Federal Register / Vol. 62, No. 203 / Tuesday, October 21, 1997 / Proposed Rules 54747

1 In a final rule published elsewhere in this issue

of the Federal Register, the OCC has amended the

definition of ‘‘non-lead bank’’ to include a national

bank that is not the largest national bank controlled

by a company (as opposed to a bank holding

company).

2The OCC made this reduction pursuant to an

interim rule published on December 2, 1996 (61 FR

64000). In the final rule referred to in footnote 1 of

this document, the OCC is adopting the changes set

forth in that interim rule. The final rule also adopts

the changes set forth in an interim rule published

in 1994 (59 FR 59640) concerning fees for

examinations of fiduciary activities, special

examinations and investigations, examinations of

affiliates, and examinations and investigations of

corporate activities.

3 In the final rule referred to in footnote 1, the

OCC added a new paragraph (b)(4) to § 8.2.

4CAMELS is an acronym that stands for capital,

assets, management, earnings, liquidity, and

sensitivity to market risk.

5This is the approach taken by the Office of Thrift

Supervision in assessing savings institutions. See

12 CFR 502.1.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 8

[Docket No. 97–20]

RIN 1557–AB60

Assessment of Fees; National Banks;

District of Columbia Banks

AGENCY: Office of the Comptroller of the

Currency, Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Office of the Comptroller

of the Currency (OCC), in order to more

accurately reflect the OCC’s costs of

supervising banks, is proposing to

amend its assessment regulation to

impose a surcharge on banks that

receive a rating of 3, 4, or 5 under the

Uniform Financial Institutions Rating

System (UFIRS) (also referred to as the

CAMELS rating) and on Federal

branches and agencies of foreign banks

that receive a rating of 3, 4, or 5 under

the ROCA rating system (which rates

risk management, operational controls,

compliance, and asset quality). This

amendment will enable the OCC to

distribute more equitably the costs it

incurs when supervising institutions

that are experiencing significant

problems. The OCC also is soliciting

comments on the appropriate method of

computing assessments for those banks

that own other banks.

DATES: Comments must be received by

November 20, 1997.

ADDRESSES: Comments should be

directed to, and may be inspected and

copied at: Communications Division,

OCC, 250 E Street, SW., Washington,

D.C. 20219, Attention: Docket No. 97–

20. In addition, comments may be sent

via FAX, at (202) 874–5274, or via

Internet at

regs.comments@occ.treas.gov.

FOR FURTHER INFORMATION CONTACT: Roy

Madsen, Deputy Chief Financial Officer,

Financial Review, Policy and Analysis,

(202) 874–5130; or Mark Tenhundfeld,

Assistant Director, Legislative and

Regulatory Activities Division, (202)

874–5090.

SUPPLEMENTARY INFORMATION:

Background

The OCC charters, regulates, and

supervises approximately 2,700 national

banks and 64 Federal branches and

agencies of foreign banks in the United

States, accounting for nearly 60 percent

of the nation’s banking assets. Its

mission is to ensure a safe, sound, and

competitive National Banking System

that supports the citizens, communities,

and economy of the United States. The

OCC funds the activities that further this

mission by imposing assessments, fees,

and other charges on banks within its

jurisdiction, as necessary and

appropriate to meet the OCC’s expenses,

pursuant to 12 U.S.C. 482.

The OCC charges each national bank

and Federal branch and agency a

semiannual assessment according to a

formula that is described in 12 CFR 8.2.

In general, the OCC calculates the

semiannual assessment by using a

marginal rate that declines as an

institution’s asset size grows. The OCC

also reduces assessments charged to a

‘‘non-lead bank’’ (which, generally

speaking, refers to a national bank that

is not the largest national bank owned

by the same company 1) by a percentage

determined in accordance with each

assessment. For example, the OCC

reduced the assessment for non-lead

national banks that was due January 31,

1997, by 12 percent.2

The marginal rate structure (which

applies a declining marginal rate as

bank asset size grows) and the

assessment reduction for non-lead

national banks reflect the OCC’s cost

savings resulting from the economies of

scale realized in the examination and

supervision of large institutions and

non-lead banks. However, the current

assessment regulation does not reflect

the increased costs that the OCC incurs

when supervising a bank whose

condition requires special attention. As

a result, healthy banks subsidize banks

that are experiencing significant

problems. The proposed imposition of a

surcharge on banks requiring additional

OCC resources, discussed in the section

that follows, addresses this concern.

Discussion of the Proposal and Request

for Comment

Surcharge

The proposal adds new paragraphs

(a)(7) and (b)(5) to § 8.2,3 which provide

that the OCC will impose a surcharge

equal to 25 percent of the amount of the

assessment that otherwise would be due

from (a) national banks that receive a

UFIRS rating (also referred to as a

CAMELS rating 4) of 3, 4, or 5 and (b)

Federal branches and agencies of foreign

banks that receive a ROCA rating of 3,

4, or 5. OCC cost data show that there

is a significant increase in supervision

costs once an institution’s rating moves

from 2 to 3 and that these increased

costs continue while the bank is rated

3, 4, or 5. To reflect this increase in

costs of supervising a bank rated 3 or

worse, the proposal uses a UFIRS or

ROCA rating (as appropriate) of 3 as the

threshold for applying the surcharge.

Using the most recently available data at

the time this proposed rule was

prepared, the surcharge would affect a

total of approximately 85 national banks

and Federal branches and agencies of

foreign banks, resulting in an aggregate

annual increase in assessments for these

banks of approximately $0.7 million.

