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

34855

Vol. 66, No. 127

Monday, July 2, 2001

1 John D. Hawke, Jr., ‘‘The Internet Impact,’’

Independent Banker, March 2001; Veronica Agosta,

‘‘Nation’s Small Banks Have Big Plans for the

Internet,’’ The American Banker, March 9, 2001, at

5; Leslie Walker, ‘‘E-Mail Money Gains Currency,’’

The Washington Post, October 5, 2000, at E1; Steve

Marlin, ‘‘B2B: Swirling E-Marketplace Pulls in

Banks,’’ Bank Systems & Technology, June 2000, at

32; ‘‘Online Finance Survey: Paying Respects,’’ The

Economist, May 20, 2000, at 24; Carol Power,

‘‘Banks Start to Click into Wireless Banking,’’ The

American Banker, June 7, 2000, at 16.

2See OCC Internet Banking Questionnaire,

December 31, 2000.

3 ‘‘Online Finance Survey: Branching Out,’’ The

Economist, May 20, 2000, at 19.

4The OCC has established a website that contains

information relating to electronic banking activities.

See www.occ.treas.gov/netbank/netbank.htm

(Electronic Banking website). The site includes a

listing of opinions, approval letters, supervisory

guidance, and other issuances on this subject and

provides links to the documents listed.

5See, e.g., OCC Bulletin 98–3, Technology Risk

Management—Guidance for Bankers and Examiners

(February 4, 1998).

6 66 FR 8616 (Feb. 1, 2001) (information security

guidelines issued jointly by the OCC, the Board of

Governors of the Federal Reserve, the Federal

Deposit Insurance Corporation, and the Office of

Thrift Supervision). These guidelines implement

the requirements of section 501(b) of GLBA, Pub.

L. 106–102, sec. 501(b), 113 Stat. 1338, 1436–37

(Nov. 12, 1999), codified at 15 U.S.C. 6801.

7Comptroller’s Handbook, Other Income

Producing Activities: Internet Banking (Oct. 1999).

8 65 FR 4895 (Feb. 2, 2000).

9Section 729 of GLBA requires the OCC and the

other Federal banking agencies to conduct a study

of banking regulations pertaining to the delivery of

on-line financial services and to make

recommendations on adapting existing regulations

and legislative requirements to on-line banking and

lending. We noted in the ANPR that commenters’

suggestions would be helpful in formulating

recommendations for legislative action or for

actions that may be appropriately undertaken on an

interagency basis. We continue to invite

commenters to address these points.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 7

[Docket No. 01–15]

RIN 1557–AB76

Electronic Banking

AGENCY: Office of the Comptroller of the

Currency, Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Office of the Comptroller

of the Currency (OCC) is proposing to

amend its regulations in order to

facilitate national banks’ ability to

conduct business using electronic

technologies, consistent with safety and

soundness. This proposal groups

together new and revised regulations

addressing: National banks’ exercise of

their Federally authorized powers

through electronic means; the location,

for purposes of the Federal banking

laws, of a national bank that engages in

electronic activities; and the disclosures

required when a national bank provides

its customers with access to other

service providers through hyperlinks in

the bank’s website or other shared

electronic ‘‘space.’’

DATES: Comments must be received by

August 31, 2001.

ADDRESSES: Please send your comments

to: Office of the Comptroller of the

Currency, Public Information Room, 250

E Street, SW., Mail Stop 1–5,

Washington, DC 20219, Attention:

Docket No. 01–15. You may make an

appointment to inspect and photocopy

comments at the same location by

calling (202) 874–5043. In addition, you

may fax your comments to (202) 874–

4448 or electronic mail them to

regs.comments@occ.treas.gov.

FOR FURTHER INFORMATION CONTACT:

Stuart Feldstein, Assistant Director, or

Heidi M. Thomas, Counsel, Legislative

and Regulatory Activities, at (202) 874–

5090; James Gillespie, Assistant Chief

Counsel, at (202) 874–5200; or Clifford

Wilke, Director, Bank Technology, at

(202) 874–5920.

SUPPLEMENTARY INFORMATION:

Background

Automation, the Internet, wireless

communications, and other technologies

are impacting not just how financial

products and services are delivered, but

also the substantive characteristics of

those products and services.1 By the end

of 2000, approximately 37 percent of

national banks offered Internet banking

via transactional World Wide Web

(Web) sites, with another 18 percent

expecting to offer Internet banking

services in the future.2 By the end of

2003, an estimated 25 million to 40

million households will bank on-line.3

The OCC has approved a number of

activities involving innovative uses of

new technology, including the

establishment of transactional Web

sites, virtual marketplaces, Internet

access services, and electronic payment

systems. We have also permitted

national banks to provide digital

certification and electronic

correspondent banking services.4

To ensure that electronic banking

activities are conducted consistent with

bank safety and soundness, we have

issued guidance addressing supervisory

issues relating to banks’ use of

technology.5 Together with the other

Federal banking agencies, we have

recently issued guidelines prescribing

information security standards that

implement the requirements of the

Gramm-Leach-Bliley Act (GLBA).6 We

also have issued a comprehensive

handbook on Internet banking that

discusses business and technical issues

associated with providing goods and

services via the World Wide Web, the

risks presented by these activities, and

the OCC’s procedures for Internetrelated examinations.7 In addition, we

recently issued ‘‘The Internet and the

National Bank Charter,’’ as part of the

Comptroller’s Corporate Manual

(January 2001). These and other

issuances, including Internet-related

regulatory updates, are available on our

Electronic Banking website.

Finally, we have initiated a review of

the OCC’s regulations with a view

toward removing unnecessary

impediments to national banks’ use of

technology. In an advance notice of

proposed rulemaking (ANPR) published

on February 2, 2000,8 the OCC invited

public comment on issues involving

Internet banking and other uses of

electronic technology. Specifically, the

ANPR focused on three issues: (1) How

should the OCC adapt its regulations

and supervisory policies to facilitate

national banks’ use of electronic

technology consistent with bank safety

and soundness? (2) What statutes can

the OCC interpret more flexibly to

accommodate new technologies? and (3)

How can the OCC enhance the

operational flexibility of banks engaging

in electronic banking consistent with

bank safety and soundness? 9

The OCC received 16 comments on

the ANPR, including 7 from banks, 6

from trade associations, 2 from

individuals, and 1 from a company that

provides information processing

34856 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules

10Pub. L. 106–2299, 114 Stat. 464 (June 30, 2000).

11 12 CFR 7.1002.

12See OCC Conditional Approval No. 369 (Feb.

25, 2000) (national bank may, incidental to its

hosting of a virtual mall, provide at that site access

to a limited amount of nonfinancial information

(e.g., information on current events and weather)

that is necessary to attract persons to the virtual

mall site); OCC Interpretive Letter No. 875,

reprinted in [Current Transfer Binder] Fed. Banking

L.Rep. (CCH) ¶ 81–369 (Oct. 31, 1999) (the

components of Internet services package that

involve hosting of commercial web sites, registering

merchants with search engines and obtaining URLs,

and electronic storage and retrieval of the data set

for a merchant’s on-line catalog are permissible

finders activities authorized for national banks

pursuant to 12 U.S.C. 24(Seventh)); OCC

Conditional Approval No. 221 (Dec. 4, 1996)

(national banks, in the exercise of their finder

authority, may establish hyperlinks between their

home pages and the Internet pages of third party

providers so that bank customers will be able to

access those non-bank web sites from the bank site);

Letter from Julie L. Williams, Chief Counsel,

October 2, 1996 (unpublished) (national bank as

finder could use electronic means to facilitate

contacts between third party providers and

potential buyers); OCC Interpretive Letter No. 611,

reprinted in [1992–1993 Transfer Binder] Fed.

Banking L. Rep. (CCH) P 83,449 (Nov. 23, 1992)

(national bank linking non-bank service providers

to its communications platform of smart phone

banking services was within its authority as a finder

‘‘in bringing together a buyer and seller;’’ national

banks may act as finders by providing to their

customers links to non-banking, third-party

vendors’ Internet web sites); OCC Interpretive Letter

No. 516, reprinted in [1990–1991 Transfer Binder]

Fed. Banking L. Rep. (CCH) P 83,220 (July 12, 1990)

(national banks as finder may provide electronic

communications channels for persons participating

in securities transactions).

