This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

33157

Vol. 66, No. 120

Thursday, June 21, 2001

1 12 U.S.C. 1463(a).

2 12 U.S.C. 1467(k). See also 12 U.S.C. 1462a,

1463, 1467(a), 1467a.

3The UFIRS rating system was developed jointly

by all of the Federal banking regulators in an effort

to establish a uniform system using standard

criteria and definitions for rating in six different

rating areas: capital, assets, management, earnings,

liquidity, and sensitivity to market risk. See 61 FR

67021 (Dec. 19, 1996). UFIRS is an effective

supervisory tool for evaluating the soundness of

financial institutions on a uniform basis, and for

identifying those institutions requiring special

supervisory attention or concern.

4OTS has assessed a 50 percent premium on 4-

and 5-rated institutions since 1990. 55 FR 34519

(Aug. 23, 1990). OTS began to impose a 25 percent

premium on 3-rated institutions in 1998. 63 FR

65663 (Nov. 30, 1998).

5Recently, the Office of the Comptroller of the

Currency issued a final rule imposing a similar

premium on 3-, 4- and 5-rated national banks. See

66 FR 29890 (Jun. 1, 2001).

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 502

[No. 2001–44]

RIN 1550–AB47

Assessments and Fees

AGENCY: Office of Thrift Supervision,

Treasury.

ACTION: Final rule.

SUMMARY: The Office of Thrift

Supervision (OTS) is amending its

assessments rule to more accurately

reflect the increased costs of supervising

3-, 4-, and 5-rated institutions. As

amended, OTS will compute the

condition component of a savings

association’s assessment at 50 percent of

the size component for 3-rated

institutions, and 100 percent of the size

component for 4- and 5-rated

institutions.

EFFECTIVE DATE: July 23, 2001.

FOR FURTHER INFORMATION CONTACT:

Karen Osterloh, Assistant Chief

Counsel, (202) 906–6639, Regulations

and Legislation Division, Chief

Counsel’s Office; or William Brady,

Director, Planning & Budget, (202) 906–

7408, Office of Thrift Supervision, 1700

G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

OTS is charged with examining,

regulating, and providing for the safe

and sound operation of savings

associations.1 OTS funds its operations

through assessments on savings

associations and through other fees. The

Home Owners’ Loan Act (HOLA)

specifically authorizes the Director to

assess such fees to fund its direct and

indirect expenses, as the Director deems

necessary or appropriate.2

Under 12 CFR part 502, OTS

determines each institution’s

assessment by adding together three

components reflecting the size,

condition and complexity of an

institution. OTS computes the size

component by multiplying an

institution’s total assets (as reported on

the Thrift Financial Report (TFR)) by the

applicable assessment rate. The

condition component is a percentage of

the size component and is imposed on

institutions that have a 3-, 4-, or 5-

composite rating under the Uniform

Financial Institutions Rating System

(UFIRS) (also referred to as the CAMELS

rating system).3 OTS imposes a

complexity component if: (1) A thrift

administers more than $1 billion in trust

assets; (2) the outstanding balance of

assets fully or partially covered by

recourse obligations or direct credit

substitutes exceeds $1 billion; or (3) the

thrift services over $1 billion of loans

for others. OTS calculates the

complexity component by multiplying

set rates times the amounts by which an

association exceeds each particular

threshold.

On April 30, 2001, OTS published a

proposed rule revising the condition

component. 66 FR 21288 (Apr. 30,

2001). Under the existing rules, the

condition component equals 25 percent

of the thrift’s size component for 3-rated

institutions, and 50 percent of the

thrift’s size component for 4- or 5-rated

institutions.4 Based on the higher

amount of supervisory resources

demanded by 3-, 4- and 5-rated

institutions, OTS proposed to raise the

condition component to 50 percent for

3-rated institutions and 100 percent for

4- and 5-rated institutions.

II. Analysis of the Comments

The comment period on the proposed

rule closed on May 30, 2001. OTS

received one comment from a trade

association.

The commenter urged OTS to

carefully consider whether the revised

assessment structure will push the OTS

regulated industry toward other federal

or state charters. OTS does not believe

that the final rule will have this effect.

Over 90 percent of the thrift industry is

1- or 2-rated or has not received an

initial rating. This final rule should

benefit these institutions because their

assessments will be reduced as OTS

recaptures more of its supervisory costs

from low rated thrifts.

