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

64392

Vol. 65, No. 209

Friday, October 27, 2000

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 584

[Docket No. 2000–91]

RIN 1550–AB29

Savings and Loan Holding Companies

Notice of Significant Transactions or

Activities and OTS Review of Capital

Adequacy

AGENCY: Office of Thrift Supervision,

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Office of Thrift

Supervision (OTS) is proposing to

require certain savings and loan holding

companies to notify OTS before

engaging in or committing to engage in

a limited set of debt transactions,

transactions that reduce capital, some

asset acquisitions, and other

transactions. The proposal would

generally exclude holding companies

whose subsidiary savings associations’

assets represent a small percent of

consolidated assets and holding

companies that would have

consolidated tangible capital of ten

percent or greater following the

transaction.

OTS also seeks comment on its

proposal to codify its current practices

for reviewing the capital adequacy of

savings and loan holding companies

and, when necessary, requiring

additional capital on a case-by-case

basis. This notice identifies certain key

factors that OTS uses to evaluate the

need for additional holding company

capital.

DATES: Comments must be received on

or before December 26, 2000.

ADDRESSES:

Mail: Send comments to Manager,

Dissemination Branch, Information

Management and Services Division,

Office of Thrift Supervision, 1700 G

Street, NW., Washington, DC 20552,

Attention Docket No. 2000–91.

Delivery: Hand deliver comments to

the Guard’s Desk, East Lobby Entrance,

1700 G Street, NW., from 9:00 a.m. to

4:00 p.m. on business days, Attention

Docket No. 2000–91.

Facsimiles: Send facsimile

transmissions to FAX Number (202)

906–7755, Attention Docket No. 2000–

91; or (202) 906–6956 (if comments are

over 25 pages).

E-Mail: Send e-mails to

‘‘public.info@ots.treas.gov’’, Attention

Docket No. 2000–91, and include your

name and telephone number.

Public Inspection: Interested persons

may inspect comments at the Public

Reference Room, 1700 G St. NW., from

10 a.m. until 4 p.m. on Tuesdays and

Thursdays or obtain comments and/or

an index of comments by facsimile by

telephoning the Public Reference Room

at (202) 906–5900 from 9 a.m. until 5 on

business days. Comments and the

related index will also be posted on the

OTS Internet Site at

‘‘www.ots.treas.gov’’.

FOR FURTHER INFORMATION CONTACT:

Kevin O’Connell, Senior Project

Manager, (202) 906–5693, Supervision

Policy; and Valerie J. Lithotomos,

Counsel (Banking and Finance), (202)

906–6439, Regulations and Legislation

Division, and Richard L. Little, Senior

Counsel, (202) 906–6447, Business

Transactions Division, Chief Counsel’s

Office, Office of Thrift Supervision,

1700 G Street NW., Washington, DC

20552.

SUPPLEMENTARY INFORMATION: The

financial stability and health of a

savings and loan holding company can

have a direct impact on the financial

condition of its subsidiary thrift.

Savings and loan holding companies are

frequently managed on a consolidated

basis with their subsidiaries. Indeed, the

benefits from such integration are key

incentives for establishing holding

companies. However, because of such

integrated operations, problems in one

entity in the corporate structure may

affect other affiliated entities, including

the thrift.

Increasingly, savings associations are

becoming parts of highly integrated

corporate structures. Instead of being

held as passive investments, thrifts are

acquired as a key component of an

overall strategy for providing

comprehensive services. These

affiliations often involve outsourcing of

critical functions of the savings

association and cross-marketing of

products. As a result, many savings

associations are subject to decisions that

are made with regard to the best

interests of the corporate structure, often

with little consideration of any potential

positive or negative impact on the thrift

standing alone. This highlights the need

for increased supervisory vigilance to

ensure that actions by an affiliate do not

pose a material risk to the safety,

soundness, or stability of the subsidiary

savings association.

Actions by the savings and loan

holding company, in particular, can

affect the condition of its subsidiary

thrift, especially where the parent

organization undertakes significant new

activities or has significant debt

exposure. For example, the practice of

double leveraging—where holding

company debt is used to increase the

capital of the subsidiary thrift—can

generate the need for additional

regulatory oversight at the savings and

loan holding company level, especially

when consolidated capital levels are

low. In addition, a holding company

that makes risky investments that

generate less than anticipated returns or

result in losses can exert undue pressure

on the thrift to meet the demands of its

other obligations. Similarly, a holding

company that grows too fast may not

have sufficient capital to support its

operations and may, therefore, incur

excessive debt or look to the thrift to

fund its operations.

To address these issues, OTS is

proposing to require certain holding

companies to notify OTS before

engaging in certain described debt

transactions, transactions that reduce

capital, some asset acquisitions, and

other transactions determined by OTS

on a case-by-case basis. This proposal is

described in Section I. of this notice of

proposed rulemaking (NPRM). OTS is

also considering whether to codify its

current practice for reviewing the

capital adequacy of savings and loan

holding companies and, when

necessary, requiring additional capital

on a case-by-case basis. OTS seeks

comment on the factors it considers in

determining the appropriate capital

level. The capital considerations are

described in Section II. of this NPRM.

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules 64393

1For example, when a company files an

application to acquire an existing thrift or to charter

a de novo thrift, OTS reviews the proposed business

plan to ensure that the activities of the holding

company (and its affiliates) will not have a negative

impact on the subsidiary thrift. OTS has required

some holding companies, as a condition to the

approval of the application, to notify the agency

before the holding company causes the subsidiary

thrift to make any material changes in the

subsidiary thrift’s business plan. Conversely,

however, when a holding company purchases a

subsidiary, even if that entity is large, highly

leveraged and engaging in high-risk activities, no

notice is required under current regulation.

2See 12 U.S.C. 1831o(d)(1)(B); 12 CFR part 563,

subpart E. See also 12 U.S.C. 1467a(f).

3See 12 U.S.C. 1468; 12 U.S.C. 371c and 371c–

1; 12 CFR 563.41 and 563.42.

4See 12 CFR part 225, Appendix A.

5See e.g., 12 U.S.C. 1467a(g).

6 12 U.S.C. 1462a. See also 12 U.S.C. 1463(a)(2)

and 12 U.S.C. 1464(a). OTS notes that sections

10(g)(5) and 10 (p) of the HOLA expressly permit

OTS to restrict the ability of savings and loan

holding companies to continue to conduct certain

activities. 12 U.S.C. 1467a(g)(5) and (p). In this

regard, the focus of the proposed rule and sections

10(g)(5) and 10 (p) are entirely different. The

proposed notice is primarily preventive. It is

designed to permit OTS to review proposed

activities and to prevent a savings and loan holding

company (or its affiliate) from undertaking new,

risky activities. On the other hand, sections 10(g)

and (p) are remedial. These statutes are designed to

allow OTS to require corrective action when

established, ongoing activities threaten the safety

and soundness of a subsidiary thrift.

7As a result of its placement in part 584, all of

the definitions in 12 CFR part 583 (‘‘e.g.,

subsidiary’’) would also apply to the new subpart.