13See, e.g., OCC Interpretive Letter No. 824 (Feb.

27, 1998) (determining, in the context of insurance

activities, that the ‘‘finder function is an activity

authorized for national banks under 12 U.S.C.

24(Seventh) as part of the business of banking.’’).

The OCC makes this determination pursuant to its

authority under section 24(Seventh) to authorize

activities as part of the business of banking.

NationsBank v. Variable Annuity Life Insurance

Co., 513 U.S. 251, 258 n.2 (1995) (VALIC) (‘‘We

expressly hold that the ‘‘business of banking’’ is not

limited to the enumerated powers in [section]

24(Seventh) and that the Comptroller therefore has

discretion to authorize activities beyond those

specifically enumerated.’’). In VALIC, the Court

noted that the Comptroller’s exercise of discretion

is subject to a reasonableness standard. Id. It is clear

that our determination that finder activities are part

of the business of banking satisfies this standard.

See Norwest Bank v. Sween Corporation, 118 F.3d

1255 (8th Cir. 1997) (determining that finder

activities were authorized for a national bank

because ‘‘allowing banks to use their expertise as

an intermediary effectuating transactions between

parties facilitates the flow of money and credit

through the economy.’’). The Sween court did not

distinguish between activities that are ‘‘part of’’ the

business of banking and those that are ‘‘incidental

to’’ that business, relying, instead, on the preVALIC formulation of the analysis as whether an

activity is ‘‘closely related to an express power and

is useful in carrying out the business of banking.’’

Id. at 1260. The court’s conclusions are nonetheless

clear that finder activities are authorized pursuant

to section 24(Seventh) and that the Comptroller’s

determination to that effect, embodied in the OCC’s

regulations, was a reasonable construction of the

statute.

14See, e.g., ‘‘SEC Redefines What Triggers B/D

Registration,’’ VII Compliance Rep. 1 (April 10,

2000) and ‘‘On-line Brokerage: Keeping Apace of

Cyberspace,’’ Report of Laura S. Unger,

Commissioner, U.S. Securities and Exchange

Commission 98–106 (Nov. 1999).

management, outsourcing services, and

application software to banks. The

commenters strongly supported the

OCC’s initiative, emphasizing that

outdated and inflexible regulations are

one of the largest obstacles banks face as

they attempt to adopt new technologies.

The comments offered suggestions in

each of the three areas identified in the

ANPR and raised a wide variety of

additional issues.

After reviewing these comments, the

OCC has developed a proposed rule to

update its regulations to reflect national

banks’ use of new technologies and to

provide simpler, clearer guidance to

banks engaging in electronic activities.

Shortly after the ANPR was

published, Congress passed the

Electronic Signatures in Global and

National Commerce Act (the E-Sign

Act), which was enacted on June 30,

2000.10 Among other provisions, the ESign Act establishes certain uniform

Federal rules concerning the use of

electronic signatures and records in

commercial and consumer transactions

and establishes certain requirements for

making disclosures to consumers

electronically. Although it does not

require implementing regulations, the ESign Act gives the OCC (and other

Federal and state regulatory agencies)

authority to interpret the Act’s

requirements with respect to the statutes

they administer, subject to specified

limitations. The OCC is considering

whether it would be appropriate to

further revise its regulations in light of

the E-Sign Act. Any such revisions

would be undertaken in a separate

rulemaking, however, and are,

accordingly, not covered by this

proposal.

Section-by-Section Analysis of the

Proposal

In the following discussion, the

changes included in this proposal are

grouped in three categories: national

bank powers, location with respect to

the conduct of electronic activities, and

safety and soundness requirements for

shared electronic ‘‘space.’’

A. National Bank Powers

1. National Bank Finder Authority

(revised § 7.1002)

The OCC has long permitted a

national bank to act as a finder to bring

together buyers and sellers of financial

and nonfinancial products and services.

Under our current rules, a national

bank, acting as a finder, may identify

potential parties, make inquiries as to

interest, introduce or arrange meetings

of interested parties, and otherwise

bring parties together for a transaction

that the parties themselves negotiate

and consummate.11 National banks have

used the finder authority to engage in

several new activities made possible by

technological developments,

particularly the Internet.12

The proposal makes several changes

to section 7.1002. First, the proposal

clarifies that it is part of the business of

banking for a national bank to engage in

finder activities. This provision codifies

the position the OCC has taken in recent

interpretative letters.13

Second, the proposal adds a number

of specific examples illustrating the full

range of finder activities that we have

authorized. For example, the proposal

states that a national bank may

communicate information about thirdparty providers, their services and

products, and proposed offering prices

and terms to potential markets. These

examples are illustrative and not

exclusive, and the OCC may find new

activities to be authorized under the

finder authority that are not included in

the examples.

Finally, the current rule contains the

express statement that acting as a finder

does not include activities that would

characterize the bank as a broker under

applicable Federal law. Like other

aspects of the financial services

business, the concept of what

constitutes acting as a broker is

changing in response to technology and

is expanding in some Federal regulatory

regimes.14 Accordingly, the proposed

rule restates the exclusion contained in

the current rule to provide that the

authority to act as a finder does not

enable a national bank to engage in

activities that would characterize the

bank as a broker under Federal law that

are not otherwise permissible for

national banks. This change is prompted

in response to changes in the definition

of ‘‘broker’’ under Federal law and does

not affect whether activities regulated as

brokerage under state law are

permissible for a national bank. In

addition, as under the current

regulation, a national bank acting as

finder may not represent or bind either

of the parties to a transaction, nor may

it take title to goods as finder.

2. Electronic Banking—Scope (new

Subpart E and § 7.5000)

The proposal creates a new Subpart E

to part 7, which collects regulations

pertaining to electronic activities. New

section 7.5000 describes the scope of

Subpart E, which addresses national

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules 34857

15 VALIC, 513 U.S. at 258.

16 In brief, state law applies to a national bank’s

exercise of a Federally authorized activity if a

Federal statute directs that result or if the state law

is found to apply under principles of Federal

preemption derived from the Supremacy Clause of

the U.S. Constitution and applicable judicial

precedent. See, e.g., Barnett Bank v. Nelson, 517

U.S. 25 (1996).

17See, e.g., Conditional Approval No. 267

(January 12, 1998) (A national bank may engage in

certification authority activities that are the

functional equivalent to and a logical outgrowth of

established banking functions) and Conditional

Approval No. 220 (December 2, 1996) (The creation,

sale and redemption of electronic stored value in

exchange for dollars are part of the business of

banking because these activities comprise the

electronic equivalent of issuing circulating notes or

other paper-based payment devices like travelers

checks).

18See, e.g., M&M Leasing v. Seattle First National

Bank, 563 F.2d 1377 (9th Cir. 1977), cert. denied,

436 U.S. 956 (1978) (national bank leasing of

personal property permissible because it was

functionally interchangeable with loaning money

on personal security and therefore incidental to the

express power of loaning money on personal

security); VALIC, 513 U.S. at 259–60 (national bank

annuity sales are permissible because they are

functionally similar to other financial investment

products banks have long been authorized to sell).

19 Merchants’ Bank v. State Bank, 77 U.S. 604,

648 (1871) (‘‘The practice of certifying checks has

grown out of the business needs of the country.’’)

See Clement National Bank v. Vermont, 231 U.S.

120, 140 (1923) (‘‘the bank should be free to make

* * *reasonable [depositors’] agreements, and thus

promote the convenience of its business * * * .’’).

20See Merchants’ Bank, 77 U.S. at 648 (‘‘A bank

incurs no greater risk in certifying a check than in

giving a certificate of deposit.’’); M&M Leasing, 563

F. 2d at 1383 (leasing personal property

functionally equivalent to secured lending because

the risks to the bank of such leasing were

essentially the same as if the bank had made

secured loans to buyers of the same property). See

also Decision of the Comptroller of the Currency on

the Operating Subsidiary Application by Zions First

National Bank, Salt Lake City, Utah, OCC

Conditional Approval No. 267 (January 12, 1998) at

13 (acting as a certification authority involves core

competencies of national banks and thus entails

risks similar to those that banks are already expert

in handling).

