8868 Federal Register / Vol. 62, No. 39 / Thursday, February 27, 1997 / Rules and Regulations

In 1995, the year before The

Netherlands was declared free of hog

cholera, U.S. pork imports from The

Netherlands were valued at $14.5

million (less than 2 percent of the total

value of all U.S. pork imports that year).

No live swine or fresh pork were

imported from The Netherlands in 1995.

Removing The Netherlands from the

list of countries free of hog cholera is

not expected to significantly affect U.S.

entities, large or small. The value of

pork products imported by the United

States from The Netherlands is expected

to be much the same as it was before

The Netherlands acquired hog cholera

free status 6 months ago.

Under these circumstances, the

Administrator of the Animal and Plant

Health Inspection Service has

determined that this action will not

have a significant economic impact on

a substantial number of small entities.

Executive Order 12988

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. This rule: (1) Preempts all State

and local laws and regulations that are

inconsistent with this rule; (2) has no

retroactive effect; and (3) does not

require administrative proceedings

before parties may file suit in court

challenging this rule.

Paperwork Reduction Act

This rule contains no new

information collection or recordkeeping

requirements under the Paperwork

Reduction Act of 1995 (44 U.S.C. 3501

et seq.).

List of Subjects in 9 CFR Part 94

Animal diseases, Imports, Livestock,

Meat and meat products, Milk, Poultry

and poultry products, Reporting and

recordkeeping requirements.

Accordingly, 9 CFR part 94 is

amended as follows:

PART 94—RINDERPEST, FOOT-ANDMOUTH DISEASE, FOWL PEST (FOWL

PLAGUE), EXOTIC NEWCASTLE

DISEASE, AFRICAN SWINE FEVER,

HOG CHOLERA, AND BOVINE

SPONGIFORM ENCEPHALOPATHY:

PROHIBITED AND RESTRICTED

IMPORTATIONS

1. The authority citation for part 94

continues to read as follows:

Authority: 7 U.S.C. 147a, 150ee, 161, 162,

and 450; 19 U.S.C. 1306; 21 U.S.C. 111, 114a,

134a, 134b, 134c, 134f, 136, and 136a; 31

U.S.C. 9701; 42 U.S.C. 4331 and 4332; 7 CFR

2.22, 2.80, and 371.2(d).

§ 94.9 [Amended]

2. In § 94.9, paragraph (a) is amended

by removing the phrase ‘‘The

Netherlands,’’.

§ 94.10 [Amended]

3. In § 94.10, paragraph (a) is

amended by removing the phrase ‘‘The

Netherlands,’’.

Done in Washington, DC, this 21st day of

February 1997.

Terry L. Medley,

Administrator, Animal and Plant Health

Inspection Service.

[FR Doc. 97–4932 Filed 2–26–97; 8:45 am]

BILLING CODE 3410–34–P

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 935

[No. 97–12]

Restrictions on Advances to NonQualified Thrift Lenders

AGENCY: Federal Housing Finance

Board.

ACTION: Interim rule with request for

comments.

SUMMARY: The Board of Directors of the

Federal Housing Finance Board

(Finance Board) is amending its

regulations on advances to members

that are not qualified thrift lenders to

implement certain changes made by the

Economic Growth and Regulatory

Paperwork Reduction Act of 1996

(EGRPRA). Among other things, the

EGRPRA broadened the universe of

assets that a savings association may use

in meeting its qualified thrift lender

(QTL) requirement. Non-savings

association members are not directly

subject to the QTL requirement,

although their ability to obtain advances

is restricted if they do not meet the QTL

requirement. The amendments should

prove beneficial to many non-savings

association members by allowing them

to report increases in their levels of

qualified thrift investments and, in

some cases, satisfy the QTL

requirement. Because certain of the

items authorized by EGRPRA to be

included in the QTL calculation are not

separately identified on a non-savings

association member’s published

financial reports, such as a call report,

the Federal Home Loan Banks (Banks)

have no readily available source from

which to obtain or verify that

information. To allow the Banks to

include the newly authorized items

when conducting their annual QTL

calculation of their non-savings

association members, the Finance Board

has determined that the Banks may rely

on a certification from their members of

any relevant QTL financial information

that is not available from published

financial reports. Because the Banks

must complete the annual QTL

calculations for calendar year 1996 no

later than April 15, 1997, the Finance

Board is issuing this rule as an interim

final rule. As the certification process

raises a number of questions about how

best the Banks can determine the QTL

status of their non-savings association

members, and because the Office of

Thrift Supervision (OTS) is in the

process of a rulemaking relating to the

EGRPRA amendments, the Finance

Board has determined to solicit

comments on the interim final rule for

a period of 30 days.