8A diversified savings and loan holding company

is ‘‘any savings and loan holding company whose

subsidiary savings association and related activities

under 12 U.S.C. 1467a(c)(2) represent on either an

actual or pro forma basis, less than 50 percent of

its consolidated net worth at the close of its

preceding fiscal year and of its consolidated net

earnings for such fiscal year.’’ 12 CFR 583.11 and

12 U.S.C. 1467a(a)(1)(F).

I. Notice of Significant Transactions or

Activities

Currently, OTS does not analyze

proposed major transactions by holding

companies before the transactions

occur, other than in connection with

reviewing applications for a limited

group of transactions.1 Moreover, there

are few regulatory and statutory

restrictions designed to reduce the risks

posed to thrifts by such proposed

transactions, other than capital

distribution and various restrictions 2 on

transactions with affiliates.3

On several occasions, OTS has

learned during an examination or

through the news or other media that a

holding company has engaged in or has

committed to engage in major

transactions or activities that may have

a substantial negative effect on the

subsidiary thrift. By that point,

however, OTS’s ability to require the

holding company to reverse or modify

the transaction to protect the safety and

soundness of the thrift may be limited.

To adequately monitor these types of

transactions and to ensure that thrifts

are adequately protected, OTS proposes

to review significant holding company

transactions and activities of certain

holding companies before they occur in

order to ensure that these transactions

and activities do not pose a material risk

to the financial safety, soundness, or

stability of the subsidiary savings

association. OTS notes that the Federal

Reserve Board (FRB) does not have a

similar review procedure. However,

FRB requires bank holding companies to

comply with detailed and static capital

adequacy requirements 4 which

generally makes a similar review

process unnecessary. Rather than

impose an across-the-board capital

requirement, OTS is proposing this

review process for a limited group of

savings and loan holding companies

engaging in a limited group of activities

in order to ensure the safety and

soundness of subsidiary thrifts.

OTS bases this rulemaking on its

extensive statutory authority over

savings and loan holding companies

under section 10 of the Home Owners’

Loan Act (HOLA). OTS, for example, is

authorized to issue such regulations or

orders as are ‘‘necessary and

appropriate’’ to administer and carry out

section 10 of the HOLA,5 and also has

general statutory authority to prescribe

regulations necessary for carrying out all

provisions of the HOLA.6

Accordingly, OTS is proposing to

require that certain savings and loan

holding companies notify OTS before

engaging in several types of

transactions, as more fully described

below in the section-by-section

summary. OTS seeks comment on all

aspects of the proposal. OTS is

particularly interested in whether the

proposed notice procedure is the best

way for OTS to obtain timely

information regarding significant

transactions and activities, while

imposing the least possible regulatory

burden.

Section-by-Section Analysis

Proposed Section 584.100—What Does

This Subpart Do?

The proposed rule would add a new

subpart B, entitled Notice of Significant

Activities or Transactions, to part 584.

Proposed § 584.100 states that subpart B

requires certain savings and loan

holding companies to notify OTS before

engaging in or committing to engage in

certain significant activities or

transactions. Proposed § 584.100 also

sets out the definitions that apply to the

new subpart.7

Proposed Section 584.110—Must I File a

Notice?

The purpose of the proposed rule is

to ensure that OTS has adequate notice

and an opportunity to object when a

savings and loan holding company is

about to engage in an activity that could

have a material negative effect on the

subsidiary savings association. While it

is often a relatively simple matter to

identify problem holding companies

and holding companies that control

troubled thrifts, it is far more difficult to

predict which holding companies may

engage in transactions that could raise

supervisory concerns for their

subsidiary thrifts. To ensure that the

regulation is properly focused, OTS will

exempt two classes of holding

companies because their activities are

unlikely to materially affect the

subsidiary thrift. Similarly, OTS will

only require notices for those activities

and transactions that are significant in

nature and reasonably present a

potential for an adverse impact on the

thrift institution. These activities and

transactions are described below in

proposed § 584.120.

The proposed rule would require

savings and loan holding companies

whose proposed transactions meet the

standards in proposed § 584.120, to file

a notice, with two exceptions. First,

OTS would not require a holding

company to file a notice if all of its

subsidiary thrifts have consolidated

assets that, when aggregated, represent

less than 20 percent of the holding

company’s consolidated assets. This

percentage indicates that all of the

subsidiary thrifts constitute a small

share of the holding company’s overall

business. In these structures, the

regulated thrifts are not the primary line

of business of the consolidated parent

organization and, therefore, are less

likely to be affected by the transactions

covered by the proposal. OTS

specifically requests comment on

whether this percentage is appropriate.

OTS also asks whether it should rely on

other existing regulatory definitions,

such as the definition of diversified

savings and loan holding company,8 to

describe situations where the thrift is

not the primary line of business of the

parent holding company.

Second, a holding company would

not be required to file a notice if it has

a significant capital cushion. Where a

holding company has a significant

capital base, it is less likely that its

transactions will present a significant

risk to the subsidiary thrift. OTS

64394 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules

9 Debt of the subsidiary thrift includes debt of its

consolidated subsidiaries.

10Consolidated non-thrift liabilities would be

defined as the holding company’s consolidated

liabilities less the consolidated liabilities of the

subsidiary savings associations.

11For the purposes of this rule, consolidated

tangible capital would be defined as consolidated

capital minus consolidated intangible assets and

deferred policy acquisition costs.

12Consolidated tangible assets would be defined

as the holding company’s consolidated assets less

its consolidated intangible assets and deferred

policy acquisition costs.

proposes to exclude those savings and

loan holding companies that would

have consolidated tangible capital of ten

percent or greater following the

proposed transaction. This exclusion is

not intended, in any way, as a de facto

capital requirement for savings and loan

holding companies. Rather, the purpose

of this proposed exclusion is solely to

exclude the most financially sound

holding companies from the notice

requirement. OTS specifically requests

comment on whether this percentage is

appropriate.

OTS specifically seeks comment on

whether it is also appropriate to exempt

holding companies that control only

savings associations with limited

operations (e.g., a subsidiary thrift that

conducts only fiduciary operations

under part 550 of OTS’s regulations). If

so, what types of thrifts should be

exempted?

Notwithstanding the two exceptions

discussed above, an OTS Regional

Director would have the authority to

require any savings and loan holding

company to file a notice if the Regional

Director has concerns relating to the

holding company’s financial condition

or the safety and soundness of its

subsidiary thrift. The proposed rule

would require the Regional Director to

notify the holding company, in writing,

of this determination.

Proposed Section 584.120—What

Transactions or Activities Require a

Notice?

The proposed rule would identify

three categories of activities or

transactions that would require the

filing of a notice by a holding company

described in proposed § 584.110. These

activities and transactions would

include: the issuance, renewal or

guarantee of a certain level of debt; any

activity or transaction resulting in a

substantial reduction of capital; and

certain asset acquisitions. Subject to

specified quantitative thresholds, OTS

believes these three areas would

identify any major change on a holding

company’s balance sheet—namely,

acquisitions of assets, increases in

liabilities, or reductions in capital—that

could have a material negative impact

on the thrift. In addition to these three

areas, OTS Regional Directors would

have the discretion to inform a holding

company in writing that a transaction or

activity would pose a risk to the

financial safety, soundness, or stability

of the thrift and require the holding

company to file a notice.

