Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations 23151

1A ‘‘lead bank’’ is the largest national bank

controlled by a company, based on a comparison of

the total assets held by each national bank

controlled by that company as reported in each

bank’s Call Report. 12 CFR 8.2(a)(6)(ii)(A).

2 Independent trust banks are also assessed based

on the amount of trust assets those banks manage.

See 65 FR 75859 (December 5, 2000).

3 12 CFR 8.6(a) also permits the OCC to assess a

fee for fiduciary examinations and examinations

made pursuant to 12 CFR part 5.

4 12 U.S.C. 1867(c). Thus, as would be the case

if the activity were performed by the bank itself, the

OCC’s authority to examine the activity does not

lapse if the activity is not being conducted at the

same time the OCC undertakes an examination.

5The OCC has recently noted the risks that may

be associated with using service providers in a

recent Advisory Letter and urged national banks to

focus on conducting proper due diligence before

entering into third party arrangements and on

maintaining effective oversight and controls during

the third party relationship. See OCC Advisory

Letter No. 2000–9, ‘‘Third Party Risk,’’ August 29,

2000.

6 65 FR 75196 (December 1, 2000).

§ 1779.96 Termination of Loan Note

Guarantee.

The Loan Note Guarantee under this

part will terminate automatically:

(a) Upon full payment of the

guaranteed loan; or

(b) Upon full payment of any loss

obligation or negotiated loss settlement

except for future recovery provisions; or

(c) Upon written request from the

lender to the Agency, provided that the

lender holds all of the guaranteed

portion and the original Loan Note

Guarantee is returned to the Agency.

§§ 1779.97–1779.99 [Reserved]

§ 1779.100 OMB control number.

The reporting and recordkeeping

requirements contained in this part have

been approved by the Office of

Management and Budget and have been

assigned OMB control number 0572–

0122.

PART 1780—WATER AND WASTE

LOANS AND GRANTS

2. The authority citation for part 1780

continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16

U.S.C. 1005.

Subpart A—General Policies and

Requirements

3. Amend § 1780.10(b)(4) by removing

the reference ‘‘subpart I of part 1980 of

this title’’ and adding in its place ‘‘7

CFR part 1779.’’

Chapter XVIII—Rural Housing Service, Rural

Business—Cooperative Services, Rural

Utilities Service, and Farm Service Agency,

Department of Agriculture

PART 1980—GENERAL

4. The authority citation for part 1980

continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42

U.S.C. 1480.

Subpart A—[Removed and Reserved]

5. Remove and reserve subpart A,

consisting of §§ 1980.1 through

1980.100 and Appendices A through C.

Subpart I—[Removed and Reserved]

6. Remove and reserve Subpart I,

consisting of §§ 1980.801 through

1980.900.

Dated: April 23, 2001.

Dawn Riley,

Acting Deputy Under Secretary, Food,

Nutrition and Consumer Services.

[FR Doc. 01–11366 Filed 5–7–01; 8:45 am]

BILLING CODE 3410–15–P

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 8

[Docket No. 01–08]

RIN 1557–AB90

Assessment of Fees

AGENCY: Office of the Comptroller of the

Currency, Treasury.

ACTION: Final rule.

SUMMARY: The Office of the Comptroller

of the Currency (OCC) is amending its

assessment regulation to clarify that the

OCC has authority to charge a national

bank when the OCC conducts a special

examination of a third party that

provides services to the bank. The rule

applies in the same way to Federal

branches and agencies and District of

Columbia banks.

EFFECTIVE DATE: June 7, 2001.

FOR FURTHER INFORMATION CONTACT:

Mitchell E. Plave, Senior Attorney,

Legislative and Regulatory Activities

Division, (202) 874–5090.

SUPPLEMENTARY INFORMATION:

Background

The OCC charters, regulates, and

supervises more than 2,200 national

banks, accounting for nearly 60 percent

of the nation’s banking assets, as well as

58 Federal branches and agencies of

foreign banks in the United States. Its

mission is to ensure a safe, sound, and

competitive national banking system

that supports the citizens, communities,

and economy of the United States.

The OCC funds the activities it

undertakes to carry out this mission

through assessments and fees charged to

the banks it supervises. The National

Bank Act authorizes the OCC to collect

‘‘assessments, fees, or other charges as

necessary or appropriate to carry out the

responsibilities of the office of the

Comptroller.’’ 12 U.S.C. 482 (Supp.