21The U.S. Supreme Court has relied upon the

permissibility of an activity for state banks as a

factor in the analysis of permissible national bank

powers. See Colorado National Bank v. Bedford,

310 U.S. 41 (1940), in which the Court, concluding

that national banks had the authority to conduct a

safe-deposit business, stated that ‘‘State banks, quite

usually, are given the power to conduct a safedeposit business. We agree with the appellant bank

that such a generally adopted method of

safeguarding valuables must be considered a

banking function authorized by Congress.’’ 310 U.S.

at 51.

banks’ use of electronic technology to

deliver products and services,

consistent with safety and soundness.

3. Electronic Banking Activities That

Are Part of, or Incidental to, the

Business of Banking (§ 7.5001)

The rapid development of new

technologies requires banks to be able to

respond quickly and effectively to

changing customer needs. As they take

up the new lines of business and offer

the new financial products needed to

serve their customers, national banks

must continually evaluate their

authority, pursuant to 12 U.S.C.

24(Seventh), to conduct electronic

activities that are part of, or incidental

to, the business of banking.15 Proposed

new § 7.5001 assists banks that are

contemplating new electronic activities

by identifying the factors the OCC uses

to determine whether the electronic

activity would be authorized pursuant

to section 24(Seventh).

Section 7.5001(a) provides the

purpose and scope of the new section

and describes the general parameters of

national banks’ ability to engage in

electronic activities. First, it sets out

expressly the OCC’s authority to impose

conditions on the exercise of newly

authorized activities if necessary to

ensure that they are conducted safely

and soundly and in accordance with

applicable law and supervisory policies.

Second, it clarifies that state law applies

to a national bank’s conduct of

electronic activities to the extent it

would apply if the activity were

conducted through traditional means.

The provision clarifies that the same

analysis governs the applicability of

state law to Federally authorized

activities that national banks conduct

whether using new technologies or

using more traditional means.16

Electronic banking activities that are

part of the business of banking (new

§ 7.5001(b)). Proposed § 7.5001(b)

provides that an electronic activity is

authorized for national banks as part of

the business of banking if the activity is

permitted under 12 U.S.C. 24(Seventh)

or other statutory authority applicable to

national banks, or otherwise constitutes

part of the business of banking. The

proposal sets forth four factors the OCC

considers in determining whether an

electronic activity is part of the business

of banking. A proposed activity does not

necessarily have to satisfy all four

criteria in order to be permissible.

Rather, we recognize that one or more

of these factors may predominate,

depending on the specific facts and

circumstances presented.17

The first factor is whether the

electronic activity is functionally

equivalent to, or a logical outgrowth of,

a recognized banking activity. This

factor is based on judicial precedents

approving activities that have

traditionally been performed by banks,

that are functionally similar to

recognized banking activities, or that

represent advances in recognized

banking practices.18

The second factor that we consider is

whether the proposed activity

strengthens the bank by benefitting its

customers or its business. Courts have

long recognized that banks’ ability to

serve the needs of their customers by

offering appropriate products and

services is crucial to the capability of

national banks to compete successfully.

Therefore, the courts have also

approved many activities on the basis

that they benefit a bank’s customers or

the bank’s business itself.19 Examples of

the types of activities the OCC would

look to that would benefit bank

customers or may be useful or

convenient to banks include those

where the activity increases service,

convenience, or options for bank

customers or lowers the cost to banks of

providing a product or service.

The third factor that we consider in

determining whether an electronic

activity is part of the business of

banking is whether the activity presents

the types of risk that banks are

experienced in managing.20

Finally, the proposal recognizes the

relevance of state law in the analysis the

OCC conducts when it receives requests

regarding the permissibility of new

electronic activities for national banks.

Since the statutory reference to the

‘‘business of banking’’ does not imply

that there are two distinct businesses of

banking, one for Federally-chartered

and another for state-chartered banks,

activities that are recognized as

permissible for state banks are at least

a relevant factor in determining whether

an electronic activity is part of the

business of banking.21

Electronic activities that are

incidental to the business of banking

(new § 7.5001(c)). We are also proposing

to set forth the factors the OCC

considers in determining whether an

electronic activity is incidental to the

business of banking. In Arnold Tours,

Inc. v. Camp, 472 F.2d 427, 432 (1st Cir.

1972), the court held that a national

bank’s activity is authorized as an

incidental power if it is convenient or

useful in connection with the

performance of one of the bank’s

established activities pursuant to the

five express powers enumerated in 12

U.S.C. 24(Seventh). Consistent with the

Supreme Court’s holding in VALIC that

national banks’ authority to engage in

the business of banking is not limited to

the five express powers, proposed

§ 7.5001(c) updates this standard to

provide that an activity is incidental to

the business of banking if it is

convenient or useful to an activity that

is specifically authorized for national

banks or to an activity that is otherwise

part of the business of banking.

34858 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules

22See Franklin Nat’l Bank v. New York, 347 U.S.

373 (1954) (national bank may advertise savings

accounts); Clement National Bank, 231 U.S. at 140

(national bank may promote its deposit services by

computing, reporting and paying the state tax levied

upon the interest earned by bank customers on their

deposits).

23See OCC Interpretative Letter No. 754,

reprinted in [1996–97 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 81–118 (Nov. 6, 1996)

(national bank operating subsidiary may sell general

purpose computer hardware to other financial

institutions as part of larger product or service

when necessary, convenient, and useful to bank

permissible activities.)

24See, e.g., 12 U.S.C. 78 (defining persons

ineligible to be bank employees); 12 U.S.C. 83

(limiting national bank’s purchase of its own stock);

12 U.S.C. 24 (Seventh) (limiting presupposed

authority of national bank to own a subsidiary

engaged in the safe deposit business; 12 U.S.C.

371d(1994) (defining ‘‘affiliates’’ to include

subsidiaries owned by national banks); GLBA

section 121 (defining financial subsidiary as a

subsidiary ‘‘other than’’ a subsidiary that conducts

bank-permissible activities under the same terms

and conditions as apply to the parent bank or a

subsidiary expressly authorized by Federal statute).

25 563 F.2d at 1382.

26See 12 U.S.C. 24(Seventh) and 29; Perth Amboy

National Bank v. Brodsky, 207 F.Supp. 785, 788

(S.D.N.Y. 1962) (‘‘It is clear beyond cavil that the

statute [12 U.S.C. 29] permits a national bank to

lease or construct a building, in good faith, for

banking purposes, even though it intends to occupy

only a part thereof and to rent out a large part of

the building to others.’’)

27 12 CFR 7.1019.

28OCC Conditional Approval No. 304 (Mar. 5,

1999).

29See also, Conditional Approval No. 220

(December 2, 1996) (The creation, sale and

redemption of electronic stored value in exchange

for dollars is part of the business of banking because

it is the electronic equivalent of issuing circulating

notes or other paper based payment devices like

travelers checks); Conditional Approval No. 267

(January 12, 1998) (A national bank may store

electronic encryption keys as an expression of the

established safekeeping function of banks.)

Proposed § 7.5001(c) relies on Federal

incidental powers precedents to identify

the factors the OCC uses in determining

whether an activity is convenient or

useful to the business of banking. As

with determinations about whether an

activity is part of the business of

banking, specific facts may implicate

one or more factors, and the activity

need not satisfy each factor to be

permissible as incidental to that

business.

The first factor listed in the proposal

as part of the OCC’s determination as to

whether an electronic banking activity

is incidental to the business of banking

is whether the activity facilitates the

production or delivery of a bank’s

products or services, enhances the

bank’s ability to sell or market its

products or services, or improves the

effectiveness or efficiency of the bank’s

operations in light of risks presented,

innovations, strategies, techniques and

new technologies for providing financial

products and services. For example,

relying on well established judicial

precedents,22 the OCC has determined

that the provision of certain products

and services is permissible as incidental

to the business of banking when needed

to package successfully or promote

other banking services. 23

In addition to incidental activities

based on specific banking services or

products, proposed § 7.5001(c)(1) also

recognizes a category of incidental

activities based on the operation of the

bank itself as a business concern.

