This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

47101 

Vol. 83, No. 181 

Tuesday, September 18, 2018 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 101 

[Docket ID OCC–2018–0020] 

RIN 1557–AE45 

Covered Savings Associations 

AGENCY: Office of the Comptroller of the 

Currency (OCC), Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The OCC is inviting comment 

on a proposed rule to implement a new 

section of the Home Owners’ Loan Act 

(HOLA). The Economic Growth, 

Regulatory Relief, and Consumer 

Protection Act (EGRRCPA) amended 

HOLA to add a new section that allows 

a Federal savings association with total 

consolidated assets of $20 billion or 

less, as of December 31, 2017, to elect 

to operate as a covered savings 

association. A covered savings 

association has the same rights and 

privileges as a national bank and is 

subject to the same duties and 

restrictions as a national bank. A 

covered savings association retains its 

Federal savings association charter and 

existing governance framework. The 

new section of HOLA requires the OCC 

to issue rules that, among other things, 

establish streamlined standards and 

procedures for elections to operate as 

covered savings associations and clarify 

requirements for the treatment of 

covered savings associations. 

DATES: Comments must be received on 

or before November 19, 2018. 

ADDRESSES: You may submit comments 

to the OCC by any of the methods set 

forth below. Commenters are 

encouraged to submit comments 

through the Federal eRulemaking Portal 

or email, if possible. Please use the title 

‘‘Covered Savings Associations’’ to 

facilitate the organization and 

distribution of the comments. You may 

submit comments by any of the 

following methods: 

• Federal eRulemaking Portal— 

‘‘Regulations.gov:’’ Go to 

www.regulations.gov. Enter ‘‘Docket ID 

OCC–2018–0020’’ in the Search Box and 

click ‘‘Search.’’ Click on ‘‘Comment 

Now’’ to submit public comments. Click 

on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for submitting 

public comments. 

• Email: regs.comments@

occ.treas.gov. 

• Mail: Legislative and Regulatory 

Activities Division, Office of the 

Comptroller of the Currency, 400 7th 

Street SW, Suite 3E–218, Washington, 

DC 20219. 

• Hand Delivery/Courier: 400 7th 

Street SW, Suite 3E–218, Washington, 

DC 20219. 

• Fax: (571) 465–4326. 

Instructions: You must include 

‘‘OCC’’ as the agency name and ‘‘Docket 

ID OCC–2018–0020’’ in your comment. 

In general, the OCC will enter all 

comments received into the docket and 

publish the comments on the 

Regulations.gov website without 

change, including any business or 

personal information that you provide 

such as name and address information, 

email addresses, or phone numbers. 

Comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

include any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

You may review comments and other 

related materials that pertain to this 

rulemaking action by any of the 

following methods: 

• Viewing Comments Electronically: 

Go to www.regulations.gov. Enter 

‘‘Docket ID OCC–2018–0020’’ in the 

Search box and click ‘‘Search.’’ Click on 

‘‘Open Docket Folder’’ on the right side 

of the screen. Comments and supporting 

materials can be viewed and filtered by 

clicking on ‘‘View all documents and 

comments in this docket’’ and then 

using the filtering tools on the left side 

of the screen. 

• Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov. 

The docket may be viewed after the 

close of the comment period in the same 

manner as during the comment period. 

• Viewing Comments Personally: You 

may personally inspect comments at the 

OCC, 400 7th Street SW, Washington, 

DC 20219. For security reasons, the OCC 

requires that visitors make an 

appointment to inspect comments. You 

may do so by calling (202) 649–6700 or, 

for persons who are deaf or hearing 

impaired, TTY, (202) 649–5597. Upon 

arrival, visitors will be required to 

present valid government-issued photo 

identification and submit to security 

screening in order to inspect comments. 

FOR FURTHER INFORMATION CONTACT: For 

additional information, contact 

Charlotte Bahin, Senior Advisor for 

Thrift Supervision, 202–649–6281, 

Lazaro Barreiro, Director for Governance 

and Operational Risk Policy, 202–649– 

6550, Alison MacDonald, Special 

Counsel, 202–649–5490, Priscilla 

Benner, Attorney, 202–649–5490, Marta 

Stewart-Bates, Attorney, 202–649–5490, 

Frances C. Augello, Special Counsel, 

202–649–5500, Demetria C. Hannah, 

Special Counsel, 202–649–5500, or 

Kevin S. Kirby, Attorney, 202–649– 

5500, Chief Counsel’s Office, for persons 

who are deaf or hearing impaired, TTY, 

202–649–5597, Office of the 

Comptroller of the Currency, 400 7th 

Street SW, Washington, DC 20219. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 206 of the Economic Growth, 

Regulatory Relief, and Consumer 

Protection Act (EGRRCPA), Public Law 

115–174, 132 Stat. 1310, amended the 

Home Owners’ Loan Act (HOLA) (12 

U.S.C. 1461 et seq.) to add a new section 

5A (12 U.S.C. 1464a) that allows a 

Federal savings association with total 

consolidated assets of $20 billion or 

less, as of December 31, 2017, to elect 

to operate as a covered savings 

association. 

A covered savings association has the 

same rights and privileges as a national 

bank that has its main office situated in 

the same location as the home office of 

the covered savings association. A 

covered savings association is subject to 

the same duties, restrictions, penalties, 

liabilities, conditions, and limitations 

that would apply to such a national 

bank. However, a covered savings 

association retains its Federal savings 

association charter and continues to be 

treated as a Federal savings association 

for purposes of governance, including 

for purposes of procedures and 


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1 12 U.S.C. 1464a(g). 

2See Testimony of Acting Comptroller of the 

Currency Keith A. Noreika before the Committee on 

Banking, Housing, and Urban Affairs, United States 

Senate, June 22, 2017, at 22. 3 12 U.S.C. 1467a(m). 

4See Written Statement of Toney Bland, Senior 

Deputy Comptroller for Midsize and Community 

Bank Supervision, Office of the Comptroller of the 

Currency, before the Committee on Banking, 

Housing and Urban Affairs, United States Senate, 

February 10, 2015, at 9–10. 5 Id. 

requirements governing incorporation 

and organization, procedures and 

requirements governing charter and 

bylaws (e.g., form, amendments), board 

of director governance procedures and 

requirements (e.g., elections, term of 

service), shareholder governance 

procedures and requirements (e.g., 

meetings, voting requirements), and 

requirements governing distribution of 

dividends (e.g., payment, prior 

approval, and other restrictions). A 

covered savings association also is 

treated as a Federal savings association 

for purposes of consolidation, merger, 

dissolution, conversion (including 

conversion to a stock bank or another 

charter), conservatorship, and 

receivership, and for other purposes 

determined by OCC regulation. A 

covered savings association may 

continue to operate any branch or 

agency that the covered savings 

association operates on the date an 

election to operate as a covered savings 

association takes effect. A covered 

savings association will continue to be 

treated as a covered savings association 

even if its assets exceed $20 billion after 

it makes an election.1

Section 5A of HOLA requires the OCC 

to issue rules to carry out that section. 

The OCC must issue rules that: (1) 

Establish streamlined standards and 

procedures that clearly identify required 

documentation and timelines for an 

election; (2) require a Federal savings 

association that makes an election to 

identify specific assets and subsidiaries 

held by the Federal savings association 

that do not conform to the requirements 

for national banks (‘‘nonconforming 

assets and subsidiaries’’); (3) establish a 

transition process for bringing the 

nonconforming assets and subsidiaries 

into conformance with the requirements 

for national banks and procedures for 

allowing a Federal savings association 

to submit an application to continue to 

hold nonconforming assets and 

subsidiaries after electing to operate as 

a covered savings association; (4) 

establish standards and procedures to 

allow a covered savings association to 

terminate an election after an 

appropriate period of time and to make 

a subsequent election after terminating 

an election; and (5) clarify requirements 

for the treatment of covered savings 

associations, including the provisions of 

law that apply to covered savings 

associations. Section 5A also gives the 

OCC the authority to issue rules as the 

Comptroller determines necessary in the 

interests of safety and soundness. 

The OCC views section 5A of HOLA 

as a way to provide Federal savings 

associations with additional flexibility 

to adapt to new economic conditions 

and business environments without the 

cost and time involved in changing their 

charters.2 This flexibility will allow 

Federal savings associations to better 

meet the needs of their communities. 

For example, section 10(m) of HOLA 

requires a Federal savings association to 

maintain its status as a qualified thrift 

lender (QTL) by either holding a 

specified percentage of its assets in 

qualified thrift investments or 

qualifying as a domestic building and 

loan association as defined in the 

Internal Revenue Code.3 Further, prior 

to the enactment of section 5A of HOLA, 

a Federal savings association would 

have been required to convert to a bank 

charter to pursue a business strategy 

involving greater commercial or 

consumer lending if it would have 

exceeded the investment limits in 

HOLA. The OCC has heard for a number 

of years that Federal savings 

associations would like to engage in 

additional activities (for example, 

additional commercial or small business 

lending and consumer lending) to serve 

their communities, but they cannot 

increase lending in those areas because 

of the statutory lending limits and 

limitations imposed on the operating 

strategies of Federal savings associations 

that are required to comply with QTL. 

In 2015, the OCC reported this 

information in written testimony to 

Congress.4 The OCC noted that the 

charter conversion process can be time 

consuming and burdensome, 

particularly for smaller savings 

associations. At that time, Federal 

mutual savings associations faced an 

especially burdensome process, because 

they would have had to convert to the 

stock form of organization before 

converting to a national bank charter. As 

discussed in more detail later in this 

preamble, under the new section 5A of 

HOLA, a Federal savings association, 

whether in stock or mutual form, can 

adjust its business model without the 

additional burden and expense of 

changing charters. 