1999). The statute requires that our

charges ‘‘be set to meet the

Comptroller’s expenses in carrying out

authorized activities.’’ Id. Under part 8

of our regulations, the OCC currently

assesses national banks and Federal

branches and agencies according to a

formula based on factors that include a

bank’s asset size, its condition, and

whether it is the ‘‘lead’’ bank or ‘‘nonlead’’ bank 1 among national banks in a

holding company.2 The OCC also has

the authority to assess a fee for special

examinations and investigations of these

banks. 12 CFR 8.6(a).

In its current form, section 8.6(a)

refers only to fees for a special

examination of a national bank or its

affiliate.3 It does not reflect the OCC’s

authority to assess a national bank in

connection with special examinations of

any of the bank’s service providers. The

Bank Service Company Act provides

that performance of services for national

banks (or for other entities supervised

by the OCC, including subsidiaries

subject to examination by the OCC)

‘‘shall be subject to regulation and

examination by [the OCC] to the same

extent as if such services were being

performed by the bank itself on its own

premises.’’ 4

Banks historically have used third

parties to perform certain activities—

payment processing, for example. Some

banks, however, have recently entered

new lines of business or introduced

novel, and potentially high-risk,

products, relying substantially on third

party service providers to enable the

bank to participate in or to conduct

those activities. These include, for

instance, certain types of credit card

programs, sub-prime lending, check

cashing, and other specialized types of

lending. In many instances, the service

provider’s interest in, and connection

with, these transactions are significantly

greater than that of the bank. The bank

may nonetheless be exposed to higher

than normal levels of risk. This

increased reliance on service providers

will result in an increased need for the

OCC to examine or investigate third

party service providers in order to

evaluate the effect that third-party

activities and relationships have on the

safety and soundness of the bank.5

On December 1, 2000,6 we proposed

to amend 12 CFR 8.6 to make clear our

authority to assess banks for our

23152 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations

7Banks may indemnify themselves against this

cost by including in their contractual arrangements

with service providers terms that obligate the

service provider to reimburse the bank in the event

the OCC conducts an examination or investigation

of the service provider and charges the bank the fee

described here.

8See 12 CFR 8.8.

9 12 U.S.C. 3102(b).

supervision of third party servicers. We

also proposed to clarify our authority to

charge Federal branches and agencies a

fee for conducting special examinations.

For the reasons described in the

following discussion, we adopt the rule

substantially as proposed, with a

clarification suggested by one

commenter.

Proposed Rule and Comments Received

The proposal stated that the OCC may

charge a special examination or

investigation fee to national banks when

examination or investigation of the

activities of a third party service

provider is warranted by the high risk

or unusual nature of the activities

conducted by the service provider for

the bank, or when the OCC believes that

the bank has insufficient systems,

controls, or personnel to adequately

monitor, measure, and control the risks

associated with the activity. The

proposed rule also applied to Federal

branches and agencies. In addition, the

proposal permitted the OCC to impose

the assessment if we examine or

investigate third party providers of

services to subsidiaries subject to

examination by the OCC.

The OCC received two comments on

this proposal. The first, from a trade

association for community banks,

suggested that the OCC identify in

advance, in the final rule, those

instances in which OCC would conduct

special examinations and investigations.

The commenter suggested that this

approach would provide more

predictability as to when the OCC

would charge the fee that was proposed.

The circumstances under which the

OCC will conduct special examinations

or investigations of third parties may

differ. Accordingly, the OCC is unable

to identify in advance every situation

that may warrant use of this authority or

imposition of a fee on the bank. The

final rule addresses this issue

highlighted by the commenter, however,

by describing the factors the OCC will

consider in determining whether to

impose fees for examination of a bank’s

third party service providers. In

addition, the OCC will provide banks

with notice before we begin a special

examination of a service provider for

which the fee will be imposed.7

The second commenter, a trade

association for check cashing centers,

suggested that the proposal might

discourage relationships between their

members and national banks. The

commenter noted that check cashing

organizations serve local communities

by making funds available to consumers

quickly. This rulemaking does not

address the merits of the check cashing

business. We note that the Bank Service

Company Act provides pre-existing

authority for the OCC to examine check

cashers that have entered into particular

relationships with national banks. The

final rule does not alter the nature or

extent of that oversight. Rather, it

clarifies the OCC’s authority to assess

banks for OCC’s examination of third

parties so that the cost associated with

examining them is borne principally by

the banks with whom they have

relationships, rather than by the

national banking system as a whole.