Banking activities that fall in this

category may include hiring employees,

issuing stock to raise capital, owning or

renting equipment, borrowing money

for operations, purchasing the assets

and assuming the liabilities of other

financial institutions, and operating

through optimal corporate structures,

such as subsidiary corporations or joint

ventures. Various Federal statutes have

implicitly recognized national banks’

authority to perform the activities

necessary to conduct their business. For

example, Federal laws refer to limits on

persons who can serve as bank

employees, to the permissible

disposition of bank stock, and to the

existence of bank subsidiaries.24 In each

case, the statutes presume the existence

of corporate power to conduct the

bank’s business under 12 U.S.C.

24(Seventh).

The authority of banks to deliver and

sell products and services or improve

the effectiveness of its operations must

be viewed in light of innovations,

strategies, techniques and new

technologies for marketing financial

products and services. For example, in

VALIC, the Supreme Court recognized

that the concepts of the ‘‘business of

banking’’ and of activities ‘‘incidental’’

to that business must be sufficiently

flexible to accommodate the constant

evolution of banking services. These

grants of power must be given a broad

and flexible interpretation to allow

national banks to utilize modern

methods and meet modern needs. The

court in the M&M Leasing case also

focused on this point noting that

‘‘commentators uniformly have

recognized that the National Bank Act

did not freeze the practices of national

banks in their nineteenth century

form* * *. [W]e believe the powers of

national banks must be construed so as

to permit the use of new ways of

conducting the very old business of

banking.’’ 25 Proposed § 7.5001(c)(1)

recognizes that market and

technological changes that will affect

the banking industry will shape the

OCC’s future determinations of whether

an activity is incidental to the business

of banking.

The second factor is whether the

activity enables the bank to profitably

use capacity acquired for its banking

operations or otherwise avoid economic

waste or loss. For example, it is well

settled that a nonbanking activity can be

validly incidental when it enables a

bank to realize gain or avoid loss from

activities that are part of, or necessary

to, its banking business. Federal statutes

and case law also recognize national

banks’ need to optimize the value of

bank property by authorizing banks to

sell excess space or capacity in that

property.26 Proposed § 7.5004, which

pertains to excess capacity, is a specific

application of this general principal.

4. Furnishing of Products or Services by

Electronic Means and Facilities

(§ 7.5002).

The OCC’s rules currently provide

that a national bank may perform,

provide, or deliver through electronic

means and facilities any function,

product, or service that it is otherwise

authorized to perform, provide or

deliver.27 This so-called ‘‘transparency

doctrine’’ is a key provision for national

banks engaging in electronic activities

because it requires the OCC to look

through the means by which the

product is delivered and focus instead

on the authority of the national bank to

offer the underlying product or service.

The proposed rule moves the

transparency rule to new subpart E and

expands it to include examples of

permissible activities under the rule.

For example, we have relied on the

transparency doctrine in § 7.1019 to

approve a number of technology-based

activities, such as web site hosting and

the operation of a ‘‘virtual mall,’’ that

are otherwise permissible under a

national bank’s finder authority.

Similarly, we have approved electronic

bill presentment activities because

billing and collecting services are

permissible for national banks.28 We

believe that moving this section under

new subpart E and providing concrete

examples of how it may be used will

provide clearer guidance to national

banks that wish to engage in new

electronic activities.29

5. Composite Authority To Engage in

Electronic Banking Activities (§ 7.5003)

An electronic banking activity may

appear to be novel but may actually

comprise a collection of interrelated

activities, each of which is permissible

under well-settled authority. For

example, the authority for a national

bank to offer a commercially enabled

web site service to merchants is actually

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules 34859

30OCC Conditional Approval No. 361 (Mar. 3,

2000).

31See OCC Interpretative Letter No. 742,

reprinted in [1996–1997 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶81–106 (Aug. 19, 1996);

OCC Interpretative Letter No. 677, reprinted in

[1994–1995 Transfer Binder] Fed. Banking L. Rep.

(CCH) ¶ 83,625 (June 28, 1885); unpublished letter

from William Glidden (June 6, 1986); unpublished

letter from Stephen Brown (Dec. 20, 1989); and OCC

Conditional Approval No. 361 (Mar. 3, 2000).

32See OCC Interpretive Letter No. 888 (Mar.14,

2000).

33Until 1984, the OCC’s data processing rule

specifically recognized the by-product theory. 12

CFR 7.3500 (1983). Although this language was

deleted from the rule in 1984, see 49 FR 11157

(Mar. 26, 1984), this deletion did not indicate a

change in the OCC’s position regarding this theory.

The 1984 revision was merely a non-substantive

format change in the rule. Id; see also 47 FR 46526

(Oct. 19, 1982).

34The mathematical function the sender uses to

encode a message is called the sender’s private key.

The related function that the recipient of the

message uses to decode the message is called the

sender’s public key. In public key infrastructure

systems based on asymmetric encryption, each

private key is uniquely associated with a particular

counterpart public key. Thus, if one has assurance

that a specific private key is associated with a

person and under their sole control, any message

that can be decoded using that person’s public key

may be assumed to have been sent by that person.

35See OCC Conditional Approval No. 267 (Jan.

12, 1998).

36See, e.g., OCC Conditional Approval No. 289

(Oct. 2, 1998); OCC Interpretative Letter No. 805

(Oct. 9, 1997). A prior OCC interpretive ruling on

electronic banking specifically stated that ‘‘as part

of the business of banking and incidental thereto,

a national bank may collect, transcribe, process,

analyze and store for itself and others, banking,

financial, or related economic data.’’ 39 FR 14192,

14195 (Apr. 22, 1974). This language was deleted

from former 12 CFR 7.3500 because the OCC was

concerned that the specific examples of permissible

activities in the ruling, such as the marketing of

excess time, by-products, and the processing of

‘‘banking, financial, or related economic data’’ had

led to confusion and misinterpretation. See 47 FR

at 46526, 46529 (Oct. 19, 1982). However, the

preamble to the proposal to simplify the rule stated

that ‘‘the Office wishes to make clear that it does

not intend to indicate any change in its position

regarding the permissibility of data processing

services.’’ Id. Since 1982, the risk of confusion and

misinterpretation of a regulation has significantly

diminished due to, among other reasons, the

substantial number of interpretive letters the OCC

has issued on permissible data processing that can

provide a context for understanding the proposed

rule if it is adopted.

37See, e.g., OCC Conditional Approval No. 369

(Feb. 25, 2000).

a blend of established authorities to

offer the constituent parts of the service,

including the authorities to act as

finder, to process banking or financial

data, and to engage in payments

processing and collection. To clarify

national banks’ conduct of this type of

‘‘composite’’ activity, proposed § 7.5003

codifies the approach we have used in

our approval letters by providing that an

electronic product or service that

comprises several elements, or

activities, is authorized if each of the

constituent elements or activities is

authorized. This provision does not

authorize activities that are not

otherwise permissible for national banks

under Federal law.

6. Excess Electronic Capacity (§ 7.5004)

The OCC has long permitted national

banks to rely on the ‘‘excess capacity’’

doctrine to avoid waste and deploy

resources efficiently. The excess

capacity doctrine holds that a bank

acquiring an asset in good faith to

conduct its banking business is

permitted, under its incidental powers,

to make full economic use of the

property if using the property solely for

banking purposes would leave the

property underutilized.30 While the

doctrine originated to allow banks to

use excess real property efficiently, it

has taken on particular significance as

banks conduct more business through

developing technologies. We have

applied the excess capacity doctrine to

a broad range of electronic products and

services, including Internet access,

software production and distribution,

long line telecommunications and data

processing equipment, electronic

security systems and a call center.31

The OCC’s rules currently recognize

the excess capacity doctrine with

respect to excess electronic capacities

acquired or developed by a bank in good

faith for banking purposes. The proposal

relocates the excess electronic capacity

rule from current § 7.1019 to new

subpart E and adds specific examples.