As the supervisor of both national 

banks and Federal savings associations, 

the OCC is well-positioned to 

administer section 5A. OCC 

examination staff are familiar with the 

unique situations and business models 

of individual institutions and with 

national bank and Federal savings 

association laws.5

This proposed rule would implement 

section 5A in a manner that minimizes 

regulatory burden on Federal savings 

associations seeking to be treated as 

covered savings associations while 

ensuring that these Federal savings 

associations can continue to operate 

safely and soundly. The election process 

set out in the proposed rule is intended 

to be simple and streamlined. The 

proposed rule takes a similarly 

streamlined approach for the procedures 

and standards applicable to 

terminations of elections and to 

reelections. 

The OCC also is mindful of the need 

to permit all OCC-supervised 

institutions to engage in the same 

activities to the extent permitted by 

different statutory frameworks. The 

proposed rule does not confer rights or 

privileges on covered savings 

associations that would not be available 

to similarly located national banks, 

except as required by section 5A of 

HOLA or specifically set out in the 

proposed rule. Under the proposed rule, 

covered savings associations would be 

required to divest, conform, or 

discontinue nonconforming 

subsidiaries, assets, and activities, with 

appropriate lead-time, so that they do 

not operate, hold, or conduct 

subsidiaries, assets, or activities that 

would not be permissible for a national 

bank. Consistent with section 5A, the 

proposed rule would treat covered 

savings associations and national banks 

differently when necessary to allow a 

covered savings association to retain its 

Federal savings association charter and 

associated governance processes. To 

reduce unnecessary burden, the 

proposed rule also would allow covered 

savings associations to continue to use 

Federal savings association procedures 

rather than national bank procedures 

where the application of those 

procedures would not result in 

substantively different outcomes. For 

example, a covered savings association 

would be subject to the Federal savings 

association requirements for 

adjudicative proceedings under 12 CFR 

parts 108 and 109 rather than the 

national bank requirements under 12 

CFR part 19. 

II. Description of the Proposal 

101.1 Authority and purposes. 

Paragraph (a) of this section provides 

that the proposed rule is issued 

pursuant to sections 3, 4, 5, and 5A of 


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6 12 CFR 5.59(f)(5). 

7The proposed rule also would allow the OCC to 

notify a Federal savings association that it is eligible 

before the full 60-day period has elapsed. 

HOLA (12 U.S.C. 1462a, 1463, 1464, and 

1464a), section 5239A of the Revised 

Statutes (12 U.S.C. 93a), and section 

312(b)(2)(B) of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (12 U.S.C. 5412(b)(2)(B)). 

Paragraph (b) of this section describes 

the purposes of the proposed rule. 

Those purposes are to establish 

standards and procedures for an 

election to operate as a covered savings 

association, to clarify the requirements 

that apply to covered savings 

associations, and to establish standards 

and procedures for terminations of 

elections and for reelections. 

101.2 Definitions and computation 

of time. Paragraph (a) of this section sets 

out definitions for the proposed rule. 

Paragraph (a)(1) of this section defines 

the term ‘‘appropriate OCC supervisory 

office.’’ As in 12 CFR 5.3(d), the 

appropriate OCC supervisory office is 

the OCC office responsible for 

supervision of a Federal savings 

association, as described in subpart A of 

12 CFR part 4. The definition is 

intended to help Federal savings 

associations identify the office that can 

assist them with issues related to an 

election, a request to terminate, or a 

reelection. 

Paragraph (a)(2) of this section defines 

the term ‘‘covered savings association.’’ 

This definition, consistent with the 

definition of the term in section 5A(a) 

of HOLA, refers to a Federal savings 

association that has made an election 

that is in effect in accordance with 

§ 101.3(b) of the proposed rule. 

Paragraph (a)(3) of this section defines 

the term ‘‘effective date of the election’’ 

as the date on which a Federal savings 

association’s election to operate as a 

covered savings association takes effect 

pursuant to § 101.3(b) of the proposed 

rule. 

Paragraph (a)(4) of this section defines 

the term ‘‘nonconforming subsidiary, 

asset, or activity.’’ When this term is 

applied to a covered savings association, 

it means a subsidiary, asset, or activity 

that is not permissible for a covered 

savings association or, if permissible, is 

being operated, held, or conducted in a 

manner that exceeds the limit 

applicable to a covered savings 

association. When applied to a covered 

savings association, this term includes 

an investment in a subsidiary or other 

entity if that investment is not 

permissible for a covered savings 

association. When this term is applied 

to a Federal savings association that has 

terminated an election to operate as a 

covered savings association, it means a 

subsidiary, asset, or activity that is not 

permissible for a Federal savings 

association, or if permissible, is being 

operated, held, or conducted in a 

manner that exceeds the limit 

applicable to a Federal savings 

association. When applied to a Federal 

savings association that has terminated 

an election to operate as a covered 

savings association, this term includes 

an investment in a subsidiary or other 

entity if that investment is not 

permissible for a Federal savings 

association. 

Section 5A(f) of HOLA uses the term 

‘‘assets and subsidiaries.’’ However, 

under section 5A(c)(2) of HOLA, a 

covered savings association would be 

subject to the same duties, restrictions, 

penalties, liabilities, conditions, and 

limitations that apply to a similarly 

located national bank. As a result, a 

covered savings association’s activities 

would be limited in ways that a Federal 

savings association’s activities would 

not. For example, under 12 U.S.C. 

1464(c)(4)(B) and 12 CFR 5.59, a Federal 

savings association can invest in a 

service corporation, but a national bank 

cannot. Some activities a Federal 

savings association may conduct in a 

service corporation (e.g., acquiring real 

estate for development) are not 

permissible for a national bank.6

Consistent with section 5A(c)(2) of 

HOLA, the proposed rule would require 

covered savings associations to cease 

those activities that would not be 

permissible for a national bank. As 

discussed below, the OCC proposes to 

establish the same transition process for 

discontinuing nonconforming activities 

as it does for divesting nonconforming 

assets and subsidiaries. 

Paragraph (a)(5) of this section defines 

‘‘similarly located national bank’’ to 

mean, with respect to a covered savings 

association, a national bank that has its 

main office situated in the same location 

as the home office of the covered 

savings association. For purposes of the 

proposed rule, the location of a national 

bank’s main office is the home state of 

the national bank. The location of a 

covered savings association’s home 

office is the home state of the covered 

savings association. 

Paragraph (b) of this section provides 

that, for purposes of the proposed rule, 

the OCC will compute time in the same 

manner as set forth in 12 CFR 5.12. That 

section provides that, in computing a 

period of days, the OCC does not 

include the day of the act (in this case, 

the date the OCC receives a notice of 

election or termination) from which the 

period begins to run. If the last day of 

the time period is a Saturday, Sunday, 

or Federal holiday, the time period runs 

until the end of the next day that is not 

a Saturday, Sunday, or Federal holiday. 

101.3 Procedures and standard of 

review. Under section 5A(b) of HOLA, a 

Federal savings association with total 

consolidated assets of $20 billion or less 

as of December 31, 2017, may elect to 

operate as a covered savings association 

by submitting a notice to the 

Comptroller. The Federal savings 

association is deemed approved to 

operate as a covered savings association 

beginning 60 days after the Comptroller 

receives the notice, unless the 

Comptroller notifies the association that 

the association is not eligible.7 This 

section of the proposed rule establishes 

streamlined standards and procedures 

that identify required documentation 

and timelines for an election to operate 

as a covered savings association. The 

proposed rule would establish 

procedures that are as simple and 

straightforward as possible. 

Section 101.3(a)(1) of the proposed 

rule allows a Federal savings association 

that had total consolidated assets of $20 

billion or less as of December 31, 2017, 

to make an election to operate as a 

covered savings association by 

submitting a notice to the appropriate 

OCC supervisory office. The OCC 

proposes to use the Consolidated 

Reports of Condition and Income (Call 

Report) submitted for the quarter ending 

December 31, 2017, to determine if the 

Federal savings association meets this 

threshold. Because section 5A of HOLA 

contemplates that ‘‘a Federal savings 

association’’ with a certain amount of 

assets ‘‘as of December 31, 2017,’’ may 

make an election, under the proposed 

rule, institutions that were not Federal 

savings associations as of December 31, 

2017, are not eligible to operate as 

covered savings associations. 

Under this approach, an institution 

that was a credit union, state savings 

association, or state bank on December 

31, 2017, but that later converted to a 

Federal savings association charter, 

would not be eligible to make an 

election under the proposed rule. 

Similarly, a de novo Federal savings 

association chartered after December 31, 

2017, would not be eligible to make an 

election to operate as a covered savings 

association. A Federal savings 

association in stock form would retain 

the option to convert directly to a 

national bank charter, but for 

institutions in mutual form, such as 

credit unions, state savings associations, 

or state savings banks, a national bank 

charter is not available without first 


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converting to stock form. The OCC 

invites comment on whether the option 

to elect to operate as a covered savings 

association should be limited to 

institutions that were Federal savings 

associations on December 31, 2017. 

Paragraph (a)(1) of this section would 

require a Federal savings association to 

submit a notice to the appropriate OCC 

supervisory office. The appropriate OCC 

supervisory office has an established 

relationship with the Federal savings 

associations it supervises, and it is in 

regular quarterly contact with 

management of Federal savings 

associations. As a result, the supervisory 

office will be familiar with the 

condition and operations of a Federal 

savings association that submits a 

notice. 

The OCC encourages management of 

Federal savings associations to contact 

the appropriate OCC supervisory office 

to determine whether it would be useful 

to meet before submitting a notice under 

this section. The OCC believes such 

meetings can be beneficial to the 

management of Federal savings 

associations considering operating as 

covered savings associations, 

particularly Federal savings associations 

that may operate, hold, or conduct 

nonconforming subsidiaries, assets, or 

activities or that are operating under 

outstanding enforcement actions or 

matters requiring attention. These 

informal conversations could help 

address potential issues before a Federal 

savings association submits a notice. 

The proposed rule would require that 

a notice: Be signed by a duly authorized 

officer of the Federal savings 

association; identify each branch and 

agency that the Federal savings 

association will operate on the effective 

date of the election that has not been the 

subject of an application or notice under 

12 CFR part 5; and identify and describe 

each nonconforming subsidiary, asset, 

or activity that the Federal savings 

association operates, holds, or conducts 

at the time it submits the notice, each 

of which must be divested, conformed, 

or discontinued pursuant to § 101.5. 

