Federal Register / Vol. 62, No. 166 / Wednesday, August 27, 1997 / Rules and Regulations 45307

Canada, Barclays PLC and Barclays Bank PLC, 76

Federal Reserve Bulletin 158, (1990).

3The terms ‘‘branch’’ and ‘‘agency’’ refer to a U.S.

branch and agency of a foreign bank.

4For purposes of this operating standard, a retail

customer is any customer that is not an ‘‘accredited

investor’’ as defined in 17 CFR 230.501(a).

1Section 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.

(2) Internal controls. (i) Each bank

holding company or foreign bank shall

cause its subsidiary banks, thrifts,

branches or agencies 3 to adopt policies

and procedures, including appropriate

limits on exposure, to govern their

participation in transactions

underwritten or arranged by a section 20

affiliate.

(ii) Each bank holding company or

foreign bank shall ensure that an

independent and thorough credit

evaluation has been undertaken in

connection with participation by a bank,

thrift, or branch or agency in such

transactions, and that adequate

documentation of that evaluation is

maintained for review by examiners of

the appropriate federal banking agency

and the Federal Reserve.

(3) Interlocks restriction. (i) Directors,

officers or employees of a bank or thrift

subsidiary of a bank holding company,

or a bank or thrift subsidiary or branch

or agency of a foreign bank, shall not

serve as a majority of the board of

directors or the chief executive officer of

an affiliated section 20 subsidiary.

(ii) Directors, officers or employees of

a section 20 subsidiary shall not serve

as a majority of the board of directors or

the chief executive officer of an

affiliated bank or thrift subsidiary or

branch or agency, except that the

manager of a branch or agency may act

as a director of the underwriting

subsidiary.

(iii) For purposes of this standard, the

manager of a branch or agency of a

foreign bank generally will be

considered to be the chief executive

officer of the branch or agency.

(4) Customer disclosure—(i)

Disclosure to section 20 customers. A

section 20 subsidiary shall provide each

of its retail customers 4 the same written

and oral disclosures, and obtain the

same customer acknowledgment,

required by the Interagency Statement

on Retail Sales of Nondeposit

Investment Products as if it were a

depository institution.

(ii) Disclosures accompanying

investment advice. A director, officer, or

employee of a bank, thrift, branch or

agency may not express an opinion on

the value or the advisability of the

purchase or the sale of a bank-ineligible

security that he or she knows is being

underwritten or dealt in by a section 20

affiliate unless he or she notifies the

customer of the affiliate’s role.

(5) Intra-day credit. Any intra-day

extension of credit to a section 20

subsidiary by an affiliated bank, thrift,

branch or agency shall be on market

terms consistent with section 23B of the

Federal Reserve Act.

(6) Restriction on funding purchases

of securities during underwriting period.

No bank, thrift, branch or agency shall

knowingly extend credit to a customer

secured by, or for the purpose of

purchasing, any bank-ineligible security

that a section 20 affiliate is underwriting

or has underwritten within the past 30

days, unless:

(i) The extension of credit is made

pursuant to, and consistent with any

conditions imposed in a preexisting line

of credit that was not established in

contemplation of the underwriting; or

(ii) The extension of credit is made in

connection with clearing transactions

for the section 20 affiliate.

(7) Reporting requirement. (i) Each

bank holding company or foreign bank

shall submit quarterly to the appropriate

Federal Reserve Bank any FOCUS report

filed with the NASD or other selfregulatory organizations, and any

information required by the Board to

monitor compliance with these

operating standards and section 20 of

the Glass-Steagall Act, on forms

provided by the Board.

(ii) In the event that a section 20

subsidiary is required to furnish notice

concerning its capitalization to the

Securities and Exchange Commission

pursuant to 17 CFR 240.17a–11, a copy

of the notice shall be filed concurrently

with the appropriate Federal Reserve

Bank.

(8) Foreign banks. A foreign bank

shall ensure that any extension of credit

by its branch or agency to a section 20

affiliate, and any purchase by such

branch or agency, as principal or

fiduciary, of securities for which a

section 20 affiliate is a principal

underwriter, conforms to sections 23A

and 23B of the Federal Reserve Act, and

that its branches and agencies not

advertise or suggest that they are

responsible for the obligations of a

section 20 affiliate, consistent with

section 23B(c) of the Federal Reserve

Act.

By order of the Board of Governors of the

Federal Reserve System, August 22, 1997.

William W. Wiles,

Secretary of the Board.

[FR Doc. 97–22840 Filed 8–26–97; 8:45 am]

BILLING CODE 6210–01–P

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.1 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,2 and has promulgated

regulations enabling stock depository

institutions to convert directly to a

federal stock savings association

charter.3

The OTS published a notice of

proposed rulemaking regarding direct
45308 Federal Register / Vol. 62, No. 166 / Wednesday, August 27, 1997 / Rules and Regulations

4 62 FR 17115 (April 9, 1997).

5As 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.

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

7See 12 CFR 543.3, added by 62 FR 27177, May

19, 1997.

conversions of mutual depository

institutions to federal mutual charters in

the Federal Register on April 2, 1997.4

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.