These examples, while not exclusive,

illustrate uses of excess electronic

capacity that we have approved. The

proposal retains the requirement that

the excess capacity must be acquired in

good-faith for banking purposes.32 As

our approvals to date demonstrate, the

determination that a particular use of

excess electronic capacity is permissible

is fact specific. Accordingly, we

encourage banks considering

appropriate uses of excess electronic

capacity to consult with the OCC.

This proposal does not affect other

bases upon which the OCC has

approved similar types of activities. For

example, this proposal does not affect

the so-called ‘‘ by-product theory,’’

where a national bank may sell byproducts, such as software, developed

by the bank for or during the

performance of its permissible data

processing functions.33

7. National Bank Acting as a Digital

Certification Authority (§ 7.5005).

Digital signatures are a form of

electronic authentication that permit the

recipient of an electronic message to

verify the sender’s identity. In order for

a digital signature system to operate

successfully, the message recipient must

have assurance that the public key 34

used to decode a message is uniquely

associated with the sender. One method

of providing that assurance is for a

trusted third party—called a

certification authority—to issue a digital

certificate attesting to this association.

The certification authority generates and

signs digital certificates to verify the

identity of the person transmitting a

message electronically.

To date, we have permitted a national

bank to act as a certification authority

that issues certificates verifying the

identity of the certificate holder.35 The

proposed rule would codify this

position.

National banks also have

demonstrated increasing interest in

issuing certificates that verify the

authority or financial capacity of the

certificate holder. In these instances, for

example, the bank could issue a

certificate that the individual has the

authority to debit a particular account

(account authority digital certificates) or

has the financial capacity to make a

purchase or engage in a particular

transaction. We invite comment on the

extent to which national banks propose

to engage in these activities, how they

will be structured, and whether

permitting national banks to issue

certificates to verify authority or

financial capacity presents unique risks.

8. Data Processing (§ 7.5006)

We have repeatedly confirmed that a

national bank may collect, process,

transcribe, analyze and store banking,

financial and economic data for itself

and its customers as part of the business

of banking.36 The proposed rule would

codify these interpretations.

Commenters are invited to address

whether more modern terminology

should be used to better describe what

functions should be considered to be (or

not to be) ‘‘data processing’’ in light of

advances in technology.

We have also found that national

banks, under their authority to conduct

activities incidental to the business of

banking, may provide limited amounts

of nonfinancial information processing

to their customers to enhance

marketability or use of a banking

service.37 We typically inquire whether

the processing of nonfinancial data is

convenient or useful to the specific

processing of financial data or other

business of banking activities in a

specific contract or relationship. In the

final rule, we could codify this caseVerDate 11<MAY>2000 16:24 Jun 29, 2001 Jkt 194001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\02JYP1.SGM pfrm01 PsN: 02JYP1
34860 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules

38We note that the Board of Governors of the

Federal Reserve System’s Regulation Y currently

authorizes bank holding companies to conduct data

processing and data transmission activities where

the data to be processed or furnished is not

financial, banking, or economic if the total annual

revenue derived from those activities does not

exceed 30% of the company’s total annual revenue

derived from data processing and data transmission

activities. 12 CFR 225.28(b)(14) (2000). Further, the

Board of Governors recently proposed amending

this rule to expand the permissible nonfinancial

revenue percentage to 49%. 65 FR 80384 (Dec. 21,

2000).

39See, e.g., OCC Interpretative Letter No. 875,

reprinted in [1999–2000 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 81–369 (Oct. 31, 1999);

OCC Interpretative Letter No. 811, reprinted in

[1997–1998 Transfer Binder] Fed. Banking L. Rep.

¶ 81–259 (Dec. 18, 1997); Corporate Decision 97–79

(July 11, 1997).

40See OCC Interpretative Letter No. 467,

reprinted in [1988–1989 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 85,691 (Jan. 24, 1989)

(national bank may offer wide range of

correspondent services); Letter from Wallace S.

Nathan, Regional Counsel (Dec. 3, 1982)

(unpublished) (microfiche services); Letter from

John E. Shockey, Chief Counsel (July 31, 1978)

(unpublished) (advertising services).

41E.g., OCC Interpretative Letter No. 875, supra;

OCC Interpretative Letter No. 513, reprinted in

[1990–1991 Transfer Binder] Fed. Banking L. Rep.

¶ 83,215 (June 18, 1990).

42See OCC Interpretative Letter No. 754,

reprinted in [1996–1997 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 81–118 (Nov. 6, 1996).

43See, e.g., Letter from Vernon E. Fasbender,

Director for Analysis, Southeastern District (Dec. 6,

1990); OCC Interpretative Letter No. 345, reprinted

in [1985–1987 Transfer Binder] Fed. Banking L.

Rep. (CCH) ¶ 85,515 (July 9, 1985); Letter from Joe

H. Selby, Deputy Comptroller (November 22, 1978);

Letter from Vernon E. Fasbender, Director for

Analysis, Southeastern District (Dec. 6, 1990).

44See, e.g., OCC Interpretative Letter No. 868,

reprinted in [Current Transfer Binder] Fed. Banking

L. Rep. (CCH) ¶ 81–362 (Aug. 16, 1999).

45See, e.g., OCC Interpretative Letter No. 890,

reprinted in [1999–2000 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 81–409 (May 15, 2000).

46See, e.g., Letter from Vernon E. Fasbender,

Director for Analysis, Southeastern District (Dec. 6,

1990); and Letter from J.T. Watson, Deputy

Comptroller of the Currency (Mar. 22, 1973).

47See OCC Interpretative Letter No. 805,

reprinted in [1997–1998 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 81–252 (Oct. 9, 1997).

48See Corporate Decision No. 2000–08 (June 1,

2000); and OCC Interpretative Letter No. 875,

reprinted in [Current Transfer Binder] Fed. Banking

L. Rep. (CCH) ¶ 81–369 (Oct. 31, 1999).

49OCC Interpretative Letter No. 611, reprinted in

[1992–1993 Transfer Binder] Fed. Banking L. Rep.

(CCH) ¶ 83,449 (Nov. 23, 1992); OCC Interpretative

Letter No. 516, reprinted in [1990–1991 Transfer

Binder] Fed. Banking L. Rep. (CCH) ¶ 83,220 (July

12, 1990); and OCC Interpretative Letter No. 346,

reprinted in [1985–1987 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 85,516 (July 31, 1985).

50See, 12 U.S.C. 24(8) (charitable contributions);

12 U.S.C. 29 (authority to hold real estate); 12

U.S.C. 36 (branching); 12 U.S.C. 72 (director

qualifications); 12 U.S.C. 92a (trust powers); 12

U.S.C. 94 (venue); and 12 U.S.C. 548 (State

taxation).

specific approach to incidental

nonfinancial data processing.

However, we also are considering

whether to issue a rule on incidental

data processing that would recognize

that a national bank may generally

derive a certain specified percentage of

its total annual data processing revenue

from processing nonfinancial data as

incidental to its financial data

processing services. We are aware of

anecdotal evidence suggesting that

national banks attempting to market

financial data processing services are

frequently confronted with customer

demands that the bank also process

some nonfinancial data so that the

customer can avoid the inconvenience

of having to use two different

processors: the bank for financial data

and some other firm for nonfinancial

data. Indeed, one commenter to the

ANPR suggested that bank customers

would like their banks to offer broader

processing services and that competitors

in the marketplace are providing these

services. We are interested in comments

and evidence on the extent of this

phenomenon so we can determine

whether it is so pervasive as to warrant

a general rule establishing a limited and

specific safe harbor for processing

nonfinancial data in connection with

financial data processing in lieu of our

current case by case approach.38

We invite comment on all aspects of

this provision. We specifically invite

commenters to provide any evidence

indicating whether or not national

banks’ data processing customers need

incidental nonfinancial data processing

services on a routine basis. We also

invite comment on what percentage of

nonfinancial data revenue would be

appropriate for such a safe harbor if it

were adopted.