The requirement for a signature of a 

duly authorized officer of the Federal 

savings association is intended to allow 

the Federal savings association to 

demonstrate that it has obtained any 

approval that may be required under its 

own internal procedures for making 

strategic decisions of this type. 

The proposed rule would require that 

the notice identify branches and 

agencies that the Federal savings 

association will operate on the date an 

election takes effect, and that have not 

been the subject of an application or 

notice under 12 CFR part 5, in order to 

determine which branches and agencies 

are eligible to be grandfathered pursuant 

to section 5A(e) of HOLA and § 101.4(b) 

of the proposed rule. Federal savings 

associations are already required under 

12 CFR part 5 to submit applications or 

notices to the OCC with respect to 

branches and agencies (for example, 

when establishing, acquiring, or 

relocating branches or establishing 

agencies). The proposed rule would 

only require a Federal savings 

association to identify branches or 

agencies for which the Federal savings 

association has not already submitted an 

application or notice. These are likely to 

be branches or agencies that are newly 

established at the time of an election 

under the proposed rule. 

The proposed rule would require 

Federal savings associations to identify 

nonconforming subsidiaries, assets, and 

activities because these are the 

subsidiaries, assets, and activities the 

Federal savings association would need 

to divest, conform, or discontinue 

pursuant to section 5A(f)(3) of HOLA 

and § 101.5 of the proposed rule after an 

election takes effect. Consistent with 

section 5A(f)(2) of HOLA, the OCC 

would expect a Federal savings 

association to identify subsidiaries, 

assets, and activities operated, held, or 

conducted at the time it submits a 

notice of election. The OCC expects that 

the description of the subsidiaries, 

assets, and activities would specify 

whether an asset or activity is held or 

conducted by the Federal savings 

association itself or by a subsidiary. The 

description of these subsidiaries, assets, 

and activities should be sufficient to 

allow the OCC to understand the size of 

the subsidiaries or assets and the scope 

of the activities relative to the asset size 

or capital of the Federal savings 

association. However, given the 

possibility of fluctuations, the OCC 

understands that the value of a 

subsidiary, asset, or activity at any given 

point in time might not reflect its usual 

size or scope. The OCC invites comment 

on whether the proposed rule should 

specify metrics for determining the size 

or scope of a subsidiary, asset, or 

activity, and, if so, whether those 

metrics should reflect a specific point in 

time. 

Under § 101.3(b) of the proposed rule, 

a Federal savings association’s election 

to operate as a covered savings 

association would automatically take 

effect 60 days after the OCC receives a 

notice from the Federal savings 

association, unless the OCC notifies the 

Federal savings association that it is not 

eligible in accordance with paragraph 

(c). The OCC also could notify a Federal 

savings association that it is eligible to 

operate as a covered savings association 

before 60 days have elapsed. The 

proposed rule does not include a 

provision for written notification if an 

election takes effect by operation of law, 

but the OCC would expect to provide 

such notification as a matter of course. 

The OCC expects that such a 

notification would state that a Federal 

savings association is subject to the 

covered savings association laws, as 

described in § 101.4 of the proposed 

rule, once an election takes effect. Such 

a notification would have no impact on 

whether or when an election takes 

effect. 

Section 101.3(c) of the proposed rule 

permits the OCC to notify a Federal 

savings association in writing that it is 

not eligible to make an election to 

operate as a covered savings association 

if the Federal savings association is not 

an ‘‘eligible savings association’’ as that 

term is defined in 12 CFR 5.3(g). Under 

the definition in 12 CFR 5.3(g), an 

eligible savings association is a Federal 

savings association that (1) is well 

capitalized as defined in 12 CFR 6.4; (2) 

has a composite rating of 1 or 2 under 

the Uniform Financial Institutions 

Rating System (CAMELS); (3) has a 

Community Reinvestment Act (CRA) 

rating of ‘‘outstanding’’ or 

‘‘satisfactory,’’ if applicable; (4) has a 

consumer compliance rating of 1 or 2 

under the Uniform Interagency 

Consumer Compliance Rating System; 

and (5) is not subject to a cease and 

desist order, consent order, formal 

written agreement, or Prompt Corrective 

Action directive or, if subject to any 

such order, agreement, or directive, is 

informed in writing by the OCC that the 

savings association may be treated as an 

‘‘eligible savings association’’ for 

purposes of 12 CFR part 5. Because the 

purposes of 12 CFR part 5 and the 

purposes of the proposed rule are 

different, the proposed rule specifies 

that a Federal savings association that is 

subject to a cease and desist order, 

consent order, formal written 

agreement, or Prompt Corrective Act 

directive would not be eligible to elect 

to operate as a covered savings 

association unless the OCC informs it in 

writing that it is eligible for purposes of 

part 101 (that is, for purposes of the 

proposed rule). 

The concept of an ‘‘eligible savings 

association’’ as described in 12 CFR 

5.3(g) is well understood and relatively 

straightforward to apply. In the 

licensing context, an ‘‘eligible savings 

association’’ may receive expedited 

review of filings because it is generally 

the type of savings association that can 

operate safely and soundly. In the 

context of the proposed rule, a Federal 


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8For convenience, this preamble refers to these 

areas as ‘‘the Federal savings association 

categories.’’ They are discussed in greater detail 

later in this preamble. 

savings association that meets the 

definition of ‘‘eligible savings 

association’’ typically does not raise the 

types of concerns that would suggest it 

should not operate as a covered savings 

association. 

The OCC invites comment on whether 

there are standards other than those in 

the definition of ‘‘eligible savings 

association’’ in 12 CFR 5.3(g) that would 

allow the OCC to determine, without 

imposing undue burden, whether a 

Federal savings association is eligible to 

operate as covered savings association. 

The OCC also invites comment on 

whether there are situations in which, 

or Federal savings associations for 

which, it would not be appropriate to 

use the definition of ‘‘eligible savings 

association’’ to make determinations 

about the eligibility of a Federal savings 

association to operate as covered 

savings associations. Additionally, the 

OCC invites comment on whether the 

rule should identify other factors for 

consideration when determining a 

Federal savings association’s eligibility 

to operate as a covered savings 

association. 

The proposed rule would not require 

a Federal savings association to amend 

its charter or bylaws or to obtain the 

approval of shareholders or members 

before submitting a notice to the OCC. 

The model Federal savings association 

charter allows a Federal savings 

association to pursue any lawful 

objectives of a Federal savings 

association chartered under section 5 of 

HOLA. Section 5A of HOLA permits 

covered savings associations to engage 

in activities that would be permissible 

for a national bank. Covered savings 

associations will continue to be Federal 

savings associations chartered under 

section 5 of HOLA, as neither the 

proposed rule nor the statute requires a 

charter conversion. 

Nevertheless, management of a 

Federal savings association that is 

interested in submitting a notice to elect 

to operate as a covered savings 

association should review the Federal 

savings association’s charter and 

bylaws, as well as any other applicable 

law, to determine whether an election 

will require shareholder or member 

approval or whether it should amend its 

charter or bylaws because the 

documents contain terms that are 

inconsistent with the rights and duties 

of a covered savings association. 

101.4 Treatment of covered savings 

associations. Section 5A(c) of HOLA 

provides that a covered savings 

association has the same rights and 

privileges as a national bank that has the 

main office of the national bank situated 

in the same location as the home office 

of the covered savings association and is 

subject to the same duties, restrictions, 

penalties, liabilities, conditions, and 

limitations that would apply to such a 

national bank. Section 5A(d) of HOLA 

also specifies that a covered savings 

association is treated as a Federal 

savings association for the purposes of 

governance of the covered savings 

association, including incorporation, 

bylaws, boards of directors, 

shareholders, and distribution of 

dividends, as well as for purposes of 

consolidation, merger, dissolution, 

conversion (including conversion to a 

stock bank or to another charter), 

conservatorship, and receivership. 

Section 5A(d)(3) gives the OCC the 

authority to identify by regulation other 

purposes for which a covered savings 

association will be treated as a Federal 

savings association. Within that general 

framework, section 5A(f)(5) of HOLA 

directs the OCC to clarify the 

requirements for the treatment of 

covered savings associations, including 

the provisions of law that apply to a 

covered savings association. Although, 

for many purposes, the regulations that 

apply to national banks are identical to 

the regulations that apply to Federal 

savings associations, there are 

provisions of Federal savings 

association law that are neither identical 

to national bank laws nor explicitly 

identified in section 5A(d) as purposes 

for which Federal savings association 

laws continue to apply to covered 

savings associations. For these 

provisions of law, the OCC seeks to 

clarify the legal framework that will 

apply while preserving the OCC’s 

flexibility to address novel situations 

and unforeseen questions. 

The proposed rule offers two 

alternatives to explain what it means for 

a covered savings association to have 

the rights and privileges of a similarly 

located national bank while being 

subject to the same duties, restrictions, 

penalties, liabilities, conditions, and 

limitations as a similarly located 

national bank. 

The first alternative would require a 

covered savings association to comply 

with the same provisions of law that 

would apply to a similarly located 

national bank and would not require it 

to comply with the provisions of law 

that apply to Federal savings 

associations, except in specific areas 

identified in § 101.4(a)(2) of the 

proposed rule, such as governance 

(including incorporation, bylaws, 

boards of directors, shareholders, and 

distribution of dividends), 

consolidation, merger, dissolution, 

conversion (including conversion to a 

stock bank or to another charter), 

conservatorship, and receivership. In 

these specific areas, the laws otherwise 

applicable to a Federal savings 

association will apply to a covered 

savings association.8

The first alternative would provide a 

framework for a covered savings 

association to understand the provisions 

of law that apply to it: That is, national 

bank provisions will apply, except 

where specifically set out in the 

proposed rule, and Federal savings 

association laws will not apply, except 

where specifically set out in the 

proposed rule. However, there may be 

circumstances where it would not be 

appropriate to apply a provision of 

national bank law to a covered savings 

association. Under the first alternative, 

unless that provision of national bank 

law is included in one of the Federal 

savings association categories, the OCC 

may not have the flexibility to decline 

to apply it to a covered savings 

association without amending the rule. 