Admittedly, the assessments for 3-,

4-, and 5-rated institutions will increase

commensurate with their need for

increased supervision. However, the

assessment of a premium on such

institutions is consistent with the

assessments imposed by other banking

regulators.5 Moreover, our experience

under the current rule indicates that the

risk-adjusted premiums for 3-,

4- and 5-rated institutions have not

resulted in significant defections to

other charters.

The commenter also encouraged OTS

to address its budget issues in a

comprehensive fashion. While a

wholesale review of these issues is

beyond the scope of this rulemaking,

OTS believes that this rule will enhance

OTS budgetary efforts. In particular, this

rule will permit OTS assessment

revenues to automatically expand (or

contract) in direct response to the

supervisory demands imposed by an

increased (or decreased) number of

lower rated institutions.

OTS specifically sought comment

whether it should consider the

complexity of an institution’s operations

in its calculation of the condition

component. The commenter urged OTS

not to make such changes to the existing

rule. The final rule does not make any

changes in this area.

III. Effective Date

Section 302 of the Riegle Community

Development and Regulatory

Improvement Act of 1994 (CDRIA) states

that OTS rules that impose new

33158 Federal Register / Vol. 66, No. 120 / Thursday, June 21, 2001 / Rules and Regulations

6See H. Rep. No. 103–252, p. 168 (1994).

7 5 U.S.C. 605(b).

8 12 U.S.C. 1462a, 1463, 1467, 1467a.

9 13 CFR 121.201 Division H (1998).

requirements must take effect on the

first day of a calendar quarter that

begins on or after the date of publication

of the rule. 12 U.S.C. 4802. A related

provision, section 553 of the

Administrative Procedure Act (APA),

states that a rule may not be made

effective less than 30 days after

publication. 5 U.S.C. 553(d). Under

either statute, OTS may make a rule

effective on a different date, if it finds

good cause.

Working together, the APA and

CDRIA provisions would delay the

effective date of this final rule until

October 1, 2001, and OTS would be

unable to use the revised calculation

method for the July 31, 2001

assessment. OTS believes that this

would lead to an inequitable result

since 1- and 2-rated institutions would

be required to subsidize the extra

supervisory costs of 3-, 4- and 5-rated

institutions for yet another assessment

period.

Moreover, OTS does not believe that

an October 1, 2001 effective date would

further the purposes of CDRIA. CDRIA

ensures that depository institutions will

be regularly informed of new rules with

which they must comply. CDRIA also

ensures that depository institutions

must make operational changes only

four times, rather than sporadically,

during a calendar year.6 Since savings

associations are not required to take any

action to comply with this new rule,

OTS does not believe that it is necessary

to apply the CDRIA effective date

provisions. For these reasons, OTS finds

that there is good cause to make this

rule effective on a date other than the

first date of a calendar quarter.

Consistent with the APA, this rule will

become effective thirty days after

publication.

IV. Executive Order 12866

The Director of OTS has determined

that this final rule does not constitute a

‘‘significant regulatory action’’ for the

purposes of Executive Order 12866.

V. Regulatory Flexibility Act Analysis

Under section 605(b) of the

Regulatory Flexibility Act of 1980,7 OTS

has evaluated the effects this final rule

will have on small businesses, small

organizations, and small governmental

jurisdictions. As required, OTS has

prepared the following final regulatory

flexibility analysis.

A. Reasons for and objectives of the

rule; Legal basis for the rule

OTS funds its operations through

assessments on savings associations and

through other fees. The Director of OTS

is authorized by the HOLA to impose

assessments.8 OTS is specifically

authorized to assess such fees to fund

the direct and indirect expenses of OTS,

as the Director deems necessary or

appropriate. 12 U.S.C. 1467(k).

OTS has found that there is

significant increase in supervisory

demands on the agency when an

institution’s rating moves to a ‘‘3’’

rating, and an even greater increase

when a thrift’s rating moves to a ‘‘4’’ or

a ‘‘5’’ rating. Accordingly, the current

OTS assessments regulation imposes a

premium on these institutions to reflect

the increased supervision costs.

OTS experience since 1998, when it

last revised its condition component,

has shown that the current premium for

3-, 4-, and 5-rated institutions does not

adequately compensate it for the

additional demands on its resources.

