This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

19375 

Vol. 72, No. 74 

Wednesday, April 18, 2007 

1Under the regulation, before being modified by 

the Interim Policy adopted by the FDIC Board of 

Directors in April 2004, the staff responsible for 

examination of FDIC-insured depository 

institutions were prohibited from obtaining credit 

from an FDIC-insured State nonmember bank, any 

subsidiary of such bank, or any person associated 

with such bank. No exceptions were made for home 

mortgages. An exception was made for credit cards 

issued outside the region or field office of 

assignment. Corporation officials in top 

management positions were prohibited under the 

regulation from entering into financial obligations 

with an institution over which the Corporation had 

primary Federal supervisory authority and its 

subsidiaries. An employee in the Division of 

Finance, Division of Insurance and Research, 

Division of Resolutions and Receiverships, the 

Legal Division, or who was a member of a standing 

committee of the Board of Directors, was prohibited 

from obtaining credit from an FDIC-insured 

depository institution or its subsidiary for a period 

of two years after the employee had participated 

personally and substantially in certain matters 

affecting the institution, its predecessor, successor, 

or affiliate. An exception was made for ordinary 

credit cards. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

5 CFR Part 3201 

RIN 3209–AA15 

Supplemental Standards of Ethical 

Conduct for FDIC Employees 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The FDIC is finalizing the 

proposed rule to amend existing FDIC 

ethics regulations involving extensions 

of credit, ownership of stock, and 

definitions. It implements the 

Preserving Independence of Financial 

Institution Examinations Act of 2003, 

which amended sections 212 and 213 of 

title 18 of the United States Code. These 

sections continue generally to impose 

criminal penalties on examiners’ 

borrowing from banks they have 

examined, and financial institutions’ 

extending a loan to anyone who 

examines or has authority to examine 

that institution. The statutory 

amendment, however, decriminalizes 

extensions of credit to examiners for 

credit cards and for primary residential 

home loans from institutions that they 

examine or have authority to examine if 

these loans are made on the same terms 

and conditions as are available to other 

cardholders and borrowers and satisfy 

other criteria contained in the statute as 

amended. Additionally, the final rule 

clarifies and makes minor revisions to 

definitions and restrictions for FDIC 

employees’ acquisition, ownership, or 

control of securities of FDIC-insured 

depository institutions and certain 

holding companies. 

DATES: The final rule is effective May 

18, 2007. 

FOR FURTHER INFORMATION CONTACT: 

FDIC: Robert J. Fagan, Ethics Program 

Manager, Legal Division, (202) 898– 

6808; and Michelle Borzillo, Counsel, 

Legal Division, (202) 898–7400. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On December 4, 2006, the FDIC 

published a notice of proposed 

rulemaking to amend 5 CFR part 3201, 

entitled ‘‘Supplemental Standards of 

Ethical Conduct for FDIC Employees.’’ 

The FDIC is adopting the proposed rule 

as final. It addresses issues involving 

extensions of credit to all FDIC 

employees, including FDIC employees 

covered by the amended criminal 

statutes pertaining to examiners, 

members of the FDIC Board of Directors, 

Division and Office Directors, and their 

direct subordinates, as well as 

employees in the Corporate Employee 

Program who perform examiner 

functions (‘‘covered employees’’). This 

final rule also clarifies and makes minor 

revisions to the provisions governing 

employee ownership of stock and the 

definitions used in the regulation. 

On December 19, 2003, the President 

signed Public Law 108–198, the 

Preserving Independence of Financial 

Institution Examinations Act of 2003. 

The bill amended sections 212 and 213 

of title 18 of the United States Code. 

These sections continue generally to 

impose criminal penalties on examiners’ 

borrowing from banks they examine, 

and financial institutions’ extending a 

loan to anyone who examines or has 

authority to examine that institution. 

The amendment, however, 

decriminalizes extensions of credit to 

examiners for credit cards and for 

primary residential home loans from 

institutions that they examine or have 

authority to examine if these loans are 

made on the same terms and conditions 

as are available to other cardholders and 

borrowers. 

The amended statute at 18 U.S.C. 212 

provides that, subject to the exception 

noted above, any officer, director, or 

employee of a financial institution, who 

makes or grants any loan or gratuity, to 

any examiner or assistant examiner who 

examines or has authority to examine 

such bank, branch, agency, organization, 

corporation, association, or institution is 

subject to criminal penalties. 

Under 18 U.S.C. 213, as amended, any 

examiner or assistant examiner who 

accepts a loan or gratuity, except for 

primary residential loans or credit cards 

described in this final rule, from any 

bank, branch, agency, organization, 

corporation, association, or institution 

examined by the examiner or from any 

person connected with it, is subject to 

criminal penalties and will be 

disqualified from holding office as an 

examiner. 