The OCC invites comment on whether 

there are situations in which the first 

alternative would inappropriately apply 

provisions of national bank law to a 

covered savings association. The OCC 

also invites comment on whether the 

first alternative, if adopted, should 

include a reservation of authority to 

allow the OCC to determine that a 

particular provision of national bank 

law should not apply to covered savings 

associations. Would the framework of 

this alternative give covered savings 

associations and other interested 

persons sufficient notice of the 

provisions of law that do and do not 

apply to covered savings associations? 

Would the latitude provided to the OCC 

under a reservation of authority make 

this first alternative more workable? 

The second alternative focuses on the 

activities that would be permissible for 

a covered savings association. It is based 

on the requirements for operating 

subsidiaries of national banks set out in 

12 CFR 5.34(e). This alternative would 

provide that a covered savings 

association may engage in any activity 

that is permissible for a national bank to 

engage in as part of, or incidental to, the 

business of banking, or explicitly 

authorized by statute for a national 

bank, subject to the same authorization, 

terms, and conditions that would apply 

to a similarly located national bank, as 

determined by the OCC for purposes of 

the proposed rule. Like the first 

alternative, this second alternative 

would be subject to an exception for 


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9October 2017, available at https://

www.occ.treas.gov/publications/publications-bytype/other-publications-reports/pub-otheractivities-permissible-october-2017.pdf. 

10 12 U.S.C. 1467a(m). 

11 12 U.S.C. 1467a(m)(3)(B). 

12See, generally, Statement of Ellen Seidman, 

Director, Office of Thrift Supervision, before the 

Committee on Banking, Housing, and Urban Affairs, 

United States Senate, February 24, 1999. Other 

differences are, for example, a bar under section 

11(a) of HOLA that prevents Federal savings 

associations from making loans to affiliates not 

engaged in activities permissible for a bank holding 

company under section 4(c) of the Bank Holding 

Company Act and other constraints on the amount 

of commercial lending. 

13 12 U.S.C. 1464a(c). 

14 12 U.S.C. 1464(c)(2)(B). 

15 12 U.S.C. 1464(u) and 12 CFR part 32. 

16 12 CFR 163.80. 

17 12 U.S.C. 1468(a) and 12 CFR 223.72. 

provisions of law in the Federal savings 

association categories. 

The second alternative provides 

general guidance about the types of 

activities in which a covered savings 

association would be permitted to 

engage. Covered savings associations 

would be able to refer to OCC 

publications such as ‘‘Activities 

Permissible for National Banks and 

Federal Savings Associations, 

Cumulative’’ 9 to find activities that are 

permissible for national banks. The 

OCC’s permissible activities document 

includes links to OCC advisory letters, 

interpretive letters, bulletins, and other 

resources that would help covered 

savings associations understand the 

authorization, terms, and conditions 

that apply to these permissible 

activities. 

The second alternative is more 

narrowly tailored than the first 

alternative, and it preserves the OCC’s 

authority to determine that a particular 

provision of national bank law does not 

apply to covered savings associations. 

However, it may be difficult for a 

covered savings association to 

determine whether a particular 

provision of law is considered an 

‘‘authorization,’’ ‘‘term,’’ or ‘‘condition’’ 

that applies to a covered savings 

association if that provision is not 

otherwise discussed in an OCC 

publication. 

The OCC invites comment on which 

of these alternatives would best clarify 

the requirements for the treatment of 

covered savings associations, including 

the provisions of law that apply to 

covered savings associations. Are there 

provisions of law that would not be 

clearly addressed by these alternatives? 

Are there situations in which these 

alternatives would not lead to an 

appropriate result? 

Because section 5A(c) provides 

covered savings associations with the 

same rights and privileges as a similarly 

located national bank, subject to the 

same duties, restrictions, penalties, 

liabilities, conditions, and limitations 

that would apply to a similarly located 

national bank, both alternatives would 

allow a covered savings association to 

engage in activities to the same extent 

as a national bank. Except as provided 

in the proposed rule, a covered savings 

association would be permitted to 

engage in the same activities as a 

national bank, subject to the restrictions 

that would apply to a national bank 

rather than the restrictions that would 

apply to a Federal savings association. 

Unlike national banks, Federal 

savings associations are required to 

comply with the QTL test,10 which 

limits the majority of their activities and 

asset mix to those with a housing 

focus.11 The QTL test is a defining 

distinction between the rights and 

privileges of a savings association and a 

national bank.12 Following an election 

under section 5A, while it retains its 

charter, a covered savings association 

has all the same rights and privileges of, 

and is subject to the same duties, 

restrictions, penalties, liabilities, 

conditions, and limitations that would 

apply to, a similarly located national 

bank.13 Although section 5A provides 

that a covered savings association 

continues to be treated as a Federal 

savings association for certain 

enumerated areas and purposes such as 

governance and distribution of 

dividends, none of these enumerated 

areas or purposes relate to the QTL test, 

the other limitations in section 5(c), or 

the lending restrictions of section 11(a). 

A covered savings association cannot 

logically exercise the rights and 

privileges conferred on it under section 

5A (and have the activities and asset 

mix permitted to a national bank) while 

simultaneously being subject to the 

limitations of the QTL test, section 5(c), 

or section 11(a) lending restrictions. 

Accordingly, a covered savings 

association under section 5A is not 

subject to, among other things, the QTL 

test and the restrictions in 12 U.S.C. 

1467a(m)(3)(B) for failing to meet the 

QTL test. 

A similar analysis applies to the 

limits on aggregate amounts of loans 

secured by liens on nonresidential real 

property,14 additional restrictions on 

loans to a single borrower,15 other 

borrowing limitations,16 and certain 

affiliate transaction requirements.17

Because national banks are not subject 

to the duties, restrictions, penalties, 

liabilities, or conditions described in 

these provisions (and the proposed rule 

does not require covered savings 

associations to continue to comply with 

these provisions, as described later in 

this preamble), covered savings 

associations would not be subject to 

these provisions. 

In order to clarify the provisions of 

law that apply to covered savings 

associations, the OCC also must identify 

the purposes for which a covered 

savings association will be treated as a 

Federal savings association. Section 5A 

of HOLA sets out specific categories of 

activities where Federal savings 

association laws apply. Those categories 

are governance of the covered savings 

association (including incorporation, 

bylaws, boards of directors, 

shareholders, and distribution of 

dividends), consolidation, merger, 

dissolution, conversion (including 

conversion to a stock bank or to another 

charter), conservatorship, and 

receivership. The OCC can exercise its 

interpretive authority to determine 

which Federal savings association laws 

fall into each of those categories. The 

chart below shows examples of Federal 

savings association laws with which the 

OCC proposes to require covered 

savings associations to comply because 

these examples fall into the categories 

specifically created by section 5A. The 

OCC proposes that the statutory 

category for provisions relating to 

‘‘shareholders’’ be construed to include 

provisions relating to the members of 

Federal mutual savings associations. 

Statutory category Provision of law 

Incorporation ................................ 12 CFR 5.20. This section sets out requirements for organizing a national bank or Federal savings association, including for establishment as a legal entity. Although many aspects of this section are identical for 

national banks and Federal savings associations, where there are differences, the Federal savings association requirements would apply to a covered savings association. 

Bylaws ......................................... 12 CFR 5.21. This section sets out the requirements for Federal mutual savings associations when adopting 

or amending the charters or bylaws. 


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Statutory category Provision of law 

Bylaws ......................................... 12 CFR 5.22. This section sets out the requirements for stock Federal savings associations when adopting 

or amending the charters or bylaws. 

Board of directors; bylaws ........... 12 CFR 145.121. This section requires Federal savings associations to indemnify directors, officers, and employees. 

Board of directors ........................ 12 CFR 163.33. This section sets out requirements for the composition of the board of directors of a Federal 

savings association. 

Board of directors ........................ 12 CFR 163.47. This section sets out requirements for employee pension plans of Federal savings associations, which may be amended or terminated by the board of directors. 

Board of directors ........................ 12 CFR 163.200. This section sets expectations for the directors, officers, and employees of Federal savings 

associations, particularly as it relates to conflicts of interest. 

Board of directors ........................ 12 CFR 163.201. This section sets expectations for the directors and officers of Federal savings associations, particularly as it relates to corporate opportunity. 

Board of directors ........................ 12 CFR 163.172(c), (d), and (e). These provisions establish requirements for directors and management of 

Federal savings associations to oversee and keep records pertaining to derivatives transactions. 

Board of directors ........................ 12 CFR 163.176. This section requires the boards of directors of Federal savings associations to participate 

in interest rate risk management. 

Board of directors ........................ 12 CFR 160.130. This section prohibits directors and officers from receiving loan procurement fees. 

Shareholders (members) ............. 12 CFR part 144. This part sets out rules for communications between members of Federal mutual savings 

associations. The national bank laws relating to shareholder communications do not adequately address 

the unique needs and rights of Federal mutual savings association members. 

Shareholders (members) ............. 12 CFR part 169. This part sets out rules for proxies in the mutual context. The national bank laws relating to 

proxies do not adequately address the unique needs and rights of Federal mutual savings association 

members. 

Distribution of dividends .............. 12 CFR 5.55. This section sets out requirements for capital distributions by Federal savings associations, including distributions of dividends. The entire section would apply to a covered savings association. 

Consolidation ............................... 12 CFR 5.33. This section sets out requirements for business combinations involving a national bank or Federal savings association, including consolidation. Although many aspects of this section are identical for 

national banks and Federal savings associations, where there are differences, the Federal savings association requirements would apply to a covered savings association. 

Merger ......................................... 12 CFR 5.33. This section sets out requirements for business combinations involving a national bank or Federal savings association, including mergers. Although many aspects of this section are identical for national 

banks and Federal savings associations, where there are differences, the Federal savings association requirements would apply to a covered savings association. 