Therefore, OTS has amended its rules to

more closely associate its costs with its

assessments.

B. Effect of the final rule on small

savings associations

The final rule may affect small

savings associations. The final rule,

however, does not affect small

businesses, small organizations other

than small savings associations, or small

governmental jurisdictions. Small

savings associations are generally

defined, for Regulatory Flexibility Act

purposes, as those with assets under

$100 million.9

As discussed above, the final rule

imposes a premium equal to 50 percent

of an association’s size component for

each 3-rated association, and a 100

percent of an association’s size

component on each 4- or 5-rated

institution. OTS will assess this

premium regardless of the institution’s

size. Based on OTS most recent data, 37

savings associations were 3-rated and

had assets under $100 million.

Currently, the semi-annual assessment

for a 3-rated institution with$100

million in assets is $19,380, exclusive of

any complexity component. Under the

final rule, this institution’s semi-annual

assessment will be $23,256—an increase

of $3,876. Other 3-rated small savings

associations will see their assessments

increase by lesser amounts depending

on their asset size.

Based on OTS most recent data, six

institutions were 4- or 5-rated and had

assets under $100 million. Currently,

the semi-annual assessment for a 4- or

5-rated institution with $100 million in

assets is $23,256, exclusive of any

complexity component. Under the final

rule, this institution’s semi-annual

assessment will be $31,008—an increase

of $7,752. Other 4- and 5-rated

institutions will see their assessments

increase by lesser amounts depending

on their asset size.

C. Significant Issues Raised in Response

to Initial Regulatory Flexibility Analysis

and Changes Made to Minimize Burden

OTS did not receive any significant

comments in response to the Initial

Regulatory Flexibility Analysis and has

made no changes in the final rule.

D. Significant Alternatives to the Final

Rule

As discussed earlier, 3-, 4- and 5-rated

savings associations require more

supervisory attention than 1- or 2-rated

associations. Therefore, OTS has three

alternatives: impose extra assessments

on all 3-, 4- and 5-rated associations;

impose extra assessments on some subcategory of 3-, 4- and 5-rated

institutions; or require 1- and 2-rated

institutions to subsidize these extra

supervisory costs of 3-, 4- and 5-rated

institutions.

OTS believes it is most equitable to

match assessments with OTS’s

supervisory costs as far as possible.

Therefore, it has increased the amount

of the condition component for 3-, 4-,

and 5-rated associations. OTS believes

that requiring these institutions to pay

for their extra supervisory costs

provides an incentive for those

institutions to improve their condition

and their ratings. OTS also believes that

the condition component best

accomplishes OTS’s objective of closely

tailoring assessment rates to OTS’s

increased costs in supervising 3-, 4- and

5-rated institutions.

E. Other matters

The final rule imposes no reporting,

recordkeeping, or other compliance

requirements. Assessments will

continue to be based on Thrift Financial

Reports that savings associations

otherwise must file with OTS. OTS will

continue to use its current collection

procedures. Therefore, the final rule

imposes no new or additional reporting,

recordkeeping, or compliance

requirements.

There are no federal rules that

duplicate, overlap, or conflict with this

final rule.

Federal Register / Vol. 66, No. 120 / Thursday, June 21, 2001 / Rules and Regulations 33159

VI. Unfunded Mandates Act of 1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, Pub.

L.104–4 (Unfunded Mandates Act),

requires an agency to 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 final 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.

List of Subjects in 12 CFR Part 502

Assessments, Federal home loan

banks, Reporting and recordkeeping

requirements, Savings associations.

Accordingly, the Office of Thrift

Supervision amends part 502, chapter

V, title 12, Code of Federal Regulations

as set forth below.

PART 502—ASSESSMENTS AND FEES

1. The authority citation for part 502

continues to read as follows:

Authority: 12 U.S.C. 1462a, 1463, 1467,

1467a.

2. Section 502.20 is revised to read as

follows:

§ 502.20 How does OTS determine my

condition component?

OTS uses the following chart to

determine your condition component.

If your component

rating is:

Then your condition

component is:

1 or 2 ......................... Zero.

3 ................................ 50 percent of your

size component.

4 or 5 ......................... 100 percent of your

size component.

Dated: June 13, 2001.

By the Office of Thrift Supervision.

Ellen Seidman,

Director.