By linking assessments with the

condition of the banks supervised, the

proposal ensures that a greater

proportion of increased OCC costs

attributable to banks whose condition

requires additional supervisory

resources is funded by those banks

rather than by the national banking

system as a whole. If more banks were

rated 3, 4, or 5, the OCC would need

additional and/or more specialized staff

to monitor the efforts of those banks to

improve their condition. The proposal

expands or contracts assessment

revenue automatically in a way that

responds to the changing demands on

the OCC.

The OCC considered the alternative of

imposing a 50-percent surcharge on

banks that are rated 4 or 5.5 However,

a 50-percent surcharge on UFIRS or

ROCA 4-and 5-rated institutions would

not cover the increased costs of

supervising all institutions rated 3, 4, or

5. As a result, institutions rated 3 would

be subsidized both by healthier banks

(who would, under the alternative

approach, be paying assessments at the

same rate as 3-rated institutions even

though the healthier banks require less

supervision) and by banks in worse

condition (who would be paying the

assessment surcharge).

The OCC seeks comment on the

approach set out in proposed

paragraphs (a)(7) and (b)(5) of § 8.2. The

OCC also seeks comment on whether

the ROCA rating is the appropriate
54748 Federal Register / Vol. 62, No. 203 / Tuesday, October 21, 1997 / Proposed Rules

6See 62 FR 8078 (February 21, 1997).

rating to use in imposing an assessment

surcharge on Federal branches and

agencies, and, if not, whether some

other rating or set of criteria would be

more appropriate.

Assessments of a Bank That Owns

Another Bank

An issue has arisen concerning the

proper method of calculating the

assessments of national banks that own

other banks. This issue stems from a

recent change in the Call Report

instructions 6 pursuant to which the

assets of a subsidiary bank are reported

on a consolidated basis in the Call

Report of its parent bank. Given that the

subsidiary bank also is required to file

a Call Report, the current assessment

regulation, which bases assessments on

assets reported in a bank’s Call Report,

has the unintended effect of doublecounting at least some of the assets of

the subsidiary bank.

The OCC seeks comment on methods

that commenters believe would be

appropriate for calculating, for

assessment purposes, the assets of a

national bank that owns another bank.

Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act (RFA) (5

U.S.C. 605(b)), the regulatory flexibility

analysis otherwise required under

section 603 of the RFA (5 U.S.C. 603) is

not required if the agency certifies that

the rule will not have a significant

economic impact on a substantial

number of small entities and the agency

publishes that certification and a short,

explanatory statement in the Federal

Register along with its notice of

proposed rulemaking.

Pursuant to section 605(b) of the RFA,

the OCC hereby certifies that this

proposal will not have a significant

economic impact on a substantial

number of small entities. The proposed

rule does not impose any new reporting

or recordkeeping requirement. While

the proposal would require national

banks, Federal branches, and Federal

agencies of all sizes that receive a UFIRS

or ROCA rating of 3, 4, or 5 to pay an

assessment surcharge, this will not

create a significant or disparate impact

on small institutions. The assessments

for the 58 national banks, Federal

branches, and Federal agencies with

total assets of under $100 million that

currently are rated 3, 4, or 5 would

increase, in the aggregate, by

approximately $287,204 per year, or

approximately $4,952 per institution.

Accordingly, a regulatory flexibility

analysis under 603 of the RFA is not

required.

Executive Order 12866

The OCC has determined that this

proposal is not a significant regulatory

action under Executive Order 12866.

Unfunded Mandates Reform Act of

1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, Pub. L.

104–4 (2 U.S.C. 1532) (Unfunded

Mandates Act), requires that an agency

prepare a budgetary impact statement

before promulgating any rule likely to

result in 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 Mandates Act also

requires an agency to identify and

consider a reasonable number of

regulatory alternatives before

promulgating a rule. The OCC has

determined that the proposed rule will

not result in expenditures by State,

local, and tribal governments, or by the

private sector, of $100 million or more

in any one year. Accordingly, the OCC

has not prepared a budgetary impact

statement or specifically addressed any

regulatory alternatives. As discussed in

the preamble, the proposal, while

increasing the annual assessments for

institutions receiving a UFIRS or ROCA

rating of 3, 4, or 5, will, in the current

banking environment, increase

assessments in the aggregate only by

approximately $0.7 million.

List of Subjects in 12 CFR Part 8

Assessments, Fees, National banks.

Authority and Issuance

For the reasons set forth in the

preamble, part 8 of chapter I of title 12

of the Code of Federal Regulations is

proposed to be amended as follows:

PART 8—ASSESSMENT OF FEES;

NATIONAL BANKS; DISTRICT OF

COLUMBIA BANKS

1. The authority citation for part 8

continues to read as follows:

Authority: 12 U.S.C. 93a, 481, 482, 3102,

and 3108; 15 U.S.C. 78c and 78l; and 26 D.C.

Code 102.

2. Section 8.2 is amended by adding

new paragraphs (a)(7) and (b)(5) to read

as follows:

§ 8.2 Semiannual assessment.

(a) * * *

(7) The OCC shall adjust the

semiannual assessment computed in

accordance with paragraphs (a)(1)

through (a)(6) of this section by

multiplying that figure by 1.25 for each

bank that receives a rating of 3, 4, or 5

under the Uniform Financial

Institutions Rating System at its most

recent examination.

(b) * * *

(5) The OCC shall adjust the

semiannual assessment computed in

accordance with paragraphs (b)(1)

through (b)(4) of this section by

multiplying that figure by 1.25 for each

Federal branch or Federal agency that

receives a ROCA rating (which rates risk

management, operational controls,

compliance, and asset quality) of 3, 4, or

5 at its most recent examination.

Dated: October 15, 1997.

Eugene A. Ludwig,

Comptroller of the Currency.

[FR Doc. 97–27829 Filed 10–20–97; 8:45 am]

BILLING CODE 4810–33–P