On April 7, 2004, based on the 

statutory amendments, FDIC’s Board of 

Directors adopted the Interim Policy on 

Credit Cards and Home Mortgages 

(‘‘Interim Policy’’) pending revisions to 

the FDIC’s existing regulation on 

extensions of credit. The Interim Policy 

permits extensions of credit in the form 

of home mortgages for primary 

residences and credit cards under 

certain conditions. This final rule 

replaces the Interim Policy and 

supersedes the current version of 5 CFR 

3201.102.1

Additionally, the final rule clarifies 

and makes revisions to 5 CFR 3201.103, 

which restricts FDIC employees’ 

acquisition, ownership, or control of 

securities of FDIC-insured depository 

institutions and certain holding 

companies. Finally, the final rule makes 

appropriate revisions to the definitions 

in 5 CFR 3201.101. 

In making these regulatory revisions 

in part pursuant to its rulemaking 

authority under 18 U.S.C. 212(b), the 

FDIC has consulted with the other 

Federal financial institution regulatory 

agencies. In addition, the FDIC has 

determined, with Office of Government 

Ethics (OGE) concurrence, that, under 5 

CFR 2635.403(a) of the executive branch 

standards of ethical conduct, these 


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revised provisions as to FDIC 

employees, their spouses and minor 

children, are needed so that a 

reasonable person would not question 

the impartiality and objectivity with 

which agency programs are 

administered. Further, with respect to 

the revised restrictions and prohibitions 

on the holding of financial interests 

(including indebtedness, i.e., certain 

extensions of credit and loans) by the 

spouses and minor children of FDIC 

employees and covered FDIC 

employees, the FDIC has determined 

that there is a direct and appropriate 

nexus between such restrictions and 

prohibitions as applied to spouses and 

minor children and the efficiency of the 

service. 

II. Comments on the Proposed Rule 

The FDIC received one comment on 

the proposed rule. The commenter 

addressed only the use of plain language 

and did not comment on the substance 

of the rule. The commenter offered 

several plain language suggestions 

which the commenter believes would 

make the rule easier to read and 

understand. 

The FDIC has considered these 

comments and opted to finalize the rule 

as proposed without change for the 

following reasons. The rule restates and 

codifies the FDIC’s longstanding interim 

policy that was well-known and 

understood by FDIC employees and the 

FDIC’s ethics officials. The rule applies 

only to FDIC employees—it does not 

apply to non-FDIC employees and 

therefore has no impact on the public. 

Additionally, OGE concurred in the 

proposed rule prior to its publication as 

required by 5 CFR 2635.105 entitled 

‘‘Supplemental Agency Regulations’’, 

and is also concurring in the final rule. 

The commenter found it confusing 

that the proposed rule used two 

different terms to refer to FDIC 

employees: ‘‘covered employees’’ and 

‘‘FDIC employees.’’ This use of two 

different terms is intentional. The term 

‘‘covered employee’’ is defined in 

§ 3201.101(d)(3) and includes 

employees occupying certain identified 

positions within the FDIC, while other 

provisions of the rule apply to all ‘‘FDIC 

employees.’’ The regulation uses the 

different terms to distinguish between 

the provisions that apply only to 

‘‘covered employees’’ from the 

provisions that apply to all ‘‘FDIC 

employees.’’

For example, the final rule restates the 

general rule that all ‘‘FDIC employees’’

are prohibited from participating in an 

examination, audit, visitation, review, 

or investigation, or any other particular 

matter involving an FDIC-insured 

institution, subsidiary or other person 

with whom that employee has an 

outstanding extension of credit. 

‘‘Covered employees’’ under the final 

rule may obtain a waiver from that 

general prohibition under the 

conditions and circumstances specified 

in the final rule. ‘‘Covered employees’’

are more restricted than all ‘‘FDIC 

employees.’’

III. The Final Rule 

Section 3201.102—Extensions of Credit 

and Loans From FDIC-Insured 

Institutions 

The revision to 5 CFR 3201.102 

retains the existing general prohibitions 

on borrowings and disqualification 

provisions for FDIC employees and 

members of the FDIC Board of Directors. 

Likewise, a current or contingent 

financial obligation of an employee’s 

spouse or minor child is considered to 

be an obligation of the employee. 

However, the final rule in a new 

paragraph (e) authorizes the FDIC Ethics 

Counselor to waive any disqualification 

under this section based on a 

determination with the advice of the 

Legal Division that the waiver is not 

inconsistent with the standards of 

ethical conduct for employees of the 

executive branch as set forth in 5 CFR 

part 2635 or otherwise prohibited by 

law and that, under the particular 

circumstances, application of the 

prohibition is not necessary to avoid the 

appearance of misuse of position or loss 

of impartiality and objectivity with 

which the FDIC programs are 

administered. 