[FR Doc. 01–15654 Filed 6–20–01; 8:45 am]

BILLING CODE 6720–01–P

NATIONAL CREDIT UNION

ADMINISTRATION

12 CFR PART 707

Truth in Savings

AGENCY: National Credit Union

Administration (NCUA).

ACTION: Interim final rule with request

for comments.

SUMMARY: NCUA is amending its

regulation that implements the Truth in

Savings Act (TISA). This interim final

rule establishes uniform standards for

the electronic delivery of disclosures

required by TISA. NCUA is also

amending its regulation to address

electronic advertisements. These

amendments conform to the Electronic

Signatures in Global and National

Commerce Act (E-Sign Act).

DATES: This rule is effective June 21,

2001. To allow time for any necessary

operational changes, however, the

mandatory compliance date is October

1, 2001. Comments must be received on

or before August 20, 2001.

ADDRESSES: Comments should be

directed to Becky Baker, Secretary of the

Board. Mail or hand-deliver comments

to: National Credit Union

Administration, 1775 Duke Street,

Alexandria, VA 22314–3428. You may

also fax comments to (703) 518–6319 or

e-mail comments to

regcomments@ncua.gov. Please send

comments by one method only.

FOR FURTHER INFORMATION CONTACT:

Frank S. Kressman, Staff Attorney, at

the above address or telephone: (703)

518–6540.

SUPPLEMENTARY INFORMATION

A. Background

Part 707 of NCUA’s regulations

implements TISA. 12 CFR part 707. The

purpose of part 707 and TISA is to assist

members in making meaningful

comparisons among accounts offered by

credit unions and other financial

institutions. Part 707 and TISA require,

among other things, disclosure of yields,

fees and other terms concerning share

accounts to members at account

opening, upon request, when changes in

terms occur and in periodic statements.

Many of these disclosures must be

written.

In April 2001, The Board of Governors

of the Federal Reserve System (Federal

Reserve) issued an interim rule

amending its Regulation DD, which

implements TISA (April 2001 Interim

Rule). That rule established uniform

standards for the timing and electronic

delivery of disclosures required by TISA

and Regulation DD, and addressed

electronic advertisements. 66 FR 17795

(April 4, 2001). The Federal Reserve has

stated that electronic disclosures can

effectively reduce compliance costs for

financial institutions and allow them to

provide Regulation DD disclosures to

the consumer more efficiently without

adversely affecting consumer

protections. Under that rule, disclosures

may be sent by e-mail to an electronic

address designated by the consumer, or

made available at another location, such

as an Internet web site. If disclosures are

not sent by e-mail, consumers must

receive a notice informing them that

they are available elsewhere. If posted to

a web site, disclosures must be available

for at least 90 days to allow consumers

adequate time to access them. For

disclosures that must be provided before

account opening, consumers are

required to access them before the

account is opened. Under this rule,

financial institutions must make a good

faith attempt to redeliver electronic

disclosures that are returned as

undelivered, using the address

information available in their files.

These amendments conform to the ESign Act. 15 U.S.C. 7001. The E-Sign

Act was enacted in June 2000, to

encourage the continued expansion of

electronic commerce. It generally

provides that electronic documents and

signatures have the same validity as

paper documents and handwritten

signatures. It provides that consumer

disclosures may be provided in

electronic form only if the consumer

affirmatively consents after receiving

information specified in the statute. The

consumer consent provisions in the ESign Act became effective October 1,

2000. Section 101(c)(5) of the E-Sign Act

provides that consumers who gave

consent prior to the effective date are

not subject to those consent

requirements.

In September 1999, before enactment

of the E-Sign Act, the Federal Reserve

issued an interim rule that also

amended Regulation DD (September

1999 Interim Rule). 64 FR 49846

(September 14, 1999). With the issuance

of the April 2001 Interim Rule, the

Federal Reserve has withdrawn the

September 1999 Interim Rule.

TISA requires NCUA to promulgate

regulations substantially similar to those

promulgated by the Federal Reserve

within 90 days of the effective date of

the Federal Reserve’s rules. 12 U.S.C.

4311(b). In doing so, NCUA is to take

into account the unique nature of credit

unions and the limitations under which

they may pay dividends on member

accounts. In compliance with TISA, as

discussed more fully below, NCUA is

issuing this interim final rule with