Final Rule

The final rule amends section 8.6(a) to

state that the OCC may assess a national

bank or a Federal branch or agency a fee

for the examination or investigation of

an entity that performs services for the

institution or its subsidiary and that is

subject to OCC examination and

regulation pursuant to the Bank Service

Company Act (12 U.S.C. 1867(c)). The

fees for special exams and investigations

will be based on an hourly rate, with the

hourly rate provided each year by the

OCC in its Notice of Comptroller of the

Currency Fees (Notice of Fees).8 The

final rule also states that the factors the

OCC will consider in determining

whether imposition of a fee for

examination of a bank’s third party

service providers is warranted are (1)

the high risk or unusual nature of the

activities conducted by the service

provider for the banks; (2) the

significance to the bank’s operations

and income of the activities conducted

by the service provider for the banks;

and (3) the extent to which the bank has

sufficient systems, controls, and

personnel to adequately monitor,

measure, and control risks arising from

activities conducted by the service

provider for the bank.

The final rule also amends section

8.6(a) to clarify that the OCC may charge

a fee for conducting special

examinations and investigations of

Federal branches and agencies of foreign

banks or their affiliates. Federal

branches and agencies are subject to the

same ‘‘duties, restrictions, penalties,

liabilities, conditions, and limitations’’

that apply national banks, except as

otherwise specifically provided by

statute.9 Current section 8.6 does not

address the assessment of a fee for the

special examination or investigation of

Federal branches and agencies or their

affiliates. The final rule amends section

8.6 to make our authority to assess such

a fee explicit. The OCC will state the

amount of these fees in the Notice of

Fees.

The final rule amends the title of part

8 to more accurately reflect the scope of

the regulation. While part 8 includes

Federal branches and agencies within

the scope of the rule, only national

banks and District of Columbia banks

are listed in the title. The final rule

removes from the title references to the

types of regulated entities covered by

the regulation.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA)

requires federal agencies to certify that

a final rule will not have a significant

impact on a substantial number of small

entities. See 5 U.S.C. 603, 605. On the

basis of the information currently

available, the OCC is of the opinion that

this final rule is unlikely to have a

significant impact on a substantial

number of small entities, within the

meaning of those terms as used in the

RFA. As previously noted, a national

bank would be assessed a fee for the

examination or investigation of its

service provider when the examination

or investigation is warranted by the

level of risk or unusual or novel nature

of the activities conducted by the

service provider for the bank, or when

the OCC believes that the bank has

insufficient systems, controls, or

personnel to adequately monitor,

measure, and control the risks

associated with the activity. As a result,

the OCC believes that the fees will not

be imposed on a substantial number of

small entities.

Executive Order 12866

The OCC has determined that this

final rule is not a significant regulatory

action under Executive Order 12866.

Unfunded Mandates Reform Act of

1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, Pub. L.

104–4 (2 U.S.C. 1532) (Unfunded

Mandates Act), requires that an agency

prepare a budgetary impact statement

before promulgating any rule likely to

result in a Federal mandate that may

result in the expenditure by State, local,

and tribal governments, in the aggregate,

or by the private sector of $100 million

or more in any one year. If a budgetary

impact statement is required, section

205 of the Unfunded Mandates Act also

requires an agency to identify and

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations 23153

1 12 U.S.C. 1815(d).

2 12 CFR 543.14 (2000).

3See 12 CFR 552.13(l) (2000).

consider a reasonable number of

regulatory alternatives before

promulgating a rule. The OCC has

determined that the final rule will not

result in expenditures by State, local,

and tribal governments, or by the

private sector, of $100 million or more

in any one year. Accordingly, this

rulemaking is not subject to section 202

of the Unfunded Mandates Act.

List of Subjects in 12 CFR Part 8

National banks.

Authority and Issuance

For reasons set forth in the preamble,

the OCC amends part 8 of Chapter I of

title 12 of the Code of Federal

Regulations as follows:

PART 8—ASSESSMENT OF FEES

1. The authority citation for part 8 is

revised to read as follows:

Authority: 12 U.S.C. 93a, 481, 482, 1867,

3102, and 3108; 15 U.S.C. 78c and 78l; and

26 D.C. Code 102.

2. The heading of part 8 is revised to

read as set forth above.

3. Section 8.6 is amended by revising

the section heading and paragraph (a) to

read as follows:

§ 8.6 Fees for special examinations and

investigations.

(a) Fees. Pursuant to the authority

contained in 12 U.S.C. 481 and 482, the

Office of the Comptroller of the

Currency assesses a fee for:

(1) Examining the fiduciary activities

of national and District of Columbia

banks and related entities;

(2) Conducting special examinations

and investigations of national banks,

District of Columbia banks, and Federal

branches or Federal agencies of foreign

banks;

(3) Conducting special examinations

and investigations of an entity with

respect to its performance of activities

described in section 7(c) of the Bank

Service Company Act (12 U.S.C.