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

§§ 543.8 and 543.9 as proposed, to

permit any type of mutual depository

institution to convert directly to a

federal mutual savings association.5

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 §§ 543.8

and 543.9 as described below.

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 § 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 6 within a time frame

prescribed by the OTS. Section 552.2–

6 of the OTS regulations already

contains this requirement for federal

stock associations.

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.7

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.
Federal Register / Vol. 62, No. 166 / Wednesday, August 27, 1997 / Rules and Regulations 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:

§ 543.8 Conversion of depository

institutions to Federal mutual charter.

(a) With the approval of the OTS, any

depository institution, as defined in

§ 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:

§ 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

§ 543.8 shall, after approval by its board

of directors, file in accordance with

§ 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

§ 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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 96–ANE–40; Amendment 39–

10112; AD 97–18–02]

RIN 2120–AA64

Airworthiness Directives; Hartzell

Propeller Inc. ( )HC–( )(2,3)(X,V)( )–( )

Series and HA–A2V20–1B Series

Propellers With Aluminum Blades

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule; request for

comments.

SUMMARY: This amendment supersedes

four existing airworthiness directives

(ADs), applicable to Hartzell Propeller

Inc. ( )HC–( )(2,3)(X,V)( )–( ) series

propellers with aluminum blades, that

currently require inspections for cracks

in blade shanks and clamps. This

amendment requires initial and

repetitive dye penetrant and eddy

current inspections of the blade and an

optical comparator inspection of the

blade retention area, and, if necessary,

replacement with serviceable parts. In

addition, this AD requires initial and

repetitive visual and magnetic particle

inspection of the blade clamp, dye

penetrant inspection of the blade

internal bearing bore, and, if necessary,

replacement with serviceable parts.

Also, for all HC–(1,4,5,8)(2,3)(X,V)( )–( )

steel hub propellers, this AD requires an

additional initial and repetitive visual

and magnetic particle inspection of the

hub and, if necessary, replacement with

serviceable parts. This amendment is

prompted by reports of cracked blades,

blade clamps, and hubs and reports of

blade separations. The actions specified

by this AD are intended to prevent blade

separation due to cracked blades, hubs,

or blade clamps, which can result in

loss of control of the airplane.

DATES: Effective September 11, 1997.

The incorporation by reference of

certain publications listed in the

regulations is approved by the Director

of the Federal Register as of September

11, 1997.

Comments for inclusion in the Rules

Docket must be received on or before

October 27, 1997.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), New England

Region, Office of the Assistant Chief

Counsel, Attention: Rules Docket No.

96–ANE–40, 12 New England Executive

Park, Burlington, MA 01803–5299.

Comments may also be sent via the

Internet using the following address: ‘‘9-

ad-engineprop@faa.dot.gov’’. Comments

sent via the Internet must contain the

docket number in the subject line.

The service information referenced in

this AD may be obtained from Hartzell

Propeller Inc., One Propeller Place,

Piqua, OH 45356–2634, ATTN: Product

Support; telephone (937) 778–4200, fax

(937) 778–4321. This information may

be examined at the FAA, New England

Region, Office of the Assistant Chief

Counsel, Burlington, MA; or at the

Office of the Federal Register, 800 North

Capitol Street, NW., suite 700,

Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Tomaso DiPaolo, Aerospace Engineer,

Chicago Aircraft Certification Office,

FAA, Small Airplane Directorate, 2300

East Devon Ave., Des Plaines, IL 60018;

telephone (847) 294–7031, fax (847)

294–7834.

SUPPLEMENTARY INFORMATION: The

Federal Aviation Administration (FAA)

issued airworthiness directive (AD) 68–

13–02, Amendment 39–614 (33 FR

9252, June 22, 1968), applicable to

Hartzell Propeller Inc. Model PHC–

A3VF–4/V8433–2R and –4R propellers,

to require repetitive inspections for

cracks in blade shanks at intervals not

to exceed 400 hours Time in Service

(TIS). That action was prompted by

reports of cracks in blade shanks. That

condition, if not corrected, could result

in loss of a blade due to blade shank

cracks, which could result in loss of

aircraft control.

The FAA issued AD 68–19–04,

Amendment 39–868 (34 FR 18296,

November 15, 1969), applicable to

Hartzell Propeller Inc. Model HC–A2XF,

HC–12X20, HC–82VF, BHC–A2XF, HC–

13X20, HC–82VK, HC–A2XK, HC–

D3X20, HC–82VL, HC–A2XL, HC–

82X20, HC–83XF, HC–A3XK, HC–82XF,

HC–83XK, HC–A3VK, HC–82XG, HC–

83X20, HC–82XK, and HC–82KL

propellers, with 8433, V8433, 8833, and

V8833 blades, to require repetitive

inspections for cracks in blade shanks at

intervals not to exceed 1,000 hours TIS.

That action was prompted by reports of

cracks in blade shanks. That condition,

if not corrected, could result in loss of

a blade due to blade shank cracks,