The final rule, in keeping with the 

amended statutes at 18 U.S.C. 212 and 

213, eliminates the current regulatory 

disqualification for FDIC examiners, 

FDIC Board members, Division and 

Office Directors, and their immediate 

subordinates, and employees in the 

Corporate Employee Program 

performing examiner duties (defined as 

‘‘covered employees’’ in 

§ 3201.101(d)(3) of the rule), who obtain 

credit cards on terms and conditions no 

more favorable than generally available 

to other borrowers. See new paragraphs 

(c)(1) and (c)(2) of § 3201.102. Covered 

employees assigned to a bank from 

which they hold a credit card must 

inform their supervisor and ethics 

official prior to the examination or other 

participation in a matter involving the 

bank if any issue exists such as noncurrent payments, a billing dispute, or 

if negotiating with the bank concerning 

the debt. In certain cases, a 

disqualification will be required. Under 

paragraph (d)(4) of § 3201.102, covered 

employees and their spouses and minor 

children are prohibited from applying 

for or receiving a credit card from an 

institution if the covered employee is 

assigned or about to be assigned to an 

examination of that institution. 

Under § 3201.102(c)(3)(ii), 

disqualification will continue to be 

generally required for residential real 

property loans on a primary residence. 

However, such loans are permitted in 

accordance with paragraph (c)(2)(ii) of 

§ 3201.102, if the terms and conditions 

are no more favorable than the terms 

and conditions of loans generally 

available to other similarly situated 

creditworthy borrowers. Thus, covered 

FDIC employees can obtain such 

permitted loans, but will need to be 

recused from official participation in 

any particular matters involving the 

lending institution or person. The final 

rule also covers limitations, restrictions, 

and the mechanism for waiver of the 

disqualification from participation in an 

examination or other matter in 

appropriate circumstances, under 

paragraphs (c)(4), (c)(5), (d) and (e) of 

§ 3201.102, as amended. 

As previously noted above, a new 

general waiver will be available under 

the final rule in certain circumstances. 

Specifically, paragraph (e) of § 3201.102 

authorizes the Ethics Counselor to 

waive any provision based on a 

determination with the advice of the 

Legal Division that the waiver is not 

inconsistent with the standards of 

ethical conduct for employees of the 

executive branch as set forth in 5 CFR 

part 2635 or otherwise prohibited by 

law and that, under the particular 

circumstances, application of the 

prohibition is not necessary to avoid the 

appearance of misuse of position or loss 

of impartiality and objectivity with 

which the FDIC programs are 

administered. A waiver under paragraph 

(e) of § 3201.102 could impose 

appropriate conditions, such as 

requiring the execution of a written 

disqualification. 

Under paragraph (c)(5)(i) of 

§ 3201.102, a covered FDIC employee is 

not prohibited from retaining a loan or 

extension of credit from a State 

nonmember bank or its subsidiary on its 

original terms if it was obtained prior to 

FDIC employment or reassignment to a 

covered employee position, or a result 

of the sale, or transfer of the loan or 

credit extension to, or the conversion or 

merger of the lender into, such a bank 

(or subsidiary). However, any renewal 

or renegotiation of such a pre-existing 

loan or credit extension is subject to the 

prohibitions in paragraphs (c)(3) and 

(c)(4) of § 3201.102, subject to an 

exception noted in the following 

sentence. Under paragraph (c)(5)(ii) of 


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§ 3201.102, a covered employee who 

experiences financial or other hardship 

unless allowed to renegotiate credit 

incurred prior to FDIC employment or 

reassignment of duties could submit a 

request for a waiver to his or her 

supervisor and the Ethics Counselor 

setting forth the reasons for the desired 

renegotiation and other details. After 

consideration, the employee’s 

supervisor and the Ethics Counselor 

could jointly grant a written waiver of 

the prohibition based on a finding that 

the renegotiation would not be 

prohibited by law and that the waiver 

would not result in a loss of impartiality 

or objectivity or misuse of the 

employee’s position. 

Paragraph (d) of § 3201.102 of the 

final rule also prohibits an FDIC 

employee (other than examiners who 

are covered by the statutory prohibition 

under 18 U.S.C. 212 and 213) from 

directly or indirectly accepting or 

becoming obligated on any extension of 

credit from an FDIC-insured depository 

institution or its subsidiary for a period 

of two years from the date of the 

employee’s last personal and substantial 

participation in an audit, resolution, 

liquidation, assistance transaction, 

supervisory proceeding, or internal 

agency deliberation affecting that 

particular institution, its predecessor or 

successor, or any subsidiary of such 

institution. This prohibition does not 

apply to credit obtained through the use 

of a credit card or a residential real 

property loan secured by the principal 

residence of the employee, subject to the 

same conditions, limitations, 

disqualification, and waiver procedures 

applicable to covered employees under 

paragraphs (c) and (e) of § 3201.102. 

Section 3201.103—Prohibition on 

Acquisition, Ownership or Control of 

Securities of FDIC-Insured Depository 

Institutions and Certain Holding 

Companies 

In addition, this final rule amends 5 

CFR 3201.103, which generally provides 

in paragraph (a), with certain exceptions 

set forth in paragraph (b), that no FDIC 

employee, spouse of an employee, or 

minor child of an employee may 

acquire, own, or control, directly or 

indirectly, a security of an FDIC-insured 

depository institution or its affiliate. 