DATES: The interim rule is effective on

February 27, 1997. Comments must be

received by March 31, 1997.

ADDRESSES: Mail comments to Elaine L.

Baker, Executive Secretary, Federal

Housing Finance Board, 1777 F Street,

NW., Washington, DC 20006. Comments

will be available for public inspection at

this address.

FOR FURTHER INFORMATION CONTACT:

Steven P. Wojtaszek, Financial Analyst,

Financial Research Division, Office of

Policy, (202) 408–2863, or Neil R.

Crowley, Senior Attorney, Office of

General Counsel, (202) 408–2990,

Federal Housing Finance Board, 1777 F

Street, NW., Washington, DC 20006.

SUPPLEMENTARY INFORMATION:

I. Background

Historically, membership in the

Federal Home Loan Bank System

(System) had been comprised

predominantly of savings associations,

which tended to concentrate their

investments in residential mortgage

loans. In 1987, Congress established the

QTL test, which required savings

associations to maintain 60 percent of

their assets in instruments related to

domestic residential real estate or

manufactured housing. Competitive

Equality Banking Act of 1987, Public

Law 100–86, section 104(c), 101 Stat.

571–573 (August 10, 1987). Among

other things, a savings association that

failed the QTL test was limited in the

amount of advances that it could receive

from its Bank. Id. section 105. In 1989,

Congress authorized commercial banks

and credit unions, institutions that

historically had not been so

concentrated in residential mortgage

lending, to become members of the

System. Financial Institutions Reform,

Recovery , and Enforcement Act of 1989

(FIRREA), Public Law 101–73, section

704(a), 103 Stat. 415 (August 9, 1989),
Federal Register / Vol. 62, No. 39 / Thursday, February 27, 1997 / Rules and Regulations 8869

codified at 12 U.S.C. 1424(a). FIRREA

also limited the amount of advances that

such non-savings association members

could obtain from their Bank, and

imposed a 30 percent System-wide limit

on the aggregate amount of advances

that could be outstanding to such nonQTL members. 12 U.S.C. 1430(e).

As a general matter, the QTL test now

requires a savings association to

maintain 65 percent or more of its

portfolio assets in certain designated

instruments, which are characterized as

‘‘qualified thrift investments.’’ The QTL

test requires one to determine an

institution’s ‘‘actual thrift investment

percentage’’ (ATIP), which is obtained

by dividing the institution’s ‘‘qualified

thrift investments’’ by its ‘‘portfolio

assets.’’ The QTL test applies directly

only to savings associations, and OTS,

as the principal federal regulator of

savings associations, determines their

QTL compliance. The QTL test does not

apply to commercial banks, credit

unions, or insurance companies,

although if such institutions become

members of the System their ability to

obtain advances is restricted if they do

not meet the QTL test. 12 U.S.C.

1430(e). The Banks are required to

determine the ATIP for each nonsavings association member at least

annually, between January 1 and April

15, based on financial information as of

December 31 of the prior calendar year.

12 CFR 935.13(a)(3).

In EGRPRA (Public Law 104–208, 110

Stat. 3009, September 30, 1996),

Congress made it easier for all members

to achieve QTL compliance by

broadening the universe of ‘‘qualified

thrift investments’’ that may be

included in calculating an institution’s

ATIP. Those changes could benefit nonsavings association members by

allowing them to increase their ATIP,

possibly to the point of satisfying the

QTL test. Even those members that do

not meet the QTL requirement should

benefit from the amendments because

an increase in their ATIP should allow

them to obtain a greater amount of

advances based on their existing level of

Bank stock. Under the amendments

made by EGRPRA, a member now may

include without limit as ‘‘qualified thrift

investments’’ the full amount of its

loans for educational purposes, loans to

small businesses, and loans made

through credit cards or credit card

accounts. In addition, institutions may

include an increased amount of

consumer loans, subject to certain

aggregate limits. For purposes of the

EGRPRA amendments, the director of

OTS is required to define the terms

‘‘small business,’’ ‘‘small business

loans,’’ and ‘‘credit card,’’ which the

OTS has done by means of an interim

final rule. 61 FR 60179 (November 27,

1996), to be codified at, 12 CFR 560.3.

