[Federal Register Volume 62, Number 166 (Wednesday, August 27, 1997)]
[Rules and Regulations]
[Pages 45307-45309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22798]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 543

[No. 97-83]
RIN 1550-AB06


Incorporation, Organization, and Conversion of Federal Mutual 
Associations

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Thrift Supervision (OTS) is issuing a final rule 
amending its regulations governing conversions to federal mutual 
savings associations. The final rule permits the direct conversion of 
all types of mutual depository institutions into federal mutual savings 
associations. This final rule simplifies the conversion process.

EFFECTIVE DATE: August 27, 1997.

FOR FURTHER INFORMATION CONTACT: David A. Permut, Counsel (Banking and 
Finance) Business Transactions Division (202/906-7505); Scott Ciardi, 
Senior Analyst, Corporate Activities Division (202/906-6960); or Kevin 
A. Corcoran, Assistant Chief Counsel for Business Transactions (202/
906-6962), Business Transactions Division, Chief Counsel's Office, 
Office of Thrift Supervision, 1700 G Street, NW., Washington, D.C. 
20552.

SUPPLEMENTARY INFORMATION:

I. Background

    The OTS is issuing a final regulation that permits all types of 
mutual depository institutions to convert directly to a federal mutual 
savings association charter.<SUP>1</SUP> The regulation is consistent 
with OTS's long-standing position that depository institutions should 
be free to operate under whatever charter best suits their business 
needs, consistent with safety and soundness. The OTS previously has 
granted federal savings associations explicit authority to convert 
directly to a bank charter,<SUP>2</SUP> and has promulgated regulations 
enabling stock depository institutions to convert directly to a federal 
stock savings association charter.<SUP>3</SUP>
---------------------------------------------------------------------------

    \1\ Section 2(5) of the Home Owners' Loan Act defines ``federal 
savings associations'' to include federal savings associations and 
federal savings banks. Accordingly, references herein to federal 
savings associations include federal savings banks.
    \2\ 12 CFR 552.2-7.
    \3\ 12 CFR 552.2-6.
---------------------------------------------------------------------------

    The OTS published a notice of proposed rulemaking regarding direct

[[Page 45308]]

conversions of mutual depository institutions to federal mutual 
charters in the Federal Register on April 2, 1997.<SUP>4</SUP> The 
public comment period closed on June 9, 1997. The OTS received two 
comments regarding the proposal, both from trade associations. Both 
commenters supported the proposal generally, without commenting on 
specific aspects of the proposed regulation. In light of the 
commenters' support and the OTS's continuing belief that this approach 
will promote efficiency and reduce regulatory burden, today's final 
regulation adopts the proposed regulation without changes.
---------------------------------------------------------------------------

    \4\ 62 FR 17115 (April 9, 1997).
---------------------------------------------------------------------------

II. Description of the Final Rule

    Pursuant to its authority under section 5(a) of the Home Owners' 
Loan Act (``HOLA''), the OTS is amending Secs. 543.8 and 543.9 as 
proposed, to permit any type of mutual depository institution to 
convert directly to a federal mutual savings association.<SUP>5</SUP> 
Previously, mutual depository institutions could convert to a federal 
mutual charter indirectly, by chartering a federal mutual association, 
and combining the other depository institution with the new federal 
association in a merger or purchase and assumption transaction. The 
final regulation eliminates unnecessary regulatory burdens associated 
with indirect conversions. The rule applies all existing regulatory 
requirements currently applicable to direct conversions by state mutual 
associations and savings banks to this expanded class of applicants and 
revises Secs. 543.8 and 543.9 as described below.
---------------------------------------------------------------------------

    \5\ As discussed in the proposal, section 5(a) of the HOLA gives 
the OTS plenary authority to provide for the organization and 
regulation of federal savings associations, consistent with the 
``best practices'' of thrift institutions in the United States and 
for the purpose of encouraging such institutions to provide credit 
for housing safely and soundly.
---------------------------------------------------------------------------

    Section 543.8 permits conversions of mutual depository institutions 
to federal mutual associations, subject to three requirements. First, 
the institution must, upon consummation of the conversion, have its 
deposits insured by the Federal Deposit Insurance Corporation 
(``FDIC''). See also Sec. 543.9(c)(3).
    Second, the depository institution, in accomplishing the 
conversion, must comply with all applicable state and federal statutes 
and regulations, and OTS policies, and must obtain all necessary 
regulatory and member approvals. This provision requires, among other 
things, that the converting depository institution have the authority 
to convert to a federal association under the statutes and regulations 
applicable to the converting institution and that the conversion be 
approved by a vote of its members pursuant to the laws applicable to 
the converting institution.
    Third, a depository institution converting to a federal mutual 
association charter must conform with the investment limitations of 
Section 5(c) of the HOLA <SUP>6</SUP> within a time frame prescribed by 
the OTS. Section 552.2-6 of the OTS regulations already contains this 
requirement for federal stock associations.
---------------------------------------------------------------------------

    \6\ 12 U.S.C. 1464(c).
---------------------------------------------------------------------------