9. Correspondent Banking (§ 7.5007)

The OCC has long permitted national

banks to perform for other entities an

array of activities called ‘‘correspondent

services’’ as part of the business of

banking.39 These activities include any

corporate or banking service that a

national bank may perform for itself.40

A national bank may perform these

activities for any of its affiliates or for

other financial institutions.41 The

proposed rule would codify this

position.

In addition, the OCC has approved a

number of electronic- and technologyrelated activities as permissible

correspondent services for national

banks. These activities have included:

• Providing computer networking

packages and related hardware that

meet the banking needs of financial

institution customers; 42

• Processing bank, accounting, and

financial data, such as check data, other

bookkeeping tasks, and general

assistance of correspondents’ internal

operating, bookkeeping, and data

processing; 43

• Selling data processing software; 44

• Developing, operating, managing,

and marketing products and processing

services for transactions conducted at

electronic terminal devices including,

but not limited to, ATMs, POS

terminals, scrip terminals, and similar

devices; 45

• Item processing services and related

software development; 46

• Document control and record

keeping through the use of electronic

imaging technology; 47

• Internet merchant hosting services

for resale to merchant customers; 48 and

• Communication support services

through electronic means, such as the

provision of electronic ‘‘gateways’’ in

order to communicate and receive

financial information and to conduct

transactions; creating, leasing, and

licensing communications systems,

computers, analytic software, and

related equipment and services for

sharing information concerning

financial instruments and economic

information and news; and the

provision of electronic information and

transaction services and linkage for

financial settlement services.49

This proposal would codify these

interpretations and include these

activities in the text of the regulation as

examples of electronic activities that

banks may offer as correspondent

services.

B. Location

1. Location of a national bank

conducting electronic banking activities

(§ 7.5008)

The effect of several statutes affecting

national banks turns in part on where

the bank in question is ‘‘located.’’ The

scope of this term—specifically,

whether it refers only to the bank’s main

office, includes branches as well, or

means something different—varies from

statute to statute and depends on the

specific statutory context.50 Moreover,

national banks often conduct a

significant portion of their operations in

locations that are distinct from their

main office and branches. For example,

a bank that has a branch in State A and

its main office in State B may have an

automated loan processing center in

State C and depend on a third party

vendor in State D for certain ministerial

lending functions.

One commenter on the ANPR said

that a national bank’s location for

Federal banking law purposes should

not be determined by the physical site

of its technology-related equipment. The

OCC agrees with that result, and the

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules 34861

51See, e.g., Amberson Holdings LLC v. Westside

Story Newspaper, 110 F. Supp. 2d 332 (D.N.J. 2000).

52 Marquette National Bank v. First of Omaha

Service Corp., 439 U.S. 299 (1978).

53 12 CFR 7.3001.

proposal, accordingly, provides that a

national bank will not be considered

located in a state solely because it

physically maintains technology, such

as a server or automated loan center, in

that state, or because the bank’s

products or services are accessed

through electronic means by customers

located in the state. This is consistent

with evolving case authority.51

2. Location of Internet-only bank under

12 U.S.C. 85 (§ 7.5009)

Twelve U.S.C. 85 authorizes a

national bank to charge interest in

accordance with the laws of the state in

which it is located. In interpreting

section 85, the Supreme Court has held

that a national bank is ‘‘located’’ in the

state where it has its main office (its

home state).52 Thus, a national bank

may charge the interest rates permitted

by its home state no matter where the

borrower resides or what contacts with

the bank occur in another state.

The OCC has chartered several

Internet-only national banks that

operate without physical branches and

that make loans or extend credit

primarily through the Internet. The

proposal provides that, for purposes of

12 U.S.C. 85, the main office of a

national bank that operates exclusively

through the Internet is the office

identified by the bank under 12 U.S.C.

22(Second) or as relocated pursuant to

12 U.S.C. 30 or other appropriate

authority.

C. Safety and Soundness

Shared electronic space (§ 7.5010).

The advent of Internet technology has

dramatically increased the ability of

banks to enter into joint marketing

relationships with third parties. For

example, national banks are becoming

increasingly involved in electronic

marketing arrangements that involve

providing bank customers with access to

providers of retail or financial services

through hyperlinks on the bank’s web

site or through other shared electronic

‘‘space.’’ Under current OCC rules, a

national bank may lease space on bank

premises to other businesses and share

space jointly with other businesses

subject to certain conditions.53 These

conditions, set forth in section

7.3001(c), are intended to minimize

customer confusion about the nature of

the products offered and promote the

safe and sound operation of the bank.

The proposal would extend the same

general principles set forth in section

7.3001 to situations where banks share

co-branded web sites or other electronic

space with subsidiaries or unaffiliated

third parties. Under the proposal, the

bank would be required to take

reasonable steps to enable customers to

distinguish between products and

services offered by the bank and those

offered by the bank’s subsidiary or a

third party. The bank also should

disclose its limited role with respect to

the third party product or service.

The proposal also recognizes that the

way disclosures are displayed and the

context in which they are displayed

may vary significantly. Thus, the

proposal requires disclosures to be

conspicuous, simple, direct, readily

understandable, and designed to call

attention to the fact that the bank does

not provide, endorse, or guarantee any

of the products or services available

through third party web pages.

Comment Solicitation

The OCC requests comment on all

aspects of this proposal, including the

specific issues that follow.

The OCC seeks comment on the

impact of this proposal on community

banks. The OCC recognizes that

community banks operate with more

limited resources than larger

institutions and may present a different

risk profile. Thus, the OCC specifically

requests comment on the impact of the

proposal on community banks’ current

resources and available personnel with

the requisite expertise, and whether the

goals of the proposal could be achieved,

for community banks, through an

alternative approach.

Solicitation of Comments on Use of

Plain Language

Section 722 of the Gramm-LeachBliley Act, Pub. L. 106–102, sec. 722,

113 Stat. 1338, 1471 (Nov. 12, 1999),

requires the 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 proposal easier to

understand. For example:

• Have we organized the material to

suit your needs? If not, how could this

material be better organized?

• Are the requirements in the

proposed regulation clearly stated? If

not, how could the regulation be more

clearly stated?

• Does the proposed regulation

contain language or jargon that is not

clear? If so, which language requires

clarification?

• Would a different format (grouping

and order of sections, use of headings,

paragraphing) make the regulation

easier to understand? If so, what

changes to the format would make the

regulation easier to understand?

• What else could we do to make the

regulation easier to understand?

Regulatory Analysis

A. Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act, the

Comptroller of the Currency certifies

that this proposal will not have a

significant economic impact on a

substantial number of small entities.

B. Unfunded Mandates Reform 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.

The OCC has determined that the

proposal will not result in expenditures

by State, local, or tribal governments or

by the private sector of $100 million or

more. Accordingly, the OCC has not

prepared a budgetary impact statement

or specifically addressed the regulatory

alternatives considered.

C. Executive Order 12866

The Comptroller of the Currency has

determined that this rule does not

constitute a ‘‘significant regulatory

action’’ for the purposes of Executive

Order 12866.

D. Paperwork Reduction Act of 1995

For purposes of compliance with the

Paperwork Reduction Act of 1995, 44

U.S.C. 3501 et seq., the OCC invites

comment on:

(1) Whether the proposed collection

of information contained in this notice

of proposed rulemaking is necessary for

the proper performance of the OCC’s

functions, including whether the

information has practical utility;

(2) The accuracy of the OCC’s

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 the

34862 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules

respondents, including the use of

automated collection techniques or

other forms of information technology;

and

(5) Estimates of capital or start-up

costs and costs of operation,

maintenance, and purchase of services

to provide information.

Respondents are not required to

respond to this collection of information

unless the final regulation 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 for review in

accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C.

3507(d)). Comments on the collection of

information should be sent to the Office

of Information and Regulatory Affairs,

Office of Management and Budget,

Attention: Alexander Hunt, Desk

Officer, Washington, DC 20503, with a

copy to Jessie Dunaway, Legislative and

Regulatory Activities Division, Office of

the Comptroller of the Currency, 250 E

Street, SW., Mailstop 8–4, Washington,

DC 20219.