Although EGRPRA clearly specifies

the types of additional assets that may

be included as qualified thrift

investments (and OTS has defined small

business loans), the Banks cannot

readily incorporate those items into

their annual QTL calculations because

the call reports of the commercial bank

and credit union members, and the

comparable reports of insurance

company members, do not separately

identify those items. The absence of

these QTL items from the available

regulatory financial reports of the nonsavings association members

complicates the Banks’ annual task of

determining the ATIP for those

members. As a consequence of the

additional items added by EGRPRA, the

number of elements within the QTL

calculation for which the Banks lack

accurate and readily available data has

increased, which introduces a greater

element of uncertainty into the accuracy

of the Banks’ QTL determinations. This

is not so much of a concern with respect

to savings association members because

OTS routinely examines the

associations for QTL compliance, and

the Finance Board and the Banks can

rely on those OTS determinations. With

respect to the non-savings association

members, however, the principal federal

regulators do not conduct examinations

for QTL compliance and the Banks

cannot look to those regulators as a

source for the required QTL

information.

For example, a commercial bank’s

outstanding credit card loans are

separately stated on its Report of

Condition and Income (Call Report), but

its education loans and small business

loans (at least as defined for QTL

purposes) are not separately identified.

Although the Call Report includes

information about small business loans,

that information does not correspond to

the information that the Banks require

when making the annual QTL

calculations for their non-savings

association members. The OTS

regulation defines the term ‘‘small

business loans’’ by incorporating the

definitions from the Small Business Act

and its implementing regulations

promulgated by the Small Business

Administration (SBA). Thus, for QTL

purposes, a small business loan is one

made to a ‘‘small business.’’ Under the

SBA regulations, a ‘‘small business’’ is

an entity the gross receipts of which (or

the number of its employees) fall below

certain thresholds specified by SBA. By

comparison, the Call Report defines a

small business loan based on the size of

the loan, not the size of the borrowing

entity. Thus, the Banks’ use of the

‘‘small business loan’’ information that

is available from the Call Report likely

will overstate the amount of ‘‘small

business loans’’ that are eligible to be

used in deter mining a commercial bank

member’s QTL status. The same

problem exists with respect to the

reports submitted by credit union and

insurance company members, neither of

which separately identify the amount of

loans meeting the SBA definition of

small business loans.

This disparity between the statutory

requirements of the QTL test and the

information that is readily available to

the Banks is not limited to the items

added by EGRPRA. For example, the

QTL test includes within a member’s

‘‘portfolio assets’’ certain government,

agency, and other debt securities with

specified maturities (from two to five

years), none of which is separately

identified by maturity on the published

financial statements. Similarly, the QTL

test includes within a member’s

‘‘qualified thrift investments’’ certain

construction loans related to one-to

four-family residential properties, 50

percent of residential mortgage loans

sold during a calendar quarter, 200

percent of affordable housing-related

loans, and 200 percent of service facility

loans, none of which is separately

identified on the available reports.

The Finance Board believes that nonsavings association members can benefit

from the newly authorized qualified

thrift investments, and that it is

appropriate to allow the Banks to

incorporate the new classes of

investments into their ATIP calculations

for the calendar year ending December

31, 1996. Of supervisory concern to the

Finance Board, however, is how best to

ensure that the Banks conduct their

annual QTL determinations consistently

with Section 10(e) of the Federal Home

Loan Bank Act (Bank Act), 12 U.S.C.

1430(e). The Finance Board believes

that it would be imprudent for the

Banks to confer QTL status on nonsavings association members that cannot

demonstrate that their qualified thrift

investments actually include the

claimed amount of the newly authorized

investments.