The existing regulation at 5 CFR 

3201.103(b) provides six exceptions to 

that general prohibition: (1) Acquiring, 

owning, or controlling securities of 

certain bank holding companies or their 

nonbank subsidiaries that are publicly 

traded, not primarily engaged in 

banking, and exempt from the Bank 

Holding Company Act; (2) acquiring, 

owning, or controlling securities of 

certain nonfinancial savings association 

holding companies; (3) retaining 

securities of an FDIC-insured depository 

institution or affiliate if retention was 

permitted under 12 CFR part 336 prior 

to a certain date, prior to employment 

with the FDIC, or when the securities 

were acquired by a spouse prior to his 

or her marriage to the employee; (4) 

acquiring, owning, or controlling 

securities of an FDIC-insured depository 

institution or affiliate if acquired by 

inheritance, gift, stock split, involuntary 

stock dividend, merger, acquisition, or 

other change in corporate ownership, 

exercise of preemptive right, or 

otherwise without specific intent to 

acquire it, or if acquired by a spouse or 

minor child as part of a compensation 

package from their employer, subject to 

certain disclosure and disqualification 

requirements; (5) acquiring, owning, or 

controlling an interest in certain 

publicly traded or publicly available 

investment funds; and (6) using an 

FDIC-insured depository institution or 

affiliate as a custodian or trustee of 

accounts containing tax-deferred 

retirement funds. The final rule narrows 

the scope of these prohibitions and 

generally clarifies the prohibitions of 

this section. 

Revised § 3201.103(a) as revised 

narrows the scope of the general 

prohibition concerning ownership and 

control of a security by FDIC employees, 

spouses and their minor children by 

removing the prohibitions on ownership 

of securities with respect to insured 

depository institution affiliates, other 

than certain holding companies. The 

reason for eliminating other affiliates 

from the prohibition is that the potential 

for a conflict of interest is generally only 

present when there is ownership or 

control of a company that in turn has 

control of an insured depository 

institution. Affiliates other than holding 

companies do not own, and generally do 

not control, an insured depository 

institution that is their parent or sister 

organization. 

Section 3201.103 as revised generally 

prohibits ownership of a security of, in 

addition to an FDIC-insured bank or 

savings association; a bank holding 

company that is subject to supervision 

by the Federal Reserve Board (FRB); a 

savings and loan holding company that 

is subject to supervision by the Office of 

Thrift Supervision (OTS); a financial 

holding company that is subject to 

supervision by the FRB; and a company 

that (i) owns or controls an FDICinsured bank or savings association, (ii) 

is not an FRB-supervised bank holding 

company, an OTS-supervised savings 

and loan holding company, nor an FRBsupervised financial holding company, 

and (iii) either is primarily engaged in 

banking or is not publicly traded on a 

U.S. securities exchange. These 

categories, in appropriate cases, cover 

companies that control industrial banks. 

Section 3201.103 as revised also 

creates in paragraph (b)(1), a specific 

exception for acquisition, ownership, or 

control of securities of a unitary thrift 

holding company. In addition, the final 

rule reorganizes the descriptions of the 

prohibited securities and exceptions. 

The intent of the reorganization is to 

make this section clearer and more 

useable. The final rule retains in revised 

paragraphs (b) and (c) the other existing 

exceptions, limitations, and divestiture 

requirements of § 3201.103. Moreover, 

in a new paragraph (d) of this section, 

the final rule adds a provision for 

written waiver in appropriate 

circumstances by the Ethics Counselor, 

with Legal Division advice and legal 

clearance, of any provision of the 

section that is identical to the 

§ 3201.102(e) waiver provision 

discussed above. 

Section 3201.101(d)—General Section; 

Definitions 

Finally, the definitional section at 

paragraph (d) of § 3201.101 is amended 

to add and revise certain useful 

definitions and delete others (‘‘assisted 

entity’’ and ‘‘assuming entity’’) that are 

no longer used. 

The term ‘‘covered employees’’ is 

expanded to include employees whose 

duties and responsibilities include the 

examination of a financial institution or 

participation in the examination of any 

financial institution. The FDIC is 

republishing all the definitions in the 

paragraph, including those not being 

revised, for ease of reference. 

Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

requires that each Federal agency either 

certify that a final rule would not have 

a significant impact on a substantial 

number of small entities. See 5 U.S.C. 

603, 605. The Small Business 

Administration (SBA) defines small 

banks as those with less than $165 

million in assets. The final rule 

implements the statutory 

decriminalization under certain 

circumstances of extensions of credit to 

FDIC examiners for credit cards and for 

primary residential home loans from 

institutions that they examine and 

clarifies certain restrictions on the 

acquisition, ownership, or control of 

securities of FDIC-insured depository 

institutions and certain holding 

companies on the part of FDIC 

employees. The final rule does not 

impose any obligations or restrictions 


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on depository institutions, including 

small depository institutions. On this 

basis, the FDIC certifies pursuant to 5 

U.S.C. 605(b) that this final rule will not 

have a significant impact on a 

substantial number of small entities. 