Dissolution ................................... 12 CFR 5.48. This section sets out requirements for voluntary liquidation of a national bank or Federal savings association. Although many aspects of this section are identical for national banks and Federal savings associations, where there are differences, the Federal savings association requirements would apply 

to a covered savings association. 

Conversion .................................. 12 CFR 5.25. This section sets out requirements for conversion from a national bank or Federal savings association to a state bank or state savings association. Although many aspects of this section are identical 

for national banks and Federal savings associations, where there are differences, the Federal savings association requirements would apply to a covered savings association. 

Conversion .................................. 12 CFR part 192. This part sets out requirements for savings associations converting from mutual to stock 

form. 

Conservatorship .......................... 12 U.S.C. 1464(d) and 1821(c). The statutes set forth the authorities for the appointment of a conservator for 

Federal savings associations. 

Receivership ................................ 12 U.S.C. 1464(d) and 1821(c). The statutes set forth the authorities for the appointment of a receiver for 

Federal savings associations. 

These are the types of provisions that 

the OCC would expect to identify in 

guidance as governance-related 

provisions but would not expect to 

include in the text of the rule. The OCC 

invites comment on whether the 

particular provisions identified earlier 

in this preamble should be considered 

provisions of law that relate to 

governance (including incorporation, 

bylaws, boards of directors, 

shareholders, and distribution of 

dividends), consolidation, merger, 

dissolution, conversion (including 

conversion to a stock bank or to another 

charter), conservatorship, and 

receivership and whether there are other 

provisions of law that the OCC should 

identify. The OCC also invites comment 

on whether these provisions should be 

specifically identified in the rule rather 

than in guidance. 

Under section 5A(d)(3) of HOLA, the 

OCC also has the discretion to identify, 

by rule, additional areas where Federal 

savings association laws apply to 

covered savings associations. There are 

three categories of laws for which this 

treatment would be appropriate. The 

first category consists of laws that allow 

Federal mutual savings associations to 

conduct business as mutual institutions. 

For example, 12 CFR 163.74 sets out 

rules for mutual capital certificates. 

There is no comparable provision for 

national banks. Likewise, 12 CFR 163.76 

prohibits a Federal savings association 

from selling equity securities in its 

offices, unless the sale involves stock 

sold to convert the savings association 

from the mutual to stock form. Sale of 

conversion stock in offices can promote 

a widespread distribution of conversion 

stock as required by the stock 

conversion regulations (see 12 CFR part 

192) and help facilitate the success of a 

stock conversion. Because a similar rule 

does not exist for national banks, under 

the proposed rule, the requirements of 

12 CFR 163.76 will continue to apply to 

the operations of a covered savings 

association in the event the savings 

association seeks to convert from the 

mutual to stock form of organization. 

The OCC proposes to continue to apply 

these types of Federal savings 

association requirements to covered 

savings associations. 

The second area consists of rules that 

set out procedural and operational 

requirements for Federal savings 

associations but that do not result in 


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18See the discussion of section 5A(e) of HOLA 

later in this preamble, which allows a covered 

savings association to continue to operate branches 

it operated on the date its election is approved. 

substantively different outcomes for 

Federal savings associations and 

national banks. The OCC proposes to 

apply Federal savings association rules 

that set forth procedural and operational 

requirements to covered savings 

associations, because Federal savings 

associations have already developed the 

policies, procedures, and expertise to 

comply with the Federal savings 

association procedures. 

The following chart sets out rules that 

set forth procedural and operational 

requirements: 

Applicable Federal savings association rule 

(applies to covered savings associations) 

Comparable national bank 

rule (does not apply to covered savings associations) 

12 CFR parts 108 and 109, adjudicative proceedings ................................................................................................... 12 CFR part 19. 

12 CFR part 112, investigative proceedings .................................................................................................................. 12 CFR part 19. 

12 CFR part 151, recordkeeping and confirmation for securities transactions ............................................................. 12 CFR part 12. 

12 CFR 5.56, inclusion of subordinated debt securities and mandatorily redeemable preferred stock of Federal 

savings associations as supplementary capital.

12 CFR 5.47. 

12 CFR 5.45, increases in permanent capital ................................................................................................................ 12 CFR 5.56. 

12 CFR part 168, security procedures ........................................................................................................................... 12 CFR part 21, subpart A. 

Finally, the OCC proposes to apply 

Federal savings association provisions 

where there is a specific Federal savings 

association rule with no corresponding 

specific national bank rule, but the 

Federal savings association rule sets out 

requirements that are consistent with 

supervisory expectations for national 

banks or is substantially similar to an 

interagency rule. For example, 12 CFR 

part 162 implements a statutory 

requirement in HOLA that requires 

Federal savings associations to use 

generally accepted accounting 

principles. Pursuant to the Federal 

Deposit Insurance Act at 12 U.S.C. 

1831m and its implementing regulation 

at 12 CFR 363, all insured depository 

institutions are required to use generally 

accepted accounting principles. 

Similarly, 12 CFR 163.170(c) sets out 

expectations for maintenance of records 

with which the OCC also would expect 

a national bank to comply as a matter 

of course. The proposed rule also would 

treat covered savings associations as 

Federal savings associations for 

purposes of 12 CFR part 128, which sets 

out nondiscrimination requirements, 

and 12 CFR 163.27, which prohibits 

inaccurate or misrepresentative 

advertising. 

The OCC invites comment on whether 

any of the provisions of Federal savings 

association law proposed earlier in this 

preamble to be applicable to covered 

savings associations should not apply to 

covered savings associations. The OCC 

also invites comment on whether the 

OCC should exercise its discretion 

under section 5A(d)(3) of HOLA to 

identify in this rule additional areas in 

which Federal savings association laws, 

rather than national bank laws, should 

apply to covered savings associations. 

The OCC recognizes that the areas 

described earlier in this preamble may 

not be the only areas where it would be 

appropriate to apply provisions of 

Federal savings association laws to 

covered savings associations. Novel and 

unforeseen situations may arise in 

which it would be appropriate to apply 

a provision of Federal savings 

association law not identified earlier in 

this preamble to a covered savings 

association. The OCC solicits comment 

on whether it would be helpful to 

include a mechanism in this rule that 

would allow the OCC, in the future, to 

identify additional provisions of Federal 

savings association law that apply to 

covered savings associations, without 

amending this rule. Such a mechanism 

might consist of publishing an 

interpretive letter or updating a 

particular OCC publication. 

In areas not specifically described 

earlier in this preamble, the proposed 

rule contemplates that national bank 

laws would apply to a covered savings 

association. For example, a covered 

savings association seeking to establish 

a de novo branch or close an existing 

branch would be subject to the statutes 

and regulations that govern the 

establishment or closing of a national 

bank branch.18 Similarly, the 

requirement for employment agreements 

is not an area identified earlier in this 

preamble, so the Federal savings 

association rules in 12 CFR 163.39 

would not apply. 

The proposed rule also would require 

a covered savings association to comply 

with national bank law with respect to 

subsidiaries. Section 5A(f)(2) of HOLA 

directs the OCC to issue rules that 

require Federal savings associations 

making an election to identify ‘‘specific 

assets and subsidiaries’’ that do not 

conform to the requirements for assets 

and subsidiaries of a national bank. 

Section 5A(f)(3) requires that the OCC’s 

rules establish a transition process for 

bringing these assets and subsidiaries 

into conformance with the requirements 

for a national bank. This suggests that 

Congress may have intended to prohibit 

covered savings associations from 

retaining assets or subsidiaries, such as 

service corporations, in which a 

national bank would not be authorized 

to hold, operate, or invest. 

Consequently, the proposed rule would 

require a covered savings association to 

comply with national bank laws for 

purposes of forming new subsidiaries. 

Under § 101.4(a)(1) of the proposed rule, 

12 CFR 5.34, 5.35, and 5.39, which 

respectively set out requirements for the 

formation of operating subsidiaries, 

bank service companies, and financial 

subsidiaries by national banks, would 

apply to covered savings associations. 

Similarly, 12 CFR 5.36, which addresses 

other equity investments by national 

banks, would apply to covered savings 

associations. Because 12 CFR 5.59, 

addressing Federal savings association 

service corporations, is not listed in 

§ 101.4(a)(2) as a provision of Federal 

savings association law that continues 

to apply to covered savings associations, 

12 CFR 5.59 would not apply. 

Service corporations of Federal 

savings associations have been 

authorized to engage in a range of 

activities. Some of those activities are 

permissible for a national bank and 

some are not. Under the proposed rule, 

both subsidiaries and those activities 

conducted in a subsidiary that are 

impermissible for a national bank would 

be impermissible for a covered savings 

association. However, the OCC 

recognizes that a prohibition on 

operating a service corporation could 

have a significant effect on a covered 

savings association. The OCC invites 

comment on whether the rule should 

allow covered savings associations to 

continue to operate a service 

corporation, and under what conditions, 

if the service corporation is engaged 


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19These institutions also receive grandfathered 

treatment under section 18(m) of the Federal 

Deposit Insurance Act (12 U.S.C. 1828(m)). 

20For example, a national bank with total 

consolidated assets of $250 million would be 

subject to a public welfare investment limit of 

$4,500,000 (15 percent of its capital and surplus if 

capital is 12 percent). A Federal savings association 

of the same size would be permitted to invest 

$300,000 under 12 CFR 160.63, $5,000,000 under 

12 CFR 160.30, and $2,500,000 under 12 CFR 5.59, 

for a total of $12,300,000. If that Federal savings 

association elected to become a covered savings 

association, it would be required to divest 

$7,800,000 of its community development 

investments to comply with the public welfare 

investment limit for national banks. 

only in activities that would be 

permissible for a national bank. 