OTS proposes to require a notice if

the holding company or any of its

subsidiaries (other than the subsidiary

thrift) will issue, renew or guarantee a

certain level of debt.9 Debt will trigger

the notice requirement only if two

criteria are met. First, the debt, when

combined with all other debt

transactions conducted by the holding

company or any of its subsidiaries

(other than a subsidiary thrift) during

the past twelve months, must increase

the amount of the holding company’s

consolidated non-thrift liabilities by five

percent or more.10 Second, the holding

company’s consolidated non-thrift

liabilities after the debt transaction

would have to equal 50 percent or more

of the holding company’s consolidated

tangible capital.11

The following example illustrates the

application of these criteria. On October

1, 1999, a holding company’s

consolidated non-thrift liabilities were

$1.0 billion. The holding company

plans to incur an additional $40 million

in debt on September 30, 2000. On that

date, the holding company projects that

its consolidated non-thrift liabilities

would increase to $1.06 billion. (This

$60 million increase is made up of the

$40 million in new debt issuance plus

another $20 million in liabilities

accrued during the prior 12 months). As

of September 30, 2000, the holding

company’s consolidated tangible capital

would stand at $1.8 billion. This

holding company would be required to

file a notice with OTS because both of

the following conditions are met:

• With the new debt, the holding

company’s consolidated non-thrift

liabilities would have increased by more

than five percent during the prior

twelve-month period. Under this

example, the holding company’s

consolidated non-thrift liabilities would

increase six percent from $1.0 billion to

$1.06 billion.

• The holding company’s

consolidated non-thrift liabilities exceed

50 percent of its consolidated tangible

capital. Under the example, the holding

company’s consolidated non-thrift

liabilities would equal $1.06 billion on

September 30, 2000. This amount

exceeds $900 million (50 percent of $1.8

billion, the holding company’s

consolidated tangible capital).

A notice is also required for certain

asset acquisitions by the holding

company or its subsidiary (other than a

subsidiary thrift). Under the proposed

rule, an acquisition of assets (other than

cash, cash equivalents, and securities or

other obligations unconditionally

guaranteed by the United States

Government) would require a notice if

the amount of the transaction would

exceed fifteen percent of the holding

company’s consolidated assets. In

determining whether the fifteen percent

threshold is met, the holding company

must combine the proposed transaction

with all other asset acquisitions

conducted during the past twelve

months.

OTS also would require a notice if a

holding company or its subsidiary

(other than the subsidiary thrift)

proposes to conduct any transaction,

which when combined with all other

transactions during the past twelve

months, would reduce the ratio of the

holding company’s consolidated

tangible capital to consolidated tangible

assets 12 by ten percent or more. For

example, a projected change of this ratio

from 8 percent to 7.2 percent would

trigger the notice requirement. To

ensure adequate supervisory review, the

proposed rule would require a holding

company with negative consolidated

tangible capital to file a notice, unless

the Regional Director informs the

holding company, in writing, that a

notice is not required.

OTS requests comment on the

transactions and activities that would

require notice. Specifically:

• Has OTS appropriately identified

the scope of proposed transactions and

activities that may pose a material risk

to the financial safety, soundness, or

stability of the subsidiary savings

association?

• What additional transactions or

activities should require a notice? For

example, should OTS require a notice

when a savings and loan holding

company or its subsidiary enters a new

line of business or divests a significant

asset or line of business? If so, how

should OTS define new lines of

business and the appropriate thresholds

that would trigger a notice?

• Should all transactions by holding

companies with negative consolidated

tangible capital require a notice?

• Are the applicable percentages or

numerical thresholds appropriate?

• In computing the thresholds under

the proposed rule, a holding company

must combine a proposed transaction

with all other transactions within the

three relevant categories (acquisitions of

assets, increases in liabilities, and

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules 64395

13These guidelines are at 12 CFR part 225,

Appendix A.

reductions in capital) conducted during

the prior twelve month period. Thus,

once the threshold is met, the proposed

rule would require a notice even though

a proposed transaction itself is small.

Should the rule exclude de minimus

transactions? If so, what transactions

should be considered de minimus?

As noted above, OTS Regional

Directors would have the discretion to

require notices for other transactions or

activities. In identifying significant

transactions, OTS has relied upon

quantified changes to the holding

company’s balance sheet. Some

transactions with significant long-term

consequences, however, may not have

any immediate impact on the holding

company’s balance sheet. These

transactions would include recourse

transactions and certain guarantees.

These transactions are examples of

when the Regional Directors might

exercise their discretionary authority to

require notices.

Proposed Section 584.130—How Do I

File My Notice?

Under the proposed rule, a savings

and loan holding company would be

required to file a written notice with its

OTS Regional Office at least 30 days

before the earlier of engaging in or

committing to engage in the transaction

or activity. The holding company would

be required to include the basis for the

filing requirement, a description of the

transaction or activity, the purpose of

the transaction or activity, an analysis of

the impact on consolidated earnings and

consolidated capital, and an analysis of

its impact on the subsidiary savings

association. The holding company

would also be required to identify the

amount of the debt, capital reduction or

asset acquisition, indicate the intended

use of the funds or the reasons for the

capital reduction or asset acquisition,

and summarize the relevant terms of the

transaction (including a description of

any significant covenants or collateral

requirements). OTS specifically requests

comment on whether the information in

the proposed notice is necessary and

sufficient to enable OTS to accurately

assess the transaction’s impact on the

subsidiary thrift.

To minimize regulatory burden, the

proposed rule would permit a holding

company to file a schedule proposing

transactions or activities over a

specified period, not to exceed twelve

months. If OTS approves the proposed

schedule, the holding company would

be permitted to engage in the proposed

transactions or activities without filing

another notice for that twelve month

period. If there has been a material

change in circumstances, the OTS

Regional Director may advise the

holding company, in writing, that it

must file a new notice for scheduled

activities or transactions. See proposed

§ 584.150(c).

A savings and loan holding company

may also combine a notice with a

related notice or application. To do so,

the holding company must state that the

related notice or application is intended

to serve as a notice under proposed

§ 584.120, and must submit the notice or

application in a timely manner.

Proposed Section 584.140—On What

Grounds Will OTS Disapprove or

Condition the Proposed Activity or

Transaction?

Under the proposed rule, the OTS

Regional Director could disapprove or

condition a proposed transaction if a

proposed transaction or activity would

pose a material risk to the financial

safety, soundness, or stability of the

subsidiary thrift. In making this

determination, the OTS Regional

Director would consider, among other

things, the following factors:

• The extent to which the transaction

or activity is funded by debt, and on

what terms.

• The effect of the transaction or

activity on the cash flow and liquidity

of the thrift.

• The impact of the transaction or

activity on the risk to the overall

organization.

• Whether the transaction or activity

is self-sustaining or requires financial

support from other business segments,

especially the subsidiary savings

association.

