27282 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Notices

1For the convenience of the reader, the initial

reference to a provision of the FDI Act or interstate

branching legislation will be made to the citation,

as enacted, followed by the United States Code

citation. Thereafter, the provision will be referred

to by the section number contained in the United

States Code. For example, the initial citation of

section 27 of the FDI Act will be followed by the

United States Code citation (12 U.S.C. 1831d) and

the section will subsequently be referred to as

‘‘section 1831d’’.

2This opinion is not intended to address these

issues with regard to national banks. The Office of

the Comptroller of the Currency (‘‘OCC’’), which

has regulatory jurisdiction over national banks, has

issued several Interpretive Letters addressing these

issues, in the context of national banks and section

85. See, OCC Interpretive Letter No. 686, September

11, 1995, reprinted in [1995–1996 Transfer Binder]

Fed. Banking L. Rep. (CCH) P 81–001 (‘‘Interpretive

Letter No. 686’’); OCC Interpretive Letter No. 707,

January 31, 1996, reprinted in [1995–1996 Transfer

Binder] Fed. Banking L. Rep. (CCH) P 81–022

(‘‘Interpretive Letter No. 707’’); OCC Interpretive

Letter No. 782, May 21, 1997, reprinted in [Current

Binder] Fed. Banking L. Rep. (CCH) P 81–209

(‘‘Interpretive Letter No. 782’’); OCC Interpretive

Letter No. 822, February 17, 1998, reprinted in

[Current Binder] Fed. Banking L. Rep. (CCH) P 81–

265 (‘‘Interpretive Letter No. 822’’).

regulations, and any chemical releases,

transfers, and spills. Facility-specific

reports are available in the SFIP for

viewing and downloading. In addition

to gathering all this information into one

location for the first time, the SFIP is

unique in that it structures and

aggregates the data so a user can easily

view, compare, and analyze information

from different facilities. The SFIP

includes compliance and enforcement

information submitted to state and

federal regulators, as well as chemical

release information submitted under the

federal Toxics Release Inventory (TRI).

The SFIP also links data submitted to

state and federal agencies by facilities

regulated under the Clean Air Act, the

Clean Water Act, the Resource Recovery

and Conservation Act, and the

Emergency Planning and Community

Right-to-Know Act. Finally, statistics

about the population around facilities

were taken from census reports, and

information about production was

gathered from sources outside EPA.

To link all these data, the SFIP uses

an interactive, high-speed data retrieval

and integration system developed by

EPA, the Integrated Data for

Enforcement Analysis (IDEA) system.

EPA has been committed to providing

all stakeholders an opportunity to

comment formally on the SFIP in its

entirety, as well as to review the

project’s underlying data. Therefore,

from the onset of this project, the

Agency embarked upon an extensive

review and outreach process.

Stakeholders, including environmental

and community organizations, have

commented on the project. Each facility

included in the pilot project received a

copy of its records and was given an

opportunity to submit corrections. State

agencies also received the information

for review, since a large portion of the

data is provided to EPA by state

governments. EPA modified the data as

appropriate, based on these comments.

EPA will continue taking comments as

this pilot project evolves. The Agency

has set up an SFIP Hotline (617–520–

3015) and has also established a

‘‘comment page’’ on the SFIP website

for users to submit their comments

instantly.

In addition to releasing the data

electronically, EPA also will be

providing a hard copy summary report

of SFIP. The SFIP Progress Report is a

publication that provides aggregated,

pre-formatted information. A Notice of

Availability will be placed in the

Federal Register when it is ready for

distribution.

Dated: May 11, 1998.

Mamie Miller,

Branch Chief, Manufacturing Branch,

Manufacturing Energy & Transportation

Division, Office of Compliance.

[FR Doc. 98–13116 Filed 5–15–98; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

General Counsel’s Opinion No. 11,

Interest Charges by Interstate State

Banks

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Notice of General Counsel’s

Opinion No. 11.

SUMMARY: The FDIC has received

inquiries regarding the application of

section 27 of the Federal Deposit

Insurance Act to State banks operating

interstate branches. This General

Counsel’s Opinion sets forth the Legal

Division’s conclusions regarding where

such banks are ‘‘located’’ for purposes of

section 27; when host state, as opposed

to home state, laws will provide the

appropriate interest rates for loans to

customers; how various functions

related to making loans to customers

should be defined and the impact that

they will have on the application of a

particular state’s interest rates to those

loans; and the need for appropriate

disclosure of the laws governing the

loan to bank customers.