The proposed rule would not apply 

section 5(i)(4) of HOLA to covered 

savings associations. Section 5(i)(4) of 

HOLA provides that Federal savings 

banks chartered prior to October 15, 

1982, may continue to make any 

investment or engage in any activity not 

otherwise authorized under section 5 to 

the degree they were permitted to do so 

as a Federal savings bank prior to 

October 15, 1982.19 In addition, any 

Federal savings bank in existence on 

August 9, 1989, that had been formerly 

organized as a mutual savings bank 

under State law may continue to make 

any investment or engage in any activity 

to the degree it was authorized to do so 

as a mutual savings bank under State 

law. Some of these investments and 

activities, although permissible for 

certain Federal savings associations, 

would not be permissible for a national 

bank. The proposed rule would not 

apply section 5(i)(4) of HOLA (or the 

implementing regulations at 12 CFR part 

143) to a covered savings association, 

meaning that a Federal savings 

association with investments and 

activities grandfathered under that 

section would be required to divest any 

of those investments and discontinue 

any of those activities that would not be 

permissible for a national bank. 

The proposed rule would require a 

covered savings association to comply 

with the national bank public welfare 

investment limits rather than the 

Federal savings association community 

development limits. National banks are 

subject to a public welfare investment 

limit of 15 percent of their capital and 

surplus, consistent with 12 U.S.C. 24 

(Eleventh) and 12 CFR part 24. The 

community development investment 

limits for Federal savings associations 

are set out in 12 CFR 160.36 (less than 

or equal to the greater of 1 percent of the 

association’s capital or $250,000); 

section 5(c)(3)(A) of HOLA (12 U.S.C. 

1464(c)(3)(A)) and 12 CFR 160.30, as 

interpreted by the Office of Thrift 

Supervision’s May 10, 1995, Letter 

Regarding Community Development 

investments (aggregate community 

development loans and equity 

investments may not exceed 5 percent 

of the association’s total assets, and, 

within that limitation, the association’s 

aggregate equity investments may not 

exceed 2 percent of its total assets); and 

12 CFR 5.59 (allowing the association to 

invest up to 3 percent of its assets in 

service corporations but providing that 

any amount exceeding 2 percent must 

serve ‘‘primarily community, inner-city, 

or community development purposes’’). 

If a Federal savings association uses all 

or a portion of the investment limits 

permitted under the three legal 

authorities, it is possible that its 

aggregate community development 

investments would exceed the 

investment limits for national banks. As 

a result, applying national bank 

limitations to covered savings 

associations for purposes of public 

welfare and community development 

investments could require a Federal 

savings association that elects to operate 

as a covered savings association to 

divest some of its community 

development investments.20 Divesting 

community development investments 

could have a negative impact on a 

covered savings association’s 

community, and divestment may make 

it more difficult for the covered savings 

association to meet its requirements 

under the CRA. Given these potential 

consequences, the OCC invites comment 

on whether covered savings associations 

should be treated as Federal savings 

associations for purposes of public 

welfare and community development 

investments. 

Paragraph (b) of § 101.4 of the 

proposed rule provides that a covered 

savings association may continue to 

operate any branch or agency that the 

covered savings association operated on 

the effective date of the election. This 

provision implements section 5A(e) of 

HOLA. 

Section 5A(g) of HOLA provides that 

a covered savings association can 

continue to operate as a covered savings 

association, even if its total consolidated 

assets grow to more than $20 billion. 

Although this principle is not explicitly 

set out in the proposed rule, the OCC 

would apply it when supervising 

covered savings associations. 

101.5 Nonconforming subsidiaries, 

assets, and activities. This section 

establishes a transition process for 

bringing nonconforming subsidiaries, 

assets, and activities into conformance 

with the requirements for national 

banks. 

Paragraph (a) of § 101.5 would require 

a covered savings association to divest, 

conform, or discontinue nonconforming 

subsidiaries, assets, and activities at the 

earliest time that prudent judgment 

dictates but not later than two years 

after the effective date of an election. 

This requirement is consistent with 

paragraphs (2) and (3) of section 5A(f) 

of HOLA, which set out an expectation 

that covered savings associations will 

bring assets and subsidiaries that do not 

conform to the requirements for national 

banks into conformance with the 

requirements for national banks. 

In keeping with the goal of 

maintaining a level playing field among 

OCC-supervised institutions, the 

proposed rule would require a covered 

savings association to divest, conform, 

or discontinue nonconforming 

subsidiaries, assets, and activities at the 

earliest time prudent judgment dictates. 

Recognizing that circumstances may 

occasionally dictate that immediate 

divestment, conformance, or 

discontinuance is not prudent, the 

proposed rule would provide up to two 

years for such action. The two-year 

period for divesting, conforming, or 

discontinuing nonconforming 

subsidiaries, assets, and activities is the 

same period that the OCC would 

generally allow for a Federal savings 

association converting to a national 

bank. This period should, in most cases, 

provide a covered savings association 

with sufficient lead-time to minimize 

potential undue financial harm from 

divesting, conforming, or discontinuing 

nonconforming subsidiaries, assets, and 

activities. This period also is intended 

to be short enough to ensure that 

covered savings associations are not 

allowed to gain an advantage by holding 

or operating assets or subsidiaries or 

conducting activities that would not be 

permissible for a national bank. The 

OCC invites comment on whether a 

different period, such as the more 

general ‘‘reasonable time’’ standard set 

out in the conversion rules at 12 CFR 

5.24, should apply. 

Paragraph (a) of this section also 

provides that the OCC may require a 

covered savings association to submit a 

plan to divest, conform, or discontinue 

a nonconforming subsidiary, asset, or 

activity. Such a plan would assist OCC 

supervisory staff in assessing 

compliance with the proposed rule. 

Paragraph (b) of this section would 

allow the OCC to grant a covered 

savings association extensions of not 

more than two years each up to a 

maximum of eight years if the OCC 

determines that: (1) The covered savings 

association has made a good faith effort 

to divest, conform, or discontinue the 


daltland on DSKBBV9HB2PROD with PROPOSALS
47110 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Proposed Rules 

nonconforming subsidiaries, assets, or 

activities; (2) divestiture, conformance, 

or discontinuance would have a 

material adverse financial effect on the 

covered savings association; and (3) 

retention or continuation of the 

nonconforming subsidiaries, assets, or 

activities is consistent with the safe and 

sound operation of the covered savings 

association. This paragraph is intended 

to provide the OCC with flexibility 

where a covered savings association, 

despite its best efforts, is unable to 

divest or conform assets or discontinue 

activities within the two-year period. 

For example, in cases where a covered 

savings association has a service 

corporation that owns nonconforming 

real estate in a market experiencing a 

significant and prolonged lack of 

demand, the OCC could grant an 

extension to allow market conditions to 

improve rather than requiring the 

covered savings association to sell the 

real estate within two years and take a 

loss on the property, provided the 

standards set forth in paragraph (b) are 

satisfied. The proposed rule limits the 

number of extensions to ensure that a 

covered savings association cannot 

retain or continue a nonconforming 

subsidiary, asset, or activity for more 

than 10 years past the effective date of 

an election. The 10-year period in the 

proposed rule is consistent with the 10- 

year limitation on possession of OREO 

by national banks under 12 U.S.C. 29. 

The limitation is intended to ensure that 

covered savings associations do not 

have the ability to retain or continue 

indefinitely subsidiaries, assets, or 

activities that would not be permissible 

for a national bank. 

The OCC invites comment on whether 

there are any situations in which it 

would be appropriate for a covered 

savings association to retain a 

nonconforming subsidiary or asset or 

continue a nonconforming activity for 

longer than 10 years. What 

characteristics do these subsidiaries, 

assets, or activities have that would 

make it appropriate for them to be 

treated differently than other 

nonconforming subsidiaries, assets, or 

activities (for example, would 

conforming result in particularly severe 

adverse consequences)? If the rule 

permits a subsidiary, asset, or activity to 

be retained or continued for longer than 

10 years, should the OCC limit the 

ability of a covered savings association 

to expand the subsidiary, asset, or 

activity? 

Paragraph (c) of this section of the 

proposed rule provides that Federal 

savings association law would continue 

to apply to nonconforming subsidiaries, 

assets, and activities during the period 

before the covered savings association 

divests, conforms, or discontinues the 

subsidiary, asset, or activity. This 

provision is intended to clarify the 

treatment of nonconforming 

subsidiaries, assets, and activities 

during the transition period. 

101.6 Termination. This section 

would establish standards and 

procedures to allow a covered savings 

association to terminate an election after 

an appropriate period of time. 

Under § 101.6(a) of the proposed rule, 

a covered savings association may 

request to terminate an election after an 

appropriate period of time, as 

determined by the OCC. The OCC 

would generally view an appropriate 

period of time to be relatively soon after 

an election takes effect (for example, 60 

or 90 days). However, the OCC might 

determine that a longer period of time 

is appropriate where there is evidence 

that a covered savings association is 

attempting to use a termination to evade 

the requirements or purposes of section 

5A of HOLA, such as the requirement to 

divest, conform, or discontinue 

nonconforming subsidiaries, assets, and 

activities. 

Paragraph (b) of this section 

establishes procedures for terminating 

an election that are intended to be the 

mirror image of the procedures for 

making an election, with some 

exceptions noted below. As with an 

election, a covered savings association 

that wishes to terminate an election 

would be required to notify the OCC of 

the termination in writing. The notice 

would need to be signed by a duly 

authorized officer. A covered savings 

association would also be required to 

provide the OCC with a list of 

nonconforming subsidiaries, assets, and 

activities—that is, subsidiaries, assets, 

and activities (e.g., investments in 

excess of HOLA limits) that would not 

be permissible for a Federal savings 

association. The same effective date 

timelines and requirements would 

apply to a request for termination as 

apply to a notice of election. The OCC 

could notify a covered savings 

association that it is not eligible to 

terminate an election if the covered 

savings association is not an ‘‘eligible 

savings association’’ within the meaning 

of 12 CFR 5.3(g). 

A savings association terminating an 

election would have the same period of 

time after submitting a notice of 

termination to divest, conform, or 

discontinue nonconforming 

subsidiaries, assets and activities. 