    The rule also revises Section 543.9(a) to set forth the filing 
requirements. Section 543.9(c) is revised to eliminate the statement 
that the OTS will not consider the application of a converting 
institution not insured by the FDIC until the FDIC completes an 
eligibility examination. The OTS does not believe it is necessary to 
delay consideration of an application until the eligibility examination 
has been completed. Moreover, the OTS has the ability to deem a 
conversion application incomplete, if processing of the application 
hinges on the final results of the eligibility examination, under the 
application processing procedures at Section 516.2.
    In addition, Section 543.9(c) now explicitly provides that the OTS 
will consider applications to convert to a federal mutual charter under 
the standards set forth at section 5(e) of the HOLA, as well as Section 
543.2(g). The revised regulation explicitly states that converting 
institutions that have been in existence as depository institutions for 
less than three years will be subject to all approval criteria and 
other requirements applicable to de novo federal 
associations.<SUP>7</SUP>
---------------------------------------------------------------------------

    \7\ See 12 CFR 543.3, added by 62 FR 27177, May 19, 1997.
---------------------------------------------------------------------------

    The OTS notes that applicants utilizing the provisions of the new 
direct conversion regulation should file their applications on OTS Form 
number 1582.

IV. Executive Order 12866

    The Director of the OTS has determined that this final rule does 
not constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866.

V. Regulatory Flexibility Act Analysis

    Pursuant to Section 605(b) of the Regulatory Flexibility Act, the 
OTS certifies that this rule, which will reduce regulatory burdens, 
will not have a significant economic impact on a substantial number of 
small entities. The final regulation merely reduces regulatory burden 
for all institutions, including small entities that convert from a 
mutual charter to a federal mutual charter. Accordingly, a Regulatory 
Flexibility Analysis is not required.

VI. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
federal mandate that may result in expenditures by state, local, and 
tribal governments, in the aggregate, or by the private sector, or $100 
million or more in any one year. If a budgetary impact statement is 
required, Section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. The OTS has determined that 
the final rule will not result in expenditures by state, local or 
tribal governments or by the private sector of $100 million or more. 
Accordingly, this rulemaking is not subject to Section 202 of the 
Unfunded Mandates Act.

VII. Effective Date

    The OTS finds good cause for dispensing with the 30-day delayed 
effective date ordinarily prescribed by the Administrative Procedure 
Act (5 U.S.C. 553(d)). This rule confers a benefit on any institution 
wishing to convert to a federal mutual charter by reducing the number 
of steps required for conversion.
    In addition, section 302 of the Community Development and 
Regulatory Improvement Act of 1994 (12 U.S.C. 4802(b)(1)) (CDRIA) 
delays the effective date of regulations promulgated by the Federal 
banking agencies that impose additional reporting, disclosure, or new 
requirements, to the first day of the first calendar quarter following 
publication of the final rule. OTS believes that CDRIA does not apply 
to this final rule because it imposes no new burden.

List of Subjects in 12 CFR Part 543

    Conversions, Reporting and recordkeeping requirements, Savings 
associations.

    Accordingly, the Office of Thrift Supervision amends chapter V, 
title 12, Code of Federal Regulations, as set forth below.

[[Page 45309]]

PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL 
MUTUAL ASSOCIATIONS

    1. The authority citation for part 543 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et 
seq.

    2. Section 543.8 is amended by revising the heading and paragraph 
(a) to read as follows:


Sec. 543.8  Conversion of depository institutions to Federal mutual 
charter.

    (a) With the approval of the OTS, any depository institution, as 
defined in Sec. 552.13 of this chapter, that is in mutual form, may 
convert into a Federal mutual savings association, provided that:
    (1) The depository institution, upon conversion, will have its 
deposits insured by the Federal Deposit Insurance Corporation;
    (2) The depository institution, in accomplishing the conversion, 
complies with all applicable state and federal statutes and 
regulations, and OTS policies, and obtains all necessary regulatory and 
member approvals; and
    (3) The resulting Federal mutual association conforms, within the 
time prescribed by the OTS, to the requirements of section 5(c) of the 
Home Owners' Loan Act.
* * * * *
    3. Section 543.9 is amended by revising paragraph (a) and the 
introductory text of paragraph (c) to read as follows:


Sec. 543.9  Application for conversion to Federal mutual charter.

    (a) Filing. Any depository institution that proposes to convert to 
a Federal mutual association as provided in Sec. 543.8 shall, after 
approval by its board of directors, file in accordance with Sec. 516.1 
of this chapter an application on forms obtained from the OTS. The 
applicant shall submit any financial statements or other information 
the OTS may require.
* * * * *
    (c) Action on application. The OTS will consider such application 
and any information submitted with the application, and may approve the 
application in accordance with section 5(e) of the Home Owners' Loan 
Act and Sec. 543.2(g)(1). Converting depository institutions that have 
been in existence less than three years will be subject to all approval 
criteria and other requirements applicable to de novo Federal 
associations. Approval of an application and issuance by the OTS of a 
charter will be subject to:
* * * * *
    Dated: August 19, 1997.

    By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 97-22798 Filed 8-26-97; 8:45 am]
BILLING CODE 6720-01-P