• The projected effect of the

transaction or activity on the capital and

earnings of the consolidated entity.

These factors are not exclusive. The

OTS Regional Director may consider

other factors deemed relevant and may

impose appropriate conditions on the

transaction. OTS requests comment on

whether these factors are appropriate

considerations in determining whether

to disapprove or condition a notice, and

whether additional factors should be

added.

Proposed Section 584.150—When May I

Engage in the Proposed Activity or

Transaction?

The savings and loan holding

company (or its subsidiary) would be

permitted to engage in the activity or

transaction 30 days after OTS receives

all required information, unless OTS

notifies the holding company, in

writing, that it has disapproved the

notice. OTS would be permitted to

extend the 30 day review period for an

additional 30 days. The holding

company (or its subsidiary) could

engage in the proposed activity or

transaction earlier if OTS notifies the

holding company, in writing, that OTS

does not intend to disapprove the

notice.

II. OTS’s Practice for Reviewing Capital

Adequacy for Savings and Loan

Holding Companies

The level and composition of capital

held by a company is an important

measure of the company’s overall

financial health, as well as the health of

its subsidiaries. For financial

institutions, capital serves several

purposes: it is available to bear risk and

absorb unexpected losses; it protects the

Federal Deposit Insurance Corporation’s

insurance fund; it provides a permanent

source of revenue for the shareholders

and funding for the institution; it

provides a base for further growth; and

it gives the shareholders assurance that

the financial institution is managed in a

safe and sound manner.

Capital adequacy is one of the critical

factors that Federal banking agencies

consider in the regulation of financial

institutions’ holding companies. FRB,

for example, has required bank holding

companies to comply with specific

capital adequacy guidelines since

1983.13 While OTS has not established,

and is not proposing to establish, capital

guidelines applicable to all savings and

loan holding companies, OTS reviews

the financial resources of a savings and

loan holding company, including

capital adequacy, in the examination

and supervisory processes. OTS also

reviews the financial resources of

prospective holding companies in

evaluating holding company and other

applications, and has the authority to

require additional capital on a case-bycase basis.

Low levels of holding company

capital can raise supervisory concerns

in a number of ways. For example, in

one situation, a highly leveraged

holding company began to have severe

cash flow problems during the real

estate crisis in the early to mid-90s. As

a result, creditors canceled lines of

credit and the holding company came

close to defaulting on its obligations.

The holding company’s cash flow needs

caused the thrift to adopt riskier lending

and aggressive pricing strategies to

enable it to fund the holding company’s

operations through the payment of

dividends and tax sharing payments. As

a result, the thrift’s asset quality and its

financial condition deteriorated.

64396 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules

14 12 U.S.C. 1467a(g)(1).

15 12 U.S.C. 1467a.

16 12 U.S.C. 1462a(b), 1463(a) and 1464.

In another situation, the holding

company engaged in the practice of

double leveraging to facilitate the

subsidiary thrift’s purchase of

additional branches. The holding

company sought to fund the branch

acquisitions, in part, by issuing a

substantial amount of new debt. As a

result of the transaction, the holding

company’s capital significantly reduced

both on a relative basis, due to the

growth in assets, and on a tangible level,

since the branch purchase resulted in

goodwill. The sharply reduced level of

tangible capital raised concerns about

the holding company’s ability to service

the debt without making undue

demands on the thrift. In this instance,

however, OTS was able to address these

concerns by conditioning the approval

of the thrift’s purchase on the holding

company maintaining an agreed upon

level of capital.

OTS would have similar concerns if a

holding company decided to quickly

expand the scope of its business without

a similar increase in its capital base. For

example, a holding company that

doubled in size while maintaining the

same amount of capital would reduce its

capital to assets ratio by 50%. With a

smaller capital cushion, the holding

company would have less flexibility to

react to unexpected, adverse market

conditions. A smaller capital cushion

would also limit the holding company’s

ability to come to the aid of its

subsidiary thrift, and if the holding

company itself came under financial

distress, would increase the chances it

would pressure the thrift for financial

resources.

In the course of its supervisory

monitoring and examination of savings

and loan holding companies, OTS

currently reviews the financial

condition, including the capital

adequacy, of holding companies. In

cases like those discussed above, OTS

may require the holding company to

maintain a specified level of capital.

This gives OTS an additional tool to

safeguard thrifts without unduly

restricting the business objectives of

holding companies.

OTS is considering whether it should

adopt a rule codifying its current

practice for reviewing capital adequacy,

on a case-by-case basis, and, when

necessary, requiring additional capital

for savings and loan holding companies.

Such a rule would also clarify the

factors that OTS uses in reviewing a

holding company’s capital adequacy,

would promote a better understanding

of OTS’s supervisory approach, and

would help to ensure that capital

principles are consistently applied in

the holding company context.

As noted above, OTS has extensive

regulatory authority under the HOLA to

regulate savings and loan holding

companies. This authority includes its

powers under section 10(g)(1) 14 to issue

such regulations necessary or

appropriate to ensure compliance with

and prevent evasions of section 10,15

and its general rulemaking authority

under the HOLA.16

While the factors OTS may consider

in its review of capital will vary from

case-to-case, the following factors are

relevant, but not all-inclusive, in

determining whether capital is adequate

and if additional capital is necessary for

a savings and loan holding company:

Debt

• What is the ratio of holding

company consolidated debt as a

percentage of consolidated tangible

capital? Is the level of debt generally

rising? What investments or activities

does the debt fund? Could the terms,

conditions or covenants of the debt have

an adverse effect on the thrift? What is

the level of interest expense? Is the

interest expense a significant percentage

of recurring income? What debt ratings

has the holding company received from

nationally recognized credit rating

organizations?

Capital

• How much consolidated tangible

capital does the holding company have

as a percentage of consolidated tangible

assets? What are the overall quality and

composition of the holding company’s

capital? Does the holding company rely

on hybrid instruments that possess debt

characteristics? Does the holding

company have the ability to raise new

equity capital or generate capital

internally?

Cash Flow and Earnings

• Does the holding company have

sufficient cash flow? To what extent

does the holding company rely on

dividends from the thrift to service the

holding company’s debt or fulfill other

holding company obligations? What

sources of liquidity, other than the

thrift, does the holding company have?

What are the quality and quantity of

such sources?

• What are the quality and level of

the holding company’s earnings? Does

the holding company rely on nonrecurring sources of earnings? How does

the volatility of earnings affect pro

forma business plan projections? Has

the holding company stress tested its

projections?

Overall Risk Profile

• How significant is the thrift in the

holding company’s corporate structure?

What risks do the holding company’s

activities and assets present? What

significant risk does the thrift face? Has

the holding company influenced the

thrift to engage in riskier activities?

Does the holding company have offbalance sheet contracts or activities that

result in a high degree of risk exposure?

What level of inter-company

transactions do the holding company

and other affiliates have with the thrift?

What is the quality of management and

risk management systems? Is the overall

financial condition of the holding

company deteriorating, stable, or

improving?

OTS specifically requests comment on

whether the listed factors are relevant to

OTS’s review of capital adequacy. OTS

also solicits comment on whether other

factors would be relevant to OTS’s

review.