Generally, this period of time would not 

exceed two years, but a savings 

association could request extensions of 

this time in the manner described in 

§ 101.5 of the proposed rule. A Federal 

savings association that has terminated 

its election would not be permitted to 

retain or continue any subsidiaries, 

assets, or activities that would be 

permissible for a national bank but not 

for a Federal savings association. This 

includes lending activities that would 

cause the savings association to violate 

the QTL test. 

Unlike an election, a covered savings 

association wishing to terminate an 

election would not be required to 

identify branches or agencies in 

operation at the time of termination. 

Paragraph (c) of this section specifies 

that, once a termination takes effect, a 

Federal savings association is subject to 

the same provisions of law that apply to 

other Federal savings associations that 

are not covered savings associations. 

101.7 Reelection. This section 

allows a covered savings association to 

make a subsequent election after 

terminating an election. 

Under the proposed rule, a Federal 

savings association that wishes to make 

a subsequent election after terminating 

a previous election would be subject to 

the same requirements as a Federal 

savings association making an election 

for the first time. 

However, a Federal savings 

association that previously made and 

terminated an election to operate as a 

covered savings association would be 

required to wait five years after the 

termination before making a subsequent 

election. The purpose of this cooling-off 

period is to prevent institutions from 

taking advantage of a potential overlap 

between transition periods for divesting 

nonconforming subsidiaries and assets 

and discontinuing nonconforming 

assets. Under the proposed rule, the 

OCC has the authority to waive the fiveyear period for good cause. 

101.8 Evasion. This section of the 

proposed rule provides that the OCC 

may disapprove a notice of election, 

termination, or reelection if the OCC has 

reasonable cause to believe the notice is 

made for the purpose of evading § 101.5 

of the proposed rule, including as that 

section applies to a termination. For 

example, the OCC might disapprove a 

covered savings association’s notice of 

termination if it determined the covered 

savings association was attempting to 

terminate to take unfair advantage of an 

overlap between the period to divest, 

conform, or discontinue nonconforming 

subsidiaries, assets, and activities 

provided for an election and the period 

to divest, conform, or discontinue 

nonconforming subsidiaries, assets, and 

activities provided for a termination. 


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Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Proposed Rules 47111 

21We base our estimate of the number of small 

entities on the SBA’s size thresholds for commercial 

banks and savings institutions, and trust 

companies, which are $550 million and $38.5 

million, respectively. Consistent with the General 

Principles of Affiliation 13 CFR 121.103(a), we 

count the assets of affiliated financial institutions 

when determining if we should classify an OCCsupervised institution a small entity. We use 

December 31, 2017, to determine size because a 

‘‘financial institution’s assets are determined by 

averaging the assets reported on its four quarterly 

financial statements for the preceding year.’’ See 

footnote 8 of the U.S. Small Business 

Administration’s Table of Size Standards. 

22We believe that costs associated with electing 

to be treated as a covered savings association will 

be minimal and that Federal savings associations 

will only choose to be treated as a covered savings 

associations if the benefits outweigh the costs. 23 44 U.S.C. 3501 et seq. 24 12 U.S.C. 4802(a). 

III. Request for Comments 

The OCC encourages comment on any 

aspect of this proposal and especially on 

those issues noted in this preamble. 

IV. Regulatory Analysis 

Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601 et seq., (RFA), requires an 

agency, in connection with a proposed 

rule, to prepare an Initial Regulatory 

Flexibility Analysis describing the 

impact of the rule on small entities 

(defined by the Small Business 

Administration (SBA) for purposes of 

the RFA to include commercial banks 

and savings institutions with total assets 

of $550 million or less and trust 

companies with total revenue of $38.5 

million or less) or to certify that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

The OCC currently supervises 

approximately 886 small entities, of 

which 258 are Federal savings 

associations.21 Because the proposed 

rule does not contain any new 

recordkeeping, reporting, or compliance 

requirements, we anticipate that it will 

not impose costs on OCC-supervised 

institutions unless they elect to operate 

as a covered savings association.22

Therefore, the OCC certifies that the 

proposed rule, if implemented, would 

not have a significant economic impact 

on a substantial number of OCCsupervised small entities. 

Unfunded Mandates Reform Act of 1995 

Consistent with the UMRA, our 

review considers whether the mandates 

imposed by the proposed rule may 

result in an expenditure of $100 million 

or more by state, local, and tribal 

governments, or by the private sector, in 

any one year. The proposed rule does 

not impose new mandates. Therefore, 

we conclude that the proposed rule will 

not result in an expenditure of $100 

million or more annually by state, local, 

and tribal governments, or by the 

private sector. 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995,23 the OCC may not conduct or 

sponsor, and a person is not required to 

respond to, an information collection 

unless the information collection 

displays a valid OMB control number. 

The OCC has submitted the information 

collection requirements imposed by this 

proposed rule to OMB for review. 

A Federal savings association seeking 

to operate as a covered savings 

association would be required under 

§ 101.3(a) to submit a notice making an 

election to the appropriate OCC 

supervisory office that: (1) Is signed by 

a duly authorized officer of the Federal 

savings association; (2) identifies the 

branches and agencies that will be in 

operation on the effective date of the 

election that have not been the subject 

of an application or notice under 12 

CFR part 5; and (3) identifies and 

describes any nonconforming 

subsidiaries, assets, or activities that the 

Federal savings association holds, 

operates, or conducts at the time its 

submits its notice. 

Under § 101.5(a), the OCC may 

require a covered savings association to 

submit a plan to divest, conform, or 

discontinue a nonconforming 

subsidiary, asset, or activity. 

A covered savings association may 

submit a notice to terminate its election 

to operate as a covered savings 

association under § 101.6 using similar 

procedures to those for an election. In 

addition, after a period of five years, a 

Federal savings association that has 

terminated its election to operate as a 

covered savings association may submit 

a notice under § 101.7 to reelect using 

the same procedures used for its original 

election. 

Title: Covered Savings Association 

Notice. 

OMB Control No.: To be assigned by 

OMB. 

Frequency of Response: On occasion. 

Affected Public: Businesses or other 

for-profit organizations. 

Election, Termination, Reelection: 

Estimated Number of Respondents: 

295. 

Estimated Burden per Respondent: 2 

hours. 

Estimated Total Annual Burden: 590 

hours. 

Plan to Divest: 

Estimated Number of Respondents: 

25. 

Estimated Burden per Respondent: 2 

hours. 

Estimated Total Annual Burden: 50 

hours. 

Total Annual Burden: 640 hours. 

In addition, the OCC will file a 

nonmaterial change at the final rule 

stage to amend its Licensing Manual 

Collection (OMB Control No. 1557– 

0014) to increase the respondent count 

to reflect additional filings from Federal 

savings associations. 

Comments are invited on: 

(a) Whether the collections of 

information are necessary for the proper 

performance of the functions of the 

OCC, including whether the information 

has practical utility; 

(b) The accuracy of the OCC’s 

estimates of the burden of the 

collections of information; 

(c) Ways to enhance the quality, 

utility, and clarity of the information to 

be collected; 

(d) Ways to minimize the burden of 

the collections on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology; and 

(e) Estimates of capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to provide information. 

Riegle Community Development and 

Regulatory Improvement Act of 1994 

Pursuant to section 302(a) of the 

Riegle Community Development and 

Regulatory Improvement Act of 1994 

(CDRI Act),24 in determining the 

effective date and administrative 

compliance requirements for new 

regulations that impose additional 

reporting, disclosure, or other 

requirements on insured depository 

institutions, the OCC will consider, 

consistent with the principles of safety 

and soundness and the public interest: 

(1) Any administrative burdens that the 

proposed rule would place on 

depository institutions, including small 

depository institutions and customers of 

depository institutions, and (2) the 

benefits of the proposed rule. The OCC 

requests comment on any administrative 

burdens that the proposed rule would 

place on depository institutions, 

including small depository institutions, 

and their customers, and the benefits of 

the proposed rule that the OCC should 

consider in determining the effective 

date and administrative compliance 

requirements for a final rule. 

List of Subjects in 12 CFR Part 101 

Administrative practice and 

procedure, Assets, Reporting and 

recordkeeping requirements, Savings 

associations. 


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47112 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Proposed Rules 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, and under the authority of 12 

U.S.C. 93a and 5412(b)(2)(B), chapter I 

of title 12 of the Code of Federal 

Regulations is proposed to be amended 

by adding Part 101 as follows: 

PART 101—COVERED SAVINGS 

ASSOCIATIONS 

Secs. 

101.1 Authority and purposes. 

101.2 Definitions and computation of time. 

101.3 Procedures and standard of review. 

101.4 Treatment of covered savings 

associations. 

101.5 Nonconforming subsidiaries, assets, 

and activities. 

101.6 Termination. 

101.7 Reelection. 

101.8 Evasion. 

Authority: 12 U.S.C. 93a, 1462a, 1463, 

1464, 1464a, and 5412(b)(2)(B). 

§ 101.1 Authority and purposes. 

(a) Authority. This part is issued 

pursuant to sections 3, 4, 5, and 5A of 

the Home Owners’ Loan Act (HOLA) (12 

U.S.C. 1462a, 1463, 1464, and 1464a), 

section 5239A of the Revised Statutes 

(12 U.S.C. 93a), and section 312(b)(2)(B) 

of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (12 U.S.C. 

5412(b)(2)(B)). 

(b) Purposes. This part establishes 

standards and procedures for a Federal 

savings association to elect to operate as 

a covered savings association pursuant 

to section 5A of the HOLA and clarifies 

the requirements for the treatment of 

covered savings associations. It also 

establishes standards and procedures to 

terminate an election and to reelect to 

operate as a covered savings association. 

§ 101.2 Definitions and computation of 

time. 

(a) Definitions. As used in this part: 

(1) Appropriate OCC supervisory 

office means the OCC office that is 

responsible for the supervision of a 

Federal savings association, as 

described in subpart A of 12 CFR part 

4. 

(2) Covered savings association means 

a Federal savings association that has 

made an election that is in effect in 

accordance with § 101.3(b). 