Paperwork Reduction Act 

The FDIC has determined that the 

final rule does not involve a collection 

of information pursuant to the 

provisions of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). 

The Treasury and General Government 

Appropriations Act, 1999—Assessment 

of Federal Regulations and Policies on 

Families 

The FDIC has determined that the 

final rule will not affect family wellbeing within the meaning of section 654 

of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681). 

Small Business Regulatory Enforcement 

Fairness Act 

The final rule relates to agency 

management or personnel, and the final 

rule is therefore not covered by the 

Small Business Regulatory Enforcement 

Fairness Act of 1996 (‘‘SBREFA’’) (5 

U.S.C. 801 et seq.). 5 U.S.C. 804(3)(B). 

List of Subjects in 5 CFR Part 3201 

Conflict of interests, Ethical conduct, 

Extensions of credit and loans from 

FDIC-insured depository institutions, 

Government employees, Prohibitions on 

ownership of securities of FDIC-insured 

depository institutions. 

■ For the reasons set forth in the 

preamble, the Board of Directors of the 

FDIC, with the concurrence of OGE, 

amends part 3201 of title 5 of the Code 

of Federal Regulations as follows: 

PART 3201—SUPPLEMENTAL 

STANDARDS OF ETHICAL CONDUCT 

FOR EMPLOYEES OF THE FEDERAL 

DEPOSIT INSURANCE CORPORATION 

■ 1. The authority citation for 5 CFR 

part 3201 is revised to read as follows: 

Authority: 5 U.S.C. 7301; 5 U.S.C. App. 

(Ethics in Government Act of 1978); 12 

U.S.C. 1819(a), 1822; 18 U.S.C. 212, 213; 26 

U.S.C. 1043; E.O. 12674, 54 FR 15159, 3 CFR, 

1989 Comp., p. 215, as modified by E.O. 

12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 

306; 5 CFR 2635.105, 2635.403, 2635.502, 

2635.803. 

■ 2. Paragraph (d) of § 3201.101 is 

revised to read as follows: 

§ 3201.101 General. 

* * * * * 

(d) Definitions. For purposes of this 

part, the following definitions apply: 

(1) Affiliate, as defined in 12 U.S.C. 

1841(k), means any company that 

controls, is controlled by, or is under 

common control with another company. 

(2) Appropriate director means the 

head of a Washington office or division 

or the highest ranking official assigned 

to a regional office in each division or 

the Ethics Counselor. 

(3) Covered employee means: 

(i) Members of the FDIC Board of 

Directors and any employee required to 

file a public or confidential financial 

disclosure under 5 CFR part 2634 who 

holds a position immediately 

subordinate to such Board member; 

(ii) The director of any Washington 

division or office and the director of any 

regional office, and any employee 

required to file a public or confidential 

financial disclosure report under 5 CFR 

part 2634 who holds a position 

immediately subordinate to such 

director; 

(iii) An FDIC examiner; 

(iv) Any other FDIC employee whose 

duties and responsibilities include the 

examination of or the participation in 

the examination of any financial 

institution; 

(v) Any other FDIC employee whose 

duties and responsibilities, as 

determined by the Chairman or Ethics 

Counselor after notice to the employee, 

require application of the prohibition on 

borrowing contained in § 3201.102 to 

ensure public confidence that the 

FDIC’s programs are conducted 

impartially and objectively. 

(4) Employee means an officer or 

employee, other than a special 

Government employee, of the 

Corporation, including a member of the 

Board of Directors appointed under the 

authority of 12 U.S.C. 1812(a)(1)(C). For 

purposes of 5 CFR part 2635 and 

§§ 3201.103 and 3201.104, employee 

includes any individual who, pursuant 

to a contract or any other arrangement, 

performs functions or activities of the 

Corporation, under the direct 

supervision of an officer or employee of 

the Corporation. 

(5) Ethics Counselor means an officer 

or employee who is designated by the 

head of the agency to coordinate and 

manage the agency’s ethics program, 

and includes the Corporation’s 

Alternate Ethics Counselor. 

(6) Security includes an interest in 

debt or equity instruments. The term 

includes, without limitation, a secured 

or unsecured bond, debenture, note, 

securitized assets, commercial paper, 

and all types of preferred and common 

stock. The term includes an interest or 

right in a security, whether current or 

contingent, a beneficial or legal interest 

derived from a trust, the right to acquire 

or dispose of any long or short position, 

an interest convertible into a security, 

and an option, right, warrant, put, or 

call with respect to a security. The term 

security does not include a deposit 

account. 

(7) State nonmember bank means any 

State bank as defined in 12 U.S.C. 