FOR FURTHER INFORMATION CONTACT:

Barbara I. Taft, Assistant General

Counsel, (202) 898–6830, Rodney D.

Ray, Counsel, (202) 898–3556 or Robert

C. Fick, Counsel, (202) 898–8962,

Federal Deposit Insurance Corporation,

Legal Division, 550 17th Street, NW,

Washington, DC 20429.

Text of General Counsel’s Opinion

General Counsel’s Opinion No. 11;

Interest Charges by Interstate Banks

By William F. Kroener, III, General

Counsel

Background

Section 27 of the Federal Deposit

Insurance Act (‘‘FDI Act’’) (12 U.S.C.

1831d) 1 (‘‘section 1831d’’) establishes

the maximum rates that insured statechartered depository institutions and

state-licensed insured branches of

foreign banks (collectively, ‘‘State

banks’’) may charge their customers for

most types of loans. Section 1831d is

patterned after and has been construed

in pari materia with section 5197 of the

Revised Statutes (12 U.S.C. 85) (‘‘section

85’’ of the National Bank Act (‘‘NBA’’)).

Like section 85, section 1831d has been

construed to provide State banks with

‘‘most favored lender’’ status and to

permit State banks to ‘‘export’’ interest

charges allowed by the state where the

lender is located to out-of-state

borrowers.

Since the enactment of the RiegleNeal Interstate Banking and Branching

Efficiency Act of 1994, Pub. L. 103–328,

108 Stat. 2338 (1994)(‘‘Riegle-Neal Act’’)

and the Riegle-Neal Amendments Act of

1997, Pub. L. 105–24, 111 Stat. 238

(1997) (‘‘Riegle-Neal Amendments

Act’’)(collectively, ‘‘Interstate Banking

Statutes’’) questions have arisen

regarding the appropriate state law for

purposes of section 1831d that should

govern the interest charges on loans

made to customers of a State bank that

is chartered in one state (the bank’s

home state) but has a branch or

branches in another state (the host state)

(an ‘‘Interstate State Bank’’). These

questions have not previously been

addressed by the Legal Division.

Therefore, this General Counsel’s

Opinion sets forth the Legal Division’s

interpretation of section 1831d as it

relates to the Interstate Banking Statutes

to provide guidance in this area to State

banks and the public.2

The Riegle-Neal Act established, for

the first time, a comprehensive federal

statutory scheme for interstate

branching by state and national banks.

In doing so, Congress recognized the

potential efficiencies to be gained by an

interstate branch banking structure as

well as the complications that could

arise in determining when an interstate

bank should look to the laws of its home
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Notices 27283

3The alternative interest rate that is tied to the

discount rate on 90-day commercial paper in effect

at the Federal Reserve Bank is not tied to state law

but it, like the rate allowed by state law, also

requires a determination of where the lender is

‘‘located’’.

4Section 85 states, in relevant part: ‘‘Any

association may take, receive, reserve, and charge

on any loan or discount made, or upon any notes,

bills of exchange, or other evidence of debt, interest

at the rate allowed by the laws of the State,

Territory, or District where the bank is located, or

at a rate of 1 per centum in excess of the discount

rate on ninety-day commercial paper in effect at the

Federal reserve bank in the Federal reserve district

where the bank is located, . . . .’’ (Emphasis

added.)

5 Marquette Nat’l Bank v. First Omaha Serv.

Corp., 439 U.S. 299 (1978) (‘‘Marquette’’).

6See also Cades v. H & R Block, 43 F.3d 869 (4th

Cir.), cert. denied, 515 U.S. 1103 (1995);

Christiansen v. Beneficial Nat’l Bank, 972 F. Supp.

681 (S.D. Ga. 1997); Basile v. H & R Block, 897 F.

Supp. 194 (E.D. Penn. 1995).

7See Greenwood Trust Co. v. Commonwealth of

Massachusetts, 971 F.2d 818, 826–827 (1st Cir.),

cert. denied, 506 U.S. 1052 (1993) (‘‘Greenwood’’).

8 Greenwood, at 829; see also Venture Properties,

Inc. v. First Southern Bank, 79 F.3d 90 (8th Cir.

1996) (Arkansas bank located in Arkansas for

purposes of section 1831d).

9 12 U.S.C. 1831a(j)(1).

10Section 86 of the NBA provides the remedy for

violations of section 85. Section 1831d(b) is the

statutory counter-part contained in the FDI Act.