OTS has not decided whether it will

promulgate a final rule addressing

holding company capital in connection

with this rulemaking or whether it will

use the comments provided as the basis

for a future proposal. However, as part

of today’s proposal, it is OTS’s intent to

describe its current approach to holding

company capital, in sufficient detail, to

support a final rule codifying the

practice.

OTS intends to use different

procedures for requiring additional

capital, depending on the

circumstances. For example, in the

application process, OTS may condition

the approval of an application on a

holding company maintaining a certain

capital level. In other instances, OTS

would notify a savings and loan holding

company of a determination that

additional capital may be appropriate.

The notice would include such

information as the amount of capital

needed, a proposed schedule for

compliance, and the specific reasons

why OTS believes that additional

capital is necessary or appropriate. OTS

would also provide the savings and loan

holding company with an opportunity

to respond and to provide additional

information for OTS to consider in

establishing the capital standard. OTS

requests specific comment on whether

these procedures would be appropriate.

III. Request for Comments

In addition to the specific request for

comment in the preamble, OTS invites

comment on all aspects of the Notice of

Proposed Rulemaking.

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules 64397

17 5 U.S.C. 601.

18OTS is also considering issuing a final rule for

reviewing the capital adequacy of savings and loan

holding companies and, when necessary, requiring

additional capital. Since these requirements will be

imposed on a case-by-case basis and since this rule

would merely codify current practices, OTS does

not anticipate that this aspect of the rule will have

a significant impact on a substantial number of

small entities.

19See 65 FR 30836 (May 15, 2000), to be codified

at 13 CFR 121.201.

20OTS used financial data for 404 publicly traded

thrift holding companies as a statistical sample for

revenue, assets, and capital for all thrift holding

companies.

21 65 FR at 30858 (NAICS Codes 551111 and

551112). Entities that fall within this category are

primarily engaged in holding the securities (or other

equity interests) of companies and enterprises for

the purpose of owning a controlling interest or

influencing the management decisions of these

firms. These companies do not administer, oversee,

and manage other establishments of the company or

enterprise whose securities they hold. Entities that

hold the securities of a depository institution and

operate the entity are classified at NAICS Industry

Group 5221, Depository Credit Intermediation. 65

FR at 30856. These businesses are subject to a $100

million in assets limitation.

22NAICS Subsector 523—Financial Investments

and Related Activities and Subsector 524—

Insurance Carriers and Related Activities. 65 FR at

30856. The size standard for direct property and

casualty insurance carriers, however, is based on

the number of employees.

23OTS has established these definitions of small

savings and loan holding companies for the sole

purpose of this Regulatory Flexibility Act Analysis,

after consultation with the Small Business

Administration’s Office of Advocacy.

IV. Plain Language Requirement

Section 722 of the Gramm-LeachBliley (GLB) Act (12 U.S.C. 4809)

requires federal banking agencies to use

‘‘plain language’’ in all proposed and

final rules published after January 1,

2000. We invite your comments on how

to make this proposed rule easier to

understand. For example:

(1) Have we organized the material to

suit your needs?

(2) Are the requirements in the rule

clearly stated?

(3) Does the rule contain technical

language or jargon that isn’t clear?

(4) Would a different format (grouping

and order of sections, use of headings,

paragraphing) make the rule easier to

understand?

(5) Would more (but shorter) sections

be better?

(6) What else could we do to make the

rule easier to understand?

V. Executive Order 12866

The Director of OTS has determined

that this proposed rule does not

constitute a ‘‘significant regulatory

action’’ for the purposes of Executive

Order 12866. OTS intends to exempt a

substantial percentage of savings and

loan holding companies from the notice

requirement and would require a notice

for a limited number of transactions.

Nevertheless, OTS acknowledges that

the rule would impose costs on savings

and loan holding companies that are

required to file a notice requirement.

Therefore, OTS invites the thrift

industry to provide any cost estimates

and related data that it thinks would be

useful to OTS in evaluating the overall

costs of the rule.

VI. Regulatory Flexibility Act Analysis

The Regulatory Flexibility Act of

1980 17 requires federal agencies to

prepare an initial regulatory flexibility

analysis (IRFA) with a proposed rule, or

certify that the proposed rule would not

have a significant economic impact on

a substantial number of small entities.

OTS cannot, at this time, determine

whether this proposed rule would have

a significant economic impact on a

substantial number of small entities.

Therefore, OTS includes the following

IRFA.

A description of the reasons why OTS

is considering the proposed rule, a

statement of the objectives of the

proposal, and the legal basis for the

proposed rule are contained in the

supplementary material above.

A. Small Entities to Which the Proposed

Rule Would Apply

1. Background.

The proposed rule would apply to

savings and loan holding companies

and subsidiaries of savings and loan

holding companies (other than savings

association subsidiaries). A savings and

loan holding company would be

required to file a notice before it or its

non-thrift subsidiary may engage in

specified activities. While a subsidiary

of a savings and loan holding company

would not be required to file a notice,

OTS could, by disapproving a notice,

prevent the subsidiary from engaging in

certain proposed actions.18

The proposed rule would apply to

savings and loan holding companies

and their subsidiaries, regardless of size.

The rule, however, includes a

significant exemption that would

substantially limit its application to

small businesses. This exception is

discussed below.

OTS analysis of savings and loan

holding companies and their non-thrift

subsidiaries is complicated by the fact

that these entities may engage in a wide

range of activities. The Small Business

Administration (SBA) applies different

size standards for various industries in

order to determine whether a particular

business is small.19 OTS has reviewed

the activities of its holding companies to

determine if there is a prevailing

standard that it may apply in this

rulemaking.

Based on data for publicly traded

holding companies,20 OTS estimates

that the primary asset of approximately

78.2 percent of all holding companies is

the thrift. These holding companies

would likely fall within one of two SBA

size standards: (1) The size standard for

offices of bank holding companies and

offices of other holding companies

(annual receipts of less than $5

million); 21 or (2) The size standard for

depository credit intermediation (less

than $100 million in assets). An

additional 13.8 percent of savings and

loan holding companies are engaged in

financial management activities

(insurance, brokerage, or real estate

development). The prevailing SBA size

standard for these companies is less

than $5 million in annual receipts.22

The remaining holding companies

engage in a variety of diverse

commercial activities for which no

consistent size standard is evident.

Accordingly, OTS has analyzed its

available data by applying two size

standards—the $5 million in annual

receipts and the $100 million in assets

size standards.23

2. Analysis

Based on March 31, 2000 data, OTS

calculates that there are approximately

959 savings and loan holding

companies. The 959 holding companies

are aligned in approximately 531

holding company structures for the

purposes of this analysis. A thrift may

be directly or indirectly controlled by

more than one holding company. A

holding company structure, as used in

this preamble, includes all holding

companies within the same family of

companies.

As of March 31, 2000, OTS estimates

that approximately 16.6 percent or 88 of

the 531 OTS regulated holding company

structures were small under the assetbased definition (i.e., these holding

company structures hold assets of less

than $100 million.) About 150 of the

thrift holding company structures (28.2

percent) are small businesses using the

revenue-based definition.

