in the notice of 

proposed rulemaking on this subject in 

the Proposed Rules section in this issue 

of the Federal Register. 

DATES: Effective Date: These regulations 

are effective April 10, 2007. 

Applicability Date: For dates of 

applicability, see §§ 1.1502–32T(k) and 

1.1502–35T(j)(2). 

FOR FURTHER INFORMATION CONTACT: 

Theresa Abell, (202) 622–7700 or 

Phoebe Bennett, (202) 622–7770 (not 

toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

Section 1.1502–35 currently addresses 

loss duplication. The rule generally 

applies whenever there is a disposition 

of loss shares of subsidiary stock or a 

subsidiary is deconsolidated. The 

regulation includes several specific antiabuse rules, including a rule intended to 

prevent a group from getting the benefit 

of a loss on the stock of one of its 

subsidiaries and then reimporting the 

same economic loss back to into the 

group (or its successor) in order to claim 

a duplicative benefit from the one loss. 

The current anti-loss reimportation 

rule generally disallows reimported 

losses that duplicate a loss recognized 

and allowed with respect to the 

disposition of subsidiary stock. The 

term ‘‘subsidiary’’ is defined in 

§ 1.1502–1(c) to mean a corporation that 

is a member of a consolidated group but 

is not the common parent of the group. 

Taxpayers have attempted to avoid the 

anti-loss reimportation rule by first 

deconsolidating a subsidiary and then 

selling loss shares of the subsidiary’s 

stock. The loss on the stock is one that 

was reflected in the subsidiary’s 

attributes at the time of the 

deconsolidation and is thus one that the 

anti-loss reimportation rule is intended 

to address. But because the sale occurs 

after the subsidiary ceases to be a 

member of the group, taxpayers take the 

position that the loss recognized is not 

with respect to ‘‘subsidiary’’ stock and 

therefore is not subject to the anti-loss 

reimportation rule. Thus, after obtaining 

the tax benefit of its economic loss (on 

the disposition of the stock), the group 

would be free to reimport the loss and 

then (directly or through a successor 

group) claim a second tax benefit for its 

one economic loss. 

The IRS and Treasury Department 

believe that the duplication of a group 


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