11See Greenwood, at 827; Hill v. Chemical Bank

799 F. Supp. 948, 952 (D. Minn. 1992) (‘‘Hill’’)

(‘‘The key language of (section 1831d) is

substantially identical to language in sections 85

and 86 of the National Bank Act, the federal usury

provisions governing national banks. Generally,

similar language should be interpreted the same

way, unless context requires a different

interpretation. Further, Congress is presumed to be

aware of judicial interpretations of statutory

language when it intentionally incorporates the

language of one statute into another statute.’’)

12See 126 Cong. Rec. 6900 (1980) (statement of

Senator Proxmire); 126 Cong. Rec. 6907 (1980)

(statement of Senator Bumpers); see also Hill, at 952

(‘‘Given the similarity in language and clearly

expressed intent of Congress to create parity

between state and national banks, (section 1831d)

should be interpreted consistently with sections 85

and 86.’’)

13See 143 Cong. Rec. H3089 (daily ed. May 21,

1997) (statement of Representative Roukema).

state or a host state to determine the

interest rates that the bank may

permissibly charge its customers.

1. Where May an Interstate State Bank

Be Located for Purposes of Section

1831d?

Section 1831d(a) establishes the

maximum interest charges that State

banks may charge their customers for

most types of loans. The interest charges

are established by reference to the

location of the lender. The statute

provides:

In order to prevent discrimination against

State-chartered insured depository

institutions, including insured savings banks,

or insured branches of foreign banks with

respect to interest rates, if the applicable rate

prescribed in this subsection exceeds the rate

such State bank or insured branch of a

foreign bank would be permitted to charge in

the absence of this subsection, such State

bank or such insured branch of a foreign

bank may, notwithstanding any State

constitution or statute which is hereby

preempted for purposes of this section, take,

receive, reserve, and charge on any loan or

discount made, or upon any note, bill of

exchange, or other evidence of debt, interest

at a rate of not more than 1 per centum in

excess of the discount rate on ninety-day

commercial paper in effect at the Federal

Reserve bank in the Federal Reserve district

where such State bank or such insured

branch of a foreign bank is located or at the

rate allowed by the laws of the State,

territory, or district where the bank is

located, whichever may be greater.

(Emphasis added.) 3

While the FDI Act does not

specifically address where a lender is

located for purposes of section 1831d,

the same reference to interest rates

where the bank is located is contained

in section 85 of the NBA, upon which

section 1831d is based.4

Prior to the enactment of section

1831d, the United States Supreme Court

recognized that a national bank,

pursuant to section 85, could ‘‘export’’

interest charges allowable in the state

where the bank was located to debtors

domiciled outside the bank’s home

state.5 In Marquette the Court

determined that the national bank was

‘‘located’’ for purposes of section 85 in

the state designated in its organization

certificate and could charge interest to

residents of other states at rates

permitted under the laws of the state so

designated.6 Section 85 has been

recognized to be the ‘‘direct lineal

ancestor’’ of section 1831d, which was

enacted as part of the Depository

Institutions Deregulation and Monetary

Control Act of 1980, Pub. L. 96–221, 94

Stat. 132 (1980). Congress made a

conscious choice to pattern section

1831d after section 85 to achieve

competitive equality in the area of

interest charges between state and

national banks.7

Reading the two provisions in pari

materia because of their historical

background, the court in Greenwood

determined that section 1831d provided

a state bank with the ability to export

interest charges to out-of-state borrowers

from the state in which it was chartered

(recognizing the state where the bank

was chartered, Delaware, as the place

where the bank was ‘‘located’’ for

purposes of section 1831d).8 Therefore,

prior to the enactment of the Interstate

Banking Statutes, the state where a State

bank was chartered had been

established as the state in which a bank

was ‘‘located’’ for purposes of exporting

interest rates under section 1831d(a).

Following enactment of the Interstate

Banking Statutes it is possible for an

Interstate State Bank to make loans to

customers either from the state in which

it is chartered or from an out-of-state

branch. Although the courts do not

appear to have addressed the issue of

whether an Interstate State Bank may be

located for purposes of section 1831d in

the state where it is chartered and in

each state where it maintains one or

more branches the OCC has recently

issued several Interpretive Letters

indicating that an interstate national

bank may be ‘‘located’’ for purposes of

section 85 in the state where its main

office is located, as well as in the state

or states where it maintains branches.

See Interpretive Letter Nos. 686, 707,

782 and 822.