As noted above, OTS has proposed an

exemption that would substantially

limit the rule’s application to small

businesses. Under the proposed rule,

OTS would exempt a holding company

from the notice requirement if it will

have consolidated tangible capital of 10

percent or greater after the proposed

transaction. OTS estimates that this

proposed exemption would exempt 81.3

64398 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules

24The tangible capital exception would exempt a

much smaller percentage of large holding

companies from the notice requirement. For

example, only 20 percent of the thrift holding

companies holding over $2 billion in assets would

be exempt under the proposed tangible capital

criteria. Similarly, 17.2 percent of thrift holding

companies with revenues of $100 million or more

would be exempt under this exception.

There is a second exception for savings and loan

holding companies whose subsidiary thrifts

represent less than 20 percent of the consolidated

assets. However, OTS estimates that this exemption

should not significantly reduce the number of small

holding companies that are subject to this rule. As

noted above, OTS estimates that the primary asset

of approximately 78.2 percent of all holding

companies is the thrift itself.

25As noted above, OTS used a statistical sample

of publicly traded thrift holding companies to

obtain information for all thrift holding companies.

The percentages of exempt holding companies

listed in the tables are the actual percentages

derived from this sample. The number of exempt

holding companies was derived by multiplying

these percentages by the 531 thrift holding

company structures. The numbers in the ‘‘Number

Exempt’’ column were rounded to the nearest

whole number.

percent of small holding companies

under the asset-based definition, and

70.5 percent of small holding companies

using the revenue-based definition.

Based on these percentages, OTS

estimates that from 16 to 44 small

holding company structures may be

subject to the proposed rule.24

The following tables estimate the

number of thrift holding companies at

various asset and revenue levels and

illustrates the impact of the proposed

tangible capital exemption at various

revenue and asset levels.25 The

proposed exemption more favorably

affects smaller holding companies.

Regardless of whether the asset size test

or revenue test is used, a greater

proportion of smaller holding

companies are exempt than larger

holding companies.

Asset size Number Percent of

total No. exempt Percentexempt

Less than $100mm .......................................................................................................... 88 16.6 72 81.3

$100mm–$250mm ........................................................................................................... 142 26.8 90 63.3

$250mm–$500mm ........................................................................................................... 114 21.4 45 39.8

$500mm–$2b ................................................................................................................... 127 23.9 39 30.5

Greater than $2b ............................................................................................................. 60 11.3 12 20.0

Total ...................................................................................................................... 531 100.0 258 48.6

1999 revenue Number Percent of

total No. exempt Percentexempt

Under $5mm .................................................................................................................... 150 28.2 106 70.5

$5mm–$10mm ................................................................................................................. 138 25.9 63 45.6

$10mm–$50mm ............................................................................................................... 158 29.7 60 38.1

$50mm–$100mm ............................................................................................................. 47 8.8 9 20.0

Greater than $100mm ..................................................................................................... 39 7.4 7 17.2

Total ...................................................................................................................... 531 100.0 244 48.6

OTS does not know how many nonthrift subsidiaries are held by small

thrift holding companies, how

frequently small thrift holding

companies and their subsidiaries will

engage in transactions subject to the

proposed rule, or how often OTS will

object to a proposed transaction because

the activity will pose a material risk to

the financial safety, soundness, or

stability of a subsidiary savings

association. Accordingly, OTS

specifically seeks comments on these

and any other issues.

B. Requirements of the Proposed Rule

As described more fully in the

supplementary information section, the

proposed rule would require savings

and loan holding companies to notify

OTS before they (or their subsidiaries,

other than savings association

subsidiaries) engage in certain types of

activities. OTS may object to the

proposed transaction if certain

prerequisites are met.

The primary economic impact of this

proposed rule is the additional expenses

that holding companies may incur to

prepare and submit notices. In addition

to these expenses, when OTS objects to

a proposed transaction or activity, there

may be the additional expenses

associated with seeking reconsideration

of the OTS determination and with

abandoning and not pursuing a

proposed transaction.

To minimize the potential burdens of

the proposed notice requirement, this

proposed rule would:

• Exempt certain holding companies

whose activities do not present a

significant risk to a subsidiary thrift.

Under the proposed rule, a notice is not

required where the parent holding

company would have a substantial

capital cushion.

• Apply only to certain types of

transactions that meet specific criteria

established to identify those

transactions that may pose a possible

threat to the safety, soundness, or

stability of the thrift.

• Minimize the filing burden by

prescribing the content of the notice,

permitting notices to include schedules

of proposed transactions or activities for

up to twelve months, and permitting

consolidated filings with related

applications.

• Minimize regulatory burden by

providing an expeditious review period.

Generally, the period is 30 days.

• Permit OTS to disapprove a

transaction only under limited

circumstances. Specifically, OTS may

object only if it finds that the proposed

transaction or activity would pose a

material risk to the financial safety,

soundness, or stability of the thrift.

OTS does not have a practicable or

reliable basis for quantifying the costs of

this proposed rule. While OTS does not

believe that the rule would be

burdensome, OTS cannot predict the

economic impact on savings and loan

holding companies (or their subsidiaries

that are non-thrift subsidiaries) of the

proposed rule. Rather than merely guess

at the regulatory burden of the proposed

rule, OTS solicits comment on potential

burdens and on ways to minimize the

burdens.

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules 64399

C. Significant Alternatives

Consistent with the purposes of this

rulemaking, OTS has exercised its

discretion to minimize the burden of

this proposed rule on small entities.

Although OTS could exempt small

savings and loan holding companies

from the notice requirement, OTS does

not believe that this action is

appropriate. The purpose of the notice

is to ensure that holding companies and

their subsidiaries do not engage in

transactions that could pose a material

risk to the financial safety, soundness,

or stability of the subsidiary thrift.

There is no rationale for exempting

thrifts from this regulatory protection

merely because they are affiliated with

small holding companies.

OTS, however, has attempted to

ensure that holding companies,

including small holding companies, are

not unduly burdened by the notice

requirements. Specifically, the proposal

recognizes that transactions involving a

holding company with a substantial

capital cushion are less likely to present

a significant risk to the subsidiary thrift.

By exempting savings and loan holding

companies that will have consolidated

tangible capital of ten percent or greater,

OTS excludes 70.5 percent to 81.3

percent of small thrift holding

companies from the coverage of this

rule.

OTS considered reducing the tangible

capital threshold to minimize the

impact on small thrift holding

companies. Using the asset-based

definition of small holding company,

OTS data indicates that reducing the

tangible capital threshold to 9 percent

would increase the percentage of

exempted small companies from 81.3

percent to 86.4 percent. Reducing the

tangible capital threshold to 8 percent

would increase the percentage of

exempted small holding companies to

87.9 percent.

Using the revenue-based definition of

small holding company, OTS data

indicates that reducing the tangible

capital threshold to 9 percent would

increase the percentage of exempt small

companies from 70.5 percent to 80.4

percent. Reducing the threshold to 8

percent would further increase the

percentage exempted to 88.4 percent. In

this preamble, OTS specifically seeks

comment whether a tangible capital

threshold of less than 10 percent,

however, would be sufficient to protect

the subsidiary thrift.