1813(e) that is not a member of the 

Federal Reserve System. 

(8) Subsidiary, as defined in 12 U.S.C. 

1813(w), means any company that is 

owned or controlled directly or 

indirectly by another company. 

■ 3. Section 3201.102 is revised to read 

as follows: 

§ 3201.102 Extensions of credit and loans 

from FDIC-insured institutions. 

(a) Credit subject to this section. The 

prohibition, disqualification, and 

retention provisions of this section 

apply to a current or contingent 

financial obligation of the employee. For 

purposes of this section, a current or 

contingent financial obligation of an 

employee’s spouse or minor child is 

considered to be an obligation of the 

employee. 

(b) Disqualification applicable to 

FDIC employees generally. Except as 

provided in this section: 

(1) No FDIC employee may participate 

in an examination, audit, visitation, 

review, or investigation, or any other 

particular matter involving an FDICinsured institution, subsidiary or other 

person with whom the employee has an 

outstanding extension of credit. 

(2) For employees, other than covered 

employees as defined in 

§ 3201.101(d)(3), disqualification is not 

required if the credit was extended 

through the use of a credit card on the 

same terms and conditions as are 

offered to the general public. 

(3) The Comptroller of the Currency 

and the Director of the Office of Thrift 

Supervision shall be disqualified from 

any matter pending before the FDIC 

Board of Directors to the same extent as 

an FDIC employee subject to paragraph 

(c) of this section. 

(c) Prohibited borrowing by covered 

employees. (1) Prohibition on covered 

employee borrowing—Except as 

provided below, no covered employee 

shall, directly or indirectly, accept or 

become obligated on a loan or extension 

of credit, whether current or contingent, 

from any FDIC-insured State 

nonmember bank or its subsidiary or 

from an officer, director, or employee, of 

any FDIC-insured State nonmember 

bank or its subsidiary. 


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(2) Exceptions: (i) Credit Cards. A 

covered employee (or spouse or minor 

child of a covered employee) may obtain 

and hold a credit card account 

established under an open end 

consumer credit plan and issued by an 

FDIC-insured State nonmember bank or 

its subsidiary subject to the following 

conditions: 

(A) The cardholder must satisfy all 

financial requirements for the credit 

card account that are generally 

applicable to all applicants for the same 

type of credit card account; and 

(B) The terms and conditions 

applicable with respect to the account 

and any credit extended to the 

cardholder under the account are no 

more favorable generally to the 

cardholder than the terms and 

conditions that are generally applicable 

to credit card accounts offered by the 

same bank (or the same subsidiary) to 

other cardholders in comparable 

circumstances under open end 

consumer credit plans. 

(ii) Loans secured primarily by 

principal residence. A covered 

employee (or a spouse or minor child of 

a covered employee) may obtain and 

hold a loan from an FDIC-insured State 

nonmember bank or its subsidiary 

subject to the following conditions: 

(A) The loan is secured by residential 

real property that is the principal 

residence of the borrower. The borrower 

may retain the loan if the residential 

real property ceases to be the principal 

residence. However, any subsequent 

renewal or renegotiation of the original 

terms of such a loan must meet the 

requirements of this paragraph; 

(B) The borrower may not apply for 

the loan while the covered employee 

participates in any examination, the 

review of any application, or any other 

supervisory or regulatory or other 

particular matter directly affecting the 

State nonmember bank or its 

subsidiaries; 

(C) The borrower must satisfy all 

financial requirements for the loan that 

are generally applicable to all applicants 

for the same type of residential real 

property loan; and 

(D) The terms and conditions 

applicable with respect to the loan and 

any credit extended to the borrower 

under the loan are no more favorable 

generally to the borrower than the terms 

and conditions that are generally 

applicable to residential real property 

loans offered by the same State 

nonmember bank or the same subsidiary 

to other borrowers in comparable 

circumstances for residential real 

property loans. 

(3) Disqualification of covered 

employees. A covered employee shall 

not participate in an examination, audit, 

visitation, review, or investigation, or 

other particular matter involving an 

FDIC-insured depository institution or 

other person with whom the covered 

employee has an outstanding extension 

of credit, or with whom the covered 

employee is negotiating an extension of 

credit. 

(i) Payment dispute, delinquency, or 

other significant matter concerning 

credit card debt. Disqualification is not 

required if the credit is extended 

through the use of a credit card. 

However, disqualification will be 

required when a covered employee is 

delinquent on payments, has a billing 

dispute, is negotiating with the 

institution, or has any other significant 

issue regarding the credit card debt. The 

covered employee must notify his or her 

supervisor and deputy ethics counselor 

of a dispute in writing. 

(ii) Primary residence mortgage loan. 

Disqualification will be required if the 

covered employee is negotiating for, has 

an application pending for, or enters 

into a primary residence mortgage loan. 

This disqualification will cease when 

the loan is sold, even if the loan 

originator retains the loan servicing. 