Similarly, in my view an Interstate

State Bank also may be ‘‘located’’ for

purposes of section 1831d in its home

state and in each state where it

maintains out-of-state branches. There

are at least three reasons for this view.

First, the Riegle-Neal Amendment Act’s

applicable law clause for State banks 9,

discussed in greater detail below, is an

indication of Congress’ recognition that

maintaining a branch within a state,

except as otherwise provided in section

1831a(j), constitutes a sufficient

presence (i.e., location) in the state to

subject the branch to host state laws,

including the host state’s consumer

protection laws (which include

applicable usury ceilings). Second, the

OCC also has observed, most recently in

Interpretive Letter No. 822, that there is

a clear and direct relationship between

section 94 of the NBA, addressing the

‘‘location’’ of a national bank for venue

purposes, and section 85, addressing the

‘‘location’’ of a bank for usury purposes,

based upon court decisions construing

the two provisions. The language of

section 1831d, which is based largely

upon sections 85 and 86 10 of the NBA,

has been recognized to include judicial

interpretations of those provisions.11

Finally, there is an evident

congressional intent to provide State

banks with competitive equality with

national banks in enacting section

1831d 12 and to provide parity between

State banks and national banks in

enacting the Riegle-Neal Amendments

Act.13

2. If a State Bank is Located in More

Than One State, Which State’s Usury

Provisions Govern the Loans From the

Bank?

Given that a State bank can be located

in more than one state, the next

question is what state’s usury provisions

should govern loans made by an

Interstate State Bank.
27284 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Notices

14Section 36(f)(1)(A)(ii) also provided for

preemption of host state law where the Comptroller

determines that state law discriminates between an

interstate national bank and an interstate state bank.

15Section 36(f)(1)(A)reads in relevant part as

follows:

The laws of the host State regarding community

reinvestment, consumer protection, fair lending,

and establishment of intrastate branches shall apply

to any branch in the host State of an out-of-State

national bank to the same extent as such State laws

apply to a branch of a bank chartered by that State,

except—

(i) when Federal law preempts the application of

such State laws to a national bank * * *

In the context of the law applicable to branches

of out-of-state State banks, however, section

1831a(j)(1) read in relevant part as follows:

The laws of a host State, including laws

regarding community reinvestment, consumer

protection, fair lending, and establishment of

intrastate branches, shall apply to any branch in

the host State of an out-of-State State bank to the

same extent as such State laws apply to a branch

of a bank chartered by that State. (Emphasis

added.)

16The reference to ‘‘applicable usury ceilings’’ in

the Riegle-Neal Act Conference Report’s

(‘‘Conference Report’’) discussion of host state

consumer protection laws clearly indicates that the

statute’s reference to consumer protection laws of

host states included any applicable host state usury

ceilings. See H.R. Rep. No. 651, 103d Cong., 2d

Sess., 51 (1994).

17Pub. L. 105–24, 111 Stat. 238 (1997).

18 143 Cong. Rec. H3089 (daily ed. May 21, 1997).

19Section 1831a(j)(3)(B), however, requires that

the applicable law clause for State banks not be

construed to affect the applicability of Federal law

to State banks and State bank branches in a home

or host state. Therefore, the reference to home state

law in the applicable law clause for State banks

may not dictate the result in all circumstances

regarding interest charges on loans to bank

customers if reference to other federal law, such as

section 1831d, the usury savings clause, or the rules

regarding exportation of interest charges, would

lead to a different result.

20See Nationwide Banking and Branching and

the Insurance Activities of National Banks:

Hearings Before the Senate Committee on Banking,

Housing, and Urban Affairs, 103d Cong., 1st Sess.

272 (1993) (Response to Written Questions of

Senator Roth from Andrew C. Hove, Jr.); (Response

to Written Questions of Senator Roth from John P.

LaWare), id. at pp. 280–81.

21 12 U.S.C. 1811 (note).

The answer to this question requires

reference to the applicable law and

usury savings clauses contained in the

Riegle-Neal Act, the Riegle-Neal

Amendments Act, which subsequently

amended the applicable law clause for

State banks, and to the legislative

history underlying these provisions.

The Applicable Law Clause for State

Banks

With the introduction of nationwide

interstate branching, questions arose as

to the appropriate law to be applied to

out-of-state branches of interstate banks.

Congress addressed this matter for

national banks in section 102(b)(1) of

the Riegle-Neal Act, which amended

section 36 of the NBA to add a new

subsection (f), which included 12 U.S.C.