In addition to this alternative, the

supplementary material solicits

comment on a number of alternatives

that could reduce regulatory burden on

holding companies, including small

holding companies. These include, but

are not limited to, the following

questions:

• Should OTS consider a different

threshold to describe situations where a

thrift is not the primary line of business

of the parent holding company?

• Should OTS exempt holding

companies that control savings

associations with limited operations

(e.g., a subsidiary thrift that conducts

only fiduciary operations)?

• Should OTS redefine the types of

transactions and activities that are

subject to a notice?

OTS requests comment on whether

these or other alternatives would reduce

the burdens and whether any exceptions

for small institutions would be

appropriate. Also, OTS welcomes

comment on the appropriateness of its

approach, and on any other alternatives

that would satisfy the objectives of this

proposal.

D. Other Matters

The proposed rule does not appear to

duplicate or overlap with any other

rules or requirements. However, it is

possible that a transaction within the

scope of this proposed rule may be

related to another transaction for which

an application or notice is required

under another regulation or statute. For

example, a holding company may

propose to incur additional debt in

connection with its acquisition of a new

branch office for its subsidiary savings

association. Under these circumstances,

the savings association would be

required to file a related branch notice

or application. To the extent that related

notice or applications may exist, the

proposed rule permits the holding

company to combine the notice with

any related notice or application.

OTS generally seeks comment on any

Federal statutes or rules that may

duplicate, overlap, or conflict with the

proposal.

VII. Unfunded Mandates Act of 1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, Pub. L.

104–4 (Unfunded Mandates Act),

requires that an agency prepare a

budgetary impact statement before

promulgating a rule that includes a

Federal mandate that may result in

expenditure by state, local, and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year. If a budgetary impact

statement is required, section 205 of the

Unfunded Mandates Act also requires

an agency to identify and consider a

reasonable number of regulatory

alternatives before promulgating a rule.

OTS has determined that the proposed

rule will not result in expenditures by

state, local, or tribal governments or by

the private sector of $100 million or

more. Accordingly, this rulemaking is

not subject to section 202 of the

Unfunded Mandates Act and the OTS

has not prepared a budgetary impact

statement or specifically addressed the

regulatory alternatives considered.

VIII. Paperwork Reduction Act

OTS invites comment on:

(1) Whether the collection of

information contained in this notice of

proposed rulemaking are necessary for

the proper performance of OTS’s

functions, including whether the

information has practical utility;

(2) The accuracy of the estimate of the

burden of the proposed information

collection;

(3) Ways to enhance the quality,

utility, and clarity of the information to

be collected;

(4) Ways to minimize the burden of

the information collection on

respondents, including the use of

automated collection techniques or

other forms of information technology;

(5) Estimates of capital or start-up

costs and costs of operation, minutes,

and purchase of services to provide

information.

Respondents are not required to

respond to this collection of information

unless it displays a currently valid

Office of Management and Budget

(OMB) control number.

The collection of information

requirements contained in this notice of

proposed rulemaking have been

submitted to the OMB in accordance

with the Paperwork Reduction Act of

1995, 44 U.S.C. 3507. OTS will use any

comments received to develop its new

burden estimates. Comments on the

collection of information should be sent

to the Dissemination Branch (1550),

Office of Thrift Supervision, 1700 G

Street, NW., Washington DC 20552,

with a copy to the office of Management

and Budget, Paperwork Reduction

Project (1550), Washington, DC 20503.

The collection of information

requirements in this proposed rule is

found in 12 CFR 584.110 through

584.130. OTS requires this information

for the proper supervision of activities

and transactions by savings and loan

holding companies. The likely

respondents are savings and loan

holding companies.

Estimated number of respondents:

190.

Estimated average annual burden

hours per respondent: 5.

Estimated total annual disclosure and

recordkeeping burden: 950.

64400 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules

List of Subjects in 12 CFR Part 584

Administrative practice and

procedure, Holding companies,

Reporting and recordkeeping

requirements, Savings associations,

Securities.

Accordingly, the Office of Thrift

Supervision hereby proposes to amend

part 584, chapter V, title 12, Code of

Federal Regulations as set forth below:

PART 584—REGULATED ACTIVITIES

1. The authority citation for part 584

continues to read as follows:

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

1464, 1467a, 1468.

2. A heading for a new subpart A is

added preceding § 584.1 to read as

follows:

Subpart A—Regulated Activities

3. A new subpart B is added to read

as follows:

Subpart B—Notice of Significant

Transactions or Activities

Sec.

584.100 What does this subpart do?

584.110 Must I file a notice?

584.120 What transactions or activities

require a notice?

584.130 How do I file my notice?

584.140 On what grounds will OTS

disapprove the proposed activity or

transaction?

584.150 When may I engage in the

proposed activity or transaction?

Subpart B—Notice of Significant

Transactions or Activities

§ 584.100 What does this subpart do?

(a) This subpart requires certain

savings and loan holding companies

(‘‘you’’) to notify OTS before engaging in

or committing to engage in significant

transactions or activities.

(b)(1) As used in this subpart B:

(i) Consolidated non-thrift liabilities

means your consolidated liabilities less

the consolidated liabilities of your

subsidiary savings association(s).

(ii) Consolidated tangible assets

means your consolidated assets less

your consolidated intangible assets and

deferred policy acquisition costs.

(iii) Consolidated tangible capital

means your consolidated capital less

your consolidated intangible assets and

deferred policy acquisition costs.

(iv) Subsidiary savings association

means the subsidiary savings

association itself and its consolidated

subsidiaries.

(2) In applying the definitions in this

paragraph (b), you must compute assets,

intangible assets, liabilities, and capital

consistent with generally accepted

accounting principles.

§ 584.110 Must I file a notice?

(a) General. You must file a notice

before you may engage in or commit to

engage in transactions described under

§ 584.120, unless one or more of the

following applies:

(1) Your subsidiary savings

association(s) has consolidated assets

that, when aggregated, represent less

than 20 percent of your consolidated

assets; or

(2) You will have consolidated

tangible capital of 10 percent or greater

following the transaction.

(b) Required by Region. You must file

a notice before you engage in or commit

to engage in a transaction or activity if

your Regional Director informs you, in

writing, that OTS has concerns relating

to your financial condition, or the safety

and soundness of your subsidiary

savings association. The Regional

Director will identify, in writing, the

types of transactions and activities that

will require you to file a notice. These

transactions may include, but are not

limited to, the transactions and

activities described in § 584.120.

§ 584.120 What transactions or activities

require a notice?

(a) Unless you are excepted under

§ 584.110(a), you must file a notice

before you engage in or commit to

engage in any transaction or activity

described in the following chart. In

determining the thresholds in the chart,

you must combine the proposed

transaction with all other transactions

within the three relevant categories

(acquisitions of assets, increases in

liabilities, and decreases in capital)

conducted during the prior twelve

months.

You must file a notice if you or your subsidiary (other than a savings

association) will . . . And the proposed transaction will . . .