Section 7.5010 of the proposed rule

requires a national bank that shares a

co-branded website or other electronic

space with a bank subsidiary or a third

party to make certain disclosures

designed to enable its customers to

distinguish its products and services

from those of the subsidiary or third

party.

The likely respondents are national

banks.

Estimated number of respondents:

1,609 respondents.

Estimated number of responses: 1,609

responses.

Estimated burden hours per response:

1 hour.

Estimated total annual burden hours:

1,609 hours.

List of Subjects in 12 CFR Part 7

Credit, Insurance, Investments,

National banks, Reporting and

recordkeeping requirements, Securities,

Surety bonds.

Authority and Issuance

For reasons set forth in the preamble,

part 7 of chapter I of the Code of Federal

Regulations is proposed to be amended

as follows:

PART 7—BANK ACTIVITIES AND

OPERATIONS

1. The authority citation for part 7

continues to read as follows:

Authority: 12 U.S.C. 1 et seq. and 93a.

2. Revise § 7.1002 to read as follows:

§ 7.1002 National bank acting as finder.

(a) General. It is part of the business

of banking under 12 U.S.C. 24(Seventh)

for a national bank to act as a finder

bringing together buyers and sellers.

(b) Permissible finder activities. A

national bank that acts as a finder may

identify potential parties, make

inquiries as to interest, introduce or

arrange contacts or meetings of

interested parties, and otherwise bring

parties together for a transaction that the

parties themselves negotiate and

consummate. For example, permissible

finder activities include:

(1) Communicating information about

providers of products and services, their

products and services, and proposed

offering prices and terms to potential

markets for these products and services;

(2) Communicating to the seller an

offer to purchase or a request for

information, including forwarding

completed applications, application

fees, and requests for information to

third-party service providers;

(3) Arranging for third-party providers

to offer reduced rates to those customers

referred by the bank;

(4) Providing administrative, clerical,

and record keeping functions related to

the bank’s finder activity, including

retaining copies of documents,

instructing and assisting individuals in

the completion of documents,

scheduling sales calls on behalf of

retailers, and conducting market

research to identify potential new

customers for retailers;

(5) Conveying between interested

parties expressions of interest, bids,

offers, orders, and confirmations

relating to a transaction; and

(6) Conveying other types of

information between potential buyers

and sellers.

(c) Limitation. The authority to act as

a finder does not enable a national bank

to engage in brokerage activities that

have not been found to be permissible

for national banks.

(d) Advertisement and fee. Unless

otherwise prohibited, a national bank

may advertise the availability of, and

accept a fee for, the services provided

pursuant to this section.

§ 7.1019 [Removed]

3. Remove § 7.1019.

4. Add new subpart E to read as

follows:

Subpart E—Electronic Banking

Sec.

7.5000 Scope.

7.5001 Electronic banking activities that are

part of, or incidental to, the business of

banking.

7.5002 Furnishing of products and services

by electronic means and facilities.

7.5003 Composite authority to engage in

electronic banking activities.

7.5004 Excess electronic capacity.

7.5005 National bank acting as digital

certification authority.

7.5006 Data processing.

7.5007 Correspondent banking.

7.5008 Location of national bank

conducting electronic banking activities.

7.5009 Location of Internet-only bank under

12 U.S.C. 85.

7.5010 Shared electronic space.

§ 7.5000 Scope.

This subpart applies to a national

bank’s use of technology to deliver

services and products consistent with

safety and soundness.

§ 7.5001 Electronic activities that are part

of, or incidental to, the business of banking.

(a) Purpose and scope. This section

identifies the criteria that the OCC uses

to determine whether an electronic

activity is authorized as part of, or

incidental to, the business of banking

under 12 U.S.C. 24(Seventh). The OCC

may restrict or condition activities that

are permissible under the statutory

standard in order to ensure that they are

conducted safely and soundly, and in

accordance with applicable statutes,

regulations, or supervisory policies.

State laws may be applicable to the

provision of activities by a national

bank through electronic means to the

extent that they apply to the activity

otherwise conducted by the national

bank.

(b) Activities that are part of the

business of banking. An activity is

authorized for national banks as part of

the business of banking if the activity is

described in 12 U.S.C. 24(Seventh) or

other statutory authority, or is otherwise

part of the business of banking. In

determining whether an electronic

activity is part of the business of

banking, the OCC considers the

following factors:

(1) Whether the activity is the

functional equivalent to, or a logical

outgrowth of, a recognized banking

activity;

(2) Whether the activity strengthens

the bank by benefitting its customers or

its business;

(3) Whether the activity involves risks

similar in nature to those already

assumed by banks; and

(4) Whether the activity is expressly

authorized by law for state-chartered

banks.

(c) Activities that are incidental to the

business of banking. An electronic

banking activity is authorized for a

national bank as incidental to the

business of banking if it is convenient

or useful to an activity that is

specifically authorized for national

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules 34863

banks or to an activity that is otherwise

part of the business of banking. In

determining whether an activity is

convenient or useful to such activities,

the OCC considers the following factors:

(1) Whether the activity facilitates the

production or delivery of a bank’s

products or services, enhances the

bank’s ability to sell or market its

products or services, or improves the

effectiveness or efficiency of the bank’s

operations, in light of risks presented,

innovations, strategies, techniques and

new technologies for producing and

delivering financial products and

services; and

(2) Whether the activity enables the

bank to profitably use capacity acquired

for its banking operations or otherwise

avoid economic loss or waste.

§ 7.5002 Furnishing of products and

services by electronic means and facilities.

(a) Use of electronic means and

facilities. A national bank may perform,

provide, or deliver through electronic

means and facilities any activity,

function, product, or service that it is

otherwise authorized to perform,

provide, or deliver. For example,

permissible activities under this

authority include:

(1) Acting as an electronic finder by:

(i) Establishing, registering, and

hosting commercially enabled web sites

in the name of retailers;

(ii) Establishing hyperlinks between

the bank’s site and a third party site,

including acting as a ‘‘virtual mall’’ by

providing a collection of links to web

sites of third party vendors, organized

by product type and made available to

bank customers;

(iii) Hosting an electronic marketplace

on the bank’s Internet web site by

providing links to the web sites of third

party buyers or sellers through the use

of hypertext or other similar means;

(iv) Hosting on the bank’s servers the

Internet web site of:

(A) A buyer (or seller) that provides

information concerning the buyer (or

seller) and the products or services it

seeks to buy (or sell) and allows sellers

(or buyers) to submit expressions of

interest, bids, offers, orders and

confirmations relating to such products

or services; or

(B) A governmental entity that

provides information concerning the

services or benefits made available by

the governmental entity, assists persons

in completing applications to receive

such services or benefits from the

governmental entity, and permits

persons to transmit their applications

for services or benefits to the

governmental entity;

(v) Operating an Internet web site that

permits numerous buyers and sellers to

exchange information concerning the

products and services that they are

willing to purchase or sell, locate

potential counter parties for

transactions, aggregate orders for goods

or services with those made by other

parties, and enter into transactions

between themselves; and

(vi) Operating a telephone call center

that provides permissible finder

services;

(2) Providing electronic bill

presentment services;

(3) Offering electronic stored value

systems; and

(4) Safekeeping for personal

information or valuable confidential

trade or business information, such as

encryption keys.

(b) State laws. State laws are

applicable to the activities of a national

bank conducted through electronic

means only to the extent that they

would apply to the activities conducted

otherwise by a national bank.

§ 7.5003 Composite authority to engage in

electronic banking activities.

Unless otherwise prohibited by law, a

national bank may engage in an

electronic activity that is comprised of

several component activities if each of

the component activities is itself

permissible as part of or incidental to

the business of banking.

§ 7.5004 Excess electronic capacity.

A national bank may, in order to

optimize the use of the bank’s resources

or avoid economic loss or waste, market

and sell to third parties excess

electronic capacities acquired or

developed by the bank in good faith for

its banking business. Examples of

permissible excess electronic capacity

that banks have acquired or developed

in good faith for banking purposes

include:

(a) Data processing services;

(b) Production and distribution of

nonfinancial software;

(c) Providing periodic back-up call

answering services;

(d) Providing full Internet access;

(e) Providing electronic security

system support services;

(f) Providing long line

communications services; and

(g) Electronic imaging and storage.