(4) Other limitations on covered 

employees. (i) A covered employee shall 

not accept or become obligated on an 

otherwise permissible loan if the 

disqualification arising from the credit 

relationship would materially impair 

the covered employee’s ability to 

participate in matters that are central to 

the performance of the covered 

employee’s official duties, or if the 

covered employee has been advised of 

an assignment to handle a matter 

involving that institution. (ii) Covered 

employees to whom the prohibitions in 

this section apply may not apply for a 

credit card or primary residence 

mortgage loan from a State nonmember 

bank or subsidiary that the covered 

employee is assigned to examine or 

participate in a matter involving that 

institution, or if such an assignment is 

imminent. 

(5) Pre-existing credit. (i) This section 

does not prohibit a covered employee, 

or any FDIC employee who becomes a 

covered employee as a result of any 

reassignment of duties or position, from 

retaining a loan or extension of credit 

from a State nonmember bank or its 

subsidiary on its original terms if the 

loan or extension of credit was incurred 

prior to employment by the FDIC or as 

a result of the sale or transfer of a loan 

or credit to a State nonmember bank or 

its subsidiary or the conversion or 

merger of the lender into a State 

nonmember bank or its subsidiary. Any 

renewal or renegotiation of a preexisting loan or extension of credit will 

be treated as a new loan or extension of 

credit subject to the prohibitions at 

paragraphs (c)(3) and (c)(4) of this 

section. 

(ii) A covered employee may request 

that an exception be made to the 

prohibitions to permit renegotiation of a 

pre-existing loan or extension of credit. 

If a covered employee would experience 

financial or other hardship unless 

allowed to renegotiate a pre-existing 

loan or extension of credit, the covered 

employee may submit a written request 

to his or her supervisor and to the Ethics 

Counselor, describing the reasons for 

renegotiation, the original and the 

proposed terms and conditions, 

including whether the financial 

institution makes such terms generally 

available to the public, and any attempts 

by the covered employee to move the 

loan to a non-prohibited source. After 

consideration of the request, the covered 

employee’s supervisor and the Ethics 

Counselor jointly may grant the waiver 

upon a finding that renegotiation is not 

prohibited by law, and that the waiver 

does not result in a loss of impartiality 

or objectivity or in misuse of the 

employee’s position. To be effective, the 

waiver must be in writing. 

(d) Two-year prohibition on 

acceptance of credit from an FDICinsured depository institution. An FDIC 

employee shall not, directly or 

indirectly, accept or become obligated 

on any extension of credit from an 

FDIC-insured depository institution or 

its subsidiary for a period of two years 

from the date of the employee’s last 

personal and substantial participation in 

an audit, resolution, liquidation, 

assistance transactions, supervisory 

proceeding, or internal agency 

deliberation affecting that particular 

institution, its predecessor or successor, 

or any subsidiary of such institution. 

This prohibition does not apply to 

credit obtained through the use of a 

credit card or a residential real property 

loan secured by the principal residence 

of the employee, subject to the same 

conditions, limitations, disqualification, 

and waiver procedures applicable to 

covered employees under paragraphs (c) 

and (e) of this section. 

(e) Waiver. The Ethics Counselor may 

grant a written waiver from any 

provision of this section based on a 

determination made with the advice and 

legal clearance of the Legal Division that 

the waiver is not inconsistent with part 

2635 of this title or otherwise prohibited 

by law, and that, under the particular 

circumstances, application of the 

prohibition is not necessary to avoid the 

appearance of misuse of position or loss 

of impartiality, or otherwise to ensure 


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19380 Federal Register / Vol. 72, No. 74 / Wednesday, April 18, 2007 / Rules and Regulations 

confidence in the impartiality and 

objectivity with which the FDIC’s 

programs are administered. A waiver 

under this paragraph may impose 

appropriate conditions, such as 

requiring execution of a written 

disqualification. 

■ 4. Section 3201.103 is revised to read 

as follows: 

§ 3201.103 Prohibition on acquisition, 

ownership, or control of securities of FDICinsured depository institutions and certain 

holding companies. 

(a) Prohibition on acquisition, 

ownership, or control. Except as 

provided in paragraph (b) of this 

section, no employee, spouse of an 

employee, or minor child of an 

employee may acquire, own, or control, 

directly or indirectly, a security of any 

of the following: 

(1) A bank or savings association that 

is insured by the Federal Deposit 

Insurance Corporation (FDIC); 

(2) A bank holding company that is 

subject to supervision by the Federal 

Reserve Board (FRB); 

(3) A savings and loan holding 

company that is subject to supervision 

by the Office of Thrift Supervision 

(OTS); 

(4) A financial holding company that 

is subject to FRB supervision; or 

(5) A company that: 

(i) Owns or controls an FDIC-insured 

bank or savings association; 

(ii) Is neither an FRB-supervised bank 

holding company, an OTS-supervised 

savings and loan holding company, nor 

an FRB-supervised financial holding 

company; and 

(iii) Is either primarily engaged in 

banking or not publicly traded on a U.S. 

securities exchange. 