One means of ensuring this result

would be through an examination

process. The Finance Board believes

that it has the authority, under Sections

2A(a)(3), 2B(a), and 22, of the Bank Act,

12 U.S.C. 1422a(a)(3), 1422b(a), and

1442(a), to examine, or to require the

Banks to request an examination of,

individual members if necessary to

ensure that the Banks operate in

compliance with the law. The Finance
8870 Federal Register / Vol. 62, No. 39 / Thursday, February 27, 1997 / Rules and Regulations

Board believes, however, that the more

reasonable and efficient approach is to

allow the Banks to obtain that

information from their members. As a

matter of practice, some Banks already

obtain from their members information

regarding certain QTL items that are not

separately identified on the published

financial reports. For example, some

Banks obtain all QTL-related financial

data from the member and use the

published financial reports, such as a

Call Report, to confirm the general

accuracy of the information. Other

Banks calculate a member’s ATIP as a

service to their members using the most

recently published financial reports and

either obtain any additional data from

the member or estimate it from other

known sources.

Accordingly, through this interim

final rule the Finance Board will allow

the Banks to accept from their nonsavings association members

supplemental QTL information that

does not appear in the published

financial statements. The chief

executive officer (CEO) of the member

must certify to the Bank that the

information is accurate and complete as

of the date provided. The Finance Board

believes that such an arrangement

strikes an appropriate balance between

its need to ensure that the Banks base

their QTL calculations on accurate

financial information, and the practice

of allowing the Banks to manage their

own business. To allow the Banks to

make use of the newly authorized QTL

categories prior to the April 15, 1997,

deadline for their QTL calculations, the

Finance Board has determined to issue

this rule as an interim final rule, but

also is soliciting comments on the

specific provisions of the rule. The

Finance Board appreciates that OTS

may yet revise the QTL definitions

established through its recent interim

rule, and intends to monitor the OTS

rulemaking proceeding. The Finance

Board anticipates that it will make

corresponding changes to its advances

regulation should the OTS further

amend the QTL regulation in any

material respect.

II. Description of the Interim Final Rule

The interim rule amends the

definitions of ‘‘actual thrift investment

percentage,’’ ‘‘Qualified Thrift Lender,’’

and ‘‘Qualified Thrift Lender test,’’ in

the Finance Board’s advances

regulation, 12 CFR 935.1, to delete

references to OTS regulations that no

longer exist. The interim rule also

amends the Finance Board’s advances

regulations, 12 CFR 935.13(a)(3), to

direct the Banks to use the financial

information from the call report (which

term is defined to include the published

financial reports submitted by credit

union and insurance company

members) as the primary source for QTL

determinations. In those cases in which

not all of the information needed to

perform an accurate QTL calculation is

included in the call report, the Bank

may accept other information submitted

by the member, provided that the CEO

of the member certifies in writing that

the information is accurate and

complete as of the relevant date. As it

appears to have been the practice of

some Banks to obtain the required

financial information for the QTL

calculation from their members and

then compare that information to the

call report, the rule allows the Banks to

continue to obtain information from

their members as the first step in the

process, provided that any information

not in the call report must be subject to

the same certification requirement. By

requiring the formality of a certification

from the CEO the Finance Board

believes that the Banks will have

sufficient assurance that the information

on which they conduct their

determinations is accurate, which is the

minimum effort required to ensure

compliance with the Bank Act.

The Finance Board does not intend to

require the Banks to obtain a CEO

certification from every non-savings

association member as a matter of

course. Such a certification is necessary

only when a member wishes the Bank

to include in its annual ATIP

calculation qualified thrift investments

or portfolio assets that do not appear in

its published financial reports. If a

member has no such investments or

assets, then the Bank need not require

a certification from the member.

Similarly, if a member has a portfolio of

small business loans or education loans,

but the inclusion of those items in the

calculation would not materially change

the member’s ATIP, then a member

could elect not to provide a

certification. If a member were to have

a substantial portfolio of education

loans, for example, but only minor

investment in small business loans, the

member could opt to certify the number

of education loans and omit, or indicate

a zero balance, for the category of small

business loans. The Finance Board

specifically requests public comment on

the certification process, as well as the

content and format for the certification.