(3) Effective date of the election 

means, with respect to a Federal savings 

association, the date on which the 

Federal savings association’s election to 

operate as a covered savings association 

takes effect pursuant to § 101.3(b). 

(4) Nonconforming subsidiary, asset, 

or activity: 

(i) With respect to a covered savings 

association: 

(A) Means any subsidiary, asset, or 

activity that is not permissible for a 

covered savings association or, if 

permissible, is being operated, held, or 

conducted in a manner that exceeds the 

limit applicable to a covered savings 

association; and 

(B) Includes an investment in a 

subsidiary or other entity that is not 

permissible for a covered savings 

association; and 

(ii) With respect to a Federal savings 

association that has terminated an 

election to operate as a covered savings 

association: 

(A) Means any subsidiary, asset, or 

activity that is not permissible for a 

Federal savings association or, if 

permissible, is being operated, held, or 

conducted in a manner that exceeds the 

limit applicable to a Federal savings 

association; and 

(B) Includes an investment in a 

subsidiary or other entity that is not 

permissible for a Federal savings 

association. 

(5) Similarly located national bank 

means, with respect to a covered savings 

association, a national bank that has its 

main office situated in the same location 

as the home office of the covered 

savings association. 

(b) Computation of time. The OCC 

will compute a period of days for 

purposes of this part in accordance with 

12 CFR 5.12. 

§ 101.3 Procedures and standard of 

review. 

(a) Notice—(1) Submission. A Federal 

savings association that had total 

consolidated assets of $20 billion or less 

as of December 31, 2017, as reported on 

the Federal savings association’s 

Consolidated Reports of Condition and 

Income for December 31, 2017, may 

make an election to operate as a covered 

savings association by submitting a 

notice to the appropriate OCC 

supervisory office. 

(2) Contents. The notice shall: 

(i) Be signed by a duly authorized 

officer of the Federal savings 

association; 

(ii) Identify each branch or agency 

that the Federal savings association 

operates or will operate on the effective 

date of the election that has not been the 

subject of an application or notice under 

12 CFR part 5; and 

(iii) Identify and describe each 

nonconforming subsidiary, asset, or 

activity that the Federal savings 

association operates, holds, or conducts 

at the time it submits the notice, each 

of which must be divested, conformed, 

or discontinued pursuant to § 101.5. 

(b) Effective date of the election—(1) 

In general. An election to operate as a 

covered savings association shall take 

effect on the date that is 60 days after 

the date on which the OCC receives the 

notice submitted under paragraph (a) of 

this section, unless the OCC notifies the 

Federal savings association that it is not 

eligible in accordance with paragraph 

(c) of this section. 

(2) Earlier notice. Notwithstanding 

paragraph (b)(1) of this section, the OCC 

may notify a Federal savings association 

in writing prior to the expiration of 60 

days that it is eligible to make an 

election, and the election shall take 

effect on the date the OCC so notifies 

the Federal savings association. 

(c) Federal savings association not 

eligible. Prior to the expiration of 60 

days after the date on which the OCC 

receives the notice submitted under 

paragraph (a) of this section, the OCC 

may notify a Federal savings association 

in writing that it is not eligible to make 

an election to operate as a covered 

savings association pursuant to this part 

if the Federal savings association is not 

an eligible savings association as that 

term is defined in 12 CFR 5.3(g). If the 

Federal savings association is subject to 

a cease and desist order, consent order, 

formal written agreement, or Prompt 

Corrective Action directive, the Federal 

savings association is not eligible to 

make an election to operate as a covered 

savings association unless the OCC 

informs the Federal savings association 

in writing that it may be treated as an 

eligible savings association for purposes 

of this part. 

§ 101.4 Treatment of covered savings 

associations. 

(a) In general— 

[OPTION A: (1) Treatment as a 

national bank. Except as provided in 

this section, a covered savings 

association shall comply with the same 

provisions of law that would apply to a 

similarly located national bank and 

shall not be required to comply with the 

provisions of law that apply to Federal 

savings associations.] 

[OPTION B: (1) National bank 

activities. Except as provided in this 

section, a covered savings association 

may engage in any activity that is 

permissible for a similarly located 

national bank to engage in as part of, or 

incidental to, the business of banking, or 

explicitly authorized by statute for a 

national bank, subject to the same 

authorization, terms, and conditions 

that would apply to a similarly located 

national bank, as determined by the 

OCC for purposes of this part.] 

(2) Treatment as a Federal savings 

association. A covered savings 

association shall continue to comply 

with the provisions of law that apply to 

Federal savings associations for 

purposes of: 


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Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Proposed Rules 47113 

(i) Governance (including 

incorporation, bylaws, boards of 

directors, shareholders, and distribution 

of dividends); 

(ii) Consolidation, merger, 

dissolution, conversion (including 

conversion to a stock bank or to another 

charter), conservatorship, and 

receivership; 

(iii) Provisions of law applicable only 

to Federal mutual savings associations; 

(iv) Offers and sales of securities at an 

office of a Federal savings association; 

(v) Inclusion of subordinated debt 

securities and mandatorily redeemable 

preferred stock as Federal savings 

association supplementary (tier 2) 

capital; 

(vi) Increases in permanent capital of 

a Federal stock savings association; 

(vii) Rules of practice and procedure 

in adjudicatory proceedings; 

(viii) Rules for investigative 

proceedings and formal examination 

proceedings; 

(ix) Removals, suspensions, and 

prohibitions where a crime is charged or 

proven; 

(x) Security procedures; 

(xi) Maintenance of records and 

recordkeeping and confirmation 

requirements for securities transactions; 

(xii) Nondiscrimination; and 

(xiii) Advertising. 

(b) Existing branches. A covered 

savings association may continue to 

operate any branch or agency that the 

covered savings association operated on 

the effective date of the election. 

§ 101.5 Nonconforming subsidiaries, 

assets, and activities. 

(a) Divestiture, conformance, or 

discontinuation. A covered savings 

association shall divest, conform, or 

discontinue a nonconforming 

subsidiary, asset, or activity at the 

earliest time that prudent judgment 

dictates but not later than two years 

after the effective date of the election. 

The OCC may require a covered savings 

association to submit a plan to divest, 

conform, or discontinue a 

nonconforming subsidiary, asset, or 

activity. 

(b) Extension. The OCC may grant a 

covered savings association extensions 

of not more than two years each up to 

a maximum of eight years if the OCC 

determines that: 

(1) The covered savings association 

has made a good faith effort to divest, 

conform, or discontinue the 

nonconforming subsidiary, asset, or 

activity; 

(2) Divestiture, conformance, or 

discontinuation would have a material 

adverse financial effect on the covered 

savings association; and 

(3) Retention or continuation of the 

nonconforming subsidiary, asset, or 

activity is consistent with the safe and 

sound operation of the covered savings 

association. 

(c) Applicable law. Until a covered 

savings association divests, conforms, or 

discontinues a nonconforming 

subsidiary, asset, or activity, the 

nonconforming subsidiary, asset, or 

activity shall continue to be subject to 

the same provisions of law that applied 

to the nonconforming subsidiary, asset, 

or activity on the day before the 

effective date of the election. 

§ 101.6 Termination. 

(a) Termination. A covered savings 

association may terminate its election to 

operate as a covered savings association, 

after an appropriate period of time as 

determined by the OCC, by submitting 

a notice to the appropriate OCC 

supervisory office. 

(b) Procedures. A covered savings 

association wishing to terminate its 

election shall comply with, and shall be 

subject to, the provisions of §§ 101.2, 

101.3, and 101.5, except that: 

(1) The provisions of §§ 101.3 and 

101.5 shall be applied by substituting 

‘‘covered savings association’’ for 

‘‘Federal savings association’’ and 

‘‘Federal savings association’’ for 

‘‘covered savings association’’ each 

place those terms appear in those 

sections; 

(2) Section 101.3(a)(1) and (2)(ii) shall 

not apply; and 

(3) Sections 101.3 and 101.5 shall be 

applied by substituting ‘‘effective date 

of the termination’’ for ‘‘effective date of 

the election.’’ 

(c) Applicable law. On and after the 

effective date of the termination, a 

Federal savings association that has 

terminated its election to operate as a 

covered savings association shall be 

subject to the same provisions of law as 

a Federal savings association that has 

not made an election under this part. 

§ 101.7 Reelection. 

(a) Reelection. A Federal savings 

association that has terminated its 

election to operate as a covered savings 

association may submit a notice to 

reelect to operate as a covered savings 

association, if at least five years have 

elapsed since the effective date of the 

termination. Upon determining that 

good cause exists, the OCC may permit 

a Federal savings association to reelect 

to operate as a covered savings 

association prior to the expiration of the 

five-year period. 

(b) Procedures and treatment. A 

Federal savings association reelecting to 

operate as a covered savings association 

shall comply with, and shall be subject 

to, the provisions of this part as if it 

were making an election for the first 

time. 

§ 101.8 Evasion. 

The OCC may disapprove any notice 

submitted pursuant to this part if the 

OCC has reasonable cause to believe the 

notice is made for the purpose of 

evading § 101.5, including as that 

section applies to a covered savings 

association terminating an election. 

Dated: September 10, 2018. 

Joseph M. Otting, 

Comptroller of the Currency. 

[FR Doc. 2018–19955 Filed 9–17–18; 8:45 am] 

BILLING CODE 4810–33–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2018–0796; Product 

Identifier 2018–NM–104–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier, 

Inc., Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for certain 

Bombardier, Inc., Model BD–700–1A10 

and BD–700–1A11 airplanes. This 

proposed AD was prompted by reports 

of drainage holes on the belly fairing 

forward and middle access panels being 

obstructed with sealant. This proposed 

AD would require inspecting for and 

removing all sealant blocking the 

drainage holes on the belly fairing 

forward and middle access panels. We 

are proposing this AD to address the 

unsafe condition on these products. 

DATES: We must receive comments on 

this proposed AD by November 2, 2018. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 


daltland on DSKBBV9HB2PROD with PROPOSALS