36(f)(1)(A)(’’the applicable law clause

for national banks’’), and addressed this

matter for State banks in section

102(b)(3)(B) of the Riegle-Neal Act,

which amended section 1831a of the

FDI Act to add a new subsection (j),

which included 12 U.S.C.

1831a(j)(1)(’’the applicable law clause

for State banks’’).

As originally enacted by the RiegleNeal Act, the applicable law clause for

national banks provided for the

inapplicability of specific host state

laws to a branch of an out-of-state

national bank under specified

circumstances, including where Federal

law preempted such state laws for a

national bank.14 No similar provision,

however, was contained in the

applicable law clause for State banks.15

This made branches of out-of-state State

banks subject to all of the laws of the

respective host state. In contrast, a

national bank operating with branches

in various states benefitted from

preemption, and hence greater

uniformity than a State bank, with

regard to those host state laws specified

in section 36(f)(1)(A) 16 that affected

their operations. This led to concerns

that the nation’s dual banking system

might be jeopardized because State

banks might opt to convert from state to

national bank charters to avoid

compliance with a multitude of

different state laws in each state in

which State banks wished to operate

through interstate branches.

On June 1, 1997, the interstate

branching provisions of the Riegle-Neal

Act became fully effective. Shortly

thereafter, on July 3, 1997, section

1831a(j) was amended by the RiegleNeal Amendments Act to revise the

applicable law clause for State banks.

As amended by the Riegle-Neal

Amendments Act, section 1831a(j)(1)

provides:

The laws of a host State, including laws

regarding community reinvestment,

consumer protection, fair lending, and

establishment of intrastate branches, shall

apply to any branch in the host State of an

out-of-State State bank to the same extent as

such State laws apply to a branch in the host

State of an out-of-State national bank. To the

extent host State law is inapplicable to a

branch of an out-of-State State bank in such

host State pursuant to the preceding

sentence, home State law shall apply to such

branch. (Emphasis added.) 17

As explained by the legislation’s

sponsor, Representative Roukema, the

purpose of the legislation was to

provide parity between State banks and

national banks. In describing the

amendment’s effect on host state

consumer protection laws, she

indicated:

* * * Moreover, it recognizes the

importance of host State laws by requiring all

out-of-State banks to comply with host State

laws in four key areas, community

reinvestment, consumer protection, fair

lending, and intrastate branching, unless the

State law has been preempted (with respect

to) national banks. In that instance the law

of the State which issued the charter will

prevail.18

Therefore, under section 1831a(j)(1),

the laws of a host state apply to

branches of out-of-state State banks to

the same extent such state laws would

apply to a branch of an out-of-state

national bank. If the laws of the host

state would be inapplicable to a branch

of an out-of-state national bank they are

equally inapplicable to a branch of an

out-of-state State bank and the home

state law will generally apply to the

branch of an out-of-state State bank.19

The Usury Savings Clause

The next question is when the host

state interest provisions will apply to a

branch of an out-of-state State bank. For

that issue, it is necessary to consider the

Riegle-Neal Act’s usury savings clause

and the pertinent portions of the

statute’s legislative history.

Section 111 of the Riegle-Neal Act

(the usury savings clause), was added to

the legislation prior to its enactment by

an amendment sponsored by Senator

Roth to address the effect of the RiegleNeal Act on sections 85 and 1831d. The

amendment was introduced by Senator

Roth in response to uncertainty

expressed by the Acting Chairman of the

FDIC and one of the Governors of the

Federal Reserve Board regarding the

effect that pending drafts of the

interstate banking legislation might have

on the exportation of interest rates by a

bank to borrowers residing in states

where the bank also operated an out-ofstate branch.20 See 140 Cong. Rec.

S12789 (daily ed. Sept. 13, 1994)

(remarks of Senator Roth).

The usury savings clause provides, in

pertinent part:

No provision of this title and no

amendment made by this title to any other

provision of law shall be construed as

affecting in any way—

* * * * *

(3) The applicability of (section 85) or

(section 1831d) of the Federal Deposit

Insurance Act. 21

Therefore, Congress did not intend for

the Riegle-Neal Act to affect the

applicability of section 1831d to State

banks.
Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Notices 27285

22As enacted by the Riegle-Neal Act, as indicated

earlier, the applicable law clause for State banks

made branches of out-of-state State banks subject to

the laws of the host state. Also, as indicated earlier,

concerns had been expressed over the impact that

the application of host state laws regarding

consumer protection might have on the ability of an

out-of-state bank to export interest charges

authorized by its home state to a state where the

bank maintained a branch.