III. Regulatory Flexibility Act

Under the Regulatory Flexibility Act

(RFA), 5 U.S.C. 601, et seq., the Banks

are not ‘‘small entities.’’ Id. 601(6). As

the interim final rule would apply only

to the Banks, it does not impose any

additional regulatory requirements on

small entities of the type contemplated

by the RFA. Thus, in accordance with

the provisions of the RFA, the Board of

Directors of the Finance Board hereby

certifies that this interim final rule will

not have a significant economic impact

on a substantial number of small

entities. Id. 605(b).

IV. Paperwork Reduction Act

The Finance Board has submitted to

the Office of Management and Budget

(OMB) an analysis of the collection of

information contained in § 935.13 of the

interim rule, described more fully in the

SUPPLEMENTARY INFORMATION. The Banks

will use the information collection to

determine whether a non-savings

association member satisfies the

statutory QTL requirement. Only Bank

members that meet the QTL standards

may maintain unrestricted access to

long-term Bank advances. See 12 U.S.C.

1430(e). Responses are required to

obtain or retain a benefit. See id. The

Finance Board will maintain the

confidentiality of information obtained

from respondents pursuant to the

collection of information as required by

applicable statute, regulation, and

agency policy.

Likely respondents and/or

recordkeepers will be non-savings

association members of a Bank.

Potential respondents are not required

to respond to the collection of

information unless the regulation

collecting the information displays a

currently valid control number assigned

by OMB. See 44 U.S.C. 3512(a).

The estimated annual reporting and recordkeeping hour

burden is:

a. Number of respondents ... 4,272

b. Total annual responses .... 4,272

Percentage of these responses

collected electronically ........ 0

c. Total annual hours requested .............................. 3,930

d. Current OMB inventory .. 0

e. Difference ......................... 3,930

The estimated annual reporting and recordkeeping cost

burden is:

a. Total annualized capital/

startup costs ...................... 0

b. Total annual costs (O&M) 0

c. Total annualized cost requested .............................. $126,660

d. Current OMB inventory .. 0

e. Difference ......................... $126,000

The Finance Board has submitted the

collection of information to OMB for

review in accordance with section 3507

of the Paperwork Reduction Act of 1995.

See 44 U.S.C. 3507. Comments

regarding the collection of information

may be submitted in writing to the
Federal Register / Vol. 62, No. 39 / Thursday, February 27, 1997 / Rules and Regulations 8871

Finance Board at the address above, and

to the Office of Information and

Regulatory Affairs of OMB, Attention:

Desk Officer for Federal Housing

Finance Board, Washington, DC 20503

by March 31, 1997.

V. Other Procedural Requirements

The interim final rule does not meet

the criteria for a ‘‘significant regulatory

action’’ under Executive Order 12866.

The Finance Board has determined

that the notice and comment procedure

ordinarily required by the

Administrative Procedure Act (APA) is

not required in this instance. The APA

authorizes agencies to waive the notice

and comment procedures when the

agency ‘‘for good cause finds . . . that

notice and public procedure thereon are

impracticable, unnecessary, or contrary

to the public interest.’’ 5 U.S.C.

553(b)(3)(B). The Finance Board has

determined that compliance with the

APA procedure in this instance would

be impracticable, unnecessary, and

contrary to the public interest because it

effectively would deny the Banks the

opportunity to incorporate the newly

authorized QTL investments into their

annual QTL calculations for the current

year. As described in the

SUPPLEMENTARY INFORMATION, the Banks

must calculate the QTL ratio of each

non-savings association member

between January 1 and April 15 of each

year. If the Finance Board were to

observe the notice and comment

procedures, it is unlikely that the

Finance Board could promulgate a final

rule sufficiently in advance of the April

15 deadline for the Banks to incorporate

its provisions into their current QTL

calculations. Nonetheless, because the

Finance Board believes that public

comments aid in effective rulemaking, it

will accept written comments on the

interim rule until March 31, 1997.

The Finance Board also has

determined that the 30-day delay of the

effectiveness provisions of the APA may

be waived in these circumstances.

Section 553(d) of the APA permits

waiver of the 30-day delayed effective

date requirement, among other things,

where a substantive rule relieves a

restriction, or otherwise for good cause

found by the agency. As with the APA

notice and comment procedures,

described above, the Finance Board

finds that there is good cause for making

the interim rule effective on February

27, 1997, because it will allow the

Banks to take advantage of the

EGRPRA’s amendments in calculating

the QTL ratios for the current year.