(b) Exceptions. Notwithstanding the 

prohibitions of paragraph (a) of this 

section, but subject to the limitations of 

paragraph (c) of this section, an 

employee, or the spouse or minor child 

of an employee, may do any or all of the 

following: 

(1) Acquire, own, or control the 

securities of a unitary thrift holding 

company (i.e., a savings and loan 

holding company that is subject to OTS 

supervision but whose principal 

business is neither banking nor 

activities closely related to banking); 

(2) Own or control a security of an 

entity described in paragraph (a) of this 

section if the security was permitted to 

be retained by the employee under 12 

CFR part 336 prior to May 25, 1995, was 

obtained prior to commencement of 

employment with the Corporation, or 

was acquired by a spouse prior to 

marriage to the employee; 

(3) Own, or control a security of an 

entity described in paragraph (a) of this 

section if: 

(i) The security was acquired by 

inheritance, gift, stock-split, involuntary 

stock dividend, merger, acquisition, or 

other change in corporate ownership, 

exercise of preemptive right, or 

otherwise without specific intent to 

acquire the security, or, by an 

employee’s spouse or minor child as 

part of a compensation package in 

connection with his or her employment; 

(ii) The employee makes full, written 

disclosure on FDIC form 2410/07 to the 

Ethics Counselor within 30 days of the 

commencement of employment or the 

acquisition of the interest; and 

(iii) The employee is disqualified in 

accordance with 5 CFR part 2635, 

subpart D, from participating in any 

particular matter that affects his or her 

financial interests, or that of his or her 

spouse or minor child; 

(4) Acquire, own, or control an 

interest in a publicly traded or publicly 

available investment fund provided 

that, upon initial or subsequent 

investment by the employee (excluding 

ordinary dividend reinvestment), the 

fund does not have invested, or indicate 

in its prospectus the intent to invest, 

more than 30 percent of its assets in the 

securities of one or more entities 

described in paragraph (a) of this 

section and the employee neither 

exercises control nor has the ability to 

exercise control over the financial 

interests held in the fund; and 

(5) Use an FDIC-insured depository 

institution or an affiliate of an FDICinsured depository institution as 

custodian or trustee of accounts 

containing tax-deferred retirement 

funds. 

(c) Divestiture. Based upon a 

determination of substantial conflict 

under 5 CFR 2635.403(b), the Ethics 

Counselor may require an employee, or 

the spouse or minor child of an 

employee, to divest a security he or she 

is otherwise authorized to acquire, own, 

control, or use under paragraph (b) of 

this section. 

(d) Waiver. The Ethics Counselor may 

grant a written waiver from any 

provision of this section based on a 

determination made with the advice and 

legal clearance of the Legal Division that 

the waiver is not inconsistent with part 

2635 of this title or otherwise prohibited 

by law, and that, under the particular 

circumstances, application of the 

prohibition is not necessary to avoid the 

appearance of misuse of position or loss 

of impartiality, or otherwise to ensure 

confidence in the impartiality and 

objectivity with which the FDIC’s 

programs are administered. A waiver 

under this paragraph may impose 

appropriate conditions, such as 

requiring execution of a written 

disqualification. 

By order of the Board of Directors. 

Dated at Washington, DC, this 20th day of 

March, 2007. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

Approved: April 10, 2007. 

Robert I. Cusick, 

Director, Office of Government Ethics. 

[FR Doc. E7–7377 Filed 4–17–07; 8:45 am] 

BILLING CODE 6714–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2007–27898; Directorate 

Identifier 2007–NM–078–AD; Amendment 

39–15029; AD 2007–07–05 R1] 

RIN 2120–AA64 

Airworthiness Directives; Boeing 

Model 777 Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Final rule; request for 

comments. 

SUMMARY: The FAA is revising an 

existing airworthiness directive (AD), 

which applies to all Boeing Model 777 

airplanes. That AD currently requires a 

one-time inspection to determine the 

part number of the left and right air 

supply and cabin pressure controllers 

(ASCPCs), and installation of new 

ASCPC software if necessary. This AD 

requires those same actions. This AD 

also revises the existing AD to allow 

installation of an ASCPC with 

additional versions of software installed 

and to correct a part number reference. 

This AD results from a report of an 

ASCPC failure during flight. We are 

issuing this AD to prevent an ASCPC 

failure that could stop airflow into the 

airplane, inhibit the cabin altitude 

warning message, and cause an 

incorrect display of cabin altitude. 

These failures could result in 

depressurization of the airplane without 

warning. 

DATES: The effective date of this AD is 

April 18, 2007. 

On April 18, 2007 (72 FR 15820, April 

3, 2007), the Director of the Federal 

Register approved the incorporation by 

reference of Boeing Service Bulletin 

777–36A0026, Revision 1, dated 

February 8, 2007. 


rmajette on PROD1PC67 with RULES