1867(c)), if the OCC determines that

assessment of the fee is warranted with

regard to a particular bank because of

the high risk or unusual nature of the

activities performed; the significance to

the bank’s operations and income of the

activities performed; or the extent to

which the bank has sufficient systems,

controls, and personnel to adequately

monitor, measure, and control risks

arising from such activities;

(4) Conducting special examinations

and investigations of affiliates of

national banks, District of Columbia

banks, and Federal branches or Federal

agencies of foreign banks; and

(5) Conducting examinations and

investigations made pursuant to 12 CFR

part 5, Rules, Policies, and Procedures

for Corporate Activities.

* * * * *

Dated: April 26, 2001.

John D. Hawke, Jr.,

Comptroller of the Currency.

[FR Doc. 01–11572 Filed 5–7–01; 8:45 am]

BILLING CODE 4810–33–P

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 552

[No. 2001–34]

RIN 1550–AB46

Conversion From Stock Form

Depository Institution to Federal Stock

Association

AGENCY: Office of Thrift Supervision,

Treasury.

ACTION: Direct final rule.

SUMMARY: The Office of Thrift

Supervision (OTS) is amending its

regulation on conversions from stock

from depository institutions to federal

stock savings associations. This direct

final rule clarifies that the resulting

federal stock savings association in such

transactions succeeds to all the rights,

property, and obligations of the

converting institution. This amendment

merely codifies OTS’s interpretation of

its existing regulation.

DATES: The direct final rule is effective

July 9, 2001, without further notice,

unless OTS receives significant adverse

comments by June 7, 2001. If OTS

receives such comments, it will publish

a timely withdrawal informing the

public that this rule will not take effect.

ADDRESSES: Mail: Send comments to

Regulation Comments, Chief Counsel’s

Office, Office of Thrift Supervision,

1700 G Street, NW., Washington, DC

20552, Attention Docket No. 2001–34.

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

Regulation Comments, Chief Counsel’s

Office, Docket No. 2001–34.

Facsimiles: Send facsimile

transmissions to FAX Number (202)

906–6518, Attention Docket No. 2001–

34.

E-Mail: Send e-mails to

regs.comments@ots.treas.gov, Attention

Docket No. 2001–34, and include your

name and telephone number.

Public Inspection: Comments and the

related index will be posted on the OTS

Internet Site at www.ots.treas.gov. In

addition, you may inspect comments at

the Public Reading Room, 1700 G St.

NW., by appointment. To make an

appointment for access, call (202) 906–

5922, send an e-mail to

public.info@ots.treas.gov, or send a

facsimile transmission to (202) 906–

7755. (Prior notice identifying the

materials you will be requesting will

assist us in serving you.) Appointments

will be scheduled on business days

between 10:00 a.m. and 4:00 p.m. In

most cases, appointments will be

available the next business day

following the date a request is received.

FOR FURTHER INFORMATION CONTACT:

Aaron B. Kahn, (202) 906–6263, Special

Counsel, or Kevin A. Corcoran, (202)

906–6962, Assistant Chief Counsel,

Business Transactions Division, Chief

Counsel’s Office, Office of Thrift

Supervision, 1700 G Street, NW.,

Washington DC 20552.

SUPPLEMENTARY INFORMATION:

Background

OTS’s regulations at 12 CFR 552.2–6

provides that, with OTS approval, any

stock depository institution that is, or is

eligible to become, a member of a

Federal Home Loan Bank may convert

to a federal stock savings association if

the converting institution has deposits

insured by the Federal Deposit

Insurance Corporation (FDIC) at the

time of conversion, and complies with

all applicable statutes and regulations,

including section 5(d) of the Federal

Deposit Insurance Act.1 This regulation

does not explicitly address the

succession of the federal association

resulting from such a conversion to the

rights, obligations and property of the

converting institution. However, as a

matter of practice OTS treats federal

stock associations that have resulted

from direct conversions pursuant to 12

CFR 552.2–6 as the corporate successors

of the converting institutions.

OTS regulations addressing similar

transactions explicitly provide that the

resulting federal association succeeds to

the rights, obligations, and property of

a converted or disappearing entity. This

is true, for example, for conversions of

mutual depository institutions to federal

mutual savings associations 2 and the

merger or consolidation of stock

institutions that result in a federal stock

association.3

To clarify the legal consequences of

direct conversions under 12 CFR 552.2–

6, OTS is amending that regulation to

provide explicitly that a converted