23 In this respect, the analysis tracks that

employed by the courts. See Weinberger v. Hynson,

412 U.S. 609, 631–32 (1973) (‘‘It is well established

that our task in interpreting separate provisions of

a single Act is to give the Act ‘the most harmonious,

comprehensive meaning possible’ in light of the

legislative policy and purpose. (Citations

omitted).’’); Dierksen v. Navistar Internat’l

Transportation Corp., 912 F. Supp. 480, 486 (D.

Kansas 1996) (‘‘A primary rule of construction of a

statute is to find the legislative intent from its

language, and where the language used is plain and

unambiguous and also appropriate to an obvious

purpose the court should follow the intent as

expressed by the words used. (citation omitted). It

is the duty of the court, insofar as practical, to

reconcile different statutory provisions so as to

make them consistent, harmonious and sensible.

(Citation omitted). Allegedly repugnant statutes are

to be read together and harmonized, if at all

possible, to the end that both may be given force

and effect. (Citation omitted).’’)

24H.R. Rep. No. 651, 103d Cong., 2d Sess., 63

(1994).

25 140 Cong. Rec. S12789 (daily ed. Sept. 13,

1994).

26These include providing loan applications,

assembling documents, providing a location for

returning documents necessary for making a loan,

providing loan account information, and receiving

payments.

27The non-ministerial functions are the decision

to extend credit, the extension of credit itself, and

the disbursal of the proceeds of the loan.

28 140 Cong. Rec. S12789–12790 (daily ed. Sept.

13, 1994).

29The non-ministerial functions, according to

Senator Roth’s discussion of the Conference Report,

are factors to be considered in determining which

state’s law should be applied to a loan. See Roth

statement, at S12789:

The rationale for this conference amendment

(substituting loan servicing for disbursal of loan

proceeds in the agency authority contained in

section 101) is that the actual disbursal of

proceeds—as distinguished from delivering

previously disbursed funds to a customer—is so

closely tied to the extension of credit that it is a

factor in determining, in an interstate context,

what State’s law to apply. (Emphasis added.)

Harmonization of the Applicable Law

Clause for State Banks with the Usury

Savings Clause

While the usury savings clause could

conceivably be read to conflict with the

language of the applicable law clause,22

reference to the Riegle-Neal Act’s

legislative history allows the provisions

to be harmonized and placed in proper

context.23

In discussing the usury savings

clause, the Conference Report states:

Section 111(3) specifically states that

nothing in Title I affects sections (85) or

(1831d). Accordingly, the amendments made

by the (Riegle-Neal Act) that authorize

insured depository institutions to branch

interstate do not affect existing authorities

with respect to any charges under section

(85) or (1831d) imposed by national or state

banks for loans or other extensions of credit

made to borrowers outside the state where

the bank or branch making the loan or other

extension of credit is located.24 (Emphasis

added.)

Senator Roth explained this section of

the Conference Report as follows:

The statement of the managers expressly

refers to the potential of a ‘‘branch making

the loan or other extension of credit * * *’’

This language underscores the widespread

congressional understanding that, in the

context of nationwide interstate branching, it

is the office of the bank or branch making the

loan that determines which state law applies.

The savings clause has been agreed to for the

very purpose of addressing the FDIC’s

original concerns and making clear that after

interstate branching, section (85) and section

(1831d) are applied on the basis of the branch

making the loan.25

According to Senator Roth, for

purposes of determining where a loan is

‘‘made’’ the managers of the Conference

Committee recognized that in the new

interstate banking environment banks

with a branch or branches in other states

could involve those branches in some

but not all aspects of a loan transaction

without the state law where the branch

was located becoming applicable to the

loan. In explaining the provisions

Senator Roth distinguished ‘‘ministerial

functions’’ 26 from other functions

(subsequently referred to as ‘‘nonministerial functions’’ 27) related to the

loan. To further explain the importance

of these distinctions, in the context of

the appropriate state law to apply to an

interstate bank loan, Senator Roth

indicated:

(It) is clear that the conferees intend that

a bank in State A that approves a loan,

extends the credit, and disburses the

proceeds to a customer in State B, may apply

the law of State A even if the bank has a

branch or agent in State B and even if that

branch or agent performed some ministerial

functions such as providing credit card or

loan applications or receiving payments.28

Senator Roth’s comments, considered

in the context of the applicable law

clause for State banks, are indicative of

congressional intent to recognize a

parallel between existing law and the

law that should be applied if a loan was

made in a branch or branches of a single

host state. Existing law already

recognized the effect of home state law

on the state laws of a borrower’s

residence when loans were made by

national banks and State banks,

respectively, to out-of-state borrowers.