Moreover, the absence of accurate call

report information about the categories

of newly authorized QTL assets impairs

the ability of the Banks to implement

the EGRPRA’s amendments, which

problem is remedied by the interim rule.

By eliminating a practical impediment

to the implementation of the QTL

amendments the interim rule relieves a

restriction that might otherwise prevent

the Banks from realizing the benefits

intended by Congress.

List of Subjects in 12 CFR Part 935

Credit, Federal home loan banks.

Accordingly, the Board of Directors of

the Federal Housing Finance Board

hereby amends title 12, chapter IX, part

935 of the Code of Federal Regulations,

as follows:

PART 935—ADVANCES

1. The authority citation for part 935

continues to read as follows:

Authority: 12 U.S.C. 1422b(a)(1), 1426,

1429, 1430, 1430b, and 1431.

2. Section 935.1 is amended by

republishing the introductory text and

revising the definitions for ‘‘Actual

thrift investment percentage’’,

‘‘Qualified Thrift Lender’’, and

‘‘Qualified Thrift Lender test’’ to read as

follows:

§ 935.1 Definitions

As used in this part:

* * * * *

Actual thrift investment percentage or

ATIP has the same meaning as used in

section 10(m)(4) of the Home Owners’

Loan Act (12 U.S.C. 1467a(m)(4)),

except that the ATIP will be calculated

and applied for purposes of this part to

all members of the Banks, whether or

not they are savings associations.

* * * * *

Qualified Thrift Lender or QTL means

the term as defined in section 10(m)(1)

of the Home Owners’ Loan Act (12

U.S.C. 1467a(m)(1)). A non-savings

association member which meets the

QTL test as applied by the Banks will

be treated as a QTL for purposes of this

part.

Qualified Thrift Lender test or QTL

test means the asset test described in

section 10(m) of the Home Owners’

Loan Act (12 U.S.C. 1467a(m)), except

that the QTL test will be applied for

purposes of this part to all members of

the Banks, whether or not they are

savings associations.

* * * * *

3. In § 935.13, paragraph (a)(3) is

revised to read as follows:

§ 935.13 Restrictions on advances to

members that are not qualified thrift lenders

(a) Restrictions on advances to nonQTL members. * * *

(3)(i) A Bank shall calculate each nonsavings association member’s ATIP at

least annually, between January 1 and

April 15, based upon financial data as

of December 31 of the prior calendar

year. The Bank may, in its discretion,

calculate a member’s ATIP more

frequently than annually.

(ii) In determining a non-savings

association member’s annual ATIP, a

Bank shall use the financial information

from the member’s December 31 call

report as the primary source of

information. A Bank making ATIP

determinations more frequently than

annually shall use the member’s most

recent call report. If any information

necessary for determining the member’s

ATIP is not separately identified on a

member’s call report, the Bank may rely

on a written certification provided by

the member as to the dollar amount and

composition of those other assets that

meet the definitions of ‘‘qualified thrift

investments’’ or ‘‘portfolio assets.’’

Notwithstanding the preceding two

sentences, a Bank may, at its option,

accept a certification from a non-savings

association member as to the dollar

amount and composition of all assets

that meet the definitions of ‘‘qualified

thrift investments’’ or ‘‘portfolio assets.’’

In any case in which a Bank relies on

a certification from a non-savings

association member as to its level of

‘‘qualified thrift investments’’ or

‘‘portfolio assets,’’ the certification must

be in writing and signed by the chief

executive officer of the member.

(iii) As used in this section, the term

‘‘call report’’ shall include:

(A) With respect to a commercial

bank, the annual or quarterly ‘‘Report of

Condition and Income’’ submitted to its

appropriate Federal banking agency;

(B) With respect to a credit union, the

quarterly or semi-annual call report

submitted to the National Credit Union

Administration; and

(C) With respect to an insurance

company, its National Association of

Insurance Commissioners annual

regulatory filing.

* * * * *

Dated: February 6, 1997.

By the Board of Directors of the Federal

Housing Finance Board.

Bruce A. Morrison,

Chairperson.

[FR Doc. 97–4795 Filed 2–26–97; 8:45 am]

BILLING CODE 6725–01–U