§ 7.5005 National bank acting as digital

certification authority.

It is part of the business of banking

under 12 U.S.C. 24(Seventh) for a

national bank to act as a certificate

authority and to issue digital certificates

verifying the persons associated with a

particular public/private key pair. As

part of this service, the bank may also

maintain a listing or repository of public

keys.

§ 7.5006 Data processing.

It is part of the business of banking

under 12 U.S.C. 24(Seventh) for a

national bank to collect, transcribe,

process, analyze, and store for itself and

others, banking, financial, or economic

data. A national bank also may collect,

transcribe, process, and analyze other

types of data if the derivative or

resultant product is banking, financial,

or economic data.

§ 7.5007 Correspondent banking.

It is part of the business of banking for

a national bank to offer as a

correspondent service to any of its

affiliates or to other financial

institutions any service it may perform

for itself. Examples of electronic

activities that banks may offer

correspondents under this authority

include the following:

(a) The provision of computer

networking packages and related

hardware;

(b) Data processing services;

(c) The sale of software that performs

data processing functions;

(d) The development, operation,

management, and marketing of products

and processing services for transactions

conducted at electronic terminal

devices;

(e) Item processing services and

related software;

(f) Document control and record

keeping through the use of electronic

imaging technology;

(g) The provision of Internet merchant

hosting services for resale to merchant

customers; and

(h) The provision of communication

support services through electronic

means.

§ 7.5008 Location of a national bank

conducting electronic banking activities.

A national bank shall not be

considered located in a state solely

because it physically maintains

technology, such as a server or

automated loan center, in that state, or

because the bank’s products or services

are accessed through electronic means

by customers located in the state.

§ 7.5009 Location of Internet-only bank

under 12 U.S.C. 85.

For purposes of 12 U.S.C. 85, the

main office of a national bank that

operates exclusively through the

Internet is the office identified by the

bank under 12 U.S.C. 22(Second) or as

relocated under 12 U.S.C. 30 or other

appropriate authority.

34864 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Proposed Rules

§ 7.5010 Shared electronic space.

A national bank that shares a cobranded web site or other electronic

space with a bank subsidiary, affiliate,

or a third party must take reasonable

steps to enable customers to distinguish

between products and services offered

by the bank and those offered by the

bank’s subsidiary, affiliate, or the third

party. The bank also should disclose its

limited role with respect to the third

party product or service. This disclosure

should be conspicuous, simple, direct,

readily understandable, and designed to

call attention to the fact that the bank

does not provide, endorse, or guarantee

any of the products or services available

through third party web pages.

Dated: June 19, 2001.

John D. Hawke, Jr.,

Comptroller of the Currency.

[FR Doc. 01–16330 Filed 6–29–01; 8:45 am]

BILLING CODE 4810–33–P

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 41

RIN 3038–AB77

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 240

[Release No. 34–44475; File No. S7–11–01]

RIN 3235–AI13

Method for Determining Market

Capitalization and Dollar Value of

Average Daily Trading Volume;

Application of the Definition of NarrowBased Security Index

AGENCIES: Commodity Futures Trading

Commission and Securities and

Exchange Commission.

ACTION: Proposed rule; reopening and

extension of comment period.

SUMMARY: The Commodity Futures

Trading Commission (‘‘CFTC’’) and

Securities and Exchange Commission

(‘‘SEC’’) (collectively the

‘‘Commissions’’) are extending the

comment period for proposed Subparts

A and B of Part 41 of the CFTC’s

regulations under the Commodity

Exchange Act (‘‘CEA’’) and SEC Rules

3a55–1 through 3a55–3 under the

Securities Exchange Act of 1934

(‘‘Exchange Act’’), contained in Release

No. 34–44288 (May 10, 2001), 66 FR

27560 (May 17, 2001). The original

comment period ended on June 18,

2001. The new deadline for submitting

public comments is July 11, 2001.

DATES: Public comments are due on or

before July 11, 2001.

ADDRESSES: Comments should be sent to

both agencies at the addresses listed

below.

CFTC: Comments should be sent to

the Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, N.W., Washington, DC

20581, Attention: Office of the

Secretariat. Comments may be sent by

facsimile transmission to (202) 418–

5521, or by e-mail to secretary@cftc.gov.

Reference should be made to ‘‘NarrowBased Security Indexes.’’

SEC: Please send three copies of your

comment letter to Jonathan G. Katz,

Secretary, Securities and Exchange

Commission, 450 5th Street, NW.,

Washington, DC 20549–0609.

Comments can also be sent

electronically to the following e-mail

address: rule-comments@sec.gov. Your

comment letter should refer to File No.

S7–11–01. If e-mail is used, include this

file number on the subject line. Anyone

can inspect and copy the comment

letters in the Commission’s Public

Reference Room at 450 5th Street, NW.,

Washington, DC 20549–0102.

Electronically submitted comments will

be posted on the Commission’s Internet

web site (http://www.sec.gov). The SEC

does not edit personal identifying

information, such as names or e-mail

addresses, from electronic submissions.

Submit only the information you wish

to make publicly available.

FOR FURTHER INFORMATION CONTACT:

CFTC: Elizabeth L.R. Fox, Acting

Deputy General Counsel; Richard A.

Shilts, Acting Director; or Thomas M.

Leahy, Jr., Financial Instruments Unit

Chief, Division of Economic Analysis,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, N.W., Washington, DC

20581. Telephone: (202) 418–5000. Email: (EFox@cftc.gov),

(RShilts@cftc.gov), or (TLeahy

@cftc.gov).

SEC: Nancy J. Sanow, Assistant

Director, at (202) 942–0771; Ira L.

Brandriss, Special Counsel, at (202)

942–0148, or Sapna C. Patel, Attorney,

at (202) 942–0166, Office of Market

Supervision, Division of Market

Regulation, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–1001.

SUPPLEMENTARY INFORMATION: On May

17, 2001, the Commissions published

for public comment proposed Subparts

A and B of Part 41 of the CFTC’s

regulations under the CEA and SEC

Rules 3a55–1 through 3a55–3 under the

Exchange Act. These proposed rules

would implement new statutory

provisions of the Commodity Futures

Modernization Act of 2000 (‘‘CFMA’’)

concerning the definition of ‘‘narrowbased security index.’’ The CFMA

directed the Commissions jointly to

specify by rule or regulation the method

to be used to determine ‘‘dollar value of

average daily trading volume’’ and

‘‘market capitalization’’ for purposes of

the new definition of ‘‘narrow-based

security index’’ in the CEA and the

Exchange Act.

The proposing release established a

deadline of June 18, 2001 for submitting

public comments. The Commissions

have received requests to extend the

deadline. Therefore, the Commissions

are extending the comment period to

July 11, 2001 so that commenters will

have adequate time to address the issues

raised by the proposing release.

Dated: June 26, 2001.

By the Commodity Futures Trading

Commission.

Jean A. Webb,

Secretary.

Dated: June 26, 2001.

By the Securities and Exchange

Commission.

Jonathan G. Katz,

Secretary.

[FR Doc. 01–16501 Filed 6–29–01; 8:45 am]

BILLING CODE 6351–01–P; 8010–01–P

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[IN 131a; FRL–7005–9]

Approval and Promulgation of Air

Quality Implementation Plans; Indiana;

Oxides of Nitrogen Regulations

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: On March 30, 2001, Indiana

submitted and requested parallel

processing on a draft plan to control

emissions of oxides of nitrogen (NOX)

throughout the State. The plan consists

of two proposed rules, a preliminary

budget demonstration, and supporting

documentation. The plan will

contribute to attainment and

maintenance of the 1-hour ozone

standard in several 1-hour ozone

nonattainment areas including the

Chicago-Gary-Lake County and

Louisville areas. Indiana’s plan, which

focuses on electric generating units,

large industrial boilers, turbines and

cement kilns, was developed to achieve

the majority of reductions required by

EPA’s October 27, 1998, NOX State