In the context of interstate branching,

however, Congress intended to strike a

balance between the application of host

state and home state interest provisions

by applying the same exportation

principle previously recognized by the

courts to loans made in a host state

because the three non-ministerial

functions occurred in a branch or

branches of the host state.

Therefore, under the Riegle-Neal Act’s

usury savings clause the ability of an

out-of-state State bank to export the

interest charges that are permissible in

the home state are preserved, even if a

branch or branches of the same bank is

located in the same state as the

borrower. If all of the non-ministerial

functions involved in making the loan

are performed by a branch or branches

located in a host state, however, the host

state’s interest provisions should be

applied to the loan.

Non-Ministerial Functions Occur in

Multiple States or Outside of Banking

Offices

There are some situations that are not

addressed by the Interstate Banking

Statutes. These include loans where the

three non-ministerial functions occur in

different states or where some of the

three non-ministerial functions occur in

an office that is not considered to be the

home office or branch of the bank

(collectively, ‘‘banking offices’’). The

OCC recently addressed these issues in

Interpretive Letter 822. With regard to

loans where the three non-ministerial

functions occur in banking offices

located in different states and the loans

cannot be said to have been ‘‘made’’ in

a host state under the criteria discussed

in the legislative history of the RiegleNeal Act, the OCC concluded that the

law of the home state could always be

chosen to apply to the loans because

such a result will avoid throwing

‘‘confusion’’ into the complex system of

modern interstate banking by having no

rate to apply and because the bank is

always the lender, regardless of where

certain functions occur.

The other situation addressed in

Interpretive Letter 822 is where any of

the non-ministerial functions occur in a

host state but not in a branch. This

could occur, for example, where a loan

is approved in a back office but the

proceeds of the loan are disbursed in a

branch in a host state.

In these and similar situations, the

OCC concluded that home state rates

may be used. Alternatively, in those

situations the interest rates permitted by

the host state where a non-ministerial

function occurs may be applied, if based

on an assessment of all of the facts and

circumstances, the loan has a clear

nexus to the host state.29
27286 Federal Register / Vol. 63, No. 95 / Monday, May 18, 1998 / Notices

I agree with the OCC Chief Counsel’s

analysis on these issues and her

observations in Interpretive Letter 822

regarding the significance of an

appropriate disclosure to customers that

the interest to be charged on the loan is

governed by applicable federal law and

the law of the relevant state which will

govern the transaction.

The Non-Ministerial Functions

The OCC identified three nonministerial functions for national banks

in Interpretive Letter No. 822 based

upon the Riegle-Neal Act’s legislative

history. An inquiry is required to

determine the location where each of

the non-ministerial functions occur.

Briefly stated, the OCC determined that

‘‘approval’’ (i.e., the decision to extend

credit) occurs where the person is

located who is charged with making the

final judgment of approval or denial of

credit, and the site of the final approval

is the location where it is granted.

‘‘Disbursal’’ means actual physical

disbursal of the proceeds of a loan, as

opposed to the delivery of previously

disbursed funds to the customer.

Disbursal can occur in various ways,

including delivery to the customer in

person or crediting proceeds to the

customer’s account at a branch, but does

not include delivering the funds to an

escrow or title agent who, in turn,

disburses them to the customer or for

the customer’s benefit. ‘‘Extension of

credit’’ means the site from which the

first communication of final approval of

the loan occurs.

While the need for such inquiries as

to non-ministerial functions may not be

initially apparent, I believe that Senator

Roth’s distinction for purposes of the

‘‘disbursal’’ function between ‘‘the

actual disbursal of proceeds’’ and

‘‘delivering previously disbursed funds

to a customer’’ is indicative of the type

of inquiry Congress intended in order to

identify non-ministerial functions

which effect where a loan is made for

purposes of determining the state law to

be applied to a loan. The same

definitions should be equally applicable

to State banks under section 1831d.

Conclusion

An Interstate State Bank can be

‘‘located’’ for purposes of section 1831d

in the state in which it is chartered, as

well as the states where the bank’s outof-state branch or branches are located.