(1) Issue, renew, or guarantee debt . . . Increase the amount of your consolidated non-thrift liabilities by five

percent or more. You are not required to file a notice for debt, however, if your consolidated non-thrift liabilities will be less than 50 percent of your consolidated tangible capital after the proposed debt

transaction.

(2) Acquire assets (other than cash, cash equivalents, and securities or

other obligations unconditionally guaranteed by the United States

Government) . . .

Exceed an amount equal to fifteen percent of your consolidated assets.

(3) Engage in any transaction . . . Reduce the ratio of your consolidated tangible capital to consolidated

tangible assets by ten percent or more. If your consolidated tangible

capital is less than zero, you must file a notice unless your Regional

Director informs you, in writing, that a notice is not required.

(b) Other transactions or activities.

You must file a notice if your OTS

Regional Director informs you, in

writing, that a transaction or activity

may pose a risk to the financial safety,

soundness, or stability of the subsidiary

savings association and will require a

notice.

§ 584.130 How do I file my notice?

(a) Regional Office. You must file a

written notice with the applicable OTS

Regional Office at the address listed in

§ 516.1 of this chapter, at least 30 days

before the earlier of engaging in or

committing to engage in a transaction or

activity.

(b) Content. You must include the

following information in your written

notice:

(1) The basis for the filing

requirement.

(2) A description of the transaction or

activity, its purpose, and an analysis of

its impact on the savings association.

You must identify the amount of the

debt, capital reduction, or asset

acquisition, indicate the intended use of

the funds or reason for capital reduction

or asset acquisition and an analysis of

the impact on consolidated earnings and

consolidated capital, and summarize the

relevant terms of the transaction,

including a description of any

significant covenants or collateral

requirements.

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Proposed Rules 64401

(c) Schedules. You may include a

schedule proposing transactions or

activities over a specified period, not to

exceed 12 months.

(d) Combining notice. You may

combine your notice with related

notices or applications. If you submit a

combined filing, you must:

(1) State that the related notice or

application is intended to serve as a

notice or application under this subpart;

and

(2) Submit the notice or application in

a timely manner.

§ 584.140 On what grounds will OTS

disapprove or condition the proposed

activity or transaction?

The OTS Regional Director will

disapprove or condition your notice if

the proposed transaction or activity will

pose a material risk to the financial

safety, soundness, or stability of your

subsidiary savings association.

§ 584.150 When may I engage in the

proposed activity or transaction?

(a) You or your subsidiary may engage

in the proposed transaction or activity

30 days after OTS receives all required

information, unless OTS informs you, in

writing, of one of the following:

(1) OTS disapproves the notice.

(2) OTS extends the 30-day review

period for an additional period not to

exceed 30 days. You or your subsidiary

may engage in the proposed transaction

or activity when the extended period

expires, unless OTS informs you, in

writing, that it disapproves the notice.

(b) In addition, you or your subsidiary

may engage in the proposed transaction

or activity after OTS notifies you, in

writing, that it does not intend to

disapprove the notice.

(c) Notwithstanding paragraphs (a)

and (b) of this section, you may not

engage in a proposed transaction or

activity if:

(1) Your notice included a schedule of

proposed transactions or activities

under § 584.130(c); and

(2) The OTS Regional Director

determines that there has been a

material change of circumstances, and

informs you, in writing, that you must

file a new notice under this subpart.

Dated: October 23, 2000.

By the Office of Thrift Supervision.

Ellen Seidman,

Director.

[FR Doc. 00–27705 Filed 10–26–00; 8:45 am]

BILLING CODE 6720–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 187

[Docket No. FAA–00–7018; Admt. No. 187–

11]

RIN 2120–AG17

Fees for FAA Services for Certain

Flights; Extension of Comment Period

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Interim final rule; Extension of

comment period.

SUMMARY: On June 6, 2000, the FAA

published an Interim Final Rule (IFR)

establishing fees for FAA air traffic and

related services for certain aircraft that

transit U.S.-controlled airspace but

neither take off from, nor land in, the

United States and invited comments for

a 120-day period. The IFR went into

effect on August 1, 2000, and the

comment period was originally

scheduled to close on October 4, 2000.

However, on September 29, 2000, the

FAA extended the comment period to

October 27, 2000, to ensure that affected

entities, mostly foreign, have sufficient

time to comment on the contents of the

docket. Due to recently passed

legislation and the availability of other

relevant accounting and economic

information, the FAA is extending the

comment period another 60 days, to

December 26, 2000.

DATES: Comments must be received on

or before December 26, 2000.

ADDRESSES: Address your comments to

the Docket Management System (DMS),

U.S. Department of Transportation,

Room Plaza Level 401, 400 Seventh

Street, SW., Washington, DC 20590–

0001. You must identify the docket

number ‘‘FAA–00–7018’’ at the

beginning of your comments, and you

should submit two copies of your

comments.

You may also submit comments

through the Internet to http://

dms.dot.gov. You may review the public

docket containing comments in this

rulemaking in person in the Dockets

Office between 9 a.m. and 5 p.m.,

Monday through Friday, except Federal

holidays. The Dockets Office is on the

plaza level of the NASSIF Building at

the Department of Transportation at the

above address. Also, you may review

public dockets on the Internet at http:/

/dms.dot.gov.

FOR FURTHER INFORMATION CONTACT:

Randall Fiertz, Office of Performance

Management, (APF–2), Federal Aviation

Administration, 800 Independence

Avenue, SW., Washington, DC 20591;

telephone (202) 267–7140; fax (202)

493–4191.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in this rulemaking by

submitting such written data, views, or

arguments, as they may desire.

Comments relating to the

environmental, energy, federalism, or

economic impact that might result from

this rulemaking are also invited.

Substantive comments should be

accompanied by cost estimates.

Comments must identify the regulatory

docket or notice number and be

submitted in duplicate to the Rules

Docket address specified above.

All comments received, as well as a

report summarizing each substantive

public contact with FAA personnel on

this rulemaking, will be filed in the

docket. The docket is available for

public inspection before and after the

comment closing date.

The Administrator will consider all

comments received on or before the

closing date. Late-filed comments will

be considered to the extent practicable.

The Interim Final Rule, as well as the

Final rule, may be changed in light of

the comments received.

Commenters wishing the FAA to

acknowledge receipt of their comments

must include a pre-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket No. FAA–00–7018.’’ The

postcard will be date-stamped and

mailed to the commenter.

Availability of Interim Final Rule

You can get an electronic copy using

the Internet by taking the following

steps:

(1) Go to the search function of the

Department of Transportation’s

electronic Docket Management System

(DMS) web page (http://dms.dot.gov/

search).

(2) On the search page type in the last

four digits of the Docket number shown

at the beginning of this notice. Click on

‘‘search.’’

(3) On the next page, which contains

the Docket summary information for the

Docket you selected, click on the

document number for the item you wish

to view.

You can also get an electronic copy

using the Internet through FAA’s web

page at http://www.faa.gov/avr/arm/

nprm/nprm.htm or the Federal

Register’s web page at http://

www.access.gpo.gov/su_docs/aces/

aces140.html.