The Interstate Banking Statutes do not

affect the ability of an Interstate State

Bank to export interest rates on loans

made to out-of-state borrowers from that

bank’s home state, even if the bank

maintains a branch in the state where

the borrower resides. If an out-of-state

branch or branches of an Interstate State

Bank in a single host state performs all

the non-ministerial functions (approval

of an extension of credit, extension of

the credit, and disbursal of loan

proceeds to a customer) related to a

loan, it ‘‘makes’’ the loan to the

customer for purposes of the Interstate

Banking Statutes and the loan should be

governed by the usury provisions of the

host state. If the three non-ministerial

functions occur in different states or if

some of the non-ministerial functions

occur in an office that is not considered

to be the home office or branch of the

bank, then home state rates may be

used. Alternatively, in those situations

the interest rates permitted by the host

state where a non-ministerial function

occurs may be applied, if based on an

assessment of all of the facts and

circumstances, the loan has a clear

nexus to the host state. To avoid

uncertainty regarding which state’s

interest rates apply to a loan Interstate

State Banks should make an appropriate

disclosure to the customer that the

interest to be charged on the loan is

governed by applicable federal law and

the law of the relevant state which will

govern the transaction.

Authorized to be published in the

Federal Register by Order of the Board

of Directors dated at Washington, DC,

this 9th day of May, 1998.

Federal Deposit Insurance Corporation,

Robert E. Feldman,

Executive Secretary.

[FR Doc. 98–13084 Filed 5–15–98; 8:45 am]

BILLING CODE 6714–01–P

FEDERAL MARITIME COMMISSION

Notice of Agreement(s) Filed

The Commission hereby gives notice

of the filing of the following

agreement(s) under the Shipping Act of

1984.

Interested parties can review or obtain

copies of agreements at the Washington,

DC offices of the Commission, 800

North Capitol Street, N.W., Room 962.

Interested parties may submit comments

on an agreement to the Secretary,

Federal Maritime Commission,

Washington, DC 20573, within 10 days

of the date this notice appears in the

Federal Register.

Agreement No.: 217–011317–003.

Title: PONL/BHP–IMTL Space Charter

Agreement.

Parties: P&O Nedlloyd Limited

(‘‘PONL’’) BHP–IMTL.

Synopsis: The proposed Agreement

modification (1) substitutes P&O

Nedlloyd Limited for its commonlyowned affiliate, P&O Nedlloyd B.V.

(formerly named Nedlloyd Lijnen BV) as

party to the Agreement; (2) changes the

name of the Agreement to reflect the

foregoing substitution; (3) deletes U.S.

Atlantic and Gulf ports, as well as the

ports in New Zealand, Chile, Peru, and

Panama from the scope of the

Agreement; and (4) makes other nonsubstantial changes to the Agreement.

Dated: May 12, 1998.

By Order of the Federal Maritime

Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 98–13057 Filed 5–15–98; 8:45 am]

BILLING CODE 6730–01–M

FEDERAL RESERVE SYSTEM

Formations of, Acquisitions by, and

Mergers of Bank Holding Companies

The companies listed in this notice

have applied to the Board for approval,

pursuant to the Bank Holding Company

Act of 1956 (12 U.S.C. 1841 et seq.)

(BHC Act), Regulation Y (12 CFR Part

225), and all other applicable statutes

and regulations to become a bank

holding company and/or to acquire the

assets or the ownership of, control of, or

the power to vote shares of a bank or

bank holding company and all of the

banks and nonbanking companies

owned by the bank holding company,

including the companies listed below.

The applications listed below, as well

as other related filings required by the

Board, are available for immediate

inspection at the Federal Reserve Bank

indicated. The application also will be

available for inspection at the offices of

the Board of Governors. Interested

persons may express their views in

writing on the standards enumerated in

the BHC Act (12 U.S.C. 1842(c)). If the

proposal also involves the acquisition of

a nonbanking company, the review also

includes whether the acquisition of the

nonbanking company complies with the

standards in section 4 of the BHC Act.

Unless otherwise noted, nonbanking

activities will be conducted throughout

the United States.

Unless otherwise noted, comments

regarding each of these applications

must be received at the Reserve Bank

indicated or the offices of the Board of

Governors not later than June 12, 1998.

A. Federal Reserve Bank of Boston

(Richard Walker, Community Affairs

Officer) 600 Atlantic Avenue, Boston,

Massachusetts 02106-2204:

1. Summit Bancorp, Inc., Medway,

Massachusetts; to become a bank

holding company by acquiring 100